“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


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Thursday, April 17, 2014

Geneva Talks Pressure Gold

"She loves me; she loves me not", could be the expression best used to "time" one's entry into or out of the gold market lately. Just look at the headlines I have chosen to employ the last few trading days and you will get the idea. Back and forth they have gone as the mood of the market has been flipping from day to day. Most of gold's recent gains are related to the situation in Ukraine; take that away and the other fundamental factors remain bearish. Gold is therefore ultra sensitive to any sort of swing/change in what is taking place over there.

Today, apparently talks in Geneva ( 6 hours worth ) between the US, Russia and the EU, yielded some fruit, at least in the mind of traders. A framework was agreed upon which it is hoped that tensions could be throttled back. We'll see how that goes but for today, it was negative for gold prices, especially with yields on US Treasuries rising and a stable to firm Dollar. The yield on the Ten Year jumped today to 2.721% as I type these comments from a low near 2.60% earlier this week.

Again, at the risk of beating a dead horse, buying gold based on geopolitical tensions is always tenuous at best because as soon as those tensions are viewed as diminishing, gold is going to come under selling pressure not only from longs who are seeking to book any gains that they might have achieved before those are lost, but also from opportunistic shorts who are hoping for additional long liquidation to take the market down into sell stops that they have been eying.

We got that today in the form of a breach below psychological chart support at the $1300 level. Once gold lost that "13" handle, the stops kicked in and took it down sharply. It did get some buying right above $1290 but the technical damage was done at that point.

Looking at the daily chart, the market looks heavy heading into next week. Keep in mind that we have a long holiday weekend in the West with Easter coming up. That means a lot can happen between now and Sunday evening ( in the West) or Monday morning in Asia. If we do not see any flareups over in Ukraine over the weekend, gold could be in for some more selling come then. Everything is contingent on events meaning the market can go either way.

Back to the chart however...The big move down on Tuesday this week has cast a bearish pall over the market. It did bounce from the support level near $1280 but that was due to events in Ukraine. Two things have happened as a result of this. First, is that the price fell BELOW the 50 day moving average on Tuesday; that is negative. Then today, it fell BELOW the 200 day moving average once again. It should be noted in a trendless market moving averages are notorious for producing whipsaws but nonetheless, technicians keep an eye on these things to try to gauge just who might have the upper hand, bulls or bears.



The support noted is not that far off meaning if tensions lighten up a bit over the weekend, we will more than likely see gold test that support level. If it holds, fine. If it does not, $1260 will be seen in short order followed by a trip to $1240 if that fails to stir up active buying. All of this to say one simple thing - $1280 is shaping up to be a most significant chart technical level. If the bears crash it, watch for them to really pour on new, fresh short positions.

The ADX continues to move lower indicating the trendless feature of this market. The trading range, once between $1400 and so on the top and $1280 on the bottom has now constricted to near $1320 on the top with the bottom remaining the same. Bears are currently in control based on the directional movement lines.

A big contributor to the lack of upside enthusiasm in gold continues to be the poor showing by the gold mining shares. As mentioned yesterday, the market does not like these bidding wars it is seeing among some of the larger firms and is punishing their stock prices as a result. By more importantly, look at the technical price chart of the HUI and you will see what the problem is:


The HUI ended last week on a horrible note and it has been bleeding lower for most of this week. As things now stand, it is precariously perched just on top of chart support near 216 closing in the lower half of today's trading range. If it loses that, there is not much in the way of help until the index would near 211- 210. If 210 were to go, all bets would be off for the gold shares as one could begin to make the case that the index is on course to surrender all of the gains of the year. Let us hope not for the long suffering bulls.

Disgruntled Bulls - Please keep the hate emails and the nasty posts to yourself as I am just relating how things could shape up from a purely technical posture.



The overall commodity sector ( as a whole ) is working higher adding some support to gold but as far as any sort of upside trending move higher, the GSCI is not indicating one at the moment. Instead we see the index continuing to make a series of lower highs and relatively stable lows. Keep in mind something I wrote yesterday - this index is designed to key off of the most active or front months in the commodity futures markets. Currently a goodly number of these markets are showing markets in a backwardation structure. What is important to note about this is that the futures markets are anticipating a comedown in commodity prices as we move deeper into this year. Markets, being forward looking by nature, are discounting any serious threat of upward price pressures later this year. Of course, unforeseen events, especially weather, can always trigger reassessments of such things, but for now, the markets are signaling a break in upward price pressures in the commodity sector towards the third quarter of this year.

Along this line, economic data coming out of China will be closely scrutinized.
There are already rumblings of credit issues in that regards involving Chinese buyers of soybeans. That is not insignificant and will be closely watched due to its implications in the grain markets. Old crop beans seemed a bit nervous about this today although with the way the funds have been buying them, they did not break down all that much. Quite frankly, that soybean market makes me nervous. There remains a large number of farmers who are sitting with last year's beans in their storage bins who apparently will not let go of them. I have no idea what they are waiting for. If the function of the market is to ration demand, it is certainly doing that judging from the export numbers we got this morning. Maybe we need to see another week of poor numbers to convince some of these guys that prices are getting rather lofty. The thing is however, as long as the funds can push them higher without any serious hedge pressures from commercial entities, they are going to do just that. Standing in their path is a quick way to become a "former" commodity trader.

With the markets being closed for Easter, it will be a nice break away from the madness. We Christians celebrate the Resurrection of the Lord Jesus Christ from the grave as the evidence that His sacrifice for our sins was accepted and that they are now atoned for. We also believe that the resurrection is proof that Jesus was who He said He was, namely the Son of God. For those who believe, it is a glorious message!

"I am the resurrection and the life; he who believes in Me, shall live, even if he dies."   ( John 11:25).

Happy Easter! 

29 comments:

  1. Happy Easter Dan and All followers!!!
    HUBERT, Keep those posts coming.. thanks to you!!!!

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  2. Amen, brother in Christ... It seems that those who are strong enough to observe and witness the evil that runs the world are those whose faith in Jesus is the most hardened. It is galvanized and unshakable.

    I just hope that the patience of the saints is not worn out, as this evil will continue for a long time to come.

    Keep your physical hedged!

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  3. Happy Easter, & Passover to you, all. Enjoy the break until we meet back next week.

    ReplyDelete
  4. http://2.bp.blogspot.com/-6lIa7BRpW7Y/U09EU2wMnvI/AAAAAAAAzEA/bvKXw_jNoeM/s1600/gold2014.gif

    Chart I found on jesse's blog. What do you make of this?

    ReplyDelete
    Replies
    1. I find that interesting, as Tuesday is the cutoff for the COT.

      Delete
  5. Hi Dan,
    Your thoughts seem to be right on the money. I heard an interview with Pierre Lassonde this week. A very clear thinking and realistic gold guy. He thinks gold will be range bound for a long time without inflation. He does however think there is a floor under the gold price at 1250 where the Chinese will step in and buy in mass. Of course he does not rule out a lower price down near the old low but he feels gold will be in range under 1400 to 1180 or so. Do you find that realistic? Or do you think we are headed to 1000 or so.

    ReplyDelete
    Replies
    1. Concord,
      That's the question that everybody and their brother is trying to figure out. Since your question is about the price of gold in US dollar terms I would like to throw in my two cents. I would argue that the dollar is going to strengthen substantially higher than most people can even imagine. Since 1985 the US dollar has lost about half of it's value from the peak and the amount of dollar shorts are staggering. I think the dollar could break back above 100 with the amount of bearishness and world turmoil we are facing. That would send gold priced in US dollars below 1000.00, but gold would be going higher in other currencies especially the EURO. Until gold is going higher in ALL currencies it's not in a bull market. With that being said, gold will start the next phase of it's bull market after we have a complete washout in bullish sentiment with the presstitutes calling for 600.00 gold etc. This is the best thing that can happen for people who are looking for gold to make new highs as this will wash out the weak hands more than likely for good. Nobody knows for sure whats going to happen in the future as you already know. People on this blog probably thought I was a bear. I'm a huge bull on gold longer term, but the weakness in gold priced in US dollars right now is just a product of deflation. Again, this is just my opinion and I doubt that Trader Dan with agree with anything I've said. lol I value his opinion more than mine anyways!

      Delete
    2. "Do you find that realistic? Or do you think we are headed to 1000 or so."
      Concord, Dan will correct me if he thinks I'm answering wrong, but imho whatever he wrote, he didn't convince you yet that this is not how trading works.
      It's not a chess game where you are going to guess the price moves 5 moves in advance.
      You take moves one move at a time.
      Dan explained not so long ago that gold prices are rangebound between 1200 and 1400, which answers your first question.
      Wherever it goes after that is therefore anyone's guess.
      A trader doesn't try to anticipate which way gold is going to break through from the range, up or down.
      A trader detects where are the borders of the range, then monitors prices when prices get in contact with them, and observes what is happening in order to make a decision.
      It is not now that prices are oscillating in the middle of the range that a trader will tell you which way it is going to go afterwards.
      You don't understand what trading is about.
      Trading is not about making predictions.
      Leave that to newsletters (and Socrate lol).

      Delete
    3. P.S : what is going to make you win money in trading is NOT about guessing where prices will go.
      You MUST understand that concept, and that a trader (just as anyone else) has no idea where prices will go.
      This is not the point of technical analysis.
      The whole point of technical analysis is to :
      - detect the moment you will get into the market with a close stop loss with enough odds not to be stopped and a good risk reward ratio
      - good money management and knowing when to get out, based on indicators as well, such as the weakening strength of a trend on shorter time units, etc, etc...
      - understanding which time unit you are in. If you trade long term, then the answer is clear : don't trade now based on the range, because gold is rangebound, i.e without direction, and noone can tell you which way it will go for sure. Noone. I remember Dan admitting this as well. You will then wait for gold to reach one of those borders, or of course, you will watch smaller time units, as daily time unit, or even 4hours time unit, in order to try to trade earlier, based on other chart supports and resistances, which is for example what I'm doing now (i.e support area at 1280, upwards pitchfork on the 2day timescale, etc...). I don't care where gold prices will go. The only important thing would be to check the general trend of the longer time unit to see that you are in the direction of the longer trend...as this trend is rangebound i.e no direction...it's not really important to be bull or bear now. More important is to make sure you get into the market with minimal risk on your money, minimal loss if you are wrong with your trade, make sure that your trade quickly becomes a Win or No Lose bet.

      Delete
    4. Hubert,
      Thanks for those very incisive comments on trading. I rarely trade as you can tell in gold but since I have core holdings am concerned if a big downdraft is coming. The scenarios that have been circulated about with crazy upsides and downsides certainly speak to the rational view of your fact that rangebound is what we are. Thanks again Hubert. Happy Easter as well.

      Delete
    5. Concord, Hubert, John;

      I could not have said it any better than Hubert did.

      One can have an opinion on what they think a market might do - there is nothing wrong with that - we all have our ideas - however, but this is key - you have to be willing to subordinate that to the larger view of the market.

      Barring any sort of extraneous event, it is difficult for me to see gold breaking upward in a strong, sustained trending move, but who knows what the future might bring us. We have to respond to market price action. If it happens - it happens. If it does not; it does not.

      As far as downside goes, generally speaking, once a commodity moves down to levels that are near the cost of production, the supply tends to dry up. After a while, the balance between demand and supply then shifts in favor of demand and the price will begin a slow rise.

      The problem with markets however is that no one knows how far below the cost of production they might fall or exactly how long price could remain there. From a trader's perspective, or from even an investor's perspective, the length of time that money is tied up in that investment is lost opportunity cost that the money could otherwise be invested elsewhere making some return for you.

      This is the reason why I believe one needs to monitor technical price charts and not stick with absolute price prediction levels. If a support level gives way on the downside, price is going to fall lower until it reaches a level that buyers feel represents value. If enough buyers feel the same way, then the market will bottom.

      I can tell you one thing from painful experience - buying into a market because one feels it is "cheap" or selling into it because one feels the price is "expensive" is not wise. "Cheap" and "Expensive" are relative terms and will change as the market sentiment changes. Let the market define these things for you and you will be better off.

      Happy Easter

      Delete
  6. I share your thoughts on Easter so in the spirit of the weekend....Happy Easter Dan.

    ReplyDelete
    Replies
    1. That a boy Got It Right!! Civility

      Delete
    2. Got it Right;

      Same to you as well. Thanks!
      Dan

      Delete
  7. Shortly after the Shanghai gold market closed last night, the market manipulators went to work on the gold price.    Gold was taken down another $20 during the morning trading in London, primarily in three HFT trading induced “mini flash crashes.”  There were not any related news reports or events that would have triggered the relentless selling of paper gold (Comex futures via the Globex system and LBMA forward contracts).As soon as the Comex floor trading opened at 8:20 a.m. EST, nearly 4,000 contracts were dropped instantaneously onto the floor and into the Globex system.  This is over a half a billion dollars worth of gold – over 10 tonnes of paper gold – in a nano-second.    This amount represents 47% of the amount of actual physical gold that was reported to be available for delivery by the Comex yesterday.   The sudden burst in volume halted the Comex computer system for 10 seconds.   The contract bomb caused an immediate $16 plunge in the price of gold.   Over a period of 7 minutes from the time the Comex opened, over 14,000 contracts traded.   This represented over 18% of the total volume in Comex contracts that had traded in the previous 14 hours of trading starting at 6 p.m. EST the night before.Obviously this is was intentional and determined selling  of paper gold for the purposes of driving the price a lot lower.  The news reported over the last 24 hours, if anything, should have caused the price of gold to move higher.   This includes the re-escalation of the events in Ukraine, an inflation report released this morning which showed that the rate of inflation in March was double the rate that was expected by Wall Street forecasters and a report of manufacturing activity in the northeast which was significantly  lower than expected.It is no coincidence that today is the anniversary date of last year’s $200 price plunge in gold.  In fact, about a week prior to last year’s intervention operation, a series of bearish articles and Wall Street analyst reports started hitting the newswires, similar to the flurry of news reports that were released last night.   It is painfully obvious to anyone paying attention that there is a serious effort being conducted by the Fed, the U.S. Government and the big banks to hold down the price of gold.The reason for this is that the U.S. Government is growing more desperate by the day to prop up the stock market and the U.S. dollar.  Russia and China have been announcing a series of deals between each other and with several other large trading partners to begin conducting oil and gas trade using their respective currencies, thereby completely bypassing the use of the U.S. dollar.  It is clear that far and middle eastern countries are working to systematically scale down and phase out the world’s reliance on the U.S. dollar and the catastrophic political and economic policies it represents.

    Investment Research Dynamics

    ReplyDelete
    Replies
    1. Jasa, you do know that you just posted absolute propaganda?

      Delete
    2. Jasa,

      . . . .and infringed on someone's copyrights.

      Delete
    3. Thanks John Taylor for your comments on gold. I am still sorting out the downside which I think will be with us for the next two months.

      Delete
    4. jasa;

      Volume in commodity futures - every single one of them - ALWAYS spikes at the opening of the pit session and near the close of the pit session. It is not something unique to gold.

      In regards to those comparisons made about the amount of gold in relation to deliverable supply, my comment is very simple - "SO WHAT?"

      The number varies by most in the industry will tell you that the number of contracts actually delivered in a commodity futures markets tends to be in the vicinity of 3% or less of the total open interest.

      Delete
  8. S&P shoots higher like a missile. Market reminds me of cattle suffering from BSE.


    Creutzfeldt–Jakob disease (/ˈkrɔɪtsfɛlt ˈjɑːkoʊb/kroits-felt yah-kohb)[1] or CJD is a degenerative neurological disorder that is incurable and invariably fatal.[2] CJD is at times called a human form of mad cow disease (bovine spongiform encephalopathy or BSE).[3] However, given that BSE is believed to be the cause of variant Creutzfeldt–Jakob (vCJD) disease in humans, the two are often confused.[4]

    Happy Easter

    ReplyDelete
  9. Happy Easter to everyone.
    Let it be the occasion to remember some of Jesus teachings and try to apply them best we can.
    Have a nice weekend,

    ReplyDelete
  10. Dan,could you comment on nat gas and lean hogs?

    ReplyDelete
  11. Where's Mark?

    Maybe he's on the patio BBQing a rabbit for Easter dinner.

    Happy holiday weekend all!

    ReplyDelete
  12. I look forward to the day we will walk streets of gold and have no concern what the price of it is :) The price has been paid !

    Happy Easter to everyone !

    ReplyDelete
  13. To Dan, Hubert, Mark, Concord, Taylor and everyone else, a Happy Easter! Sparks

    ReplyDelete
  14. jasa, I reworked your post for you......

    Shortly after the Shanghai gold market closed last night, it was evident that ES futures would be higher the next morning, so hedge funds immediately dumped gold as a safe haven to prepare to buy U.S. stocks.

    Gold was taken down another $20 during the morning trading in London, primarily in three HFT trading induced “mini flash crashes.” There were not any related news reports or events that would have triggered the relentless selling of paper gold, other than the fantastic opportunity to buy U.S. stocks such as SanDisk and Micron which announced stellar earnings.

    As soon as the Comex floor trading opened at 8:20 a.m. EST, nearly 4,000 contracts were dropped instantaneously onto the floor and into the Globex system. This is over a half a billion dollars worth of gold – over 10 tonnes of paper gold – in a nano-second. This amount represents 47% of the amount of actual physical gold that was reported to be available for delivery by the Comex yesterday. The sudden burst in volume halted the Comex computer system for 10 seconds. The contract bomb caused an immediate $16 plunge in the price of gold, as speculators needed to raise more cash to participate in the coming buying orgy in U.S. common stocks when the NYSE opened.

    The news reported over the last 24 hours, if anything, should have caused the price of gold to move higher. This includes the re-escalation of the events in Ukraine, an inflation report released this morning which showed that the rate of inflation in March was double the rate that was expected by Wall Street forecasters and a report of manufacturing activity in the northeast which was significantly lower than expected.

    However, investors were willing to ignore such news as the re-opening of Ukraine will usher in 500 new Starbucks, 300 new Chipotle restaurants, and 200 new Buffalo Wild Wing sports centers which will create a huge economic boom in Eastern Europe.

    It is no coincidence that today is the anniversary date of last year’s $200 price plunge in gold. In fact, about a week prior to last year’s intervention operation, a series of bearish articles and Wall Street analyst reports started hitting the newswires, similar to the flurry of news reports that were released last night. It is painfully obvious to anyone that gold is now in a bear market and global stock markets are in the midst of one of the greatest secular bulls in history.

    Russia and China have been announcing a series of deals between each other and with several other large trading partners to begin conducting oil and gas trade using their different currencies, however no currency will ever be able to replace the mighty U.S. Dollar.

    It is clear that far and middle eastern countries are working to systematically scale down the reliance on the U.S. dollar since the global economic boom unfolding necessitates the need to carry a wide range of currencies with which to conduct trade.

    ReplyDelete
    Replies
    1. Good stuff Mark.
      I know there's a lot of folks on your case because they think your a gold bear and lover of paper markets etc.

      I'd ask everyone to merely CONSIDER the oppositional or objective words of others while not necessarily EMBRACING their words (at all) but to at least consider them and balance them against what you think you know for sure...but MORE importantly...to consider some views (and results) out of your comfort zone.

      Take Martin Armstrong for example...I follow him but I don't automatically super impose his views as becoming my outlook in a "all or nothing" take it or leave it critique of his thoughts.

      No matter which way a person leans idealogically they need to keep abreast of their personal opposite view point (and results...or lack thereof) if they're primary goal is to correctly read between the lines and various viewpoints.
      As always, the truth or trend usually lies somewhere inbetween.

      Looking at things from all angles ensures a rounded/balanced view.
      Eliminating contrarian views (because they're uncomfortable) is what small-minded limited individuals engage in.

      This is not a total endorsement of Mark but he's got some good views and to be comfortably honest with myself I'd be a hell of a lot wealthier if I'd have played and trusted (yes...trusted!) the markets and played them and made lots of paper profits
      Let's face it...as much as some folks despise, distrust or bemoan paper they likely in reality wish they had much, much more of it in their bank accounts.

      A classic example of uncomfortable contrarian views and real life monetary needs that cuts to the core of the matter in the present tense.


      Delete
  15. Just reviewing base metals prices for 1 year period. Don't know what to make of the divergence. Can't be just the China affect said to be pushing Dr Copper.

    ReplyDelete
  16. I mentioned earlier in the week about increased troop movements in Poland and Romania.
    Both Russia and US/NATO can say whatever they want and agree to whatever "deals" that are nothing more then meaningless diplomatic feints while tactical and strategic decisions paint a different picture.
    An increase in US Naval assets in the Black and Mediterranean Sea (off Syria) seems likely. Look for US "TOW missiles and other advanced armaments) in Syria to start making a difference in a civil (US propagated) war that at some point essentially pits US interests directly against Russian/Iranian interests more or less.

    The diplomats can say what they want or need to say but actions speak louder then words. Listening to Putin answer a question from Snowden is a Twilight Zone Moment to be sure. The level of disinformation and propaganda and diplomatic-speak is thick like one would expect in a pivotal moment in hstory that is about to be written.

    Actions louder then words...

    ~¤~¤~¤~¤~¤~¤~¤~¤~¤~¤~¤~¤~¤~¤~¤~¤~¤~

    De-Escalation Off: US Deploys Troops To Poland


    Submitted by Tyler Durden on 04/18/2014 - 17:59

    So what part of "All sides must refrain from any violence, intimidation or provocative actions," did the US not understand when they decided that deploying troops to Poland was in keeping with the four-party deal? As WaPo reports, Poland and the United States will announce next week the deployment of U.S. ground forces to Poland as part of an expansion of NATO presence in Central and Eastern Europe in response to events in Ukraine. As a reminder, we noted in December, Russia's placement of tactical nuclear-capable weapons near the Polish border which at the time sent a very clear message of escalation (despite the, at the time, lack of New Cold War headlines).

    ZeroHedge.com

    ReplyDelete

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