Bond Markets Gyrate While China is on Holiday

By Tom Luongo in Gold and Oil News | June 11, 2013 23:20 | Tags: , , , , ,

For anyone trying to figure out why Gold cannot rally in the face of spiking bond yields and an appreciating Yen, look no further than your calendar.  The Chinese markets are closed for the first three days of this trading week and with that one of the major sources for gold demand.  For those that don’t know the drill at this point, 90% of all trading days in gold go something like this. Beginning at around 3am Gold will come under attack during early European trading.  This will continue into the COMEX pre-market at 7:30am.  Depending on the news cycle there may be a small bounce between then and 8:15 or so, until gold reaches some important technical level, at which point the selling will begin and the price capped below either that important level, or a slightly higher one if the post 8:30am economic data is so horrific even the Fed and its quislings have to let the price of gold rise for 5 minutes or so.

But, no matter what, no technically significant level will be breached for more than 5 to 15 minutes and the chart will get violent. This selling will grind the price down for the rest of the day until the New York market closes at 6:30pm.  New York opens back up at 6pm, Syndey at 7pm and the price will begin to rise slowly.  If there was a huge wash out it will continue on margin-related selling until Shanghai and Hong Kong open at 9pm and this is when the grown-ups come to trade, bidding the price up until 3am when the whole thing starts all over again.

No China equals no upside momentum.  The raid on Friday began after London closed and no more physical metal could change hands.

From the action in the bond markets today it looks like the Fed has finally stepped back on the QE accelerator after taking a couple of weeks off.  The 30 year bond moved up as high as 3.43% before turning around and pushing back to 3.31% just 4 hours later.   If they can move the biggest market in the world like that in that short a time frame, are you surprised by the volatility in gold?

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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