"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, January 23, 2014

Upward Rigging of the Gold Price Continues

I must admit; I just cannot help myself having a bit of fun. I wanted to try these catchy titles the same way that the GIAMATT crowd web sites do in order to generate more site hits to increase their ad revenue dollars!

I should know as my poor inbox gets inundated with such articles whenever gold has experienced a sharp selloff of late. "See - we told you so", seems to be the message.

The poor bears however have no friends for no one writes snappy titles to defend them whenever gold has one of these big up days like it is having today.

On to more serious business however - there was a strong combination of data releases that really lit a fuse under the gold market in today's session. Unemployment numbers, the Chicago Fed's index, China, etc. Each of these data releases showed slowdowns in growth.

If that were not enough, India's ruling Congress party chief, Sonia Gandhi was reported to have requested the Ministry of Commerce to ease restrictions on gold imports into India. The gem and jewelry industry is complaining, rightfully so in my view, that this 10%  barrier is forcing their costs to rise and impacting their businesses negatively. Any easing of this tariff would be viewed by gold traders as friendly towards India gold demand. At least that is how the market seems to be regarding it at the moment.

Back to the US data however but more specifically, back to its impact on the US DOLLAR. It fell SHARPLY and guess what???? -  Yes, Gold rose sharply. No manipulation, no theories, just a simple correlation between the Dollar and the Anti-Dollar or ol' Yeller. The weak economic data, which reminded people of just how weak that last payrolls number was, once again spurred more of the same talk that the Fed was going to be on hold in the regards to the Tapering.

Side note here - one wonders just what will happen if the next payrolls number just happens to be above 200K. Will all of today's talk disappear once again? From a trader's perspective, it is like trying to catch a yo-yo.

With equities selling off sharply on the sharp reported fall in the Chinese manufacturing index, investors are fearing more slowing growth and that translated to sinking interest rates here in the US as bonds were the recipient of money flows today. Those money flows dropped interest rates and that pulled the rug out from beneath the US Dollar which has been supported by a general tend of rising rates here in the US.

The yield on the Ten Year as I type these comments is down to 2.8%. At the start of this year it was trading above 3%! The Dollar has tended to generally track the yield on this note.

Watch the Dollar to get a clue as to whether or not gold can muster the energy to punch through this tough overhead resistance barrier that it has now once again entered.

Around 10:00 AM CST, the Kansas City Fed numbers were released and this data showed a big improvement in the manufacturing in the Plains area. The number rose to 5 from -3 in December. That showed manufacturing growth for the month, the exact opposite of what we got from the Chicago Fed. Gold seemed to fade a bit when that number hit the wires.

This market remains so incredibly sensitive to Tapering/Not Tapering issues that for all practical purposes, we are trading each and every single economic data release with the view to how traders are generally interpreting that data. Predicting this sort of thing in advance is fool's work so just be warned that volatility will continue to remain quite high until we get some sort of clear, defined TREND in this data. Right now there is no consensus and that will lead to sharp bouts of buying/selling depending on which side panics. Today it was the bears' turn; tomorrow - who knows? 

This is the reason I continue to urge caution for those traders who are still attempting to work this gold market. KEEP YOUR POSITION SIZE SMALL OR MANAGEABLE. You are liable to get hurt and hurt badly if the economic data does not come out your way. It is not trading at this point because there is no clear trend. You are essentially gambling or rolling the dice and hoping that the roll comes out in your favor. There is no skill to that, just chance, and good traders do not rely on chance.

Let's see how the dust settles at the end of the day but more importantly, how the market reacts to the next payrolls number coming our way.

A couple of charts for you to examine... note the daily chart and the strong push above the 50 day moving average. That is quite positive. Also, the ADX has gotten a clear crossover of Positive Directional Movement Indicator ( BLUE LINE ) above the Negative Directional Movement Indicator ( Red LINE ). Clearly that bulls have regained control of the market at this time frame. As a matter of fact, the ADX, the trending indicator, is actually beginning to rise, just as gold is moving higher. It is still below 25 so the trend is not yet confirmed but it is very close. What the bulls need is one more ingredient and that is a strong push through that very tough overhead resistance zone noted on the chart. That means we need to see prices above $1,262, preferably a bit higher, to give us the real possibility, the first in a while I might add, of an upside trending move.

Look at the 4 hour time frame. Here you can see the strong volume on today's big move higher ( a lot of this is due to panicked shorts when that data came out). This REVERSE FLASH CRASH is CLEAR PROOF that gold prices are being manipulated higher. After all, who would buy in such a fashion? Sorry - I think I need some help restraining myself at this point. ( it comes from having to deal with all the nasty emails that constantly fill my inbox from the gold acolytes in the cult).

Seriously, look at where the bulls have taken this thing - right on the verge of a breakout! We have a big hurdle to clear with that next payrolls report but suffice it to say, that IF THE US DOLLAR experiences another strong selling-related plunge as it is doing today, gold should break free to the upside. I am noting that the Dollar is holding initial support near the confluence of the 40 and 50 day moving averages. Failure there and it has a strong possibility of visiting 80.20 - 80.00.


  1. It is all fun and games until/if no wants paper.


    Is an inflation cyclical genie ( in this secular DEFLATIONARY cycle) about to come out of the bottle;: look at Nat Gas, Oil, Gold, Silver, Coal all slowly beginning to turn up ever so slowly and stealthily ( yes 70% HDTVs are dropping for SuperBowl aficionados ).

    Will this last ?( today's and end of week closing on prices of these commodities is impt .

    Are years of money printing sins from Greenspan and Bernanke going to haunt Yellen ? Is she going to be the Carly Fiorina of the FED ?

  3. Thanks a lot for the update Dan,
    Nothing new about my trade : I'm in the truck long side, 2/3 of initial position (back 1/3 the other day sub 1239) and next target now at least 1300, but watching the resistances on the way as potential opportunities to sell under them / buy lower.
    1268 area is the horizontal neckline of the daily Head & Shoulders, so I'll watch what's going on there, on the 2day candle chart for example.
    On the weekly time unit, I'll also check where gold prices stop at the close of the week tomorrow, but it seems we are headed towards a break of the immediate weekly downwards channel which linked previous tops, so...so far, so good on the long side of gold :)
    Hehe, was a long time I didn't feel happy with a long position on gold, last time was around july last year :)
    Have a nice day,

    1. It's tough, there is no clear "victory" from bulls imho if we don't close above 1268 this week, and the ma20 weekly just there plus the horizontal neckline are pretty tough targets...look at the two red resistances below. They cross right in this area 1260-1270, so the real battle for bulls is just above head, not under. I'm more careful than ever about tomorrow's price action.


      Happy bull one day, sad bull the day after...still, on a daily time unit, now the cycle seems to favor the bulls : prices went up alongside CDur, but now CDur reversed down and prices didn't follow...pretty nice to see, didn't happen in a long time. That's why I stay on the long side.

    2. For the record, I'm out of 1/3 once more at 1264+
      This area of resistance is still active, tomorrow might show a correction...I prefer to wait and see if we can get through this tough one. Meanwhile, I'm taking profits once more and, if we correct towards 1230 and hold there, I'll be happy to buy once more.
      Have a nice day all,

  4. If gold was being manipulated downwards upward spikes would be a tell tail sigh. Very much akin to stretching a rubber band, holding a ball under water etc... if market forces are unnatural then nature will try reassert itself

    1. Selina Hartley;

      Based on this assumption, every single market that experiences a sharp, short covering rally is therefore evidence that it is being manipulated.

      Sharp, short covering rallies ARE NORMAL in every bear market, especially after markets fail to crack through support levels and bounce. The shorts cover and then the computers kick in and out more shorts come as the upside buy stops are taken out.

      Short covering rallies DO NOT PROVE market manipulation. Sorry but your thesis is simply incorrect.

      If I were to assume it was true, every single rally in corn, wheat, and soybeans that we have seen over the last few months would be proof positive that the grain markets are rotten to the core and are the subject of price manipulation.

      My goodness, when are you folks going to give this up and just admit that the trend in gold has been lower for the last two years until recently and that we might, just might be seeing a trend change occurring?

      No matter how many times I post charts of the Dollar, the Commodity sector, silver, copper, crude oil, etc. nothing seems to be able to register. It is evident that gold is the one market that MUST ALWAYS rise in price, no matter what else is going on in the investment world, or it is being manipulated lower. I must have missed that day in class when this axiomatic truth was being instilled in minds full of mush.

    2. Sorry I was just pointing out that the "There are markets smack ups as well as smack downs therefore they cancel each other out and no manipulation here", is a little too simplistic as IF there is manipulation smackups would be a natural flow on.

      What I would like to know is IF there is no manipulation, why the hell not?? I mean it would be
      1) Easy to accomplish (given enough $$ I bet you could do and do it well)
      2) It would be profitable (this is the least enticing as CBs have tons of money)
      3) Deniable (A lot of people now realize that LIBOR was manipulated, but still don't believe Gold is?!)

      Personally I would suggest the chief manipulator is China (via proxies). Short paper long physical... it's like arranging your very own special discount. Certainly if they are not doing this they are missing a trick.

      A good example is resistance at $1530 crack that by piling on the short contracts and you can get a nigh on $300 discount on your next phys purchase and stacks of $$$ when closing the shorts all arranged by yourself :)

      BTW your work is fantastic... I just can't believe such dishonest, intelligent well resourced people with a motive would miss the opportunity to manipulate gold

  5. Dan - I have no point to defend nor market commentary. I just wish to say I enjoy your commentary and want to express thanks for your efforts. I am learning a lot about PM markets from your postings.

    1. Kaiwen;

      Thanks for taking time to write those kind words. Very much appreciated.,


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