"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

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Friday, June 7, 2013

Gold Specs Washed out and Wrung on Friday

Once again we get a Friday with a payrolls number and once again we get a wave of selling in the gold pit. It does seem as if this has been pretty much the norm for as long as I can remember.

The catalyst was the "Goldlilocks" jobs number of 175,000. I have no idea where this kind of rubbish comes from but somehow, "analysts are in agreement" that the number was not too hot and not too cold, but just perfect, at least for equities (when is anything not perfect for equities these days?).

The talk was that a stronger number would have meant the Fed was going to dial back on its bond buying program or TAPER sooner than expected. A weaker number would have ensured more QE but would have been regarded as disappoint for the overall economy. It seems to me that when it comes to equities, it is "HEADS - I win; TAILS - You lose".

Perversely enough, equity perma bulls were cheering the number as being conducive to no cutting short of the current round of QE but gold bears were crying up the number as proof positive that the economy was coming around and that the Fed was going to indeed begin tapering? Seriously, both pits looked at the same data and came up with two completely, antithetical hypotheses.

Bonds got in on the action as well as traders in that pit seized on the 175,000 number as evidence that the bond buying was going to taper off. Down they went once again and up went long term interest rates. AS a matter of fact, the yield on the Ten Year Note closed at 2.161%, fully 4% higher on the day.

The bond chart is increasingly looking like it wants to break down further as rallies cannot seem to stick. If they take out this week's and last week's low anytime soon, they could easily drop another 3 full points. Both the Fed and the Bank of Japan are now experiencing something that I am sure is not set down in their playbook, mainly how to deal with rising long term interest rates in economies that are not strong enough to handle them.

That brings me back to gold - with safe havens being jettisoned so that money can be put to work in equity markets, "gold is looking for love in all the wrong places; looking for love in too many faces," to quote an old Johnnie Lee song. Any of the readers who ever had a chance to visit legendary Gilleys down in Pasadena, Texas, before it burned down, will remember Johnnie. The metal just cannot seem to engender any sustained speculative buying. All that money is chasing equities instead of no yield gold.

While this week's COT report shows some short covering on the part of the hedge fund community, rest assured that they were selling quite vigorously today. We saw some light covering on their part with the pop through $1400 but when it stalled out, they were back to selling.

I have said it here many times recently and will say it again - specs are looking to sell rallies in gold. They will do so until it can convincingly clear $1420. Those who keep talking "Bullish" on gold while the specs are in a selling mood, simply are not experienced traders. Specs drive markets; not commercials. When the speculative selling trend reverses course and they move to buy dips, then and only then will gold make a SUSTAINED move higher. If anything, gold's poor close this week will further embolden the bears early next week. It will be up to Asian buying to save the day for the yellow metal.

The gold shares, as evidenced by the HUI, cannot find any strong sponsorship. Technically, until the HUI can close the chart gap between 285-301 or so, they are stuck going nowhere. That gap is critical to the future of the mining shares. It will either be filled and have a close ABOVE IT, or it will continue to act as an overhead barrier blocking all pops higher from becoming a sustained trend higher. I am hopeful that the bottom near 244 does not fail; if it does, the gap will have been proved to be an ISLAND GAP lower and the index could fall all the way to 200. At that point my guess is that even the long term holders of the gold shares will curse the day they ever thought of owning any of these things and will probably never return to the mining sector as traders or investors as long as they live.

The Dollar looks to have been stymied in its upward march at the 84 level on the USDX. Perhaps it is carving out a trading range; I am unclear. It will take a weekly push past 84 now to reignite the uptrend that has been in place for nearly a year now. Support lies at every round number interval on the way down; first at this week's low near 81 followed by 80 and then by very strong support near 79.


  1. "At that point my guess is that even the long term holders of the gold shares will curse the day they ever thought of owning any of these things and will probably never return to the mining sector as traders or investors as long as they live."

    Heh, just imagine if those poor investors had invested in the usual "glam" stocks like AMZN, SBUX, LULU, PCLN and all the rest over the last 5 years, most guys would be able to retire by now if they were fully invested in those names.

    I wonder what ever happened to Frank Barbera, he used to say massive profits could be obtained by investing in gold stocks after big washouts. But now he's nowhere to be found. I haven't been able to find any commentary from him in over a year. Maybe he finally shut down his newletter service.

  2. http://www.youtube.com/watch?v=1MnU6p3sGSw

  3. I have been warning at gold sites for investors to have an open mind about risk of confiscation through capital gains and windfall profits taxes on miners, political risks but never naked short selling. Those holding physical close by endure the bear trends in the bull market with little other concerns.

    1. Physical gold is generally suited to people who already have accumulated a lot of wealth and need currency insurance. For the lower worth individual, a few ounces of physical gold won't mean sh--.

    2. Exactly! The majority is more worried how to survive and pay their bills and how to get food for the day. Its a day by day survival for them. All those government numbers are scam.

  4. http://truthingold.blogspot.com/2013/06/the-revival-friday-chart-porn.html#comment-form
    Dave comment one of several. Neat chart and goes 13 yrs of ecstacy LOL

  5. http://stockcharts.com/h-sc/ui?s=$XAU:$GOLD&p=W&st=1980-08-01&id=p00680254452&a=158843719 ratio trade but dollars in scents

  6. This comment has been removed by the author.

  7. It's clear there is a guiding hand to make gold persona-non-grata. The globalists gradually drive it up and get Joe Six-pack suckered in then they pull the rug out from underneath it. Why confiscate it? Nobody will own it anyway. After 1600 from Cyprus could not be contained I oversized my short hedge on my physical, and kept it. Thank goodness I did.

    Watch for COMEX print of 1,000 eventually. Physical gold will be impossible to get, a de facto confiscation, but the wealthy elite will continue to buy gold and put on a passive offsetting short. Whose money is going into those hedge funds? The wealthy elite who are buying gold know where its price is going - straight down. Most of the shorts (myself included) continue to hold shorts that offset their long physical. Don’t look to the COT reports and Got Gold Report for trends. The 1632 breakdown was my wake up call. How long will it take before this strategy is employed by the average guy, 1300? 1200? a sub-1000 COMEX print?

    Look for more Indian gov’t type moves to make gold harder to come by. Do we think we can maintain assets outside the globalists' asset control? Get real....

    Gold is very good at any price. I have already made enough to buy 20% more. But, it's going lower. In fact, I am hoping and banking on it. The quicker the better.

    Forget about shares. Some buyers of gold say we can’t trust paper, but get their panties in a twist when the HUI continues to bleed.

    Contradictions abound, with many dummies owning gold for all the wrong reasons. They are contributing to the volatility.

  8. Hello Dan and everybody, here are my modest comments about gold TA.


    - Red median of pitchfork is still a magnet for gold prices.
    - Volatility is dicreasing around that magnet. Bollinger Bands squeezing confirm that.
    - As long as gold prices contained between 2 orange segments, no impulsion, no trend.
    - warning signal because silver broke the 22 $ support level.

    Interesting, if we keep being stuck on the red median will be to Watch prices when they get close to the 1345 support level :

    - 1345 is a Fibo retracement level of the 750-1940 up move.
    - prices would form a very dangerous descending triangle should we hit 1345 $ once more. Bulls beware.

    1. Hubert- thanks as always Hubert....


  9. +1 for the voice of reason, Dan, and another +1 from this native Texan for the Johnnie Lee reference. Though Gilley's was a bit before my time...

    1. Biosci - The movie Urban Cowboy put Gilley's on the national map but it was a permanent fixture in the Houston night life scene during its heyday. The popular mechanical bull that you see at nearly all the county fairs owes its success to Gilley's.

  10. Thanks as always, Dan (and Hubert).
    Here's a question, Dan: do large foreign entities hedge their S&P holdings by shorting the dollar or how do they protect against the currency risk associated w/ investing in US equity market?

    Just one comment w/ respect to the HUI. HUI:GOLD has actually been rising over the past few weeks, likewise, DUST (inverse 3x miners) looks like it might be forming a double top (It's more pronounced than looking for a double bottom in the HUI). It would seem that if gold can hold, the HUI would be in good shape.


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