Gold Breaks Out — Print Away!
By Global Macro Monitor
Gold is up big today and trading like the monetary printing presses are ready to kick into overdrive. We believe the recent Fed speak about QE3, possible BofJ intervention to weaken the yen, and growing expectations that tomorrow’s announcement by by the EU may fall short and force the ECB to monetize bond purchases are contributing to the move. In addition, given the recent PMI data out of Europe, the ECB may be forced to ease sooner rather than later and even hearing hints and rumors floating around the ether of China easing.
At the end of the day we don’t know why gold moves the way it does and given its ambiguity of value it is the one commodity most dominated by technicals, in our opinion. Note how it traded down and held its 200-day just like a textbook on technical analysis says it should. The next move should be to fill the Sept 23rd gap down, which also coincides with the 50-day at around $1740 in the December contract or the $169.50-170 level in the GLD.
Always with a stop!
The only thing gold is “following” is the manipulation money. We’re in a global deflation (other than the commodities manipulated bubble); the value of the dollar will go up and the gold bugs will be be shocked to see gold eventually fall to $300. The only instruments worth holding are actual cash (not money market funds) and US Treasury notes, bills, and bonds. The Treasury auctions are over-subscribed every time. Regardless of what they say publically, the sovereigns still buy US treasuries. Forget all this technical analysis !