Originally published by Chamber of Merchants
I tweeted the word “Volatility” and immediately received instant likes and retweets. That sums it up in a nutshell: most traders are being tossed around between currencies and commodities.
I’ll make it brief.
This is what I see:
The Euro looks like it has bottomed (or at least not going lower). This is despite the DOJ from the USA holding a 15 billion dollar fine over Deutsche Bank AG (DE:DBKGn) NA O.N. (NYSE:DB), which adds market uncertainty and puts additional downward pressure on the Euro. Interestingly, the USA, for some reason might only reach a settlement after the election. Go figure.
The dollar meanwhile is testing lower resistance. If the Euro, Yen and Pound bounce, we should see a fallout on the US Dollar, especially after the first week in November when the hope of an early interest rate rise disappears entirely.
Meanwhile, Gold starts it 4th or 5th attempt at the $1270’s. However, it will not break through $1275 until the currency battle above gets sorted out. Gold is in a holding pattern until the currencies get sorted.
Conclusion
If you’re trading gold right now, then you’re actually trading on any news that gives strength to the Euro, Yen and British Pound, because these will exaggerate a dip or fallout in the dollar.
If you’re long on the US dollar, then you’re hoping for any news that will be bad for the Euro or Japanese currencies. You also want economic news that increases the case for a rate hike in November/December.(You also want a Hillary Election win).
I am long (placing by bets on) gold and silver because I believe that the economics don’t justify a rate hike. I also believe that the dollar is being held up by temporary factors that will not last long beyond the election.