Gold gets back on the rally tracks!

• Dollar short trade becomes overcrowded

• Gold gets back on the rally tracks!

• A$ and kiwi are best overnight performers

Good day... And a Tub Thumpin' Thursday to you! I'm still not feeling like I could go out and do some Tub Thumpin' so, it's up to you today... Gold did some Tub Thumpin' yesterday and overnight, short dollar is an overcrowded trade, and more real economic data today... All that, and more! The Eagles greet me today with their song: Victim of Love... This is from the Hotel California album, which I played so much in the day, that the groves in the record disappeared!

Well, it appears that we've stepped back into the Twilight Zone.. No wait, I meant to say, the dog days of summer! The participants of the saber rattling, last week, have been sent to their respective rooms, to think about what they did! HA! Seriously, the saber rattling is being forgotten for now, and we're back to the dog days of summer, where the volumes are thinned out, and the heat just gets to everyone.

I read an article on Bloomberg this morning that made sense, given the way the euro has traded in the past week, after it nearly traded to 1.19... The article points out that the "short dollar" trade is overcrowded... It's the 2nd most overcrowded trade... So, take wild guess at what is the most overcrowded trade... Final Jeopardy music is playing in my head, and the answer is... Long dollar! In all my years of being around currencies, I've never seen anything like this! Until January this year, the long dollar trade was the cat's meow, and the charts are quite interesting showing all the trades in long dollar, and then watching them change to "short dollar"...

But, the point I'm attempting to get to, is that the short dollar trade is overcrowded, which has been illustrated these past few days, with the euro losing ground it had earlier gained. These short positions begin to get closed out, until something comes along to make the investors go short again.

That's as clear as mud, right? Sorry, I'll attempt to do better with this discussion of the Aussie and kiwi dollars... The Aussie dollar (A$) jumped back over 79-cents overnight, after a better than expected Employment report showed that Aussie job creation for July was 27,000, marking the 10th consecutive month of job gains, and the Unemployment rate fell to 5.6% from 5.7%...

Then add in the Fed's FOMC Meeting Minutes (the minutes) revealed that the Fed members are beginning to worry about the fact that inflation will not get to higher levels as they keep telling everyone it will. This helped the currencies like A$ and kiwi because they currently enjoy a positive rate differential to the dollar, and if the Fed members are worried about the lack of inflation, they won't be hiking rates, thus the A$ & kiwi don't have to worry about a narrowing of their positive rate differential. There! How'd I do, better, eh? HA!

Gold got a reprieve from all the selling that has occurred in the shiny metal this week, and carved out a gain yesterday… I was reading an article yesterday that got me thinking about what could be the catalyst to get Gold back on the rally tracks firmly… And there it was right before my eye! The U.S. debt ceiling debacle that was kicked down the road a few months ago, is coming back to haunt us this September… Now, I realize that nothing really bad has ever come from these debt ceiling circuses, but this time we have a president who has said, “the U.S. Government is in need of a good shutdown”… Uh oh! So, as we draw closer to September, I’m sure the jawboning will begin, and depending on the President’s participation in the jawboning, it could be a very good time for Gold…

The shiny metal saw a gain yesterday of $11.70 to close at $1,282.80, and in the early morning trading today, Gold is up another $8.30, and is back to knocking on the door of $1,300, as it trades this morning at $1,291.20! I just sent my weekly article to the Dow Theory Letters editors and its about Gold, and I'll give you a little peak at what I said... "I just can't help but think that Gold's got something cooking, can you smell it? Like the Rock says, "can you smell what I'm cooking"...