“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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Friday, August 8, 2014

Ukraine Events Supporting Gold, but for How Long?

We are back to the same old "Tale of Two Cities" when it comes to gold. It is garnering support from fears of escalations in Ukraine but seeing selling pressure from concerns about higher interest rates coming to the US.

In looking at the falling yield on the Ten Year, it is hard to envision rising interest rates but both bonds and notes are responding to safe haven flows due to those above mentioned geopolitical concerns at the moment, and that is temporarily masking the slow, but certain shift in sentiment concerning interest rates.

Talk continues that the Fed will be out of the QE business before the end of the year but will hold pat on hiking rates until Q2 of next year. Such talk in recent weeks has put a bid into the Dollar and led to selling in the Euro but money flows coming off of Ukraine are clouding issues for Forex traders at the moment.

The reason I chose the above headline is because deep at heart I am essentially a fundamentalist when it comes to trading. I do not like trading any market that I do not have a solid grasp on the fundamentals. I then rely on technical analysis for entry and for exiting. Over the years I have learned to know the "why" behind moves before I commit to it. If I do not, I simply don't trade it. Others may have a different philosophy but this works for me and thus I stick with it.

Case in point - I have made the claim that I am concerned about the fortunes of the gold market should events in Ukraine recede from the forefront of traders' minds. With a stronger US Dollar, with talk of rising interest rates here in the US, and with commodity indices that are all down on the year, several of the fundamental pillars for a SUSTAINED rise in the price of gold are notably absent.

Yes, gold has been strong of late but as I have written many times here, I learned never to chase gold prices higher on the heels of a geopolitical event. I have been burned too often in the past and have learned my lesson. Since no one knows how an event like that will resolve itself, no one really knows with any degree of certainty when the gold price will have factored in the worst. Once that occurs, (Provided that the event does not worsen or escalate), gold usually surrenders most of its gains. Those who come late to the party are then inevitably left holding the bag.

What does this have to do with fundamentals? Answer - take a look at the chart of GLD, that big gold ETF. Studying this chart in relation to the price of gold has been invaluable to me as an asset to gauge one of the fundamentals that I like to track, namely Western-based investment demand. Look, it is a given that Asian demand for the physical metal has been solid for many years now. I will not waste time arguing whether or not Chinese demand is waning. I happen to believe that it is but others argue that the true level of demand has been masked because of changes in the entry point for gold coming into the country. Fine. Each has their own view on that. It is however irrelevant as far as I am concerned because the factor that led to a SUSTAINED rise in the price of gold prior to the end of the bull market was enormous Western-based investment demand.

One can look at the chart of gold holdings in GLD and compare that to the price of gold and easily see that when money flows from the West were pouring into this investment vehicle, gold was soaring. As money left it, the price of gold began moving lower. What could be more simple than that?

Demand and supply; demand and supply. When all is said and done, the essence of price discovery can be distilled to those two simple factors.

So why am I concerned about gold at this point when so many are bulled up about it as they talk war and collapse, etc. Look at the chart:



Does this look like Western-based investors are tripping over themselves to buy GLD? Would you like to know what the most current reported holdings of the ETF are? Answer - 797.65 tons. Not only has that number been falling as the metal works higher at the Comex on war fears, but it is also now DOWN on the year! At the end of 2013, ( or the start of 2014 if you prefer), reported holdings stood at 798.22 tons. GLD is now down a bit more than a half a ton on the year.

In trying to be as objective as I possibly can, how can anyone look at this number and not be concerned? Where is the haste to acquire the metal or metal products in the West? If it is there, I certainly do not see it.

Yes, I understand that there are other sources of demand for the metal; gold bars, gold coins, etc. that do not show up in this sort of chart. However, I do not think it can be successfully argued that demand among Western-based money managers for gold was not a huge source of demand during the bull phase of the metal's run. This group, or more accurately, the demand from this group, is simply not there at this time.

As a trader or an investor, one wants to have powerful "friends" with them when trading positions in the market. What I mean by this is that one wants to be on the side that hedge funds and other large players are on because those are the ones with the huge capital at their disposal. You can talk all you want about "contrarian" trades but I have learned through painful experience that I would much rather have the hedge funds on my side than be against them. The sheer firepower at their disposal can make even large, well capitalized commercial interests pale at times.

The surest and quickest way I know of to turn a large commodity trading account into a small commodity trading account is to be on the wrong side of a hedge fund buying or selling binge. Do it at your own risk.

That brings me back full circle to the question I posed in the headline. If one is looking for significantly higher gold prices then one should want to see a steady, sustained rise in reported holdings in GLD. If not, then all I can say is that you had better be very quick and nimble when it comes to gold. It can reverse on a dime. If one is long based on the expectation that events will further deteriorate in Ukraine, then that is understandable. Just be careful and don't get complacent is all I want to say. If something occurs over there to significantly lower tensions, gold will surrender a goodly portion of its recent gains because traders will then shift their focus to the negative factors for gold.

As a last comment to the rabid gold bugs - Yes, I know you will hate reading this and I know you will want to vent your spleen at someone who is giving an honest opinion. Spare us your venom. You can rant and rave and spew out all the trite arguments that you have mustered over the years but that will not change the reported holdings in the GLD, nor the fall in commodity indices nor the stability in the US Dollar. If those things change, I will happily note it. If they do not, then I suggest you are losing reason for gold to move to the kinds of levels that some in your camp are throwing around.

Markets move when they are good and ready to move - screaming, throwing temper tantrums, slandering others with different opinions than yours will not do a single thing to disturb the gold market. It will do what it wants to do when it wants to do it. Learn that and accept it - you might be a happier person. As it now stands, one thing I have learned - the rabid gold bugs are your best friends as long as you sing from the same choir book. Change your tune, respond to changes in the price charts and to investor sentiment and money flows, and they are some of the vilest, most bitter and malicious people you will ever run across. Touch their yellow metal god and they will curse you and spew out hatred which is astonishing for its ferociousness.




By the way, cattle are down the limit a second day in the row... as long as I have been at this it still never ceases to amaze me at how quickly sentiment and prices can change!


125 comments:

  1. No mention of the jihad in Iraq and the rest of the middle east. US re-entry to Iraq . Sure Ukraine is certainly an issue , and will continue to be it seems. Just curious if you have a passport and have done any traveling outside the US Mr. Norcini. Thanks, enjoy the discussion and your blog.

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    1. R Bart;

      The ISIS thing does not seem to be that big of a factor in traders' minds at the moment which is why I did not refer to it. I think the reason is that most see it as more of a local ( regional ) issue that does not directly affect the markets. The GAZA thing had more impact than ISIS it seems.

      Ukraine however is the big deal right now however...

      Delete
    2. Hi Dan,
      I was wondering how come oil market did not respond to the ISIS thing. I suppose there is no threat to the oil supply.
      Just wanted to thank you for your great blog. It is highly appreciated.

      Delete
    3. great stuff Dan!

      wow what a bounce by the dow (INDU) off it's 200-day MA touch yesterday... and the NDX 50-day MA held. big money is into the key moving ave's i.e. 20 34 100 200.. SPX has held the 100-day which is also the 20-week consistently thru this bull.
      ..precious metals and wheat are not having a fun day, they have been in the 'opposite the stock mkt' pattern.

      ag's will be interesting sunday nite depending on if the bearish weekend weather prints cause there must be somebody who wants to induce short covering ahead of the usda report tuesday.

      crude oil is interesting as it has been hanging around all week, if it bottoms then the CCI continuous commodity index would get a shot to bottom as well.

      TGIF!

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    4. Janet;

      thanks... see my response to R. Bart... also, crude oil traded on the old Merc (Nymex) is a different market than Brent Crude. WTI crude is more focused on Cushing, Oklahoma and the abundance or lack thereof of supplies, depending on the case.

      Brent however is more of a global benchmark and thus it can respond differently to events than WTI crude might. Make sense?

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    5. 77;

      I second your vote to celebrate Friday, I am completely exhausted after this week.... That Tuesday USDA report will have everyone holding their breath although I am hard pressed to see how they are going to come up with a number than anything other than bearish for the corn at this point.

      Beans = that old crop situation has screwed up the entire bean complex. It keeps jerking the shorts around in the other contracts as the strong hands in the August squeeze the shorts. They can play this game for now because the harvest has not yet started but their days of gaming the board in this matter are coming to an end.

      have a good weekend

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    6. Noticed the only market reaction to ISIS was when the Commander In Chief announced we were going to drop bombs on the terrorists. Gold rallied, crude rallied, the market dropped. The story had about a 6 hour shelf life and the markets started reversing early this morning. Could be that the intervention thus far will have a stabilizing effect in the region and was viewed favorably? ISIS doesn't have may friends in that part of the world... Maybe we will hear more details from the administration on what we are trying to accomplish there??? I guess that would be too much to ask if they don't know themselves.

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    7. Bart, I sincerely doubt that Dan or his fellow traders would know the difference between the Ukraine and Utah, other than what they see on CNN and frankly they don't care unless there is a "trade". Also, they follow these charts like religion with likely no idea who prepares them, how they are prepared and what garbage statistics actually go into them. Dan refers to his gold charts as being accurate and the absolute indicators. It is like believing the information published by the FED is honest and not corrupted? For an organization that refuses to be fully audited, how can anyone really believe and trust what is published by them? Has Dan ever seen the gold supposedly held by the GLD? Does he even know where to look? All he needs is a chart to be certain of what is happening. The fact is that the world is becoming a real mess financially and from a humanitarian standpoint. My and Dan's generation has really screwed things up for the next generation. Young people can't afford housing, schooling, and don't get the opportunities we had. Traders don't produce anything. They just play in a financial, fiat world of ponzi, which doesn't help society.

      Delete
    8. Mega
      You seriously miss understand Dan and traders in general. So far off the mark I can't begin to detail in the time I have.

      Yes the world is a lousy place with many people far more in humane than I would like. Also much less opportunity for growth than their should be.

      Characterize the financial system how you will. But, if your going to make a living there you better play the game that is here, not the game you want.

      Delete
    9. "But, if your going to make a living there you better play the game that is here, not the game you want."

      True and I would add, that as manipulated charts are, they give orientation and exit and entry points.
      BUT: Dan is only ciriticizing the gold community. Does he critizice the international banks for rigging the forex markets? The Libor? The isdafix? The energergy market?
      NO!
      It's one thing to play along the charts, but it's a COMPLETELY DIFFERENT thing, if someone only attacks and ridicules a very small "community", while he doesn't even dara to raise a critical word about the BIG PLAYERS that are rigging every market and are paying billions of dollars to avoid being put on trial!

      Instead Dan only knows one evil in the markets: the gold pushers.
      And that is not ok!

      Delete
    10. you are clearly a very angry man, endzeit. have you considered counseling?

      Delete
    11. endzeit;

      I think you need professional help because you are an extremely bitter and angry person. I do not believe every market is rigged so you and I have nothing in common. Goodbye...

      Delete
    12. Megaprophet;

      last time I checked Utah was in Uruguay and Ukraine was in the Underworld. In both of them everyone wears Underwear and they live in Upside down houses.

      I am learning so much from you.

      I learned to put my positions on in the markets and leave them for ten years or more if I want to make the big money.

      You might have screwed up the world for your kids but you can leave mine out of it. The reason I do what I do is for them to provide them a better life.

      Again, why don't you simply have the self-respect to stop reading here and go find those who sing from the same choirbook as you do. I think you will be happier surrounded by those who hold to the same world view as you do.

      Adios.... and good riddance....

      Delete
    13. LOL.
      If someone is not becoming angry, if the big banks are paying billions of dollars as fines and no one from management goes into jail, while only small people are prosecuted anymore, when corruption in Wahsington has reached unprecedented dimensions, when all private sphere is eliminated and every movement and call you make is recorded, if you are not frustrated by the amount of criminal activity in the markets and politics, then you either are already dead, or never have lived.

      And Dan, that you, the former supporter of secession movement now are defending the banksters, would be funny, if spineless men weren't so disgusting.

      Looking forward to your upcoming transformations where you will continue to show the world how flexible your spine is.

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    14. Megaprophet,

      Media Brainwashing has a saturation point. & China & Russia & Eurasia recognize this.

      Despite all their efforts, the western elites could not suppress GOLD. Otherwise why would it rise from 249$ to 1300-1900$ ?

      The current correction is only momentary in this Rock Solid Inflation Bull market since 2000.

      Delete
  2. Oh but Dan we do have powerful friends on the side of Gold. John Paulson was terribly early on his gold positions. He has since scaled out but still has a presence in the gold sector. Steven Cohen started buying gold stocks last summer. And our friend George Soros has been buying established gold players recently. I am sure there are other hedge fund kings getting into the mix as well provided we have seen gold shares up some 15-20% So Far this year 2014. These are not stupid people by the way and I am sure they know what they are doing...

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    Replies
    1. Bob;

      I think you are missing my point. If gold has such powerful friends as you cite, how come the gold holdings are not reflecting it? These guys are in the minority.

      I think you should also consider something. I see guys who are perma gold bulls ( not saying you are - I do not know ) citing the performance of the gold shares this year as if somehow that vindicates their permanently bullish view concerning gold.

      Here is a better way of looking at it however. Let's give them their say that the gold shares are up some 15-20% this year. The HUI closed at 203.49 the last trading day of 2013. Currently it is sitting at 242 or so. That is up 18%. Not too bad for sure.

      However, where was the HUI trading last year at this time? Answer 240.23. In the last 52 weeks, it has gone nowhere.

      Now back it up to the peak made nearly 3 years ago. Where was it trading at that time? Answer - 628.33. That means it has lost 62% or so the last three years.

      Is that something that any long term investor should be crowing about? Are you kidding! That is awful no matter how one measures it. That is money that could have gotten spectacular returns elsewhere had these guys simply been able to read a price chart OBJECTIVELY instead of their "long and wrong" strategy of "buy and hold to kingdom come".

      Take the S&P 500. Last year in August it was trading at 1686 this week. Today it is at 1921. Do the math - it is up 14% in the last 52 weeks.

      To start this year it was at 1825. While not as good a gain as the HUI this year ( beginning Jan 1), it still has thus far managed a gain of 5%.

      But here is the real kicker and the proper way to compare these things in my view. How has the S&P 500 fared since 2011, when the mining shares puked....? It was trading near 1130 or so at the same time the HUI Peaked. Since then it has returned 70%!

      Now THAT is something worth bragging over if one is inclined to brag like some of these perma gold bulls seem to always want to do for some reason.

      Just some perspective....

      Which would you rather have had? A gain of some 70% over the last three years or a loss of 62%. To say it a different way... those who used the "buy and hold to kingdom come strategy" in the gold shares since 2011 ( as many of these self-appointed experts told them to do when gold was soaring to record heights) have lost MORE THAN HALF of their net worth by so doing. Those who bought a broad basket of stocks across a variety of sectors using the S&P as their benchmark have MADE MORE THAN HALF of their money.

      Delete
    2. Dan, I guess what I am trying to tell you here is that yes, it is important to view the GLD holdings as a decent proxy to overall western gold demand but the Hedge Fund crowd doesn't like the GLD because it does not pay Dividends. I think it is myopic of you to rely heavily on the GLD as a read on the overall hedge fund crowd demand for gold. They like Dividends and Capital Appreciation. Gold Stocks will produce much greater returns on capital as opposed to having exposure to the GLD in a rising market. Take your own Advice and remove Personal Bias. I think you will be better served to pay closer attention to the gold stock sector when it comes to Gold Demand with respect to the hedge fund world...

      Delete
    3. Bob;

      Politely speaking - are you nuts? What do you mean the hedge fund crowd doesn't like GLD because it does not pay dividends? Is this the same hedge fund crowd that has been chasing equities relentlessly higher year after year since 2008 because they all pay such wonderful dividends? Come on already, use your damned head and try to be objective.

      Also, you are making the assumption, wrongly in my view, that gold stocks will pay great returns on capital... that assumes that the big speculative crowd does not leverage up GLD. that is exactly what they did with it during the bull market in gold. Why do you think it was so popular? Because large funds who were prohibited by their charters from participating into the futures market used to have no choice if they wanted to obtain LEVERAGED exposure to gold but to buy gold shares. That all changed because the ETF gave them a vehicle to get leveraged exposure to the metal WITHOUT having the risk of buying poorly managed gold mining companies which had geopolitical, legal and other such risks associated with them. In other words, GLD became a pure play on gold which could be leveraged they wanted without having the risk of being exposed to the risks of owning gold companies.

      Personal Bias - how the hell do you know what bias I have? I am reading the charts and telling you what they are saying. Is gold in a roaring bull trend or is it rangebound? the answer is the latter.

      As far as better served, I think I will follow the principles I have followed for more than 2decades in the market which have served me very well. Principles which I learned from losing money in my earlier days and principles which I hope will continue to serve me well until I retire from this business.

      Please leave it at that. It is evident that you are a perma gold bull. Good for you. I hope you are satisfied with a market than has gone nowhere for the last 52 weeks. I for one prefer to allocate my capital to asset classes that actually yield returns.

      Good luck to you. you will most certainly need it.

      Delete
    4. Dan, first of all I love you for this debate and I find it quite fun. You are a good sport. We should all want to have our personal views Challenged in life but most don’t like it when that occurs.

      Great point on the dividend remark. I should have emphasized more on the capital appreciation component of gold shares as opposed to the dividend aspect but I still think hedge funds would rather have a dividend over just having to rely on spot appreciation of gold (GLD).

      And for the record I am not a gold bug at all which is why I find this so amusing as I type this reply. The yellow metal clearly evokes strong emotion among some but I count myself out on that account.

      You made a very interesting remark regarding the past 3 year performance of the S&P vs. Gold and Gold shares. I agree that the results are startling. But now is Now. That was the Past. Clearly, you can see conditions are changing in the gold sector. GLD has slowed down dramatically with redemptions and gold shares are performing very well. And Big players are getting their feet wet in the gold shares.

      Adapt or Die. One thing I can Guarantee you Dan is that the Next 3 years will NOT be like the last 3 years.

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    5. Oh, and Dan...
      https://www.youtube.com/watch?v=Tgij7iRRew0

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    6. Lol bob. If they were not stupid why didnt they sell in 2011. Like anyone else you win some you lose some

      Delete
    7. This comment has been removed by the author.

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    8. The charts don't lie. Hard to get to excited about Gold until it can break above 1400 or so to get out of the green box. GLD redemptions have stabilized and we have seen higher lows this year but not much to get excited about. Dan what do you make (if anything) that the last time GLD holding were at this level (early 2009) gold price was $1000 versus $1300 today? An indication to you of lower Western investor sentiment toward Gold?

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    9. And Rick Rule seconds my remarks today over at KWN. I failed to mention consolidation in the resource and mining industry with respect to mergers and acquisitions. You Have to remember that because the majority of mining stocks have been absolutely hammered in the last 3 years, some losing over 75% and most losing over 60%,that means that said percentage of risk is Priced Out!!!! Conditions in the gold and silver Equity space Are Changing NOW NOW NOW for the Better in terms of price appreciation. Don't get left behind with dated bias.

      Delete
    10. Penny Stocks only cost pennies for a reason

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  3. BTW, word is out on ICPT today. Positive results soon? hmmmmm

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  4. could be a 3 day island top for hui and xau; looks to be a disappointing close going into the last hour, no? plat usually leads and the chart points south; only metal up is the very THIN palladium; have a good wknd all!!

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  5. Agree, this is unpredictable, one thing I see whatever one believes about the fundamentals manufactured or not is that usd higher and that alone is enough I believe at this point in time to keep bulls at bay.

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  6. Hello there.
    OK, so, just to make a statement on how useful T.A can be.
    I used the method of choosing a time unit where the ma20 is linear and parallel to an upwards channel in a strong trend (SP500).
    In this case, linking the bottom prices and making them parallel to the ma20 tends to give a nice support area to monitor in order to go long.
    I did it several times in other markets but on much shorter time units.
    It worked once more this time with the SP500, where the upwards support given by the channel was at 1900.
    I didn't think we's bounce so strong today, so I managed already to sell 50% at 1927 to secure some profits and wait for the next candle on monday.
    Conclusion : in terms of T.A, it is interesting to monitor markets where the ma20 is linear (and not horizontal!) on a certain time unit, even "exotic" like the 2week. It often allows you to spot an interesting support or resistance level.
    If the market wants to keep the support upwards, next two weeks it must stay above 1910. I'll reinforce my long position of the sold 50% at that 1910 level during the next two weeks IF the situation on the faster time scale, i.e 2days is good.
    Hope some find this useful.

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  7. The key point for the Fed exiting the QE business would seem to be, are the markets self sustaining this time or will everything start to deflate again as QE is ended like the previous times QE has ended?
    The Fed’s hope seems to be that tapering QE instead of just ending QE cold turkey like they have the previous times will produce a different result.
    If QE ends and everything starts to deflate again like the past times, does the Fed just allow asset values to deflate to their true market prices or is the deflation of asset values still unacceptable?
    It seems that besides golds geopolitical support lately, that gold had been hanging around the 1280 level waiting to find out the answer to this QE question.
    The bond market since January has been saying deflation is still the trend.

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    1. Barney- Will the patient relapse after the IV is removed, that is the 18 Trillion dollar question!

      http://www.usdebtclock.org/

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  8. Ukraine

    "Let the shipwrecks of others bevyour Sea Marks"

    As I have confessed before, I bought a 10 oz bar on impulse on the Friday night before the Crimean election in mid-March; the price was around 1387/oz and hasn't been even remotely close since despite MH-17, Gaza, ISIS, Ebola, Portuguese banks and one of the worst US GDP prints in living memory

    Geopolitics can be a fickle friend and do not form the basis of any rational investment strategy



    And a propos Western supply vs Asian demand ~ go to your favourite online bullion shop or coin dealer, and you will note that most if not all are offering discounted premiums over spot. There is currently NO shortage of physical metal in the West because more people want to Sell it than Buy it. They may be nuts, but their activity and sentiment set the market, and the fact that you or I might disagree with their perspective is totally irrelevant to the price dynamics

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  9. Dan -

    Getting back to corn. With last years crop and this years bumper crop - I would have expected even lower prices right now. What gives? The Chinese I noticed had some drought issues. Are farmers going to find extra storage for the crop coming up?

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    1. jmsvett;

      Traders are hesitant to push prices too strongly ahead of the upcoming Tuesday USDA report. Depending on the weather over the weekend and next week's outlook, we could see more selling pressure hit on Sunday evening, Monday morning but some are concerned that USDA will not give a bearish report and thus are reluctant to get too aggressive ahead of it.

      for beans -= it is all about the old crop carryover and the fact that crushers and others are not letting loose of them without forcing those who want them to pay up. That strength in the August beans, is propping up the entire bean complex.

      August beans have rallied $1.30 off its recent low and is pushing back up into the $13.00 level. Given the size of the upcoming crop, those paying that kind of money for beans for immediate delivery must need them extremely bad because if they can just wait for another month, they will be able to get them much cheaper.

      Quite frankly, the game that the crushers are playing with the bean market scares the heck out of me. Once the harvest combines start rolling, basis is going to weaken considerably.

      In the interim, those who own the beans can play this game.

      Delete
    2. Thanks Dan -

      I saw this weeks COT for managed money. Guess what??

      326,261 231,743 119,672

      Managed money is still long.

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    3. jmsvett;

      Yes, I saw that as well. I continue to be astonished at this. Cannot recall anything quite like it in which the big specs have been on the wrong side of such a powerful trending move. I was planning on posting up something about it tomorrow. I am beat for this week... lots of wild action has me worn out for now. TGIF!

      Delete
  10. Dan, thank you for your outstanding service, to prevent us from making fatal errors, and careening off into a black hole, never to be seen again, on little more than a whim! Before I make a move I always consult your blog.
    Reading your article I see that you are very skeptical about gold's chances of recovery, for a number of cogent reasons, which I think we must count as fundamentals. These fundamentals include the Ukraine crisis, which could change and have a negative impact on gold; the depleted GLD fund indicating low western interest; the booming stock market that has distracted investment from gold; and the threat of rising interest rates.
    I would like to suggest that these factors could easily quickly change. For example the Ukraine crisis could escalate into something much worse, and although Putin clearly does not want this, he may lose control of his own game; the so-called recovery may be just a chimera that could vanish like a puff of smoke, as it is perceived to be based on massive indebtedness, something that to me defies commonsense; which as a consequence would cause the Fed to keep interest rates as low as possible, probably re-instituting QE; and also if the stock market rally, already very long in the tooth, and possibly long overdue for a substantial correction at the very least, could draw investment back into gold.
    You state that your investment policy is based on technical factors in a market where you understand the fundamentals, with which I would concur. But is not the technical picture now not much better for gold? And are the fundamentals not rather murky at this time, and could actually degenerate much more in the future, favorably for gold?
    Your other advice, which is well-taken, is that if it is so unclear, just keep out, until the omens are more favorable.

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    1. Peter;

      Thanks for such a sincere post.

      All of your points are very well taken and very solid. The simple fact is none of us know for sure how any of this is going to end up or play out and things could always take a change for the worse.

      I think it is very prudent to own physical gold against potential problems as you mentioned. who knows what can happen in the future.

      My biggest beef is with those who are ALWAYS bullish and always assuring us that they know exactly what is coming and where gold is going in price. They do not but that does not stop them from honking like noisy geese.

      I said all that to say this - yes, things can change and that means it could get worse. One thing I have learned about the markets over the many years is that they never stay the same but are always dealing with some new issue.

      As far as the charts go, yes, they are certainly improved for gold considering that the metal plunged from $1900 to under $1200. At least it has stabilized and has stopped going down. My only other comment would be that the intermediate term chart currently reflects a market that is moving sideways in a range.

      We could very well see gold sit here within this range and essentially move back and forth for a long period of time. If you notice on the earlier range, it was in that range for over a year and a half before it actually legged lower. I am not saying that it will do this again, but if it loses chart support at the bottom of that range for any reason ( $1200 - $1180) it could drop another $100 - $150 again. Who knows? Then again it could take out $1400 and make another run. Again, who knows?

      That is why we need to be flexible and not dogmatic when it comes to the markets. Case in point, two weeks ago everyone and their dog was just certain that cattle prices were going to stay firm for at least another two full months, if not longer. Now look at the charts!

      I could point out other examples but I think you get my point. I have nothing but contempt for these self-appointed experts who so arrogantly predict this and predict that for gold/silver. It would be one thing if they went about deluding themselves only with their pretensions of special exotic insight into the markets that no other mere mortal possesses. the problem is that they deceive many others who lose their wealth on their account. That is simply evil if you want my honest opinion.

      Delete
    2. "My biggest beef is with those who are ALWAYS bullish and always assuring us that they know exactly what is coming and where gold is going in price."

      Dan, it's a mystery to me why you insist on repeating this straw man. It's a ridiculous caricature which doesn't even apply to those who are featured on KWN. The closest I've seen is the arguably reasonable position taken by most long-term gold bulls, namely that the world's economy is extremely fragile, sovereign debts are soaring and too big to be repaid, there will either be a "reset" or collapse, and in either case, gold will rise rapidly in value. But the vast majority of those who fall in that camp qualify their beliefs by saying that they don't know precisely when the S will HTF.

      Now, if you want to argue that their premise if faulty, then feel free to make your case. But these are not traders who are concerned about gold's performance since 2011. In fact many of them began acquiring gold well below $1000/oz.

      Delete
    3. Paul Warfield;

      I don't know what planet you reside on but here on planet Earth and in my email box, I read what is set before my eyes. If you want to call it " a straw man" you are of course entitled to call it whatever lights your fire and makes you feel good but I know what I am responding to and why. Tough if you don't like it. I could care less.

      If one wants to own physical gold as I do, then why the big worries. Buy it, set it aside and forget about it. Who the hell gets up every day and goes to their file cabinet, pulls out their insurance policy and reads it, over and over again, that day and the next, and the next and the next... to see if they need it.

      Too many of you clowns own gold because you want to become fabulously rich when everything collapses. Just be honest and admit it.

      For me, and other sane investors, we buy the metal as part of portfolio diversification which we may increase or decrease as conditions warrant. I do not obsess over the gold price as those clowns featured on KWN.

      That is my opinion - if you don't like reading it then get lost because I am not going to change it to please you or anyone else for that matter.

      Delete
    4. Dear Peter,

      What if Putin Bans GAS to Eurozone in this standoff? Germany Economy will collapse overnight. How long can Germany LAP DANCE to the tune of USA ?

      Thus is Putin Stronger or USA?

      Delete
    5. Dear Dan,

      What i understand is that GEOPOLITICAL EVENTS are MANAGED CONFLICT and nothing but a WEAPON to defend ECONOMIC SUPERIORITY (i.e USDOLLAR Supremacy).

      Thus whenever we see GEOPOLITICAL EVENTS like UKRAINE, or ISIS or SYRIA etc, we must INSTANTLY relate it to USDOLLAR's FIGHT AGAINST GOLD BACKED NEW GLOBAL CHALLENGING CURRENCIES.

      Delete
  11. I just came across the following article, which I would like to share with the Group as a Case Study in lies, selective misinformation and just simply being plain wrong:

    " educated Eastern investors are more incredulous of the blatant paper suppression of their “savings” than their uneducated Western counterparts.  Which is why, with 100% certainty, they will continue to acquire physical metal hand over fist until the West’s dramatically depleted supply is gone.  And don’t forget the billions of Western investors that will “join the party” the second the Cartel blinks yielding the same inevitable swamping of the shorts that destroyed the London Gold Pool in 1968; the “bullion banks” in the early 2000s and every effort throughout history to elevate fraudulent fiat money at the expense of the time-honored, intrinsic value of gold and silver.  Thus, if you want to “bet” against billions of Easterners holding Aces on a handful of Western bankers holding deuces, be our guest.  However, we’ll stick with the “safe bet,” which has paid off for thousands of years."

    http://www.24hgold.com/english/news-gold-silver-gold-and-silver-manipulation-in-the-eyes-of-the-chinese.aspx?article=5714904878H11690&redirect=false&contributor=Andy+Hoffman

    If you believe that, then Heaven help you, because I surely can't

    ReplyDelete
  12. Here are a series of Gold charts: http://www.kitco.com/charts/livegold.html

    Here is a recent article stating that Gold Breaks Out As Tensions In Middle East, With Russia Intensify - Technicals and Fundamentals Positive http://www.zerohedge.com/news/2014-08-08/gold-breaks-out-tensions-middle-east-russia-intensify-technicals-and-fundamentals-po

    Please help me, because I am unable to reconcile one with the other: maybe the charts are just "painted" (and the news agenda isn't).

    Take, for example, the following: "Gold is up nearly 2% this week on safe haven buying, its best weekly performance since mid-June".. Yes, but it is also down from it's peak in March and significantly down from the levels in March 2013 and 2011. How is a 2% upswing evidence of any kind of "break out"?

    Again, "Traders were surprised that prices were capped from further gains and there was not more of a safe haven bid and more technical related buying after gold broke above the 50, 100 and 200 day moving averages." Really? - not the lot I speak to, certainly, because NONE of them believe that prices are "capped" and they all got their fingers burnt last quarter when Gold briefly blipped above the MA's in a false rally, before collapsing back down below 1300

    and so it continues: "Silver is outperforming again ". NO, it isn't! What is it supposed to be "outperforming" - a Lemming?

    and the Money Shot? - "On Wednesday, gold broke out of bullish descending wedge chart pattern that has formed in recent months. The falling wedge is a generally bullish pattern signaling that a market will break upwards through the wedge and move into an uptrend."

    Well, let's wait and see, shall we..... No, stuff it, I am going to call this out as total bullshit right here, right now........

    ReplyDelete
  13. Watch the Wildebeest Herd sell bonds and gold en masse and start piling back into stocks again.

    It is as if the business cycle is now wobbling back and forth within months instead of years.

    And why is that?

    Because of the Fed's "Command and Control" mechanixim which allows it to control interest rates, the CRB Index, and stock markets with ease via "meatballing" the Algo/Igor/Robo greyhounds.

    Sometimes by uttering a statement such as "whatever it takes".

    Bottom line is that with ES at 1900, the 10-yr. yield at 2.35%, crude and gasoline prices plummetting, it is only a matter of time before the "animal spirits are finally unleashed to u-turn the markets as they did last night.

    40 point run in ES off the lows, quite amazing.

    Reminds me of October 1998 when fear escalated very quickly as everyone thought the top was in and everybody sold out within days of making all time highs.

    ReplyDelete
  14. NB. On 19th March the 50 day MA broke through the 200 day: Gold was trading at $1337.68. By the time the 50 day crossed back through the 200 day MA on May 29th, Gold was at $1247. Personally, I hesitate to call this a Bullish leading indicator

    In isolation, the 50 day MA tells you nothing, as it is too "fast": Gold broke through this on Sept 18th (fell back through on 19th), on 24th October (fell back through on 30th October), 10th January (until 26th March), 19th June until Jul 30th, and most recently on 5th August. Despite this, the Gold price remains pretty much unchanged over that period, having closed at $1306.75 on September 17th (the day before this sequence of "indicators" began)

    Please be clear; I hold a large amount of physical Gold, and I would like to see the price rise; however, my settled conclusion is that, for the time being, we are rangebound and directionless, and that geopolitical concerns appear to have little enduring or meaningful impact on this situation. I do not believe that there is any greater probability of a currency meltdown, COMEX default or economic collapse than there has been at any time over the past 6 years. These outcomes remain possibilities, but are neither "certainties" nor even probabilities, and whilst it is tempting to believe that these problems face us "now more than ever", the truth is that it simply isn't so, and that none of us know what/when the actual tipping point will be. This could go on for decades

    Timeo Goldbugs et bullshit ferentes Virgil, The Aeneid (II, 49)
    http://en.wikipedia.org/wiki/Timeo_Danaos_et_dona_ferentes

    ReplyDelete
  15. Don't look now, but despite:

    - Flash Crash
    - Greece Fears
    - H1N1 Flu
    - EuroZone PIIGS Crisis
    - Arab Spring
    - Fukushima
    - Sequester
    - Fiscal Cliff
    - Taper Talk
    - Ukraine
    - Gaza
    - Iraq

    3478 articles posted by jsmineset and 38,456 articles posted by Zero Hedge and hundreds of "Endgame" screaming headlines from KWN,

    The XRT is still only a few dollars away from all-time, world record highs.

    The consumer has never been stronger, never so resilient.

    ReplyDelete
  16. Dan

    it is important to realise that technical analysis is a PRIVILEGE and not a "right" and that in centuries gone by our forefathers - or "Chartists" as they were known had to fight the authorities to secure this democratic concession. Few realise that, 175 years ago, 22 heroic protestors whose names have since gone down in the annals of history (Bollinger, Gann, Elliot and the Welsh heroine Laura Vaverages) gave their lives so that we today might have the freedom to "paint" random lines across the staccato trace of what passes for "price discovery", but is, in fact, simply the fleeting shadow of "The Invisible Hand" which drives the market http://en.m.wikipedia.org/wiki/Newport_Rising

    As before, so today, and next week a brave and determined band of 20,000 or so courageous Welshmen will honour the memory of their ancestors, and march in solemn protest against The Powers That Be http://rt.com/uk/179000-nato-summit-protest-march/

    The venue for this epic but ill-starred showdown will once again be that fabled "shining City on a hill" - otherwise known as Newport, Gwent (which those of us who have had the dubious pleasure of renewing our UK passports there will recall is one of the "less favoured" tourist destinations in an otherwise consistently drab and uninspiring part of the country). The place is kmown amongst the local tribes as "The Celtic Manor" - which is an unusual nane, given that the Celts in general (and the Welsh in particular) have no manners, and remain to this day a savage and barbaric race, much given to whinging, speaking a made-up language, and the unforgivable crime of Ginger Hair

    The likely outcome? Blame Putin, bomb Iraq, lie through your teeth (i.e. pretty much Business As Usual and a few rounds of golf at the Taxpayers expense)

    ReplyDelete
    Replies
    1. to refer to Newport as "less favoured" is woefully inaccurate: for those of you reading this in black & white at home in Minnesota, here is what it really looks like

      http://www.webbaviation.co.uk/gallery/d/41291-1/newportaerial-db73673.jpg

      http://images.icnetwork.co.uk/collections/Regionals_WALES/wo_iya_newport.jpg

      http://upload.wikimedia.org/wikipedia/commons/a/ae/Newport_docks,_from_the_Transporter_Bridge.jpg

      http://s3.favim.com/orig/40/blue-eyes-freckles-red-hair-Favim.com-330263.jpg


      Delete
  17. So how high can interest rates go before the debt is unserviceable. I don't understand how they could go up at all.

    ReplyDelete
    Replies
    1. Yes would be interesting to hear Dan's thoughts on this as the math does not seem to add up.
      At 18 trillion each 1% rate rise looks to add somewhere around 180 billion to the deficit and national debt.
      Can't see more than a few token 1/4 point rate hikes happening.

      Delete
  18. Another thing interesting about SP500 :

    http://i61.tinypic.com/3167m9t.jpg

    SP500 is within 2 upwards channel, with different inclinations.
    The oldest one is 4 year old, and each time prices tried to go beyond resistance (twice now), they soon failed afterwards.
    The most recent one is 2 year old and its slope is stronger.
    So...which one of them is the strongest?
    The market will have to choose soon.
    Meanwhile, it seems to me that the oldest channel is still active and it means that it is quite unlikely that SP500 will make new historical highs before mid september.
    More, the resistance of this channel is probably going to be hard to break for the bulls, and a trap to those who watch only the most sloppy and recent one.
    I'm keeping half my long position now, will reinforce at 1910 next week (probably, if 2day unit confirms), but my maximum target will be the top of the oldest channel. I will look for an opportunity to revert my position and go short if we go back to this area.
    I'm not sure if this kind of post finds some interest among readers at the moment, so please let me know, as it takes me some time to share this on the blog. I would completely understand that you have your own trading system or are focused on longer term investment or other markets, so just let me know if I write this for noone :)

    ReplyDelete
    Replies
    1. Hubert
      Your posts are about the only ones that have any value here.
      Good information.
      Please continue....
      Hopefully your objective info will drown out such useless drivel like counting how many thousands posts were made on another website ...unbelievable waste of time...and actually kind of scary on so many levels.

      Delete
    2. If you consider it a waste of time you must either already be aware their charlatans and an egoist or a cultist and an egoist.

      Whats drivel is whats posted on mineset kwn and zerohedge.

      Delete
    3. Dean

      my starting hypothesis is that I am a complete and utter moron; rather than seeking to overturn this assumption - which is supported by an overwhelming tsunami of compelling evidence - perhaps you could help me understand two small points which continue to escape my primitive brain

      1. When - if ever - did anyone on Dan's site refer to (much less "count") the number of posts on someone else's website? I must have missed that

      2. Whilst Hubert does indeed have much of value to add to the discussion, I suspect that he too would hold that there are other objective opinions voiced in these discussion - not least of all from Dan himself

      If you find the discussions here "scary", then might I respectfully suggest you seek professional therapy rather than posting contentious remarks online - unless, of course, your only mode of self-validation is by trying to goad a response, in which case you can now relax, as your existence has been acknowledged

      "Drowning out useless drivel" is not a noble aspiration, and as far as I can tell does not reflect Dan's own philosophy, nor that of people such as steve (with whom I frequently cross swords, but nonetheless respect even though I consider his remarks to be utter tripe). Tolerance and civility are surely the Order of the Day, and if you can't manage that, then go fuck yourself

      Delete
    4. My oh my.
      I stopped reading the charlatans years ago...I could care less what they say.
      I see that you ended your post with "tolerance and civility"
      Glad you made my point for me

      Delete
    5. Aware they are charlatans and an egoist then.

      Dean only is interested in trading tips that benefit Dean and let the charlatans screw people; Dean doesnt care.

      Delete
    6. Hubert, I enjoy reading your thoughts and encourage you to continue.

      Delete
    7. I *definitely* appreciate your posts Hubert. I'm sort of a fledgling technical analyst, so I really appreciate you sharing your thoughts (as well as those from Dan and others!).

      Thanks for sharing your long-term charts. Here's what I've got for an ES 20-minute chart right now: http://www.screencast.com/t/OigAHgOc

      Delete
  19. Mike Maloney is at it again: Silver - The Opportunity Is Now

    http://hiddensecretsofmoney.com/blog/silver-the-opportunity-is-now

    On 23rd July (when Mike posted the article) Silver closed at $20.95; today it closed at $19.90 - a loss over the period of over 5%

    Consider if you will, an Investor wishing to invest $100,000 in Precious Metals:

    1. Generic Gold Bars: http://goldsilver.com/buy-online/1-oz-gold-bar/

    the price per oz is currently $1,347.95 and Mike will buy the bars back from you for $1, 296.93 - a Bid/Offer spread of around 3.8%; to break even, Gold would need to rise in price to almost exactly $1400

    2. Generic Silver Barshttp://goldsilver.com/buy-online/1-oz-Silver-Bar-Sunshine-Mint/

    Mike will sell you these at the bulk-discount price of $21.39, and will buy them back from you for $19.86 - a Bid/Offer spread of 7.15% and Silver would need to rise to almost $23 in order for you to break even. (Of course, order sizes of less than 1,000 bars would not attract such a generous discount)

    If you were Mike, which precious metal would you prefer retail investors to buy?

    And if you believe that the price discrepancy is attributable to the different weight (i.e. value density) of the two metals, consider this

    a. Is that not in itself a reason to avoid Silver, $100,000 of which will weigh around 140 kilogrammes (300 lb or so), whilst and equivalent value of Gold would weigh around 2.3kg and could probably fit in your pocket?

    b. So what - do you really want to pay over $3,000 for the inconvenience?

    c. Hey, that's business! When we are talking $100,000 it's not like some Mom & Pop transaction, this is serious money; it's hard to believe that the handling and storage costs are double what they are for Gold, and remember - these are generic bars we are talking about, not "special" rounds, numismatic coins or precision-designed jewellry.

    ReplyDelete
  20. http://i59.tinypic.com/2cdzbe0.jpg

    Gold is within a downtrend on the weekly time unit (red), but finds support on the long term upwards line (black) one can draw on the monthly time unit.
    I don't see how to know which one will win at this time.
    Meanwhile, gold is bouncing within the triangle formed by black support / red resistance.

    ReplyDelete
  21. Thanks for the charts and perspective Dan. Been looking at the commodity anks charts over last few weeks. Boy are those moves widowmakers! Definitely more volatile than the preciois metals. Keep posting technicals Hubert, interesting stuff. Got caught today by the strong rally in the SP ouch!

    ReplyDelete
    Replies
    1. jasa;

      Indeed - those who keep squawking about "flash crashes" and "orchestrated takedowns in gold" know little or nothing about the rest of the commodity markets and how violent some of the moves can be in this sector.

      Delete
  22. This guy Bo Polny is really a pure bastard.
    How this kind of gangsters dares to keep sending newsletters after his continuous blunders is just beyond me.
    Somebody should call the police.

    http://i58.tinypic.com/2q173p1.jpg

    I LOVE point 4, you have to read it!!
    This guy is basically saying that he called the top 3 times of gold in june and july and IT DIT... ???!!! Are his subscribers utterly STUPID? Is he a complete donk??
    What it means (and he is right) is he made 2 wrong calls about gold's supposed top.
    Bo Polny also made 2 wrong calls in 2013 about gold's bottom.
    Bo Polny made wrong calls about USD Index never to go again above 80.
    Bo Polny made wrong calls about Silver never to go again under 20 $.

    This guy is a total fraud and the fact that he is still alive and active sending his BS is just making me sick, along with all the websites which accept to advertise for him.

    This time, Bo Polny is giving you the chance of your life. Indeed, he wrote that the summer bottom is in for gold (1280) and confirms that gold will reach 2000 by year end. Understand what it means? If one thinks he is right, the risk is 30 $ (buy gold 1309 stop loss 1279) and the reward is 700 $. Risk-Reward ratio of 20+.
    Not bad, asshole. Well if it's a free advice, why should we buy your stupid 20.000 $ letter for?
    Personnally I'd wait at least for gold to confirm that it can break above the red resistance on my chart, but that's just me.

    ReplyDelete
    Replies
    1. Hubert
      I remember that guy from several years ago.
      It is incredible that he is still around.
      is that a 20.00 newsletter or a 20,000.00 newsletter?
      This is why I stay away from KWN et al.

      Delete
  23. Another great post Dan, thanks.

    While we wait for western demand for Gold ETF, find it of interest that India consumers have increased its their holdings 43 tonnes in June via Hawala/Black Market financing.

    http://www.dnaindia.com/india/report-sharp-rise-in-gold-imports-from-switzerland-alarms-intel-sleuths-2008983

    "Colossal shipments of gold leaving Switzerland for India in recent months have alerted top Central agencies, such as Intelligence Bureau and Customs, on the possibility of the Indian black money stashed in Swiss banks being routed back to the country in the form of gold through hawala operators active in Dubai."

    ReplyDelete
    Replies
    1. Here's the math:
      June
      Rs Crore 11,000.00
      Swiss franc 1,630,000,000.00
      US$ exchange 1.116
      US Dollars $1,819,080,000
      $ per oz $1,290
      ounces 1,410,140
      Tonnes 43.8

      Delete
  24. Hubert:

    Hey, I've gone to 3 Q & A sessions already to listen to "Mr. Gold".

    And Bo Polny's got my back.

    Same with Lars Lindstrom and a handful of other "no-name experts" who appear then disappear.

    And because I have a significant amount of money invested in Matterhorn Asset Management, I've missed the majority of the bull market in stocks.

    But I'm not worried.

    The squeaky voices of Stephen Leeb and John Embry assure me that "any minute now"......

    I'm going to get rich and everyone else's expense.

    And soon I will be able post of chart showing gold with its meteoric rise and a sudden 1987-style collapse in the Dow.

    With the headline "Presented Without Comment"

    Along with follow up posts visualizing the "plunging" and "tumbling" asset markets watching the rest of the world go broke.

    And when the dust clears, Bo Polny and I will be knee deep in booze and hookers with bright red lipstick, laughing our way to the gold vaults.

    LOL....

    ReplyDelete
  25. Mark
    Never been to one of the famous Q&A's.
    You have been, so, do you ask the hard questions?
    Just curious on what kind of replies you get in person (from the Guru) when you point out the obvious " you are not even close to being right" type of questions.
    If I was a Guru I would be terrified to hold a public forum

    ReplyDelete
    Replies
    1. There is tons of group pressure. Couple hundred people want to ask 2 questions each. Critical questions are not appreciated. If you do ask them Jim will lie. Next person please.

      Delete
  26. the simple reason that these thieves are still around is because of what the late, great P.T. Barnum said over a hundred years ago; that is all

    ReplyDelete
  27. https://www.youtube.com/watch?v=32GaowQnGRw

    The Man who closed the Gold Window 40 years ago today...Watch!

    ReplyDelete
  28. All I can say is I wish we could post pictures and/or cartoons on this blog.

    We would have a field day poking fun at the hysterical headlines and the gloomers bullhorning from the hilltops.

    ReplyDelete
  29. I think this is really worth reading.
    If history repeats itself or merely rhymes, then we can see the ukrainian dominos here and where they lead to. Changing mankind's fate means everyone must share, understand what's going on and what are the options.
    People must oppose madness. If not, history will sadly repeat itself indeed, imho, and who will care about gold prices anymore?

    http://www.handelsblatt.com/meinung/kommentare/essay-in-englisch-the-west-on-the-wrong-path/10308406.html

    ReplyDelete
    Replies
    1. You know Hubert, I saw that over at Mish's site and it is a worthwhile read. Also, and you know that I think 90% of the commentary at KWN is happy horseshit, but sometimes there is something to be gained. There is an interview with a Michael Belkin that I think is a reasonable and worthwhile listen. Take care and do not forget that we have a full moon coming in 9 hours or so.

      Delete
    2. big surprise to read something like this in german press (handelsblatt). And big surprice: in english language, in russian language and in german language.

      Such newpaper articles can I otherwise read only in alternative press in germany,

      for someone who was born in sarajevo like me (1914- I WW) is crisis in ukraine a big thing.

      politicians in western europe are no better than 1914!!

      I am very grateful to have found this blog

      Thanks Dan (and to all who write regularly here

      Dakac

      Delete
  30. Dan,

    Thanks so much for your honesty. A great post!

    One question, would the seasonality of gold/gold stocks also play a part in gold's price rise as of late?

    ReplyDelete
    Replies
    1. Shaun Forster;

      Thanks.

      Honestly, I do not think so at this juncture. I think it is more an issue of the geopolitical uncertainty involving Ukraine and the nervousness among some of the equity guys about the stock market at the moment.

      There is a line of thinking that suggests that the gold stocks have limited downside so some are buying them based on that. That may be true ( if gold can stay up near current levels which is unclear) but that does not mean that they are going to mount a massive upside rally.

      They could work within the same type of broad trading range that gold is currently mired in. I honestly do not know what the next thing or event might need to be to take the metal out of its range trade. As noted on that chart, it was stuck in a sideways pattern for over a year and half before it lost chart support and then dropped into another leg lower before it found some buyers and entered into its current, yet lower range trade.

      Delete
  31. Poor Michael Pento still doesn't get it.

    He's yapping about sky high interest rates and a collapsing economy after the Fed stops QE entirely.

    What he is ignoring is that the full scale collapse in the CRB Index combined with constant geopolitical turmoil which has driven down interest rates again has allowed the "Central Planners" to re-load the chamber.

    Meaning that any time they want, they can launch yet another un-named program to start buying back even more bonds.

    Which in turn:

    - Allows the unprecedented $17 trillion in debt to be rolled over at even cheaper rates

    - Boosts the stock market up to 20,000

    - Enabling small businesses to have more confidence

    - Thereby causing another increase in the LEI's

    - Perpetuating the self-reinforcing feedback loop of lower interest rates, higher stock prices, improving economy.

    I mean really, a 10 year old could figure that out.

    ReplyDelete
  32. This comment has been removed by the author.

    ReplyDelete
  33. I have been meaning to ask this for the longest time. What does it mean when it says this comment has been removed by the author. ??? Thank you.

    ReplyDelete
    Replies
    1. I decided that it wasn't worth correcting my typos, so I deleted it

      This current discussion is becoming a little too polarized, with little new information introduced

      Delete
  34. Hillbilly Economist Paul Craig Roberts going bonkers on KWN.

    "Da companies are barring money frum bonks to buy back dar own stock!"

    Well today on Gary Kaltbaum's podcast, he noted many stocks near or at all time highs that did not pull back during this correction.

    And the majority of those are CONSUMER STOCKS, lol.....

    DECK
    UA
    CMG
    NKE
    HD
    LOW

    ReplyDelete
    Replies
    1. If you are a CEO or BoD paying a big dividend it may be cash flow positive to borrow at lower interest rates than the dividend rate.

      Makes sense to me.

      Delete
    2. LOL but wha bout da corlapse of the dualla ?

      Delete
  35. Central Planners have been fighting a war that has left every gloom and doomer attempting to short the market the last 2 years flat broke.

    If this latest correction turns out to be like October 1999, we'll you know how that ended up. QQQ doubled from $53 to $105, led by the semiconductor index that surged from 476 to 1,290 in under 5 months.

    ReplyDelete
    Replies
    1. Xau to 50 and gold under 1000 then.

      Delete
  36. To put some of our favorite charlatans in some entertaining historical context, Josh Brown has put chapter 7 of his book online for us to read for free. It's the chapter on Joe Granville. It's a fun read, and it makes you realize there's nothing new under the sun. All these guys we mock every day learned the trade from Granville.

    http://www.thereformedbroker.com/2014/08/10/exclusive-excerpt-the-man-who-moved-markets/

    ReplyDelete
  37. And some excellent follow up comments from Josh, referencing Richard Russell.

    http://www.thereformedbroker.com/2014/08/10/the-guys-who-get-you-out-will-never-get-you-back-in/

    ReplyDelete
  38. I was at Dean Witter in Clayton, Mo > leaving Clayton Brokerage when the checkbook was opened up and I remember when Glanville came with his all out sell signal sometime in late'80 or '81 or thereabouts and the mkt never went lower. Just another case of a donkey letting his alligator mouth overloading his hummingbird ass.

    ReplyDelete
  39. this just in hot off the presses; Rick Rule has commodity shortages showing up! he must have some real special charts. or maybe what he really means is that in Arg and Venz they can not find enough toilet paper?

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  40. Brassey:

    I'm sure the CRB Index will crater within 48 hours of that article's posting.

    Rick "I'm Delighted" Rule's investors got decimated by the gold junior and uranium recommendations 3 years ago.

    Same with James Dines.

    A girlfriend's mother who is retired bet her entire retirement on James Dines' recommendations and now she's working part time at a clothing store.

    Unfortunately, another blue hair "extended family" member that got taken to the cleaners. Said "expert" soon to be profiled on "American Greed", LOL...

    ReplyDelete
    Replies
    1. nobody with any sense or $ has paid any attention to Belvedere Dines for 30 years; just another letter writer

      Delete
  41. Dan,

    I respect your views but I do believe that you do not have a full understanding of how GLD works.

    For every buyer of a share in GLD there is a seller of the same share and so that does not affect the float or the amount of Gold held. That share of GLD is tied to the market price of Gold but only the share float reflects the amount of Gold in inventory. It is only the AP's (Authorised Participants) who can add or subtract from the float and so either injext or remove Gold from the GLD. The AP's can use GLD, therefore, as ready source of physical Gold as needed and can also increase the float by injecting Gold.

    So, my point is simply that the amount of Gold held by GLD does not necessarily reflect "Investment demand"

    ReplyDelete
    Replies
    1. philipat;

      Thank you for the comments but I have to marvel at how some cannot " see the proverbial forest for the trees".

      Pull up a chart of the reported holdings of GLD and then overlay that chart over the price of gold at the Comex both leading up to the peak in price and then following the move lower in the metal.

      Then come back and tell us here how GLD does not reflect western-oriented investment demand.

      My oh my, I will never understand how some can consistently overlook the simplest, most obvious answer to questions and insist on muddying the waters.

      Have you ever heard of Ockham's Razor?

      I will stick to my personal observation and conviction of GLD as a reflection of WEstern-oriented investment demand.

      Delete
    2. So why haven't GLD holdings in 2014 not increased in propertion to the Gold price? All I am saying is that the Gold holdings of GLD do not necessarily mirror the the price of Gold but, of course, the individual price of a GLD share DOES mirror the Gold price. It would be possible, as an example, for JPM to reduce the share float by half and withdraw half of the inventory of Gold if, for instance, it needed physical Gold to ship to China. The share float would also halve but a share would still mirror the price of Gold. But that reduction in float and inventory would NOT reflect Western investment demand reduction. It's just simple mathematics so Ockham's Razor is not really a relevant issue.
      You obviously have much greater faith in the integrity of the BB's than I do.

      Delete
    3. Good comment Phil,

      check my (similar) observation from 8/11 am

      David

      Delete
    4. Philipat,

      GLD represents western gold invesment demand. Which has crashed since 2011. Most of the weak hands have panicked and sold. The sales were bought by China last year. Some 900 MT.

      In 2014 , Eastern Gold demand (Especially from China & Russia) has pushed Gold up. While GLD now has only strong hands left.

      Delete
    5. Sorry but neither you, nor apparently Dan, actually understand how GLD works. I have already explained it earlier. You need to understand the difference between the GLD Share price, which directly reflects the market price of Gold, and the Share Float and Physical Inventory which, because of the way GLD is constructed such that ONLY AP's can actually take out Physical Gold in multiples of 100K shares. I'm sorry if you can't understand.

      Delete
  42. Each spent on a derivative is not spend on the real asset. Only purchases on the real asset affects the price.

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    Replies
    1. Michael;

      Apparently you have never traded the futures markets and have never understood how they are used as pricing mechanism for all manner of forward contracts throughout various industries.

      Most nearly every single bushel of grain traded in the US is priced on the basis. Futures markets ( derivatives) are an essential element in this for without them there would be no such thing as "basis".

      Try harder next time....

      Delete
    2. First: Assumptions are the mother of all f*ckups. I have traded gold and silver futures in the past. It was an expensive lesson for me to say the least.
      Second: Not all derivatives are futures.
      A derivative like the GLD share is NOT a future contract and can not be redeemed back to the real underlying asset (at least the buyer of it cannot claim it). There is actually a possibility the underlying asset even not exist anymore.

      Delete
    3. Michael;

      I will never understand what some people in this world hope to prove by continuing to argue with those who are not going to listen to them. I have already informed you and others about my view of GLD as a proxy for Western-oriented investment for gold. Now you can either accept that or you cannot. Frankly I don't care either way. But one thing you are not going to accomplish is to change my mind about how I see it. So my suggestion is for you to stop wasting my time and go your merry way.

      This discussion is over.

      Delete
  43. Sanofi!!!!! MNKD Partner!!!!!!! Where's BOB????? AWESOME!!!!!!

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    Replies
    1. Hi Nate. Yes, saw the news but don't like the deal. MNKD only 35% of the profits going forward...seems low to me even though SNY will be doing the heavy lifting. I immediately bought short term puts on the open and cashed out already with a nice quick profit. It will be interesting to see how this plays out in the future. MNKD still looks intriguing long term because of their Technosphere technology. That is their best bet going forward to me personally.

      Delete
  44. I just wish I had listened to Mark and sold all MNKD holdings at $4....

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  45. Hello Dan,

    I enjoy your analysis.
    You have stated "...trying to be as objective as I possibly can..". How do you explain? Yes, the price of gold is down almost 30% since 2013 and the GLD inventory is down about 30% to 798t or so - so there is definitely some correlation. Price of silver is also down over 30% - so there is definitely some correlation with gold, and historically has always been... SO HOW DO YOU EXPLAIN the SLV inventory is ACUALY UP over 5%? You can google (images) "GLD SLV inventory" to see many charts documenting that.
    Isn't there a "bit of truth" to the conspiracy theory that GLD has been drained to obtain those critical 600+ tuns, since gold is monetary and strategic metal ..while silver is not?
    Thank you for your comment Sir!

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  46. David

    May I respectfully refer you to Keith Weiner's ongoing work on Basis/Cobasis, which goes some considerable way towards explaining the divergence between Gold and Silver, and the very considerable hole that currently exists beneath the latter

    Put bluntly, Silver is both more volatile and less exclusively "monetary" than Gold, and at certain stages of the economic cycle behaves more like a Commodity (something which Dan has also remarked upon)

    In last week's bulletin (in particular) Weiner comnented on the trend and cyclicality of the Gold:Silver ratio, and suggested that this remained within an established upwards trend channel, targeting previous highs of 80. Certainly, over the past few years Silver has given very little indication of any likelihood of seeing $23 any time soon, whereas $1400+ on Gold remains a plausible (if at present unlikely) possibility - suggesting a lower boundary for the GSR some way above 1400/23 = 61

    There is massive speculative interest in Silver, but little evidence of hoarding, to the point where "the warehouse" is the buyer of last resort simply because the "Buy Spot / Sell Forward" carry trade has recently been so lucrative. There is currently more above-ground Silver than there are investors wanting to hokd it, and inventories are being built up not on a "marginal cost of production" basis, but as a waste byproduct if refining other metals

    Consider this; if you go to The Royal Mint website, for £20 you can buy a 1/2 oz Silver coin which is legal tender and redeemable for cash at any UK bank for £20 of fiat sterling. 1/2 oz of Silver is currently worth around £5, and so the value of that coin is 25% intrinsic metal, 75% British Government "promise". Looked at another way, in order to make good the difference between 1/2 oz of metal and £20 invested, they need to promise you an additional £15 (for which you could buy 1.5 oz if Silver) - a "paper promise" is therefore worth 1.5 iz of Silver

    Compare this to another widely circulated legal-tender UK coin - the £1 Gold Sovereign (currently costing around £200 and contaiin around 1/4 oz Gold). The intrinsic metal value is worth around £199 and the "promise" to pay £1 fiat can logically not be worth more than £1, suggesting that it is equivalent to a vanishingly small fraction of an ounce of Gold

    Same promise, same fiat, same highstreet bank - worth 1.5 oz of Silver or less than 1% of an ounce of Gold - do the math, and if you don't believe thus trade is both real and legitimate, go to www.royalmint.com and www.bullionbypost.co.uk and check it out for yourself

    Actually, think the £20 WW1 commemorative Silver coins arevan absolute bargain, because at £20 each they don't charge any premium for the implicit out-of-the-money perpetual Call Option on the 1/2 oz Silver, because its so worthless in the current market

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  47. I would like to take this opportunity to be the first to claim that the ISIS insurgency in Iraq is in fact a false-flag scenario directly sponsored by Putin (and Elvis)

    remember where you saw it first.

    Ponzi.

    http://www.zerohedge.com/news/2014-08-10/guest-post-us-airstrikes-northern-iraq-are-all-about-oil

    ReplyDelete
  48. Dear Mr. Dan,

    USA is loosing its dictatorship over the world, now desperately trying to enforce its Dollar when many large nations like Russia & China do not want to trade in dollars.

    Thus it is provoking&threatening Russia into submission to $ supremacy via UKRAINE. But then many nations are not confirming. Germany will soon EXIT EUROZONE as its economy fails as Putin Bans Gas to EU.

    Quoting Michael Noonan : http://news.goldseek.com/GoldSeek/1407679620.php

    The idiotic sanctions Obama keeps on imposing on Russia are now backfiring even more. Putin is striking back, banning food imports from the EU. This is just what the insolvent EU nations need, more weakening of their economies. It is costly for EU nations to be the lap-dog for Obama. Soon, reality self-survival will surface, and EU nations will learn to just say No! Austria already has. France has.

    Germany has been lacking integrity, with over 3,000 businesses dealing extensively with Russia, with 30%-40% of its energy needs coming from Russia. Russia is using German lawyers to improve Russia’s international laws to improve the willingness of foreigners to conduct business with Russia. Why does anyone think Germany will alienate Putin and put their economical strength at risk? Yet, Germany [Merkel] is dragging her feet in breaking away from the model of war and banking suicide, in favor of aligning with greater growth and financial health with Eurasian nations. An inexplicable Why?

    The fact that the West is fading fast, choking on trillions in worthless derivatives that are propping up the all but failed Western financial system, and can keep countries like Germany in the fold is a testament to how fierce the elites will exert whatever control they can over each country, mostly by financial threat of destroying the country’s banking viability.

    Russia to Europe: You want gas? It will cost you. Price? Pay in rubles, yuan, maybe even gold. You want to pay in “dollars?” No sale.

    ReplyDelete
    Replies
    1. Note that US can only for a few weeks more continue fooling the world that its economy is fine and that money printing is not required. But this is until the QE3 buffers are fully utilized.

      As such no country is ready to buy US bonds to finance the Huge Deficits of the USGovt. Its only the FED who prints and finances USG.

      Soon the buffers will be empty and liquidity will dry up. Then who will finance the Deficits? Economy will start tanking and QE4 will be announced. Another blow to confidence in US Central Bank.

      So before that happens US is desperate to use its military might and neuter challenging nations into submission. But this is also failing.

      Delete
    2. Shark, I do not think anyone here cares for your thoughts, so why not get the message and just leave?

      Delete
    3. This comment has been removed by the author.

      Delete
    4. Personal attacks are not appropriate.

      Delete
  49. "Russia & China do not want to trade in dollars."
    But then how do they store it? I'm no specialist, but Armstrong said that trade in dollars is irrelevant, because only the dollar is deep enough now to store big wealth. So, want it or not, countries must store in dollars. Bullshit? No idea. But sure enough dollar and T-Bonds is one of the deepest markets in the world.

    "Germany will soon EXIT EUROZONE as its economy fails as Putin Bans Gas to EU. " Hmm...you are really ahead of your time, or you have a great cristal ball.
    "Soon, reality self-survival will surface, and EU nations will learn to just say No! " You just don't know that, unfortunately.

    "An inexplicable Why?". Maybe you don't see all the puzzle behind the scenes. Maybe she has no choice. I have no idea.

    "As such no country is ready to buy US bonds to finance the Huge Deficits of the USGovt. Its only the FED who prints and finances USG."
    Really?? Please send me the link to the chart proving this very statement.

    Difficult to see. Always in motion the future is. - Yoda.








    ReplyDelete
  50. Shark, why do more Indians move to America every year than Americans move to India?

    ReplyDelete
    Replies
    1. Steve,
      Even the chinese have been pouring into USA.

      Hubert,
      China was the largest buyer of US bonds pre 2009. Since then its bond buying has trickled down to 5% of previous yearly purchases. Same with many other large countries. If so, guess who might be buying those bonds?

      Delete
    2. Shark, you are like all the rest. You know everything that is wrong with America, yet you never seem to tell us about how smart and ethical the Russkis, Indians, and Chinese are. Why is that I wonder?

      Delete
    3. You know Shark, the Chinese own all the world's cotton at $2, all the copper at $4.40, and $17 beans, so maybe since they are underwater on all these wrongheaded buys that they just do not have any money left to buy bonds over here. On the other hand, maybe they have decided to build more malls that nobody wants to go to, or railroads to nowhere, or bridges , but hey, they did build the greatest dam in the world, right? And guaranteed that it will do its best to wreck things as they relentlessly ruin their environment until the cows come home. Still basically a command and control oligarchic nightmare unfolding. Last but not least and I do not know if you understand the concepts of contrarian thinking or consensus, but you have a lot of company in your thinking that the East is going to trample the West. Myself, I will fade that thought.

      Delete
  51. Steve,

    Everything that USA has achieved is via debt. Which can only be repaid thru debasement.

    ReplyDelete

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