"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


Monday, April 30, 2012

One Minute Chart of Gold - 7,501 contracts

By request of a reader S Roche, I am providing a one minute chart showing the enormity of the trade in gold early this morning (4-30)

Monthly Gold Charts

Isn't it amazing that some are so ready to call for an end to the bull market in gold. From a monthly chart perspective, there is nothing to indicate such an occurrence.

In 2008, the CLOSING MONTHLY GOLD PRICE dropped 26.5% from its best to worst level before it renewed its uptrend.

More recently, gold has dropped a mere 14.4% from it bests closing monthly level to its worst level reached with a handle of "15" in front of the gold price.

Keep in mind that purely from a long term technical chart perspective, the metal remains in a solid uptrend.

As a side note - for those of you would never seem to grow tired of castigating me for using the phony government CPI data in calculating my inflation adjusted gold price chart, please make an attempt to restrain yourself. You are always welcome to create one of your own and send it to us for publication which I will gladly to do.


Traders continue to chatter about the so-called "FAT FINGER" trade in gold that occurred early this morning, a trade which dropped the gold price $15 in minutes and consisted of an order of 7,500 contracts. Many seem to agree that it was a trade placed in error.

The problem is that we also witnessed a similar surge in the volume done in the nearby silver pit at the exact same moment. Note the time right after the 5:00 AM hour (Pacific time) on the following 5 minute chart and see how large the volume was compared to that for the remainder of the session.

No matter who did the trade, ( I remain of the opinion that this was a raid designed to knock the metal lower in hopes of creating a cascading running of downside sell stops), the fact is that it failed miserably. Besides, if it was a "FAT FINGER" ( a trade placed in error) how did the same fat finger knock silver down so sharply? Was that too a simple "error".

Note how both metals recovered the losses and added some additional gains even with the mining shares weaker and the broader equity markets lower. Even copper was lower today for a while before it too moved higher.

I still believe that traders are becoming more convinced that another round of QE is coming sooner rather than later. At least that is what is being reflected in the price action.

Gold Takedown Rejected

Take a look at the following 5 minute chart and note especially the volume readings posted below each individual price bar. Look just past the 5:00 AM Pacific time hour and you will see the enormous volume spike accompanying the sharp downdraft that occured in the gold price dropping it $15 in the course of minutes. Analysts are still grasping for an explanation.

The most common is that it was another one of those "fat fingered trades". Have you ever noticed how many fat fingered human beings apparently camp out in the trading community. Last time I checked a skinny finger could hit an "enter" key just as easily as a fat finger could.

My view on this is that gold's psychology changed late last week as it begin seeing some seriously interested buyers whose entrance back on the long side was able to take it up through a minor chart resistance level near $1650 and set it on a course to test overhead resistance at $1680, a key chart level. That is a no-no in the world of the Western Central Banks who cannot tolerate this rebellious upstart of a metal telegraphing to the entire world the failure of their attempts to paper over the problems ailing both Western Europe as the US.

That called forth reinforcements to take the price lower to try to corral the unruly upstart and put it back into the box. As you can see, the selling was met with more buying that completely erased the losses and then added some more gains for good measure.

We are right back to being in position to try to tackle $1680 again. Weakness in the mining shares however is working once again to dampening excitement in the actual metal.

Saturday, April 28, 2012

Trader Dan on King World News Metals Wrap

Please click on the following link to listen in to my regular weekly radio interview with Eric King on the KWN Weekly Metals Wrap.

Friday, April 27, 2012

US Q1 GDP grows 2.2% - Copper moves Higher?

This morning's big news item was the fact that US Q1 GDP growth came in at 2.2%, well under expectations of 2.6% growth predicted by analysts and well down from Q4 2011 growth of 3.0%. Under "normal" circumstances, such a number would have been expected to put downward pressure on the bellwether copper market. 'Twas not the case however as copper shot up on the news bursting through the 50 day moving average in the process. What gives? Simple - we are now in an environment in which the more bad news we get, the more optimistic traders are becoming that the next round of QE is coming right up.

That is what gold began sniffing out in yesterday's session and appears to be continuing today. We have been accustomed to seeing these rotten numbers generate the risk aversion trades, trades in which commodities in general are dumped and the Dollar is bid higher. We are now seeing a change in trader perceptions, which after all is what runs markets, in which the steady trickle of news showing a deteriorating growth pattern in the US is being met with increased expectations for QE sooner rather than later.

In other words, it is QE ON instead of RISK OFF.

As long as this perception continues, gold is going to move higher. The trick is just how bad do traders think the news has to get before it forces the hands of the Fed.

I think it should be noted here that we also have politics at play as far as the Fed is concerned. Governor Romney, the presumptive Republican nominee for President, has made it clear that he is not a big fan of Chairman Bernanke. Bernanke serves at the pleasure of the current President Obama. If Obama loses the upcoming election, Bernanke is OUT AND HE KNOWS IT. Now, maybe he no longer wants to play MASTER OF THE UNIVERSE, but methinks very few men are able to gladly relinquish such power. My guess is that he is going to make sure that if his boss goes down in flames at the next election, at least it will not be on Bernanke's account for not acting to keep the markets from sinking lower.

Bernanke has also kept the door open for additional QE but coyly suggests that the time is not just yet. In other words, he is keeping his options open but does not want to get too assertive about it precisely because of what we are now seeing occur in some of the commodity markets such as copper. If traders become CONVINCED (they are not there yet but leaning in that direction now more heavily) that Bernanke is going to pull the trigger on the next round of QE, they will bid the price of essential commodities higher so quickly that if you snooze you will miss it! The Fed Chairman is trying to keep that from happening, particularly with energy prices. He already has a problem with the grain markets, particularly soybeans; the last thing he needs is for crude oil to take off to the upside because the hedge funds go giddy on him.

REmember that the Fed's game has been to talk up the stock market but try to talk down the commodity markets. There are only TWO MARKETS that the Fed wants to see going up - EQUITIES AND BONDS. They want everything else going down, including the Dollar, if they can accomplish that.

This brings us back to gold - it continues to exhibit strength but has not yet cleared the single major hurdle preventing it from tearing higher, namely that stubborn $1680 level. It is creeping closer to this barrier but has not yet managed to test it. Perhaps that will come next week. We will see. One thing is for sure. All of the usual suspects who were so giddy and so presumptuous to declare the bull market in gold is over, are going to look like buffoons if Bernanke and company indeed pull the trigger and fire off another round of QE.

Besides, with China buying oil from Iran and paying for it in gold, as my pal Jim Sinclair has so brilliantly noted, the game has changed as the Western powers are being served notice. One wonders if they even get the message.

Thursday, April 26, 2012

Gold seeing some strength

Gold appears to be catching some decent buying in today's session - buying that has been strong enough to take it out of the range within it has been trading for approximately the last ten days or so. Note the resistance levels shown on the chart and you can see the progress.

It still has a big hurdle to clear if it is going to get any fireworks going and that hurdle remains the same as it has been for some time now, namely the region up near $1680.

It seems that Central Bank buying below the market has shored up support on the chart.

One gets the impression that the gold market simply does not believe that the Bernanke-led Fed is going to be able to avoid doing another round of QE.

Tuesday, April 24, 2012

Gold chart and some comments

Gold remains in a sideways trade above strong support emerging below $1630 and continuing down towards $1620 and below.

As suspected from the price action and the inability of the paper shorts to break through this support, we learned that several foreign Central Banks have been very active buyers of the metals on these breaks in price. I see nothing on the horizon that would lead me to believe that anything has changed in regards to these Central Banks and their desire to acquire gold during these periodic bouts of weakness. I repeat for the sake of emphasis - Central Banks do not CHASE GOLD PRICES HIGHER - they buy when prices drop and only when prices are moving lower. It is only the brain dead hedge fund managers who are servants to their gods, the computer algorithm, who sell gold as it moves lower hoping to profit from momentum based moves.

In many markets this strategy works relatively well for them; however, gold is not just another market. It is the currency of last resort with no liabilities attached to it and certainly no connection to the Western Powers which are presiding over their own financial downfall by their insistence on papering over their structural problems.

To force some of these newer paper shorts out, we are still going to need to see gold climb ABOVE $1680 and stay there on any dips lower. That will be the signal that there are now buyers who do not mind paying up for gold.

The gold shares, as exemplified by the HUI continue getting more and more undervalued in relation to gold itself. At some point, these shares are going to be the trade of the decade. You now have to move as far back as early 2002, a FULL DECADE AGO, to find the shares at this level of valuation against an ounce of gold. Heaven help the shorts in these shares when the tide reverses - there will be no one left to sell to as they try to cover.

Saturday, April 21, 2012

Trader Dan on KWN Weekly Metals Wrap

Please click on the following link to listen in to my regular weekly radio interview with Eric King on the KWN Weekly Metals Wrap.

Monday, April 16, 2012

RISK OFF Trades hitting the Commodity Sector

Investors/traders are growing increasingly concerned about an overall global economic slowdown. This morning's Retail Sales number had temporarily cheered them with higher equities coming in on that news but then the fall of the NAHB housing market index (the first in seven months I might add) soured them rather quickly and led to increased selling pressure being seen in the broader equity markets as well as the commodity complex. Even gasoline has thus far not been immune to the pressure.

The result of this has seen the CCI moving back towards the critical low made late last year. You might recall that as the year 2011 wound down, many speculators were in a selling mood fearing European Sovereign debt woes contagion and slower growth in general.

That began to change towards the end of December as many then began anticipating a Central Bank response. Fund flows began reversing and moving back into RISK assets particularly at the start of the New Year as traders were certain that the Fed would not only be bringing back the punch bowl to the party, but also spiking it as well.

Now that we have heard nothing in the last few days from the monetary masters about such things, traders are growing increasingly despondent that a new round of QE is forthcoming and are reacting accordingly - they are generally selling risk assets and buying Treasuries.

Surprisingly, silver is holding relatively well today in spite of the general trend away from risk as it is attempting to hold chart support centered in the region near $31. Bulls need to dig in here or it will sink rather quickly to $30 for a test of their resolve at that level.

I am going to be extremely interested to see whether we get some comments soon from the various Fed Governors. While the S&P is holding much better than the broad commodity sector, it is still trading below its 50 day moving average, having fallen back through that critical level last Friday on the news of China's growth for Q1 slowing to 8.1%.

The least whiff of another round of QE will completely reverse the losses in the CCI - in the meantime the Bears are dominating.

Gold continues to struggle at $1680 - there currently does not seem to be enough speculative money flows to take this market through that level without some sort of spark.

The HUI is lower today and is sinking back towards a very important chart support level near 440.

Saturday, April 14, 2012

Trader Dan on King World News Weekly Metals Wrap

Please click on the following link to listen in to my regular weekly radio interview with Eric King on the KWN Weekly Metals Wrap.

Friday, April 13, 2012

Algorithms Gone Wild - AGAIN, and AGAIN, and AGAIN

What more is left to say at this point other than the fact that the hedge fund computers and their damnable algorithms have destroyed the integrity of the US futures markets. The sheer size, extent, ferocity and volatility of the moves that these pestilential computers are creating have rendered these markets basically useless for what they originally came into being for, namely, risk management for commercial entities.

Price swings of this magnitude are blowing up hedged positions put on by commercials and other end users/merchants/processors, etc. While margins are reduced for legitimate hedgers, they still must meet any and all margin calls on any hedged position, whether that is a long position or a short position. Some will say that all they need to do is to buy or sell the corresponding physical commodity and while simultaneously lifting the hedge. That might work fine on paper but in the real world it is a fabrication.

A cattle feedlot, a grain elevator owner/operator, a cocoa processor, a cotton mill, etc, may or may not have the actual product ready to sell as it is still maturing or growing in the field or may not be ready yet to actually buy the product but they might have hedges in place while they are waiting. So much for their hedges in this sort of idiotically insane trading environment. Their hedges are getting blasted to kingdom come but they must maintain the thing if it moves against them meaning that they need cash to meet any and all margin calls.

At some point, the cost of doing so, with hedge fund running prices all over the damn planet on a daily basis, is no longer feasible.

I am predicting here and now that unless something is done to corral these hedge funds, the futures market is going to become useless as a risk management tool for non-speculative entities.

Take a look at the following CCI chart (it might as well be copper or silver for that matter) and look at the extent of the daily price swings. Tuesday saw a big sell off across the sector as traders feared European debt woes and that brought about the RISK OFF trades. Commodities were dumped, the Dollar was bid higher and up went the bonds. The next day was relatively tame by comparison as traders were hesitant to do much of anything. Thursday saw the entire losses of the previous two days erased as Fed Governor Dudleys' comments were interpreted as making the case for another round of QE forthcoming sooner rather than later.

Today, news hit that Chinas' growth had slowed in the first quarter to a "pitiful" 8.1%. Yep, such a debacle ( if we could get half of that over here, a lot of our fiscal budget woes and our unemployment problem would actually get better). I am of course being sarcastic but once again the hedge funds and their mindless machines dumped everything in sight since we all know that no one needs to eat when growth is slowing down now do they? The result, YEP - all of the Dudley rally went down in flames with the market right back where it ended Tuesday.

Maybe we all should just go the hell to sleep and wake up in a year and see if the chart has actually gone anywhere besides up and down like a stinking yo-yo.

Thursday, April 12, 2012

A Little Dab will Do Ya

Years ago there was a men's hair care product (okay - let's call it what it really was and do away with the euphemisms - GREASE) by the name of Brylcreem. Boys and men slathered this stuff between the palms of their hands and then rubbed it into their hair. The result was that you could make that hair so stiff it would stay there all day no matter rain, fog, or gloom of night. Problem hair? No problem! Grease it into obedience!

In watching the price action in the S&P 500 this morning I am reminded of that commercial (Yeah I know - my brain thinks in weird terms!). The index had the audacity to become like a problem hair - uncooperative, unruly and generally out of place in the minds of the monetary authorities idea of what is supposed to be a beautiful head of hair.

So what to do about this? Why send the boyz out to the microphone and "grease" this thing back into compliance.

Note the price chart and you will see what I am talking about. For the first time this year the S&P had fallen BELOW the techically significant 50 day moving average. That is a gigantic "NO-NO", as it signifies a market moving toward a bearish posture.

Why, miracle of miracles, out trots New York Fed President Dudley with his comments fanning the hopes of those wishing for more QE, and "Voila!", back goes the S&P 500 through the 50 day moving average! Problem solved; hair greased back into place; now let's go play Dodge Ball!

The "Dudley" Rally

New York Fed President William Dudley apparently supplied both the gasoline and the match to the "risk asset" fire this morning as his comments sparked a strong rally in both equities and in commodities. Interestingly enough, the markets were relatively flat after the gain in unemployment claims as traders began fearing that the pop in the payrolls numbers of late was about to become a thing of the past.

Dudley reversed all of that when he stated that it was too soon to say the US economy was out of the woods. That was all that traders needed as their brains are already preprogrammed into interpreting all such comments as: "HERE COMES THE NEXT ROUND OF QE".

It was fascinating to watch copper in particular go from treading water following its 5 day collapse in price to shooting sharply higher when the Dudley comments hit the wire. It is now over 2% higher on the day; as is silver which is nearly 3% higher.

Forgotten are the woes about Spain, Italy and the rest of the other "problem" nations of the Euro zone; woes which I might add had been responsible for knocking the stuffing out of both equities and commodities recently when the risk aversion trades came back on in full force.

The lesson from all this is simple - in the minds of today's modern trading community, especially the monolithic thinking hedge fund managers, Quantitative Easing will fix anything that gets in the way of rising markets.

Those of us who have a bit more sense understand that this is not true but like any drug addict, another fix does do away with the withdrawal symptoms for at least a little while. It never cures the patient but makes him or her feel better which is now the name of the game among the monetary authorities.

The problem is that the worse the addiction, the more resistant the patient becomes to getting high as his system begins to develop a type of resistance to the effects of the drug. What this means is that each successive dose of QE will have shorter and shorter lasting effects before it wears off once again.

For the time being however, the result has led to US Dollar selling which is fueling a rush of hot money flows back into the commodity sector today. That is leading gold higher and has put it back within striking distance of tough resistance at the $1680 level once again. This is the top of the recent tighter trading range that has contained the metal for some time now. Bulls must take the price up and through this level and KEEP IT ABOVE $1680 if this thing is going to have any additional legs to it.

Saturday, April 7, 2012

Trader Dan on King World News Weekly Metals Wrap

Please click on the following link to listen in to my regular weekly radio interview with Eric King on the KWN Weekly Metals Wrap.


Friday, April 6, 2012

Pre-Easter Weekend Comments

Today's Payrolls number for the month of March came in at 120K, far less than the market was expecting. The response of those futures markets which were still open for trading was swift and immediate - Emini S&P 500 futures dropped sharply while the US long bond staged a nearly two point rally.

So much for notions that the economy is performing well enough that the QE3 option is off the table.

The markets will not interpret this abysmal number as the start of a new and lower trend in employment but it will serve to squelch some of the uncalled for and certainly undeserved euphoria about the state of the US economic recovery that we have been treated to of late by the spinmeisters and various talking heads.

Some might try talking up the insignificant drop in the unemployment rate to 8.2% but that is another cute statistical gimmick brought about by the fact that the participation rate fell once again. Fewer people in the overall work force tends to push the unemployment number down masking the true condition of the chronically out of work who have simply given up looking for work.

Some are going to wait for the next month's numbers to see if this one was a one-off but for the time being, it should at least serve to stop the mouths of those pooh-poohing the notion that another round of QE is not going to be considered at some point. The economy may be plodding along but it is certainly not setting any records as far as increasing growth goes.

One other thing to consider here - not only will job growth need to do better than 250,000 month to get people excited, it also has to be growing fast enough to provide jobs for new additions to the work force - namely college grads and high school seniors who will be graduating within the next two months. Exactly where are they supposed to find work? It is one thing to have an economy growing at a rate fast enough to bring back into it those who have been unemployed and looking for work for more months than they can remember - but what about these new graduates also?

In the meantime I thought I would post a couple of charts detailing the Custodial Accounts for Foreign Central BAnks at the US FEderal Reserve.

Take a look at these and you can get a bit of an idea about foreign central bank appetite for US government and government agency debt.

I am quite curious as to whether or not these Treasury holdings have reached a plateau. They have remained under the $2.75 Trillion level for some time now. Have we reached a point where they are saying "NO MAS!" ?

If so, then will the Fed step up its purchases of US TReasuries to make up for the fall off in demand? All very good questions that we need to monitor as they will serve to show us whether or not our foreign "bankers" are willing to finance further our profligage ways.

Happy Easter to all my Christian readers and a Blessed Passover to my Jewish ones.

Thursday, April 5, 2012

Weekly Gold Chart

Gold did not have a good week falling below chart support at the 50 week moving average for only the second time since the bottom made way back in late 2008/early 2009. As you can see, since then it had only violated this important chart level once and that was the very last week of trading in 2011. You might recall that funds were then dumping longs, booking profits before year end and moving out of commodities over fears of European sovereign debt meltdowns.

The start of the new year brought with it expectations of increased liquidity coming from Western Central Banks to deal with the fallout from that sovereign debt crisis and the deflationary impact it would necessarily have on global financial markets. As the new year unfolded, funds increased exposure to the commodity sector in general and to gold in particular, that is until Uncle Ben and his merry band of dollar creators decided to try talking down the commodity sector and herding these pesky funds into the equity markets instead.

Seeing the importance of this chart level now violated, it is imperative that bulls push the price back up through it before the end of next week's trade. Two consecutive weekly closes below this level would not augur well moving forward.

As long as gold holds above the red lines shown on the chart and labelled as chart support, it will be okay as it still remains in a very broad range defined by a top at $1800 and a bottom down near $1535 - $1530.

Central Bank buying has been quite strong down at that latter level and I would expect that to continue should price indeed move down towards that level.

As far as any upside momentum goes for the metal, it is going to have to firmly clear and hold the $1680 level before it can generate the least bit of excitement.

Swiss National Bank intervenes to undercut Franc Strength

While the Swiss Franc is lower today against the Dollar (as is the case with all of the European  majors), it has been gaining against the Euro as nervous investors in Europe weigh further escalation in the region's ongoing sovereign debt crisis.

Note the following ratio chart or the cross I have created to give you an idea of what has been happening with that particular cross. The Swiss Franc has been the beneficiary of investor preference going back to the beginning of the Fed's stimulus party in late 2008.

European sovereign debt fears then further contributed to increasing gains in the value of the Franc against the Euro as investors on the Continent began looking for a safe haven alternative to US Treasuries. Apparently that has led the Swiss National Bank to once again intervene into the foreign exchange markets. They are determined to prevent the Swissie from rising any further against the Euro.

This is an interesting development since it may serve to preclude any further investor flows from Europe into the Franc leaving them with one less safe haven to run into in the event that things begin spiraling downhill once again over there. With issues now arising related to Spain and Italy not out of the woods yet, this is the sort of thing that has the potential to give rise to a series of investment flows back into gold on the Continent.

If that is the case, EuroGold will begin to move higher and that will work to steady the US Dollar price of Gold.

The jury is still out on this but it does indeed bear watching.

Food Inflation back in the News

Reuters is carrying an article discussing the rising cost of food ( By the way, the US monetary authorities all tell us that is not true as their parrots have trained them to repeat the words. "there is no inflation; inflation is subdued") in an article that I have linked to.

Eric King and I have been discussing this on our recent KWN Weekly Metals Wrap interviews but it seems to have gone unnoticed by many in the financial press until now.

While the Continuous Commodity Index ( CCI ) has been moving lower again, this is more a function of the outflow of hedge fund money from the sector as they jam into the equity markets, the obedient lapdogs of the Fed that they are. The rest of them have been too busy getting whipsawed to death in the commodity markets.

With current stocks of both corn and soybeans tight, and energy costs remaining stubbornly high, it was just a matter of time before those at the final end of the pipeline had no choice but to pass on those costs to the consumer if they wished to remain in business.

Keep in mind that high gasoline and diesel prices impact the cost of food from a transportation viewpoint ( trucking them to market ) and from a planting point of view ( running tractors and other farm equipment requires fuel).

I am of the opinion that the rise in the broad US equity markets is more a case of paper asset inflation than anything connected to a true signal of strength in the underlying US economy. After all, that freshly printed money has to go somewhere and why not into stocks. In an ultra low interest rate environment, the Fed can easily herd their lapdogs into stocks to prop up that all-important "economic indicator".

As it becomes more clear to others that the need for continued accomodative monetary policy is the only option left for the Fed ( let them even hint at trying to remove it and watch what will happen to their beloved equity market rally), gold will get its legs back under it and stabilize prior to making another leg higher.

Food inflation seen back on the table as prices rise

Wed Apr 4, 2012 6:01pm EDT
* Strong correlation with high oil price* Corn, soybeans gain on physical markets in March -FAO data
* U.S. soybean futures jump in March on tight supply concerns
By Svetlana Kovalyova
MILAN, April 5 (Reuters) - World food prices are likely to rise for a third successive month in March, and could gain further beyond that, with expensive oil and chronically low stocks of some key grains putting food inflation firmly back on the economic agenda.


A Happy Ending News Story - Dogs RULE!

Those of you who are dog lovers as I am, will be absolutely edified by the following story detailing the heroics of Man's Best Friend. A cat would have probably run and hid under the sofa...

Pit Bull Shot In The Head Trying To Protect Owner, But Miraculously Survives

'Kilo' Didn't Take Too Kindly To Gunman Pushing Into Staten Island Home


Wednesday, April 4, 2012

Today's comments

The mining shares continue being pummelled to the point where one wonders who is left in the sector to sell them at these levels.

Take a look at the following chart and marvel:

How many of us who were trading the shares can forget what happened to them back in the summer of 2008 when the credit crisis erupted causing an avalanche of selling across the paper and hard asset sectors. When the S&P 500 was crushed  ( it lost over 50% of its value plunging from over 1500 to down under 750) the mining shares were unceremoniously trampled under the feet of men.

During that stage, the shares seriously underperformed against gold bullion losing value at a much faster rate than did the metal itself. The result was to take the HUI/Gold ratio down to levels not seen since the very early stages of the bull market in gold.

Look at where these same shares are now in relation to gold bullion again! Yep - you guessed it - down nearly to the exact same level that they had fallen against gold back in 2008.

Yet, today's finishing quote for the S&P 500 was at 1393; a far cry from near the 740 level to which it had fallen back then.

Compare this to the monthly chart of the HUI and note their abysmal performance with the index now closing at levels last seen back in July 2010!

Looks like the guys who bought Apple were the smart ones and those who bought the shares expecting them to match the performance of gold have now ended up looking foolish. Investing is an art that demands a great deal of patience (at least it used to before the Fed perfected the art of creating funny money) but the patience of most of the gold mining share owners is about exhausted. The only ones left in the shares are the very strongest of hands at this point.

Gold is seeing a bit of buying across Asia this evening but the damage on the technical price charts has been done. We are now seeing hedge funds becoming active shorters of the Comex gold contract. They still remain net long (even with the liquidation) but a growing percentage of this category of traders is playing gold from the short side. This means that rallies are going to be sold UNLESS gold can clearly get back above $1680. A trip back towards $1660 will flush a few of the weaker handed shorts out but not until and unless gold proves that it has what it takes to stay above $1680 will some of the stronger shorts begin getting squeezed out.

We now have a boatload of brand, new fresh short positions by this category, all of which were put on below $1660. Keep an eye on how it behaves should it make it back to that level.

Downside support near $1600 is now in play with a breach of that setting the stage for an even deeper drop down towards $1570.

Tuesday, April 3, 2012

The FOMC Strikes Again

All one needs to know about how the Fed is attempting to knock down the price of commodities in general was demonstrated in today's FOMC minutes.

The idea that I believe it wants to keep uppermost in the mind of traders is that the US economy is recovering, very slowly, but recovering - enough to justify the idea that growth will be steady, that employment will be increasing  - slowly  - but that there are still headwinds.

However those headwinds, while they bear watching, are not sufficiently strong enough to derail the recovery - this will prevent any slipping back into recession. If they are - of course the ever vigilant Fed stands ready to act - if not now however.

This means that equities should move higher as long as the economy is growing and moving forward, even if it is moving forward at a snail's pace.

One of those headwinds, which they were very concerned to make known, was the idea that GLOBAL GROWTH is slow (hint, hint - CHINA). That means less need for commodities! Again - HINT- HINT.

This notion is designed to take away the idea of an IMMEDIATE QE3 which works to herd the cattle-brained hedge funds (insert theme from "RAWHIDE" here with Ben playing the part of the trail boss)  into selling commodities in general. Down goes copper, platinum, other base metals, other tangibles, etc. - only the markets which have the strongest set of fundamentals on the supply/demand equation are able to withstand the barrage of hedge fund, one way, selling pressure which then immediatey follows the minutes as surely as night follows day.

Thus, if the global economic growth is slow and there is not the same demand for commodities as there was previously, and if there is no need for an immediate round of QE3 - then where oh where can the hedge funds make money? Answer - where else but in equities.

We then see commodities mauled while stocks initially tank but then rapidly bounce off their worst levels of the session to end only modestly lower. Yep - no inflation here anywhere - see - just look at the commodity indices and you can see that our near zero interest rate policies are not creating the faintest whisp of inflation. Oh, ignore that gasoline price chart - it's definitely pesky but we can always have the political branch open up the spigots on the Strategic Petroleum Reserve in time for the General Election and deal with that if those prices are still too high at the gas pump come August or September and the Dear Comrade's poll numbers are not any better.

Yes, Virginia - modern price controls without price controls. What a marvelous innovation from our monetary masters.

Now if they can just get that pesky bond market to cooperate and turn around after today's plunge out of disappointment that the Fed will not be buying bonds forthwith. Ah, but that is another day's work for our saviors.

Monday, April 2, 2012

Gold Chart

Gold managed to claw its way back above important technical resistance near the $1680 level in today's trade and is thus far holding above that number, albeit just barely. The market needs to push away from $1680 with some conviction and demonstrate that it can attract enough buyers at this level to take it firmly up and then through $1700. If it can do that, we have a solid shot at the $1720 level.

If it fails to sustain its footing above $1680, it will fall back within the recent trading range that it has been carving out with the bottom down near $1650 - $1640.

By the way, the Dollar continues to sink and unless it can recapture the 79 level immediately, it looks like it is heading for a test of support down near 78. Note that all of the shorter term moving averages and the 50 day are now all trending lower in sync again.

Start of 2nd Quarter brings Hedge Fund money flows with it

It appears from today's price action across both the equity markets and the commodity markets in general, that the beginning of the 2nd quarter is seeing hedge fund managers put money back to work across a wide variety of risk assets.

The catalyst seems to be both the Chinese manufacturing data and the US manufacturing PMI data which were on the friendly side and relieved traders' concerns for at least today. Oddly enough that same PMI data showed inflation data relatively tame which generated a move higher in the bond market in spite of the risk allocation trades. Then again, with the Fed managing the bond market, getting a read on it is particularly "fun".

The industrial metals of course led the charge higher with this sort of manufacturing news and so it is no suprise then to see copper, silver, palladium and platinum all strongly higher as a result. Gold benefitted somewhat from this reallocation back into the metals but definitely is underperforming silver with the risk trades in the forefront of the action.

Silver, which is currently up more than 2% as I write this, has managed to better two important overhead technical resistance levels. The first was at $32.50 and the latter near $33. It is now trading at the top of its recent range and should it be able to attract buying on any retreat in price that will keep it above both levels, it should be able to break out of the top of the range and have a decent shot at moving towards $34.25 - $34.45.  If it fails to hold and sinks back inside the range once again, decent support emerges on the chart near $31.50.

Helping both silver and gold today is the fact that the mining shares are also relatively firm for a change further cementing that region from 465- 460 as very solid technical support. Time and time agian over the last two weeks the bears have pushed these shares lower but have not been able to absorb the valued-based buying originating at the recent lows of the last two trading weeks. It certainly appears that a bottom is in the shares; now whether they can finally generate any decent excitement on the upside is the question. The accumulation phase continues but we have await the advent of the markup phase.

charts later....