"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

Thursday, June 27, 2013

Gold Snowballing Lower

We are seeing a snowballing effect now occurring in gold as even long term holders of the metal are getting washed out. As the metal moves lower, those who are still long are eying trendlines and support levels and are growing increasingly worried that what is left of any profits they might have in gold, since coming in back in 2010, are disappearing. That is creating forced selling further emboldening the bears who are now pressing hard on the market.

I mentioned in yesterday's post that the round numbers such as $1400, $1300 and $1200, do not seem to be holding very well on the way down but are acting much better as resistance levels on the way back up. That is proving to be the case with the $1200 level. Gold has dipped down below there twice in the last two sessions (previous session and current session). Downside momentum is favoring a push towards $1150 at this point unless price can QUICKLY recover $1200 and push away from that level to the upside.

See that previous post for downside targets....

I wanted you to notice on the weekly chart that this particular indicator that I employ has not been this oversold since the very beginning of the bull market in gold all the way back to the year 2001. As of now, I do not yet see any signs that this indicator is leveling out or is losing downside momentum. That translates to the odds favoring further downside before this wave lower is exhausted.

With no signs of inflation in the eyes on most investors, with rising interest rates and with little to no focus on the long term structural problems besetting the US (ballooning deficits and an out-of-control growth in entitlements, not to mention sovereign debts fears out of Europe receding from the front pages, gold is struggling to attract any buying among speculators.

I suspect that when price has fallen far enough however, Far Eastern buying by Central Banks and large long-term oriented interests from that region, will abruptly arise. We will continue to monitor the price charts for evidence of their footprints. For now, specs continue to unload the metal.

Let's watch the HUI however to see if there are any signs that the selling in the mining shares might possibly be coming to an end. Remember, the shares led the metal lower and will probably lead the metal higher. One day does not however make an end to a strong trend.


  1. Dan- there was a strong gap up in the daily HUI:GOLD chart today. Also the MACD for this chart is showing strong negative divergence since mid april. Any significance to this action today in your mind?

    1. I would like to see a huge move in OI by the specs on the short side. It's pretty much only the bullion banks acting as market makers on the long side is my guess.

      When they do finally flip the trade on the shorts, it's going to be tough for them to manage gold to the upside. I also don't think they have managed risk very well for a run on the bullion banks by the physical crowd when they want to lock in on low bullion prices and stand for delivery.

      They are going to have a heck of a time capping gold with the usual 2%/2%/1% they allow when letting it move up.

  2. Between geopolitical risks, governments wanting to raise taxes on PM miners, low dividend yields that get reduced with lower bullion prices, low bullion prices, miners constant missing estimates, and not-quite-yet bargain basement multiples I still see more downside.

  3. It is quite ironic that the first week of July, night trading session begins for the first time in Communist China's Shanghai metals exchange for silver + gold. Physical settlement trades. Woe unto the nazional zocialist (command) controlled 'market' whose pants will drop lower than a rapper at a skate party. The eyes of the world have no one to shield them.
    Let JPMorgueandChafes speculate from offshore numbered (proxy) accounts until the music stops, or the punch bowl falls off the table, whichever comes first.

  4. Question for the group, and Dan:

    If you had the ability to print currency, would your friends (cronies) and family be poor? Or would they benefit from every piece of legislation (I mean decision) you make?

    1. debts and deficits won't be the end of fiat. Class warfare and inflation will. Those with inflatable assets who can deal with inflation, and those without.

      Seventy six percent of Americans live paycheck to paycheck.

  5. Interesting analysis by Citi's FX Technicals:


  6. Pretty soon we will hear the real reason for the gold crash.

    My guess is that a major commodity fund blew up.

    The real shocker is that the price decline in the PM's was greater than the housing crash in 2009, or even the 1987 Dow crash.

    Who would have know that when "This Is It!" was hollered about in 2011, it was a signal to short gold and PM stocks for one of the fastest bear markets ever.

    Most likely the result of forced liquidation by a major player getting vaporized.

  7. Dear all,

    I've just bought a bit of gold as 1200$ exactly.
    When a write "a bit", I mean that I'm using CFDs and one CFD contract is worth 1200 $ on gold, so nothing like future markets and over-leveraging here.
    Reasons :
    - on the chart below, I think that the Fibo retracements of the 750-1940 upwards move are playing an active role in the downtrend. I saw this configuration several times when I used to do intraday in other markets. Levels are like a stairway. You go down step by step, and bounce back up checking if the previous level is now a resistance, and that's exactly what happened until now, so I'm trying to play the 1200 fibo level.
    - just under 1200, in the 1130-1150 area, I see a convergence of strong supports (mlh inf of andrew's fork, Fibo retracement of 300-1940, etc...) and I think that there is a strong chance that the market will bounce there and retrace at least to 1200 $, should 1200 $ not hold right now. If the market bounces now, I'll have my stop loss quickly put just under the recent lows. If it doesn't, it has a fair chance to bounce back to 1200$ and give me a chance to get out if I choose to at break even, depending on the signals I'll read.
    - this starts to be an interesting level to buy on the long term, as we are nearing most production costs for gold. So buying a little now for the long term should the market decide to krach directly down to 1000 $ is not totally hopeless.

    By no means am I buying strongly now. It's a small, speculative muy in order to get back in progressively into the market which is starting to look quite oversold.
    T.A is helping me chose here (to Hubert) : 1200 is a fibo level, and just under is an area which I think will be likely to generate at least a bounce back towards 1200 if 1200 doesn't hold now (1130-1150).
    Let's see if it happens or not. T.A gives an edge on probabilities, no more, and certainly no absolute certitude (which is why I don't like analysts who forecast that this WILL happen, especially based on time and cycles...)


  8. Answer to Nate:

    Yes, my friends and family would be so rich and powerful it would make you puke.

    As much as we loath to admit it, Bernanke has printed the US to prosperity. The US is in economic recovery. Forget this shadow stat nonsense and all the KWN tabloid style rubbish.

    Anyway....just read Monty Guilds latest. He is now saying it could be many years before we see anywhere near the 2011 highs again.
    The fact that many were burying and hiding bullion almost seems comical now. At this point you could leave a gold coin laying around anywhere and I doubt anyone would bother with it.

    I hate to say it but shorting Gold for the last 2 years has been an easy money maker..this is not going to change anytime soon.
    I have given up guessing where the bottom might be, I did foolishly buy some at 1380 or so thinking I was getting a good deal...ha ha ha ha!

    I might buy again when it hits $800..maybe

    1. Hi Dean,

      imho Monty is right. It could take more than one year.
      On a yearly time unit, gold was up for 12 uninterrupted years.
      12 higher tops.
      This calls for a pause, on the same time unit, i.e YEAR.
      So I'd forget about 1900 $ in 2013 and actually I'd love to see gold under 1600 $ (close of 2012) in 2013, because at last we would have the expected pause (well, we are in the middle of a terrible correction here, so we do have it).

      Also, bull markets usually go up slower than bear markets go down. Fear is a stronger - faster emotion than greed. In 3 months, we lost as much as 1 year of previous gains.
      After such a collapse, it is quite unlikely to V-bottom anyway.
      I think buying now can be only :
      - long term investment
      - very short term, targeting 50-100 $ moves up max.

      I'm disappointed by John Embry's statement :
      “What’s going on right now in gold and silver is preposterous. The gold price has been driven down roughly $600 from its peak in August of 2011. But if you really examine what’s unfolded in that ensuing period, there isn’t anything that would justify the gold price going down to any extent, let alone $600".
      If gold went ahead of itself, it was due to a major correction.
      Jim Rogers was right to wait for it. Point.

      These "experts" are dangerous, because not only they don't seem to understand the dynamics of futures markets, but when proved wrong, they don't admit they were, they'll put it in the nasty manipulators.
      I don't say there is no manipulation.
      But I think manipulation is here to start the move and amplify it. It is not the main engine of the downtrend.

    2. Hubert Du Haut,
      Agree with you. Be careful about who you decide to listen to.
      Jim Rogers and Dan Norcini are both very good in my opinion. Followed them for a while and believe them to be great commentators, and guide us into making good decisions.
      When you here comments like, silver is going to skyrocket, gold to the moon, $10,000 gold, gold will NOT go below 1520 (or whatever figure they give), 100 silver by end year, etc etc---be careful, be suspicious.

  9. The one market that is supposed to benefit from currency devaluation , which is what QE is, is gold. And it is crashing. Throw logic out the door.

    1. Arnie-
      One of the things that Trader Dan has pointed out is that gold is part of the bull market in commodities (the bull market in gold pretty well coincides with w/ the bull market in gold)--so the fact that lumber, copper, etc. have been flagging is telling. Also note that one of Jim Sinclair's pillars for 1650 gold is the bull market for commodities. (Currency debasement should be affecting the price of all commodities, right?).

      I don't think the answer is that central bankers are right (Even the recent BIS report stated as much as QE is just kicking the can) or have one at all. They are obviously soiled-pants scared that interest rates are going up, that asset bubbles are threatening to take down the financial system and yet the word of the day is deflation.
      This isn't good for gold in the short-medium term, but it's not nec. illogical.

      I loved Trader Dan's post on the HUI: from the other day: The market is right, and maybe the are not interpreting the message correctly.

  10. yep, the fundamentals are (or used to be) there.

    Dan is right when he refers to it as snowballing. Only a black swan type event could ever get it going again.
    Also right about Embry, I don't even waste my time reading what he has to say.
    Keep in mind him and Sprott are behind some of the largest PM funds in the world. I can't imagine they have many investors left at this point.
    Time to move on and do what Bernanke wants us to...buy the DOW. It looks like it is in a Bull market that has a couple more years in it.

  11. I have never being so bullish in gold since 2008...,

    I am not trying to get the floor.... But as a value investor am happy with my investment...

    Not to worry.. I am not planning to cash out next week...

    I am going to vacation .. Turn off my computer and relax....

    I am all in and note that I am not leveraging position... So no liquidation for my position.

    "Gold is money and nothing else" was a statement made by J.P. Morgan to the US Congress in 1913

  12. Is this a consiracy theory?

    - I'm a bankster
    - Crime pays (as long as the toll is lower than the crime)
    - Comex is the tool of paper price manipulation
    - Paper price manipulation will come to an end, because Comex stocks are being depleted quickly (i.e 100% margin market = 100% cash market, i.e paper = physical)
    - Then as a bankster, what the hell do I need Comex for after manipulation is not possible? Why would I bother increasing margins to 100% to keep it alive/afloat?
    - Why would I not choose rather to end Comex like HKmex ended, that is : I short infinity of contracts. Prices plummet. I make a profit. I buy physical gold, and more physical gold. Then I declare Comex default. I compensate the contracts with cash settlements. Hahahaha. The bulls are doomed. I made the money both ways. The day after, gold prices go up 30% and are traded through new exchange places such as Russia and China (currently being set up).

    Is it just science fiction?

    1. Looks like it is indeed FACT not FICTION

  13. And note,

    I invest more heavily in silver then gold.

    Cheer guy...

    Hope you have great weekend

  14. Here comes the bullion banks finally with some risk management. They most certainly don't want the bottom to come in a week. They want to see it linger for a long time at depressed levels.

  15. Well, now that gold is way oversold, Bernanke is now attacking the grains, as DBA is plunging to new lows for the move.

    It is simply amazing how Bernanke has single-handedly crashed the CRB index and has completely obliterated any hope of inflation expectations, such that Yellen is now free to use QE whenever it is necessary in the future.

    If fact, if the S & P 500 drops below 1,500, or if unemployment starts crawling back up, I'm sure another "program" will be announced immediately by the FOMC, supported by Draghi and Uncle Abe.

    That will create another temporary inflationary "crack up boom", which will take the S & P 500 over 2,000 for sure, and the CRB Index won't be a danger since it will have to rally 35% just to get back to where it was in 2012.

    And gold would have to rally SIXTY PERCENT before it gets back to $1,900!!!

    Heck, if we just have a 25% rally in the CRB Index from here, the speculative juices will be flying so high, any jawbone effort from Yellen could quash inflation expectations in a matter of hours.

    By that time the Federal Reserve balance sheet would have doubled from today's levels, and will be piling on to our national debt at a rate of $2 trillion per year.

    But markets won't care because there won't be any inflation, and the next round of QE will cause another buying panic into bonds as Bill Gross's "Bond Vigilantes" have now turned into "Fed Frontrunning PigMen", LOL!!

    Simply the most brilliant Central Banking tactics ever employed.

    1. I agree Mark

      Bernanke once famously said that he has a printing press and he intends to use it.
      We are witnessing the unlimited power of having that ability.
      At this time I cannot see how the DOW could possibly have any meaningful correction.
      If the economy worsens they will print and the DOW will rally.
      If the economy gets better...the DOW will rally.

      In the meantime the FED prints unlimited amounts to short commodities or anything that remotely threatens Wall Street.

      If there were only 1 bushel of wheat left on the entire planet, Goldman would short it..and get away with it!

      This will all end very very badly..but by then the banksters will own all of your gold, farmland, mines..your Sole!

    2. Might just rally the 32%, up quite a bit today. Lets see how it unfolds Mark.

  16. Hey Preditor 1976

    No doubt you are correct. I liquidated a chunk of my position before it went negative.
    Takes a key stroke to get back in.
    Never sold a single ounce of my physical though.

    Patience will be key at this point...I mean patience that most people cannot fathom.
    Dan is correct that this will be no V bottom without a black swan type event.
    For the moment Gold is the most repulsed, reviled, hated, scorned and avoid at all costs asset on the planet.
    This is a good thing, I will be able to get some on sale.

  17. Another thing to keep in mind everyone and I believe this to be true.

    For years it has been standard practise on Wall Street to seek out and hire Sociopaths.
    These same entities have control of the US government and the military that goes with it.
    As Jim Sinclair has stated "they would put their Mother in a microwave if they could make a profit doing it"

    Make fun of the Hoss Cartwright ten gallon tin foil hat that I wear but I really do fear how this will all end.

    1. My mining stocks up 8.5% today. Looks like Sinclair, Dave in Denver, and the rest just could be CORRECT!!!!!!!!!!!!1

    2. It's another trap. They did the same thing at 1410. Set a nice little trap. Some shorts in London covered before the weekend. Don't bite.

  18. With Corzine ready to go into cuffs, maybe JPM and Blythe Masters will be next. That sure would start the fire if they default can the CFTC could actually do something other than allow citizens to get raped by these people. MF Global Crime Scene, next crime scene...COMEX

  19. Be careful everyone..we have all seen these one day rallies before.

    Listen to what Dan says


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