There are two news stories serving as catalysts for the move higher in gold in today session.
The first of these is talk that the US is planning on lobbing some cruise missiles into Syria in response to unsubstantiated reports that the Assad regime has used chemical weapons against civilians. The has the attention of not only the safe haven markets, (the Yen is also getting another one of those goofy safe haven bids) but also the crude oil market, which is soaring moving above $109 at one point in the session.
The second news item is that the US is up against that pesky debt ceiling once again. It never ceases to amaze me how damned inept these politicians are and how they cannot live within their means.
Either way, that has the focus of the markets back on the US fiscal house disorder which is helping to put a bit of pressure on the Dollar in spite of the fact that global investors want to own the thing whenever a crisis or shock event appears on the radar screen.
I mean the entire thing is weird. Here we are talking about a nation that is running over $17 TRILLION in its national debt ( and remember we are not even talking about unfunded liabilities here) and there are those who are dense enough that they want to own more US Debt as a SAFE HAVEN. I honestly cannot stretch my mind around the two sets of words ever being coupled together in the same sentence; it is a fact however that the global investment community has been conditioned as well as Pavlov’s dogs to buy the blasted things every time they get nervous.
Gold has run into some pretty good selling at the highs made back in late May/early June after putting in some sizeable gains since Thursday of last week. Working against further gains in today’s session is the weakness in the mining shares ( HUI ) as those are following the broader stock market lower due to Syria fears.
Remember, gold buyers never like to see the shares going lower with the metal moving higher as it makes them nervous and more likely to snatch profits rather than dig in and buy more at the highs. Additionally, gains in gold due to geopolitical events tend to not hold as a general rule unless the events indicate a worsening of the situation. It looks to me like the market has priced in a missile strike; whether that escalates into something further is unclear.
I personally think it is ill-advised for the US to be meddling over there in Syria as I see no strategic interest of ours being threatened. Assad is a dictator of that there is no doubt but whose business is it of the US what he does or does not do in his own country? As long as he is not threating us or any ally or ours, why should we be lobbing million dollar plus missiles into that nation? To do exactly what anyway? If he were to go, who exactly replaces him?
Also where is the US Congress on this? Apparently Congress has ceded its war making authority to the executive branch. That seems to be a pattern nowadays.
Back to gold – the market has run into a band of resistance just shy of $1440. You can see how price has met up with selling at this level since late May of this year. Bulls have taken it firmly above the 100 day moving average however and three major moving averages ( 10, 20 and 50 day) are all moving higher with price trading ABOVE those levels. Also, the ADX line continues to rise and is at 23.45 indicating the presence of an incipient uptrend.
The lower indicator is nearing overbought levels however so some caution is warranted if you are long. That does not mean price is ready to collapse; it merely means that one might wish to protect some profits while they wait for another entry point if we get a correction lower in price. Any correction should encounter dip buyers just above psychological support at $1400 and again at the confluence of the 10 day moving average and the 100 day moving average in the vicinity of $1375 – $1370. The trend is up and that is the key right now. If it changes, we will try to pick that up using the indicators.
Syria is a wild card however and no one can predict exactly how events are going to unfold over there so traders with a short term horizon need to be vigilant. If that band of overhead resistance gives way gold will catch some upside wind due to the plethora of buy stops sitting just above there that should carry it on towards $1480 where I would expect some formidable selling to appear.
The miners need to find some sponsorship…..
by the way, Silver knocked RIGHT ON THE DOOR of its April high today before setting back a bit. That is near $24.80. Frankly, I do not see much in the way of resistance to a move higher if it clears that until one gets near $26. This market is extremely overbought and can spin on a dime so caution is also warranted. Bulls, do not get too complacent but stay alert for any shift. A 25% gain in the price of the metal since late June is nothing to sneeze at.