"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


Tuesday, December 10, 2013

Gold Mining Shares having a Strong Day

Barclays, in one of their research notes today, named Goldcorp as one of their top picks for 2014. They cited an expected increase in gold production of some 33% by the end of the year 2015. This is the result of heavy cap-ex in 2013 to bring these various projects to a state of production. They expect that spending will drop considerably in 2014 while gold output increases. The study also cited an expected cost of production at $888/ounce compared to the industry average of $959/ounce.

GG is up some 3.4% as I type these comments. The HUI is actually doing better as it is up some 4.2%.

It is refreshing to finally see some notes like this hitting the beleaguered mining sector. Value-based buying could very well put a bottom in the mining sector. If, and this is a big "IF", the shares stop moving lower, gold, the metal, will not be far behind. I would keep an eye on the reported holdings of the gold ETF, GLD, to see if that bleeding finally has been stemmed and the reported holdings begint to rise. That would be a clue that the worst is over.

Again, the jury is still out on this in my view but the chart action looks encouraging for a change. Even Barrick gapped higher today and is currently up over 5% on the day! It opened sharply higher on a strong gap and then pushed through the 20 day moving average. That is the first time it has been above this level since October 30th!

Note that the ADX has turned lower from a rather lofty level indicating a pause or interruption in the ongoing downtrend. The market could move into a consolidation pattern at these levels with value based buyers perhaps cementing the recent lows just above $15 as a higher secondary bottom from the low made this summer. The stock could conceivably move up to as high as $21.00 or so and still be in a broader range trade. If it were to climb past that level, on decent volume, it would confirm a long term bottom is in.

Barrick's lousy performance has been a type of proxy for the entire sector as a whole so if this stock were to turn and begin a leg higher, the rest of the sector will more than likely go along for the ride as well. Don't forget that just because a stock stops going down does not mean it is going to immediately start a sustained move higher. It could conceivably meander sideways for some time before a catalyst of some sort kicks it up and out of a range trade.

The intermediate term Weekly chart still shows the bears in control of this stock so try not to get too slap happy. Remain objective ( if you can) but enjoy the respite from the selling barrage.


  1. Like I say, another 20 - 30 days like this and all is good !
    Yes, I'm a dreamer.

  2. dan, i would be at a great loss without your daily expenditure of valuable time and energy, sharing your seasoned views. please know you are deeply appreciated, and without peer, imho.

  3. Now that the volcker rule is passed and proprietory trading by banks is not allowed, wouldnt it be an amazing coincidence if the bear market in metals and gold stocks suddenly stopped. Just saying.

  4. short covering bounce for maybe another $50 in the gold; that is all from sparks

  5. Why is it that when Asian trading starts, the metals are ALWAYS down...

  6. I will keep following the 2months / 2weeks /2day time units in parallel with the m/w/d
    Call it exotic, but I think it gives additional clues on several occasions.
    I'm not repeating my long post on last line, simply reminding my key levels :
    - 1220-1225 key horizontal support level long-term on the 2week time unit
    - reinforced by the 1210 support level on the 2 months time unit (horizontal bol inf)
    - 1270 key horizontal resistance on the 2 day time unit (neckline of H&S)

    Call it a correction, but I see as a victory in itself for the bulls to maintain the 1225 support zone, with lately a bullish divergence on the OBVD daily hitting 1210 area. I'm not convinced yet that 1180-1220 must absolutely give way. If it does, we'll likely have a waterfall decline. Meanwhile, despite bear's impatience, the support area is holding.

    1. Hubert the "hot " Trader

      Hubert you have enought material and words to have your own dedicated blog. Suggested name the The HOT ( from Haut ) Trader.
      Give it some thought.

  7. Hubert

    Great info.
    Do you think this will be followed by another 200 ton dump in the off hours?

    1. In fact, I'm trying to anticipate as little as possible.
      Anticipations often go wrong (mine anyway! :))
      I'm mostly trying to detect a good entry point, i.e a good stop loss nearby which makes sense and a good risk/reward ratio, so that even if I'm wrong about price direction half the time (which is again my case :)), I'm still making a profit on the long run.

  8. With the HUI where it is, I really want to go long (long term buy), but I also want to see the light weights capitulate on mass to show me that the bear market is over. Anyone know a goldbug website worth monitoring (to get an idea of what diehards are thinking)?

    1. John

      You are already on the best website to monitor.
      I really don't know of a single goldbug website that will give you the straight facts. Not one that I know of foresaw how vicious and relentless this correction would be.

    2. You want a "diehard" site, I remember silverdoctors held a forum of silver addicts back 2 years ago when silver was plumetting, you could get insulted as a traitor if you mentioned sub 30 $ possibility :)

      Other interesting sites, Dan gave a link towards Trader Garett who has his own trading system as well, and I also like Eric de Groot for the intermarket analysis, diffusion index and concentration of market principles. That's for the websites regarding gold, of course.
      But why some readers are waiting for a guide?
      Most important trading rules are simple, they are linked with a sound money management policy, and you have a real trader here to teach you how to think like a successful one.
      Conclusion : you have the opportunity to learn how to become a trader for free, I mean one who doesn't lose money. Take it.
      Spend a bit of time on a real platform (free), with a demonstration account (again free), and be active by doing your own charts, getting familiar with your indicators. You don't learn trading at university. You learn the hard way behind a screen. Alone, you'd spend a lot of time and money to learn to become succesful. I think here Dan can accelerate the process with all the hints he gives. So if your money is important enough that you come here regularly and monitor gold prices, why don't you spend some of this time by simply learning how to trade? You don't need to be a genius...

  9. Nice move but Rome wasn't built in a day. This is a bit like a rodeo ride, slow accumulation will win in the end. Patience and more patience will be rewarded in spades no one knows when, so forget trying to time the move or the bottom, don't use leverage, buy low sell high.

    1. no way dude - you've been sold a dud. Will be using the NUGT until gold hits $2000 and also keep an eye on the ETF provider. I've taken my losses on the PMs when l held physical. Not going to catch me napping again. I do not believe that gold will go from $1250 to $5000 in a day. Capital is clever - tangible assets will appreciate before the dollar is revalued (as the equity markets adjusted prior to WW2). Just need to keep an eye on the ball.

  10. Gold is just rallying to the upside so it gets more momentum to the downside and smash! through $1210 with a vengence. Once that goes there is nothing but air to the downside, where it stops no one knows. That'll be the final wash out.

  11. HO !
    The mighty Dow down again, XRT continues to decline!
    The great American consumer starts to stagger and weaken with just the thought of the Fed cocaine bowl being taken away!

  12. If we close above 1255, it is again not bad at all, as it was more or less the previous horizontal resistance (and before that used to be again a support area), so testing the previous resistance as a support before attacking once more 1270 would then look possible.
    On the other hand, breaking under 1250 would be a bad omen imho.
    To trade in gold now, I would need to check the smaller time units, and I currently have no time to do so...time to go to bed and big trip tomorrow.
    Have a nice day (for some :))

  13. "I would keep an eye on the reported holdings of the gold ETF, GLD, to see if that bleeding finally has been stemmed and the reported holdings begint to rise. That would be a clue that the worst is over."

    The bleeding of the ETF has nothing to do with the price of gold, as the SLV and the price of silver prooves.
    JPM is going long gold to an incredible amount AND is taking delivery. And whenever that happens, GLD is bleeding. Just coincidence, I'm sure.

    That the biggest Swiss refiner tells, that in the meanwhile very old LBMA bars from the 1960s are resmelted into 1kg bars for China, is probably also only a sign of oversupply...

    1. endzeit;

      my advice to you based on your comments. Just keep buying physical gold and ignore the technical price action in the gold market.

      AT some point down the road, gold demand will pick up and the price will go up. As long as the ETF bleeds gold, it will not mount a sustained rise in price.

      Incidentally, if the ETF has nothing to do with the price of gold, please explain to the rest of us morons why the reported holdings in GLD rose steadily from its inception on 2004 to over 1300 tons before now steadily declining. Maybe all that gold was imaginery.

      Also, you previously announced to all of us here, with great fanfare I might add, that you were no longer going to be reading/visiting this site because you were offended by what you read here.

      What are you still doing here?

      Some additional advice - honor your own word. If you tell someone you are going to do something, then do it.

    2. I said as long as paper-bugs were spaming here, I will no longer post. I overlooked that the self proclaimed Prophet had posted indeed.
      But since you also wrote that I said I wasn't no longer reading your blog, is quite telling, because I did not do so. So I guess you prefer the spaming of paper bugs instead of a factual discussion, if the price of gold behaves strangely.
      But your wish is understood...

      I find it strange, that you are becoming aggressive, if discrepancies between the increasing indications of short physical supply all over the world and the price movement are mentioned but on the other hand you are still appearing on KWN.

      I guess it's all about being present...

    3. Endzeit;

      I do not understand why it is so difficult for you to understand a rather simple concept. "paper bugs" as you so contemptuously refer to them is another name for TRADERS. Traders go with the money flow and do not argue with the market is they wish to be successful.

      Long term investors who are worried about the gargantuan debt load occurring in the US and the endless money printing should acquire PHYSICAL GOLD - not mining shares and not ETF shares and not futures.

      There is a world of difference between these two views. One is short term oriented by its nature due to the excessive leverage involved in trading future. The other is long term oriented.

      Stop griping about those of us "paper bugs" who have learned or are in the process of trying to learn to properly listen to and read the voice of the market while we let price action dictate our shorter term views.

      I am only aggressive towards those who are too dense to understand something I have said more times than I care to remember. This is a site dedicated to trading. That involves paper. Now will you finally please accept that and leave us be.

      By the way, I appear on KWN because I give a TRADER's View of the markets. There are not too many out there on that site that do that. They are mostly, but not exclusively, long term oriented there.

    4. Oh and one last note since you are repaeting this over and over again:
      Look at the price of Silver and the SLV and you will see, that the price decline had nothing to do with ETF holdings.

      The GLD is losing, because speculators are exiting, but the physical demand from Asia as been MUCH more expanded than than the supply from the ETFs.
      If you follow the delivery action on the Comex and the GLD and Gofo, you will notice, that price drops are used to get the redemtions of the GLD being delivered on the Comex. And when that happens Gofo goes DOWN.
      But if supply in gold would increase, then the Dollar should yield more than Gold. And soon after GOFO indicates short supply, also the first months of Gold go into backwardation.
      Now into June '14 Gold is already in backwardation.

      I'm interested, when this phase of manipulation will become visible as deal between the US and China, that you will stand tall and call yourself a believer of an unmanipulated Gold market, while all other markets have been manipulated...

      Looking at the charts is one thing, but understanding that the chart is painted is another thing.
      Now good luck with you new paper bug friends. They will be gone as quickly as they appeared, but the long term readers probably will remember forever how you reacted, when Gold was correcting in this bull market.

    5. endzeit;

      gold has been in a BEAR market since it broke support at $1530. Think how much money has been lost by those who failed to respect the charts and the price action.

      You can talk all about GOFO and deliveries and everything else, but the facts are really quite simple - gold fell $350 in price after it violated chart support at $1530. I am sorry if you lost a lot of money in that fall but it could have been avoided if you had learned to read the voice of the market.

      If you are content sitting on and enduring such large losses, that is fine. Most others are not. Traders in particular that do not respect price action will be destroyed by the huge leverage in the futures market. That is also a simple axiom.

      Also, gold being in backwardation could very well be a reflection of the market anticipating LOWER GOLD prices in the future. But to correct an obvious mistake on your part. June 2014 gold is trading at a premium to both the February and April 2014 contracts. That is not backwardation. it is contango. Get your facts straight.

      Have a nice day and please go away.


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