As you can see on the chart, volume is miniscule however. The big test will be what the metal does when it enters European trading but more importantly, New York trading.
The weakness in the gold shares today (Monday) is generally a bearish sign when the metal and the shares go their own separate way so call me a skeptic until proven otherwise. Asia still loves gold while the West seems to despise it; until the West comes around to falling back in love with the metal, it will be up to Asian buying to do the heavy lifting in the metal.
I have noted an overhead chart resistance zone which basically extends from last week's high at $1267 - $1269. Bears will be complacent unless this region is taken out with strong volume, otherwise they are going to look to sell into this rally. If the mining shares were strong, that would make them second guess so we will have to see how that sector trades during Tuesday's session.
I have also noted a region between $1210 and $1185 on the downside which was the price range delineated by very strong volume. Most of that volume was short covering after the $200 plunge where bears rang the cash register on what was one of the most profitable gold trades in a very long time. There was some bottom picking as well but compared to the extent of the short covering, it was insignificant.
The key for the market right now is that it did drop back down into the very top of that region but attracted more buying that selling. That is a positive. We have moved up some $40 since that brief foray into the HIGH VOLUME REGION. The trend is down however so we can expect the rally to be sold but if the bulls can surprise and take price through the anticipated selling that is going to surface, bears will run and this market could lift towards $1285 - $1290.
It does appear that once again we have that gold backwardation talk emerging. Keep in mind that all those proponents of that theory cost their devotees a tremendous amount of money the last time they were proclaiming a bottom based on that occurrence.
I maintain that until the gold futures market shows a true backwardation structure on the board, all this is just talk that is interesting but as far as a trader goes, meaningless. Price action is what confirms theories. If it does, fine. If it does not, that is also fine. Watch for resistance levels and support levels and make your trading decisions on that and that alone.
Remember what I have written here more times than I care to recall at this point - calling market bottoms and tops is a fool's errand for those with egos that need to be fed. A profitable and successful trader can make a fine living just catching 60- 70% of a trending move.
What will eventually take gold higher will be that shift in sentiment from one of deflation or benign inflation to one of concerns about a resurgence in inflation. That is what we are watching for signs of. When it does, we will know it from the price action!
"There was some bottom picking as well but compared to the extent of the short covering, it was insignificant."
ReplyDeleteHi Dan,
How do you make the difference?
Is it your experience, or is there a realtime indicator showing short contracts decreasing or long contract increasing? If so, I'd like to add this one to my toolbox :)
Thanks a lot,
good points, Dan. the backwardation donkeys are the same guys that have the world ending and PM going to the moon next Wednesday
ReplyDeleteand the very same guys who have gold to sell. What an incident is it not?
DeleteAfter gold fell from 1900 to 1200 they are still repeating the same mantra of gold is just about exploding to the moon.
Shameless con artists!
Incidentally, Mr Jim Sinclair's commentary as below (bottom picking again):
Delete"Looking for a low in gold? It has already come, or will come on this."
[Bernanke to make July 10 speech on Fed’s policy record
WASHINGTON | Wed Jul 3, 2013 4:19pm EDT]
Imho one should listen to Sinclair for news about the fundamentals, not about short-term price direction or bottom picking.
DeleteAt 1800 he advised to keep buying and not to care about TA.
At 1560 he called a bottom.
At 1320 he called a bottom.
So he can be right about the end game, protecting your assets, about the opportunity of a long term investment in phyz gold and diversifying your assets, etc...but short-term, sorry, unless you want to see your asset's prices melt and watch Henry V's movie speeches to feel better while gold keeps going down, you are better off following Dan's updates and advice.
Investment and trading are 2 different things.
Let the experts be the experts of their category.
XRT and XLY now up 10 consecutive trading days, to new fresh world record highs.
ReplyDeleteFDX up nearly 7%.
U.S. Dollar breaking out to new highs.
Global investors are obviously putting their faith into the power of the U.S. consumer to lift the world economy out of recession.
The moves in gold are pretty much chump change compared to the incredible gains being made in the consumer and transportation sectors.
In fact, many investors who put their money to work betting on the consumer have made so much money so fast, many could probably retire by now.
Nothing short of a Central Banking miracle by Ben Bernanke.
check out gcv-plv charts and you will note that even though we broke $200 in the last 30 days , gold did not go lower than -$120 vs. plat; this to me says that for the balance of the year commods remain defensive, as gold always acts better relatively speaking in deflationary environments; steve in sparks, nv
ReplyDeleteDan - Thanks! I really appreciate that you look through the commentary and answer questions. To use the parlance of our time: awesome.
ReplyDeleteHi Dan,
ReplyDeleteWith the greatest respect... "the last time they were proclaiming a bottom based on that occurrence..."
That would be November 2008, and prior to that March 2001.
The London physical market is in backwardation through to 6M based on GOFO yesterday, and it has been a remarkably rare and potent indicator previously, as those two dates were pivotal events in the gold market. The time before that when GOFO went negative, September 1999, was pivotal in its own way as well, and created an extraordinary response from the UK under Gordon Brown's direction.
Whether negative GOFO again portends the spectacular rises seen previously does remain to be seen, and you are right to counsel caution as those previous rises were at first very volatile, but it is erroneous to claim, as you appear to be, that anyone relying on negative GOFO has lost money in the past, or cost others money. In fact, the opposite is true.
You may be referring to those who bang on about backwardation in Comex Gold Futures, or the "basis", but that is not the case here.
I hope my comment is received in the manner it is intended, with respect on my part for all the work and information that you freely offer for the assistance of readers.
All the best,
They called a bottom at 1600 too. Look at the price now. Most definitely a lot of people lost a lot of money on that call.
Delete@kris,
DeleteI am differentiating between habitual bottom callers, (and I would remind readers of Andrew Maguire's assertion through his London contacts that Chinese buyers would provide a floor at $1785), and those that are now calling everyone's attention to negative GOFO, as they did in November of 2008 and March of 2001.
I have posted a link to a very interesting piece on GOFO below from a writer who is no fan of gold but who has done a lot of work on gold's role as collateral in the financial system.
All the best,
Dear all,
ReplyDeleteI'm posting 2 charts here to let you consider the possibility that 1205 $ (62% fibonacci retracement level of the 750-1940 move up) may hold.
First, monthly candles.
http://s16.postimg.org/mj6sheyhx/gld_m.jpg
- we are completely our of the Bollinger bands.
- we are close to an uptrend support near 1150.
So, I drew 2 potential Andrew's forks to follow the move from here. It's an anticipation, because july candle is not over yet. But I think it's worth following them, as they give a support (mlh inf) and target (median) on the short to medium term.
Second, daily candles.
http://s10.postimg.org/49g2q7d6h/gld.jpg
- there is a clear upward divergence on the MACD.
- 1160-1200 area was the meeting point at that precise time of several supports. We met the area, and it held.
- 1205 Fibo level is important imho in the short term. We bounced a bit below it during the most recent drop, then went up and bounced precisely on it a few days ago. This validâtes its value as a support.
I'm not calling a bottom here, nor am I erasing the possibility that we will meet 1150 $ this summer. But mentionning that everything is not as dark as they say on most blogs, and that for the moment, we have a strong support zone in the 1180-1200 area.
Going above the ema15 and recent highs (both at 1265) would make me quite interested as a bull (and think target monthly bol inf at 1300 $ feasible).
Have a nice day :)
P.S : if we go through 1260 $ area, my target will be 1325 $.
DeleteIt is the first fibonacci retracement (23,6%) of the monthly candles down move from 1805 to 1180 $.
It is also the lowest point of the april correction.
It's not such an ambitious target!
There is so much pessimism out there that people entirely forgot that even in a bear market, gold could correct a bit up ;)
We never closed a week Under the 1205 $ fibo level.
As long as this support holds, I have a short term close security net under my feet.
"I'm not calling a bottom here..." After reading your comments for awhile now I have surmised that you are far too clever to do that! I just wanted to say that, even though I myself do not trade gold or silver, I quite enjoy following along with all that you share here and appreciate it very much. Cheers!
DeleteThis comment has been removed by the author.
ReplyDelete
DeleteHubertJuly 10, 2013 at 2:48 AM
It is interesting to read many of the comments. I would say that the blinds have taken over this blog. They see the forest for the trees.
Many are attacking Sinclair... Of course he has been wrong calling the bottom (as did many others) but it has also been right for 10 years when gold was up and up.
I am referring to Sinclair, because he sees the big picture (the forest) and give all of his readers the reasons why they have to be careful and why they should buy gold. Some would say that they are making a difference between the trader and long term investor which could be the ones seeing the tree vs the ones seeing the forest.
I DON'T CARE about the tree because in a manipulated (YES again the word manipulation) market we are all -except the ones part of it- hostages and there is nothing you can do. YES you can give the resistance and support levels and -as Dan has said it here many, many times- the fools can day trade, but better use your money in Vegas, it is cheaper and you still have a better chance to make money.
Bernanke is talking this afternoon and the -financial- world stops. What is he going to say? is it good or bad? Should I buy or sell? Wait... The New York Fed and the one from Dallas are talking tomorrow and Friday... and... These guys will tell YOU what THEY want you to hear and fundamentals have no value anymore. It is a Hollywood production and nothing else. How long can this continue? Not long in my opinion because "in the forest" you can see what is going on: China, Europe, IMF, Russia, Syria, South Africa, some financial magazines ...
STOP hiding and dare to go to the forest
Waiting in the Forest with you Hubert. Waiting for the great Fed Ambush. Today may bring some very weird action. 100 years of Fed Supremacy will be the words of the Great Bernanke. However, the numbers are certainly gaining speed against him. How long can he hang on to this make believe world? Not forever, but maybe longer than the Gold Bulls can hang on. I for one snuck back in just a bit. Sinclair is correct, it is however a timing issue.
DeleteWhite Wolf....
ReplyDeleteWith all due respect to Mr. Sinclair and others.
The gold sector has already seen a beat down that so far has exceeded the housing crash in 2009 in price and has exceeded the 2008 stock market crash in duration.
Anyone who took direct possession of their gold share certificates have been trapped in one of the most brutal bear markets ever recorded.
Those who fully leveraged into consumer discretionary stocks and pyramided their profits by buying all dips on margin and peeling off some at overextended points in the bull market cycle have created enormous wealth for themselves.
We have just witnesssed a bull market in equities which we will likely not see again in our lifetimes, if there was any time to make the most amount of money in the shortest period of time, we have just seen in the last 4 years.
As I said, Ben Bernanke will go down in history as the most successful ever, he was able to engineer a run in stocks against the absolute worst economic backdrop you could think of.
And now that the economy is slowly improving, the market will probably continue going up until we reach full employment. I remember the 10-yr. yield rocketing up from 3.2% to 5.2% from 2003 - 2007 and the stock market rose 50% during that rate hike campaign. Here we are at a measly 2.7% and people are screaming bloody murder.
The last 3 years will be a memorable lesson among the doom and gloom crowd. Never underestimate the power of 3 central bankers working together, as well as the animal spirits generated by 5 years of 50-year low interest rates.
Just depends on the timeframe.
DeleteFirst, let me say, I know the horror of not selling in early 2013, staying in the foxhole as it were, and seeing the miners' value effectively wiped out. Of course, nearly all commodity based stocks that are not Dow components down--even oil companies. TOT & BP are down nearly 40% from 2008, while XOM is up 10%. And you know what, NEM is down just about the same amount as TOT since mid 2008! So It's not exactly like miners have been singled out
On the other hand, if you were to have bought the HUI in fall 2008 and sold in fall 2011, the index went from roughly 200 to 600. some of the juniors even more.
RE the 10 year: 2003-2007 as you stated is a bit over 60% rise in yield over 4 years. Thanks to the small numbers we are at now, I just glanced at Bloomberg yield up 113bp over last year--that is an increase of 70% in 1 year. That's ugly for the bond orgy.
RE employment / economy. As soon as stocks start drifting down, the MSM will find justification and suddenly discover that labor participation is at all time lows and all growth as been from part time junk jobs. My takeaway is that the tape dictates interpretation of the data, not the other way around. i wouldn't go around buying the S&P now...
Lets see how it continues to play out Mark.
ReplyDeleteEurope DOA needs cash, banks failing. US not growing inflation in all things needed to buy especially gasoline. Japan DOA. Stocks are on the "edge". I really do not care what the "illusion" is right now. I lost only about 20% due to buy sell and continuing to get out before I lost my ass. Yes, I would have preferred to be in stocks, but, the game goes on. Let's see how it plays out. The Great Bernanke will destroy or already has in my opinion. Mortgage rates up, which was the great illusion, yet mortgage apps fell 23% last week. Can he continue? I do not think so. He can continue to flap his jaws and run out all the other Fed mouthpieces, but eventually the market tells him he is FOS. So lets see.
Full Employment???? You mean the lowest labor participation rate since 1970?
ReplyDeleteWhite Wolf:
ReplyDeleteLet's face facts.
NEM is now cratering to new 52-week lows again.
GDX/GLD ratio now plunging towards a fresh, new, world record lows while the Russell 2000 and the consumer discretionary ETF's power up to new world record highs.
It could take 10 - 15 years to reverse this type of technical damage.
Mark,
ReplyDeleteWith all due respect...
Do you work at (OR FOR) the FED?
"10-15 years to reverse this type of technical damage"????? This is the FED type of propaganda.
Where did you get this from??? Show me your research.
Let's talk again at the end of THIS year.
Respectfully,
Hubert
Hubert, thank you for saying what I was thinking. Of course there could be other rational explanations for such profound expressions of man-love for Bernanke ;-)
DeleteI am not here to argue, but to observe. Why are the stocks going up? Because the companies have been able to "squeeze" profits in a flat revenue world and purchase back their shares. What drives the long term markets? Growth, their is none. Employment and vast amounts of citizens are getting shafted due to the control of money. MV is down to historic levels. This does not end well. When the turn happens, which it always does, stocks will crater. They only way to continue this farce is to buy more T's to keep rates from rising. He the great powerful Bernanke is in the grips of a trap. The only reason the mouthpieces come out is to try to sway the market. It will not last forever. Banks will lose when rates go up. Housing and banking were built on a refinance, fee structure. I worked in them for years. How do we reduce our deficit when rates go up? Answer: WE DONT. FUNNY MONEY continues to be printed. When the world finally wakes up to the proposition that we will never pay it pack or even be able to service the debt, the dollar tanks. Simple Mark. So like I said lets see how it plays out. You say he already won. The banks will continue to go up. I say NO WAY.
ReplyDeleteIf this debt clock is correct, I wonder what the world will think of this years deficit?
ReplyDeletehttp://www.usdebtclock.org/
I would think the T yields will be increasing quite a bit, meaning, the need to get more yield if they "invest" and I use that term very lightly in Treasuries?
Or can the Fed mouthpieces keep convince the world market it is all "FLOW"? LOL
This ten year is looking awfully friendly to the Banks and the Mortgage business wouldn't you say?
ReplyDeletehttp://www.bloomberg.com/quote/USGG10YR:IND
Regional bank profits expected to soar after tapering. Check out KRE and KBE, both are moon shotting, anticipating an economic boom and higher net interest margins.
ReplyDeleteYou must assume that there will actually be tapering. Let's wait and see what Bernanke has to say this afternoon, and then what the other Fed guys say later in the week. Is there a limit to the number of different story lines that the Fed Chairman and the Board of Governors could feed to the MSM for public consumption in just one week? In my mind, the "brilliance" of this Fed Chairman has much to do with his ability to exploit the gullibility of the "analysts" and pundits. I'm dumbstruck that so many people actually hold their collective breath in order to closely follow and give credence to the jawboning that comes out of the Fed lately.
DeleteNot much of a contrarian, this Mark.
ReplyDeleteWith a long term view I dont see how one doesnt start "fading in" to gold at these levels.
Unless one wants to pick the bottom.
Who would have ever thought this mess could be propped up as long as it has been! The chickens WILL come home to roost, that is a certainty! When the end of this financial debaucle will occur, that is the big question. But have no doubts....... it will end. Very happy to be holding physical precious metals! Many thanks to Jim Sinclair and Trader Dan!
ReplyDeleteFor those interested in further reading on GOFO I found this article by Izabella Kaminska fascinating:
ReplyDeletehttp://ftalphaville.ft.com/2013/07/10/1561322/the-hand-of-gofo-strikes-again/
h/t Kid Dynamite
SERIOUSLY... The whole world was waiting for this??? The (June) Fed Minutes...
ReplyDeleteThis is from Marketwatch:
http://www.marketwatch.com/story/excerpts-from-the-minutes-of-last-fed-meeting-2013-07-10
AND you want to take these guys seriously???
Would anyone smart enough clarify these excerpts?
What do we know after 2PM that we did not know before 2PM?
The only revelation coming from these minutes is very simple: They are stuck, do not know what to do and are adding more chaos into an already very volatile market.
Just have to wonder why the paper gold buyers even trade at all. They just need to send a check to the shorts and say thank you for taking my money. At some point in the next 100 years, a 17 trillion debt and higher will have an impact on gold.
ReplyDeleteBased on the "POP" in the 10 year, and the 'POP" in OIL the ANALISTS will have to lower the bar a bit more so all the stocks can BEAT AGAIN. I hate to see this when the Debt clock starts ticking higher and higher and higher and the PE's keep going higher and higher. Seems like a no brainer to short this stock market slowly. NOt a lot of short, but certainly a short position will eventually take a lot of money!!! Especially the Regional and National Banks.
ReplyDeleteBy the some mining stocks really popped today!!
ReplyDeleteOne in my portfolio hit a 6.34% gain. Otherwise it was mostly awash, with me ahead about .5%. So they will have to get some more money to waste to short these guys some more. Between shorting gold and shorting the mining shares someone is losing some serious cash.
God love the perma PM bulls; I have been trading these mkts for a few minutes longer than most of the liars and pontificators on their pathetic blogs, and excuse me but GOFO arguments are the most creative yet, and I have to admit that it is all very interesting and in fact, a new idea to me, but what do I know? I am only short from the Apr break and not smart enough to figure out all the geopolitical events and so forth; price pays at the end of the day, not cynicism and ego
ReplyDeleteHope you weren't still short after the close today. After the market closed, wow, some shorts sure did run for cover. Maybe just keep doubling down on the short? Something very strange is happening. All those out there on the media saying gold is dead might just get their short pockets cleaned out now. Naa, can't be JPM is short in the pockets of gold to deliver. No the biggest bond market in the world turning around wouldn't have anything to do with it. And the continued waste of Government Money creating absolutely nothing but inflation in everything we buy doesn't either. The world is fine and the Central Bankers have everything under control. Ben the Magificient as Mark so eloquently puts it has it all figured out. Sorry but I get sick of hearing that. God help us all when this blows up.
DeleteStop pontificating steve and add something that makes sense. Im getting tired of all you litle haters.
Deletemaybe I am fos, but this action is all horribly bearish; currencies big short covering hose job; metals not doing jack; FOMC is or should be acknowledged as totally worthless; steve in sparks, nv; move along, nothing here
ReplyDeleteHi Steve,
ReplyDeleteLet see...
I don't act pro .. And I will stop posting... If you can't figure out why the gold will rally from,now onward toward the end of the year... Then good luck to,you..
Like I say do your homework..
Cheer