“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, May 1, 2014

Gold Flirting with Dangerous Chart Support

Gold has once again fallen into a support region on the charts which continues to gain in importance as it is being tested yet again. The more it is tested, the greater the chance of it breaking for each test begins with the top side of the range moving lower, first from near $1400, then from just above $1320 and most recently from slightly above the $1300 level. Resistance is moving lower and lower but thus far the $1280 level has held.

Bulls have their backs up against the proverbial wall therefore as we head into tomorrow's big payrolls number report. Any strong number is going to break their backs. If the number comes in weak, they will have dodged a bullet yet once more.

Were it not for this report due out tomorrow, I do not believe $1280 would have held today. Bears are reluctant to press it further due to the volatile nature of these recent jobs reports. They do not want to take the chance of getting blindsided by another miserable number. Bulls however are in serious trouble if the number is strong as that will remove yet another leg of support under their already wobbly stool.

Out of all the economic data releases that regularly hit the market, these payroll reports are the most important and most illuminating. Ultimately the health of the economy depends more on the number of people working that anything else in my view. Given the Fed's rather optimistic reading of the economy in the FOMC statement yesterday ( remember, they blamed the weather for the poor showing ), anything that confirms an improvement on the labor front will be viewed as confirmation that the QE program is on track to be phased out entirely before this year is out.

In looking at the chart, note that gold has not yet had a CLOSE below $1280 since February. It has closed right at that level or just barely above it, but has always managed to bounce higher. A good part of this has been due to geopolitical concerns involving the Ukranian situation. While that factor remains in play, it seems to be fading from traders' minds as the turmoil looks to remain localized in that region ( for now ). That makes tomorrow's report all the more critical to gold's fortunes moving ahead.



Let's see what we will get.

Grains are weaker again today as those weather forecasts look much more conducive to planting prospects this weekend and into next week. Also, soybean export sales were terrible as the high prices appear to be doing their work at rationing demand. Funds are big longs in both the corn and beans so this will bear watching. Thus far they have been buying dips and keeping prices supported but if their computers shift into sell mode, watch out. Again, this has not yet happened however as the pattern of late has been for them to come charging back in just ahead of the closing bell. We'll see if that is the case today or not.

New crop December corn seems to have run into a temporary wall just shy of the $5.20 level. New crop November beans have done the same near $12.50.

Currencies are rather subdued today  - again, I suspect this is due to the upcoming payrolls report tomorrow. No one wants to get too aggressive ahead of it.

Some good news, at least for consumers and some businesses, gasoline prices have fallen back below the $3.00 level wholesale. They have lost almost $0.20 over the last week. We should see a bit of relief showing up the pump shortly as a result.

26 comments:

  1. Me tomorrow morning:
    https://www.youtube.com/watch?v=AvK0muhdTf0

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  2. GLD took another hit down 5 tonnes to 787 tonnes. Gold held support today currently at 1284. To me, the interesting aspect of tomorrow jobs report will be if we get a strong report and what gold's reaction will be. Initially I'm sure it will drop through 1278, but will it reverse,as it did last Thursday. Again as I stated yesterday, if Ukraine wasn't an issue, no doubt it stay below 1278. But the interesting thing about today is the 10 year bond. The yield is down to 2.60%. Is there buying of the 10 year a safe haven play, or is it the economy getting weaker. Bottom line: many cross currents, and I don't profess to know the answers. Hopefully tomorrow, to some extent will clarify.

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    1. BOBBO, it's never going to clarify. Current environment dictates that markets are doomed to repeat an endless cycle of waiting for that next piece of news/data report/announcement for clarification (lol)

      Delete
    2. ALICE,

      Strong jobs report doesn't clarify anything, as I think the supposed strong economy is a mirage. But a weak jobs number does mean something. It means I don't have to hear CNBC endlessly talk about how the bad weather is to blame for everything economic. That would make me happy.

      Delete
  3. Thanks Dan.
    My guess would be similar to yours in that the jobs report tomorrow is just good enough to support the FOMC/Taper meme going on and that the jobs report statistics will keep gold (and silver) in check not withstanding some other external news driven event.

    It's not just gold (or silver) that are flirting with critical support levels. Some or most of the pundits out there who recently (and forever!) began again to pump silver and gold (and the miners, of course) are on the cusp of losing any shred of believable credibilty they ever had. Especially so in silver.

    Einstein reportedly said that the detinition of insanity is doing the same thing over and over and expecting a different result. While falling far short of insanity what does it say about those who continue to adamently repeat the same tired mantra over and over and over again (while price and sentiment) have steadily and obviously eroded over the past 3 years.

    On this date today, 3 years after the May Massacre we still have no shortage of hucksters still clinging desperately and sadly to some obsessive (or intentionally misleading) form of reasoning that they're convinced (deluded) is the reason why metals today are trading like they are.
    Never mind though that just previous to or after the FOMC that they anticipated something much different then what transpired in the metals overnight.

    The PM revisionists out there are now claiming they understand what happened and why blah, blah, blah etc.
    How convenient (and preposterous) is that? These same prognosticators who simply yearn/need to be correct about all that they see as wrong are nothing more than hindsighted revisionists who are making it up (and excuses) as they go along hoping no one calls them out on their obvious BS de'jour.

    Anyone making claims of being certain about these markets and their movements and the specific reasons why they react so (in hindsight) must also believe to some degree they possess some special knowledge or insight that few others do is walking along a fine line within Einsteins assertion.

    When the ability or desire to remain objective is completely absent in the face of pretty overwhelming and obvious trends one of the conclusions that might be drawn is that the advice or belief system being pushed upon you is unbalanced and what essentially amounts to noise.

    There's no shortage of it among the pumpers or PM evangelists out there who more or less have replaced FEELINGS with FACT. When you read people tell you they're correct without giving a reason why other then they just KNOW they're right (because they can just FEEL it) you eventually realize you've allowed yourself to some degree to become entangled in someone's elaborate yet simplistic fantasyland (or their subscription newsletter or website).



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    1. Actually I think by the tone of your remarks that it is you that resides in fantasy land, have you encountered the facts outside of your chart analysis? Gold and the mining stocks are cheaper than they have ever been in relation to production costs, see my post below for the numbers.

      I would presume that I would find some dollar supporters here, let me ask, what has the dollar done over the last 14 years? In 2001 the DXY was 120, now it's 79.50, likely soon to be 75 - 72 over the next year or so as Asia diversifies away from the dollar (see China's remarks as to whose side they are choosing in the new Russia cold war 2.0). The days of dollar dominance are over, Asia likes the shiny metals, and they could care less about the leveraged 100:1 comex price scam, they'll just keep buying.

      The leverage in the system is going to implode, it's not long in coming.

      Delete
  4. Silver hit 18.60 today.
    Whether you think it's following rather gold or rather copper...what a bad, bad performance on this particular metal...and gold to silver ratio still up near 68.
    That doesn't sound very bullish for PMs to me... silver bugs must be devastated.

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    1. They'll probably rest their next hope on that low 18.xx figure hit in the end of June last year to be a double bottom that holds.

      Delete
    2. Oh! Meanwhile, Bo Polny who "forecasted" that you would NEVER see 19 $ EVER again on silver (lol!! what do you have to say about that one, Bo?), keeps advertising in a "different way" on his banners.

      No, I can't accept anymore that one supports or advertises for this guy after that. He proved himself being wrong much more often than right. But still is asking for tremendous fees for his "magic" hints and newsletters.
      Noone will tell this guy for what he is? A crook.
      Good people with minimum brains can rely on Dan's blog in those hard times.

      Delete
    3. Hey for 20.000 dollar bo will predict the next 12 out of 1 bottom for you.

      The longer i look at this the more i start to believe jim is trying to do as much damage to as many people as possible on purpose.

      Whem something appears too stupid to be true it generaly isnt and jim is a very smart man. He knows what he is doing to people.

      Delete
    4. yes but the subscribers to bopol ny's newsletter's are extremely happy with his forecasts of sub 20 silver.

      Delete
    5. So how low will silver go? 20% below production costs? 50%? 80%? Please do tell, the mining executives of the world would like to know.

      Cheers

      Delete
  5. Oh, Alice, you are so right. We'll visit the low 18's, or 17.99 and on the first dead cat bounce we'll see another whole tsunami of articles about how the "massive double bottom" is a lock dead cinch to hold and be "THE BOTTOM", even though they spend all their other time savaging technical analysis as being worthless in a world of rampant criminal manipulation.

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    1. They've become so predictable, haven't they..you've really taken note of their contradictions (lol)

      If 18 is not meant to hold, what happens after the dead cat bounce, or if it rips past 17.99 without even giving one, on its way to lower levels? A tsunami of articles, videos, and banners on "the bargain of a lifetime?"

      I've been suspicious for quite some time now that the real bottom is inversely related to the presence of this group, meaning the lasting long term bottom will not be seen until they cease this nonsense. Meaning the "to the moon" rocket ride will happen WITHOUT them, after they've already given up, like an architects-of-their-own-demise sort of thing. I'm not saying they are the cause of the bear trend, rather just a symptom/indicator of it.

      Delete
    2. This blog is just seething with gold hate! I think it's the shorts that are on the ropes, not the bulls, the story told by 'Trader Dan' is very comforting for the short crowd, of which he is surely a member (he's just talking his book). 'Trader Dan' has been wrong as much as he's been right, as far as my research on his gold calls going back several years. Lets deal with the facts here:

      The average cost to mine gold is approx. $1000 - $1150 all in costs, for some miners it's higher, for a few (very few) it is lower. At prices where they are today a great many companies are losing money even after shutting down unproductive mines, cutting back exploration (not a good idea for future production), and trimming or removing dividends. Historically the price of gold, and this is the average price of gold in relation to production costs going back 100 years, is 1.8x-2.4x times production cost, that would peg gold at $2300 on the low end and $3100 on the high end, right now.

      Considering the huge number of shorts in the gold and silver market, the leverage in the stock markets, the global turmoil whether it be Ukraine, the banking system, the contracting economy, or the oil price stuck over $100 indefinitely, the risk in the markets is probably greater than ever, yet gold trades at 1.1x-1.2x its production costs?

      The rate of consumption of gold and silver right now is higher than it has EVER been, and production has peaked as of last year with no real huge discoveries for quite awhile and exploration being cut. In the silver market coins and bar consumption is almost 25% of yearly production and this for a so-called industrial metal! The move by U.S interests to have India restrict gold imports is a move based on fear of losing control and nothing else, they are desperate to keep the U.S dollar above .80 and they are having one hell of a time let me tell you.

      To consider the number of shorts in the gold mining sector at these unbelievably low prices (the lowest ever in history based on production costs) the shorts are just asking to get badly mangled. The Japanese are buying gold to protect against monetary devaluation, the Chinese are buying , eastern central banks are buying (China alone consume 100% + of yearly world production), Russia is buying, the Indian people WANT to buy, and gold is going down?

      I respect the viewpoint of a 'trader', but this scenario of gold being over-valued is simply ridiculous, and though the shorts may have their way one more time down to $1180, the real investors will punish the shorts as they refuse to sell into perceived weakness.

      While I agree that many gold bugs have been wrong, it's little fault of their own, nobody can guess at when a monkey hammer will come down against the fundamentals, the market doesn't have to make sense, it is irrational, but it can't escape reality forever, and the shorts will find that out the hard way that the pain they inflicted on gold and silver investors over the past few years will come back and bite their asses. All it takes is ONE black swan event, and the shorts are crucified. The downside risk to gold is minimal unless we like having a world with no mining companies, but the upside to the 100 year norm is like a coiled spring.

      Cheers

      Delete
    3. Angelo...I'm not sure I'd call it hatred or anything close to it.

      I'd characterize it more as a "disdain" about the 365/24/7 pompous pumping that's taken place in an increasing extreme manner and attitude that's basically given the gold investing community a huge black eye and a somewhat laughable reputation.

      I have too much gold/silver to be considered a hater. I understand some of the "pro" gold concerns and examples they give.
      But the extreme schools of thoughts and beliefs among some of the blogs borders on twisted and completely biased beliefs that allow no space for any other rationale or it's decried as some type of heresy against them.

      You seem to have an open mind about this. So do I.

      The PM's online community should vocally police itself a little bit if it's to ever regain a shred of respect.
      It's not helpful having various golden rodeo clowns spewing repetitious bottom calling predictions in the face of a 3 year downdraft in market sentiment.

      The charts don't lie. Some of the clowns out there will insist ( month after month/year after year) that it's all going to dramatically reverse itself any day/month/year from now.

      They're all just as clueless about future price direction as I am except I'm not in denial about it or trying to sell my cluelessness as some type of expertise I possess while rudely and immaturely chastising or taunting others who might have a different viewpoint.

      The thin-skinned blog dictators out there who mocked all others who had contrarian views to their own failed to recognize or acknowledge that some of them were spot on.
      Instead, they stuck their head in the sand and assumed a defensive position in their egotistical beliefs that they're smarter then almost everyone out there.

      The hubris out there is suffocating. That's where the disdain comes in.

      The silent/tolerant part of the PM community that chuckles or grimaces at some of the hyperbole out there will eventually realize a small vocal, unbalanced view of thought is helping tarnish the entire community the longer it goes on.

      It's become that absurd imho.

      Delete
    4. Angelo;

      Spoken like a true believer....

      This blog is not about "hating" anything. That is your prejudice coming through. It is about reading the market and letting it be your guide instead of the gurus and charlatans out there.

      when the chart improves and gold begins to look better, I am confident that the blog will be friendly towards gold.

      As far as your thesis about the rate of consumption of gold and silver never having been higher - the market does not agree with you. That is all one needs to know as an investor or a trader. Arguing with it is a losing proposition.

      If gold moves higher, so be it. If it moves lower, so be it. One does not get MARRIED to an investment class. You ought to try to learn this if you wish to be a successful investor down the road.

      I do wish you the best but I especially wish for you to see the light of reality.

      Delete
    5. Dark Purple Haze;

      that is an excellent post and reflects my sentiments exactly. One can own physical gold and yet not be obsessed with it like far too many of these huckster sites have become. One would think, in reading some of them ( which I no longer do ) that the be-all and end-all of human existence is the price of gold. What a pathetic place to be in - to be consumed by the price of a metal element.

      the lack of humility, the hubris, the disdain for others who dare to call the metal charts as they see them, the refusal to admit error are all symptoms of a cultish mentality. Some will never learn. Having sat through a near crash in the gold shares and watched silver evaporate from $50 to below $20 with gold dropping from $1900 to below $1300, one would think that some of the devotees would be at least a bit more realistic and reasoned. Apparently not so. Very, very tragic.

      Delete
    6. Ah condescension, the mark of someone far too smug! I am not a 'believer', I am a value investor, and I do hedge the downside so your remarks are worthless as advice.

      I used the word 'hate' intentionally, please see the comments that run on this blog, there is glee in other's loss, that is a form of hate.

      The market you're talking about, which one is that? The 1 month window market? The 6 month window market? The 1 year window market? The 10 year window market? Which one?

      Value investors make money by buying that which is severely depressed, and depressed is exactly what the mining sector is. To me it's obvious, now it's just a waiting game, I don't mind losing a little to gain a LOT.

      Cheers

      Delete
    7. Angelo;

      I will leave your post up as an example of a true believer.

      Glee in someone else's loss? Are you that damned stupid that you have chosen to completely overlook the severity of the financial damage that those whom you subscribe to have inflicted upon the every day folks who doted upon their every prediction and every prophesy?

      Do you think so little of the pain of others who have watched their life's savings evaporate in the mining shares that you have the audacity to defend the very people who steered them blindly into this sector and then never once issued the least warning but instead claimed every blip higher on the radar screen was evidence that the market was going to turn higher for them any day now? These same people, like yourself, issued one false prediction after another and yet you are unfazed by it all.

      Heaven help us when that which is so obvious to some is hidden from so many such as yourself.

      Good riddance. May you be most happy in your marriage to the yellow metal. Have a nice life.

      How truly saddened I am for you.

      Delete
    8. I hear you DarkPurpleHaze about the gold pumpers, but I should remind everyone that based on historical pricing gold 'should' be at least $2300, so I see why they say what they say. Even those who bought gold at the top, over a 5-10 year window they will be fine, better off than holding USD, that's for sure!

      Delete
    9. Angelo....I'm not so sure of the "should" part.

      Anyone who knows me from tfmr (and there were many) also realizes I still believe that certain inherent market(s) anomalies exist. Call it manipulation, grandfathered position limits etc. but I've always called it "business as normal" after realizing that's just the way it works and probably has been so for many decades.

      Mind you, that doesn't mean I condone or don't give a rats ass about the seemingly unlevel playing field. I simply recognize it for what IT IS and I simply won't bemoan the market structure (or characterize it as evil) because it's not the one I FEEL should be in place.

      The gold/silver manipulation axe-grinders need to learn to trade in the markets that exist and not the one they think should exist. I'm all for "fair" markets but I realize the big money and CB's move the markets based on any number of monetary policies in play at any given time.
      Any expectations that they'll ever be fair or completely above board is a naive hope and just noise. If the regulatory or law enforcement agencies aren't arresting anyone who is allegedly involved in an illegal scheme then what's a person to do?

      The answer: trade the markets you know that exist, not the one you think should exist. Again, I understand the regulatory and law enforcement is lame or non-existent at best (for now) but that's what were stuck with.

      Gold is at $1285 and silver is at $19 today mainly because sentiment and buying suck and the larger and smaller pools of money are looking for consistent and reliable return on their capital outlay. If large western or eastern demand for gold was indeed voracious the resultant overwhelming buying would bring the price up as well as sentiment.

      I kind of get the naked short selling argument being unfair etc. But this is how I see it.
      Like it or not, JPM and others cut a deal long ago that legally allows them that right. Fair or not, that's the way it is for now....and possibly much, much longer.
      The gold/silver crusade going on and all the chest thumping hyperbole is just noise that seems to believe that all their disbelief and moaning about it is going to change it.
      If someone actually believes that the markets they're smitten with are totally and unmercifully manipulated to the downside by some huge, evil international cabal who has successfully managed to totally control those markets it begs the question....why the hell would you even be in those markets anticipating anything else except selling pressure much less believing you somehow can fight and conquer the aforementioned powers that be? That's fantasyland.

      I'm being sarcastic in general but you get the drift. When the gold or silver market (and all it's anomalies) is ready to move upward in a significant manner it will. It'll take some buying sentiment somewhere to get the ball rolling.

      It might be awhile because $1900 & $48 are looking pretty far on the horizon at this point.

      $2300 would be awesome! I don't see it happening within 2 years at least. Hopefully I'm completely wrong.

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  8. Angelo, are you pissing in my ear and telling me it is raining? sparks, of course

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  9. What about peak oil as a consideration for higher metal prices?

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