Monday November 11, 2013 07:59
The initial sell-off last week in the metals after the ECB lowered rates was something an old trader could wrap his head around. The drop in the rates reversed the long Euro/Short $US trade and generally hit all dollar based commodities. The trade to $1,292 was expected by us, as early as Monday, but then the second leg snapped on the jobs number. We suggested a number over 170,000 would bring back the December taper argument; the market did not disappoint, adding another $15 to gold’s drop. We continue to believe tapering remains a 2014 event and suggest profits should be realized at these levels from the sell-off last week. Overnight we were looking for a $1,278 test of support which was missed by $2, with gold finding bids, just under $1,280. The market will remain focused on the Euro/$US trade, which I expect to stabilize, at least ahead of Yellen’s confirmation hearings this week, where she is expected to opine on her view of monetary policy, should she be confirmed.