Gold – the one that got away.

Morning View Sept 7

Markets all over the world are rejoicing the intraday rally in U.S. markets on Tuesday. The S&P saw a low of 1135 in pre market trading, then went on the close at 1165, quite impressive. It does appear that Indian markets quite often forecast what the U.S. will do. Notice the sharp late afternoon rally in the Nifty when it crossed 5000 (day’s high, till then) to close at 5060.

Gold is down, while Equities are up. World is now in the ‘risk on’ phase. How long this will last is anybody’s guess. For short term traders, the Nifty has closed above its 20 day MA. That is a sign of strength. It is usually wise to go with the trend, in this case the short term trend is up.

Reliance is now touching its 50 day MA, as pointed out by Sudhin. The stock is likely to outperform, should be treated as a buy on dips security.

Gold – the one that got away.

Yesterday, at 9 PM, on the hourly chart, Gold was making a bearish head and shoulder with a target that should have given almost 650 points – a lot. The neckline was at 28100. I took the short trade, Gold went down by about 150 points, then rallied, and this panicked me. As it is, I have a long term view that is bullish, so my short positions had low conviciton, I suppose. I exited at my enrty point, the trade was a break-even.

Today, I find the decline continued, hit the target of 27450. Last week, I had taken a similar downside trade – I had posted the chart in real time. Yesterday, I just could not bear the short trade. I wonder why this weakness? All of this is psychology, I suppose. Readers opinions are welcome. Chart when the trade was taken, then chart as of today.

What the Swiss Franc move means for Gold

The Swiss Franc(CHF) was perceived as a safe haven currency. Yesterday, the Swiss National Bank (SNB) intervened in a dramatic way to weaken the Franc, which has been rallying like crazy due to European investors searching out a safe-haven.
The Franc had rallied to a parity of 1 against the Euro. Such rapid expansion of currentcy was hurting Swiss business. Finally the SNB said that it will maintain the swiss franc at 1.2 against the Euro, no matter how much resources it has to give. This was a devaluation of 20% from the parity which the Franc had touched.
Now, a weakened Franc is no longer a safe-haven. CHF‟s appeal as a safe haven is diminishing given the SNB‟s attempts to weaken the currency. Hence, we could see a situation where gold strengthens and CHF weakens going forward.
This increases the safe-haven appeal of gold, which has a finite supply.