"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat


Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput

Trader Dan's Work is NOW AVAILABLE AT WWW.TRADERDAN.NET



Thursday, September 11, 2014

Weekly Gold Chart - Updated

I have posted this chart fairly regularly now for some time to give a more intermediate term look at the gold market for those who are interested.

Not a single thing has changed for gold in over a year now. The metal is still trapped within a broad range defined on the chart. It is now working its way down toward the bottom of the range having failed to make any new weekly high. As a matter of fact, the pattern for gold has been one of LOWER HIGHS for over a year now within that range. That is suggestive of weakness.

This week the HIGHER LOW was broken and while it is still not the end of the trading session for Friday, the metal is threatening to put in a LOWER LOW within the range compared to the May close. That is a sign that the odds favor a move down towards $1200 unless it swiftly reverses and regains the $1240 level in a convincing fashion.




As said many times here to the point of taxing the reader's patience - it is no where written that a market must either be trending lower or if not, then trending higher. Markets can often move within broad, well-defined ranges for a long period of time; essentially they go nowhere. What that suggests is that supply/demand are essentially in balance within that range of prices. Unless an external development occurs which CHANGES the balance between the forces of demand and the forces of supply, the most likely outcome is a furtherance of the range trade.

I find it therefore rather disconcerting that so many of the gold-perma bulls continue their mantra of "Keep Stacking". For those who want to acquire some physical metal for insurance purposes, buying gold near the bottom of a well defined trading range makes sense. However, for those who "keep stacking" while they wait for the "any day now moon launch", theirs is a 'strategy' that has more odds of leaving them disappointed rather than obscenely rich as they dream. As mentioned above, range trades for markets are more the norm than solid, trending moves. The trending moves occur because something happens which triggers a new valuation of the underlying market whether that be an increase in the demand side of the ledger or in the supply side of the ledger.

Take for example the recent rallies in the cattle market, especially feeder cattle, and the recent sharp downdraft in the corn and bean markets. In the case of the bull market in cattle, the supply side has been constrained as ranchers and producers seek to rebuild herds devastated by back to back drought years in 2011 and 2012. The result has been increased demand with sellers of the animals in control as they have the luxury of sitting back and waiting for buyers to pay up and chase prices higher.

In the case of the bear market in the grains, the supply side of the equation continues to increase as the size of the expected harvest increases with each new USDA monthly report. That gives buyers the advantage because they have the luxury of sitting on their heels and waiting for even lower prices before committing in size.

In other words, both markets are imbalanced at the moment and seeking to find a price level or a range which satisfies both sellers and buyers that prices have reached a fair value level.

For gold to therefore move out of its range, a trigger will need to occur. Without that, gold bulls will be disappointed that the metal cannot escape from the upper boundaries of its 14 month long range. Gold bears also have not yet been able to crack prices below the bottom of the range starting near $1200 and extending down to $1180. Within this very broad range, a truce exists between both buyers and sellers. Shorter term within the range; however, there are signs that the buyers are regaining an advantage as demand is falling for available supply meaning sellers are willing to take less for their gold. As long as that is the case, the price will move lower. It will not be until they are more buyers at a lower price than there are willing sellers that the price will bottom. Trying to ascertain at what level that might occur is the business of traders.

If there is a change in either supply or demand, the market will reflect that as the price chart will change accordingly.  Until then, prognostications, predictions, rash claims, etc, about surging gold prices are just that, rash claims founded on nothing but air with no basis in the price chart or in the technical patterns. Objective viewers and students of the markets learn to dismiss all such voices and listen to the only voice that matters - that of the market itself. It and only it knows when demand and supply have come into balance.

51 comments:

  1. Neat precis, Dan

    the only possible additions might be to note that, in and of themselves, Geopolitical and Macroeconomic factors do not appear to be the primary drivers of price - certainly not in terms of being "Game Changers" which violate the more general channel

    The time will come, but is not now

    ReplyDelete
  2. Hello,

    Thanks for all those new posts, very instructive.
    I'm entering a bery busy period of time and will not have much time to post charts, etc...
    When I have time, I'm currently watching WTI, Copper, Silver, Gold, which are all imo on short term inflexion points at those levels.
    I completely agree with the fact that if gold doesn't manage to hold 1240, it is likely to head towards 1200 and even 1180, why stop so close without testing the last years lows? :)
    Take care all and good trades.

    ReplyDelete
  3. lol... one more Bo Polny's forecast dead wrong!
    When we were at 1310 this summer, he wrote that for sure gold would reach 2000 by year end and for sure also the summer bottom was in at 1280!!!
    I noticed that it was a fantastic call to be long for all long term investors who still trusted that DONK, as the risk reward ratio was indeed huge : stop loss 1280, 30 $ risk for 700 $ profit.
    Well sorry Bo, even with those odds, I didn't follow your call.

    But then when 1280 broke, the stupid donk sent a free letter saying '"it's not important!! Because the real low is 1240 and it is unbreakable and as long as it holds, we are in a bullish trend."

    Lol! I can't wait for that gagngster's new letter, because I know he will say once again : See? I was Right!!!!
    Incredible!!

    I read this today, unfortunately, on jsmineset.

    "Turk also added some additional comments to go along with the extraordinary chart he sent to KWN yesterday. Below are Turk’s comments and his fantastic chart."
    It's an extract of KWN.
    Fantastic chart.
    Incredible chart.
    Turk who has now ZERO credibility as well except to sell his shit all the time.

    That jsmineset supports and advertises this nonsense and people like Turk and Bo Polny before reveals that this blog as well is a poor website if you want to follow it for investment reasons.
    It is simply impossible for Sinclair to ignore the incompetence of Turk and Bo Polny at this time. Choosing to advertise them shows this blog has a huge bias on the long side of gold, i.e cannot be trusted regarding gold forecasts and analysis.

    ReplyDelete
    Replies
    1. Hubert , if you have a minute , if you had a position filled at 1233 , and were looking to add , hoping for gold to retain 1240 , how would you play that one ? Thank you in advance . My take , I wait for a break back above 1240 , if it does , then I add another third ? otherways if it doesnt I put a stop at 1230 for the time being for the existing position ?

      Delete
    2. Hubert, it is Groundhog Day every day with kwn and his 13 Stooges; btw, lots of new Indian ladies showing up today in their typical shameless fashion.

      Delete
    3. I told you Sinclair is a moral degenerate a long time ago.

      He cannot be trusted to do what he says or believe what he promotes or speak the truth.

      With Jim its about selling TRX shares to benefit Jim and the leaches in the board.

      Soulless husk of a person.

      Delete
    4. Anon, sorry I'm not frequently here and quite busy now.
      Below 1230 like now, I'd already be out of the market.
      Now, the question is to be short or to be out, not to be long gold.
      1240 are being destroyed, next target imo is 1180.
      Of course, it's better to wait for the close to feel more comfortable about it, but we hit 1228 already, and that does not smell good for bulls.

      Delete
    5. P.S : I'm not in front of my platform, so I can't say, but if you insist on buying gold now, at least go watch the 4h and 1 hour time units. You must see some kind of signal there such as bullish divergence on MACD, extremely oversold stochastic, anything which confirms that the bleeding is over. And whatever your position, put a stop loss right now and accept losses if it gets hit.

      Delete
    6. Hubert;

      To repeat my views towards gold-oriented newsletter writers and other assorted charlatans and hucksters who prey on their subscribers.... there is a scene described in the 9th chapter of the book of Revelation detailing a horde of locusts ascending from the bottomless pit going forth to wreak havoc on the land. As a student of Scripture I have my own ideas of what this symbolism means but I am becoming more and more convinced that this biblical plague is a reference to the plethora of gold newsletter writers, "experts", pundits, etc. who have come forth to leave a path of ruin and devastation in their wake.

      Please note that the last sentence if meant to be sarcastic but I do think at times that I might not be too far off in that interpretation!

      Delete
    7. Thanks Hubert , I am out already ...

      Delete
  4. I have grown irate at the continual misuse of the phrase "ponzi" to describe all and every behaviour which the Preppers/Drink-yer-own-Pee Survivalists/Goldbugs don't like (or, more typically, don't understand). I wish more people would do their homework, because quite apart from anything educational, the story behind the underlying scam is truly fascinating. However, they don't

    But here's the funny thing; I believe that Goldbugs and websites like KWN and Turd Ferguson's 'Island of Misfit Toys' are perhaps one of the purest forms of a genuine (albeit non-financial) ponzi scheme, insofar as

    1. The headline premise (manipulation by TPTB) appears plausible, with an attractive aura of 'truthiness' mystique about it

    2. Satisfaction of the expectations (or, more accurately, the ego deficits) of previous subscribers is entirely dependent upon finding a steady stream of gullible new mugs , all eager to get rich quick by "playing a system" that they really don't understand

    3. Suspension of disbelief: whatever the opposite of "too good to be true" is. We had some verbose prat writing on this blog last week spouting off about Henry 5th at the Battle of Agincourt, and precisely that "Band of Brothers" typifies the self-referential groupthink mentality if these cliques. Nowhere is this better exemplified (as I pointed out yesterday) than in the special bile and hatred shown towards traitors to the cause such as Dan. Mere non-believers can be ignored with disdain, but anyone who has lost their religion and raises any form of challenge is to be burned as a heretic

    So, upon reflection. the fact that Turk, Maguire, von Mousetrap et al appear to have no shame nor indeed any form of memory is entirely understandable, given that they are not in the slightest bit interested in what they told Yesterday's Fools (or how that played out), because the only point of interest is to seduce Today's and Tomorrow's Fools. Without them, the whole House of Cards comes crashing down

    This also goes some way towards explaining the ritualised Articles of the Faith which only the High Priests understand and interpret: COT reports, COMEX inventories, financial leverage, options expiry, backwardation, the Plunge Pritection Team. All these things are well documented and in the public domain, but are just arcane enough for the average layman to leave to The Experts (Sound Engineer, Frozen Yogurt Retailer, Electrical Goods CFO etc) to explain.

    There is a , Fool Born every minute, and most of us have lapped up Eric's sensationalist headlines at one stage or another before realising what was going on. It's Human Nature - let's exploit it!

    ReplyDelete
    Replies
    1. This comment has been removed by the author.

      Delete
    2. Lan, add to your list the whited sepulchers that posted clips of a battle hardened ol' sarge saying, "Gentlemen, prepare to defend yourselves!"

      Delete
    3. Zhang Lan;

      You have an unique ability with words and are an excellent writer with a very keen mind!

      Delete
    4. Great comments here. Some newsletter writers and people selling gold products are using fear and greed to sell their products. It is no different than a used car salesman trying to sell a lot full of used cars. Some will use any tactic to sell their cars to a buyer who hasn't done their homework. KWN is a marketing platform for these guys and the KWN website could likely profiting someway by publishing these articles that are largely marketing propaganda - trying to get people to buy gold and silver related investments by pushing the fear and greed emotional buttons of consumers. It comes down to the old adage of "buyer beware". It is just that it is more difficult to see because it is a much more sophisticated, less obvious approach to this marketing scheme.

      Dan - you have done much good on this blog to open the eyes of many shoppers! Great analysis on the gold charts today and explanation of market dynamics.

      Delete
    5. Some people don't let market trends turn them from Austrian to Keynesian. And then back to Austrian again.

      Delete
    6. M: I'm interested in what goes up. Not what fits politics.
      A political bias (and economics is just politics in drag) is a sure road to the poor house.

      Delete
  5. MDLGTO

    not familiar with that one - I only go as far as "Brace yourself, Mildred"

    ReplyDelete
  6. TraderDan said: "I find it therefore rather disconcerting that so many of the gold-perma bulls continue their mantra of "Keep Stacking". For those who want to acquire some physical metal for insurance purposes, buying gold near the bottom of a well defined trading range makes sense. However, for those who "keep stacking" while they wait for the "any day now moon launch", theirs is a 'strategy' that has more odds of leaving them disappointed rather than obscenely rich as they dream."

    While I don't consider myself one of the gold "perma bulls" you describe I am one of those crazies who is pleased as punch that physical gold is available at these low prices. I look forward to a further breakdown of these paper gold markets so I can acquire more gold on sale.

    I am a producer and a saver with very conservative spending habits so I have to decide where to store (long term) my excess production. As I see it my choices are between dollars or gold. I may be a dinosaur but when I say saving I don't mean an IRA or 401K. IMO these are too risky to be considered saving. For a myriad of reasons my choice is to convert my excess paper to physical gold. To me this is not "insurance", it is savings. I do have about 20% of my net worth in the mainstream stock market although I have sold most of my positions recently and am mostly sitting in depreciating cash. Not that anyone cares but I wanted to explain why I am still stacking. I am not looking for a rocket launch in the POG so I can buy an Island and a private jet, I am trying to make serious, long term decisions on where to store my savings.

    ReplyDelete
    Replies
    1. Gene
      Is am in a similar situation re savings but have chosen a different path.

      Major investment in real estate and stocks. A bit of bonds.
      While I am concerned about inflation I am keeping a substantial cash position in this zero interest rate environment. Got some in gold too. Yes I trade a bit with a micro stake but don't have the time to do more.

      IMHO as long as the cheap money is around the compounded dividend and appreciation in the stock market is the place to be.

      Delete
    2. You may be right Mike. Time will tell. I do also have a substantial portion of cash savings. I am by no means all in. I have just lost faith in the dollar. Maybe if we had a real economy that valued savings I might reconsider.

      Delete
    3. I have no faith in the dollar as a sound currency but it's what I live in so will have to keep wealth there until I can't any more.

      Delete
  7. almanac shows a sept. + for cattle on back to school lunches!
    http://blog.stocktradersalmanac.com/

    GC SI XAU HUI weak on thurs. then weak on friday seems to be playing out, perhaps shorts know that bidders will keep wallets on hip on a friday and just wait til they see what happens over the wacky world weekend!

    on the 'wyckoff volume method' would like to see a low volume rejection test of 1170 gold to make a durable bottom... seeing articles that the ave. worldwide cost of producing gold is about there 1150-1200.

    silver has an ab=cd and a .786 at 11.60:
    http://www.youtube.com/watch?v=Zyu4-5CiBz8

    the usda reports coming forward i.e. oct. nov. tend to get more bearish in this situation that we've currently got in the ags, with 'record this' and 'near record that', usda doesn't go all in on the sept report as it doesn't yet have the final facts... seeing alot of good commentary with a 3.10 corn goal and a 2.5 bean/corn ratio gets beans into the low 9's.

    SPX now below the 20-day MA as we've had a low volume 'correction' week, ahead of the usually bullish op-ex week on deck.

    TGIF!


    ReplyDelete
  8. despite the USDX flying gold is holding up rather well. If someone at the Fed comes out and says the Fed is going to remain dovish for longer than people think, we could see a sharp unwinding of trading shorts on gold/silver and an unwinding of USDX longs. The slow blood drip out of gold comes concomitantly with the dollar rising.

    gold is privacy. At any price it's good, just hedge.

    ReplyDelete
    Replies
    1. This bear in gold is giving me lots of time to ease in.

      Gold goes up with interest rate rises as money exits bonds. Happend in 04 to 07 and the 80s

      Delete
  9. And for the record:

    I will repeat:

    Our own Trader Dan nailed the top in the crude market almost to the day.

    Since then the crude market has done a 1987 crash.

    On the other hand, the:

    "market veterans"
    "acclaimed experts"
    "with 45 years experience"

    Completely blew it with their gold price predictions.

    Now they have zero credibility.

    ReplyDelete
  10. North Dakota says July's oil production all time high. The domestic production numbers just keep getting better and better. Despite residents having to truck in potable water, and suing in court to stop fracking, the levels just keep rising. Anti-fracking initiatives get taken off ballots, like in CO. Don't bother getting anti fracking ballots put on your state ballot. It will be taken off.

    The plan moves forward.

    ReplyDelete
  11. Bill Murphy must be chugging 3 bottles of Wild Turkey right now.

    General Jim curled up in the fetal position with his 19 dogs.

    Rick "I'd Love To" Rule, and Eric Sprott fighting a tidal wave of fund redemptions.

    John Embry and Stephen Leeb squealing like stuck pigs, wondering how they got it so wrong.

    ReplyDelete
    Replies
    1. Mark, you sound like an embittered man. Perchance you were once an ardent follower of these demons you condemn in almost every post you make. They are no worse than the touts plugging the S&P - it is all about capturing minds with belief, to make money. We humans are a predatory species, and can't stop ourselves exploiting others. Now if only you had got into gold in the year 2000 you would still be up nearly 400%, and not unduly concerned with the 30% fall. For those who entered early gold has been a great deal more than insurance. It was, is, and always has been a valid investment in any sensible portfolio, as probably shown by the amount of people using this site if they had to confess whether they own gold. Also, Mark, I hope you didn't tumble out of gold into other markets at their peak, and repeat the same error. Life really is a bitch.

      Delete
    2. And Turd Ferguson will have to eat yet another hat!

      Delete
    3. Actually, I was both surprised and impressed when he did that; Craig is more PT Barnum than Gordon Gecko, but on that particular occasion (Silver not reaching $23) he showed considerable humility

      Quite unexpected from a Frozen Yogurt vendor, but similarly wholesome and refreshing

      Delete
    4. https://www.youtube.com/watch?v=t7XpiFu0M_g&l

      Here it is...Worth a laugh...

      Delete
  12. Strange but true, silver holding up better.

    ReplyDelete
  13. FXE trying to turn the corner.

    UUP has virtually gone straight up for many days in a row.

    There is going to be a trade on GLD coming up soon.

    THIS IS IT!! IT IS NOW!!! LOL.....

    ReplyDelete
  14. I love the discourse here, and if anything, I have not seen it so negative which I suppose in itself might be a contrarian type of indicator.

    I'm not saying there's anything currently forecasting gold to reverse, but then who in March of 2009 was not prognosticating that the markets were continued down?

    Of course these $10-20 a day losses have been relentless. Turn on the screen, red waterfall every morning.

    ReplyDelete
    Replies
    1. Quite frankly, "red waterfall" is probably better than "golden shower" any day of the week

      Delete
  15. They reverse toward GLD close and is only down a few bucks. I guess people use gld as a trading vehicle. Use future contracts. I like europe close at 11:30 edt and 3:00 lately gold only dribbling. Gld shorts hope for big collapse. But cover after 3 when it doesn't unfold.

    ReplyDelete
  16. Gold is 4% off its low of 1180 and the HUI is 15% off its yearly low. GDXJ is 24% off its yearly low. So it appears to me that there could be some downside catch up should gold retest its lows. Dan , would you please post a chart of the HUI if you get a chance. Thanks

    ReplyDelete
    Replies
    1. That is my observation as well. Either the ratio stays this way or miner shorts like DUST will gap big if 1180 breaks

      Delete
    2. Look around, almost everything is deflating in case you guys had not noticed?

      As the Fed tapers and buys less and less assets the stock markets, and many other markets are deflating.

      The Fed is the markets by the looks of it.

      Unless the Fed reverses the taper looks like deflation in all markets may be the new trend now.

      So what market or markets is the trade now might be a better question if deflation is being allowed by the central banks?

      Delete
  17. MACD rolled over 2 wks ago in the 10 year and now looking to do the same in the S&P. All take care as Sept is worst month for stks and Oct is second. Have a good wknd everyone.

    ReplyDelete
    Replies
    1. Over the last 30 years the SPX performs worst from Sep 16 to Oct 31

      Delete
  18. Gold rises with interest rate increases. Because money is exiting bonds.

    ReplyDelete
  19. I think the QE taper/denial among some is a classic egocentric defense mechanism by those who are so emotionally and financially invested in "QE2Infinity/imminent collapse" meme's of others that they can't handle the fact they may have been mistaken.

    The folks who incessantly claim with certainty that they're right (even if it takes 10, 20...or 50 years!) are afraid to consider they might be partially or completely wrong in the past, present or future.

    There's no shortage of thin-skinned shallow minded "experts" out there who are either disingenuous PM shills or simply chronic malcontents who can always find something to be afraid or suspicious of and grind their collective axes against it.

    The deeper rabbit holes of thought clearly harbor a sizable contingent of blathering, rude know-it-alls who'll quickly whip out some half crazy internet article as their proof.

    The leaders of these darker pools of thought have a couple things in common.
    They need to be heard or taken seriously because they possibly aren't taken seriously in real life. They probably rant too much about the same thing over and over.
    Or they see the opportunity for financial gain from those who are easily herded into accepting their obsessive and somewhat magical beliefs.

    Objective thinking doesn't come easy to some when a heavy emotional investment is at stake.
    Complete denial that's heavily weighted with suspicion of almost everything is easier for some folks. It feels better to consider onesself smarter than the other 99%.
    The realization they might've been totally or partially misled or bought into someone else's extreme and obsessive belief system would make them feel too uncomfortable about themselves or even the carnies they've invested so much time or energy hanging around online.

    If you wall yourself off from popular, realistic opinion or trends and circle your wagon of thought you've more or less protected your "self" from being wrong, ridiculed or hurt.
    Confirmation bias dictates they surround themselves with themselves even if it's bad for business.

    Hanging around or listening to folks who obsessively engage in angry or fear based, suspicions on a daily basis can't be a healthy or financially prudent thing to do.
    That part of it can't be denied but I'm sure they'll do so anyway.

    ReplyDelete
    Replies
    1. Gold rises as interest rates rise.

      Delete
  20. Gold looks a little better in the Euro dollar chart. Has not yet broke down but is definitely range bound.

    ReplyDelete

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