Gold Bulls Capitulate
(Kitco News)- After the Fed gave a more hawkish perspective on Wednesday,followed by the ECB announcement on Thursday that it would be year-end beforethey were looking to tighten, forex traders aggressively bought the dollar.There was a delayed reaction until Friday, but metals traders having initiallydisregarded the 250 bip drop in the eurofinally capitulated on gold. Gold's inability to break above $1,307, the200-day moving average, also created technical pressure on the gold market. Amove of this size in the euro suggests that maybe a light bulb went off in themulti-national corporate trading rooms. US rates aremoving up and ECB rates, at best, areon hold until year-end. I suspect that a number of corporates have not as ofyet converted their offshore balances for repatriation home after the tax-law changes. I would expect a bounce afterFriday's carnage. Would see a $1,287 level as an initial target, but dollar strength needs to mitigate. Thesupport line around $1,278 must hold to prevent a test as low as $1,250.
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