"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


Sunday, September 15, 2013

Summers Drops out of the Fed Chairman Contest - Dollar Weakens

The market is interpreting Larry Summers's withdrawal from consideration as Ben Bernanke's replacement for head of the Federal Reserve as negative for the dollar and thus as a positive for gold this evening. The reason? - Summers's was viewed as a more hawkish replacement for the soon-to-be retiring Bernanke. That leaves the door open further for Yellen, who is viewed as very dovish and thus more inclined to stay the course on the Fed bond buying program.

Gold has responded higher on the news but has run into a solid wall of selling just above key short-term resistance at $1330. The December contract has posted a high thus far of $1336. It will take a further push through this level in either European trading or in the New York session to run the bears out who sold into the news.

I find it rather interesting to note a very large rally in the long bond as the market there is fully one point higher on the same news. In other words, US interest rates on the long end of the curve are dropping with traders seeing a dove replacing Bernanke. Of course the S&P 500 is greeting the Summers news as wildly bullish for US equities with that index clearing 1700 in Asian trade. It looks as if it is Happy Days are Here Again for equity bulls as the punch bowl will be spiked further if the current sentiment now being reflected in this overnight trading is indeed correct.

We will have to closely watch the FOMC meeting for further clues into subsequent action but for now, Wall Street loves it.

I am concerned for gold however - if it cannot clear this overhead chart resistance on news that is obviously impacting the Dollar, the Treasury markets and the equity markets to this extent, then I am not sure exactly what it is going to take to move it into a sustained uptrend. I do want to note however that there is widespread weakness in the grain markets this evening as wide swaths of the Midwest were hit with significant rains over the weekend. That will tend to pressure food prices somewhat if this downward trend continues and thus take some of the heat off the food inflation front. Also undercutting strength in gold this evening is weakness in crude oil/energies.

We wait to see what New York bring us....


  1. Have a sneaky suspicion that gold and silver will continue to drop (further) before the FOMC meeting. Decision will probably surprise the shorts, and gold and silver will be allowed to rise once again and end this long and dragged out correction.

    Just being optimistic...haha!

  2. http://s23.postimg.org/40h2qer4b/gld.jpg

    I see short term support around 1275-1280 $.
    If gold drops there and fails, then 1220 $ is quite possible before the end of the month.
    So, testing the recent lows (1200 $ area) seems imho quite possible, if not "probable" in the next weeks.
    I'm not short or betting on it.
    I just sold enough of my long position on higher grounds (1400 +).
    And I sold more when we broke under 1350.
    Now I wait and see.
    Flat in silver (sold above 23.50, bought back flat 22.50 first target)

    1. P.S : so at the moment, I have the smallest long position in gold, with some profit took via the buying at 1200 to 1250 then via 1345 stop to 1400 +. I'm not taking any risk now being long with the real possibility of a drop lower towards 1200 $. My long position in gold varies between near zero and nearly 100% capital on my trading line. Now I'm near zero since break of 1350.

  3. Hi,

    interesting day indeed ..

    I only eye 1310 - 1315 for today before close higher.

    let see .. for short term i don't see any risk holding long..

    Anyway this just my opinion ....

    Cheer ...

    1. you do not see any risk holding long? son, hubris before the fall; take care; steve

    2. Steve,

      Thank you for your warning .. I do appreciate...

      The timing is not right for the correction now. Base on my understanding.


  4. Can somebody please help me understand, as it perplexes me:

    Andrew Maguire states the below within the context of him warning KWN that the Fed, LBMA, Comex, and the bullion banks are now on the edge of disaster.,

    "On two days this week we saw cash gold trading 85 cents in backwardation to December."

    This statement from a supposed, London metals trader, should know better than this, right!? [Unless, he is looking at different data or source from, TraderDan] Because, correct me if I'm wrong but I think Dan has reiterated many times here that GOLD IS NOT IN BACKWARDATION.

    1. Anything you see on KWN other than Dan Norcini has been dead wrong for months.

    2. But Concord, Egon said .......; steve

  5. Confused by the logic, Dan. Wouldn't damage to the crops cause grain prices to rise, not drop?

    1. Unknown;

      Rain is beneficial to the bean crop, not harmful....there is some question as to how much benefit it will be at this stage of the game...

  6. Dan; Wholesale reversals across the board; feeling like a Big Black Swan is coming; swb in sparks

    1. Steve,
      You usually have good instincts what type of thing is coming our way on the week of tapering.

    2. Concord; It is the toughest period I have ever seen, these last 5+ years; if I was boss, I would blow up the Fed, Supreme Court, Electoral College, and that is just for starters; back to your question and I do not know what is coming, but I will tell you one thing and that is that, and you can laugh, but the Autumnal Equinox and Full Moons are not to be disregarded, and I go home Friday, very, very carefully; my first daughter is 9/21, and you can check out AAPL top a year ago almost to the day; in bear mkts, surprises come to the downside and imho, pm, grains, yen are all ng right now; take care, swb

  7. Gold and grains tanking again into the close.

    While the "Too Big To Fail" banks are claiming that they are safer than ever with huge capital ratios now.

    XLF printing fresh new multi-year highs while GLD continues to grind down.

    Best advice for now is to:

    - Stay in the System

    - Remain fully invested in Fed-sponsored common stocks

    - Keep only enough gold for dire emergencies which may happen 5 - 10 years from now

    - Enjoy the uninterrupted ride in a new secular bull market in global stocks and a new secular bear market in commodities.

    Any wonder why Starbucks and Whole Foods are printing world record highs today?

    1. Mark; a guy once said that to find the top, you have to understand the bottom; to wit, '09 March blew out '02 lows marginally, and now we are blowing out '00 and '07 highs, and maybe? marginally; anybody adding up here has balls bigger then boulders and I myself keep bringing stops up every day, anticipating a key reversal at all times; Cincy 38 , Pitt 17; swb in sparks

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  9. Yep, with a small bet on those wonderful cash producing miners, I bought a small stake in the OPGSX at 17.77 and sold all of it at 19.38 for a wonderful 9% gain. Only had to hold it for about 20 Days. Not bad. So, yes I had to go. :) I believe we will see the turning point by Jan of this year, but want to get back in at lower prices as the Hedgies were not eliminated by the new game " Destroy the Hedge Monsters". It will come soon enough however, when the great Socialist King has lost all his magic potion powers and even the followers of this madness start to understand the end game is near. You cannot proclaim an Economic Recovery when all signs point to a Depression. They will fight the deflationary spiral with moar funny money all over the world, possibly a war, more likely civil strife, which will lead to uprsisings in the ranks, and chaos in the streets of the good ole USA. People will begin to pick sides, and centers of liberty will begin to bubble up from the earth. God is good, even in the darkest hours there are those that see through this collaboration of media, central banking, government statistical manipulation and downright socialism. When the red blood starts to drip, and flow, we will then have to decide our future. I have faith that Americans will again pick up the tools of self sufficiency and sacrafice towards a true liberational movement. There is right and wrong, leaders who hide their motives in the darkness and proclaim socialist agenda will be exposed once and for all. The lies are being uncovered, regardless, of his rhetorical speeches. He is a thief, not the "thief in the night" that we all will come to face.


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