Gold Breaks Above $1310 Thanks to Jackson Hole and Euro Panic Buying

My latest at Seeking Alpha looks specifically at the rally in the euro in the wake of Mario Draghi and Janet Yellen speaking at Jackson Hole's convocation of Central Bankers on Friday. But, the result now is a free-fall in the U.S. dollar thanks to the perception of complete dysfunction in Washington.

This is why Gold is breaking above $1310 this morning and it's a big deal from a technical perspective. I didn't think we had much of a chance of closing August this high, but now it is very possible. We'll need a close at this level today to get more momentum-driven buyers into the gold market.

Nice, but we need a close on Thursday above $1307 or Friday above $1298 for this rally to have legs

But, what should begin to scare you is the melt-up in the Euro. As the euro rises the odds of bank failures across the euro-zone rise with it as the debt becomes more expensive to service. Draghi refused to talk in specific terms about ending QE since he is trying to talk the euro down and has been for weeks... to no avail.

From the Seeking Alpha Article

When I back out and look at things from a quarterly perspective, the strength of this move becomes clearer.

If these levels hold through September’s close, we’re definitely looking at a euro rally that could top out near $1.30 early in 2018. Having just cleared the two years of bottom-bouncing after the Swiss de-pegged the Franc back in 2014, this huge move in the euro should be concerning for all Europe bulls.

It was the overly strong euro that precipitated the previous rounds of sovereign debt problems. Today, the financial conditions are far worse, and this is why Draghi refuses to commit to ending his asset purchase programs. He knows the markets cannot sustain higher yields at this point, and if he keeps signaling he’s a buyer, he’s hoping everyone else will continue to front-run him.

In effect, he is the buyer of last resort. And he’s not getting any help right now on the currency front. Bond prices will have to rise to keep investors happy. There’s room to the downside in yields on German bunds after a sell-off earlier in the year.

This means there is room for the euro to make that run to the $1.30 area over the rest of the year. Between now and then, the situation in Washington will likely have come to a head, and either Trump will survive it or he won’t.

It is at that point that things get really interesting.

Watch for confirmation of capital flight out of Europe in the technicals in the Cryptocurrencies as well. Litecoin going nuts, Bitcoin happily grinding towards $4500, Ethereum towards $350. Silver above $17.32. These are all signs of another impending blast higher by all of these issues. Then there's Harvey leveling Houston and the fallout from that. Money is going to flow out of U.S. oil and insurance-related stocks while the Fed provides tons of liquidity.