“Woe to the land whose king is a child and whose leaders are already drunk in the morning. Happy the land whose king is a nobleman, and whose leaders work hard before they feast and drink, and then only to strengthen themselves for the tasks ahead”. (Eccl 10: 16-17)

"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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Friday, November 11, 2011

12 Hour Gold Chart

Risk trades were back on in several markets today with equities rallying, the US Dollar selling off and both gold and silver moving higher. Once again, copper was up and thus so was silver. The link between those two metals lately has been quite tight.

Gold bounced from support near $1750 and is moving back to towards $1800 once again. You might recall from the other day that I mentioned a large number of fresh short positions were shoved on at $1800 and above. We will see how those new bears defend those fresh positions. Bulls can give them plenty of headaches if they can muster the strength to push price through that recent high. Failing that, the market will see some liquidation from both floor traders and shorter term oriented longs who will note the inability to better that level and take that as a signal to book some profits.

Aiding the cause of the gold bulls is the very strong showing in the HUI today as it is currently up better than 3% and is above the 600 level on that index's chart. A strong close above this level to end the week would be very constructive on the weekly chart and would set the sector to mount a charge to the 610 level early next week. Failing to hold above 600 would discourage some of the bulls.

Initial downside chart support lies just below 580.


  1. Looking at the dollars reversal at the end of week and the strength in oil along with what looks like a triangle in stocks, throw in a dash of seasonality and I think the set up looks good for a rise in gold to $1850. Next week should be interesting.

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  3. I completely disagree with Shawk.

    Precisely because of huge strength in Oil and rapid advance in Gold, which is not yet confirmed by Silver, I would argue that moves are now near the end, specifically for Oil which has rallied $25 in a space of a month and half!

    GLD inflows are once again very high as dumb money chases Gold's move straight line up. A correction is at hand without a doubt and it could take us back to test the lows or even push us towards making lower lows.

    It is difficult to say because at the same time, COMEX speculators have cut positions on both Gold and Silver towards levels associated with previous bottoms.

    However... Gold is up 11 years in the row. Despite of Gold being in a secular bull market, there has been no other asset class I found that went up 11 years in the row without a bad year. That is such a rare event... probability is for a major correction here after a spike towards $1925.

    Nikkei 225 did 10 years before a massive crash. I think Gold is no where near finished its run, but we are overdue for a shake out of PERMA BULLS!

    What could be interesting is that Gold could be staging its first LOWER HIGH since October 2008 and yet optimism is flourishing as if $2,000 is the next stop.

    Bloomberg reported 21 out of 22 "experts" voted for higher prices 3 weeks in the row... We'll see about that!

  4. Tiho,

    On October 24th, the Hubbert gold index hit sentiment levels on gold that were near the 2008 lows. Sentiment on gold is not even at neutral yet, so in the near term I don't see sentiment as valid reason for a decline.

    Though silver isn't confirming, it still is recovering from the major run this spring. Traders are hesitant with silver. Instead we are seeing relative strength in the HUI including some nice up days when the broad market has been down.

    Now, with that said, I'm a trader and gold could certainly correct harder. If the dollar can indeed stay above the 200dma and start showing strength and gold fails any retest of the 150dma, then I'll stop out of positions around $1620 and stand aside as the chances then become more likely we'll drop below the September lows and probably seek a low in the $1400's.

    And I respect your position. I am not a permabull and I do believe that we could use a shakeout of permabulls as you say, but also believe we could be in for a session where we climb the wall of worry during the seasonally strong period going into the holiday season.

    Appreciate the response. Always good to see both sides.


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