Gold broke out before it had a reason too
The gold chart is one of those things that technical analysts will point to in the future to show how charts can predict the future.
Very little was happening in markets yesterday but a strong, sustained bid boosted gold by $15.
More importantly, it sent gold through $1300, a level that had failed to break on three previous attempts. That it would break higher wasn't a big surprise, but that it would happen on 'no news' was eyebrow-raising.
Here's what I wrote yesterday as the break was taking place and gold was hitting $1304.
The breakout today is a strange one because there is nothing going on in the bond market or stocks. Aside from oil, it's a quiet market with the UK out for holiday. It could just be a run on stops.
I'm normally wary of a breakout that takes place on a quiet day like today but this is an exception. For one, gold has been hanging around here for awhile. When there was no hard rejection of the $1300 level earlier this month it was a signal that the upside was probably the way higher.
So whether this holds over the next few days or not, I expect the upside the win out.
The upside did win out, at least so far. The second round of buying came like a rocket -- or more accurately, like a rocket test. North Korea tested a ballistic missile by flying it through Japanese airspace in a provocative move that triggered public early-warning systems in Japan. Gold climbed to $1326.
So now we have the story to explain why yesterday's mystery bid appeared.
Or do we?
There are no fortune tellers and the traders buying gold yesterday didn't know what was coming. Maybe there's another explanation.
Hurricane Harvey hit on the weekend and gold traders only got a chance to react yesterday. The scope of the storm is incredible and rain continues to pound the area as the flooding intensifies.
The disaster will curb Q3 growth and give the Fed second thoughts about hiking rates this year. Maybe it's as simple as that.
Whatever you want to believe, the signal on the break of $1300 in gold was a strong one and whether or not you cared about the fundamentals, the trade was to buy it.
