Tuesday, April 13, 2010

Recent Action in Gold Explained

Trader Dan Norcini, Jim Sinclair's MineSet

The big mover of the day was news of the Greece bailout (okay – call it a “rescue package” – it is still a bailout) put together by the EU to the tune of €30 billion ($41 billion) at 5%. Further icing on the cake is to come from the IMF which is providing €15 billion. The Forex markets went into a tizzy last evening with the Euro jumping more than 2 points at one time before things began settling down and a bit of relative calm descended on the currency markets as traders attempted to sort out the implications. Once they did, the Euro surrendered over a full point worth of gains and the Dollar moved back ½ cent off its worst overnight lows.

Gold shot all the way to $1,170 when the news broke but as it came into New York and as the Dollar began recovering, the sell side crowd went back to work and knocked it down off its best levels of the session. The same thing occurred with both silver and copper as well, the latter which had made a new yearly high before sellers came in and took it down.

It was particularly odd seeing the bonds moving higher as the whole idea behind the party in the Forex markets was that a meltdown had been avoided and it was time to play the risk trades once again. Something tells me that the feds are playing in the bonds as they are particularly worried about rising interest rates and would have us believe that they can conjure unlimited amounts of money into existence with little to no effect on yields. The reason cited for the higher prices today was a lack of upcoming auctions over the next couple of weeks.
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