"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, May 14, 2012

Gold Probing the $1550 Level

Gold has continued to see further selling in today's session with traders once again exiting "RISK" trades in favor of the "Growth Off" or RISK AVERSION trades. Long commodity positions, along with long equities, are getting liquidated with money flows heading towards US Treasuries in general. This can be seen in the CCI, the Continuous Commodity Index, which is moving lower while bonds move higher, taking interest rates down even further as the yield on the Ten Year is now down below the 1.80% level. Remember, there has not been a week yet during which this yield ENDED BELOW that critical level.

Gold's move down towards $1550 has in the past attracted very substantial Central Bank gold buying. Hopefully this will remain the case as the market is now pushing towards the lower band of an eight month long trading range. If speculative selling of the metal is not absorbed down here and the market were to break below $1520 and fall to recover quickly, it will more than likely drop below $1500.

My own thinking on this is that the markets are moving so quickly away from risk and out of basically everything except Treasuries or cash, that the Fed is going to have a major problem on their hands if they do not soon give some sort of signal that they are preparing to act to stem the deflationary decline. JP Morgan's $2 Billion credit derivatives-based loss has spooked the banking sector and that is the one sector that the monetary officials do not want to see going from bad to worse. Keep in mind that back in 2008, once Lehman went under with Bear Stearns following, it was the woes of the financial sector that pulled the rug out from under the entire US economy and the US equity markets. The Fed is well aware of this and I suspect will not want to wait too long before beginning to make some noise to keep the markets from becoming too roiled.

The bank shares might be the first thing to watch for some signs of further monetary accomodation as one can be assured that there are lots of phone calls and discussions underway even now. If they were to show some signs of bottoming, it might be a hint of things to come.

Meanwhile gold will need to get at least back above $1600 to give the bulls some breathing room. With the Commitment of Traders report showing the NET LONG position of the big hedge funds at a 42 month low, there remains plenty of room for them to come back into this market and juice it higher but they need some sort of signal to tell them to do so. Right now they are not getting it; if anything, some hedge funds are now moving to the short side of gold along as well as a host of various other commodity markets.

Incidentally, China is lowering their bank reserve ratio requirements, a sign that they are responding to slowing growth there as their export markets are impacted by the woes in the Eurozone and the anemic growth in the US. This is one of the signals that copper has been sending for a while now as it descends in price. Were copper to finally show some signs of a bottom, that would be constructive for silver which is testing chart support down near the $28 level once again.


  1. Current gold and bond actions definitely look like what happened prior to 2008 Lehman crash.

  2. Looks like the HUI is going to close well below the 400 level.

  3. In managed markets like the ones we have today, technical analysis is of service primarily to the managers.

  4. Congratulations to Alf on his bottom call of $1612...good work and to Jim with the 2012 trading range of $1700-$2100...it is May!!

  5. TA is useless. What we need for short-term movement is SA - Shenanigan Analysis.

  6. My prediction posted on TRADER DAN September 30, 2011 9:26 AM


    "U.S. Treasury’s have a negative yield when compared to the most modest inflation numbers!

    It’s buying season for precious metals. The banksters and heggies may push the prices down as far as $1250/$24, but it won’t save them. They will lose ground, and batta-boom…the metals will sky rocket!

    Plain and simple, austerity won’t work.

    Expanding the money supply (QE3-4, etc) will work to foster economic recovery; providing that, expanding the money supply happens in a manner that joins labor with raw materials and technology. We need to produce more, not just manipulate more information.

    My take is it's buying season for precious metals."

    [End excerpt]

    My key point then and remains today...

    "Plain and simple, austerity won’t work."

    Not in Europe, not in Asia and not here...

  7. Jim Opines On Martin Armstrong’s Latest Prediction
    January 27, 2012, at 1:02 pm
    by Jim Sinclair in the category Martin Armstrong | Print This Post | Email This Post
    My Dear Friends,

    I have made it a practice not to comment on other people’s opinions as everyone has a right to voice how they see things and express themselves. I also know that no one really knows to the penny or exact day. Having said that, we in the community have given a stage to an expert on long term cyclical economic and political events.

    Martin Armstrong is a master of this discipline and may have no real competition between cycle and historic commentary. However, as you can see from one example of the large amount of incoming mail I am getting over the past few days, I need to answer Martin’s third bearish call.

    The first two calls for $1100 did not materialize. In fact, gold twice went in the opposite direction with a fervour.

    I do not agree with Martin here and now.

    By normal measures, the US dollar is violently oversold. The dollar and gold has been tied whether I like it or not.

    There are special circumstances in the dollar now as the Fed has turned the light on domestic QE. I cannot see a significant dollar rally as a result. I also cannot see gold doing worse than chopping into the $1700 range.

    If there is anything correct to his bearish prediction, which I doubt, it would take this action to a chop between $1650-1764, but I think we are now moving into the $1700-2111 range.

    Martin Armstrong is the master at the long term cyclical events. To abandon gold now to try and buy it cheaper in 60 to 90 days with the world of finance in the condition it is in, is in my mind MADNESS.


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