Gold Drops Through 200-day Moving Average

First of all, the euro (EUR) fell through the 1.30 level yesterday, and although it attempts to recover the handle, it just doesn’t have the legs to sustain a rally… There’s been no news from the Eurozone as the week has gone on, and the ratings agencies have been quiet, so the old saying that no news is good news applies here, I think… The only news we had this week was the good auction in Spain (followed by the sloppy one in Italy)…

I had a long time reader send me a note yesterday reminding me that when I say the dollar is strong, I’m wrong… The dollar is still very weak against most currencies and metals, it’s just recently stronger than it was…

Gold fell another $50 yesterday, and has now slipped through its 200-day moving average. This could be significant, if… Gold keeps falling, or remains below its 200-day moving average for a period of time. The mental giants out there are still saying, “If the dollar is going to be stronger, I don’t need gold”… They’ll rue the day they said that… But, that’s just me talking…

Recent trading patterns have gold holding its own in the overnight sessions, and even gaining a shekel or two, and then getting hammered during the US session… Gold is up $15 this morning, so it will be interesting if it follows the pattern again today…

A reader sent me a note that talked about how gold was holding up against the Indian rupee (INR)… Well… That’s because the rupee is falling faster than gold! Remember when I chastised the Reserve Bank of India (RBI) for announcing that they would defend the rupee back when it fell to 50? Not that I want central bank interference, but if they are going to do it, shouldn’t they do it before it takes a ride on the slippery slope? Rupees are around 54 this morning… So, it sure doesn’t look like the RBI came to defend the currency, eh?

And… The gold currencies (as I call the currencies that mine gold by the truckload — like Canada, South Africa, and Australia (and I know there are more, but these are the biggies))… Get dragged through the mud along with gold… So, these currencies not only feel the weight of the Eurozone sovereign debt problems, but they also feel the weight of a falling gold price…

I love it when I get to include a quote by Ted Butler, the metals guru… Most of the stuff he writes is to his paid subscribers, but every once in a while we get a snippet… And they are always welcome here… Here’s Ted Butler on the falling prices in silver and gold…

“Given human nature and our collective demand for easy to understand explanations for why prices are falling there will be, for sure, all manner of supply/demand explanations given to justify the price rout. But there have been scant signals from the real world of supply and demand to account for the decline in gold and silver prices. At the core, this is strictly another COMEX-commercial rig job. That it has been highly successful for the commercial crooks is unfortunate in many ways, but encouraging in other ways. The proof that it is another COMEX rig job is fairly easy to demonstrate in past and future Commitment of Traders Reports (COT), as the commercials are always big buyers on these price smashes. We have only gone down in price so that the commercial could buy. It’s not possible that the commercials can always be big buyers on such declines for any other plausible explanation. That the CFTC sits by, even though it has been armed with new anti-manipulative regulations is as shameful as it gets.”

I have to say that I truly believe that we’re going to see the government ovens working overtime in 2012, as they cook the books as best they can to show that we’re doing better… Got to get re-elected, right?

And then there was this, from CNN Money…

If you thought the US housing market couldn’t get much worse, think again.

Far fewer homes have been sold over the past five years than previously estimated, the National Association of Realtors said Tuesday.

NAR said it plans to downwardly revise sales of previously-owned homes going back to 2007 during the release of its next existing home sales report on Dec. 21.

NAR’s existing home sales numbers, released monthly, are a closely followed gauge of the health of the housing market.

While NAR hasn’t revealed exactly how big the revision to home sales will be, the agency’s chief economist Lawrence Yun said the decrease will be “meaningful.”

“For the real estate business, this means the housing market’s downturn was deeper than what was initially thought,” Yun said.

Yes… You see, if they come out now with this mea culpa, they can then begin to say that any gains in housing were greater than previously reported!

I also think we’re going to see battle after battle between the parties in 2012, and it starts today… You all heard that the house passed the payroll tax cut extension… But the Senate said it would not pass them… But then what do we have here? Today, the debt needs to get extended or we have to shut down the government… And who controls that? The House… Let the battles begin!

The global data cupboard shows that UK retail sales numbers were weak, just like they were here in the US and that Eurozone PMI’s (manufacturing indexes) are stronger than thought as they come in from the regions…

The US data cupboard is a veritable Whitman’s sampler of data for today… Here’s the list, for you to pick out your favorite one! PPI, Current Account Balance, Empire Manufacturing, Weekly Initial Jobless Claims, TIC’s Flows, Philly Fed (manufacturing) and two of my faves, Industrial Production and Capacity Utilization, all print today… The markets won’t get anything out of this mess of data…

To recap… The euro continues to lose ground… And rallies back to 1.30 are short-lived. Gold fell through its 200-day moving average as the mental giants still believe that dollars are better to own than gold. The gold currencies also feel the weight of the falling gold price, along with the weight of the Eurozone debt problems. And we have a data cupboard full of data today!

Chuck Butler
for The Daily Reckoning

The Daily Reckoning