The 'Reasons' Are Intended For The Weak Hands

Gold drops on equity rally? More headline fodder designed to misdirect. The headline might as well associate the decline with falling temperatures in January. As I said in previous commentary, here comes the drama on both sides of the trade. As the following note from Jim suggests, it doesn’t take much to support an operation that has been pushing the news flow since late December.

The Goldman / Face book deal yesterday shows what the general public, so called experts and the media feels about what holds value today.

* Significant forecasts of good US biz.

* Bullishness of general equities.

* Next week is the anniversary of the 1980 flop projected from the low in terms of time. The actual date Jan 14th.

* Bank of America capping amount of bad mortgage buy back from Freddie and Fanny considered a template to cap all other mortgage buy backs read positively by general investors

* Shorts taking advantage of the above.

The price can react anytime in gold, but it will trade at $1650 and higher.

Jim

Let’s not forget that dollar strength and gold weakness, whether initiated by the former or latter, provides excellent cover for a maturing Euro operation. Ah, yes, while the Euro has become a bit of old news for the retail speculator, there's still profits to be pulled from the table. The players reposition and profit while the 'experts' discuss the reasons for the weak hands.

When the weak hands finally secure their understanding of the market, they often find that reasons and trend unexpectedly changes. This is why the 'reasons' matter little - follow the money.

Euro and the Commercial Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest:


Euro and the Nonreportable Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest:


Headline: Gold Drops Most in Seven Weeks on Equity Rally; Silver Falls

Gold fell the most in seven weeks on speculation that a global recovery will curb demand for the metal as a haven asset. Silver plunged.

Equities gained worldwide. The dollar strengthened against the Japanese yen on speculation that the U.S. recovery will gather momentum. Gold posted a 10th straight annual gain in 2010, rising 30 percent and outperforming stocks and bonds. The metal reached a record $1,432.50 an ounce on Dec. 7.

Source: businessweek.com