“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 3, 2014

Gold Oscillating around a Key Pivot Point

I have mentioned and illustrated how I believe the $1280 level is a key level for the gold market as both sides ( bull and bear ) attempt to ascertain the next move for the yellow metal. See those previous posts for more particulars.

Suffice it to say that most players were unwilling to press their case very hard ahead of a crucial employment report tomorrow morning. All I can say is that it is going to be another one of those "Friday's" in which we can expect to see some fairly wild price action if it is going to be like the previous Fridays on which we have gotten the jobs number from the feds.

There is no sense in posting much of anything up for now until we get that report out of the way and see how the market responds. My own thinking is if the number comes out close to 200K or above, gold will react negatively as the Dollar will probably move higher. The reason - the market will regard the previous employment numbers, that were very disappointing, as being more a function of the severely cold weather during January and February rather than the beginning of a trend which would cause the Federal Reserve to scale back its tapering plans.

I am taking the various Fed governors' at their words, which seem to have been pretty consistent with one another for a change, that it is going to be a high bar to induce the Fed not to procede with their current tapering plans.

When I look at the inflation numbers coming out of the Euro zone ( which are well below the 2% target that the ECB has acknowledged it would like to see ), it occurs to me that a stronger jobs number will feed into the sentiment that higher rates are on tap here in the US long before they will be for the Euro zone. That should, in a normal world, tend to support the Dollar at the expense of the Euro.

The flip side is if we get a much weaker than anticipated jobs number. In that case, we would expect to see the Dollar weaken somewhat and gold move higher as traders would then begin to doubt the Fed's stated intention to taper anywhere near the extent to which is already in the market.

In other words, it will take some sort of strong negative surprise on the employment front to shift the current mindset that the poor numbers the first two months of this year were due a large extent to the inclement and record setting cold weather. If we were to get such a thing, traders might begin to believe that a trend towards weaker hiring is underway and that would be enough to halt any upward movement in the Dollar.

We shall see what we get tomorrow. One thing I can guarantee is that the HFT crowd will be making lots of money off of the rest of us. They are the human equivalent of spotted deer ticks.

23 comments:

  1. Sorry GoldBugs but Hershey Chocolate has you beat! Quote from Porter Stansberry a number of years ago:

    "But the truth of the matter is that equity offers you a hedge against inflation as well because the company's earnings and the company's assets will continue to grow in price along with inflation. In theory, dividends also should increase to match inflation. The case study here is the share price of The Hershey Company (NYSE:HSY). I have studied the price of chocolate and Hershey's bars over the last 70–80 years. Hershey went public in 1926; so, it offers a really nice template to see how changing rates of inflation and even periods of financial catastrophe such as The Great Depression affect a blue chip stock. The answer was really fun; it turns out that chocolate is a slightly better hedge against inflation than even gold. So, the world's leading branded maker of chocolate did quite well, thank you, and there are plenty of other examples from businesses of all stripes. Companies that have a good competitive position can typically raise prices as much as inflation, or more."

    Bernanke is right, Gold is for tail-risk only. M. Armstrong is right, Gold is a hedge against government not Inflation! It is Insurance and nothing more. I used to be in the Gold Cult, get over it!!! See you at $850/950 Gold bottom in the next 3-9 months.

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    1. Bob you left out..."you can't eat gold"...so I guess you will just have to munch on chocolate....and if gold does go to 950 or lower...you and everyone else will be eating...'chow mein'...as the east will rule the day

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  2. Thanks Dan. Like you said, tough to say what the jobs number might be.
    I think the seasonal nature of some types of employment (construction, farming etc.) might yield a palatable number the market won't overreact to.

    It appears the longer gold consolidates around $1280-ish without really threatening or breaching $1300 the more likely we head a bit lower incrementally. Of course, everything can change in a blink due to some geopolitical noise (or maybe a loud boom!) somewhere.

    As much as I'd love to see gold and silver zip much higher the action in them appears tepid despite the fact we recently had some currency war-like US/Russian banking salvos occur that didn't really seem to energize the metals in a meaningful way.
    We also had a multi-billion dollar trade deal announced between Russia/Iran that bypassed the USD not to mention a mini Chinese stimulus measure announced today that didn't provide a boost either.
    The USD and UST is far from dead and the prices of of oil and gold kind of reflect at this point. Gold needs something to snap it out of it's lethargy into $1300 territory soon and then $1320 or it's headed towards $1250 and eventually a retest of $1200 again.

    One major headline could change everything quickly. I'm not so sure Friday's jobs number will be that headline making market mover. Given this weeks boring sideways metals price movement I don't expect anything eye-opening to come from tomorrow's number.

    I now await Mark's daily rundown on what equities hit new high's today. };^)

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  3. the perma bull pumpers will never tell you the truth of the matter and that is that gold is the best performing for the most part, in deflation, BUT, that in inflationary times, it is a second stringer, lying on the bench and gathering splinters until the last stage of the cycle and then finally kicking in; stks, real estate, your career and family will outshine the yellow metal folks; sparks

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    3. I deleted my previous comments because I really don't want to get into a pointless argument on this board. Let me just say this though.... when the currency dies, and it is going to, none of those paper stocks you hold are going to be worth squat.

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    4. Just keep in mind people have been calling the death of the dollar since the 1970's - and some still holding their gold since then.

      Armstrong's forecast doesn't call for this till 2032.

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    5. Elijah...some people have been calling for the death of the dollar since the Fed was created in 1913...and then those same folks saw the Gold Act decreed upon! :-P

      The death of the USD is overblown and somewhat of a false flag rallying point among americans it appears. Loose monetary policy is never a good thing but by all appearances it's been going on for decades if not more then a century in the U.S. and probably in most developed nations as well.
      The same folks who rub their hands together over the evils of paper US money seem to have no aversion being paid in or spending USD paper money in everyday life. Truth be told, most folks would love to have wayyy more of it if it were possible to acquire it quickly.

      The same antagonizers of paper money don't appear to have any real aversion to using or accepting electronic payment transfers either. I guess it's easier to have disdain for fiat paper then it is to dislike electronic digits that represent the same thing that most of us use.

      The point being...if you're holding gold or silver (or equities) it's more then likely you hope it appreciates greatly (code for=skyrockets!) in price so that you can sell it and redeem it for (but not always)....paper money or an electronic bank credit.

      At some point I'll have no qualms doing just that or I'll pass the sacks of my shiny precious to my children...who'll probably cash them in at some point for fiat or electronic digits within a banking system....unless they decide to get a large and heavy personal safe....like dad. }:^)

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    6. DPH, please show me one fiat currency that has ever survived throughout history. I'll wait patiently for your answer.

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    7. Adam....none.
      Don't mistake my belief the USD will be around longer then most think as opposed to it'll be around forever. It won't.

      What I'm saying is that another 20, 30 or 50 years (or more) of relative USD strength and importance (not outright domination) is totally possible and even more so in an increasing electronic banking age that we're actually just starting to fully enter into.

      The so-called "pig" has more life left in it then some are comfortable expressing for some reason. Might it be that a sick or dying "pig" was their original basis of contention that a weak or dead USD meant gold would rise in price significantly as a result?
      That hasn't exactly panned out....but that's because of constant manipulation we're told. Was it manipulation when gold hit $1900 (and no one complained) because TPTB suposedly lost control of something they previously controlled for decades upon decades?
      That doesn't seem logical if viewed objectively instead of the usual blind eye when price rises. Funny how that works.

      (sarc on) You see....when price rises it's due to some imaginery skirmish between forces of right and moral conviction vs. evil fiat printing bankers etc who are waging life and death war against all of humanity blah, blah, blah. (sarc off)

      Ridiculous, right? Yep, about as ridiculous as the repetitive spy novel-like assertions that paint everything in good vs. evil terms that more or less prefer to paint a picture of victimization or prosecution by higher more powerful organizations.

      After awhile you can't help but tire of the incessant underdog/serf self-victimization aspect that some parts of the blogosphere afix all kinds of reasons to blame others for their perceived inability to not have more money....paper or electronic money btw.

      The soon to be death of the USD is overblown and it's been trumpeted a long time. Like 20, 30, 50 years long or longer maybe?
      We're in a new age electronic banking age. Comparisons in history to other fiat currencies are irrelevant because the monetary base was much,much smaller and international large scale frequent trade between countries wasn't part the equation then like economies and markets are today.
      Forty years and out, as far as fiat currencies go, is far from a certainty regarding the USD especially in the increasing electronic banking age we're headed further into.

      I could be wrong. Nothing is forever and time will tell but I don't get the sense amything imminent is upon us despite reading that very same mantra over and over.


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  4. "They are the human equivalent of spotted deer ticks."

    Amen Dan. If we only had more people like you on the net helping to open the eyes of the masses. I know it can be lonely being one of a very few people willing to tell the truth in dark days like today. You are one of my favorite commentators and one of the few truth tellers. Keep up the great work brother.

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  5. But wait a minute.....

    The financial markets are going to implode. Any minute now!

    And gold is going to skyrocket!

    Don't worry if your mining stocks are down 75% in 2 years. Just hang on!

    Gotta be in it to win it!

    Those guys who rode Green Mountain Coffee up from $54 to $110 in just 4 months are going to get slaughtered!!!

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  6. Thought id share this clip from Kitco. He gives his perspective on manipulation via HFT...

    http://youtu.be/h6HaZ_Y9UI4

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  7. Stocks soaring to new highs while gold is punched in the face again.

    As I predicted, the economy is booming. The riskiest stocks like Micron and Sandisk are flying today in anticipation of the fabled 2nd half v-shaped recovery.

    Stay in the System.

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    1. Mark,

      How is gold punched in the face? It is up $17+ as I write.

      BTW, I sold all my MNKD because of your recommendation so you better be right about the technicals.

      Just kidding! that would be like shooting myself in the face.

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  8. yellen at the FOMC hawkish , then yellen dovish a few days ago , then bullard hawkish , now dragui dovish … so much for consistency ….

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  9. It is a circle of wealth...everyone is doing great. No issues at all just let all the central bank's print our way to prosperity. Never worked...Never will. Keep cheer leading for those high paying jobs we are creating. Meanwhile incomes dropping, welfare, food stamps, and debt increasing. Go Mark!!!! Are you wearing a shorter cheerleading skirt for your daddy Obama, or doing cheers for the FED today?

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  10. Gold's daily ma20 is heading down, so my first target to sell 1/3 of my long 1280 position is close to that level.

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  11. http://www.ebay.com/itm/121290158951?ssPageName=STRK:MEWAX:BIN&_trksid=p3984.m1423.l2650

    Buy before the price is raised from $229 !

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  12. It used to be fun coming here until the scum from Turd Island started washing up on shore.

    g'bye

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