Monday November 25, 2013 08:29
The market consolidated on Friday but we did continue to suggest a heavy tone remained evident. On Wednesday, we cautioned that a break of $1,255 would lead the market into the $1,220’s, where we find ourselves this morning. The apparent “deal” reached over the weekend with Iran on its nuclear capacity created flows into the US dollar and global equity markets as fears for a safe haven hedge became diminished. Metals are trying to compete in an environment, where investment funds are running for yield, a theme we have been suggesting for some time now. Add to the mix virtually no short-term inflation issues, geopolitical risks that are at a minimum and are perceived to be lessening as well as US rates that are firmer against the back-drop of tapering in 2014. Also add a terrible technical picture and gold’s drop over the past few weeks should not be a complete surprise. It’s dangerous to pick an entry point for a long trade. Program selling may be triggered in an already lightly bid market. If it flushed, I would step in at the double bottom of $1,180, but at these levels, the risk reward for a long trade to capture a bounce, isn’t in my wheelhouse.