QUESTION: Marty, it is amazing how these markets gravitate to your number like the 1043 in gold and 10530 in the Euro. You said at the conference we should watch the gold benchmarks like bookends and the bounce into the first warns of an opposite trend. Which week are you now looking for the turn?
ANSWER: Yes, the numbers are truly amazing. They prove that there is a hidden order and the majority must always be wrong for they are the real driving force behind the business cycle. The standard fool will chant the same fundamentals and will refuse to consider he is ever wrong, exactly like the politicians. That is why they will always lose the farm no matter what market.
The euro rally is simply the unwinding of the carry-trade. Fundamentally, that makes no sense since there is even more money to be made now. A hike at the Fed next week will give even more incentive to return to this trade. However, what you MUST realize is that going into year-end, the banks want to close their positions for reporting. All eyes will now be on the Fed next week.
The euro has lost its upward momentum with a closing below 10897 on the cash today. A closing BELOW 10830 today will warn that this is becoming very weak. Therefore, a closing below 10897 today will warn that new lows are likely and that we will probably flirt with 10530 if not 10365 for year-end.
Unfortunately, gold is much weaker on our system’s models than even the euro. The number in the euro of 10530 is equivalent to 1435. So a break of the 1043 level will be more significant in gold should we close below that number for year-end. Gold has penetrated the 1980 high in A$ and its advance in many currencies was percentage-wise much greater than in U.S. dollars. This is what has been causing selling from overseas markets because the loss in gold as reflected in their home currencies was much worse than the U.S. greenback.
Again, it is the foreign closing of shorts causing a rally in gold as in the euro — then flattening of positions for year-end. A closing above 1081 should result in a rally into the first benchmark but to be impressive it requires a closing above 1098 today. There are no Weekly Bullish reversals even close within a $100 of the low.
We will be providing the 2016 Gold Report in two parts. Part I will cover the target for the low and then we will deal with the projections moving forward in part II. We will announce when part I is ready. No orders in advance, please.
