Gold Rockets Up on Risk Off Trade Returning

Even the late afternoon ramp in equities could not dampen the bullish atmosphere in the precious metals futures pits today.  After a horrific Non-Farm Payroll print that even CNBC couldn’t spin in a positive light, Gold shot up past $1570 and then subsequently twice pushed through obvious capping action at $1566 and $1572 before ending the COMEX session at the high for the day.  Things got even better for the bulls during the Globex session where gold continued to rally into the 5:00 EDT close, ending the week down but well off of its worst lows at $1580 per ounce.

Silver rebounded as well, ignoring the wash out in general commodities which saw Brent crude break below $105 per barrel and WTI crude close near $92.  Silver bouncing in concert with risk-off assets like Gold and U.S. Treasury bonds was a welcome sight.  Silver’s commodity character, along with the mining shares, have been used ruthlessly and with precision to create fear and panic selling in the Gold pits, contrary to all fundamentals and logic.

Of course, markets can stay irrational for long than you can stay solvent, but the truth is that gold is no longer in the hands of over-leveraged momo-chasing monkey boys.  It is in the hands of the physically committed and eastern central banks.  They will begin controlling the rise in the price of gold and anyone standing in their way with what they think is an explicit backstop by the Fed will soon get left to die on the vine.  Today may have been that day.  Next week we need a close above $1603 and preferably $1620 to ensure that the reversal signal is given and the bullish momentum players can begin doing the easy job of chasing their short brethren out of their positions.

About Tom Luongo
Tom is a professional chemist and self-taught economist who has been following and trading stocks for nearly 12 years. He has no formal ties to the financial industry and considers that an asset in his analysis of the interplay between monetary policy and capital markets.

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