"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


Thursday, November 13, 2014

GLD Drawdown Continues, Confirming the WGC Findings

If you have not taken some time out to read through the World Gold Council's recent report on the gold market ( see my earlier post from today for the link) I would strongly urge you do so. It is an excellent and illuminating read.

I already made some comments in regards to the section on ETF's.

In tracking the largest of these gold ETF's, namely, GLD, this afternoon is just more confirmation of the accuracy of that report. They have come to exactly the same conclusion as we have over here - namely that money is being pulled out of GLD in order to take advantage of obtaining better yields elsewhere, specifically in equities.

Notice that ever since that big upside day in gold last week (Nov 7), when we got a massive short covering burst of buying on the heels of the jobs report, the reported tonnage in gold has continued to drop. Simply put, investors are taking advantage of the moves higher in the price to exit and put the money to work elsewhere.

Here is the latest chart of GLD and it is a doozy. Since the day just before the big price surge last Friday, GLD has disgorged another 12+ tons of the metal. It's holdings are now down to 720.62 tons, the lowest level since September 2008. Interestingly enough, it is back to levels last seen PRIOR to the onset of any of the QE programs by the Federal Reserve.

Also, as of today, the ETF has shed an astounding 77.6 tons of gold this year alone. No matter how one slices it or dices it, that is one heckuva lot of gold.

As I have stated so often over here the last couple of years, the market sees no inflation worries whatsoever at this point so any buying of the metal as an inflation hedge is non-existent.

Just look at the carnage in crude oil today and the liquid energies! Crude oil prices are falling out of bed as the world is swimming in the black goo. The impact from this key market is being keenly seen on the various commodity indices.

Here is the latest for the Goldman Sachs Commodity Index. It hit a 51 month low today! The last time it was at this level was all the way back in September 2010!

Just look at this chart of unleaded gasoline. I recall posting a chart of unleaded just very recently and remarking that it might actually put a "1" handle in front of the price at the rate it has been plummeting, but I never expected to see it get there this quickly! Talk about a bonanza for the transportation industry and for the consumer!

This is coming at the perfect time for retailors as it puts more money in the pocket of the US consumer at precisely the exact time for Christmas shopping season. No wonder retail stocks are doing what they are doing!

I think this has a lot to do as well with the fact that the cattle market simply refuses to break down. As the frequent readers know, I am on record as saying that I believe both pork and beef prices would come down in Q4 and certainly by Q1 2015. Pork prices had come down somewhat ( they are now beginning to movce back up at the wholesale level) as had beef, but only slightly. My view was that the economy was too weak for consumers, who had been cash strapped to afford record high beef prices, especially in light of cheap pork and chicken. However, the beef market has been the beneficiary of these incredibly cheap gasoline prices which is freeing up money for consumers to spend elsewhere. As a result, packers have been able to force the wholesale price higher and so far, distributors and grocers have been willing to pay it. Apparently they are able to move it, high price notwithstanding. It is almost as if demand for beef is proving to rather inelastic due to the cheap gasoline prices.

Just look at this market. Talk about one helluva strong bull! I keep watching this for some evidence of a top but the funds are in the driver's seat and are pushing it for all their worth. Until the beef shows signs of end user resistance, feedlots are in control and are squeezing packers and forcing them to pay up, even though they are losing in the vicinity of $100 head for every single animal they put down. Good thing they have such excellent margins in the hogs.

A brief comment on the gold - again, nothing doing as it remains range bound. Safe haven buying related to the ongoing mess in Ukraine is propping it up with strength in the Dollar keeping pressure on the market. I expect this standoff to continue for a while until we get some piece of fundamental data to drive it either way.

The mining shares are proving to be of no help whatsoever to the metal as they displayed exactly ZERO upside follow through to last week's one day wonder.

Copper is trading below $3.00 and in my mind, that is a very big deal, especially if it stays below that level.

The Japanese Yen has entered Asian trade at this moment notching a fresh SEVEN YEAR LOW against the US Dollar.

 Lastly, one of the things I must do as a trader is try to juggle all the various cross currents that buffet the markets that we trade and try to understand their impact on price. One thing I can say is that in an environment such as this one, where the overall trend for commodities is lower, it makes me suspect rallies that might break out in certain sectors. I have to respect the chart pattern but I do wonder about their staying power. Thus far cattle have been the exception as has been the meal market, which continues to drag the grains higher, but one wonders how much longer those stalwarts are going to be able to buck the wider trend.


  1. Do you honestly believe that the likes of Putin and other countries who buy real gold (not s&$t gld paper) by the tons, look at charts and sites like this where a handful of bloggers like " dark purple haze" tell us how great the world and the us dollars is???
    Since 2009 china alone has imported around 5000 tons of "real" gold, not gld paper s$&t
    Mr Norcini, please send these charts to chinese and russian officials and see what they say!!
    Actually don't lol!!

    1. Mr. Bloggerhead:

      May I suggest you separate your lips away from the Kool-Aid long enough to read the TITLE of this blog? It says "TRADER DAN".

      Do you think I care what the Chinese or Russians might or might not be doing as a trader. the trend has been down for more than 2 years now. Any trader who has not understood that and has been "buying the dip following the lead of the Chinese or Russian or Martians or Klingons" has been ruined.

      Now, please go away and rejoin the gold cult worship service, which I understand is always in progress. I heard that they have added a new gold colored, orange flavored Kool-Aid for you to enjoy.

    2. I see the Yen broke 116 and the USD is poised to retest 88.

      I have to laugh at the latest attempt by some to proclaim that once the USD strengthens further and hits 90 it signals that it's collapse will start. Really?
      How is that possible and what logic dictates that?

      The same twistedw logic that bellows how a zero "paper price" for gold or silver means they're about to skyrocket.

    3. BTW - if you are using central banks to determine whether to jump into gold, then you are making a GIANT mistake. Central banks are historically behind the curve on following the trend of commodities - especially Gold. Central banks were net sellers between 2004 and 2009. Then they really began ramping up their purchases just as gold peaked in 2011 - and they have been buying like crazy ever since 2011. If anything, the fact that central banks are buying, is probably a sign that gold is heading DOWN!

      Lastly, Putin is buying gold out of mere desperation. The Russian currency is CRASHING, and he thinks (incorrectly) that buying gold will save it.

    4. James Blogger, I am with you!!

      It is a great idea to align to the moves of Russian and Chinese central banks, as an individual.
      Indeed, you are sharing the same objectives, you are more or less the same size, so why not identify to them and pursue exactly the same policy? Buy when they buy (if possible, do it with the same amount), sell when they sell, and everything will be fine.

      May the force be with you, and rest in peace.

    5. DPH, I've seen that kind of tripe a lot over the years. Someone is always out there proclaiming that if the dollar hits XX, or the yen hits XX, or the the euro hits XX, then it's game over and we are all doomed.

      Problem is the numbers keep changing, and even when they are hit, not much happens. These are just another thing to scare people with. It always looks good in hindsight. "See, last time this currency hit XX, something bad happened, and it's coming again!" Scaremongers.

    6. eric webber, central banks don't buy assets to "follow the trend" or make a profit. They buy and sell assets to diversify or out of necessity to meet their mandate.

  2. Gold is not going anywhere except staying on this earth. Not used, not consumed. Who buy or not buy, total gold on earth remains intact

    1. There are asteroids in the asteroid belt that are pure gold. Some are as big as 1/5 our moon! Imagine if we began mining those -- gold would seriously plummet as it no longer would be a rare commodity....... LOL

    2. This reserved for building new Jerusalem lol, Eric

  3. We are now witnessing history in the making.

    The greatest economic boom ever witnessed is now occurring as a result of the biggest collapse in commodity prices since Lehman.

    Just pull up a chart of any restaurant stock like Domino's Pizza (DPZ), or a hotel stock like Marriott (MAR) and you will see absolutely breathtaking gains. Stocks that have gone straight up off the lows.

    The consumer has never been in a better position. Texas, Oklahoma, and N. Dakota will be going into a huge recession as a result of the oil crash, bu the rest of the country will be booming.

    Turns out that the "Shocking Truth" and the "Volcanic Eruption" how hitting the financial markets is the runaway, breakaway move in the U.S. Dollar and the epic crash in gold, silver, copper, and energy prices.

    We should all be celebrating at the unbelievable fortune that arrived, whereby everything is going in the favor of the consumer:

    - Soaring stocks
    - Plunging commodity prices
    - Ultra cheap interest rates
    - Booming economy
    Zero inflation

    That's pretty much as "Goldilocks" as it gets.

    1. This comment has been removed by the author.

    2. So what's the latest stock tip from your shoeshine boy?

    3. Bloggerhead;

      Fair warning before all your posts are deleted. Go away and take the gold cult hype to one of the many gold perma bull sites out there.

    4. Dan, it is like I always say and that is that most traders, specs and gamblers are just looking to lose. This donkey james blogger out of the sewer only proves it.

  4. I agree the falling GLD holdings supports the WGC findings for ETF outflows during Q3, but I don't think getting that right is indicative of the report being accurate otherwise. Have you seen Koos Jansen's responses to WGC's Chinese data and if so what are your thoughts?



    1. Bullion Baron;

      What you will find at this site, if you come here to read often enough, is that we do not spend our time or our energies attempting to discredit every government report, or every private agency or group's findings.

      All of that data is reflected in the trend in price because there are certain givens in the world in which we live as traders. Among those are that while technical factors can alter price movements based on what is assumed to be the fundamental demand/supply picture for a short time, eventually those fundamentals will reassert themselves.

      The truth of the matter is that those who continue to throw dirt on the findings of these agencies or outfits do so for one reason - they do not agree with the findings because they believe the fundamental picture is different. That is fine - they are entitled to believe whatever they want to. Same goes with Mr. Jansen or whomever.
      However, the market disagrees with their assessment and agrees with the findings of the WGC. How do we know this? Because the amount of gold available to be sold has not been able to be absorbed by the current amount of demand.

      When demand exceeds supply at a certain lower price, the price will then rise, Not a moment sooner or a moment later. That is all one needs to know to be successful as a trader or an investor.
      anything else is a waste of time to be honest.

      What is so obvious about those who are perpetually and eternally bullish gold all the time, no matter what, is that they are constantly spinning this theory or that theory as to why such and such is wrong and they are the only ones that are correct.
      the market simply does not agree with them. Fighting the market is a waste of time and the fastest way to become a former trader or a broken and busted investor.

    2. Two brief points if I may, with the joint payload that 'large' numbers of foreign Gold purchases are potentially bad for future price evolution:

      1. All that buying didnt help much, did it.....

      2. Now "Putin" has got his 1150 tons of Gold with which to defend the Ruble, how us he going to use it to achieve that end? Yes, that's right, he's going to sell it.......

      Of course, "Putin" or China buying 55 tons of Gold is a positive inducator, whereas whoever sold it to them was obviously manipulating the market: thats how these things work, if course - an evil Bankster threw a lot of Gold out in the garbage in the middle of the night while nobody was looking, and the Russians and the Chinese found it lying there in the street, unwanted, and just opportunistically picked it up for next to nothing. That's the miracle of manipulation - TPTB can "print" unlimited paper contracts, sell them, and nobody has to buy them, they just automatically settle themselves in a vacuum, with nobody ever printing unlimuted paper contracts to complete the opposite side of the trade. I blame Putin. Or China

    3. I know this guy from twitter. If you haven't gathered from his name, he is a MAJOR Goldbug. He's as bad as Blogger & Muppet puppet

    4. Great tips to live (trade) by TD.

    5. Some still do not get it yet, the US markets are rising and will rise as world investors look to park money away from deflation with poor bank returns ex. bonds along with ever increasing taxes to support elected and non-elected officials. Debt is rampant even in the US but the US will be the last to fall i.e. default.

      In the longer term, foodstuffs, oil, etc. are only sideshows as people still are in no mood to spend with the future uncertain.

      Armstrong and his computer sees events in gold slightly differently just about all the time, short or long term.

  5. Hi Dan,

    You may recall my post this summer before oil turned - why not stimulate with a lower oil price? Best way to get money moving and in the hands of Mark's consumers. Not saying it's a conspiracy at all. Lower oil is here for whatever reason. My target when it was 107 was 75 and that's been breached. Your thoughts on a bottom? Would love a swing long in ERX.

  6. WOW..... common sense being peddled by ZeroHope.


    Don't see this happen too often....... I might go out and buy a lottery ticket..

  7. Everyone here must remember that our own esteemed Trader Dan nailed the top of the oil market to the day.

    It's been a full fledged crash ever since, one of the biggest, fastest moves in commodity market history.

    If I would have shorted some CL contracts and held throughout this decline, rolling and rolling, I'd be freaking rich and retired by now.

    Currency traders have made absolute fortunes within just a few months, betting with the dollar and against the Yen, Ruble, etc.

    I keep hearing about world record long spec interest in the Dollar, but so far it hasn't mattered, and Dan hasn't mentioned it yet so the gravy train rolls on.

  8. Hello,

    Here is a chart of SP500 on the 2day time unit.


    - 10 consecutive tops on this time unit (starting to be a lot)
    - red and blue line forming the first half of a potential diamond
    - SMI in the high area
    - strength of the bullish trend decreasing (smaller and smaller candles)

    On the weekly time unit, we are getting close on the MACD to a possible propagation axis (line linking recent tops of MACD 9 20 7).
    On the daily time unit, the MACD is high and reversing down, didn't cross yet though.

    All those signals should warn about a potential coming correction.
    I don't think I'll share my positions on SP500 this time, because I have too little time to ensure "near real time" updates on this blog on my positions if they change.
    But technically speaking, the current 2040-2050 is a potential reversal zone imho.
    Because of the theory of "tendance en ligne", I'm also wondering if it could be the final top, though fundamentals seem to say SP500 is going to go up forever... :)

    1. HDH
      Good to head from your. Your missed.

      T share your concern about the SandP. Awfully high awfully fast. Driven by hot money flows looking for safety and yield I guess.

      I have put stops under most of my equity holdings. Want to let them go up but not get caught when this corrects again. So I'll keep ratcheting them up.

      Once we correct I'll rebuy lower and get more shares for my money. That's the plan any way.

  9. Alternative approaches to International Diplomacy

    1. http://atimes.com/atimes/China/CHIN-01-141114.html

    2. http://www.scmp.com/news/world/article/1639640/us-lawmakers-announce-bill-supporting-hong-kong-freedom-and-democracy

    In other News:

    - China announces National Endowment for Communism NGO to sponsor independent investigation into Police brutality in the Missouri Police Department, calls for cleanup and "social equality" in Detroit and confirms joint live-fire Naval Exercises with Cuba and Venezuela involving 300,000 servicemen

  10. An excellent andvrefreshing new blog article, thanks to rererral from Bron:


  11. Hi Dan,
    Can you please write up on TIP/TLT chart for inflation projections . Currently I see bear market in inflation , hence metals,mining & interest rates stay low for sometime into 2015.


  12. Breaking News

    Crowds are out on the streets of Belfast as the divided communities are united in awe at an event unfolding in the skies high above them: some had heard tell if such things in ancient folklore or forgotten ballads from the Days of Yire, but noone could remember ever having firsthand experience of such miracles - which had long since been dismissed by many as the stuff of myths & legends

    but today, for one brief moment in a thousand lifetimes, high above them for all to see and marvel at, the clouds have parted, and the legendary fiery ball which many believed had long since deserted Northern Ireland is there for all to see. People are struggling to pronounce its strange and unfamiliar name - is it "Sonne" or Syn" or, as some believe , just a cunning CGU graphic stunt?

    Experts do not expect the phenomenon to persist, and hurricane force winds, artic temperatures and horizontal sleet are forecast to return in about 30 seconds and persist until at least 2017 (AD, not pm)

    More prosaically, does anyone else think that the rabidity of goldbug Trolls is increasing as the metals fall? Did you see that nutjob called Jake on Bron Sucheki's blog, or the obsessive savagery of Dame Edna on Mike Maloney's site? These people have a screw seriously loose and the absence of moderation is troubling

    Finally - honestly, this is it until the weekend, I promise - I gave been trying to summon up the energy to do a hatchet job on this article


    but I lost the will to live: like burglary in a high-rise apartment block, its just WRONG on so many levels, and halfway through the COMEX Oct Settlements report I just gave up and concluded the guy probably wasnt native to this Planet anyhow

    And on that note - or, rather, on the dulcet notes of Sheryl Crow , "I'm gonna soak up the Sun" while its still there http://m.youtube.com/watch?v=KIYiGA_rIls

  13. Silver looks to be testing new lows this morning. Did it touch 15.20? Anyone for 14.99? Not long ago we thought 16.99 was a big deal.

    1. How many more times can the silverbugs "back up the truck"??

  14. Good news for all the 'bugs hunkered down in their bunkers, "There's no need to fear, Bo Polny is here!"

    He says "Gold is in a grand Bull Market Formation with a minor 6 week INVERSION and a NEW cycle high expected in 2015. Does that imply no $2000 Gold before 2014 year end? No, the year is not over yet!"



    1. All the pumpers and cheerleaders are starting to kick the gold/silver can into 2015...just like they did in 2013, 2012, 2011 etc.

      In the meantime, in a place called REALITY, gold and silver are down this a.m. and the USDJPY is going nuts!
      Yen...wayyy over 116 while the USD has ripped straight up into 88 territory.
      USD 90 by next week? Seems possible at this point.

      How could so many "experts" out there have been so wrong and so consistent in their USD collapse belief system?

      Ohhh...I forgot....the USD gaining strength is just the beginning of it's collapse. Lol!

  15. Eric, the shoeclerk Poiny has about 10 years experience in these mkts; yawn zzzzzzzzzzzzzzzzzzzzzzzzzzz Have a good weekend.


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