"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, February 11, 2013

Gold Drifting towards Bottom of its Range

The Asian holiday period has closed down some of the big physical market buys that we normally see from that quarter of the globe. The result has been a lack of physical offtake which typically helps offset speculative selling over in the New York trading hours.

That has allowed bears to take gold lower after it failed to pushed past overhead resistance last week near the $1685- $1690 level. Gold is now retreating towards the bottom of its 6 week+ trading range near $1640 and below.

Bears will try to break through this support level as there are significant sell stops lurking down there that have them salivating. I would expect some Central Bank buying to emerge however should prices reach these levels. It was interesting to note a recent article detailing the extent of Russia's gold buys. Gold is certainly moving from the West to the East.

From a technical analysis standpoint, the market needs to hold support between $1640-$1630. Failure to do so will target the next level of chart support between $1620 - $1615. Below that is round number psychological support at $1600.

Bulls might be able to prevent a sharp move lower but so far they have lacked the resolve to take it up through overhead chart resistance. To get any hope of having some sort of leg higher in gold, price must clear $1700.

Silver has once again failed at $32.50. This last attempt to test that tough resistance level never made it past the $32 level for any length of time. It is now probing lower for support. If it fails to hold near $30.85, it will move back towards $30.25 - $30.10.

Weakness in the HUI is again undercutting the precious metals.

Today is a bit of a strange trading session day. The Euro is the only major currency trading higher. The other majors are moving lower. Equities are at the moment, comatose, while bonds are also lethargic. Crude oil is strongly higher pushing up towards initial overhead resistance near $97 - $97.15. Platinum is weaker but palladium is up. Copper is also weaker along with lumber. I normally would say this looks like a bit of a risk aversion day but the Euro being higher does not fit that general theme.

Let's see how the dust settles when all this is done today before making any assumptions based on a single day's worth of price action.


  1. How about that volume spike of 4800 contracts on the GC April Nymex Contract? Sounds like a someone is in a hurry to sell and doesn't care about the price... probably the same entity that has been bashing Gold for the last several weeks : http://cl.ly/Mpij

  2. Today is more "proof positive" that Central Banking has gotten so easy, all that is needed is some "Pie-Holing".

    Heh, look at Yellen's comments which crashed gold. Or was it the G-7 Communique about competitive devaluations?

    It really doesn't matter, the hubris at the Fed and ECB must be over the top, those guys now know that inflation is whipped and they can print to infinity with no consequences whatsoever.

    If things get out of hand, all they need to do is "jawbone" their way out of the problem.

    1. Mark - I can't get my head around this one. It made sense, in the Orwellian world we live in, when the Chairman of the Fed 1. chided Ron Paul and emphatically reminded rep. Paul that Gold is not Money 2. said "No More QE" (2 QEs ago!) and sent gold tanking.

      That the G-x has admitted to a currency war, has way of enforcing a truce, sent Gold tanking--that is Kafka-esque.

  3. Mark;

    Absolutely agree with ya! No consequences, no fallout, no repercussions whatsoever from unlimited "prosperity in a bottle". Everything we ever learned about the laws of supply and demand have gone out the window. The Austrian school and even the Chicago school of economics have been vanquished by the Keynesian money printers.

    Might as well enjoy the "prosperity" while it lasts....

  4. Cannot help but feel that this dip is like the tide rolling out before the Tsunami. Earthquakes of Venezuela's currency reset, Argentina's price freezes/assault on newspapers, G-7 currency war summit, Putin's steely eyed purchase of Au, China's heaping, QE...and yet the gentle tide recedes. Baywatch guards Ben, Jamie, and Blythe say, "Water's Fine!"

  5. Dan,

    I have limited charting capabilities on the hui/gold beyond 3 years. It is absolutely amazing. Raio is sitting just above the 3 year low, with the RSI at 36. Do you have a chart of this ratio back to June 2008? I just want to gaze at it. I cannot believe how dead these unhedged miners are. The RSI has only briefly gotten over the 50 range once in late dec 2012 and early Jan 2013. It is like they (??) sucked all the air out of the miners. Is it the stall before the over heated stocks are nearing a waterfall, therefore the miners collapse further? or, since their is no more room to short miners and accumulate gold, therefore, just no buyers at all and no hedge fund interest? Could you please print a long term hui/gold (5 year chart) for me? I would be greatly indebted. If you dont get time, I still thank you for your light and all the work you provide for free. Monetary base continues to move north and the sheeple sleep.
    2013-02-06: 2,820.133 Billions of Dollars St. Louis Adjusted Monetary Base (Basens)http://research.stlouisfed.org/fred2/series/BASENS?rid=79&soid=4
    Last 5 Observations
    2013-01-23: 2,762.489
    2013-01-09: 2,710.809
    2012-12-26: 2,691.010
    2012-12-12: 2,696.904

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