Mischief Over The China Sea
September 26, 2016
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.
Now that the FOMC and BOJ meetings are out of the way and by the calendar from the ECB’s own website we’ve not a monetary policy council meeting there until the 4th of October, the market is left to wonder about and deal with day-to-day comments from central bank spokespeople as well as the changing political and economic landscape instead. To this end perhaps the most important news regarding Europe is that the Italian government will push ahead with a referendum supported by Prime Minister Renzi… more on which in the days and weeks ahead.
Further, there is a very real concern in Asia this morning as over the weekend Japanese and Chinese aircraft flew at one another following the Chinese decision to fly eight jets into the airspace between Okinawa and Taiwan. China has been very “ambitious” and prone to any and all sorts of “mischief” in the region, but this is the first time that Japan felt threatened by Chinese aircraft. China and Japan have been at odds over the Senkaku Islands for decades and we’ve written about these problems dozens of times over the past many years, but this is an escalation the likes of which we’ve not seen thus far, nor do we wish to see on a regular basis. Sino-Japanese relations are always tenuous at best anyway and this has only served to increase the tenuous nature of those relations.
Turning to gold, it is stable as it holds just below the strong resistance that has held it in check in US dollar terms at $1340-$1345/oz. and just below the technically and psychologically important €1195-1200/oz. level, with the latter being the more important resistance level in our opinion given our focus upon gold predicated in EUR terms. We draw attention to the chart of gold in US dollar terms below from Finviz where we have drawn a trend line across the tops in gold forged in early July; in early August; again in early September and over the course of the past several trading sessions. Further, we note that as gold has consolidated since midweek last week the volumes being traded on the COMEX have waned. This is as it should be if the major trend is still upward; that is, volume should rise as prices rise and volume should wane as prices either weaken or consolidate… and they are.