Turning Dollars Into Gold
The dollar’s loss was gold’s gain today as traders sold the greenback, and dollar index futures
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on bets the US economy is, relatively, weaker than believed. Yesterday’s
“Beige Book” survey of economic conditions from the 12 District
Banks of the Federal Reserve had a hangover effect on currencies and
financial futures today, and gold was one of the major beneficiaries.
Most gold sold around the world is priced in dollars, so a decline in the
buck often correlates with rallies in gold as it makes the metal more
affordable and increases demand. Gold had been signaling that it could make
a larger-than-normal move by registering on the 6/100 Low Volatility
List for the past two days. Gold’s outside bar and strong close yesterday
was also an indication that the metal could trade higher today. The December
contract
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also gained 6.5 to 421.7.
The Fed’s survey painted the picture of an economy stymied by a weak
manufacturing sector and cast doubt about a recovery any time soon. Since the
prospects for recovery in the US now seem more elusive and Europe’s economy
appears not as weak as believed, traders sold September dollar index futures
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and bought Momentum-5
List member
Swiss francs
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euro FX futures
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PowerRating). The European currency futures surged to new
three-month highs.
The European Central Bank, the Fed’s cross-Atlantic equivalent, elevated
Europeans’ hopes of a recovery sooner rather than later by saying it would
“monitor” continental interest rates and presumably cut rates to
halt Europe’s own economic slowing. The implication here is that the ECB
will lower rates from their current 4.5% as early as this month. Swiss
francs added .0079 to .5931 and the euro FX gained .01190 to .89170.
Also from the
New 10-Day Highs List, the Japanese yen
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six-week high in an expansion bar, convincingly taking the yen out of its
contract-low consolidation. Notice how the Swiss franc and the yen, from the
M-5 and 10-Day High lists, qualified for Off The Blocks
entries and worked out.
Also from the Momentum-5
List, T-bonds
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start but consolidated in a narrow range. Ten-year note futures
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got stopped out of an OTB entry, hinting that its
Turtle Soup Plus One
Sell signal could might work out. The 10s fell after languishing on their
session highs for a close 10/32 lower at 105 24/32.
Sporting the same upside momentum and making good on the same setup as
T-bonds, francs and yen, September cocoa
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from the open finishing up 21 at 1032.