Let's take a look at Gold. Using a fib projection from May H/L, we can clearly see the support and resistance levels. The June 14th low of 547.20 almost hit 100% at 544.70. Since we seem to have resistance at 582, 61.8%, that will be the gauge as to whether or not we have put in the lows. Should we fail here, I would think 544 would be right around the corner. The best play at this point would be to wait for a break above 581 that holds. I would be very careful if we fall below 558, 200 dma.
The backrop is very simple: higher rates, especially ones that take us past neutral, are bullish for the dollar short-term and a graveyard for gold as inflation becomes a non-issue. Flight to safety is no longer a gold play, it has been supplanted by attractive yields. Further out, there is a danger of stagflation as the Feds go too far and keep raising rates in a slowing economy. That is the nightmare scenario for the Global markets and the inverted yield curve is looking very ominous. The hope is that for all their tough talk, the Feds might call it quits at 5.25%, and that could give gold a floor. I certainly hope so, because I am not sure the markets have fully priced in any hikes past June. Conclusion? Range bound trading for everyone ahead of the Feds.
This entry was posted
on Tuesday, June 20, 2006 at 7:36 PM.
