"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


Friday, March 9, 2012

Gold Charts and some comments

Extreme volatility was the name of the game  (ONCE AGAIN) in the gold market in today's session as it was reacting to all manner of crosscurrents.

First there was the payrolls or "jobs" report which took the market lower only to be met with news of the rating agency Fitch's downgrade of Greece to "restricted default" which seem to send the shorts into quite a frenzy in their efforts to cover and get out. Their buying took the market up off the lows bringing it back to unchanged on the session at which point fresh money came into the market keeping the price in the plus column for the remainder of trading. The result was that gold ended the day higher by nearly $13.

What is more significant is that the bulls were able to close out the week on a positive note after what amounted to a horrendous start to the week. Not only that, but price managed to recapture the psychologically significant "17" handle once again. All in all, a very good performance for the metal.

Take a look at the following chart and you can see that gold bounced precisely from the level it needed to on the technical chart, namely the $1680 level. Price spiked down through this level earlier in the week but the selling seemed to dry up, or at the very least was met with strong buying which appears to have been more of the case.

I would not be the least bit suprised to learn in next week's Commitment of Traders report that a rather sizeable block of bullion bank short positions were lifted this week. Now those traders will no doubt be selling back into this latest rally once again so we will need to see what we get early next week in Monday and Tuesday's price action to surmise the extent of their activity in the gold market Wednesday through Friday of this week.

The level near $1720 is the next resistance region on the chart. That is what stands between gold and another test of $1740. The latter zone is what held the price in check on the way higher earlier this month so before this market can hope to get another shot at $1750 or higher, the bulls will have to dispatch with that.

So far the downside support in gold seems to be very solid. Very active buying was seen at this week's lows. Should gold return to near this region next week for any reason, we will have to watch to see whether the same buyers become active once again. As long as they do, the market will hold. The longer it does so, the more the odds favor another period of sideways trade rather than any steeper selloffs or a more extended period of price weakness.

I should point out here the massive rally in the Dollar that took place today sent it on a close through the 80 level basis the USDX. It is pretty difficult to argue with the price chart which looks very strong right now. If the Dollar can continue to push through the resistance level shown, it stands a very good chance of making another run back towards 82 where it should encounter a decent test of its strength. A push past 82 that can be sustained for more than one session, will be very noteworthy.

 Technicians will note that it managed to stay above the 50 day moving average; a bullish sign.

By the way, something that should not go unnoticed in today's session is the fact that with the Dollar up over 1%, gold was higher. What that means is that it moved higher in terms of the most if not all of the major world currencies. Euro gold pushed back above the 1300 level notching solid gains on the day as did Yen gold as well. This kind of strength in the gold market is indicative of a lack of confidence in paper currencies nearly worldwide. And why shouldn't there be any confidence when Central Bankers are all beating each other to death in terms of seeing who can keep interest rates lower than the next guy.

Even Brazil has had to join in this "debauch thy currency" movement with many of the opinion that the Chinese are preparing for the same with theirs.

The HUI managed to once again close out the week ABOVE the 500 level after trading down below it earlier in the week. Apparently the same buyers in the gold shares who have been doing so for the last year and a half, are still accumulating various gold shares on these bouts of weakness. The gold shares, while attracting good buying down here, have not been able however to extend their recent rallies. They are acting as if they are still looking for a catalyst but one thing is becoming more clear - those who are buying them are very strong hands.

It would take a weekly close below that support line shown to indicate that this band of powerful buyers has had a change of sentiment.


  1. Great analysis Dan, you stand head and shoulders above anyone out there that I read. Good Job,



  2. Thanks Dan, for doing what you do and for sharing your views. Hope to hear more from you tomorrow at KWN.

  3. Nice to have a weekly wrapup. Would love to see gold and silver charts updated with moving averages! Seems the 200 day for gold played its role this week.

  4. Dear Trader Dan,
    Yes thank you for this “lifeline” - your blog. Thank you for your time, perhaps seasoned with doubt about its worth or usefulness; for me you offer a forum for people to express “reality” in their own words. No one can really claim to know the Truth, but here we can express what our experience is telling us.
    I would like to talk about “the Common Good”, which is partly an attitude that one can AND SHOULD have to his neighbor. It is also the common heritage that is held “In Trust” for all of the People, something amassed over the years to assure the well-being of all. For all the people who feel that gold represents something that is precious, and by definition hard to find, I think I can say that gold is a basis of exchange, something recognized for its value, stability, and transportability. That the United States of America has accumulated the largest stocks of gold of any other country attests to this premise.
    Now considering the Common Good in the light of the integral development of the person, I think everyone would agree that this would include by definition: the gainful employment to utilize inherent talents for his/her own progress, and for society. Furthering this logic, one could think that anything which fosters employment goes in this sense.
    Therein lies our current dilemma: that your Public Powers in the US do not recognize gold as a “Common Good” to be protected – you need only review public testimony recently given, and subsequent market action; and on the contrary, that employment for all and private sector wealth, seem to be privileged over other social considerations.
    Why bother with these two schools of thought? Well for one if I told you that the objective for the Common Good by American authorities was the promotion of the Dow Jones – you may say fine, I like that idea, I already own stocks. You could argue that these companies offer employment to American citizens; promote public wealth; that is not only very good, but patriotic. I think that as we go forward in time, if WE want to be heard in the HARD ASSET CAMP, we are going to have to debate this very issue with the SOFT ASSET CAMP.

  5. Hopefully, we get a situation of the boy who cried wolf. That the specs realize once and for all they got hoodwinked by the cartel once again and put an end to being the cartel's puppets. They should just realize that you can't trade with the cartel and stay long and strong through any shakeouts. I mean seriously, did they think gold was in a secular trading downtrend with fundos so strong?

    Notice though that the cartel has to step on the gas a lot harder this time, and had to push their short exposure to ratios that even they were uncomfortable with. If the specs can take the heat of depressed prices for a week or two, the cartel will eventually cover to get those ratios down, and who knows maybe they will get caught in a short squeeze due to a global shock event.

  6. Dear Dan, I don't know if you look at charts using Elliott Wave analysis - perhaps you can ask Alf? On the US dollar chart - do you think that we are in a corrective 2nd wave abcde expanding correction - with the "a" wave starting February 1,2,3? And if yes, at what point does this interpretation fail?


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