"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, January 7, 2013

Gold Looking for a Catalyst

With a growing number of pundits calling the 12 year bull market in gold as coming to an end, the large money flows that are necessary to drive gold higher have recently been lacking. If you look at the S&P 500 and look at the gold chart, it is not hard to see where the bulk of investment flows have been going; namely equities.

This fits with the theme being sounded by GET-TV that the bull market in stocks is proof that the global economy is recovering. Again, please no nastygrams on this; I am merely repeating what the pundit class that regularly appear on TV are saying.

I find it rather amazing that very few seem to be the least bit concerned about the growth in the size of government indebtedness. Then again, as I have been saying a lot lately, hot money has nothing to do with long term views; it is tied to near term thinking and oblivious if not downright disdainful of anything beyond the next 6 months.

As of today, the thinking is that the Fed has won the battle and that world economies are poised for a rebound. Funny how all this seems indifferent to the currency debasement war going on among the Central Banks of the West.

Gold is trading firmly below its 200 day moving average having been stopped cold there on Friday afternoon and again earlier in the session today.

Support on the downside lies at last week's low just below $1630. That area has held previously so if it goes for any reason, look for a rather quick move to $1600.

Upside - nothing doing until this market gets back above its 200 day moving average which, for now, is a selling zone for those looking to sell rallies in the metal.

Something must change to get fund flows coming back into the metal to get it moving higher.

SAme goes for the HUI. The mining shares are obviously out of favor with momentum-based hedge funds. To get any sort of upside momentum going, the former 50% Fibonacci retracemetn level near 457 has to be taken out. That would put the index back ABOVE both the 50 day moving average and the 200 day moving average which are now both trending lower.

The support level in solid red near 420 needs to hold or the HUI is going to sink all the way to 400 and even as possibly low as 390.

Value based buying can hold the support level if large enough in size but it cannot take the index strongly higher. That needs momentum players and they are busy chasing equities in other sectors right now.


  1. Interesting article. Curious to know where does one look to see where the "big money" is going?

  2. But Dan, what kind of a catalyst will be enough if :
    - QE3 was not enough
    - end of US elections was not enough
    - effective QE4 from jan 2013 was not enough

    What on earth does it take to see prices get some momentum?
    Gold bugs are waiting for the next big news, but there have been quite big news akready since september and...nothing. Will momentum buyers ever come?

  3. Those of us holding physical metal need only to go about our daily business, confident in the knowledge that fundamentals matter in the long run and that we're on the morally righteous side of this war. I can't imagine what it would feel like if my daily business was trying to trade these markets for a living. Thank you Dan for hanging in there and sharing your insights with us. I greatly admire your spirit and wish you a successful and prosperous new year.

  4. This comment has been removed by the author.

    1. So let me get this straight: Gold is a bubble, but so few people actually own gold because they know it's a bubble. That makes absolutely no sense.

    2. This comment has been removed by the author.

    3. PJAdams;

      If you wish to continue posting here then I have one very simple rule - if you insult anywhere here who advocates owning gold because they are attempting to protect themselves from the currency debasement policies currently being praticed by many of the Western Central Banks, then know in advance that every single one of your postings will be deleted and removed.

      This is a not a "free speech" zone where you are free to insult those of us who believe gold is honest money.

      Either accept that or get the hell off the site and go plague some other group.

      If you want to discuss technical price action - fine.

      One last thing - here are your words:

      The only way people like you have been making money out of Gold is by just buying it, letting it sit around in your house and wait for it to become more expensive, no effort was made on your part to make it more valuable

      My comment to this vapid sentiment is simple - just what the hell do you think anyone buying an equity does? They expect it to become more expensive, without any effort on their part to make it more valuable.

      Here is a note you damn fool - investing in ANYTHING is about buying it with the express expectation that it will go up in value without any work having to be particularly done on the part of the investor other than managing the position. What an investor does is to LET HIS OR HER's MONEY DO THE WORK -

      Good grief - no wonder our nation is finished. How much longer do we have to suffer fools to spout their ignorance into the air and allow their tongues to parade through the earth....

    4. "The only way people like you have been making money out of Gold is by just buying it, letting it sit around in your house and wait for it to become more expensive, no effort was made on your part to make it more valuable"

      And if Warren Buffet and George Soros buy shares, then they do not sit around, but do productive labour, correct?

      "It would be dumb to pretend that every asset in the market goes up and up and up all the time"

      The S&P500 is up more than 100% since 2008 and small caps reached new all time highs recently...

      Oh, and if you don't want things to go up all the time, i'd suggest you write a letter to Ben Bernanke and ask him, how an exponentially growing credit based monetary system in a limited world could ever work.

    5. This comment has been removed by a blog administrator.

    6. Thinking about this comment longer, we should be happy about this concentrated stupidity. Doesn't it remind us about the years from 2001-2008?
      When the bottom in Gold is close, the brainwashed begin to think the gold bull is over (although nothing of the old bull from 2001 has changed, in fact the REAL bull was not since 2008, but since 2001 with financial repression).
      Such posts are necessary. They indicate the negative sentiment. Otherwise it wouldn't be a bottom.

      There was lots of speculation in the PMs. Like Jimmy Rogers explained it. We must get rid of it and if the masses begin to believe, Gold is no longer needed, I say GRRRREAT!

      Yes, PJAdams, you are so correct. Sell your Gold (why do i have the impression you never had gold anyway?).
      Gold for us and the undilutable paper for you!

    7. Hey PJ, it's really sad that you are so clueless. You think that's arrogance talking? The war being waged by the collectivists against free-thinking, freedom- and liberty-loving individuals has been going on for at least a couple thousand years, probably more. One side wants to enslave the other. Do you have any idea which side is which? Who holds the moral high ground, the side that would enslave the other or the side that will not be enslaved?

      I don't make money from owning gold, gold is itself money, honest money. When you say that I belong to a group of morally repugnant people, those who choose to own honest money, it tells me a great deal about your morality.

    8. I'd say it's more a troll here :)
      But Dan I'd advocate for accepting the debate, because ignorants just make fools of themseves. Why such acrimony and aggressiity on their side? Maybe they lost ten years of the bull market already.
      Anyone knowing a bit about gold will laugh at the previous post.
      As for the rich excentrics, such as Jim Sinclair I assume?, one can find their CVs on their blog (Jim's CV mind you), which is enough to give them REAL credibility about the long-term trend, even if you don't read their blog everyday (where you'll find out the "excentric's" mind is also sharp, acute and fully functional.
      I'd like to see PJs CV attached, but for now I can only be saddened by the foolishness and aggressivity of such comments.
      Besides all Trader Dan already wrote, I'd add that you accuse gold bugs to be kind of "gangsters" trying to make money without effort? Funny, as then, please tell me how you call a central bank virtually printing 100 Mds $ a month out of thin air, which will eventually be repaid by all citizens? How do you call the plundering of retirement programs now in course in the US?
      Who do you call a gangster here? The citizens who want to protect themselves?
      Go read a bit of jsmineset and come back here at least with a bit of objective mind.
      Thanks a lot though, for making me laugh.
      I think posts like yours are very useful on this website, as I can't feel the least insulted by a foolish argumentation. If anything, it reminds me why I own gold, and how foolish one has to be not to own some nowadays.
      Happy new year 2013 (without gold, goold luck to you)

  5. ...and boom goes the Danomite!

  6. i like the danomite!

    i have not seen ONE ElliotWaveAnalysis that does not have the DOW/DAX bouncing off old highs soon before heading to '09 lows, this time taking bonds with them.......that will be the key.......the direct coupling of the bond and equity markets.

    this will be on US downgrade, debt ceiling raise and sovereign risk.

    gold/silver end consolidation and flip to safe haven on abducation by everything else.

  7. If buffett, George soros buy shares of stock, then they don't do nothing, but do productive labor, right?
    "This is stupid, pretend to all assets in the market rise, and all the time"
    Standard &poor's index has risen more than 100%, small stock since 2008 reached a new record high recently...
    Oh, if you don't want things all the time, I suggest that you write a letter to Mr Bernanke and asked him, what a exponential growth credit base currency system in a finite world can work.
    cheap nike jerseys


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