Funds now have the smallest bullish positioning in gold since June 2007. That could be your sign to buy.» Read More
Gold isn't trading like a safe haven—it's trading like a currency.
Gold retested major resistance on Thursday night, reaching $1,397.10 before falling back. The market was able to recover from pullbacks earlier Thursday to close back above $1,383.90. But early Friday trading finds gold getting back to this level from the highs.
We have been looking at a chart that discounts the quick move through the $1,411.70 retracement level up to $1,413.10, and this shows a market that has now tested resistance at $1,397 four times and has failed (and fallen back at least $10) each time. Traders have had a tremendous opportunity hedging longs as well as selling outright against this level.
Our level of support at $1,375 held very well Thursday, and a retest Friday will be very negative to the bull camp. However, the line in the sand is the support ranges from $1,464 to $1,467.70. If the market breaks this level, expect to see gold close at the lowest level in more than two weeks, which will put the bears in complete control. A close above major support at $1,380 to $1,383.90 will likely keep the market neutral to the slightest bit positive into the weekend.
The reality is that there is no imminent catalyst to help this market follow through. Recently, as the Japanese yen has moved lower, so has gold. The yen is positive against the U.S. dollar on Friday, but is still trading far from the highs (just as gold has fallen back). If the yen can climb back, you should expect gold to follow through to $1,400. Yes, this means that gold traders should also gauge the dollar, which is trading one point from this week's new swing high at $83.50. If the Dollar Index can climb back above 84, the yen should press lower and so should gold.
Due to technical difficulties that we experienced today, we were unable to stream "Futures Now" live. Our apologies for the inconvenience.
However, all of the video clips from the show, as well as the video of the full show, will be available on demand. You can find them on this site shortly.
"We're moving toward an ah-ha moment in the market where people begin to realize that these bouts of QE over four years have not produced escape velocity in the domestic economy," he said. "The domestic economy is not self-sustaining. Wealth in the stock market is not trickling down. And we saw flat revenues in the first quarter. Yes, earnings were up 3½ percent, but half of that was from buybacks. There's an artificiality in both bond prices and stock prices."
Kass said that he had misjudged the effect of quantitative easing by the world's central banks.
"I underestimated the impact that global monetary easing would have and that there were few alternatives to equities," he said.
Bond yields have surged in the month of May. So just how much have retail investors lost?
Almost five years.
On July 25, 2012, the 10-Year Treasury yield hit a low of 1.38 percent. And on Wednesday, yields finished the day just shy of 2.04 percent, as investors became concerned that the Federal Reserve will taper quantitative easing sooner than previously expected.
(Read More: Fed Mulls Tapering as Soon as June: Minutes)
That huge move in yields translates into a gigantic difference in how long it takes bond investors to get their money back. To make up for this jump in yields, bondholders would theoretically have to hold their bonds for 4.8 years longer to make the same amount of money that they would receive if they bought bonds today.
Worse, if bond yields continue to rise on the theory that the Federal Reserve is about to taper its bond purchases, then those who bought bonds at the bottom will be missing out on more and more money. Adding insult to injury, the S&P 500 has appreciated by 24 percent since then.
As Federal Reserve Chairman Ben Bernanke testified before Congress, yields on 10-Year Treasurys touched two percent for the first time since March. This as investors became nervous that the Fed could wind down their bond-buying program sooner than expected. Of course, this also has the potential to negatively impact the stock market.
All eyes are on the Federal Reserve.
Gold's choppy overnight trade kept the metal above $1,380, and it rallied to $1,388 shortly after midnight. Traders will be tuning into Fed Chairman Ben Bernanke's testimony in Congress on Wednesday morning for any clues about the bank's bond purchasing program.
Additionally, the Federal Open Market Committee Meeting minutes will be released in the afternoon, and traders again will be looking closely. The big question is when the Fed will stop or taper quantitative easing.
(Read More: Hilsenrath: Here's What Bernanke Will Say)
With Consumer Confidence at the highest levels in years, and the equity market continuing to rise, gold has taken a back seat as investors flock to more attractive investments. The metal was able to trade well off the lows it put in on Sunday night, but gold has been capped at $1,400. Only a close above $1,404 will be able to signal a potential bottom in this market.
In a hearing starting at 10 a.m. EDT, Federal Reserve Chairman Ben Bernanke will go before the Joint Economic Committee to give his outlook on the U.S. economy. But what investors will really be listening out for is what Bernanke says about when quantitative easing will end.
However, according to The Wall Street Journal's chief economics correspondent, Jon Hilsenrath, the chairman's testimony could be hamstrung by disagreement within the Fed.
Gold prices fell two percent on Tuesday, surrendering much of the previous session's hefty gains, as strength in the dollar against a basket of major currencies weighed on the precious metals.
Gold, down in seven of its last eight sessions, fell on a firm dollar, weak technical signals and speculation that the U.S. Federal Reserve might rein in its stimulus program.
Meanwhile, silver remained under pressure, but well off Monday's lows, when it slid nearly 10 percent to a 2-1/2 year trough, on heavy fund liquidation in Asian trade and generally weak fundamentals for the metal.
It's been a tough month for bonds. In May, 10-year Treasury Notes have dropped by four and a half percent. But with Fed Chairman Bernanke testifying before Congress on Wednesday, would you rather be long or short bonds right now?
Crude oil was extremely volatile last week, with big moves both to the upside and the downside, but one pattern did emerge. The range it has traded in has held over the last few weeks. Crude oil has been a sell in the $96.50 to $97 areas, and a buy between $93 and $92.
But let's take a closer look. I would like to buy dips in crude this week for two reasons.
First, as we head toward Memorial Day weekend, demand for products picks up. This applies to gasoline to be sure, but in addition, demand for ultralow sulfur diesel (the former heating oil contract) has been strong, so that alone should keep crude supported for this week.
Second, there are rumblings on the geopolitical front. Syria is still out of control, Iran nuclear talks are going nowhere, and over the weekend, North Korea launched short-range missiles.
Because of these overhanging geopolitical factors, if you are shorting crude, you have to place stops. Indeed, if something breaks out, crude could instantly pop $20. That has always been the interesting dynamic of crude: Any news about it usually means it will spike higher.
Only economic weakness sends it lower. And for now, the U.S. seems stronger, and demand worldwide has been growing.
So where would I buy in to this market?
The support areas at which I would look to buy are $95 to $94.50,and then $94 to $93.50. I would sell cautiously between $96.50 and $97.50, with a tight stop above $97.50. But I would rather trade it from the long side right now.
CME Group brings buyers and sellers together through its CME Globex electronic trading platform and trading facilities in New York and Chicago.
Take your trading to the next level with a platform that lets you trade stocks, options, futures and forex all in one place with no platform or data with no trade minimums. Open an account with TD Ameritrade and get up to $600 cash.