Once again equity market weakness resulted in a rush back into the Dollar with all things commodities seeing selling pressure as a result. Folks – it is nothing but algorithms at work and is automatic because we live in an age in which traders no longer think. They just react. Sadly, that is pretty much what the professional has devolved into.
Gold was stronger overnight and early in the session but as it wore on and the Dollar began coming back as equities faded, selling pressure tied to the usual culprits came in to take it back down below the all important $930 level. One look at the technical price chart and you can see that above that level is a whole” lotta” air. Comex gold selling also intensified as the mining equities faded well off their best prints for the session also.
We are back to seeing another flip and the near daily flip-flop between the forces of inflation and the forces of deflation. Today, deflationary forces won out but keep in mind what I have repeatedly been saying. Deflationary forces and inflationary forces are battling like the change of seasons from winter to spring. The transition is not linear but rather sporadic with intense episodes from both sides making their appearance as time progresses.
What is interesting about today’s session is the bond market did not move higher as equities swooned. Maybe it was the fact that the tech stocks held up much better than the broader indices and that sent money flowing into that sector. Who knows anymore?
Nevertheless, the strength in the Dollar forced the grains lower, the crude oil market and its liquid components lower and natural gas lower as well. It also brought selling into copper and silver to some extent although both of those markets held relatively well considering the extent of the Dollar’s rise.
Gold appeared to be on the verge of an upside trending move with the breach of $930 early today but by fading at the close, it seems as if that will have to wait for another day. While I am encouraged by the rising moving averages and the fact that gold continues to trade above all of the major moving averages, I am concerned that the RSI cannot get a clear breach of that resistance line I have on the chart. That indicator reveals the internal strength of a move and while gold has been slowly clawing its way higher, the RSI has not been particularly strong. If we get an upside breach of $930 on a pit session close AND a breach of that blue resistance line on the RSI chart, then we have something solid. Until then, it seems we are going to see more of this grinding action.
Wednesday’s big downside day on the HUI and the XAU price charts is still dominating the short term technical picture. That day’s high is now a critical resistance level that the bulls will have to take out. We have some support on the downside for the HUI near the 330 level with additional support beneath that at 320.
Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini