Gold Backs Away from Breakout Level, Euro Fades
It looks like the long Euro/long Gold trade is back on for real after taking a 2 month hiatus. This morning the Euro got thrashed because somehow the Bank of Canada not moving off of 1% for its benchmark lending rate is US Dollar positive. Personally, it looked like a convenient opportunity for short-term profit taking in both the EUR/USD, Gold and West Texas Intermediate crude.
The Euro dipped below $1.33 for a couple of hours as it is still very much range-bound below $1.34 while Gold sniffed at the $1696 level which is so prominent on the weekly and daily charts, saw its own shadow and retreated back to the safer confines of the $1680′s. gold dropped down near $1684 near the end of the European trading session and bottom bounced for the rest of the day. The weakness of these two inflation hedges saw non-confirmatory strength coming from the Silver and Brent Crude markets. Silver rallied hard up near $32.50 and Brent played catch up to last week’s lagging performance to test the $113 resistance area.
The action in Brent is very telling that this morning’s weakness in gold was simply an operation run by, most likely, the ESF to push the price back in the short-term. A weekly close of brent above $112.88 is extremely bullish. I would expect strength in gold during the Asian markets tonight once this morning’s operation is covered.