Was softer despite the weaker USD as we implied by yesterday’s Gold Fix title. This made little sense to us, as we have asserted for a week or so now that mid terms would keep gold bid, and any weakness in the USD should over react higher. That makes us rethink that correlation as elections near.
*also that the Yuan was higher (weaker) yesterday*

This Morning:

THE Buyer returned last night at midnight US time again. While we hesitate to label this activity by “our buyer” as demonstrated in this space, one has to at least acknowledge that even if it is not the same guy, liquidity does perk up in London.
Best guess is demand out of Europe is people punting long into the election or some straggling shorts covering. But note that Italian bond yields may be a trigger of some sort for weak hands to cover.

Yesterday’s Trades

We executed no Gold trades and cautioned ourselves that while a signal was on our radar, it would likely be a chip day for momentum traders like ourselves. Thus we stayed away. But at least one member saw the range as one to fade and bought against a technical number in the $1229 area and took b profits in $1233 level; which is a home run on a day like yesterday. Kudos to that member.

Other Money

The US dollar is narrowly mixed against the major currencies today, largely consolidating its recent losses. DX trading 96.30 last with 95.80 seem as major support.
The CNY is lower (stronger) vs the USD and continues to be the major currency that matters for gold and we suspect it will continue to assert itself in a trading range as long as China has the USD reserves to do it. This we feel is no longer temporary, but a mandate to appease suppliers of oil, the IMF, and assert self sustaining forex liquidity.
*comment on how this backfires*
*gold behavior yesterday vs weaker USD juxtaposed with today- variable is Yuan*

Outside Markets

HK was firmer and other global equities were mixed.
Global 10 year bonds were all a bit softer with Italy yields up 3-5 bps
Traders seem to be pulling in the reigns waiting for the US election results and FOMC meeting.
The oil market, where prices have been under pressure lately, will get both the EIA’s energy outlook and API U.S. inventory data today.

Elections Don’t Matter After All

Dems won’t fight gop on tax cuts, and its Dems cheerleading the infrastructure initiative.
This policy mix, which we associate with a stronger currency, of easier fiscal policy and tighter monetary policy will remain intact.
Both sides also believe China is cheating.  But that won’t stop stocks from rallying as GOP candidates do well. To us it really doesnt matter. And those libertarian Tea party types remind us of the judean crack suicide squad in Life of Brian. So continue down the line towards the abattoir.

Tariff Update

G20 meeting is meaningless:
Trump will likely begin the process to actually impose 10% tariffs on the remaining $255 bln of goods.
As to why he threatens frequently but rarely acts promptly, that is consistent with a man who isn’t good at having his bluff called.. but
Trump can dangle occasional carrots along the way slowing down implementation, because the real achievable goal while threatening China is to maintain maximum pressure on NAFTA partners to toe the line.
The 10% tariff on $200 bln Chinese goods is raised to 25% January 1st