“Woe to the land whose king is a child and whose leaders are already drunk in the morning. Happy the land whose king is a nobleman, and whose leaders work hard before they feast and drink, and then only to strengthen themselves for the tasks ahead”. (Eccl 10: 16-17)


"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






Thursday, September 26, 2013

Another Piece of Economic Data - Another Reaction in Gold

The drama remains exactly the same as it has for some time now....a piece of economic news is released and it either confirms or dispels ideas of Fed tapering of bond buying. This time it was the jobless claims number which came in at 305,00 first time claims versus market expectations of 330,000. The news was interpreted as a jobs market improvement or more accurately, a job market that is not deteriorating as bad as some expected and therefore bolstered Fed tapering ideas. Up goes the US Dollar and down goes gold as a result.

Get used to this - every single economic data release is going to be dissected and examined for "clues" to our monetary masters' next move. This is the tragic state to which our once proud financial market system has been reduced. As stated many times here before, go and grab a Daisy and start plucking the pedals as you recite the phrases, "She loves me; she loves me not" and you pretty much have the modern trading algorithm.

If you have noticed, even the bond market has been reduced to playing this infernal game as it has lower today, with interest rates subsequently moving back up again. Up and down, up and down....

The only major markets seemingly unaffected by this were the equity markets which rose on the news. Then again, they rise on any news these days, whether bad or good. What else can be expected here in the land of perpetual bull markets in equities  where bear markets have been rendered an obsolete concept from days gone by.

From a technical analysis perspective, gold is having trouble maintaining its footing above key resistance centered between $1330 - $1335. Rallies are attracting selling and dips towards $1300 are attracting buying. It is still in a range until it proves which way it wants to go. Weakness in the gold mining shares would seem to indicate that it wants to break lower but thus far that has not been the case. In other words, I have no idea where this thing is headed in the short term.

I have included the RSI or Relative Strength Indicator to show you the range trade and lack of clear direction. Notice that for the better part of three weeks, this indicator has been mostly confined between 60 on the top and 20 on the bottom; not a particularly friendly reading. We did get that sharp spike on the day of the FOMC statement which took the RSI through the top of this range and looked as if more promising things were ahead for the metal but it quickly surrendered its gains with the indicator reverting back to its previous pattern.


On this time frame, the RSI would need to clear at least 65 for me to get the least bit excited about the metal but more importantly, it would have to push past the previous price peak made the day of and the day after the FOMC statement. At this point, that does not appear to be in the cards WITHOUT ANOTHER CATALYST coming from somewhere. After all, if gold cannot sustain a rally with a clear statement coming from the Fed that the economy is too weak for them to consider tapering at this time, then what in the world is it going to take to push this metal higher? My answer to that is the same - a LOSS OF CONFIDENCE in the currency and with the Dollar refusing to break down significantly right now, we are not seeing any signs of that. Perhaps the upcoming federal debt ceiling will change some minds in that regards but the jury is still out on that.

The problem for gold remains the same thing I have been saying for weeks now - speculative money is not interested in chasing prices higher. Money inflows are simply not there and without them, this market cannot sustain any rallies. Something is going to have to change in investor/trader sentiment to bring this hot money back into the gold market, and the silver market, for that matter. Until it does, it looks to me like the bears still have the advantage until proven otherwise.



49 comments:

  1. Aug 9 gold closed at 1312, and at $190 discount to platinum; now at about 1324 and only $90 discount or so, which suggests that some more bearish news is around the corner if last week's lows buckle, Dan. I am with your thinking; swb in sparks

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  2. Steve,
    Is the debt ceiling likely to blow up into a crisis? This drives gold or strengthens the dollar of both?

    ReplyDelete
    Replies
    1. Concord; a good question that I do not have an answer for; swb in sparks

      Delete
    2. I still look at Aug. 2011 and see that drove the market's to the brink. Something tells me it won't happen this time.
      Thanks Steve

      Delete
  3. The daily MACD is breaking down and the weekly is also looking sombre (for both metals). I'm waiting for a cross before l get back into this long trade. Maybe once it is realized that tapering is off the cards over the midterm will both metals rally hard.

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  4. The Taper has set his sights on Washington pork so that OCT 17 will not mean default. Leading op-eds opine they'll taper off their addiction to debt, if it kills them LOL: http://thenewsdoctors.com/wp-content/uploads/2013/09/the-taper-grim-reaper-e1379963682205.jpg

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  5. "As long as gold is under pressure in the West in paper form the physical will be bought by and go to the East until there is no more. Then gold will become independent of manipulative tools and therefore rise to prices few anticipate."
    Jsmineset.com

    OK...so when do e know just before "there is no more".? If it's about physical gold delivery, then the stocks of the LBMA are concerned as well, not just the Comex. LBMA is more important than Comex regarding stocks and physical delivery.
    So where should we look?
    Is there a link to the real LBMA stocks, lol?
    If not, maybe we will have a sudden and "unexpected" default of the LBMA someday? Is that what Sinclair is expecting?

    ReplyDelete
    Replies
    1. If enough longs stand for delivery at the comex, and they dont have the gold to deliver, then you will know "there is no more". So we all know what has to happen, but when and if remain mysteries.

      Delete
    2. I believe Sinclair is correct and Eric Sprott spoke on this same issue with web conference a few days ago. James Rickards who wrote "currency wars" has a lot of credibility and not pushing metals or shares but pure financial analysis says the currency crash/rebirth will all be done within 2 years. We'll see. $85B to $100B per month of funny money and no problem here, all is well. As Dan says, wash, rinse and repeat. Transparency? Ha!

      Delete
  6. The path of least resistance is up, debt ceiling will give way. Gold capped by the FED / BIS same non profit paper shorts after London fix. Shanghai deliveries for September now +182 tonnes work that out per annum!. TBTF increasing their long positions. Follow the hard money.

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  7. GDX/GLD ratio now within a hairsbreadth of testing world record lows set in June.

    Hands down, this must be the longest period of underperformance in history.

    Meanwhile, Nike is gapping up $4 after hours to lifetime highs, apparently people cannot get enough of $180 basketball shoes.

    Come hell or high water, the consumer is going to spend no matter what.

    ReplyDelete
    Replies
    1. Your right consumer is going to spend no matter what buying Chinese made shoes. Says it all about the state of the US when a shoemaker pushes HP and Alcoa out of the DOW! Nothing to celebrate here. GDX / GLD looking like value here against the shoemaker.

      Delete
  8. hooo-ya...we just popped above 1340 just now...i hope this holds till the end this little Friday...i know its not the most important level but and 1350-1360 is more significant, but this is good. i cant be bothered with any more downside an edi must admit, 1300 held pretty good....we were making higher lows since it dipped there pre-taper anyway...but is this government shut down really a catalyst for gold? i think its almost irrelevant, especially compared to the debt ceiling.

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  9. Carney says "no more QE from BOE" and gold pops >1%. Interesting...

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  10. Hi

    1360 is the magic number ... Hold for 2-3 session the slight bearish technical.... Only then this market is in a bull..

    I currently no position will be looking for opportunity to short at higher ground

    Cheer

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  11. Now I looking at the trading of small country trading screen..

    Recall yesterday I mention that when gold was around 1300, the futures contract price is 20010 bath, now the 1340 it is amazing that the contract price is still about 19940....

    Something fishy here.. Guy..

    Cheer

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  12. Bonds soaring again today, now way off the lows after everyone was chanting the "death of paper".

    Funny how at the first sign of economic trouble, investors dump crude, gold, and grains and immediately scramble to the safety of Uncle Sam, trillion dollar annual deficits and all.

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    Replies
    1. Pavlov successfully conditionned the dogs :)

      Delete
  13. Looks like this is the first shot across the bow. Holding dollars will be dangerous to your health. Watch out world.

    ReplyDelete
  14. Is it possible that China has already accumulated over 5000 or 6000 or 7000 tons of gold and the market is ready for a move out of this area?

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  15. Gold continues to outperform the platinum and is now only $80 discount; also outperforming vs. silver, which everything being said and done is not usually a good sign for a sustained bull move in the complex; have a good wknd everyone; swb

    ReplyDelete
  16. I am leaving ALL markets. They are rigged, and it is IMPOSSIBLE for ANYONE (other than those making large transactions (hedge funds, commercials, and sovereigns) to know the direction. Sorry Dan, price actions are just that. Price actions based off of nothing of substance (anymore that is). A black swan will change that, but in which direction no one knows.

    King World News consistently puts out incorrect info. Like the Gold Exchange Act of 1934... doesn't exist. I have asked to have PROOF of Claims, yet no one can provide any. So KWN is NO DIFFERENT than MSM, except they often take the opposite side of MSM. But the OPPOSITE side of a lie, is not necessarily the truth.

    Quite frankly, I don't have the time or resources to keep up with it all. And everything seems to be smoke and mirrors. I will hang on to physical and cash.

    Will continue to monitor and post on the site, because I think Dan has lots to offer and is HONEST, something that is rare commodity these days.

    ReplyDelete
    Replies
    1. Nate;

      Thanks for the compliment. I am doing my best to read these goofy markets and having as much difficulty as many others are. The fact is that the hedge fund computers control the markets anymore and what they are going to do on any given day is anyone's guess.

      Let me make a suggestion when it comes to KWN. Please keep in mind that what you are reading there and elsewhere on the web are OPINIONS of others. Everyone has one; sometimes they are correct; sometimes not. Try not to generalize by making statements that they "consistently" put out incorrect info. If you have a difference with something written as being factually incorrect, just state that difference and present your facts to refute it. That is more edifying to the readers here instead of painting with such a broad brush.

      Thanks for your cooperation.

      Dan

      Delete
    2. Dan,

      For sure, and I agree with you. I did not gripe about any opinions on KWN (that I can recall). If you noticed, I griped about stated facts. And I posted below the facts and specifically my issue with KWN. I agree with almost ALL opinions on KWN, and that is probably the root of my frustration. I hold them to a MUCH HIGHER standard than I hold MSM. I think we are headed for disaster and an economic collapse of epic proportions.

      It is virtually impossible to state PROOF on an opinion, therefore I don't have issue with it. It is fairly simple to state PROOF on a FACT. Is there any reason they do not do this?

      To put it a different way. If you were to write on your blog that you,"like wher you live." and I were to write,"Dan you suck at speling" it would probably frustrate you that I couldn't spell myself and that I was being somewhat hypocritical...

      That is all I am saying. But the example I give is really a meaningless statement. The subjects being discussed at KWN are, IMO, EXTREMELY serious and deserve the attention KWN gives, and the KWN readers/listeners give.

      I will try not to criticize opinions in the future, but please allow me to correct FACTS on this website (from any website) so long as I back it up with proof. I think that is what our nation needs more than anything: Truth tellers and truth seekers and wisdom of discernment. And BTW, if I ever state something as FACT and I am wrong please let me know. The truth is the most important...

      Nate

      Delete
    3. Nate - Thanks for that. I appreciate your integrity.

      Yes, opinions are fair game as are predictions ( no character attacks however). Anyone making them should realize that they open themselves to either criticism if they are wrong, and praise, if they are right. I have no issue whatsoever with opinions being contested and debated when it comes to markets. After all, there is always a bullish case and a bearish case to be made.

      FACTS - absolutely! I try to be a stickler for accuracy myself as truth is what it is.

      Have a good weekend!

      Dan

      Delete
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    ReplyDelete
  18. Nate

    It is the Gold Reserve Act Jan/30 1934.
    This was preceded in April 1933 by Executive order 6102.
    These were both signed into law by Franklin Roosevelt.

    Looks pretty real to me....anyone else know anything about this?

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  19. This comment has been removed by the author.

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  20. Mark

    Yep, you are totally correct about the USD.
    It goes to show you the absolute power that comes with having the reserve currency.

    You can punish, crush, slice and dice any country you please when you have the reserve currency.
    You can print and borrow all you want, manipulate any market....actually....it gives you the ability to do pretty much whatever is deemed to be to your advantage with no consequences (so far)

    Do you think the rest of the planet is getting just a little tired of this BS ?

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  21. Dean,

    Yes, you are correct. But my point is when you call someone out, you supply evidence. It is RARELY supplied on KWN. It isn't hard to call it the GOLD RESERVE ACT of 1934... but he calls it the GOLD EXCHANGE ACT, which demonstrates he doesn't know what he is talking about, or at the least doesn't care about accuracy. He may be right in theory (and I think he is correct). I did some research on it and the Exchange Stability Fund has almost free reign to do whatever. An Article by the Cleveland Fed in 1999:

    http://www.clevelandfed.org/research/commentary/1999/1201.pdf

    States that basically they can do ANYTHING off-balance sheet, which means they can do anything they want and NOONE holds them accountable. In that regard, Ing is probably correct. But for the love, please use the accurate terms.

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  22. Nate

    I hear ya.
    I am becoming very wary of a lot of the information we are being fed.
    It seems a most of this stuff is not being properly vetted.



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  23. I'm no veteran of gold trading but one thing I find total BS is this talk of paper vs physical gold. When the price of gold started to crash in April all this talk of it's only the "paper" price that's falling, not physical. Just stupid. All I know is my mining stocks were hammered as the Comex paper price was falling, so who gives a crap about physical price. Besides if spot is $1200 no one is going to pay you $1500 for your so called physical. Maybe $1250, $50 premium - whoppee doo! So keep haning on all the way down and lose 50% in your portfolio. Sheesh.
    Even Mr Sinclairs "emancipation" of paper from physical talk, what is that even suppose to mean. Obvoiusly it did nothing to save portfolio values. And no offense to JS as his site is useful.

    ReplyDelete
    Replies
    1. Hi Elijah,

      I think (hmm...I may be wrong or not accurate) that what Sinclair says is that even paper gold is being backed by some physical gold, because one can ask for delivery at the Comex.
      Dan mentionned that Comex traders are paper lovers, and that's why the ratio between open interest and registered gold is near 60 without apparently causing a problem.
      But there may be a time when it will become a serious one, if physical stocks keep diminishing.
      The end game comes when Comex physical gold stocks decrease and come near zero : then the Comex will risk default on its deliveries.
      Jim thinks that they will change the rules before this happens, by increasing margins. As a result, shorts should have the real gold as a counterpart of their short positions, or buy back their short positions, meaning no possibility to "manipulate" the market by shorting gold with huge leverage.

      Personally, as an amateur, I'm not sure why they would choose to do that rather than simply default and announce they will suspend the possibility of delivery, turning into a pure paper market. After all, customers are paper lovers, as Dan said.

      The real default may come from the LBMA, as more and more countries are asking for gold repatriation, or are buying some fresh new bars. I'm not sure what would happen to gold prices if LBMA was to default somehow.

      Another assessment is that the price discovery will turn towards the East, because they are buying more and more physical gold, which is leaving our shores. So one day, it maybe that Hong Kong or Shangai become the market for gold price discovery.
      Though I'm interested in those statement, to me, they remain a bit theoritical, because I'm not a gold expert really, and I'm not deep enough into this to know if Sinclair is right or not. All I know is he is a lot more knowledgeable on that field than I am, but it is always dangerous to follow someone you don't fully understand.
      So I keep his thoughts in my mind, but I'm not going All In with something I don't fully undestand.

      Delete
    2. P.S : actually, if I'm not fully convinced with :
      - Comex becoming a physical market to avoid a default
      - LBMA default creating huge price discovery up
      - Asia buying gold means price discovery someday in Asia vs Comex

      on the other hand, mathematically, I think this argument makes more sense :
      - The Fed is buying more and more US bonds.
      - As a result, the Fed's balance sheet is more and more huge and unstable.
      - As a result, there will come a time when even the FED's credibility will be threatened. The Fed is the ultimate lender, payer for the US. So what if its balance sheet keeps exploding until everybody sees it is actually "bankrupt"?
      - Well the Fed must Watch what it owns as a real, undisputable asset, and guess what, Gold will be one of the only assets of such class. To avoid pure bankruptcy, the Fed may have to revaluate gold at a much much higher dollar price than current market price. (Actually currently, Fed doesn't even use mark to marked, but evaluates its gold stock at a ridiculous undervalued fixed price).

      Delete
  24. Another week where gold is slammed and the "Glam" stocks like Limited Brands, Starbucks, Nike, Tesla, Facebook all close at lifetime highs.

    As if these cult retail names are completely unfazed from any bad news about the economy, budgets, shutdowns, Syria, and all the rest.

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  25. Mark

    I just do not get the deal on Facebook. Here is a medium that has been exposed as a way of mining personal information and giving/selling it to whoever wants it including government agencies, and nobody cares !!
    I am just amazed that so many still foolishly use Facebook.

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  26. No man's land.
    I don't know how to better describe the situation from my point of view at the moment. On most of my time units, on most of my indicators, everything is unconclusive. Besides, on a weekly time scale, I'm in the middle and far between a support (1290-1300) and a resistance (1375).
    I'm not going to try to trade in those conditions (I'm not an intraday trader).
    Many indicators are in a crossroad, "about" to say something, but not yet.
    So I'm far from 1st july monthly candle starting completely out of its Bollinger Bands. One more time, I'll pass.
    Have a nice weekend,

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  27. Hubert,
    The lack of volume and underperformance in the mining shares is also holding gold back. If this debt ceiling crisis ends without much drama gold will be in trouble.

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  28. Not to mention more taper talk going into Oct or Dec, whether real or perceived.

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  29. Owning gold mining shares is almost on the same level as owning a rental property in Syria...it's bad.

    Does anyone read Peru Saxena? the guy has been deadly accurate.
    Got all of his client's totally out of PM's in September 2011 and put them into US Equities.
    Talk about a great call.
    He said he will not even consider jumping back in until Gold clears around $1520.
    His advice is well worth heeding, I will be watching for his next call on US equities.

    ReplyDelete
    Replies
    1. Dean,
      He was right but if you are sitting in gold shares he is no help at all.

      Delete
  30. The other truth of using Puru Saxena or anyone else who is right, is it ends. Jim Sinclair was like an oracle for ten years and then everything he said was wrong. Staying in gold shares(you lost all your gains by holding them) negated all his other brilliant calls. That is how it works when someone is right, look out because it will end when you least expect it.

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  31. So far Martin Armstrong and Larry Edelson have been spot on. They both called the sharp declines coming in gold 1st quarter 2013. And Armstrong said gold would touch at 1150 before it moves higher, and that was in 2011 after the peak. Pretty darn accurate.

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  32. I guess this means that your average vanilla local stock broker will make you as much or more money as the wealthy and famous analysts.
    Here we are holding gold long term and getting whipped.
    When gold starts it's climb again everyone who never owned an ounce will casually step into the market catch 60-70% of the move and make as much or more.
    We have all had a very expensive education the last few years.
    My only question is "when will we know the US equities market is topped out"?
    Everyone seems to think that someone will ring a bell warning that it is time to get out, and the crowd will leave the theatre in an orderly fashion.
    If only it was that easy!
    Sell in May and go away certainly doesn't apply anymore, most everyone was expecting a good Sep/Oct correction...didn't happen.
    The DOW just keep marching higher. Very few are seeing any end in sight.
    The FED isn't even allowing minor corrections anymore.

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  33. I have a feeling this gold bull won't be like the 70's where there was a 50% pull back then a 900% run. This one will have more big waves before we hit the summit. JMHO

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  34. Hi Dan, once again I just love reading your blog posts and learning from them!
    I also want to thank all the commenters for their posts as they are very interesting and seem to come from "where the rubber hits the road" !
    Very different from a lot of analists out there who don't seem to be from or operate in the real world!

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