Sunday, April 27, 2014

Gold reverses on Ukraine worries | …but only when traders get to their desks

Last week our short position in gold was behaving very nicely, to the extent that we had taken off half the position on the well established principle that we had gained a profit of more than 2% of equity on the trade. The precious metal seemed to be cruising past the support level that was established back at the start of the month, and we were feeling that perhaps taking off half was a little premature.

But a principle is a principle. 

Then, at around midday on the 24th, gold went suddenly into reverse. The market had apparently decided that Ukraine was coming to the fore again after a report of violence between two of the warring factions on the ground. The Yen was similarly affected. So significant was the reversal in gold that our entire position was closed by the Mandelbrot routine when price reached the Break-Even level on the balance on the following day. We are now monitoring the situation with a view with a re-entry to the downside when the criteria for this have been re-established, according to the requirements of the Mandelbrot algorithm.

…but events only become issues when traders get to their desks

What is of major interest is the timing of the move. While there were intimations, albeit well within the normal background price movement of any commodity, that something was afoot form an hour previously, the big move up did not take place until 13:30 GMT, which is 08:30 in New York, or precisely the time at which traders in that city’s institutions and hedge funds reach their desks of a morning.

Ukrainian separatists and their opponents are hardly waiting for the opening of trading in NY to begin their operations. The incident that would have been the catalyst for this move had to have taken place quite some time previously. However, the effects on the global markets must wait, seemingly, for the orderly appearance of the movers and shakers in order to be made manifest. Interesting indeed.

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