Gold took off today on news that the central bank of India purchased 200 metric tons of the metal from the IMF. The sale from the IMF was expected, but most people were expecting the Chinese not the Indians to be the buyers. The dollar was rallying in face of the gold move up, but then the dollar seemed to say ‘wait, I should go down when gold is up.’ and stocks which had been falling when the dollar rallied stopped doing so. Yet from our perspective, it didn’t seem that the gold news prompted new dollar declines and stock rallies, just that they paused their current trends (dollar up/stocks down.) But I think there’s more to this news than just a strong up day in gold.
click chart to enlarge
The daily gold chart generated a net-line buy signal today that carries with it a target of 1102 (and rising) for this move. But more interesting is the back to back range bust days (green/white) bars. It is very difficult to generate these bars on back to back days as you have to have an acceleration, and then another acceleration. Today is an extremely bullish day for gold in our opinion.
click chart to enlarge
click chart to enlarge
Both the S&P 500 and euro seemed to have found short-term support on the lower Keltner channel. I think this support is tempoary, and these markets will once again move lower together eventually. What is interesting is if these markets stay linked and gold decouples and takes its own path higher. We are expecting a dollar rally (euro decline) to take the air out of inflated asset markets worldwide. The level to watch on the euro is 1.45801, which is an active net-line sell level on the weekly chart (below). That net-line will be active through November 27 on a weekly close basis. Once that level is pierced, I think stock markets world wide acelerate lower.
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