"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

Trader Dan's free work will soon be available at www.traderdan.biz

Wednesday, April 30, 2014


One word can sum up the press release by the FOMC today: " BORING".

It pretty much said the same thing as last month's statement with the exception that the Fed cut another $10 billion off the bond buying. That however seemed to be generally expected. In effect, the Fed has just repeated that it is on track to end the QE program this year but will continue to monitor the data like the rest of us. They seemed to put the blame on the slow growth in Q1 squarely on the back of the severely cold weather. We shall see what subsequent data yields. Along that line, this Friday's payrolls number will therefore be much more significant than today's statement.

One thing is sure - the DOW seemed to like what the Fed said today. Another new high! The S&P however is much more restrained however.

Early in the session Gold once again fell down towards the key $1280 level but as has been its pattern of late, it attracted enough buying to kick it off of the worst levels of the session. Traders remain conflicted between a rotten GDP number and a fairly strong ADP jobs number. As time came for the release of the FOMC statement, the price began moving higher and actually made it into positive territory. It would seem that some shorts got a bit nervous and thought that the Fed might back away from the tapering somewhat. They decided to cover and that took the price higher. Their concerns were unfounded however as once the statement hit the wires, the price moved lower again.

The situation in Ukraine is keeping some buying rolling into the market. I am of the firm belief that were it not for that geopolitical situation, gold would be trading closer to $1260 if not lower at this point.

Aiding gold somewhat is the fact that the US Dollar is weak. It is flirting with support near 79.30 ( USDX ). Below that is more important chart support near the 79 level. This morning's GDP number seemed to send Dollar bulls scurrying for the moment with the thinking being that the Fed will certainly be hesitant to announce any interest rate hikes. Higher interest rates will support the Dollar.

One of the problems that gold has at the moment is the continued moved lower in the Chinese Yuan or Renminbi. A weaker currency there, means gold becomes more expensive to buy. While it remains unclear to what extent this could impact the amount of gold purchased by China, it certainly does not help demand and right now, gold needs all the demand news it can fetch.

Why do I say that? Because that barometer of Western Investor gold demand, the big gold ETF, GLD, has reported holdings showing that the amount of gold held there has now fallen below the closing level of last year. In other words, the trend of Western investors moving away from gold has resumed after a brief interruption.

Here is the chart:

Note how holdings are barely above a 5 year low. Western money managers and large institutions are not interested in holding an asset that pays no dividend or throws off any sort of yield in the current environment. This is the reason that gold needs the sort of support from geopolitical events, such as what is occurring in Ukraine, to keep it propped up.

Along that line, it was reported today that home prices in China are not rising at the same pace as they have been previously. Average prices rose 9.1% in April but that was down from a 10.% rise in March and a 10.8% increase in February. First quarter home sales were down 7.7%.

Traders are watching any sort of news out of China that might suggest a weakening or perhaps more properly, a slowing of the rate of growth as that will have a big impact on many commodity prices.

From what I can see at this point, any rallies in gold are likely to be viewed as opportunities to sell. With the Fed effectively tightening down on the liquidity spigot, gold is losing one of its key supportive factors. The Fed is not tightening in a direct sense but they are certainly slowing down the flow of money creation. I would think that at some point this is going to benefit the Dollar. Today it certainly did not. Interest rates actually moved a tad lower with the yield on the Ten Year down to 2.653 as I type these comments. I am not sure what to make of that to be honest.

One thing that I am continuing to monitor with increasing interest is the move higher in the Euro. The last thing the Europeans want right now is a stronger Euro. Their monetary authorities are concerned about the lack of inflation and that is precisely what a strong currency is going to bring, not to mention crimping their export markets. The ECB has been making noises about bringing in its own version of QE if deflation pops its head up. That will be worth watching, especially if the Euro manages to clear 1.39 and treks higher.

Silver continues to attract selling at the $20 level and buying near the $19 level meaning its boring, range bound trading pattern continues. Copper continues its retreat from near the $3.10 level. Much of the recent gains can be attributed to hedge fund short covering in the red metal. It will be interesting to see if it maintain its footing above the $3.00 level. From what I can see of its price chart, the metal is not showing any significant pick up in global economic growth at this time. Just more of the same - slow, mediocre growth but nothing especially torrid. I would need to see copper prices at the very least above $3.20 to see a shift in trader sentiment in this regard.

Hogs are continuing their yo-yo like trading - rallying to limit up one day, then dropping sharply the next, then back up, then back down. Discombobulated is the best word that I can think of to describe trading in this pit right now. That being said, any hog producers out there would do well to begin instituting some hedge coverage on expected 4th quarter hog marketings. Profits are enormous for that time frame - do not let them slip completely out of your fingers.

If you want to hold out some portion of your production betting on even higher prices, so be it; just do not bet the farm. Be prudent and secure some of the best 4th quarter profits that I have ever seen in the hogs on a portion of your marketings.

Don't let the usual bullish hype around the disease lull you into a state of complacency. Some are suggesting that producers are not going to be expanding due to virus issues. That sort of thing has been proven wrong already by the last USDA quarterly hogs and pigs report. Don't expect for one moment that those advocating this will be correct - they are not. Listening to them will cost you - big time. Secure some coverage and sleep well before gambling with your earnings/livelihood. There are some decent combination futures/option strategies that you can employ. Check with your broker to get some help along that line.

The corn and bean markets took a bit of a break today from moving higher as the forecasts called for some warmer weather which will allow farmers to get into the fields and make some planting progress. One never knows about weather forecasts but bulls pulled some winnings off the table, just in case. The bullish chart pattern however remains intact. Traders are going to want to see evidence of strong planting progress before becoming too bearish.

Incidentally, news today from the CME Group that it is considering limits for its gold and silver futures contracts. That has elicited the expected response from the GIAMATT crowd crowing, "we told you so", when it comes to the wild price swings in gold. Sadly for them it proves nothing at all about "nefarious evil doers" manipulating the price of gold for the government. What it does prove, if anything, is that computerized algorithms continue to wreak havoc in our financial markets and the wild volatility, so often unpredictable in nature, is scaring business and would-be customers away from the exchanges. They are grappling with how to deal with all of this. Limits might help but I doubt it. Position size reductions would be more instrumental in my view but that will probably never happen. Watching hogs go from limit down to limit up in the same day is a perfect example of what the computers have done to the price discovery process. If that is not enough for you, try trading old crop soybeans if you are bored and you will get a first hand lesson into the nature of modern computer algorithms.

Not much has changed on the gold chart which I am presenting here:

As you can see, it remains mired in its trading range. The range is constricting further however as first the top side moved down to near $1320 and now has moved down to just above $1300. The bottom is intact near $1280. Two things worth noting however - the stochastics indicator ( used for range trading ) just gave a new sell signal while the ADX line is beginning a very slow rise. Normally that indicates the presence of a trending move. With the -DMI ( Red Line ) above the +DMI ( Blue Line) that translates to a trending move lower. The chart pattern however does not as of yet show a clearly defined trend. That will require a strong close BELOW $1280 to achieve.  Stay tuned - this Friday might be a game changer.

The mining shares are a tad weaker based off the HUI today.

One last thing - the VIX or volatility index, dropped lower and is sitting near 13.38. There is not the least bit of fear/uncertainty or whatever in these markets, which is rather remarkable given the high degree of margin debt.


  1. Summer is fastly approaching. Sell in May and go away. I know I will be taking the summer off anticipating another doldrum in the metals. But who knows as anything can happen. For now I will let history be the guide. Have fun!

    1. "Sell in May" is fine but Dan is right. Let the price chart be your guide.

  2. Dan, your analysis on gold is spot on. Many gold pundits saw last Thursday's reversal as something significant. It wasn't. News came out on Ukraine, and all the shorts scurried to cover. Even today gold was headed south, when more negative news on Ukraine came out supporting gold. Any significant geo-political event skews the price of gold. Ukraine is very unlikely to have a quick resolution, therefore putting a bid under gold, and making it unlikely that it will break 1278 anytime soon. That being said it will be interesting to see what happens to gold if we get a strong employment number on Friday.

    1. BOBBO;

      I have to marvel at the temerity of those guys who were so quick to start yakking up about that supposed upside reversal on the charts last week. These are the same people who love to write me bashing me for detailing the technical posture of the market.

      "Don't you know how utterly worthless your technical price charts are in a market that is obviously manipulated by the feds?" they constantly remind me. Then, whenever those same technicals suddenly turn bullish, they are like new converts to a faith, swearing their undying allegiance to the art of technical analysis.

      It is sickening to sit here and have to stomach the duplicity and outright hypocrisy of such. They have no shame, and no hesitation whatsoever to utterly contradict themselves over and over again as long as gold moves higher or anything remotely resembling something on the charts appears to be friendly.

      You are right - Friday's employment numbers have the potential to be a big market mover.

      We'll see what we get.

      Thanks for the comments.

  3. Thanks Dan. I love reading about the other markets you mention and the current underlying conditions/trends you see within them.

    Silver closing below $19 by weeks end seems possible. It'll be interesting to see how the end of month rebalancing of the positions held by large investors effects the metals and everything else in May.

    I agree Dan, friday should be interesting.

  4. so more taper out of washington , more untaper out of brussels … what a farce … how can it be that the day they announce further tapering stock market goes up , yields go down.. ?? .. and also no growth whatsoever … so the almighty US drops 3% growth in q1 because of the weather … anyway … this , of course has nothing to do with trading .. but its just hilarious .

  5. the big moves in the pm's are all behind us, much to the chagrin of the pontificating, chest pumping letter writers soiling the media atmosphere, re-stating the obvious and looking for either the end of the world next Wednesday or whatever. What is also very tiresome is the ongoing analysis of the greatness or stupidity of various so-called world leaders and their strategies going forward. These guys all make it sound like they have a direct pipeline into Brussels, Moscow, and D.C. What they do not seem to realize though, is that all the players are merely making it up as they go along. There is no grand plan. Like we always say, the answer is in Sparks, and that is that there is no answer, so just relax and see how it all plays out; swb

    1. If the trend being set by CME to limit swings in the markets is part of the new normal it'll take a long time to repair the chart damage and overcome the negative publicity gold has received the last couple years.

      It'll be interesting to see if the Fed tapers all the way down to zero in a consistent manner by years end or early 2015.

      At that point we'll know exactly who completely blew their "...by the end of 2014..." call on gold and silver.
      The pundits out there who keep claiming that this current QE is forever are blinded with a smug certainty they've bestowed upon themselves.
      Some of their reasoning is nothing more then an overarching belief system that is so entrenched that the individuals FEELINGS (based on principles or deep biases) are projected as indeed being fact.

      To hear some of these balloon-heads speak you get the unmistakeable impression they actually believe they're smarter then and in lock step (or one step ahead) of CB policy in the US and abroad.
      That same magical know-it-all syndrome includes knowing what heads of state have in mind and how world events will play out and why.

      The KWN/Jim Willie/Alex Jones-types of the PM blogosphere have given the sector a black eye that'll linger for quite awhile...or until the end of 2014 when we see how all the wild predictions pan out and from whom.

      People at some point will wake up to the song and dance they've been patronized with is little more then cheerleading a losing team getting it's ass kocked for the last 2+ years while grasping at straws looking for any plausible reason or excuse why the PM's seem comatose.

      Evil manipulation, of course, is to blame for everything. :-0

    2. at the same time though, beans, corn, wheat limits are expanding; sparks

  6. Someone should start a subscription newsletter called, "this is it". Everyday that one sentence will be sent out to everyone. No predictions whatsoever. Just, this is it. That way the newswriter can be 100% right all the time. Dont have to bother with worthless predictions.

  7. dis-comb-u-lated, GIAMATT? what do I know of technical terms. I just see gold & silver trending down on a weekly chart. I do believe in holding physical ribs for the medium term and buy/making barbeque sauce on the dips. I'm ready to bite into my rib stack as soon as the weather turns.

  8. Hilarious. I like the idea of "This Is It!" newsletter. First page should say "It is Now!!" Maybe we fill it with a basic daily and weekly trend chart of SPY, GLD, GDX and can charge $25/yr. as long as we put in Eric King - style pretty chicks with bikinis.

    On top of that, we can hold fancy seminars in modern hotels and charge $100 a pop and do Powerpoint presentations on how "Any Minute Now, It's All Going to Implode!" and "Get Out" and "Beware of Bail In", yada, yada, yada.

    By the time we are 80 years old we'll have 250,000 subscribers just paying $25 to be entertained by the non-stop hysteria about how the world is going to end, filled with pictures of supermodels.

    Not a bad idea for doing nothing but repeating the same crap over and over again and getting paid.


    1. all I know is that I eat $13 rib-eyes, while those donkeys stuff themselves on p&j sandwiches and lousy bottled water; sparks

  9. And here comes another pumper espousing how China will be responsible for golds next big leg up (after a tremendous leg down that went unforeseen and unacknowledged)

    All the PM "veteran" jock sniffers out there who regurgitate every single bit of hyperbolic rhetoric like a seagull eating french fries will C&P Sprott's vision without a second thought to it's biases seeing as how Sprott has acknowledged he is allegedly working with Chinese Govt, interests.

    In other words...he's pumping, again. Buyer beware.

    Eric Sprott On The Implications Of The "Chinese Gold Vortex"

    Submitted by Tyler Durden on 04/30/2014 - 18:40

    After a long and agonizing winter which was attributed to the so-called “Polar Vortex”, we thought it would be appropriate to highlight for precious metal investors the implications of what we call the “Chinese Gold Vortex”. Over the past year, we have been very vocal about what we consider an aberration: the complete disconnect between gold supply and demand fundamentals and the actual price of the metal.


    Where the end of everything is only a matter of time.

  10. tyler is the Bulgarian bullshitter; all he cares about is volume; credibility, what is that? ask yourselves, are you buying gold and silver because of Ukraine? And you did not buy because of Libya or CAR, or Syria? Oh, but of course you and your family and friends are all moving to Russia, India, and China, right? lol, my good friends

  11. Dan
    Really appreciate your additional commentary on the other commodity markets.

  12. Wow, silver imploding, looks like $18 by morning, poor Stephen Leeb must be bleating and squeaking "bloody murder"!!!

    If only he had bought Borg Warner, Lithia Motors, or even Palladium to participate in the Global Economic Boom in automobiles.

  13. Dan,
    Curious about your views regarding the Gold-Silver Ratio. Does it enter into your work at all? Or is it simply something that only silverbugs give a whoop about?

    Seems to be making new highs, fwiw.

    1. Eric O;

      It makes for nice charts but is of no useful value when it comes to trading. Silver needs an inflationary environment in which to thrive and if it does not get it, it has no speculative interest on the long side. My guess is that the hedge funds are probably now net short in there but it might not show up yet on this week's COT report because of the Tuesday cut off date. They have been selling rallies in this metal for some time now and are the ones who keep hitting it near $20. Just like gold, it throws off no yield and in what most western based investors view as a benign inflationary environment, those looking for a return on capital are not interested in it.

    2. Thanks Dan.

      I like your answer, since I've always viewed the near-religous fervor regarding 15:1 as being pretty silly. I've caught a lot of flak for that from the true believers over the years.

      I spent my whole life up until 2010 owning no silver at all. And as of a month ago, again I own no silver at all.

    3. Even if you plan on a doomsday scenario, anyone who stacks physical silver soon comes to an uncomfortable realization. You can fit your life savings in a fanny pack if it's in gold. But if it's silver, you need a wheelbarrow and a strong back. Yet, amazingly, the BugOut Bag crowd seems like the same ones always touting silver. What is wrong with this picture?

    4. Eric The Red:

      What is wrong is that that crowd a while back all the way up until now wanted to believe that they stumbled upon an elite community of people and gurus (hucksters) who had the answer to a deteriorating situation (economy), and that if they participated would come out looking like winners and being alpha males once "the collapse" transpired. They still hang on to that hope. Now that they see that things have not transpired in the way that their messiahs have pumped, they perceive anybody doing technical analysis about metals being in a bear market as a threat, no matter how neutral the analyst is being..'cause misery loves company - they can't stand the thought of anything in the blogosphere deterring potential newbie stackers from joining the cause, which in their heads would further increase the chances of the price action continuing its broad descent. They're so emotionally attached to the asset class and the doomsday ideologies/stories/predictions that they've been sold that anyone who has a different take on it (namely, metals being in a downtrend) is automatically a silver-hater, even though it's quite illogical to 'hate' something that's a utility. They confuse you calling out irrational perma-bull mentality for bashing a utility, if that makes any sense. It's pathetic, but I understand it fascinates some people interested in psychology and cults.

    5. Well said, Alice :)

      The prospect of getting rich while the world burns is an alluring one. But then, as the trade goes steadily bad, they go from there to engaging in all sorts of crazy confirmation bias to things like "the world SHOULD burn", "the world DESERVES to burn", "the world MUST burn before we have a reset", and all sorts of variations on that theme. They dig themselves in deeper and deeper, getting poorer and poorer, to the point that the only thing that will save them is a moonshot in silver.

      They've already burned their own world, and now wish it upon everyone else, out of anger and a need for redemption.

      "THEN they'll be sorry, bwah, ha, ha!"

    6. "Alice" nailed it! And EO just applied the frosting and sprinkles to the cupcake.

      If it wasn't so painfully obvious it would be laughable at this point.
      However, too many people have been adversely affected by the shills out there who are so convincing/obsessed about their "cause" that some folks allowed themselves to get wrapped up in the vitriol and hyperbole. It cost them real money to discover that.

      Live and learn.

  14. Wow another rout in PMs and oil is also getting brutalized just 24 hours after jsmineset posted more than 100 articles bleating about Ukraine, lol....

    And Janet hasn't even uttered a single word to cause the sudden commodity crash.

  15. Eric Original; Dan is right on the silver and the silly 15-1 argument, which they claim has some sort of relevance going back 6-700 years or whatever. Anybody should know that Colorado and Nevada discoveries changed the dynamics years ago. We saw close to that ratio I think for about 15 minutes in '80, just like when the Dow and Gold went even money for their 15 minutes or so. Just go to some of the "stackers" sites and read their 18 year old locker room thoughts and lame vocabulary and you will know what I mean. Oh and btw, we are now close to be beginning the 4th year of the silver BEAR market; sparks

  16. Oh, that's right! Today is an anniversary of sorts. I totally forgot about that.

    5/1/2011. Check the charts.


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