Frexit Denied: Summary of $1270 Gold and Why That's Good

Politics

French Election Results

Update 6

7:25p.m.

Why is Gold Down?

via Vince Lanci

We are seeing previous safe haven buyers of gold exit based on France’s first round, and projected second round elections.
Those buyers were primarily concerned with candidate Le Pen, a right wing nationalist who is for France severing its EURO currency ties.
What made matters more worrisome was the rise of a far Left candidate, Jean-Luc Melenchon, who was also anti- EURO.
If Melenchon and LePen were the final 2 candidates, there would be a referendum to leave the EURO

BUT

Macron, a more moderate and Pro- EURO candidate beat out Melenchon. Further, he received the endorsement of another 20% of the vote represented by 2 other candidates.

That puts Macron at about 65% of the popular vote vs. Le Pen getting 35%.

Traders are handicapping this as a sign that the EU has dodged another bullet, and chances of a FREXIT referendum will diminish with Macron as President.

So we are seeing the flight OUT of safety vehicles like the USD and Gold. Since gold is priced in dollars, a weaker greenback is normally bullish for Gold. But when Gold and the dollar rise in tandem for safety purposes, they both retreat when fear subsides.

What is interesting so far is that Gold is holding up well considering the move lower in the USD. During Brexit, Gold rallied 5% when the USD rallied 2%. Here we see the USD down 1.5% and Gold down 2% so far. That is a win as far as I can tell for Gold.

The Math

June 24th Post Brexit: 2% USD Rally > a 5% Gold Rally. NICE
April 23rd France Handicap : 1.5% USD Sell-Off > 3.75% Gold Drop = $48 lower = $12.41! CRAP
April 23rd Post Election (so far) : 1.5% USD Sell-Off > a 2% Gold Drop? ILL TAKE IT !

About: Vince Lanci has 27 years’ experience trading Commodity Derivatives. Retired from active trading in 2008, Vince now manages personal investments through his Echobay entity. He advises natural resource firms on market risk. Over the years, his expertise and testimony have been requested in energy, precious metals, and derivative fraud cases. Lanci is known for his passion in identifying unfairness in market structure and uneven playing fields. He is a frequent contributor to Zerohedge and Marketslant on such topics. Vince contributes to Bloomberg and Reuters finance articles as well. He continues to lead the Soren K. Group of writers on Marketslant.

Twitter: VlanciPictures

Website: Echobay.com

Email: vlanci@echobay.com

Update 5

Euro up 1.45%
USD down vs every currency
Gold opens in less than an hour here

The Risk On Crowd Should Hammer Gold to as low as $1245.. BUT

With the USD down vs every major currency, in a normative situation you would think Gold would benefit. That is probably not the case here. WE will probably see the inverse of what happened when the Brexit surprise hit in June of 2016.

Gold spiked as much as 8% on the news and closed up 5.15% that day. It settled on Comex up $59.30 at $1,322.40, off an early high of $1,362.60 an ounce. The USD went up approximately 2.10% then. So there was an approximate fear factor in Gold of 3% added.

If we handicap that concept now, anything under a 4% drop is a win for Gold when the dust settles. We'd be happy if Gold dropped less than $40 tonight when all is said and done. To the extent it does not drop that much, we are seeing a persistancy underlying in the uncertainty in the world. French Election opiates be damned.

The remaining fear factor could be related to the chance Le Pen could beat Macron, but we hope not.

We would like to see Gold above $1260 where the USD weakness partially offsets the "risk on" crowd stampede. That would mean the market is more interested in monetary policies than the French election. This would be a home run

Ignore Spot as Starting Point Tonight

Right now spot is down $18.00 1.10% at $12.65. We'd expect it to go much lower at least once before the selling stops based on the roughed out math. That said, we'd be happy to be wrong. But Spot closed on Friday before Comex futures. Futures rallied after Spot closed. That is where you should start the calculation today.

Gold last on Friday in Comex futures was $1289.1. As of this post, June Gold is trading $12.69, down $20.00 or $1.5%. Anything down less than 4% is a home run and a reaffirmation that the problems underpinning the global situation, be they immigration, nationalism's rise, the death of Globalism, or just plain old currency debasement and price inflation.

For example, Gold is down approximately 2.6% in EURO terms, and 1.5% in USD terms.

This is not so bad

h/t Kitco Charts

Update 4

Euro Screams higher as it seems Risk- On is back
Macron receiving all endorsements so far
MELENCHON REFUSES TO ENDORSE ANYONE FOR SECOND ROUND FOR NOW
ABSTENTION RATE AT 21.82% AT 9:33PM: FRENCH INTERIOR MINISTRY
LE PEN AT 24.13%, MACRON AT 22.42%: INTERIOR MINISTRY AT 9:48PM
Macron receives Backing of Fillon, the other conservative candidate

Follow the latest news on the ground courtesy of France 24:

UPDATE 3 - Macron now Overwhelming Favorite to be Next French President

Final election Odds

1.17 to 1 that Macron will win = 85% chance of winning
7.4 to 1 that LePen will win = 13% chance of winning

according to BetFair

....Trump and Brexit never happened.. Nope

UPDATE 2 - FREXIT REFERENDUM ON TABLE

France could face 'Frexit' after far-right leader Marine Le Pen came second place, according to projections
Le Pen and independent centrist Emmanuel Macron beat two main parties to go head-to-head on May 7
Republican candidate Francois Fillon conceded after he and far-left leader Jean-Luc Melenchon got 19.5%
A polling station in Eastern France was forced to close as bomb squad was deployed to deal with a vehicle
The worrying incident comes after a deadly ISIS gun attack on the Champs-Elysees in Paris on Thursday

Update 1 - 2:38 EDT

polls are closed. Votes are being counted now.