"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

Trader Dan's free work will soon be available at www.traderdan.biz

Saturday, April 13, 2013

Some General Thoughts

Rather than trying to answer various comments individually due to time constraints, let me just jot down some thoughts here.

Andrew: I agree with your assessment completely. I believe I have been saying the same thing for some time now. The problem that we are seeing in regards to gold is the Velocity of Money. We have the gargantuan sums conjured into existence by the alchemists of the Western Central Banks but that money is not turning over fast enough in the general economy. It is going one way and one way only and that is into equities. It is NOT going through the broader economy nor is it changing hands frequently.

The continued weakness in the copper market, along with the other base metals I might add, and the general theme of weakness across many of the various commodity markets, (look at sugar and coffee as an example and now the grains), falling unleaded gasoline prices along with crude oil, etc. is telling us that there is a general deflationary theme at work. One cannot have a growing robust economy in which the price of resources (commodities) is moving continuously lower. The fact that the CCI, Continuous Commodity Index is not moving higher alongside of the equity markets tells me that there is NO REAL GROWTH in the US economy, or some of the other Western economies I might add.

What we are seeing is a freak of nature (created by men) in which growth hormones are pumped into the stock markets FORCING them higher without any true economic growth occurring at the same time. It is like a man shot full of HGH to make him 10 feet tall but who lacks the skeletal foundation to enable him to function normally. Everything about him is unbalanced and unstable. Pull back the HGH and leave him to himself, and  he will topple.

Back when things used to make sense (before the Central Banks got involved and destroyed our free markets) a stock market in a strong, robust uptrend signified solid, genuine economic growth, particularly in the manufacturing sector where raw materials are needed. That is no longer the case. We have this freak of nature that goes one way to the point of absurdity driven SOLELY by a speculative frenzy desperate for YIELD in a ZERO INTEREST RATE ENVIRONMENT created by these self-serving Central Bankers, who should damn well know better than this by now.

All we need to do is to use our common sense to consider that if manufacturing is robust, there is a real demand for the raw materials, commodities, natural resources, etc., used to create those goods or products. When I see Dr. COPPER going one way, DOWN, and I see the equity markets going the other, UP, I know something is terribly, terribly wrong.

Just consider what we witnessed when the Fed began its first QE program back in late 2008 after the credit crisis unleashed a wave of deflationary pressures. It seemed as if everything on the planet starting moving higher. It didn't matter what it was. Copper, Crude, Gold, Silver, Grains, etc. all moved up as the stock market moved up. Things seemed to be in sync. Why was that? Because investors began to anticipate an inflationary impulse due to the sheer size of the liquidity being supplied by the Fed. We all assumed that prices would rise because the underlying currency would weaken as its supply was increased. This would feed into an inflationary psyche and create an environment in which consumers would come back and begin borrowing once again, banks would lend, jobs would be created and growth would ensue. Guess what? It worked somewhat in the sense that it kept things from deteriorating further but as far as dealing with what got us to this point in the first place, it did nothing.

So here we are now, FOUR QE's later and a massive version of the Bank of Japan's own version of QE, along with bond buying programs of the ECB and the BOE and yet we still have minimal job creation and only modest to barely perceptible growth. What the Fed is trying to do, along with the Bank of Japan and the ECB and the BOE, I might add, is to drive interest rates to the point of nothing in order to stimulate demand for money or credit. Entice consumers to borrow and go deeper into debt is their recipe for growth. The problem is that requires consumers feel secure about their jobs AND that they have enough disposable income that they are comfortable taking on additional debt. That is not happening. What they have instead created is a nirvana for giant speculators and hedge funds to place huge leveraged ONE WAY bets on rising stock prices.
By the way, as an example of what I am saying here, as I am typing these thoughts, the Dow Jones newswire is flashing comments from some of these monetary masters. Get a load of this if you want to see a perfect example of either an ignorant fool of a Central Banker or one who believe his own BS.

Fed's Evans (Chicago FEd):
"Fed Actions have been helpful to the economy"
"Fed making progress  of improving the job market"
"Actual inflation is low"
"Worries of rising inflation overblown"
"Monetary policy should be more accommodative"
 and here is the kicker -are you ready....

"Doesn't see ANYTHING that Suggests FED Causing Imbalances"


Here is a perfect example of the blind leading the blind. A stock market soaring to new heights almost day after day while the poverty rate in the nation is back to where it was in the 1960's, 43-44 million people on food stamps, 14 million on some form of government disability, a shrinking labor participation rate which is the only thing driving down the farcical unemployment number and a job creation rate that is not even keeping up with the rate of the growth of the population in general... Nope - no imbalance here. Everything is just peachy keen! Idiot....

Think that is not enough? here is another one:

Kocherlakota (Minneapolis Fed):
"Doesn't see signs FED fueling Asset Bubbles"

Here is yet one more (and all of this is taking place on one day, A Saturday at that).

BOE's Miles:
"Asset buying not creating asset bubbles in UK".

Do you see a pattern here? Let me tell you what this means. It means the EXACT OPPOSITE of what these talking heads are out there parroting! Anytime you see a public official denying something, rest assured it is true. The fact that they feel so compelled to go out and talk about this denying these bubbles that they are blowing is because this is what the thinking is becoming. They are using the oldest line in the book of manipulating public opinion:

"Who are you going to believe, us or your own lying eyes?"

Who do these alchemists think that they are fooling at this point? They are doing the only thing that they know how to do and that is to turn paper (lots of it) into money. These demi gods of finance consider themselves to be infallible assessors of their own handiwork much like the one true God who when He had created, rested on the seventh day, surveyed His handiwork and called it good. In His case, it was true. In their case, it is an opiate that solves nothing but merely continues to foster the speculative mania that results from basically free money and NO RISK when it comes to buying stocks.

If and when this massive amount of liquidity ever manages to somehow get into the broader economy and people begin to DOUBT the very integrity of their own currencies, then we will see the VELOCITY of MONEY soar and with it the inflationary nightmare that many fear. That is why these people must continue to obfuscate, deny, dissemble, spin, etc. They cannot let the public lose confidence because confidence, fleeting, effervescent, transitory confidence, is the only thing preventing a run on the currencies of these nations whose Central Banks are engaging in this reckless scheme. I might add here that this is also the reason I believe there is a concerted effort by these same monetary elites to discredit gold. A soaring gold price is a vote of NO CONFIDENCE in the Central Banks.

I want to repeat it here again - this game will stop when the public loses confidence in the currency of its nation. As long as the public is either ignorant of, apathetic towards or oblivious as to the scale of money creation that is being employed by these Central Bankers, they can play their game of demi-gods and spout the kind of idiocy that I quoted above. Look at how fleeting however confidence can be. Cyprus, Greece, Italy, Spain, Portugal, etc... It can happen here and it can also happen in Japan. It can evaporate overnight and when once lost, it is not easily regained.


  1. Ever seen the movie Idiocracy?

  2. What the FED doesn't want the people to know:

  3. Dan,

    I have never seen you so agitated as you have been for the last few days. I now think we are at a major inflection point and you inherently sense it because you trade in the salts of the earth.

    I am looking for a major dislocation in the corrupt bankster section simply because they now exude desperation at every level.

    Hold the course.

    1. Jo,

      I fully agree with you. Dan's agitation is not isolated. I have had the feeling that things were going to turn very badly for sometimes now. What seems unreal is the fact that people around me think I am crazy when I think they are zombies...

      Many people are becoming as agitated as some of us and warning of the terrible events that are coming. What could be the trigger that starts the dislocation you are expecting? The only one I see is the coming conflict inside the elite circle: The coming fight between the politicians and the banksters.

      There is an inherent conflict between the 2 clans: Both went to control the world but you can have only one winner, one elite, one king. This is why we have in almost all western countries a legal separation between the state (politicians) and the church...the justice... and this separation has existed for many years (centuries in some countries). This was OK and fully accepted by the citizens.

      The new recent "legal" separation, which is now officially recognized by laws is between the state and the banks (they use central banks instead of just banks when in fact it is the same because central bankers come from the banking elite) This is where the fight (and dislocation) is going to come. The latest example is the letter sent by Draghi to the Cypriot government (from Bloomberg):

      "European Central Bank President Mario Draghi said the profits of any gold sales by the Cypriot central bank must be used to cover losses it may sustain from emergency loans to Cypriot commercial banks...
      The decision is going to be taken by the central bank,” Draghi said after a meeting of euro-area finance officials in Dublin. “What’s important, however, is that what is being transferred to the government budget out of the profits made out of the sales of gold should cover first and foremost any potential loss that the central bank might have from its ELA
      Asked about a letter he wrote to Cyprus President Nicos Anastasiades, Draghi said the letter is “very, very clear.” He said the government must abide by the central bank’s handling of the gold stock, since it is independent from political control under European rules." ( http://www.bloomberg.com/news/2013-04-12/draghi-says-any-cyprus-gold-sale-must-cover-emergency-loan-loss.html)

      This is the second time -at least- bankers are forcing politicians to do whatever the bankers want. When the citizens start to react against the intrusion of the central banks, you will witness the fracture between the 2 clans and the dislocation will turn into chaos because the 2 new enemies have a lot of power and will fight to the end to keep control of the masses...

      This has been my opinion since the crisis of 2008. I am certain it will happen and very soon.

      So agitation...the word is maybe too weak. Dan, in my opinion, has already passed the stage of agitation, which is usually the early stage and is already in the latest phase where he is acting to protect himself knowing the end is close AND friendly enough to warn the readers of his blog of what is coming.

    2. Hubert and Joe -
      agitated is definitely too mild of a word. Disgust, Disdain and Revulsion at what these central banks are doing. In the name of helping improve the economy (jobs) and keeping the system from breaking down, they are setting things up for a horrible fall. Unless of course we are in a new paradigm (don't you love that little buzz word!? ;O)) where prosperity can indeed be created by Central Banks creating money out of thin air and thereby eliminating forever the possibility of stock market ever going down again in our lifetimes. That and the new theory that unlimited amounts of money creation by Central Banks have NO repercussions whatsoever. I just refuse to believe that because history and common sense tells me that it is not true.

      The notion that a Central Bank can bring in prosperity by generating a soaring stock market (the tail wagging the dog) all the while it expands it balance sheet taking on all manner of worthless debt and somehow convince us that it is acting responsibly and is being helpful is the height of recklessness in my opinion. True prosperity involved a solid manufacturing base, goods and services being created and a stable or sound currency, with a system of laws and a level playing field for would be entrepreneurs.

  4. The local metro Atlanta coin shop is selling uncirculated American Eagles for $34. There was a sign on the desk that said "not buying silver due to excessive stock" but there was not any Constitutional silver for sale. I believe silver was in stock but not available for sale at the spot price. This feels like 2008 smack down. I cant see retail silver prices below $27 no matter what the paper price is for silver.

    1. Silver coins going for $4 to $8 over spot on Ebay.

  5. 44 comments on your previous post. wow, I imagine that must be a record for you and if so,it certainly is indicative of something happening. I love reading King World news and I support the site but it is shame that so many people are interviewed there and write their articles to buy buy buy and look whats happened so far. I to recently bought some GLD based on a recommendation and have lost about 7 percent. I don't blame him but the blind mantra of buy buy buy is not doing the public/us any service. I think only you (Dan), Louise Yamada and maybe Richard Russell and possibly Rick Rule try to be truthful instead of just saying buy buy buy.

    anyway, Dan, once again you proved you are friend of the people so thanks again.

    1. Lisa;

      Thanks for the very gracious words. I can honestly say that I am doing my best to navigate these troubled waters just like the rest of us are trying to do. I am attempting to help others make some sense of what is increasingly becoming more and more senseless.

      I have never seen such disconnection between various markets that I am currently seeing. Trying to read what is happening, is very challenging because we are in uncharted territory and the truth is not a single one of us alive on this planet have ever experienced anything quite like this. I think I read the other day that Central Bank money creation combined since 2008 has totaled somewhere in the vicinity of nearly $8 trillion! I am not sure if that number is correct but the Fed alone, by the end of this year, will have done $3.5 TRILLION all by itself.

      There is an attempt by the monetary authorities, in my opinion, to herd the speculative crowd into select markets and so far they seem to be doing just that.

      I think that the longer these people try propping up this debt-riddled system, the worse things are going to become because of the sheer size of the imbalances that they are creating among the hedge fund speculative positions. There is so much money on one side of the equity markets (LONG) that if it reverses for any reason and that reverse is sustained, heaven help us all.

      If you are trading out there, be careful... do not trade in too large of a size.

  6. Outstanding editorial essay--Thanks for shining a light on these idiots and the seeds of destruction they have been sowing. You are spot on on your observations and analysis.

    Thanks for all that you do.

  7. Dan, I am extremely grateful that you so generously share your analysis and commentary. I hope that we all find the courage to remain calm, take prudent measures to protect ourselves and our loved ones and trust that eventually the forces of nature will crush the thinly veiled intentions of the central planners. I am confident that better days are coming but not before we experience a period of increasingly violent turbulence. Hats off to you Dan, and best of luck to everyone.

  8. For information, two charts :
    1) look at the crazy short position of hedgies on silver? (chart comes from Jesse's cafe)

    2) I read many articles wondering where the physical selling comes from. Seems to be from ETFs such as GLD. GLD sold nearly 200 tons of gold during the last 3 months!!


  9. Dan, is it possible that because it isn't just one nation that is in trouble up to their necks and printing useless cash but in fact the repercussions are being delayed as there is no opposite to react to because they are all in strife? That is it is all now normal economics to print and flood where as if it was only one country doing it we would see the inflation against their currency.
    I'm certainly no economist but it's the only thing i can come up with.
    All the best mate,
    Esra Star.

  10. I think this may all end-up in a sudden krach.
    Massive hyperinflation and stock market crashes all of a sudden, during a few days.
    In 1929 most never saw the crash coming, they were singing until the very last day.
    And then it was too late.
    US desperately need buyers for their Treasury Bonds, to finance their 1 Trillion $ deficit per year. Other countries are buying less and less of them. Fed more and more.
    Last thing they need is investors looking for other safe havens competing with TBonds, such as gold.
    How to convince them?
    Easy, shoot the market with lots of paper, create volatility, doubt and even panic in the gold buyers, and they'll be so scared that they'll nicely be herded in the only safe haven that should be : dollar and US dollar debt bonds.
    I won't fall into that trap.
    If anything, I'll make the most of that gap to buy some more phyz if we ever reach 1300 $ level.
    Sooner or later, Fundamentals will come back with a vengeance.
    Of course, that's the speech of a long-term careful investor.
    It's not uncompatible with being short on gold since the beginning of the year and making money both ways. I'm not doing it, but I don't criticize traders who play the short side of gold on the short term. Long term and short term are two different horizons.

    1. Hubert

      We are in a deflationary environment. The chance of hyperinflation is very low in the next couple of years. All that money which is printed is flowing into the stockmarket. The average consumer do not see anything from all that huge amount of money which would be a condition of hyperinflation. In fact the average Joe is getting more and more pour. When 99 % of the population has less and less money in his hands how can you have hyperinflation? There is a hyperinflation only amongst millionaires as they have more and more money. But most people never will see that money. That's why this money creation is even more disgusting because it only makes the already rich richer but doesn't solve any problem. First we should see a massive increase in wages. Until than it is pointless to speculate about hyperinflation. Right now the opposite is happening.

    2. Dear Kris,
      2 case studies.
      1) Armenia 2008. Poor people. Deflationary environment. Economy based on lots of imported goods. Remind you something? Artificially maintained currency by central bank became all of a sudden unsustainable. Local Currency dropped 30% in a single day.

      2) Iran october 2012. Poor people. Deflationary environment due to global sanctions. After months of slow weakening, local currency suddenly dropped 20% PER DAY during 3 consecutive days, driving panic in the population. Shops were closed as the merchants were unable to fix a price for their products any more.
      Hope I'm wrong about the US.
      I think I'm not.
      It's all about reaching a breaking point.

    3. Dear Hubert,

      At that time Iran’s economy was already on the verge of collapse because the sanctions against Iran posed by the US. It was an artificially and externally provoked situation. Without the sanctions it would not have happened I think.

      I don't know much about Armenian hyperinflation but I think it is a small and weak economy.

      The US is still one of the strongest economy in the world with all it's flaws and huge debt. Not to speak that the US has a reserve currency unlike any other country. I would not be surprised hyperinflation happening much earlier in Japan than in the US as they are printing like crazy and their economy is still struggling because Fukushima.

      Although gold still should rise even without hyper inflationary scenario since the various other fundamentals. For some reason it is free-falling. Might be because the FED wants to do so. Who knows?

  11. "I want to repeat it here again - this game will stop when the public loses confidence in the currency of its nation."

    Holy Molly! Dan, if this comes out to be true, I think it will start with Europe.

  12. Dan, thanks very much for your words of wisdom.

    I think anyone holding physical metal should consider what they are gonna do with the money if they sell out.

    Do they just put it in a bank, brokerage, CD, etc. only to have it very possibly stolen by the government?

    I would feel better hanging in there while they try to scare me out, as I'm sure (over a relatively short time) the scam will blow-up in their faces and prices will come back and then some.

    I like the idea of being able to stand guard in front of at least some of my life's work even if my only weapon is a slingshot and a box of malted milk balls. The satisfaction of putting a big red whelp on the scum bags forehead is better than nothing!

    1. Foam_Ranger;

      Your point is an excellent one - we own the precious metals out of concern what the Central Bankers are doing to the money supply and eventually to our native currency. Some folks forget this.

      Those who distrust the integrity of their currency have limited options unless they can get out of it and into another currency.

      I cannot see getting rid of the metal and exchanging it for dollars when I see the adulteration of the currency that is occurring. Keep in mind that I have one view as a trader who has to trade the tape and another as to the ownership of the actual physical metal itself.

      I have very serious concerns that the Japanese are going to experience a crisis of confidence in the Yen at some point due to the massive Bank of Japan operations. They are buying the lion's share of all Japanese government debt. That is not a recipe for anything good as I see it.

      When that currency crisis begins, it will impact their bond market and that will pull the rug out from under their stock market. At least that is what I believe is going to happen with a nation that is going to be up in the vicinity of a DEBT to GDP ratio of over 225% before all is said and done.

      That will produce a rippling wave throughout the global economy. As to when this will occur, it is unclear however.

      As I said previously, this game the Central BAnkers are playing will continue until a crisis of confidence involving the currency of a nation begins.

  13. Thanks for the great article Dan.
    It has been frustrating for those of us who have invested using fundamentals (how odd is that)

    I also watch the DOW and S&P soar ever higher regardless of how bad the economic data or news becomes. I see my investments in Oil, gas, silver,agriculture plunge ever lower while shares in Toy companies soar.
    I keep asking myself the same question "how can this be?" I often wonder if it is us in the Gold community who are being mislead and what we are witnessing is a real economic recovery that we are too stubborn to acknowledge....could this be?
    I am increasingly having trouble sorting truth from lies...if we are being lied to by MSM and Government it is on a scale that defies any precedent in history.
    If we are being lied to by the Gold/Commodity community than we go down in history as being the most gullible fools who deserved to lose their money

    Real hard keeping my head on straight...right now I feel like a Deer in the headlights.

    1. Dean - I am thinking the same. I think the critical though is essential--when reality does not conform to the model we must re-examine both. The miners are a different story... I think there are a number of things of problems, not all their fault. RE Miners:
      1. I feel the over-investment during 2010-2011 is akin to the dot com boom where grabbing resources increased valuation akin to grabbing eyeballs at all cost w/o regard to monetizing / profits. While idiotic, it is probably not the wrong response to the market. I think (hope) come to see that this resource grabbing will lead to lower cost supply in the future. In and of itself, not the worst management decision without the benefit of hindsight.
      2. As I understand it miners have the ability to select, to a certain extent, different grades of ore to mine to manage costs. With luck, they will be doing this as realized price decreases.
      3. The most asinine comment ever was from a major producer who said gold miners aren't profitable below 1475 (or something like that)...As if gold price had anything to do with mining supply. Oops.
      4. Even at low +/- $1,400 oz gold, some miners with "all in" costs of $1,100 (GG, EGO) have about a 20% net margin. Net margin on the S&P 500 is about 4%. Plus, miners actually spend money on cap ex...
      5. If we really were in deflation, the inputs would decrease (probably less than gold's price)...

      Just saying, quality gold miners will be a really good value that produce yield (NEM, IAG over 3% yield already--NEM's will go down due to gold going under 1,600, but still should stay over 3%).

  14. Hi Dan, I love to read your commentary and completely agree with you. But I have a question. Why are we fighting the tape and not listening to market? Had we simply changed our opinion and went LONG stock market SHORT Precious metals, sometime back we would have made hell of money. Because I believe as a trader our job is to make money by following the market, whatever it does we follow. Why are we asking questions or trying to justify or understand it? I think this is the fundamental flaw in our approach. Instead, if we simply follow the market and agree with whatever it does, we can make hell of money. I just don't know why we are not doing this, including me, and trying to complain what market is doing is wrong. This kind of behavior only causes huge losses in trading. I myself don't understand this. Appreciate your thoughts and comments on this.

    1. shyam

      Great idea in theory! I also suffer from hindsight investing remorse!

      If it was obvious we should have shorted Gold and went long DOW then at this very moment we should all know what the next market move will be and act on it.
      Do you know? (I'm not being mean or sarcastic Shyam)

      For example...Will the DOW continue to climb from the present all time highs uninterrupted from here? I am starting to read predictions of 18 to 20k now on the DOW.
      I am also reading predictions of $1000 gold and 150 or less on the HUI.
      Or could the reverse happen ?

      If you ever figure it out....let me know...(and no one else!!)

    2. Hi Dean,

      Yes. Future is always unknown in real time and obvious in hindsight. But my point here is take a stand at possible intermediate low within the given long term assumption and stick to it until told otherwise. For example, when S&P was at 1340 on 11/15/12, there were two possible outcomes. One is go to 1250 from there and the other was what happened until now. Now if you take stand, which can be simple guess, and LONG at 1340 with stop at 1330 and simply hold on it would have worked, even though there was no way to know this on 11/15. Similarly now, gold at 1470 level, I will take a stand to LONG here with stop at 1460. Now, I don't know what happens next. But if I stick to this position and simply hold on and if it works out it will go to 1800 minimum or even better. If I am wrong this time I will loose some money but not a whole lot, when I compare with what I make if I am right here. Anyway, all these things are subject to future validation which we don't know, but possible to do if we can stick to certain things. BTW, I haven't done this myself until now this way, but I would like to pursue this way. Basically, trade even though you don't know what happens next.

    3. Have to agree. The Long 2 ES / Short 1 GC spread was at -500 in October. This morning it hit +150. That's $65,000 per spread profit, virtually straightline up. No telling where it will end. I thought parity would stop it, and indeed traded it the other way briefly, it bounced from +10 to -34. Now we're at +125. If you really want to see a parabolic chart, check out the Natural gas / Gold spread chart. Unbelievable. The sell indications have been clear since the divergent top at 1900. The Oct. 2012 rally to 1795 was just a bear rally in the developing downmove. The monthly MACD indicators show that we have quite a ways down to go, and quite some time to go. We may only be half-way there, in terms of time at least. So, this downmove could go on for another year or longer, before a bottom is found.

  15. Dan,
    Thank you for both the post & time you spend responding to replies...Your pointing out the divergences both of copper & dow transports has been a screaming red light that something is wrong.

    I was looking at the components...As we talked about before, a good number are logistics / delivery services (Fed Ex, UPS) that are perfect harbingers of the service economy as well getting iPhones from Shenzen to Peoria (Fed Ex Hub Ted Stevens International outside Anchorage is the world's 5th largest air cargo hub! ). Fed Ex already lowered guidance for 2013. Railcar loadings are down to lowest YOY since crisis: http://www.zerohedge.com/news/2013-04-12/railcar-loadings-drop-most-year-date-crisis

    The components that are up...AIRLINES! have squeezed about all they can out of reducing flights, non-existent cap ex & making flights as miserable as possible. I have stopped flying UAL and gone to Mexican carrier Interjet (free tequila! and legroom for my 6'6" frame). HERE IS THE THING. 2012 full year operating cash flow for UAL was LESS than that of 2009! (966million 2009, 933MM 2012). YET UAL stock is up 10x since 2009.

    1. MDLGTO;

      Very good info... thanks for sharing it with us. I am very concerned that we are seeing the loss of efficacy of the liquidity measures of the Central Banks. The deflationary wave appears to be strengthening rather than subsiding. I am not sure what it will take to reverse it.. another $1 trillion dose of QE. These guys keep talking about the economy is improving but the facts are that growth is abysmal. Overnight we are now seeing signs of growth slowing in China even. Money needs to change hands (Velocity of Money) frequently but it is not; it is just sitting in equities. If those go - look out....


  16. Hi Dan,

    i really admire your work. What would be your opinion to this analysis http://goldtrends.net/FreeDailyBlog?mode=PostView&bmi=1267250?

    1. EdgarAP;

      Hard to say if that is true or not. It might be but as a trader it does not matter to me since the damage to the charts has been done regardless of who caused it. They have now flipped the hedge funds into selling the metals and that is all that matters. Not until those same hedge funds flip to buying dips instead of selling rallies are we going to see this market bottom out for good.

    2. "Not until those same hedge funds flip to buying dips instead of selling rallies are we going to see this market bottom out for good."

      Dear Dan,
      About this Jim Sinclair was writing that those hedge funds are dwarves against Russia and China Central Banks, who are going to take the long side of the trade and beat them hard.
      My doubt about this assessment is : why, if I were China or Russia, would I hurry up to buy gold and counter these hedges, and risk to buy at higher prices, when all I have to do is wait and buy a bit here and there patiently, exactly as I've done during the last few years? I know the idiots on the other side are selling their gold and pushing it down. I hink I'd just wait for the prices to come down to me.
      Is that sensible?

  17. Here's a Pollyanna viewpoint on gold that comes from a MSM / Government viewpoint on our wonderful recovery we are basking in.

    Take note of the COT charts under the heading 'Intermediate Outlook Bullish".

    I suspect this is part of what's troubling the fraudsters.

  18. Uhh.... just call me dumb.


  19. Looks like the silver bears have a stranglehold on silver. This is as desperate for the longs as it has been in years. Just wonder at what price the bears will give up.

  20. GLD and SLV getting hit hard again...

  21. I'm no trader but after reading the various PM sites this weekend it is safe to say that total pandemonium reigns.
    Several PM newsletters have advised their readers to reduce PM exposure by half...that's right...sell 50% of your holdings (at a considerable loss no doubt)
    You can only imagine what will happen Monday morning.

    1. Too bad all these PM "experts" realized what's happening after it already happened. I haven't seen any self appointed expert to predict this water fall. In fact everybody was telling the opposite. When gold was around 1650 I had the gut feeling that i should get out. At that time I could have done it with acceptable loss. I called my broker to liquidate my positions and I wanted to sell my physical gold too. The guy talked me out of from it. He assured me that we are very close to the bottom and I would make a huge mistake of getting out now just before the next big rally starts. He was so confident about what he said that he managed to talk me out of my intention and I did not sell anything. After all he is the investment expert with 30 years experience I thought. 2 months later here do we go. I am at a loss of 20% of my life savings and who knows how far it will fall. Now it is too late to get out I am thinking but who knows maybe in a few months I will be at 40 % loss and in a year I will loose everything? What should I do with that idiot? If I were him I would immediately quit so that I don't have to face with my clients. He did not even say sorry.
      All these self-appointed experts have no fu%+=ng idea what they are doing. All these so called PM experts were pushing gold as if there is no tomorrow. All were wrong. Dan is the only one who was not mindlessly pushing gold and his analysis are more realistic, down to earth (thanks for that!). That's why I keep coming back here and did not sight the other websites for a long time. All those people are either incompetent or worse corrupt. It is easy to say get out once the disaster happened. They should have been more realistic earlier.

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  23. "I haven't seen any self appointed expert to predict this water fall. In fact everybody was telling the opposite."
    Not true.
    not to mention Dan.

    This is T.A and short term action with huge volatility. If you are not prepared / experienced in those markets, you must take a long-term attitude, or you will be wiped out.

    "who knows maybe in a few months I will be at 40 % loss and in a year I will loose everything?"
    How could you loose everything? Hear your emotions striking you down? Gold is not a stock market share, cannot go bankrupt. Take a deep breath and stay calm. Why did you buy gold in the first place? Are you leveraged? If yes, and the goal was to make a quick short-term profit, better sell a bit now indeed, because :

    1) You trade gold on short-term with leverage and benefit from volatility ONLY IF YOU ARE A GOOD, EXPERIENCED TRADER.
    2) You invest into gold on the long-term as an insurance against the worse and the possibility of a huge dollar debasement, Cyprus event like during the weekend, etc...in this case, Gold is your insurance Policy for the long-term, you invested in it because you don't need urgently the money, and you wait patiently that the storm abates. YES, gold prices may plummet down to 1200$!! YES, some analysts will still be able to show you on a chart that the long term bullish trend is still there. As bottoms are formed when capitulation sets in, i.e everyone who wanted to sell finally did it. As long as HOPE remains, prices may drop more. You MUST see through the current panic about the end game. Paper trading cannot forever suppress physical prices if it is at the expense of huge sales of physical from the west to the east. But this demands a vision of AT LEAST 2 or 3 YEARS. If you are bothered by 20% price variations within weeks, then you can't stand the heat, and the bears precisely count on it. Then my advice is indeed to SELL A PORTION of your gold. Sell like one third, and certainly no more than half of it. Then relax. Keep your fresh cash Under the mattress. Consider than if gold keeps dropping, you'll have saved half of the losses. And if gold bounces back long term, it's higher prices will soon erase your previous loss. That way, you'll stop going mad by bad emotions.
    Intense volatility markets with krach like psychology cannot be traded successfully by amateurs.
    GOLD COMMUNITY is mostly amateurs in trading. They don't try to understand the end game or the why.
    They just remember "Jim Sinclair said that 1550 would hold. He was wrong. He knows nothing. I'm selling it all".

    Consider that gold can drop down towards 1200 $ and keep the position now that you can handle whatever happens with the prices. Capitulations bottom are often deeper than everyone expects, but prices don't stay in the bottom long. They bounce back very sharply, having left most bulls out of the train with a big loss, crying when they see prices rebound.
    It's your life savings.
    It's important.
    You don't need them tomorrow for spending.
    If I were you and the pressure is too strong, I'd sell 35% now, take my loss and wait for next months without ever selling more or watching prices.
    Question : do you think that the dollar is safer than gold?
    Question : don't you think that the dollar is in such a mess that other safe havens MUST be given the appearance of HELL in order to make you stay in the dollar?
    Question : How strange that LONDON FIXING went broke on friday?!! Doesn't it make you suspicious?

    Gold prices will recover because QE cannot stop, because negative interest rates are here in order to help on the debt, because all central banks in the extended BRICS world are net buyers and know the end game.

    1. Hubert

      I myself mentioned Dan as an exception. I did not know the other guy unfortunately.
      And yes I am an amateur in trading and I exactly know that. That's why I purchased physical gold and paid a lot of commission to a professional broker to handle my mining shares. Unfortunately to me he turned out to be even more amateur than myself. If I had my shares on Etrade I certainly would have sold them before the crash as I exactly wanted to do so but stupidly listened to a self-proclaimed expert.
      Anyway, thanks for your input.

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  26. Dan,
    Just want to thank you again for a reading on the market...while i'm holding a lot of gold (and miners) i got into enough cash to weather 24-36 months of horror. You saved my hide.

  27. When Jim Sinclair said the shorts will have a religious experience....ahem....I didn't realize that it was us longs who would get religion first.

    This is either the end or it is one hell of a buying opportunity.
    NUGT anyone?

    Is anyone buying out there?

    1. Yes I just started to buy a bit at 1360. Sorry, this is not a real time site. I just think that 120 $ down in one day is not bad to start a bit coming back in a position I sold begore at 1537 $.
      A bit only, though.
      Because we have a general cleansing here.
      No way to know where it will stop when investors are forced to sell their positions because of margin calls.

      But think about it this way : during 18 months we have been prisoners of this range 1540-1800. Now it took us a few months down to go back from 1800 to 1540 during the last descent. If I report this range down, it gives roughly a symetric support at 1300 $.
      And today, 2 days only after we broke through 1540 support, we are only 60 $ from the symetry of the range?
      We made nearly as much distance down as it would be up to go to 1800 $?
      In daily candles, forget supports or channels, they are all broken.
      I'm following the pitchfork going down on a weekly scale.
      I see a support at 1340 $, corresponding to another Fibo. I bought at 1360, before the screen and a bit nervous that I wouldn't get back in the market at all.

      With tonight close, maybe there will be another round of margin calls and sell offs tomorrow.
      Maybe the cleansing is not over yet.
      But I guess the worst of it will be over by tomorrow night.
      Of course, I doubt we'll have a V bottom after that, except for the part where shorts are buying back their positions. Because many bulls lost a lot of money or are scared by volatility, so I think it will be a slow process to rebuid a solid support for gold and climb back the wall of worry.

  28. Totally unbelievable PM price action. OK, I am going to take a stab at what is going on here. The Federal Reserve proxies, such as JPM, are going all out to eliminate their short position and the gullible Hedge Fund community are taking this short position off their hands.


    Because a major shift of power is about to take place where the BRICS will take over world reserve currency status with some type of tie-in to Gold. When this happens JPM, et al wants to be long Gold so they can survive this transition.

    Hold on to your PM's people because the USD is about to undergo a major devaluation.

  29. Thanks Dan. I had some more thoughts but today has kind of killed my drive... I think we agree on most points.

    I get frustrated with gold investors who are waiting for the financial apocalypse. Gold went down before and after Lehman. Deflation is bad. Gold does well with negative real rates, but only relatively well. We should be cheering for good jobs reports, not bad. If you have a moment, read KBR's 4Q11 guidance call from 1-11-13. It missed because labor costs were shooting up (can't hire welders...). That's what I want to see.

    The S&P is different. It shouldn't do that well in deflation, but maybe it isn't as misguided as it seems. There is too much euphoria and complacency, I agree. Yet, I think the average S&P 500 company is safer than government debt. The bond market agrees; I count 39 of the S&P 500 companies with CDS spreads tighter than US Government CDS. Further, US companies aren't investing in long-term growth but in share repurchases and dividends, which may hinder future earnings but does serve to shrink the supply of shares. The flight to safety is in income producing businesses that will weather the monetary storm. In Weimar, gold did well but so did industrialists.

    I've been waiting for stocks to correct one final major time. I still think there will be a big sell off and it will be the final generational low before the next secular bull market begins. We'll see. In the meantime I appreciate your thoughts on what the market is telling us.

    All the best,

  30. As for Fed quotes, this is one of my favorites:
    "House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals." -Ben 10/20/2005.

    To your point, if they're saying one thing, the track record is almost a 100% hit rate of the opposite happening...

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