Tuesday, April 16, 2013

One more bursting bubble - this time it is gold

Tweet the headline.

Click image to enlarge in HD

Tweet the highlighted text by clicking on it

Gold has just broken through its well defined support at 1554 USD per oz. Apart from being able to spot what has just happened, a far more important consideration is to pinpoint why it has occurred, and what can be done to take advantage.

This is yet another case of delayed reaction. The US economy is growing, at long last. The US presidential election is out of the way and the incumbent has the power now to put through, albeit with some difficulty given the nature of the political opposition, the measures that will lead inexorably to the removal of the Quantitative Easing that has weighed on the US dollar and made gold the ultimate safe haven.

The big players know this, and in fact have known it for some time. Last January gold finally went below its 200 day Simple Moving Average, after flirting with it for a period prior to that:

Click image to enlarge in HD

Regular readers will know that the 200 day SMA is the only one of very few traditional technical indicators we have respect for at Omicron Forex.

What does the gold collapse mean for currencies?  Well, the Aussie dollar is in the firing line, for one. Interest rates Down Under are so elevated that the only real way is down for the Aussie. The Euro seems to be supported at around the 1.30 USD level, probably by the intervention of the European Central Bank (ECB).

Gold is enjoying a little bit of a corrective reaction this morning but we have set the Omicron Forex Silver Trigger algorithmic routine to take short trades only. Remember we are dealing in probabilities here, as always, and right now both the stats and the fundamentals favour short trades in gold.

No comments:

Post a Comment