Two weeks after the CME hiked gold margins by 22%, and two days after the Shanghai Gold Exchange sent them higher by 26%, here comes the CME, as we expected, with another 26% gold margin hike. And now we know that this particular margin hike was leaked well in advance, and explains the entire $100 plunge in gold today.
Commodities rally
The CRB Commodities Index did not follow gold lower and is testing resistance at 335. Respect of resistance, signaled by reversal below 325, would confirm the primary down-trend — offering a target of 295*. Penetration of the declining trendline is unlikely, but would warn that the down-trend is weakening.
* Target calculation: 315 – ( 335 – 315 ) = 295
Will Bernanke pull the trigger?
Rising stocks and a sharp fall on spot gold reflect uncertainty as to whether Ben Bernanke will announce further quantitative easing by the Fed, at Jackson Hole, Wyo. on Friday. Further purchases of Treasurys by the Fed would lift inflation and send investors scrambling for inflation-hedges like gold and blue-chip stocks. Stocks are rising, but gold is falling. Could it be that promise of an end to the conflict in Libya makes the world a safer place — or that a resulting fall in oil prices would reduce inflationary pressures? Brent crude and the CRB Commodities Index are both rising, suggesting that the precious metals blow-off is driven by profit-taking — after the sharp surge over the last few weeks and ahead of an uncertain announcement on Friday.
Spot gold is testing its secondary [green] rising trendline at $1700/$1720. Support is likely to hold — especially if there is any hint of QE3 on Friday — but failure would warn of a fall to the long-term trendline around $1500/ounce.
* Target calculation: 1900 + ( 1900 – 1700 ) = 2100
The monthly gold chart shows spot gold testing the upper trend channel of the long-term bull-trend. Correction to the lower channel would result in a substantial fall. A lot depends on what happens Friday.
