"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


Tuesday, May 14, 2013

Gold Range Bound; Drifting Lower

Gold continues with its lackluster performance of late since failing to extend its bounce past overhead resistance between $1475 - $1485.

With equity markets continuing to head vertically north, hedge funds are not interested in safe havens of any nature, be that gold or Treasuries. For that matter, they are not the least bit interested in mining equities either.

Sentiment towards gold among the Western investing community is horrible. It is strong Asian demand which is keeping this market supported. Had it not been for that, gold would never have managed to climb as high off that recent crash lower as it did.

From a technical standpoint it had been trading in a range bounded by $1485 on the top and $1440 on the bottom. That has given way to a new and lower trading range with $1440 now serving as upside resistance at the top and $1420 or so on the bottom.

As mentioned in my post over the weekend, until investors get rattled
either by fears of inflation (judging from the TIPs spread they are no where near so doing) or until some event occurs which rattles their confidence in the Central Banks money creation theme, it is difficult to see sentiment shifting back towards gold among the hedge funds.

The commodity sector, in general, is continuing to move lower which is mind-boggling considering the extent to which the Central Banks have goosed the equity markets with their short-sighted bond buying programs and other easy money policies.  A thinking person would look at the given reasons for rallying stock prices and connect the dots with the idea being if economies were strong enough to engender a stock rally of this magnitude then surely demand for physical commodities, which normally accompany any period of true economic growth, would be rising, not falling as it currently is.

It all just confirms in my mind the disconnect from reality which is currently being seen in this equity phenomenon. For any of your Star Trek fans out there, it is like something that has been programmed into the ship's holographic program array and into which the crew could escape to live out their fantasies. In this case however, it is real enough in the sense that fortunes are being made chasing equities higher on Wall Street. This is a "sure bet" and Wall STreet loves a sure bet.

The result of this madness is that the  word, "RISK" has been rendered meaningless, a non-entity, a bizarre leftover from an ancient world of men by these paper money alchemists. Until it recaptures its meaning in the minds of men, I find it difficult to see why gold will mount any sort of SUSTAINED rally.

Generally speaking, hysterias of this nature end badly. I maintain that it will. Traders can chase stocks higher but investors, need to be extremely careful with this market. It is rising on air and nothing else of substance.

By the way, check out this chart of lumber - sure makes me wonder where the homebuilding industry is heading!


  1. You said it all...no hope for PMs to rally when SP500 is rallying everyday, sucking in all the dumb's money...it will end as it always does...a stampede to the exits at some point, without warning.

  2. Dan,
    When you say "RISK has been rendered meaningless, a non-entity, a bizarre leftover from an ancient world of men by these paper money alchemists. Until it recaptures its meaning in the minds of men, I find it difficult to see why gold will mount any sort of SUSTAINED rally."
    I am not sure you are right. You are when you talk specifically about "these paper money alchemists" but not from a retail point of view. It seems that the retail trade is lower and lower. Main Street is fearful and is staying away. Trading volume is lower every year:

    - Volumes in U.S. equities fell 18.5% last year, averaging about 6.5 billion shares daily, compared with 7.8 billion shares in 2011, according to TABB Group. This is far below 2009's average daily volume of 9.77 billion shares.

    - Retail volume has been estimated to be 11% of the trading volume.

    In conclusion: what we are seeing is HFT, Institutional and Hedge funds chasing (up or down) the same shares and giving the illusion of an active stock market. However FEAR is in the heart of the retail investor and the manipulation by the FED and other central banks will not only keep the small investor away but increase its resolution to stay away. Only the foolish are playing the manipulated game.

    A last note: HFT seems to be less and less profitable and we could see a change in the near future. Would the change come because of the lower profits or because of a huge crash that will "naturally" eliminate some large players? Don't know but it is coming.

  3. charts get worse and the shills on KWN forecast even higher prices; the lower we go, the higher their forecasts; pretty sad to listen to von Greyerz, Leeb, Maguire,,Sprott, Sinclair and all the others with no real novel thinking; becoming a joke blog, but you and Zulauf, Yamada, Faber still lend a tad of credibility; we are headed lower

  4. "pretty sad to listen to VonGreyerz, Leeb, Maguire, Sprott, Sinclair..."

    I guess you prefer to listen to Bernanke, Draghi, Lagarde... You must like to be played by these guys. One thing I will agree with you: Gold is down as are gold equities. Does it mean the people you refer to are wrong? NO. Check the history of the stock market(s) and you will see that when bastards like the people I named above are playing with the market(s) it always end up in a huge disaster.

  5. I think we can all agree that Bo Polny was wrong.
    He may have called a top..but calling the bottom is going to be a tough one.

    Think I will add to my short position today.

    1. I am NOT going to start a long discussion here (not worth it... different opinions (or goals?) are and stay different opinions ! However Steve is mentioning Faber ("Faber still lend a tad of credibility") he should check his sources instead of using names with no reference.

      Faber agrees with Von Greyerz or Sinclair and many others named by Steve. This is a small excerpt from an interview of Faber by Bull Market Thinking.

      " As a final chilling comment to end the interview, Marc said, “In terms of social conditions in the western world, the wealth inequality, the money printing—it’s absurd to think that you can create economic growth by boosting asset prices…I’m 67, so I hope I don’t have to see all the [ultimate] disaster, but I am very, very bearish on the trend the world has embarked upon." Please read the whole interview at


      I am done on this subject.

  6. Hubert,
    I guess, Steve is just making a comment that you have some guys out there that make calls such as, "gold is going to new all time highs by end year- look for $3000 gold!" or "There will be no resistance at $50 silver- it will go straight through and never see fifty again!" and any other similar comments that are of prediction nature and create hype as oppose to providing a balanced perspective. Jim Rogers has been saying consistently that gold has been up 12 years in a row and this is extremely unusual in any markets, and was due for a correction. Whilst the others like, Steve mentioned, just kept saying buy now, low is in. Back up the truck, etc etc etc....

    I agree with, Steve. Yamada, Faber, Jim Rogers, in my experience provide great balanced perspectives and don't claim to know it all.

  7. Hubert

    You are totally correct. All of the usual suspects who pressure people to buy have skin in the game, they either own a gold mine or a gold fund.
    I admit that I was drawn in by these outrageous claims, I never backed up the truck (except the one in my driveway) but I did not properly hedge myself either.

    Martin Armstrong has been the only one who has been fairly accurate so far. He openly mocks the way we carry on in the gold community....we deserve it.

    Dan provides good technical analysis and level headed observations. This is a good site.

  8. Dan is an excellent source of insight, knowlege of how markets work, supply/demand/, markets, and the system. He was one of the first traders to understand how rigged the PM, especially the gold bullion market is manipulated. (See required reading list on Harveys blogsite). These "manipulated" markets were much more fully diluted with additional "controlled products such as highly leveraged etf's etc" since he wrote this wonderful piece. I still believe he has bias towards an eventual waterfall event which will destroy the market manipulators and the gold banking cartel. He tells us quite a bit that "HE DOES NOT KNOW". I too was caught up in the hysteria of the impending fall of the almighty bankster control. What I believe is this is a desperate act of their making an attempt to control supply and demand over all markets. Guys like Hank Paulsen, Blanfein, Dimon, etc are all turning socialists to keep their power. I would not even doubt that they will be part of the great pow wow with Washington turning the banking system publicly owned. They keep their power and the government the control. America, once land of free markets and free people is now being controlled by idealistic socialists including guys like Dimon. If I could get a cage match with that bozo, I promise guys I will rip that big fat lying pinochio nose right off his face. In time I might get to see him. The first thing I will do is flatten that nose and turn its color to a wet red dripping mess. Yes Jamie I hate your guts.

  9. Difficult times are these, at least for those who endeavor to live a life premised upon moral integrity. The political elite and their enablers, the central banks and mainstream media, tempt us every day to say "screw it" and take the path of least resistance. Of course, waiting at the end of that road is the wasteland of misery and despair. Therefore how can anyone begrudge any of the giants among men, such as Sinclair and Sprott, for offering truthful counter-arguments as a response to the incessant lies and deception from the aforementioned axis of evil? The essence of what is taking place today is more than trading account balances, it is much deeper than that. Give that some consideration before making disparaging remarks about men who understand what is at stake during this time. That is, if it's not your job to make such remarks on internet comment forums.

  10. Gill,
    Sorry, sometimes the ongoing corruption and governemnt induced bankin bs system gets to me. I do not blame guys like Sinclair, Sprott,etc. They truly are the trumpeters in the Banking worlds ongoing takeover of the metals markets. Since I still have a bit of anger and fight left in me, as well as a steady hand and a few very good accurate rifles and pistols (soon to be required to be registered and then taxed by more Maryland BS laws) it outrages me what is happening in our Governments. Period. Jamie Dimon is a thief however. The banks should be broken up period so that one side of their entity is required to attempt to make money from lending money. You know the "fractional reserve" system this country's banking system was supposed to be. It turns out the TBTF bank have morphed into one big casino, not lending money based on risk. Higher rates for more risk. What destroyed the country's banking system was these guys. Creating derivative markets (Blythe) and products and then growing them due to the unbelievable profits. When it melted down the GOVT saved them. They should have all be destroyed. Smaller banks would have eventually been able to absorb this mess and we would be out of it by now. What has happened instead is a sort of partnersip with large banks getting, giving and controlling the economy while small business' and entrepreneurs getting totally left out. I know, I spent 25 years in this business. The velocity of money is pouring into the stock market, not used to lend money to small business. Totally corrupt government and Central Banks.

  11. Never convice me otherwise Last bank I worked for had typed us up talking points on small cards to memorize statin how much in percentage terms they increased their lending. Well 7% increase from 150% decrease is ZIPPO. Screw that bank too.

  12. The current main investment theme IMO is the following:
    1. The commodity bull market is dead, because it's driver for the last 10 years, China, is to weakly growing.

    2. The money printing has not resulted in inflation (as expected from 2009 - 2011), therefore Gold and Silver are not needed.
    Economics have changed, we are now living in times, where money printing does no longer create inflation.

    3. Because economy is healing, asset price are rising and therefore the financial markets are stable. No longer Gold is needed.

    I don't say, that I agree, but I only want to point out, what the main theme is, that drives the markets now.

    You can even get the impression on many "progressive" media outlets, that the financial crisis of 2008 was only a minor accident on the road to properity and progress.
    Debt and even more debt has proven to be the solution of the problems and those who claim otherwise, do not understand anything.

    Again, this is not my opinion, but this is how it is seen. We don't know, who really believes in or who is just playing the game, but it doesn't matter. Mr. market does certainly move in this direction and being early equals being wrong.
    Shorting MBSs in 2006 was wrong. Shorting in 2008 was right. Shorting the market in 2006 was wrong. Shorting in 2008 was right. The ones who shorted it in 2006 got broke, while being perfectly correct about the developments.

    Same today. Believing that artificially inflated asset prices due to free funny money, is correct. But shorting the bubble today is wrong.

    The market can longer stay irrational than you can stay solvent.

  13. Well put Endziet

    Patience is key here. It would take balls of titanium to short the DOW right now !!
    It is tempting but your timing would have to be impeccible.

    Often times it is either JP Morgan or Goldman who will issue a key warning. Watch carefully what either one says about US Equities. Before the crash of 08 JP issued a triple sell, Goldman just recently issued a short Gold...had you followed their advice you would be in good shape.
    I know..they are part of the Evil Empire but I get this feeling that for some reason are obligated to give us sheeple some kind of notice...just so the Government can say "hey, you were warned"

  14. One thing to add. GS advised shorting, gold plunged, then 3 days later they recinded. Sounds like manipulation, not a warning that the government would hang their hat on, rather a shorting monetary "windfall". They are thieves.


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