"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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Monday, April 30, 2012

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.


  1. Hi Dan,
    Innocent / amateur question. If the idea is that whoever is shorting gold can sell & buy back lower to keep prices in check...what is happening to those positions in the past few weeks where we have seen take downs that have resorted in a V formation (sorry, not a trader)--that is, it seems that there is no opportunity to buy back lower & the position(s) are accreting short...

    Also, side note, it seems that the meme of the MSM is to now say that austerity doesn't work (krugman) etc. based on almost no data (and the fact that there has only been talk of austerity rather than actual) as a sort of set up for the next round of massive intervention

  2. MDLGTO, an innocent / amateur reply to your question. My guess is that the new gold shorts are incurring massive casualties. If the new shorts are being put on by the bullion banks, I would think that somehow we (U.S. taxpayers, present and future) will end up subsidizing those losses.


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