Buttressing gold's fortunes us a good showing by silver and a particularly good showing in the mining shares which are surging.
Support should show up on any potential dip to $1755 - $1750 with very strong support now arising closer to $1720.
Note that this very strong move higher in gold is occuring with a backdrop of the US Dollar being relatively unchanged. That means gold is moving higher in terms of most all of the major foreign currencies - a sure sign that the metal is catching its bid as a SAFE HAVEN.
I want to emphasize this because we are repeatedly told by those who should know better that gold has failed as a safe haven. They say this because they do not understand the SHORT TERM effect of money flows in today's financial markets and how interwoven overall commodity market performance is to hedge fund computer algorithms.
Gold gets sold initially during such times of general risk aversion because it is part of the basket of commodities that comprise every single commodity sector index out there. Those indices include the CCI (Continuous Commodity Index), the CRB (Commodity Research Bureau) index, the Dow Jones/AIG Commodity Index or even the Goldman Sachs Commodity Index (GSCI). Computers do not think - they just do whatever they are programmed to do and selling commodities across the board is programmed into these algorithms when certain pre-defined conditions occur. It takes independent thought and analysis, combined with DISCRETIONARY trading, and not system trading, to counteract some of this mindless buying or selling. Only when there is sufficient Discretionary trading taking place, can enough money flows arise to stem some of the effects from these computers.
That means we need buying in the physical gold market that looks for value to counter the hedge funds. That has been the pattern in the gold market for more than a decade now. Those who keep pronouncing such foolishness such as "gold is a poor safe haven", in order to say something designed to get themselves maximum exposure in the US financial press because of its shock value would be well advised to adopt a longer term view and broader their narrow perspective. They are wrong and could not be more ignorant.
Once the value-based buyers absorb the computer generated hedge fund selling, then the technical factors begin to improve for gold as its chart pattern improves and back in come the same hedge funds, this time on the buy side. That is what is happening today once again.
Thank you Dan for your time and knowledge.
ReplyDeleteSo important what you wrote in this post!
ReplyDeleteThanks a lot :)
Now I do hope we have a mini krach in the SP 500 and panic selling, which will provoke another opportunity to buy more gold in the dips.
Dan, do you think this may still occur with all this fuss about QE3, and ECB looking like it's going to have to use even more of the printing press as well?
Dan, i am confused now. I am strongly bullish myself, and have lived through this bull market. Each time there is a drop, we blame on the manipulators and hedge fund algorithms. Is it possible that, this is in general bull market behaviour? Or do you mean that if not hindered, there is only ine way for gold which is up?
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