Gold Trend Nov 11, 2014

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Long Term ~ Bearish-Need a monthly close above 1800 to confirm the bull market final phase
underway. Need a monthly close above 1560 to neutralize the trend.
Medium Term ~ Bearish– Gold needs to close above 1272 on a weekly and monthly basis to neutralize the downtrend
Intermediate Term ~ Neutral/Bearish-Short term cycles favor higher into Nov 22nd
Short Term ~ Neutral- Short term cycles favor higher into Nov 22nd but the overall trend is still only neutral between 1252-1265.

Initial Resistance 1163-1173 2nd tier 1182-1190
Initial Support 1138-1148 2nd tier 1130-1133

Trannies Trounce Small Caps As Bullion, Bonds, & Black Gold Get Battered
Submitted by Tyler Durden on 11/10/2014

Two words tell you all you need to know about today's equity trading... no volume (lowest since Aug27th). The main theme of today - away from stock markets - was to unwind some or all of Friday's moves on the dismal Italy/Greece data: Treasury yields jerked almost 10bps off their lows with 30Y almost retracing the entire Friday rally; The USD rallied, recovering some of its losses from Friday (led by CAD and JPY weakness - which were both stronger Friday); gold and silver were slammed today - almost retracing Friday's gains; and oil prices gave up all their intraday gains to close notably lower. USDJPY and bonds decoupled from stocks which appeared led by a VIX-smashing day, sending the fear index below 12.5. The Dow and S&P closed at all-time highs.

Deflation Comes Knocking On The Door
Submitted by Tyler Durden on 11/10/2014

For the moment capital markets appear to be adapting to deflation piece-meal. The fall in the gold price is equally detached from economic reality. While it is superficially easy to link a strong dollar to a weak gold price, this line of argument ignores the inevitable systemic and currency risks that arise from an economic slump. The apparent mispricing of gold, equities, bonds and even currencies indicate they are all are ripe for a simultaneous correction, driven by what the economic establishment terms deflation, but more correctly is termed a slump.

Dutch ABN AMRO Demands Draghi Buy More, Faster As ECB's Mersch Flip-Flops
Submitted by Tyler Durden on 11/10/2014

Once again today we see spurious ECB members sending more mixed messages about ECB actions in the near future (and really only impacting precious metals by the look of it. Having said just a month ago that ECB QE would only be undertaken in strict adherence with mandates and treaties, and warning that QE would strain the ECB's risk-bearing ability; today Luxembourger announced that ABS QE would start next week and Sovereign QE is an option if things get worse. One bank, at least, will be overjoyed... as ABN AMRO wrote this morning that that the ECB needs to bid more aggressively for covered bonds to encourage the street to sell to them.

A "Dangerous Spiral" Has Taken Hold In Emerging Markets
Submitted by Tyler Durden on 11/10/2014
Via Natixis Flash Economics,
We find the following cause-and-effect mechanisms in a "dangerous spiral":

•Capital outflows, leading to weak investment;
•Accordingly, exchange-rate depreciation;
•Hence inflation, loss of purchasing power and weakening of consumption;
•Hence problems for the central bank, which is faced with both sluggish growth and inflation;
•The sluggish growth amplifies the capital outflows.

Several major emerging countries are caught in this dangerous spiral; Russia, Brazil, Turkey, Argentina, India and South Africa.
This "dangerous spiral" is very clear in Russia, Brazil, Argentina and South Africa. Some of its components are appearing in Turkey and India.

First stage: Capital outflows and weakening investment
If a country is faced with large capital outflows because this capital is not being invested in the country, investment is weakened.
This can be seen for all types of capital in Russia and Argentina and since 2013 in South Africa; for non-residents’ purchases of equities and bonds in 2011 and 2013, and since the summer of 2014 in Russia, Brazil, Turkey, South Africa and India.
This has weakened investment in all six countries mentioned.

Second stage: Exchange-rate depreciation
The capital outflows lead to an exchange-rate depreciation. This has been very clear since 2011 in all six countries (Russia, Brazil, Turkey, Argentina, India and South Africa).

Third stage: Imported inflation, loss of purchasing power, weakening of consumption
The exchange-rate depreciation leads to imported inflation and hence a deterioration in the terms of trade, a decline in real income and a weakening of consumption.
Inflation is rising in Brazil, Russia, Turkey, Argentina and South Africa, but no longer in India since the start of 2014. Inflation is reducing the real wage and consumption in Russia, Brazil, Turkey, Argentina and South Africa.

Fourth stage: Problems for the central bank
These countries’ central bank is therefore faced with both sluggish growth and inflation.
It is then faced with a difficult dilemma:
•Either it reacts primarily to the sluggish growth; it will then choose a low interest rate which will amplify the capital outflows;
•Or it reacts primarily to the high inflation; it then hikes its interest rates, which will depress domestic demand even more.
•Brazil has chosen a restrictive monetary policy;
•The other countries have chosen to keep real interest rates low, close to zero or negative (Argentina).

Fifth stage: Amplification of the capital outflows
If there is sluggish growth and, even more so, if the central bank does not react to inflation and gives rise to negative real interest rates, the capital outflows are amplified and the "dangerous spiral" becomes self-sustaining. This seems to be the case currently in Russia, Brazil, South Africa and Argentina.
Conclusion: It is very difficult to get out of the "dangerous spiral"
We use the term "dangerous spiral" for the following cause-and-effect mechanisms:
How can the countries get out of it? The loss of growth caused by the capital outflows and by the deterioration in the terms of trade amplifies the capital outflows. If the central bank reacts to imported inflation by hiking interest rates, it amplifies the weakness of activity. If it reacts to the sluggish growth by keeping interest rates low, it amplifies the capital outflows.

Short term Gold

Last night’s channel lines were most unusual but as you can see the lower trend line did provide the exact low point of the Monday trade. That is not to say it will continue because as you know trend lines hold but they also get broken. As in all things in markets, there are no absolutes. Price has tested the blue 89 hour and the lower trend line and is trying to turn back up. Resistance is most likely to come back in at the green 200 hour moving average and that trend line near 1170. As time wears on the average and the trend line will be drifting lower so as far as a price point, it will depend on when price gets there. Tuesday is Veterans day in USA so markets will favor being much more quiet in gold. Globex will be trading, but volume should be subdued. That means perhaps it will be a low range day.

Support will be the lower channel line and resistance the 200 hour green moving average. If we try and nail it down further, the 1167-1172 is 1st resistance and support 1145-1148.

In summary, the bottom looks in place for the short term and odds favor a move towards the 1180-1190 area.

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No one knows tomorrow's price or circumstance. 
 I intend to portray my thoughts and ideas on the subject which may s be used as a tool for the reader. 
I do not accept responsibility for being incorrect in my speculations on market trend. 

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