"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


Wednesday, June 22, 2011

Gold chart analysis

The FOMC release this morning basically reaffirmed what most of the market has been thinking for some time now, namely, that the economic "recovery" is proceeding at a moderate pace though "somewhat more slowly" than had previously been expected. What a surprise? It is more like "YAWN".

The translation - they will be keeping interest rates near zero for the next few months, or in their words, "an extended period of time".

They repeated that the QE2 program would come to an end this month but at this point they had no intention of actually reducing their balance sheet or selling any of the $600 billion in Treasuries which they have purchased over the last 6 months or so. What they will do however is to reinvest the proceeds from maturing Treasury bonds. That will give some stimulus but compared to the massive sum of $600 billion, amounts to a drop of water into the bucket.

Gold liked what it heard and shot higher taking out the sellers who had been stalking the $1550 level. They were forced to retreat towards $1560.

From a technical perspective, the strong move past this solid resistance level, takes the market out of the recent tight range trade bounded by $1550 on the top and supported at $1520 on the bottom. It is now poised to make a run towards $1570-$1575. Downside support moves up initially towards $1540 followed by good support near $1530.

Keep in mind that this is occuring during the summer, not a time in which one generally expects to see a very strong gold market. A grinding move higher during this time frame would set this market up for a move to a fresh all time high later this year when the seasonally stronger period of the metal arrives. This just further underscores how currency concerns are moving gold as distrust in paper currencies continues to increase. Gold is signaling investors' lack of confidence in their monetary authorities and political leaders.

By the way, Gold priced in British Pounds set another all time record high price today.


  1. Dan, does this June remind your of last June for gold? Last June we made the year's high around the end of the month at $1265 (about $15 higher than the previous high set earlier that spring). On the 1st trading day of July, gold was smacked down $40/oz. and eventually sold off for the rest of the month until it bottomed at the 150dma. Do you think we are in for a repeat where we get to about $1590 by the end of the month and then sell off to $1460-$1475 in July/August? Or, are you of the opinion that if we are able to make a new high sometime soon that the pullback/consolidation will not go below recent support of $1510-$1520?

    Love the blog and your weekly interview on King World News.

  2. Dan, you said:
    "It is now poised to make a run towards $1570-$1575. Downside support moves up initially towards $1540 followed by good support near $1530."
    The move today (06/23) to $1524 shows that, IMHO, technical analysis is not relevant anymore. In a market where manipulation and/or hedgies's algoritms are the only market's movers it makes no sense to try to comprehend the market.
    I have said it before -and you did say it too lately- only fools trade this gold market.
    Your opinion would be appreciated.


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