$1,300 Was a Coiled Spring Beneath the Market
We’ve been flirting with that $1300 level all year; I’ve been talking about all the resistance that was up there and every time the price of gold got near $1300 it was met with a tremendous amounts of selling, there was a lot of supply. But as I have been saying on this podcast, the demand was building. It was a coiled spring beneath the market. The channel was narrowing. The distance between the $1300 resistance and the support kept getting narrower and narrower. I thought it was only a matter of time before we exhausted that supply and broke through that psychological $1300 level.
The Rally Held Firm All Day
Gold is up about $18-19 on the day; we closed at about $1310. Finally, I think, there were people who were worried it wouldn’t hold that level, people were thinking that we would sell off so we wouldn’t quite get a close above $1300, we’d just get a trade above $1300. But the rally held firm all day long. We actually closed on the highs of the day. In fact, as I am recording this, the price of gold is taking another jump. Maybe it is the missile North Korea fired that went through Japanese airspace. We’re tacking on another $10-11; we’re now trading above $13.20.
The Dollar Is Now a Risk Asset
The dollar continued its weakness. It is one of the reasons that gold continues to be strong. The dollar index made new lows today, down around 92.20, and looking at the action so far in the early evening. The dollar is not benefitting at all from this flight to quality. We’re seeing a big rise in the Japanese Yen, a big rise in the Swiss franc. Those are the go-to currencies. The dollar is now a risk asset. People don’t buy the dollar when they’re worried, they sell the dollar when they’re worried. Even the Chinese Yuan – new high for the year.
Gold Now Going Up in Terms of Everything
Of course gold, now, is not only rising in terms of dollars, but finally rising in terms of everything. Gold is going up in yen terms, it’s going up in Swiss franc terms, even though those currencies are rising as well. This is a key factor, and I think now that we have cleared out that resistance, there are a lot of people who thought there is no upside in gold. Well they’re about to find out just how much upside there is.