Gold Faces Technical Headwinds
March 6, 2017
Dennis Gartman is editor and publisher of The Gartman Letter, and strategic advisor of the AdvisorShares Gartman Currency Hedged Gold ETFs (GEUR & GYEN). He regularly contributes to AlphaBaskets and lends his institutional insight to educate advisors and investors about commodities and the forex markets, including about trading gold in different currency terms.
In Europe, the “big news” this morning is of the Deutsche Bank and its new “capital” raise of $8.5 billion. The Bank has needed to get this done for some while but the news was announced over the weekend and although it is obviously detrimental to existing shareholders because of the dilution, the fact that $8.5 billion shall be raised is support of the EUR itself.
Also supporting the EUR vs. the US dollar is that the PMI’s for each have moved in the former’s favor for the first time in a very, very long while. Rounding to the nearest whole numbers, here in the US, the February and January PMI’s were 54 and 55 respectively, while in Europe February’s PMI was steady at 55. This is a small difference, but it is a difference nonetheless.
Turning to Asia, the big news there, of course, is the multiple missile launches by the North Koreans into the Sea of Japan. The Yen, interestingly, is a good deal stronger despite the news that one of the four missiles fired landed only 200 miles from Japan’s west coast.
Gold traced out what was effectively a weekly reversal to the downside last week. The only thing that kept it from being a text-book weekly reversal was that the late rally on Friday kept gold in US dollar terms from closing below the lows of the previous week and merely closed lower for the week. Nonetheless, this action is clearly not bullish for gold and we have to suggest that some further selling is almost certainly going to develop, perhaps sufficiently serious to take spot dollar gold down to $1190-$1210/ounce before any longer term support can and will develop. As Sgt. Esterhaus used to say to his younger police charges before he sent them out into the mean streets of the once popular television series, “Hill Street Blues,” “Be careful out there.” That cannot be stressed firmly enough this morning: Be careful out there!