It is becoming more obvious by the day that the 79 level on the USDX is being defended by the major central banks ahead of the U.S. Presidential election in three weeks.  Four times today the USDX approached (or breached) the 79 level on the downside and four times it was lifted back up and over.  This put a lid on the Euro’s advance as well as the Yen.  It may be the BoJ doing the heavy lifting here as the Euro leaks higher and capital flows out of the long end of the U.S. treasury yield curve; flooding the system with Yen to keep the USDX from imploding lower.

The Fed wants a weaker dollar but only when it is politically convenient.  As I said earlier in the week, they and the E.C.B. have announced their QEternity programs, along with just about everyone else but the effects of it have yet to show up in the monetary statistics.  What has me most worried about the future is the Bank of Thailand’s decision to cut rates last night.  Southeast Asia should not have to do so unless the situations in China and India are worse than the moderate bulls believe.

A lid on the Euro meant an easy cap on the price of gold near the $1750 level which has been in place since last night’s Asian trading sessions. The $1753.35 level was the effective capping point today, around $7 higher than yesterday’s $1746 and it will be this kind of stair-stepping action, I believe, every day between now and November 6th. The gold market is setting up well for an positive close after the past two weeks, but with options expiry on Friday, I wouldn’t expect too much movement between now and then.