"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, August 3, 2011

Gold Chart -

The Breach of overhead resistance at the $1650 level set up a run towards resistance at $1680, which is, for charting purposes, effectively where gold has now run. It came in a bit shy of the actual number but as you can see from the chart, has encountered likely bullion bank opposition at the level noted.

You might also note that this resistance level is very near the top of the channel that has been formed over the last month's worth of price action. The angle of ascent for gold is much steeper than it has been in the past but it is certainly no where near parabolic. It has just moved to a bit more sharper angle as investor fears have grown. Even at that, the word "PANIC" is no where yet found (it will be later).

As long as we still hear commentators and analysts talking up how "CHEAP" stock valuations have become, you can rest assured we are no where near any sort of panic stage. Just look at how eager these guys are to back up the truck and reload it once again with equities. It is as if the entire generation has been conditioned to buy dips no matter what the hell is going on in the nation or the globe for that matter. I can see them still buying up stocks when the overall national debt of the nation heads to $20 trillion, then $25 trillion and then $30 trillion. "Buy 'em". Rating agency downgrade - "buy 'em". QE 5 - "Buy 'em". QE6 - "Buy 'em"... and so on and so on and so on. We just don't believe that there is any such thing as a BEAR market - those are no longer possible in this new day and age in which the Fed can print lots and lots of money to fix everything".

Today's big rumors and pit musings were started by Bill Gross of PIMCO commenting on the Federal Reserve preparing for another round of stimulus. A couple of other folks joined in on that parade and that was enough to pull the S&P 500 back from the brink. Yep - that is just what we need - more money printing! Then again, there is no other arrow left in their quiver except that one as the federal government is not going to provide another round of stimulus (not that it would do any good anyway). It was this chatter about another round of QE that knocked the props out from under the US Dollar and took some of the wind out of the long bond today which has recently been on a one way trip due north. I think Bill must be kicking himself still on that previous Treasury bond call.

In an odd manner, Federal Reserve bond buying programs are currently being viewed as NEGATIVE for bond prices. The idea is that once its sets out the punch bowl again, no one else will be buying bonds as they will all be rushing back to get their fill of equities as they load their boats with those and dump all the Treasuries they just stuffed under their mattresses. Yes, this is called "investing" in this day and age. Madness is how I prefer to describe it as another round of QE will do as much good in curing the structurally rooted problems in the US economy as the first two rounds did - mainly NOTHING.

News flash to this gang - QE will not create jobs. It has already been tried twice and been proven to be an absymal failure. Many corporations are showing good profits but that is because some of them have eliminated their single biggest expense - their payrolls! Think about it - the combined QE1 and QE2 was close to if not more than $2.5 TRILLION Dollars and how many jobs did it create?

This is what the monetary authorities of the US economy and that of the EuroZone have been reduced to - money printing. They think that by providing liquidity they can fix years of overspending and massive indebtedness. I don't know whether to laugh at such ignorant stupidity or cry because of where these people are taking us all. I sometimes wonder if we are under a divine curse that has inflicted upon us fools for leaders and policy makers. They act as if they are somehow immune from History. Or could it be that their hubris suggests to themselves that they are actually wiser and more learned than previous generations and know how to accomplish those things which their unfortunate predecessors could not?

It really does not matter at this point as the die are already cast and the drama now waits to be acted out to reach its inevitable conclusion. Debt has consequences not the least of which is it cannot be endlessly multiplied and renamed prosperity without corrupting those who are liable for it. Perhaps I am hopelessly antiquated but I learned that it is the SAVERS and the LENDERS who hold the true power and not the CREDITORS and BORROWERS. The FORMER become the masters; the latter become the slaves.

Back to gold however - it now needs to take out today's high and plow through $1680 to set up a run at $1695 - $1700. It should find some light buying support down first near $1650 and then better support near $1625, levels at which it encountered some selling resistance of the way up. Take a look at the chart and you can see the markings.

Open interest has begun to rise again which is a healthy sign - as long as it does, the market will move higher.

Silver finally made it to its target of $42 today before setting back some. It is basically running in $2 increments so look for a move to $44 should it be able to clear $42 and hold that level. Support in silver is back down near $40 for now.

Copper has rolled over on the price chart and seems to have confirmed a top in there. Any indication that another round of QE is on the way and this market will undoubtedly reverse to the upside once again. For now it is signaling a slowdown in global growth is the dominant view.


  1. Thanks Dan, I read everything you post. It offers great guidance and insight.

  2. Dan, that was an excellent analysis, again. Thank you.

  3. Dan, you're a breath of fresh air in our polluted financial world. Thanks for taking the time!

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  5. Hello Dan,

    I can sense your frustration. My view is that the market will continue up from here until the beginning of October and then we are looking at a 25 to 30% correction in the SNP. Bonds will fall in price, higher yield, and the dollar could rebound to 80.

    As for the buying - I think there's a simple reason for buy the dips mentality of the market. For one, its mindless. Really, money gets funneled into the market every month mindlessly buy millions of workers by way of their 401k's. This amounts to the tune of billions every month needing to find a home. I can't tell you how many people I have tried to convince otherwise, that continue to believe they will retire as millionaires if they just stick to the program. Logic and sanity have not place in their investing routine. It's all mindless and mechanical. Sadly, this habit will be hard to break so I foresee this kind of market behavior for years to come. The average investor just isn't sophisticated enough to see the difference between nominal and real returns. This is just another reason why I am so bullish on the metals. In my view, we have seen nothing yet!!!:)

  6. Thanks, Dan, for another wonderful post.

    Especially appreciate your comments about copper

  7. Dan,

    First as always thank you for taking the time to post your insight is highly appreciated.

    Secondly you are not antiquated. I am 26 now and have been following you and Mr Sinclair for the last 2 1/2 years - not long I know. I have also read up on Austrian literature.

    I am not the only one in my age group I have several friends who have done the same. I have also been educating others. From my prospective the ideas of economic literacy and its to liberty are moving forward.

    Thank you for your time in providing me with an eduction that I would have been hard pressed to find else were.


  8. Good on you Dan, and on you Justin too. I'm a little older (29), but have been buried in Austrian economics (via Chicago earlier in life) for the last four or five years. I haven't made entirely the right choices in my investments (learned a strong lesson about leverage last year...), but wouldn't even know where to start without Dan, TF, Bill Murphy, Franklin Sanders, Zero Hedge.

    My generation, I believe, for the most part does not have a clue about what could well be about to happen to us. We lack the benefit of experience, having not yet had to learn to mistrust authority (hell, most people I know here in the UK work for the government). Your hard work is helping people like me incalculably, and who knows, maybe when all this blows over, might just have influenced a new generation of leaders too. Please do keep it up!

    All the best,

  9. Thanks Dan, for all of your helpful advice. And at no charge!


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