Jim,

All of the selling we are seeing across the entirety of the commodity complex is related to the news that China is hiking rates again. The fear is that this will cause a slowdown in the Chinese economy which will negatively impact demand for commodities across the board.

I am seeing every single commodity being sold regardless of any current fundamentals. It is even showing up in the soybean and corn markets which have very strong fundamentals. In other words, it is purely a function of hedge fund algorithms being tripped to sell because some downside technical levels have been violated.

The fact that it is occurring even with the Dollar showing weakness tells me that it is a pure money game right now so fundamentals are taking a back seat to the flow of money out of commodities today.

Gold would have to get down below $1,345 and stay there to give me any reason for concern on the charts. Even at that, it would still be okay although the chart picture would be a bit less positive. Only two closes below $1,320 would turn the chart bearish.

Best wishes from your pal,
Trader Dan

Dear LT,

I heard there was yelling behind the scenes of the G20 meeting in Korea. These people are going to save us from the mess we are mired in? My money is on bullion.

Best,
CIGA BT

Pessimism Pervades As G20 Leaders Show Sharp Split
Trade Gaps, Protectionism, State Manipulation Of Currencies Among Issues
JEAN H. LEE, Associated Press
Posted: 9:17 pm PST November 10, 2010Updated: 12:32 am PST November 12, 2010

SEOUL, South Korea — A strong sense of pessimism shrouded the start of an economic summit of rich and emerging economies Thursday, with President Barack Obama and fellow world leaders arriving in Seoul sharply divided over currency and trade policies.

The Group of 20 summit, held for the first time in Asia, has become the centerpiece of international efforts to revive the global economy and prevent future financial meltdowns.

Failure in Seoul could have severe consequences. The risk is that countries would try to keep their currencies artificially low to give their exporters a competitive edge in global markets. That could lead to a destructive trade war. Countries might throw up barriers to imports – a repeat of policies that worsened the Great Depression.

Hopes had been high that the Group of 20 – encompassing rich nations such as Germany and the U.S. as well as growing giants such as China and Brazil – could be the world forum for hashing out an economic way forward from financial crisis.

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Dear Jim,

In spite of G20 I find it hard to understand why gold is falling hard while QE2 is being ignited and EU problems are all over the place. What am I missing in this picture?

Respectfully yours,
CIGA Arlen

Dear Arlen,

1. Chinese price controls discussion.
2. Brazilian discussion of currency controls.
3. The general commodity market is bearish today.
4. All these items are being taken advantage of by flash commodity trading and gold banks.

All of this is temporary, but from now on all gold moves will come with unprecedented volatility.

All the best,
Jim

Gold Is the World’s Premier Currency
CIGA Eric

Eric, I don’t have the technical skills to prove that We have a de-coupling taking place in Our precious metals from the ‘not so almighty" dollar is this indeed what We are witnessing, sure would appear that these last few days the case could be made, imagine that perhaps the light of day when another short squeeze failed to work this time.

Bob C
Fort Myers

Gold is the world’s permier currency, but don’t expect many to officially recognize it as such.

While the inverse correlation of the US dollar, gold, and stocks is still present, it has "loosened" against gold. That is, rallies in the U.S. dollar no longer create as large of a downside reaction in gold. This loosening will continue as long as confidence in paper continues to deteriorate at an accelerating rate. The relative direction in the U.S. dollar, gold, and stocks can be view in the chart below.

U.S. Dollar Index, Gold London PM Fixed, and S&P 500:

A better indication of the decoupling of gold from fiat will be revealed by a higher order (parabolic) trend acceleration of gold priced in major currencies. This trend, which has already started, will intensify once the upper trading channel (2001) is broken to the upside.

Gold London PM Fixed and U.S. Dollar Major Currencies Index Ratio:

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The Jump Line For Gold & Silver Is Growing
CIGA Eric

I know the line for the office window jump is growing for gold and silver, but it’s certainly not worth the wait. Today’s action reflects nothing the smell of burning electronics black box computers running algorithms unable to process selling strength and buying weakness. Breakout gaps, such as the ones formed on strong volume on 11/04 in gold and silver, are almost always filled shortly after their formation. The sell-off in stocks is little more than a retest of April gap resistance as support. See charts below.

Paper Gold:

Paper Silver:

S&P 500:

The hard sell-off, coordinated to redirect attention and instill fear, will be repaired. Investors with the discipline to avoid the jump line will come to see today’s action as just another daily hiccup within an increasingly volatile trend.

When enough “cause” is built, the run will resume. As I have said many times before, TIME is more important than price. The window of time does not become restrictive until 2011.

Gold Cycles:

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