"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


Thursday, January 24, 2013

Gold Shoved Back Down

Yesterday I mentioned that gold had stalled out at its 50 day moving average, which just so happens to come in very near the psychological resistance level of $1700. Today it was knocked lower and hit its 200 day moving average on the downside which has stopped its descent, for now.

There looks to me to be a couple of things going on here. The first is a technical failure with its inability to get a handle of $17" in front of it. That must occur for momentum based buying to come in, buying which I might add is necessary if this thing is going to to anything to excite the bulls. The Swap Dealers and Bullion Banks are selling very heavily at this level and are absorbing all of the bids coming into the market.

The second is that I get the distinct feeling that what we are seeing is disenchanted short term oriented traders who are are giving up in disgust at gold's lackluster performance and are looking for more fertile grounds elsewhere. And why should they not at this point seeing that it is the equity markets that are attracting all the hot money flows. 

Yet again we see the S&P 500 just made a FIVE YEAR high! That is where the action is and that is where the money flows are going to go. Bernanke and his merry crew of modern day alchemists have gotten precisely what they are looking for. Even the bond market refuses to break sharply lower with interest rates hovering stubbornly near the 1.84% level on the 10 Year.

The VIX moved a bit higher today, surprisingly so but then again, maybe the fact that the S&P stop less than 3 points away from the 1500 level has even rattled the cages of even the most die-hard equity perma-bulls. That index has already risen 5% since the end of last year and the month of January is not even over yet.

Back to gold however, the RSI has once again retreated lower failing to best the 60 level indicating that the gold market continues to be stuck in a broad trading range bounded by $1630-$1640 on the bottom and $1697-$1700 on the top. Volatility in the gold option pit is nearly comatose indicating the absence of any speculative fever whatsoever. Quiet markets like this make me nervous because they can make big moves in either direction at any time. With gold, the tendency is to make the big move lower when the gold shares continue reeking to high heaven. The HUI feel through its floor of support at 420 as if it were non-existent.

AS I have written previously, one can make all manner of bullish arguments for the gold shares but until the LARGER INVESTMENT COMMUNITY actually subscribes to that view and begins putting their money into the sector, nothing is going to happen. Repeat after me - SPECULATORS DRIVE MARKETS and without speculators willing to chase prices higher, stocks go nowhere.

Case in point - compare the S&P 500 with the HUI and you will see where the speculative money is going... I was telling a friend the other day that gold share investors would have been better off doing absolutely nothing after the credit crisis erupted in 2008 and leaving all of their money in a broad equity index mutual fund rather than actually attempting to understand what was happening to our financial system.

I guess that either group cannot complain in one sense - both the S&P 500 and the HUI are right back to where they were in 2008. So consider it as FIVE LONG WASTED YEARS. Motto - Drink heavily and deeply and do nothing but watch reality shows with the rest of the population.

The dumbed-down citizenry of this nation whom still do this day have no clue as to what actually happened with the economic system are no worse off than those of us who do know! Ah yes, ignorance is indeed bliss it would seem.

This is yet another important reason to lean to read price charts to move into and out of markets when the signals inform you. It will save a lot of frustation not to mention make it much more profitable for you as an investor.

This having been said, the next level of chart support on the HUI does not come in until near 400. Barring any surprises, that is more than likely where the index is heading. It had better hold there and especially above 380 for should it not, there is no support on the chart until 342 or so.

The Silver chart looks a little better than the gold chart right now but it failed to take out $32.50, that critical resistance level we have been talking about on the KWN WEEKLY METALS WRAP and is now retreating. There is a band of support (former resistance) that can be seen near today's session low which will need to hold to prevent the metal from dropping back to $31.

The RSI is still in an uptrend but it, just like with gold, failed to extend beyond the 60 level. Translation - while the market bias is still friendly, it remains mired within a broader range bounded by $32.50 on the top and supported near $30 on the bottom. For silver to get anything going to the upside it must first take out yesterday's high near $32.50 and preferably get a close above $33.


  1. Dan,

    Your quick thoughts on cattle futures right now?
    As a long play.


    1. Foam_Ranger;

      Longer term bullish with the supply expected down; near term iffy due to heavy weights...

  2. the speculators are also out of the grains now, for the same reasons as Dan stated for the precious metals..

    most of the larger precious metals stocks went down today on greater than ave volume (never a good sign) and the GC futures contract dove on 167k shares, much greater volume that it had tried for 3 sessions to get thru the 50-day MA and 1700 round number

    IAMGOLD (IAG) look at it's dump this week, was it paulson liquidation...


  3. Ugly / scary out there. HUI:GOLD down to .246 as all miners trashed.

    However, the usual suspects for speculators are looking more risky: AAPL crashing with selling straight into the close (once everyone in the world has an iPhone, what's left? Here in Mexico, people earning $100 USD a week have iPhones!), BA not losing any market cap after having its Bet-the-Company fleet grounded with no clue to what is causing battery fires...

    30 year yield has inched up since July (and for foreign investors, USD has slid).

    One wonders what will happen when the Fed mojo (& POMO) doesn't work one day...

  4. Dan,

    Some thoughts. I got in in 2009, say March. With your help, pure novice luck, strong libertarian convictions, and a familiarity with banking fraud, I was able to actually make some change in a transferred 401K (meltdown due to funding involving Bear) into a precious metals mutual fund. I nearly doubled my money and I needed it. There has been much trial and error over the last 5 years, with jobs way out of my comfort zone, coupled with trying to fully pay (with my wifes salary too) my step daughters training so she can be w/o debt. Things I used to take for gospel: 1) Experience is the most valuable thing in life 2)Hard work pays off 3)As an equipment market analyst, KEEP UP WITH TRENDS, and macro stats 4)Be Flexible

    Well, you hit the proverbial nail on the head. "The dumbed down..." I have not given all the gains back, in fact, with your information I am still way...way..ahead. I sold 1/2 my holdings yesterday as I believe I can buy them back cheaper when both the RSI, as well as the trend will end up in a Deep V. October to now faked me out. I lost some.

    I am not giving up, and eventually, this will not be controlled, however, given the MSM, collusion, and pure militaristic moves by our democratic leaders against the "PEOPLE", BS from our wonderful Davos Kings (screw you Jamie) we are in a holding pattern that may accelerate downwards, then it is "Blue Sky" looking at you..Nothing but Blue Sky...

    Thanks Dan, we love you out here in Libertarianville. I cannot for the life of me wonder why everyone wants big government, corrupt Wall Street, and no small business'.

    1. White Wolf;

      it sure does seem as if everything has been turned upside down on its head in this nation does it not.

      Take a look at the following story and you will see what I am talking about: The left has gutted this nation of any remnant of common sense. What the hell would any decent human being do if they were watching some child being mauled by a pack of dogs... and now for his compassion and concern his whole life becomes a damned living hell.


    2. >The left has gutted this nation

      The New World Order has gutted this nation. Surely you can admit that. Not only will it gut the nation but the USA will be absorbed into a Union like the North American Union. Most European nations have already been absorbed by the European Union without any superficiality of any popular vote. Although election rigging in the US has been happening for hundreds of years and people still think they have "representatives".

    3. washington times has paraded itself as the "right". this is just another covert tentacle of the military / intelligence agencies. they also have publications on the "left". this is about conning the naive people who live in the matrix. sadly the con job works fine for most people.

  5. The dominant speculators (direct and indirect) that pump and dump stocks on a large scale include the Federal Reserve, Treasury, Banks, Barclay Capital etc to name a few. The smaller speculators take their lead from the big fish. Until the big fish take their foot off the precious metals mining sector shares, the sector shares will go no where.

  6. Dear Dan,

    Let's get rid of this MLH sup on the weekly time unit first, before even dreaming about a return of the bullish trend. For now, the weekly trend is still bearish...I'm just as careful as you are.


  7. just think it is a example, i think everyone should have their own opinion. http://www.topgw2gold.com/


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