Europe or Presidential Debates – Which Moves the Market?
The European Central Bank (ECB) left interest rates unchanged today as President Mario Draghi waits to see if Spain does indeed ask for help before the weekend. The Iberian country is still deliberating on it if wants to take up the ECB’s offer, and the conditions associated with it. Mr. Draghi did say that the ECB’s aggressive bond-buying plan has eased credit tensions somewhat. The euro has reacted positively to Draghi’s comments and has broken out of its recent consolidation around 1.29. So far the currency is capped at the psychological area of 1.30. This should provide firm short term resistance.
The precious metals markets were quiet during the Asian session but were brought to life in the late European / early NY session on the heels of the ECB announcement. Gold took its cue from the euro and is fighting to stay above the significant figure of $1,790. While gold has approached and briefly broken through this level three times in the last two weeks, it has yet to close above it. It is a particularly important area because it represents the previous high from 2012, a figure it hasn’t touched since late February. When a close above $1,790 is achieved, the next major technical resistance awaits at $1,820.
The huge International Monetary Market (IMM) short position continues to exert significant downward pressure on the Dollar Index. Pressure on the dollar of course means higher prices on the metals. I expect the dollar, however, to strengthen going into the end of the year.
The presidential debate??? A non-issue in the currency and metals markets. Nothing significant is expected to change no matter the winner. Prevailing consensus is that monetary creation will continue, if for no other reason than that there is no alternative. As with businesses and individuals, when you get in too deep, your only option is to restructure your debt, default, or be bought out.
Here’s the price action so far this week:
