"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

Wednesday, June 19, 2013

Bernanke Speaks; Gold Clocked

The caption says it all - once the FOMC statement was released, followed by some comments from Fed Chairman Bernanke, that was all she wrote for gold. Down, down and down it went as the Dollar went up, up and up.

What the market is currently thinking is that if there is any nation where interest rates are going to rise, it will be in the US before it is anywhere else on the planet.

You combine that with equity markets that promise attractive gains, and large sums of money are moving out of their respective currencies and exchanging into US Dollars with which to buy US equities.

As the Dollar moves higher, gold is moving lower.

The problem for gold continues to be the same; investors do not see any signs of inflation, in spite of the Trillions of Dollars that have been conjured into existence, and hence need no inflation hedge. That, plus the fact that while there was turmoil across the world financial markets in the recent past, that seems to have come and gone as far as many are concerned. Where once the theme was "RETURN OF CAPITAL", now we are back to "RETURN ON CAPITAL".

In other words, since investor fears are basically gone for now, and since gold throws off no yield, and since they see no signs of inflation, they are dumping gold or shorting it.

Take a  look at the following chart of the GLD, the large gold ETF. Look at how there continues to be a drawdown in gold. Investors are selling out and moving the money elsewhere. For the first time in a very long time, the tonnage has fallen below the 1000 level. That is significant.

Now there is another issue to deal with and this is a technical one. I mentioned that there were a large number of sell stops building down below the $1365-$1360 level. The bears finally got to them in a big way today. In the process, they have really inflicted some damage to this chart.

The weekly gold chart is getting quite ugly to be honest. If gold does not quickly get back above that $1365 level before Friday's close, I am afraid that support is not going to hold down near $1320 and this market is going to reach psychological round number support at the $1300 level. If $1300 gives way, we are going to see a test of $1250.

Notice that gold is trading firmly under its 200 week moving average. The 50 week is moving lower and while the 200 day is still ascending, its slope is leveling off. Markets that are trading below their 200 day moving average are not bullish.

I have mentioned to the readers to ignore all that claptrap about hedge fund short positions, about big bank long positions, taking a contrarian position, etc,. and the rest of that useless COT analysis that so many novices keep touting. It means nothing - all that matters right now is money flows and they are leaving the gold market for the time being.

Something needs to occur to change speculative sentiment in gold. What that is right now is unclear. Even on the weekly chart, gold is firmly entrenched in a bear market having now fallen well off the 20% level from its peak at $1900. As a matter of fact, it is fully 30% off the peak.

At this point for the market to have any consolation for the bulls and to give a hint of a reversal, it is going to have to hold near that all-important 50% Fibonacci retracement level from the 2008 bottom noted on the chart. That is just above $1300. This is why that level must hold.

People keep talking about capitulation in gold. If gold breaks through $1300, you will see what capitulation looks like. I have said it once and will say it again; most of those who bought gold shares back in 2008 believing that they would provide some good protection against the wave of money printing that was going to be unleashed, are cursing the day they ever dropped one dime of their investment capital into those things. Maybe some day they will go somewhere; most of us will be dead and gone by then so hopefully our kids can earn something from them.

With the gold shares descending into the abyss, there is simply no evidence of speculative interest in anything gold or silver right now. Yes, physical demand is strong but it is not strong enough to take prices higher in the face of strong short selling in the paper markets and the continued exodus from GLD.

For now, the Central Bankers remain the Masters of the Universe. Thus far they have not been knocked off of their perches.

Incidentally, the one thing that threatens these demi-gods is the rise in the long end of the yield curve. Bonds are breaking down and yield on the Ten Year hit a 14 month high today! It has reached a level that has turned it back lower over that same period. If it continues rising, we will watch to see what if any impact is might have on the all important real estate market.

It still remains to be seen how in the world the Fed is going to ever be able to exit this QE business and reduce the size of its balance sheet. I suppose they could hold the paper they have until judgment day for all that most of the investment world cares. After all, the problem will be for another generation, is the thinking of our self-centered era.


  1. another good letter, Dan, and I do not see the PM bulls showing up, as I guess they are not stacking so much lately; they alll forget how small the PM mkt are and that they can be burried from time to time, like now; the miners are a total mess and this could take years to iron itself out; myself, I will not buy gold until it closes monthly over 1550; until then I will try to chisel it from the long side but with not much conviction; best trade is short Yen going back to 40 futures or 250 if you prefer; biggest joke of all is 15-1 gold silver argument; hahahahah; when will they cut loss?

  2. Thanks for another nice post, straight to the point.

    I agree with you about capitulation. 1350 is only 10% Under last support zone around 1500$ (range 1500-1800), so the "panic" was violent but brief and not so deep. Besides most long-term buyers are still making a profit with gold above 1300$. After all, since 2001, gold spent most of its time Under 1300$.
    So what happens if 1300$ are broket in anyone's guess.

    I'll just remark that the Fibo retracement level at 1345 $ that I'm following has been reached once more, and that we are now forming a nasty potential downward triangle.
    I also noticed that 22$ became a reistance to silver, and the trend is also eading South there.
    Last, volatility which was decreasing with prices attracted to the median of the andrew's fork was a scenario valid up to yesterday. Today, the market seems to indicate a direction : down.
    So I'm as usual extra careful and think that we may be close to a new cleansing in gold / silver prices.
    I sure won't get back in the boat before the market shows me a bottom and some signs of strength.

  3. Dan,
    With all respect equities were sold today on a 6 to 1 ratio, so part of your analysis should be corrected.

  4. Well....if the miners are in the Tank for 20 years or more like everyone is indicating...then I am screwed.
    I will be either dead or too old to even care by then.

    I hung on with my "good shares" thinking they cannot go down forever....WRONG!!

    I guess I will just sell and try and at least get some money back.
    I cannot describe how devastating this latest development is for me.

  5. Use the certs for starting your woodstove after you use up all your spare $100 bills. That is what I am saving them for this winter. Hilliary and Janet will give America a warm fuzzy love hug in the near future. You know that is what is awaiting us, Jamie, Blanfein want more $Trillion dollar bills. Dean I feel your pain too but only minimally cause I ran scared the last time gold did a chin up over $1400. ;(?

  6. Hi Dan,

    "People keep talking about capitulation in gold. If gold breaks through $1300, you will see what capitulation looks like."

    Out of curiosity, given that capitulations mark bottoms (I might be wrong about this), would you be a buyer at those levels, within the context of, "Markets that are trading below their 200 day moving average are not bullish"?

    Hope it doesn't break below 1300 though, given the ominous consequence of it as you mentioned.

  7. Dan,

    A view from other countries Gold in the portfolio is actually a stabilizing factor in April Gold hit US$1340 that was then A$1325 now because the A$ has fallen Gold currently US$1345 now A$1455. I would rather hold Gold than US$ as the Chinese have decided.

    I think there is too much panic, if like myself I have had my core Gold positions since 2005 Gold in A$ still up 200% in 8 years also in most currencies including the US$ Gold is up much more than 200% since 2005. Will I buy more on a pullback to say US$1100-1200 yes but I am not worrying this is a long term play still looking for Gold to DOW 1:1.

    I suspect the entities who have leased Gold over the last 10 years are orchestrating panic in the Gold market to try and buy back the Gold they have borrowed and coverted into other assets, soon there could be panic on their watch not ours, sit and wait Gold could go lower 10-20% but what of the upside, name a figure Gold is miniscule compared to the trillions in other BS assets when the sh... hits the fan where will they run.

  8. Dear all,

    So it happened, and the breaking of 1345 provoked a cascade of sell orders throuh it and to 1300 $.
    imho it reinforces the retracement levels of 750-1940.
    One retracement level was 1345.
    We then bounced up and were capped exactly by the above retracement level near 1490.
    So, I'm closely looking at the next Fibo level down now for a big opportunity of buying.
    I'll check if it coincides with a technical bottom with silver.
    I kept cash and out of the market.
    So in my position, I do hope that gold will reach that level so that I can buy more and make a try at these levels.
    Remember if you panic, that when someone sells, someone else buys.
    Important with this volatility and bear market is, from the start, to keep your losses low.
    Not necessarily by having too close a stop loss that will be hit. But by buying smaller lines with a stop loss consistent with the volatility.
    I'd welcome gold around 1200$.
    I know Jim Rogers would as well.
    Eventually, markets bounce.
    I like the site of eric de groot : market is concentrated, polarized, but it needs a technical trigger.
    That's it.
    Be patient.
    There'll be time to buy when the market shows us the cleansing is over.

  9. Houston,
    WE HAVE A PROBLEM!!!!!!!!

  10. where are all the silver stackers now? it is just a commodity folks

    1. still here. Waiting for the next sale. Chinese Pandas at $25 very appealing.

  11. Weak demand coming from China and India is taking its toll. The demand side is not holding up. The import duties coming out of India couldn't have come at a worse time as specs are all ganging up on the sell side.

    Think about it - incomes have not accelerated at the same pace as gold appreciation. People want a sale on physical to buy more. That initial wave of demand is now exhausted and supply is still plentiful.

  12. Lets see if the equity rout continues. Hopefully it does and this time if we can get a large rout, maybe, just maybe, we can then finally put the foot to the floor on Jamie, Blanfein, and the rest of the manipulators. Push it through their throats until the foot hits the floor. This time, we take out the IRS and restructure the tax laws to a flat tax. This time when the bond market fails we take away the free money to the Big Banks and let the Main Stream Media finally say that the U-3 is NOT a reflection of real economic growth. This time, the banks are taken out one at a time and no TBTF. This time the economy goes back to free market principals and the large companies suffer like the rest of us. That is my prayer. I really think this is what we have to do. Lets just see what happens. If not, Ben will be pushed to come out and make a clarifying statement. Our debt will force the deficit to a skyrocketing position. The banks and Fed are sitting on "mark to market" BS. Lets have a real economy again!!! We should be recovering by now, if, LAST TIME, we took our medicine. Here Here!!

  13. The Only question in my mind is a very simple one:

    "Why is the FED still telling us that it will stop/reduce its monthly 85B buying knowing that it leads to a fall in equity values and a rise in 10 Year Treasury and therefore a rise in fixed mortgage rates with the ugly consequences in the housing market?"

    What do they know that we don't?

    My answer? The same -right or wrong- I have been giving.

    They want the USD higher because it is the only psychological fence still up. Let go of the USD and the equity market will go down and inflation will go where all of us think it will: to the sky AND The Yuan will become the ONLY safe place to park the trillions of dollars in circulation marking the death of the USD and therefore the United States of America.

    Very dangerous game!!

  14. May I ask where I may create my own GLD chart, thanks.

    1. on a daily time unit, free software on prorealtime.
      Intraday, you can open an account with a demo platform on a futures or CFD broker and use their graphs.
      There are many, check on the web.

  15. Hubert,

    You are a smart man. Let us see what happens today. They had to capitulate on the U-3, they are washing the stats in order to give the Fed more room. I say, let it fall to a real market. Lets see what the Banks do today. The banks in italy fell hard yesterday. I hope the Banks in the US fall harder. No question Obama wants to replace Bernanke in order to keep printing. The NWO is at the door. Stay strong!!!

  16. The timing of all this gold price volatility always seems to bite me in the ass! I save my money in physical gold so when I need to dip into my savings, it never fails to coincide with one of these nasty down-drafts. In general I hate selling gold worse than I hate stepping in dog sh*t, but having to sell gold in times like these feels more like having to eat it. It may leave a bad taste in my mouth, but these price swings have not shaken my resolve to keep my money out of the system.

  17. At 1290, there is a support level on the monthly time unit.


    After that, it's the mlh inf which coincides with the next retracement fibo level around 1205 $...
    Maybe 1290 will hold.

  18. Hubert,

    If, and a big If, the rout continues, we are back to the meltdown days of pre QE 1. Can we just slaughter the system this time? .I want JPM, C, HSBC, BAC, MS to go the way they should have in 2008-2009. Then we can safely say we will be on our way to recovery. This recovery is full of BS. They know it, Bernanke knows it, and Obama may use it to try to instill Martial law. Let's see what happens...watching 1205 with baited eyes. Stocks will have to follow commodities, unless of course the PPT and the banks with Fed money start anew with another plan to buy securities flat out violating their charter. Getting fun now..Dow off over 200..come on drop to -500 at close.

  19. Look at the good side. Hang in there for a nice short squeeze opportunity, just purely on spec activity (supply/demand of the commodity aside). Greed mode should be kicking in for the shorts here very 'shortly'. They will drag along with them some weak handed longs.

    Another 10% move to the downside would setup a very nice squeeze opportunity. Catch the selloff with equities and then go long. Gold was holding up better as of late to oil at the 1380 spot level.

    Wait for the hatred of PMs to become so frothy that nobody can stand them anymore, then go in. It may have an 11 handle on it when all is said and done, but I think the bottom is near.

  20. KWN gets funnier every day; now some clown tells us all for the 44th time how gold and silver are being manipulated down and so on; I wonder why he did not explain to us all that the bonds, fx, stk indices, grains were all being manipulated down also; what a donkey!

    1. Steve,
      Looks like you arent to fond of KWN. This being the case, stop visiting there site. Food for thought!

    2. Agree - it's getting old.

  21. Regional bank stocks pinned near 52-week highs are are green on the day. Same goes for the likes of Starbucks and Panera Bread.

    Anyone who kept their hard earned investment dollars safely ensconsed in regional bank equities and brokerage account equities like Charles Schwab is sleeping like a baby.

    As I speak SCHW is now printing new 4 year highs as investors rush to place their discretionary fund into the "Too Big To Fail" banks and mainstream brokerage accounts.

    Those who staked their future on gold, emerging markets, or hard assets are seeing their wealth destroyed an an accelerated pace.

    Exactly as Ben Bernanke planned.

    Market historians will be marveling at this acheivement for the next 50 years, it will be the model for central banking for the next several decades.

    1. Schwaab ready to go negative...2:19 PM.
      Panera Bread off 1.1%
      STI SunTrust negative down
      BBT looks like a winner

      Down goes Frazier, down goes Frazier. The thrilla in Manilla now happening in Stocks sold off again today better than 6:1.

      What is the deficit going to be now that yields are up and Big Ben was PUZZLED>>>>>>>>>>>..

  22. I agree with the comment about KWN.
    Actually, all gold websites, commentators and analysts are becoming nothing but bad comedy.
    Not one...not one of them has been even remotely close to being correct.
    I did lighten up on my gold position on the last micro bounce but I wish I had just sold it all.
    We keep reading this rubbish about imminent collapse, inflation, protect yourself, gold insurance...blah blah blah!
    We've been had by a bunch of gold charlatans...there are NO exceptions

    1. If one looks at where the gold and silver market is today, then the talk about imminent collapse and stuff seems pretty ridiculous. But if I told you the US had a 17 trillion debt and counting higher, and that rates were zero, and the fed has just printed money, you would logically conclude that gold MUST be significantly. So that must be the assumptions used to make those predictions. It just hasnt turned out that way. Yet.

  23. Anybody have any thoughts at what level we'll start to see production shut-ins?

  24. Dean - Wow! There are NO exceptions?
    Dan Norcini is the exception.
    I bless the day I found Dan on Sinclair's site.
    I have learned more about markets by reading Dan than all the rest put together.
    Apart from anything else Dan has taught me to (1) read the tape, and (2) form my own thesis, test it, and retreat instantly if the tape shows that I am wrong. I agree the so-called "gurus" are all bullshit. I couldn't care less what any guru says. I trade in a market place and the tape tells me what is happening, not some bullshit guru.
    I am truly sorry Dean that your foray into gold has lost you so much money at a time in your life when you can ill afford it. But your big mistake was not buying some gold. Your big mistake seems to be that you went all-in for gold and held on, blind to the tape. Big lesson here for everyone: never put all your eggs in one basket and learn to read the tape.

    Now then, what next? There HAS to be a bounce in here, somewhere. The recovery from 1321 to 1487 was 12.5% but no chance of getting all that. I always work on the basis that even on my best days I am going to miss the first 10% and the last 10% of every move even if I get everything right. I was on vacation in April so I didn't trade, but I could trade now. I use Bullionvault. Is a possible 10% gain (before commissions) worth the risk? Well, yes it is. All eyes on the tape everyone.... Wait for it....

    1. HI going loco

      No, I am not all in. I am okay on the physical I own but it is the Gold Miners where I have lost about 60%...that is bad no matter who you are.

      I am also heavy cash, but I was also into Oil, grains etc.
      But who needs that junk!
      Buy Disney, Harley and Coach Hand bags...that's what we really need...right??

      I don't mean to come off so negative but if Gold is going to be the last man standing it sure is tuff to hang in there.

  25. when you are as bearish as I am, you always have to be on the lookout for why some of your thoughts are incorrect, and thus visits to perma bull sites is a must; btw, I wonder where the 15-1 gold/silver players have their stops? 100-1?

    1. You might perceive yourself as bearish, but you come off like an adolescent "hater". You can't seem to offer a comment without mocking KWN and the people who contribute there. It's not just old, it's pathetic.

  26. No one can stop the journey of gold from buying it. Now buying gold online has become a great trend in Canada because of the easier procedures and delivery.

  27. Thanks for the information, I've been researching buying and selling gold for a few days now. I've saw some snmp monitoring software that looks to be a great tool to track market prices. Do you have any experience in this type of software?


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