Why did gold go down when news broke that S&P was putting ALL EU countries on negative credit wa

cohodk

At about 1:45pm there was a report that S&P would put all EU countries on credit watch for possible downgrade. Gold sold off about $15 over the next 30 min. Why? Just simply because the dollar went up? I would have thought this precisely the news that would push gold higher.

Baley

the heart says gold is going to go up, the gut says gold is going to go down, the mind says gold is going to go sideways

scotty1419

Doesnt seem like PMs are doing anything based on normal practices or in reasonable response lately to market news...


What's that? Volatility in the market? Gold's going down!

What's that? record week for stocks? Gold is going to flatline!

roadrunner

Gold has 3 gaps sitting lower down to about $1690. GDX/GDXJ/SIL also have 2 obvious gaps sitting lower that they've been eyeing over the past couple of days. Seems to me
that regardless of how gold "should" react to current news, it is just mapping out a short term corrective pattern since double peaking at $1790-$1803. Charts wins out over
fundamentals/news. Based on what I saw Thursday and Friday it looked like miners were getting primed to fill lower gaps and that gold would follow. Once these gaps get filled then gold
can react "properly" gold-positive news once again.

I would think that after gold pulls back to the bottom of this sym. triangle one last time ($1690-$1702) it could be primed for a strong move....hopefully an upward one.

roadrunner

cohodk

it could be primed for a strong move....hopefully an upward one


I agree. It is certainly poised for a big move.

I would look to the US dollar chart for direction, which to me, looks very bullish, especially if it breaks 80.

roadrunner

I'm not so convinced the dollar is still primed for another move towards 80. It still has that fat gap sitting down at 75-76 just begging to be filled. Gold typically will have yet
another seasonal run from now until later December assuming the Euro banks don't experience another earthquake. I've been paying far less attention to news the past few
weeks and just concentrated more on chart action, volume and oscillators, and gaps. Having a less clutterered and fearful/anxious mind seems to work wonders. And let's face
it, there's so much news coming at as on a daily basis that one can't possibly react properly to such news unless you have a HF trading computer terminal. But I will agree that the
dollar in 2011 has put in a convincing looking cup and handle (downward sloping) that could project to the upper 80's (also an IH&S that goes back into 2010).

roadrunner

secondrepublic

There's a lot of reasons why the opposite could happen. Maybe there was something else going out that outweighed the news. Maybe a big player was clearing out a position at right around the same time. Maybe the market didn't find the news either "new" or worthy of moving the market.

cohodk

Having a less clutterered and fearful/anxious mind seems to work wonders

Truer words have never been said.

My trading follows the KISS principal. It works.

I do think there is a very strong probablity of the dollar not only breaking 80, but ripping through it. Lets see if the central banks can contain it this time.

roadrunner

The dollar is also still following a similar path as it did in 2008...now about at the same point it was in August 2008 with a 2nd tap near 80....then came the moonshot to 88.

But it's a big IF if this is a repeat of the conditions of Aug-Nov 2008. At least this time the FED,IMF,ECU all know what's coming if they don't liquify the big banks as needed.
In my mind a repeat of fall 2008 seems unlikely...though the fear of a repeat is quite present in most people's minds. They can fear it will happen again, but that's far different
than it happening.

roadrunner

cohodk

The difference I see this time vs 2008 is that now global central banks are lowering interest rates. Australia just cut again today. Europe a few weeks ago. Both will cut more over the next year. As they cut, their currency becomes less attractive. The dollar is losing its competition. Even gold is suffering.

Justacommeman

I'm really not sure what long term effect a S & P downgrade would have. After all they downgraded the US and it was summarily dismissed after a week or so. I think everyone knows that it stinks in the US and in Europe.

I have also learned over the years that the initial moves are not necessarily the real moves. MJ

ebaytrader

<< <i>At about 1:45pm there was a report that S&P would put all EU countries on credit watch for possible downgrade. Gold sold off about $15 over the next 30 min. Why? Just simply because the dollar went up? I would have thought this precisely the news that would push gold higher. >>




You answered your own question insofar as second biggest driver of the gold price is triangular forex arbitrage where gold is the third leg.

highcheese

USD moving up is making sense to me too, in a kind of "visceral way" if that makes sense to others. My concern with this is, is it due to my natural bias towards thinking as a US citizen with an admittedly limited world view? I've spent my entire life with the USD as the world's reserve currency and it is very easy to have a skewed perception. On the other hand, this bias will also be effecting millions of others the world over.

Lastly, what are some strategies/vehicles people use to play the USD potential move up?

cohodk

<< <i>

<< <i>At about 1:45pm there was a report that S&P would put all EU countries on credit watch for possible downgrade. Gold sold off about $15 over the next 30 min. Why? Just simply because the dollar went up? I would have thought this precisely the news that would push gold higher. >>




You answered your own question insofar as second biggest driver of the gold price is triangular forex arbitrage where gold is the third leg. >>



I understand that completely, of course, just wondering why the "fear" would not overwhelm the fundamentals. Is the power of fear waning?