"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput

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Thursday, March 24, 2011

Gold breaks free from its Congestion Zone

Yesterday it was Silver that broke out of its congestion zone and began a new leg higher. Today it is Gold which has finally managed to clear the top of the congestion zone that had marked its trading pattern over the last few weeks. Volume on the breakout is strong.

The breakout also set a brand new all time high for the yellow metal in the process.

We are going to be encountering rollover pressure as speculative longs begin moving out of the April contract prior to its delivery period next week and into the June contract.  Rollover periods are a very good time to gauge the strength of a move higher as it gives longs an excuse to either book profits or reinstate expiring long positions in the next active month contract. If the hedge funds in particular choose to simply rollover with a minimal amount of profit taking in the April, that will be quite positive for further gains in Gold as we move through the month of April.

Based on the extent of the congestion zone and the subsequent breakout, a technical price target for this move in gold is near $1490.

We should expect to see buying support under the market first at the breakout point naer $1440, followed by $1435 and then $1420. I would prefer not to see any move below $1420 of any duration if this leg is going to yield a strong advance higher.


  1. I think it was you who wrote of the possibilities of a commercial signal failure

    with the looming deadline for those standing for delivery, coupled with the new JPM storage across the street from the NYF, and the decoupling of silver from gold

    what do you 'see' as the probability of a CSF come month end

    thanks for what you do and thanks in advance for whatever you may add in later posts

  2. Silver will take out $50 before gold even sniffs at $1500. Gold is in the slammer.

  3. In the event of a failure at the COMEX, what does that look like for a long futures position, call options position, the price of silver, and mining stocks? Could the market go bidless and actually fall?

  4. Julia - I do not look for a failure at the Comex. Comex will change the rules before that happens.

  5. Thanks for responding and for your great weekly interviews at King World News. I would love to hear you talk more about this on the blog or with Eric King. What would changing of the rules look like? Thank you in advance.

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  7. Why do you guys keep playing paper ? To end all the manipulation.. all you have to do is sell your paper and hold the gold in your hand..RIP JPM and the paper scammers...
    In a strange way.. you guys keep this thing going while you are participating in the game..
    I on the other hand only hold the coins and bars... if every long on gold did this... then the paper scammers would have a hell of a time

  8. Great question by julia. how would the comex change the rules and how would that affect the silver price?

  9. The COMEX could simply set position limits for everybody, including JPM and HSBC, who have the gigantic short on silver. That would cause silver to skyrocket out of control. I don't believe that will happen. As Trader Dan said, the CFTC will change the rules. I can see JPM and HSBC throwing their hands up in the air claiming, "too big to fail!" So the could possibly be granted an exemption from position limits for x amount of months so they can slowly unwind.

    There's also the new vault JPM procured that makes this situation a bit more interesting too. This would allow JPM to confiscate all the metal they have in their warehouse (new vault) whenever they wanted if shit hit the fan.


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