Gold Trades Lower on Hopium, Dollar Gains One Percent

Go long on “optimism.”

Bullion.Directory precious metals analysis 23 June, 2015
By Christopher Lemieux
Senior Analyst at Bullion.Directory; Twitter @Lemieux_26

Greece is said to be saved after Prime Minister Alexis Tsipras gave into the troika and EU on a bailout extension. The game theorists got.. played? However, the International Monetary Fund managing director, Christine Lagarde, said there was still a lot of work to be done. Perhaps the greatest feat is to propose the bailout extension to Greek lawmakers, which many believe will shoot it down (i.e. progress towards no progress).

Blowhards out of the Fed continue to spew rate hike rhetoric as if they have a shred of credibility anymore. How many years has the Federal Reserve boasted about a strengthening economy and the path towards monetary normalcy? It can be described – at worst – as verbal diarrhea.

Today, Fed Governor Jerome Powell said not only will there be one rate hike but there will be two! Keep in mind, myself and my colleagues have been voicing the Fed’s inability to raise rates for a very long time. We were front-runners, as it were, long before mainstream analysts and economists began to jump on the no hike bandwagon.

Nevertheless, in volume-less markets, hopium went bid pushing the dollar up over one percent on the day right as the Fed Governor said there was stability in the dollar.

The real gem came when Powell said there were no asset bubbles, but that is expected. The Fed had absolutely no clue the Great Recession was about to grip the world. Even several months into the recession, Ben “there’s no housing bubble” Bernanke thought the growth trajectory would continue upwards.

If the market would juxtapose Powell’s comments with Fed Chair Yellen’s post-FOMC comments, there would be a crystal clear imagine of confusion. Yellen bluntly stated that both economic and inflationary data DID NOT meet requirements for a rate hike and that further improvement would be needed.

After trading slightly above $1,200 per toz., gold has retracted quite quickly, currently trading at $1,177.90. Technically, price action could find support within these levels, but that largely depends on the dollar’s performance and rather or not the optimistic perception continues to go bid.

Gold remains in the large trading range and has no real direction. If prices continue to breakdown, expect the yellow metal to seek out trend support at $1,168 with deeper support at $1,152.

Upside potential could be capped at $1,188/92 before a retest of $1,200 can happen.

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