Dennis Gartman says his 40 years of trading experience give him a good reason to stay bullish.» Read More
Long-term gold holders are in the cross-hairs again.
After trading to new yearly lows and then falling below $1,320, gold on Thursday reached its lowest level since September 2010. Friday's session has seen gold enjoy a slight profit-taking bounce to retest a high of $1,301.70.
As the dollar rallied on Thursday, with the Dollar Index stretching back above 82, commodities across the board saw tremendous pressure in dollar terms. The Dollar Index was slightly negative on Friday, and you can expect a close below 82 to support gold. However, a retest of Thursday's highs and major resistance at 83 will be very bearish for the metal, as well as for other commodities.
(Read More: Why I Became a Gold Bear: Pro Trader)
Bullion is feeling the pain, dropping well below $1,300 after Wednesday's Federal Reserve statement delivered a decisive blow to gold prices. The prospect of a more responsible Fed has led to a buoyant dollar and a sharp selloff in precious metals.
I have fought this move for a long time, but I've now come to a new conclusion. I finally realize that it's not a question of the Fed's level of accommodation—which is clearly high—but of how the Fed's policies compare with those of other central banks. Right now, the Fed is the one central bank that is considering tighter policies, and that seems good enough to keep weight on gold prices, even if those tighter policies are enacted at an undetermined time in the future.
(Read More: Taper Tipoff? Bernanke Hints Easing End Is Nearing)
It is the market's anxious question: Will Ben Bernanke roll down bond purchase? For Pimco's Tony Crescenzi, the answer is clear: "No."
"What we expect from the Fed is for it to suppress volatility, and it can do it on a number of ways," the Pimco market strategist and portfolio manager said Tuesday on CNBC's "Futures Now." One of those ways is to "indicate that the $85-billion-a-month is staying," Crescenzi said.
Crescenzi sees the quashing of volatility as a major goal for Fed Chairman Bernanke. "What the Fed has attempted to do is suppress interest rate volatility, and push investors ever-outward along the interest rate spectrum," Crescenzi said. "You could call Bernanke 'Mr. Volatility Suppressor.'"
Crescenzi believes a Fed message that scares investors is one of the few things that could actually increase bond yields right now—because Fed action is not imminent.
"When bond investors believe that the Fed will be on hold for long periods of time and sitting on interest rates like an elephant on an ant, the bond investors don't look for that extra yield for the uncertainty that exists for the policy rate, because we're not expecting the policy rate to move," Crescenzi said.
So as important as maintaining the pace of asset purchases is, Crescenzi believes the Federal funds rate is even more important. "The more important anchor for interest rates is that Federal funds rate, which is at zero," he said. He expects the Fed to reassure the market that "there will be a considerable time between the end of asset purchases, and the first rate hike."
The technical setup for a higher S&P looks good. Equities continued to trade higher, with the S&P closing above the 1,349 to 1,351 resistance in the June contract, but just below the 1,355 breakout level. We will now be using the September contract, which trades roughly 6 points lower than the June contract, and traded up to 1,648.75.
Wednesday's high is 1,649, as this aligns with the 1,655 line in the sand from the June contract. The market will likely stay quiet into the 2 p.m. EDT Federal Open Market Committee statement, and Bernanke's 2:30 p.m. news conference.
(Read More: Fed Likely to Keep Options Open on Bond Buying)
There are gold bears, gold bulls, and gold bugs. And then there's Ron Paul.
The former congressman and presidential candidate is known for favoring gold, and he still believes it will go higher. How much higher?
"Eventually, if we're not carefully, it will go to infinity, because the dollar will collapse totally," Paul said on CNBC.com's "Futures Now."
A gold price of "infinity" might be hard to conceptualize, but Paul's point is actually quite simple.
He believes that "as long as we have excessive spending, and excessive computerized money, we are going to see gold go up," because the value of the dollar will be driven down. As each dollar becomes less valuable, it takes more of them to purchase an ounce of gold, meaning that the gold price measured in dollars rises.
Paul then takes it one step further. If Washington spending and Federal Reserve easing he refers to ends up toppling the U.S. economy and makes the dollar worthless, then no amount of dollars will allow an individual to purchase an ounce of gold. In that nightmare scenario, the price of gold (or anything else) in dollar terms is technically "infinity."
Because of these larger forces undergirding his gold thesis, the unkind short-term action in gold doesn't worry Paul.
Natural gas had a huge Monday, rising nearly 4 percent. So will it get back above $4 anytime soon?
We traded to a three-month low on Friday, and have now found some solid support. We've only started the summer, when demand increases.
Crude oil is rising to a nine-month high on Monday. So what's next?
Several developments have recently provided a tailwind to crude prices, even in the face of the ongoing bearish story for oil, which has been the tremendous amount of supply.
Unrest in Syria has reminded markets that there is always the threat of the sort of headline risk that can make shorts very uncomfortable.
(Read More: Oil Hits 9-Month High As Syria Tensions Escalate)
The "Big Boys" are cutting their gold positions—so should you?
Hedge funds reduced their net long positions in gold by 4.1 percent, according to the Commodity Futures Trading Commission's weekly Commitments of Traders report. The continued banter about the tapering of quantitative easing has led investors to bet that interest rates and the dollar will both rise, reducing gold's appeal at these levels.
Gold continued to consolidate during early Monday trading, stalling out with a high of $1,391.40. Support comes in at $1,380 to $1,383, as the market has stayed just above here, putting in a low of $1,384.10.
It was the market move that everyone seemed to be expecting: the correction that the S&P 500 has suffered over the past month.
After being presaged for months by technicians, portfolio managers and traders alike, the market's uptrend finally broke on May 22. On that day, the S&P rose above 1685 to a record high, before reversing on concerns that the Federal Reserve would soon roll back quantitative easing.
Within two weeks, the S&P dropped to 1598 before recovering. So were those 5 percentage points the entirety of the correction that so many were fretting over for so long?
"We've had a correction that, peak to trough, was very shallow," Leuthold CIO Doug Ramsey said on Thursday's installment of CNBC's "Futures Now." "But what's been encouraging is just the fear I've seen on many of the sentiment data points that I track, all of which have taken some heavy damage considering how shallow this pullback has been."
Gold remains confused under $1,400. Is it a currency or safe haven? Whatever your philosophical view of the yellow metal, you have to use the technicals to trade it.
Gold retreated in early Friday trading after rallying into Thursday's electronic close, when it tested the $1,388 pivot level on the upside.
Thursday's low was $1,373, just higher than Wednesday's early low of $1,372. A higher low will help support this market's attempt to consolidate back towards $1,396. However, a violation of this level, and furthermore a close below, will lead to a much lower trade—at a minimum, a test of the $1,364 support level. A close back above $1,380 to $1,383 will help neutralize this market going into the weekend. However, only a close back above $1388.40 to $1390 will help ignite a trade higher.
I have spoken to several hedge fund traders with a billion or more in assets under management, and they have reduced their gold holdings by 2 percent to 6 percent, while increasing stock exposure. This is important, because physical demand alone will not bring gold to all-time highs—the big players must step back in the market.
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