(Kitco News)- Was yesterday the capitulation event for the metals complex? It appeared that no bids were present in the market for a period of timeand as Australia opened, gold fell anadditional $10 from Wednesday's close. When the Tokyo market opened, buying emerged, most likely on bargain hunting,which accelerated when news broke that China announced a new round of tradetalks with the U.S. The recent stories about contagion spreading to theEuropean banks from the financial woes in Turkey and the general uncertainty ofthe effects of a global trade war would have been assumed to be positive forgold. If the issues do create issues for the EU and then infect the U.S.financial market, it will be positive for gold. But, the first move is into thedollar and to some extent into the yen. In the financial crisis, gold initiallysold off, and did not begin to ascend until the Fed lowered rates to zero,which crumbled the dollar and fueled gold's surge. What has become apparent is that emerging economies, who have their debtin $U.S., are struggling with higher rates,as the interest payments take a bigger slice of their reserves. Will this beenough to create at least a pause in Fed policy? The key for gold's directionremains the dollar. We may just have another dead-catbounce on our hands here. The technical damage has been severe. Let's go a stepat a time for the bulls. Close above $1,182 and then $1,187 for a possiblebottoming signal. Support at the $1,173 area.
By Peter HugContributing tokitco.com
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