Check out this chart and you can see what I mean...
Now compare that chart to the following chart of Comex Gold...
Here is the point to takeaway from all this... As long as the holdings of GLD continue to shrink, speculative forces are not coming in on the buy side of anything gold. Obviously, someone is acquiring the gold that is being dumped out of the ETF but for investment/trading purposes, that is all irrelevant at this point. It was speculative interest in gold that took the price higher; while that is lacking, there is no force to take the price higher.
Remember, price is like a rocket ship attempting to escape gravity to ascend - it requires THRUST. If that is missing, price will tend to fall of its own weight.
The difference between that analogy and markets is that sell side pressure can come from two sources - longs who are liquidating and selling out of their positions or fresh shorts who are entering the market. If the majority of longs sell out, then it will take another force pressing down on the gold price from above to do the work of gravity. That is the new short sellers. Whether there are enough of them to press the price significantly lower in the face of buying by strong hands is a question we are all going to learn the answer to.
Brilliant post once again! Really helps to understand the process by which these prices move either up or down. Cheers, Dan!
ReplyDeleteThey have printed well over 4 trillion and what have they got for it? 0% rates, a generally stronger dollar, huge debt that very few care about.This is the greatest thing since sliced bread. And they want to stop? Are they insane. Print forever.
ReplyDeletegold is finished for a while. The aussie dollar is breaking down and signalling that commodities are going down too. Armstrong called this a while ago, while jim sinclair is trying to garner hope through hiscyrstal ball -
ReplyDeletehttp://armstrongeconomics.com/2013/06/25/the-a-is-confirming-commodity-decline-rise-in-us/
I know this is not a technical term, but when I see silver at 18, the only word to describe it is, wow.
ReplyDeleteAnother $30 drop tonight...Just blew through the 38.2% retracement of the entire 2001-2012 move which was at $1268. Next stop is the 50% retrace which sits at $1074. This is as certain a short for the summer as NatGas.
ReplyDeleteIf you folks think this is volatility, you haven't seen anything yet.
ReplyDeleteSo much for Bo Polny....actually I cannot believe that there are any gold bulls left. I'm screwed, I may as well have taken my money and just partied it away...at least I would have some good memories.
ReplyDeleteLike Dan says, someone is buying the physical from GLD...are they stupid? who knows, but at some point you run out of sellers.
I suspect we will see under $1000 on gold and about 150 on the HUI.
This is no longer a correction...you are seeing the total destruction of an entire industry.
why is this no longer a correction, Dean?
DeleteTo quote, Jim Rogers: "In the 1970s gold at one point went up 600 percent before beginning to react. It consolidated and declined 50 percent over a two-year period, causing many to give up. It then turned around and rose 850 percent. That is how markets work."
So even if it were to go lower from here, say $1000, it would still be in a correction before gold and silver resumes its rise again.
Hi Dean,
DeleteI sympathize.
- You are screwed...only if you need to spend this money right now. Keep the gold you need to feel safe as a long-term insurance.
- Did you invest too heavily in gold? Was it as a speculator to make a quick term profit? If so, how much did you lose by now? 10%? 20%? If yes, you may consider selling a bit of your speculative position to cut your losses, feel more comfortable, and wait for gold to revert back up to go back to break even and forget about it. Greed makes people buy too much and then go into panic mode at the worst time. Imho don't sell more than 50% of your position by any way, it's too late now, even if your emotions push you to sell everything and never watch gold prices ever again.
Remember : gold is a small market and easy to manipulate by large entities on the short-term. These entities feed on the panic they provoke and will be there to buy gold at lower prices when they feel the time is right. And then they'll make money the other way round by buying massively and pushing prices up when everybody will be in sell mode (and mood).
Just make sure you are not the last one to sell at the lowest prices.
Cut some of your losses now if your position is too large. Wait for a signal that the downtrend is over and the bull market is back, and then you'll just get back in as well.
And for your own sake, always keep some physical gold as an insurance against the worst. Don't sell your phyz now.
P.S. Dean, to summarize myself more clearly :
Delete- physical gold must be considered as a decade long-term investment. You have phyz gold to diversify against fiat currencies and the risk induced by constant currency debasement. You don't need the money you invest into gold for the short-term. You keep your gold as an insurance for the years to come. As a consequence, you don't care about price variations. You spent your money. You bought gold as an insurance against the worst. Sleep on it.
- paper gold is the world of trading and speculation, with lots of very dangerous sharks. If you want to be long gold in those waters, don't forget the one and only rule : protect your capital, which means put a stop loss. If you wait for the downtrend to stop and for a signal that the bull market is back, at least you will have a chance to put a stop loss under your feet and cut your losses to the acceptable if you were wrong. If you don't, you will despair, see your capital be destroyed and sell likely at the worst time. Be patient in trading just like a conservative poker player. The Blinds are not going up, my friend. Be tight and wait for the opportunity.
I now know what Sinclair meant by a great leveling! I'm glad I bought some long term puts in BOTH metals to protect my downside. You cannot go wrong with averaging down with physical though, over a lifetime. They are called cycles for a reason. It is a great way to accumulate savings over time.
ReplyDeleteI am definitely curious to see who bought all this metal. I do notice APMEX and every other PM outfit has PLENTY for sale so I wonder if it is being liquidated (pun intended). It bothers me that all the perma bulls (I am one of them still) say that metals are very scarce and orders are backed up... HOW? I can buy all the metal I want at these bullion stores. No wait at all. I do understand retail buying is nothing compared to sovereign and institutional, but come on.
Maybe the Fed itself is buying it, to deliver all the german gold, for example...
DeleteNate,
ReplyDeleteI agree with you regarding inaccurate commentaries about gold and silver shortages.
Here was my question to the director of silverbullion P/L here in Singapore:
I see that your inventory has been low for both gold and silver bullion, and I'd like to know whether this is a production problem (ie production can not keep up with the demand and has nothing to do with the supply) or are there real shortages developing as some suggest?
His reply was the following:
"The truth is likely somewhere in the middle.
The bars and coins are mostly out of stock because the mints cannot keep up with demand. The bottleneck seems to be blanks that are used to stamp the coins. On top of this some refineries like JM are scheduled to close down for regular maintenance in the coming months making the processing / production even worse.
1000 oz delivery bars are easier to get than 100 oz or 1 oz coins and granules also seems to be generally available. So it is more of a processing issue than an absence of silver and should eventually be resolved.
Having said this I feel that it is only a matter of time until physical demand (which is steadily increasing) will cause supply shortages on the raw silver side as well."
Silver Bullion Pte Ltd
www.SilverBullion.com.sg
Thanks, Jim. Never know who to trust with everyone having strong theories and oil to sell, yet almost all are wrong. Dan and Yra Harris have been the exceptions and terrific. I still really like Sinclair because I believe he is right... long term. So I listen to all angles and decide for myself.
ReplyDeleteHi Dan,
ReplyDeleteCouldn't agree more about ETF and GLD.
Actually I'd propose a theory here.
Let's zoom out at the GLD chart a bit.
http://s13.postimg.org/wexwlv8nb/GLDETF.jpg
From 2004 to 2008, stocks were increasing following a line.
Then from 2008, they abruptly doubled from 600 to 1200 tons.
That corresponds to the period of starting QE, very low interest rates promised forever, etc...
So, what if greed was there at that time and many investors got long on gold, using this easy money environment, promises of QE forever and low interest rates forever to buy too much gold, thinking they'd make a profit by borrowing cheap money and investing in a safe real physical vehicle such as GLD on a market which was likely to grow forever?
Wouldn't they be in panic now?
With the Fed announcing they will taper QE, maybe stop it soon?
With long term interest rates going up again?
With gold market reversing its course?
Wouldn't they be forced to sell some of their losing position?
And what sharks, if not some high level manipulators with very deep pockets needing gold urgently to send back to the Buba and other partners, would be there with a nice smile to buy all this real phyz that they can't find anywhere else anymore? After all, all Libya's gold must have been sold already by now...
Of course, that's just a theory.
But I'd expect 600 tons to be purged from the surplus of GLD with the greed that created this surplus. Imho until we reach 800 tons on GLD, the market is till vulnerable for more selling.
Of course, it's only an indicator.
The ultimate decision factor is price and trend.
About TA, the descending triangle formed started from the mini krach at 1550 down to 1350, so 200$ drop. My target in theory would be an additional 200 $ from the neckline, so 1150 $.
People who thought that the mini krach was a one day accident provoked by huge money were counting on 1320 $ to hold. Now that it didn't, gold may drop even more on the short term.
I still think that 1150-1200 $ will prove being a strong support zone for the metal.
Have a nice day,
Hubert du Haut,
DeleteI like your comment, however what you should keep in mind when talking about charts, TA and all the rest is what has been reported in the newspaper "Le Monde" in France. This is the headline:
"In the United States, a cyber-surveillance worthy of a police state"
My point? TA, charts... are not worth a penny. When outside forces can do -and they do- whatever they want with impunity (and even the help of the government) you become a pawn, even better a slave and there is nothing you can do.
My point again?
10 Year Treasury were up... What this could be bad for the market? It is down because this is what the FED wants.
USD is weakening? NOOOOOO... not possible! This is the currency of the No1 Superpower. So let it be up!
Gold -The canary in the mine- was singing too loudly? No problem: let kill him.
WE are ALL of us hostages of the US administration and they feed you whatever they want and the only thing you can do -for now- is to shut up and swallow the toxic food.
Let me put it in a very simple way -knowing that everything written on the internet ends up in the archives of the US cyber-surveillance office:
You guys in the US are living in a fascist country that will be destroyed by the rest of the world and when this happens may God have pity on all of us.
Hi Hubert,
Delete"TA, charts... are not worth a penny".
Why? What do you expect from TA?
Me, I expect that it gives me the trend of the market, and some stop loss points in case I'm wrong in my positions.
This expectation is enough to protect my capital, no matter what level of manipulations happen.
Right now, T.A tells me that the trend is down, therefore it kept me from buying too early and lose money.
I had some long positions, but TA told me that I should put a stop loss should 1540 fail, and I did, getting out at 1540 (mlh inf of last support andrew's fork), then the remaining at 1469.
So TA helped me protect my capital.
It would even have helped me gain money if I had had "the balls" to go short. But I didn't, for several reasons which are not the point here.
So I think in that sense, TA is very useful.
About US, I'm more afraid of a civil war if things keep going that way, but I'm not american, I don't live in the US and it's very hard to guess what will happen from where I am. I can only sympathize with the spirit of freedom and other positive values based on human rights that drive their constitution, quite similar in some aspects to our own values and history, I would say.
Sorry, but to me the chart, TA and ... are just a late indicator AGAIN because you are not in charge: THEY ARE!
DeleteIt is like Goldman SACHS AND OTHER SAYING THE PRICE OF GOLD FOPR THE YEAR IS GOING TO BE DOWN VS previous estimate... But it is too late, the game is already visible for anyone and I could have said the same myself.
YOU are becoming a follower not a leader and if the FED decides in 10 minutes gold has to go up $200 your chart and TA will be useless as it is, in y opinion, useless now.
Hubert, I'm not going to try to prove you wrong in a battle of words.
DeleteI think most important is a demonstration, i.e I'll try to inform you with my swing trading décisions :
- when do I get into gold
- at what price
- what target
- what stop loss.
- why did I make this decision based on TA.
From that point you'll have a concrete way to judge whether or not I'm making a profit and whether or not TA was useful.
TA alone without a sound money management is useless imho.
Recent example of using TA, and it's not to make a point, really, simply to share why I think it's useful.
Delete- TA made me follow Andrew's forks and the break of the mlh inf at 1539 $ made me sell. See history on this blog.
- TA made me follow the 1345 fibo retracement level and identify a descending triangle (1550 then 1490 then 1420 tops) with a neckline at 1345 which was a warning signal. I was already out of the market, so no pb, but else, I'd have sold everything left at that level.
- During the last bounces, we bounced and failed twice at an exactly 50% retracement level of the previous loss. That means bad and means bearish trend.
- MACD recently failed to cross (I'm following a 9 20 7), which was an additional warning bearish signal, watch my comments on this blog.
All the way down, TA sent me clear signals to stay away from the market (and in fact sometimes to short, for example at the bounce at 1490, but I'm long only on gold, because I'm an amateur and I don't want to go short, be wrong and have to cut my losses on both ways, and because psychologically, it's hard for me to revert abruptly from short to long, but that's just me).
I apologize for speaking about a price target as well : sometimes I'm dynamically getting out based, not on price, but on a signal such as MACD or lower time units, whatever the price I thought the market would go to initially.
Apologies also for writing too much too many posts today on this blog :) I had a lot of free time, and when I start, you can't stop me.
Bonne continuation,
i pity anyone holding gold, - my honest sympathies...even if like me you believe long term we are going beyond 2500 bucks easily.... The trend and propaganda coming out with banks saying gold will be obsolete if QE ends is helping it get whacked at the moment. but i do honestly believe that this mass deflation/correction happening a la 2008 will continue and force the Fed to change decision eventually. Whehter this happens before/after/due to Bernanke leaving is a matter of opinion atm, but i still think the movements in bonds is the biggest story. WHEN they decide to print again, gold stocks will go up disproportionate to anything else. im talking about double digigts in every mine for a few days or something. I used to laugh at people saying 1100 for gold but now i only smile. Its possible. the lower the better for me cos im out and waiting to jump in when all looks clear. Currently its another mass selling on no real news as far as i can see, although china jst printed and the EU are considering it kind of, with italy and others really screwed, eurobonds neede, banking union being devised. I actually think fundamentals to hold gold are the same/stronger if you remove the rumour of another fed voter thinking about slowing. deficits, debt, geopolitics, etc...and now debt costs more, they have to print. and i think everyone knows this. its either that or face a brazilian style rebellious turnout in the US.
ReplyDeleteanyway, Dan, im addicted to your commentary....just wondering what levels to watch out for now in Gold and HUI. still huge volume going down and im out of ideas for resistence/support levels...1200, 1150, 1100? thanks and good luck to all
Buy small amounts right now all the way down. We are in unchartered territory. The FED will have to stop this blood bath and buy more treasuries and MBS Securities, or the whole thing blows sky high. There is no recovery. There is only deceipt, misdirection, lies, and myths. No way to time this thing!!!! Buying small amounts every day. $1500 a clip.
DeleteWhen this blows this time, it will be bigger than the 2008 collapse. There just is now way around it.
Watching the Bond markets closely.
yeah well my capital is standing-by to buy shares and i dont usually buy shares in small amounts on the way down as i would agree is the way to accumilate physical gold buggets/bullion. yeah i reckon they will have to buy MBS cos honestly, interest rates going higher, thats the sharpest sphere one can throw at a bubble....i listedn to peter schiffs latest blog about whats going on and he put it with such clarity....i look at the zoomed out gold chart (month) and come onnnnn, this is not going 100s of dollars lower and then doing nothing....not without the purest of fundamental reasons behind it...and its literally 1/12 fed governors changing their mind..its bull, i call that bluff...i just want to get a better entry point.....i reckon support/resistence levels are almost irrelevant at this point...maybe cute round numbers..like gold 1200..or HUI 200...probably lower though....id love dans take on these levels though....
DeleteI suspect history repeating here Fiat end game not far away now, Nathan Mayer von Rothschild and Roosevelt come to mind. This time use printing press to short as much Gold from weak hands as possible then buy it all back with money that costs nothing, brilliant! Then reprice Gold and declare new Gold backed Fiat currency. Fed and Wall Street banks save the day.
ReplyDeleteHi Hubert
ReplyDeleteThank you for the advice.
No, I did not have stop losses in place...fool.
I have around 25% of my savings in gold, stocks etc.
I did lighten up a bit when gold went below 1400.00.
I also bought some short positions but I have sold them.
So now what?
I (like many others) am bleeding on a daily basis. If I sell now it could be at the very low, if I hang on it could go sub $1000. At this point I am starting to believe some analysts who are predicting $700.00 or lower. I'll be selling my gold coins at a garage sale...when I look at them now it almost makes me sick.
It wouldn't be so bad but I was also invested in commodities...so much for listening to Jim Rogers, Jim Sinclair et al. If there is light at the end of the tunnel I am not seeing it.
Like I say...should have bought Disney, Coach Handbags...basically anything that is consumer discretionary has gone vertical.
I really do not know what to do now.
" At this point I am starting to believe some analysts who are predicting $700.00 or lower."
DeleteDean, short-term, it could even be 500 $ and you shouldn't care if you remember just this : the cost of production for gold are now above 1000 $.
This is a fact.
So they can krach gold's prices down for a while.
If the "while" is too long, gold mines will close.
Production will decrease.
My point : long term, gold's price can't remain endlessly below its production price. So I wouldn't worry about forecasts below 1100 $ if I know I can keep my physical gold during the next few years.
Remember that the value of gold is insurance against fast krach of the economy.
Armenia 2008 : Dram lost 30% in one night.
Look at Venezuela last year.
Look at Belarus.
Look at Iran, september 2012.
Dollar is the world reserve. It is a huge privilege.
It is very unlikely to collapse next week.
But day after day, it is loosing its status and influence.
And when comes the day, I think it will be just as fast a krach as for the other currencies : a one weekend nightmare. Or a devaluation, sudden, irreversible.
And the world will Wake up with gold Worth 50% more in one day.
Keep your physical for that reason.
bien dicho Hubert du Haut.
DeleteIn support of Hubert du Haut's claim to not worry about gold price forecasts below $1,100/oz., Martin Armstrong has given us $1,110 as a worst case scenario for support in 2013. We could be there by the end of the week.
Deletehttp://armstrongeconomics.com/693-2/2012-2/gold-for-year-end-2012/
I understand that Armstrong has fallen out of favor with many goldbugs, however I still find his writings to be extremely prescient.
And here comes the Chinese wealth effect - selling off $55 on the Hong Kong market, running into cash just like I said previously. Sad.
ReplyDeleteWell I really feel that an 11 handle and a HUI that successfully tests 200, we'll start to find some stability.
I can appreciate your perspective but "stability" in the gold market? When does that ever happen? I believe "price stability" in this paper market is as completely manufactured as the volatility that interrupts it. In the calm, the people gather great complacency. In the volatility they are stunned, sheared and disoriented. "Stability" is a dangerous status quo until it's outdated.
DeleteA Democrat with idea that "Man is FREE!" I wonder what the new Democrats actually think of this video.
ReplyDeleteSecret societies ....Fed..Treasury...Press....
http://www.youtube.com/watch?v=qnEZ6FdE9mE
This country is going to go through another phase of our development. We will again rise once we crush the opposition, even if that means losing everything. I am not going to pay a bunch of Bankers for their bailouts, covetous ways and GREED!!
http://numismaster.com/ta/numis/Article.jsp?ad=article&ArticleId=26979
ReplyDeletePatrick Heller has expanded his thinking again, offers no clear short term direction but gives clues.
ZEro Hedge strikes again...
ReplyDeleteFinal Q1 GDP Is A Huge Miss, Personal Consumption Craters
Tyler Durden's picture
Submitted by Tyler Durden on 06/26/2013 08:44 -0400
fixed
Gross Domestic Product
Personal Consumption
Remember the key component of the Fed's baffle with BS strategy: namely "baffle with BS."
Following yesterday's epic trifecta of economic growth when durables, housing and confidence data all slammed expectations, it was up to GDP to be the bad cop. Sure enough, following the already disappointing first Q1 GDP revision which revised the preliminary 2.5% number to 2.4%, today economists were expecting an unchanged print. Instead they got a crash to 1.77%. And on what? Why the collapsing US consumer whose true colors have finally come out in the final Q1 GDP revision: responsible for 2.40% of the GDP print in the first revision, Personal Consumption Expenditures tumbled to just 1.83% of GDP. In absolute terms, PCE plunged from 3.4% to 2.6% on expectations of 3.4%. There goes the buying power of the overlevered, undersaved US consumer.
And perhaps just as disturbing was that Fixed Investment, i.e. CapEx, cratered to only 0.39% of the GDP print, down from 0.53% in the first revision, and 0.52% in the prelim. This was the lowest Fixed Investment number since Q3 of 2012.What is worst, is that non-residential fixed investment crashed from 2.2% to 0.4%. In other words, growth CapEx is now officially dead.
Dont worry though: 4 years of QE may not have led to sustainable 2%+ growth, but another 4 years certainly will. Or maybe another 40. At this point does anyone even care?
Average:
http://jessescrossroadscafe.blogspot.com/2013/06/gold-back-to-top-of-cup.html
ReplyDeleteGold: Back to the Top of the Cup - Overnight Paper Bear Raids Free Up Bullion from the ETFs
Excerpts:
"Remember this chart?
This is the cup and handle formation that led to the big breakout and rally in gold, the point from which gold 'slipped the leash.'
And here we are testing that handle again.
Each time they smack down the paper prices of gold and silver, they free up bullion from GLD and SLV...
With TOCOM and COMEX scraping the bottom of their deliverable inventory, and big drawdowns on the customer inventory held at JPM, the release of tonnage from the ETFs matters.
Who is the custodian for GLD again? Oh yeah..."
"I'll be selling my gold coins at a garage sale...when I look at them now it almost makes me sick."
ReplyDeleteWhat's happening is making me sad.
I'm not Dan as a trader.
I'm not Sinclair as a gold expert.
I just feel the need of sharing my own opinion here, as I know I speak under Dan's control.
I think that individually, investors in gold should watch the monster in the eye and face the worst case scenario, and wonder if they can stand it or not. Many once unbreakable truths became myths lately and have shaken badly the confidence of gold bulls into gold's future or into gold's "gurus".
But I still think that if short term, where prices will stop their collapse is anyone's guess, long-term, the reasons to hold and keep gold are still here.
But let's face the bad news once and for all.
- gold is in a down trend. Noone knows exactly when it will stop short-term. Supports are only lines on a chart.
- gold is a small market. it's easy to manipulate short-term for a big / several entity.
- we live in a world where little ethics are left. Maybe what after with HKmex or MFGlobal may happen someday somewhere else. Maybe they'll compensate contracts at a very low price for cash in some markets. I don't know. That's why having phyz as a core position is important.
- many long investors, even not leveraged, were totally unprepared to the current pressure. They are "weak hands", easy to scare, easy to panic and follow such emotions as despair. They are likely to feed the downtrend as well.
- hedge funds are acting to the same way, and they are strong. Right now they are shorting rallyes, not buying dips. It can go further that way. Market is concentrated and polarized, but it can go even further more (see Eric de Groot blog).
- some entities may be forced to sell gold as a colateral to face liquidity needs.
- some entities who bought to much gold because they could borrow cheap money at very low interest rates, thinking the market would go up forever, maybe forced now to cut their losses and sell their positions, with interest rates going up and gold prices going down.
- gold's volatility is scaring many people who can't stand the heat and sell.
I'm probably forgetting a few more reasons to be careful on the short term.
Long-term.
- gold production cost is a reality. You can't forever sell something Under the cost of production.
- central banks balance sheets look terrible. At one time, they'll have to balance it with real assets. Gold is a prime AAA asset, not a paper debt.
- money printing continues unabated.
I think this whole QE Policy is a disaster waiting to happen. Gold is one of the only protections.
Hi Hubert Du Haut
DeleteWell..I agree with everything you say. Actually I must confess that the losses in my physical gold have not been as bad due I started buying coins when it was around $800.00
However...the gold miners...I actually was nibbling on the way down thinking that 300 on the HUI would be close to a bottom...ha!
I guess I can say that I am in good company with my misery, Jim Sinclair, John Paulson, Eric Sprott, Jim Rogers, Ron Paul etc. just to name a few whose wealth exceeds mine by more than a few decimal points. It does hit us small fry harder though.
Here is an example of how insane the markets have become:
This morning reuters reported that first quarter GDP and economic growth has been down graded making the FED more cautious for the future. The next headline states that this news is causing a rally in the US markets...uh?....you see, poor economic growth means the FED will just keep goosing the market with more money...soooo...bad news is good news!
Someday in the future they will look back on us in total awe of our stupidity..the Three Stooges will be viewed as one of our few intellectual achievements.
without naming names, until all the short term bottom fishers and pontificators are all put to bed, we have a bear mkt, nothing more and nothing less, and if everybody was truly a long term bull, they would just keep buying physicals regularly and quit bellyaching about jpm, goldman, etc, etc. Bottom line is that you really can not get bullish until we see a monthly close > 1550. You know, we could now be entering the worst of all worlds, some kind of sideways to lower action that may take years to resolve itself. Who knows? I do not. steve in sparks
ReplyDeleteForget the title, a bit silly, but watch the content.
ReplyDeletehttp://www.silverdoctors.com/history-shows-gold-may-drop-to-as-low-as-900-an-oz-and-still-remain-in-a-bull-market/
Also, GLD ETF cannot bleed forever.
Eventually, stocks will be depleted, and the pressure down will diminish. Patience.
I have a very small buying order of silver just above 18 $, because I know I'll convert it into phyz for the long term.