Every year, those who manage the major commodity indices such as the Goldman Sachs Commodity Index ( GSCI) and the Dow Jones/AIG Commodity Index, REWEIGHT the composition of the various commodities that comprise their respective index. Some category of commodities see DECREASES in the weighting for that particular index; other commodities see INCREASES in the weighting.
This is common practice and happens every single year. It impacts the various markets for about a week or so as those INDEX FUNDS (These are sometimes referred to in industry slang as LONG ONLY funds) that benchmark against these indices must then BUY or SELL those commodities in order to bring their portfolio into line with the NEW WEIGHTINGS for that year.
In the case of gold and silver, both GSCI and DOW/AIG RAISED the weighting for these precious metals for 2014. That means index funds will be buying this first week of the year to align their portfolios.
That is what we are seeing occur in gold and silver today. I would expect this to provide some support to both markets until the bulk of this new money allocation process is completed.
Alongside of this today there seems to be some risk aversion related activity. As equities have moved lower, the VIX has jumped higher. Yields on Treasuries have subsequently fallen a tad as money flows move into bonds and out of stocks today. Also, the US Dollar and the Japanese Yen - both viewed as Safe Haven currencies - are moving higher. That is attracting some safe haven buying into gold with silver choosing to follow it higher rather than move lower in tandem with copper and crude oil.
I still want to wait and see what we get next week when the full complement of traders return.
For now, support in gold at $1180 is holding. Physical demand out of Asia is strong right now. That is encouraging for the bulls.
Also, those money managers who bought the mining shares on Monday and Tuesday of this week ahead of the holiday, with the expectation that the bulk of the tax-loss selling was finished, have made a nice tidy profit for this short term play. I tend to not make too much of the mining share action right now because of the nature of the buying, which is short-term opportunistic in nature. We'll watch it however. Bulls, who were beaten senseless last year in these things will however welcome any relief no matter the source.
Gold has much chart work to do in order to turn the picture friendly. Resistance comes in near today's high first, followed by $1242- $1245; and then $1260 or so. For the pattern to turn bullish, $1260 would need to give way at a bare minimum.
By the way, in honor of the FLASH CRASH crowd, gold experienced some more of these REVERSE FLASH CRASHES, first in overnight trade in Asia and then again later in the European session. Don't expect any comments on this however from them - after all it is not good for sensationalizing their conspiracy views.
One could make the case, purely out of sarcasm, that nefarious forces are at work manipulating the gold price higher so as to squeeze the shorts out and paint the chart picture in their favor. But we would not do that now would we? Note - to those who are humorless - this is meant as a tongue in cheek statement.
I am noting with interest that volume in gold is quite light. I would put a bit more credence in today's price action were the volume extremely heavy. Also to be noted is that the Goldman Sachs Commodity Index referenced above, is sharply lower being driven down by losses in the energy sector and in the soybeans and wheat. This is not yet the stuff of which inflation pressures are made.
Let's just watch it unfold and see where all this leads when the dust settles out a bit. It is too early to get dogmatic one way or the other.
Thursday, January 2, 2014
Tuesday, December 31, 2013
Gold loses 28% to end the Year
Extreme volatility/wild swings in price was the highlight of gold trading in today's end-of-the-year session. Some fund managers on the long side of gold were heavily dumping positions early in the session to clear their books of one of the worst performing assets of the year. On the other side of that activity were some large specs who have been short the market for most of the year and were busy lifting some of those positions to capture those paper gains.
Around mid-morning, a rash of "sudden orders" to buy ( Dow Jones wire services quoted traders using those exact words) flipped the market higher after it had run down near $1180. It moved as low as $1181.4 before shorts began ringing the cash register to close out the year.
The lack of selling enabled the buying to take price high enough to catch some overhead buy stops and up she went. Here we have another one of those events that I have sarcastically dubbed, "A REVERSE FLASH CRASH" in honor of those who love to regale us with stories of Flash crashes when gold drops sharply as evidence that the gold price is being manipulated lower by sinister forces intent on delegitimizing it as a viable investment.
I trust we will not hear a peep out of that crowd about today's bizarre price swing higher. After all, according to them, this is what gold should be doing all the time and thus this is legitimate price action whereas gold dropping sharply in price is somehow illegitimate.
Honestly, one grows weary of attempting to dispel the market ignorance on display from this group but this is what happens when anyone with a computer and a keyboard is now an authoritative source on market price action. Then again gold seems to spawn more of this sort of thing than many of the other commodity markets. I guess it just comes with the territory. Gold bugs tend to be very passionate about their views - nothing wrong with that - but that very same fervor is what so often makes it difficult for them to see market price action with any sort of objectivity. They have to keep coming up with reasons to explain why their asset of choice is losing them money instead of just admitting that they were wrong and moving on.
What happened is not hard to understand however - gold dropped into a major, major support zone ( I have stated that $1180 is as critical to the future fortunes of gold as was the $1530 price level some time back) where strong buying surfaced once again. The short term players saw that it was holding and began to cover their shorts realizing that the support zone was going to hold for now. As price rose, with a large number of traders out of the market already in anticipation of the holiday tomorrow and low liquidity, there was no one left to sell. Thus there was a air pocket above the market and little to no resistance to the metal's rise.
There is nothing quite as dramatic as one of these typical short squeezes. The volume leaps dramatically as fear and panic hit those who sold into the bottom of the move and are now forced to scramble in order to avoid deep losses. While it looks impressive on the surface, the key is not what happens on any given day but the SUBSEQUENT market reaction over the next couple of days. If the market builds on its gains and continues to extend, then you have the makings of a legitimate short-term bottom. If however the market simply hangs around near the highs of the short covering day and is unable to extend much higher, the odds then favor a continuation of the downtrend with stronger hands coming in to sell at the new and higher level. We simply have no way of knowing which scenario we are going to get until it occurs. SUBSEQUENT PRICE ACTION is therefore the only safe guide to rely upon; not hunches, guesses, and dogmatic assertions from newsletter writers and other various pundits who know no more than the rest of us what will happen tomorrow.
I can tell you this from experience, making any predictions as to future price movements based on the price action from the last day of trading for the year is not wise. The other thing to keep in mind - one day does not a trend make. Gold is in a BEAR MARKET until proven otherwise. It really is that simple. Any market that loses more than 20% for a year is officially in a bear market and at one point in today's session, gold was down over 29%. Do the math.
I will also add this one last thing - that the market faded from off its best levels tends to confirm the idea that we are not going to see much in the way of additional upside as we begin the New Year. The bulls are living on borrowed time and unless something occurs to change sentiment here in the West in regards to gold quite soon, it looks to me like one will be able to buy gold at a cheaper level than they were even at today's lows early next year.
As always, time will tell...
One last thing, some money managers like to come in and buy distressed stocks from poorly performing sectors towards the end of the year. The idea is that many participants are selling losers to square their books and to realize tax losses. Those who come in and buy these stocks which are being thrown out will then look to make a quick 8% - 10% profit as the selling pressure lets up when the New Year begins. It is a short term trade by nature with the theory that the heavy selling is now finished so one can safely buy. This sort of thing can tend to put temporary bottoms in those stocks. As mentioned above, the key to seeing whether or not a trend reversal/longer-term bottom is in the sector is to watch how subsequent price action unfolds and especially volume.
Moving forward this next year, gold's fortunes will be determined by whether or not Asian demand, especially out of China is sufficient to absorb Western-based selling of the metal. As stated yesterday and reiterated today, I am concerned because in spite of such heavy losses in gold, the large specs remain stubbornly bullish; this is not a recipe for a reversal. If anything it is a recipe for more losses ahead for the metal until the bullishness is killed.
When you take a look at this chart of the reported holdings of GLD and see that the holdings are back at levels last seen in January 2009 ( an incredible 5 years ago), it is not hard to understand the drop in the price of gold. What is difficult for me to grasp is why these big specs remain as net longs over at the Comex. The big money in gold has been made on the SHORT side over the last year; trend followers have done fine. It is those bucking the trend that have gotten badly burnt. One wonders just how much more pain that want to bear.
What I am going to be looking for in 2014 is if/when market sentiment begins to turn strongly in favor of "growth/inflation" and away from "growth/no inflation". If/when it does, commodities should see some risk money moving back into the sector in general with the expectation of higher prices as a result of ramped up demand. I am not saying that this is going to happen as I am not in the business of making predictions ( I will leave that to those who have no money at risk in the markets). What I am saying is that this is something to watch for to see if this were to develop.
Such an occurrence would tend to bottom gold but especially silver. Copper prices have already turned higher over the last several weeks and are now up in levels near the top of a trading range that has been in place since April of this year (2013). If copper begins to push higher, especially if it can clear $3.50 convincingly, silver should get some help on the buy side.
I would also like to take a bit of time here to thank all those who have visited the site this past year. I would especially extend my gratitude towards those who post here for your many encouraging words, your insightful posts, as well as your helping to keep this site clear of profanity, ugly personal attacks on individuals and the other assorted crap that is all-too-frequent nowadays in this unethical age. As I have written many times here, opinions on the markets are fair game; those who offer them should expect that others will often take the other side because there is always a bull side and there is always a bear side. If not, we would not have anyone to buy from if there were no bears nor would we have anyone to sell to if there were no bulls. Personal attacks that impugn the motives/character of others is a different story however and that is something that I will not tolerate here, nor should those of you who read and post here allow either. It demeans the site and interferes with what we are trying to accomplish here which is to provide a forum where folks can learn to read the voice of the market and hopefully become better informed in their trading/investment decisions by applying that which they have learned.
A Happy, Safe, and Prosperous New Year to you all. Personally I like to take this time of the year to look back at the many blessings of God and realize just how gracious He is to we who do not deserve such goodness at times. At times we are prone to measuring our "wealth" by the size of our bank accounts but what price can one put on family, health, friends, and our reputations? Such things are irreplaceable.
Once prior to a famous sermon that he preached during what historians have termed, "The Great Awakening", Jonathan Edwards prayed to the Lord asking Him to "stamp eternity on the eyeballs of those who heard him preach". We might do well to consider that more frequently during the course of the next year. It is remarkable how it tends to help us keep things in their proper perspective!
Around mid-morning, a rash of "sudden orders" to buy ( Dow Jones wire services quoted traders using those exact words) flipped the market higher after it had run down near $1180. It moved as low as $1181.4 before shorts began ringing the cash register to close out the year.
The lack of selling enabled the buying to take price high enough to catch some overhead buy stops and up she went. Here we have another one of those events that I have sarcastically dubbed, "A REVERSE FLASH CRASH" in honor of those who love to regale us with stories of Flash crashes when gold drops sharply as evidence that the gold price is being manipulated lower by sinister forces intent on delegitimizing it as a viable investment.
I trust we will not hear a peep out of that crowd about today's bizarre price swing higher. After all, according to them, this is what gold should be doing all the time and thus this is legitimate price action whereas gold dropping sharply in price is somehow illegitimate.
Honestly, one grows weary of attempting to dispel the market ignorance on display from this group but this is what happens when anyone with a computer and a keyboard is now an authoritative source on market price action. Then again gold seems to spawn more of this sort of thing than many of the other commodity markets. I guess it just comes with the territory. Gold bugs tend to be very passionate about their views - nothing wrong with that - but that very same fervor is what so often makes it difficult for them to see market price action with any sort of objectivity. They have to keep coming up with reasons to explain why their asset of choice is losing them money instead of just admitting that they were wrong and moving on.
What happened is not hard to understand however - gold dropped into a major, major support zone ( I have stated that $1180 is as critical to the future fortunes of gold as was the $1530 price level some time back) where strong buying surfaced once again. The short term players saw that it was holding and began to cover their shorts realizing that the support zone was going to hold for now. As price rose, with a large number of traders out of the market already in anticipation of the holiday tomorrow and low liquidity, there was no one left to sell. Thus there was a air pocket above the market and little to no resistance to the metal's rise.
There is nothing quite as dramatic as one of these typical short squeezes. The volume leaps dramatically as fear and panic hit those who sold into the bottom of the move and are now forced to scramble in order to avoid deep losses. While it looks impressive on the surface, the key is not what happens on any given day but the SUBSEQUENT market reaction over the next couple of days. If the market builds on its gains and continues to extend, then you have the makings of a legitimate short-term bottom. If however the market simply hangs around near the highs of the short covering day and is unable to extend much higher, the odds then favor a continuation of the downtrend with stronger hands coming in to sell at the new and higher level. We simply have no way of knowing which scenario we are going to get until it occurs. SUBSEQUENT PRICE ACTION is therefore the only safe guide to rely upon; not hunches, guesses, and dogmatic assertions from newsletter writers and other various pundits who know no more than the rest of us what will happen tomorrow.
I can tell you this from experience, making any predictions as to future price movements based on the price action from the last day of trading for the year is not wise. The other thing to keep in mind - one day does not a trend make. Gold is in a BEAR MARKET until proven otherwise. It really is that simple. Any market that loses more than 20% for a year is officially in a bear market and at one point in today's session, gold was down over 29%. Do the math.
I will also add this one last thing - that the market faded from off its best levels tends to confirm the idea that we are not going to see much in the way of additional upside as we begin the New Year. The bulls are living on borrowed time and unless something occurs to change sentiment here in the West in regards to gold quite soon, it looks to me like one will be able to buy gold at a cheaper level than they were even at today's lows early next year.
As always, time will tell...
One last thing, some money managers like to come in and buy distressed stocks from poorly performing sectors towards the end of the year. The idea is that many participants are selling losers to square their books and to realize tax losses. Those who come in and buy these stocks which are being thrown out will then look to make a quick 8% - 10% profit as the selling pressure lets up when the New Year begins. It is a short term trade by nature with the theory that the heavy selling is now finished so one can safely buy. This sort of thing can tend to put temporary bottoms in those stocks. As mentioned above, the key to seeing whether or not a trend reversal/longer-term bottom is in the sector is to watch how subsequent price action unfolds and especially volume.
Moving forward this next year, gold's fortunes will be determined by whether or not Asian demand, especially out of China is sufficient to absorb Western-based selling of the metal. As stated yesterday and reiterated today, I am concerned because in spite of such heavy losses in gold, the large specs remain stubbornly bullish; this is not a recipe for a reversal. If anything it is a recipe for more losses ahead for the metal until the bullishness is killed.
When you take a look at this chart of the reported holdings of GLD and see that the holdings are back at levels last seen in January 2009 ( an incredible 5 years ago), it is not hard to understand the drop in the price of gold. What is difficult for me to grasp is why these big specs remain as net longs over at the Comex. The big money in gold has been made on the SHORT side over the last year; trend followers have done fine. It is those bucking the trend that have gotten badly burnt. One wonders just how much more pain that want to bear.
What I am going to be looking for in 2014 is if/when market sentiment begins to turn strongly in favor of "growth/inflation" and away from "growth/no inflation". If/when it does, commodities should see some risk money moving back into the sector in general with the expectation of higher prices as a result of ramped up demand. I am not saying that this is going to happen as I am not in the business of making predictions ( I will leave that to those who have no money at risk in the markets). What I am saying is that this is something to watch for to see if this were to develop.
Such an occurrence would tend to bottom gold but especially silver. Copper prices have already turned higher over the last several weeks and are now up in levels near the top of a trading range that has been in place since April of this year (2013). If copper begins to push higher, especially if it can clear $3.50 convincingly, silver should get some help on the buy side.
I would also like to take a bit of time here to thank all those who have visited the site this past year. I would especially extend my gratitude towards those who post here for your many encouraging words, your insightful posts, as well as your helping to keep this site clear of profanity, ugly personal attacks on individuals and the other assorted crap that is all-too-frequent nowadays in this unethical age. As I have written many times here, opinions on the markets are fair game; those who offer them should expect that others will often take the other side because there is always a bull side and there is always a bear side. If not, we would not have anyone to buy from if there were no bears nor would we have anyone to sell to if there were no bulls. Personal attacks that impugn the motives/character of others is a different story however and that is something that I will not tolerate here, nor should those of you who read and post here allow either. It demeans the site and interferes with what we are trying to accomplish here which is to provide a forum where folks can learn to read the voice of the market and hopefully become better informed in their trading/investment decisions by applying that which they have learned.
A Happy, Safe, and Prosperous New Year to you all. Personally I like to take this time of the year to look back at the many blessings of God and realize just how gracious He is to we who do not deserve such goodness at times. At times we are prone to measuring our "wealth" by the size of our bank accounts but what price can one put on family, health, friends, and our reputations? Such things are irreplaceable.
Once prior to a famous sermon that he preached during what historians have termed, "The Great Awakening", Jonathan Edwards prayed to the Lord asking Him to "stamp eternity on the eyeballs of those who heard him preach". We might do well to consider that more frequently during the course of the next year. It is remarkable how it tends to help us keep things in their proper perspective!
Monday, December 30, 2013
Gold Down below $1200
Gold is getting hammered down below the psychological support zone at $1200 as we move into the last day of trading before the advent of 2014. The break, coming in spite of a weaker Dollar, does not bode well for the fortunes of the metal to begin the New Year. The story remains the same - gold performed abysmally this past year as big speculators were chasing gains in the equity markets and yanking money out of gold and many other commodities in general.
I see nothing on the near term horizon to suggest that this is going to change as we begin 2014, barring some sort of catalyst such as an event that comes out of nowhere. Right now the VIX is indicating complete complacency and a total lack of fear/concern anywhere.
The daily chart shows the price moving down into a most important technical support zone. Gold has been able to garner enough buying on forays into this zone to force a rebound in the price, even if that rebound did not last all that long. Whether or not these buyers remain willing at this level is unclear. If not, gold is going to break the bottom of the support zone near $1180 and will easily lose another $30 for starters. If the buyers show up, then the metal can continue to grind sideways above this support zone but without a catalyst to kick it higher, the intermediate trend dictates that rallies in the metal should be sold.
I am noting that the ADX is moving sideways indicating that the downtrend has temporarily halted on the daily chart but that the bears remain firmly in control of this market. If support at $1180 breaks, look for the ADX to turn up as gold will resume its downtrend and might then target the $1100 level depending on how many hedge funds decide to exit from the long side of this market. Remember, they are still net longs in there and that is what concerns me that the bleeding in gold is not yet finished.
We got the CFTC Commitments of Traders data released this afternoon as the report was delayed due to the Christmas holiday last week. It did indicate some long liquidation from the hedge fund community occurred last week but they still are NET LONGS in this market to the tune of some 28,700 contracts. The Other Large Reportables actually increased their net long position about 3,800 contracts with the result that the two groups of large speculators remain net longs. The small specs, or general public, actually finally moved to a small net short position.
The big, bad bullion banks were generally buying again this week but never fear, the "gold is always manipulated at all times crowd" will swear up and down that these banks are the ones that are knocking the price lower. Both the Producer/User/Merchant category and the Swap Dealers were Buying from Hedge funds who were selling this past week.
All in all, the report provides further evidence that money flows are coming out of gold and into equities. This is the reason the gold price is continuing to sag lower. It will until this process ends and then reverses.
I see nothing on the near term horizon to suggest that this is going to change as we begin 2014, barring some sort of catalyst such as an event that comes out of nowhere. Right now the VIX is indicating complete complacency and a total lack of fear/concern anywhere.
The daily chart shows the price moving down into a most important technical support zone. Gold has been able to garner enough buying on forays into this zone to force a rebound in the price, even if that rebound did not last all that long. Whether or not these buyers remain willing at this level is unclear. If not, gold is going to break the bottom of the support zone near $1180 and will easily lose another $30 for starters. If the buyers show up, then the metal can continue to grind sideways above this support zone but without a catalyst to kick it higher, the intermediate trend dictates that rallies in the metal should be sold.
I am noting that the ADX is moving sideways indicating that the downtrend has temporarily halted on the daily chart but that the bears remain firmly in control of this market. If support at $1180 breaks, look for the ADX to turn up as gold will resume its downtrend and might then target the $1100 level depending on how many hedge funds decide to exit from the long side of this market. Remember, they are still net longs in there and that is what concerns me that the bleeding in gold is not yet finished.
We got the CFTC Commitments of Traders data released this afternoon as the report was delayed due to the Christmas holiday last week. It did indicate some long liquidation from the hedge fund community occurred last week but they still are NET LONGS in this market to the tune of some 28,700 contracts. The Other Large Reportables actually increased their net long position about 3,800 contracts with the result that the two groups of large speculators remain net longs. The small specs, or general public, actually finally moved to a small net short position.
The big, bad bullion banks were generally buying again this week but never fear, the "gold is always manipulated at all times crowd" will swear up and down that these banks are the ones that are knocking the price lower. Both the Producer/User/Merchant category and the Swap Dealers were Buying from Hedge funds who were selling this past week.
All in all, the report provides further evidence that money flows are coming out of gold and into equities. This is the reason the gold price is continuing to sag lower. It will until this process ends and then reverses.
Tuesday, December 24, 2013
Merry Christmas
"For
unto us a child is born, unto us a son is given: and the government shall be
upon his shoulder: and his name shall be called Wonderful, Counsellor, The
mighty God, The everlasting Father, The Prince of Peace.
Of the increase of his government and peace there shall be no end, upon the throne of David, and
upon his kingdom, to order it, and to establish it with judgment and with
justice from henceforth even for ever. The zeal of the LORD of hosts will
perform this." ( Isaiah 9: 6-7)
"But thou, Bethlehem Ephratah, though thou be little among the
thousands of Judah, yet out of thee
shall he come forth unto me that is
to be ruler in Israel; whose goings forth have
been from of old, from everlasting." ( Micah 5: 2)
( And this taxing was first made when Cyrenius was governor of Syria.)
And all went to be taxed, every one into his own city.
And Joseph also went up from Galilee, out of the city of Nazareth, into Judaea, unto the city of David, which is called Bethlehem; (because he was of the house and lineage of David:)
to be taxed with Mary his espoused wife, being great with child.
And so it was, that, while there were there, the days were accomplished that she should be delivered.
And she brought forth her firstborn son, and wrapped him in swaddling clothes, and laid him in a manger; because there was no room for them in the inn.
And there were in the same country shepherds abiding in the field, keeping watch over their flock by night.
And, lo, the angel of the Lord came upon them, and the glory of the Lord shone round about them: and they were sore afraid.
And the angel said unto them, Fear not: for, behold, I bring you good tidings of great joy, which shall be to all the people. For unto you is born this day in the city of David a Saviour, which is Christ the Lord.
And this shall be a sign unto you; Ye shall find the babe wrapped in swaddling clothes, lying in a manger.
And suddenly there was with the angel a multitude of the heavenly host praising God, and saying,
Glory to God in the highest, and on earth peace, good will toward men" ( Luke 2: 1-14)
"And without controversy great is the mystery of godliness: God was manifest in the flesh, justified in the Spirit, seen of angels, preached unto the Gentiles, believed on in the world, received up into glory." ( 1 Tim 3:16)
"In the beginning was the Word, and the Word was with God, and the Word was God. All things were made through Him, and without Him nothing was made that was made. In Him was life, and the life was the light of men.... And the Word became flesh and dwelt among us, and we beheld His glory, the glory as of the only begotten of the Father, full of grace and truth." ( John 1: 1-3, 14)
Christmas has a special meaning for those of us who are Christians. We celebrate it not merely for the reason that we believe God took upon Himself flesh and dwelt among us, but more importantly that He took upon Himself flesh for one reason - so that He might offer Himself upon a bloody cross as a sacrifice for the sins all who would come to believe upon Him, thereby satisfying the claims of Divine Justice in His own person and opening the gate to eternal life. This is our "Good News" or Gospel message.
Gold may be a precious thing, as is silver, and we value them in this life, but one cannot take either of them with us when we exit this world. They only have value in this life. As Christians we take the time during this season to reflect on those things which have lasting value.
May you have a wonderful and blessed Christmas.
Sunday, December 22, 2013
Some Christmas Fun
In the spirit of the season, a broker buddy of mine, JB Slear over at Fort Wealth Trading, put together a rather humorous Christmas presentation including yours truly along with JB and Jim Sinclair's face. I think you will get a kick out of it!
Enjoy...MacaReindeer!
http://www.jibjab.com/view/RYntZ1zLsz8wRgvHlIoT
Enjoy...MacaReindeer!
http://www.jibjab.com/view/RYntZ1zLsz8wRgvHlIoT
Friday, December 20, 2013
Weekly Gold Chart
I think the chart speaks for itself. Gold has managed to put in the worst WEEKLY CLOSE since July 2010, three and a half years ago.
The bounce today was feeble, considering the extent of the downdraft on Thursday. It did manage to close above $1200 but just barely. The fact that the HUI could not hold its gains on the day is alarming to me. I would have hoped that it could hold its bounce without attracting more selling.
Based on this, I would have to lean towards saying the gold market still looks heavy to me and could come under additional pressure next week. The one saving grace that it will have working in its favor is that the Bears have made a lot of money this year and might still be looking to cover some additional shorts and book those gains before the end of the year. That, plus the fact that rarely do traders pile on large positions heading into the end of the year; they generally tend to do the opposite. That might take some of the pressure off of the market, temporarily.
Bulls need some serious help very soon....
The bounce today was feeble, considering the extent of the downdraft on Thursday. It did manage to close above $1200 but just barely. The fact that the HUI could not hold its gains on the day is alarming to me. I would have hoped that it could hold its bounce without attracting more selling.
Based on this, I would have to lean towards saying the gold market still looks heavy to me and could come under additional pressure next week. The one saving grace that it will have working in its favor is that the Bears have made a lot of money this year and might still be looking to cover some additional shorts and book those gains before the end of the year. That, plus the fact that rarely do traders pile on large positions heading into the end of the year; they generally tend to do the opposite. That might take some of the pressure off of the market, temporarily.
Bulls need some serious help very soon....
Commitment of Traders
This week's Commitment of Traders report for gold ( covering the period up through Tuesday of this week, 12/17/2013) reveals that the speculative community were net sellers on the week while the "commercial" traders were net buyers.
As many of you no doubt know, today's report both includes the sharp selloff associated with the previous Friday's jobs report. It also includes the sharp rebound that occurred on both Monday and Tuesday of this week. It does not include the wild action coming on the heels of this Wednesday's FOMC statement nor the collapse that occurred yesterday ( Thursday).
Here is what I am taking away from the report - speculators are using rallies in price to add to existing short positions. All three categories - Hedge Funds, Large Reportables and the Small Specs - remain as NET LONGS. This continues to concern me because it indicates a STUBBORN bullishness in the face of a deteriorating technical price chart. Any downside violation of that critical support level at $1180 thus has PLENTY of AVAILABLE FUEL to provide large amounts of selling.
If there is any capitulation occurring in the gold market, it is certainly not showing up in the composition of positions that the speculators are holding.
While I am on this topic, I am going to try, ONCE MORE, to dispel this pestilential notion that the reason why gold is CURRENTLY moving lower is because it is constantly being manipulated by the bullion banks at the behest of the Fed.
This concept, which I have written positively about in the past and to which I adhere during PERIODS OF RISING GOLD PRICES AND A SINKING DOLLAR, is already becoming quite old and wearisome. It seems it makes some feel better as they watch their life's savings evaporate into thin air while they loudly screech that the only reason that they are losing money on their gold and gold related stocks, is because the price is being manipulated.
It is notable that this cry of "manipulation" only works in one direction however, and that is when gold is selling off. When gold is moving higher, there is not a peep mentioned about the sharp rallies that sometimes appear because "after all, gold is only doing what it should be doing were it not manipulated".
Here is the problem with this view, at this stage in gold's bearish move lower - the facts simply do not support it.
I have put together a couple of charts to illustrate this. Let's start first with an excerpt from the Commitment of Traders data, both futures and options, going back to the beginning of this year, 2013.
What I would draw your attention to in particular, is the end of the month of October 2013. This is about the time that the latest fad known in gold circles as "the Flash Crash" began appearing. Whether stated or not, it is implied that there is a nefarious force working to suppress the gold price and this force is always the same - the bullion banks working to do the Fed's bidding.
Keep in mind that the argument goes something like this.... " You know, gold is in backwardation, meaning that demand for the physical is so strong that the only reason the paper price can be moving lower is because it is manipulated. Also, these FLASH CRASHES that occur during the thin market conditions of low liquidity mean that NO LEGITIMATE SELLER ( whatever a "legitimate" seller might be is left undefined) would be engaging in such action. Therefore, ergo, quod est demonstratum, the price is being manipulated lower. Why else would we see large offers coming out of nowhere?
Since it is always the bullion banks who get blamed for manipulating price, one assumes that it is they who are somehow behind this "mysterious" move lower in the gold price.
Regardless, I have maintained and continue to maintain, that it is speculative selling, namely HEDGE FUNDS or some other large reportable entities, that are doing the selling in gold and have been for some time now. I am also on record as stating that these same bullion banks who are constantly being blamed for everything nasty happening to gold, happen to be BUYING GOLD, not selling.
With that in mind, look at the above COT chart detailing the positioning of these large commercially-oriented players. This is their NET POSITION in the Comex Gold market. Now look at the date (Oct 29) in which they began to seriously draw down the overall size of their previously held net short position by BUYING contracts.
Over this interval, approximately a seven week time frame, there has been a reduction of over 37,000 in the net short position of the Producer category so that they are now NET LONG. In the Swap Dealer category, there has been a reduction of about 43,000 in their net short position. In other words, both categories have been NET BUYERS over the entire time frame during which, and this is important, gold has experienced a decline of some $115 in price.
Now look at the gold chart below to see the same time frame illustrated there.
This chart, unlike the COT chart above, covers through the end of this week, and not just through Tuesday this week. Since Tuesday the price of gold has declined even more losing another $30+ in the process.
Also, the CME Group, daily releases information detailing the delivery process for its various futures contract which still provide such. When it comes to gold, the December process has been ongoing. Out of the total 5,448 contracts Tendered or Issued ( by sellers who are delivering), J P Morgan, one of the infamous bullion banks, has stopped, or taken delivery of 5,106 of them for their HOUSE account, not their Customer account! That is no mean feat!
So what do we have? We have a source of data indicating a STEADY BUYING occurring by the large commercially-oriented players in the gold market so that their short positions are being covered even as they have moved to some LONG POSITIONS in the futures market so as to TAKE DELIVERY. One cannot take delivery of a futures contract if one is short the market going into the delivery period.
All this is taking place against a backdrop of falling gold prices while the SPECULATIVE COMMUNITY, is selling. Again, at the sake of excessive repetition, the specs remain as net longs but their net long position is declining as they bail out of gold and move to increasingly play it from the short side.
I should also note here that as the month of December has rolled around and the December gold contract has entered the delivery period, the number of OUTRIGHT LONG positions held by the Producer/Merchant/Processor/User category has increased from 89,853 to 90,760 as of this Tuesday. NOTE - this is using FUTURES ONLY data and not futures and options data because one needs a futures position on the long side to stand for delivery.
On the Swap Dealer front, the December long position has increased from 60,771 to 64,050 as of Tuesday this week.
It should also be noted here that as the longs take delivery of any gold, the futures long position is closed out ( as well as the short who was delivering) and the long positions (along with the short) will be reduced.
I want to also cover one more claim made by some who still refuse to accept the facts but will hold fast to their gold is always manipulated all the time thesis. Some claim that the bullion banks have been the ones recently selling gold futures to knock the price during the session only to then use the hedge fund selling that results as a way to BUY BACK or cover the shorts that they put on to precipitate the downward plunge in the futures market. The problem with this theory is that if the bullion banks were doing this ( and they currently are not), they would have to buy back all of those newly instituted short positions AND THEN SOME, in order to achieve the overall reduction in their NET SHORT position that the Commitment of Traders report details.
For example, if the bullion banks were to sell, let's say 1,000 contracts of gold, overnight in Asia and then wait for the inevitable hedge fund selling to show up so that they could then buy those contracts back, they would have to buy ALL 1,000 contracts or their NET SHORT POSITION would never budge. If they did not, let's say they bought back only 900 of those short positions, their TOTAL SHORT POSITIONS would increase by 100 contracts.
What the COT data reveals however is that the number of outright short positions of the Producer/Merchant category as well as the Swap Dealer category have been steadily SHRINKING since that October 29th date that I used as a reference point. Clearly this would not be possible if the bullion banks were only buying back some of these supposed short positions that are being claimed to be the source of the gold price manipulation. Even if they were buying back ALL of them, that would not be enough to REDUCE the number of outright short positions that they have on the books. They would need to buy back MORE THAN THE 1,000 in our example. In other words, they would have to buy 1,100 contracts after selling 1,000 overnight in order to show a reduction in their total short position of 100 contracts. Thus, they would consistently have to be buying large amounts of contracts ( much more than they are supposedly selling according to some) on a regular basis to give us this constant decrease in short positions which the COT report reveals. It would take some near miraculous feat for buying of that magnitude NOT TO DRIVE THE PRICE OF GOLD SHARPLY HIGHER.
Here is the simple truth about gold as it now stands - the bullion banks try to slow the rise of gold during those periods in which it is rising sharply and the US Dollar is sinking as part of the effort to keep the gold price from signaling any sort of distress, distrust or lack of confidence in the US Dollar and by consequence, the Federal Reserve's stewardship of such. Once the gold price broke below the key chart support level of $1530 in April of this year, the trend in gold turned from one of bullishness to one of bearishness. From that point, specs have been gradually abandoning the gold market and moving towards equities. This is why the price continues to fall, not because some nefarious force has continually been at work in gold since then.
At some point the price will reach a level in which the market views strong value. When it does, the willing buyers at that point and price will outnumber the sellers and the price will bottom and then begin to rise.
One last thing for those who listen in regularly to the King World News Metals Wrap on a regular basis. We are not doing one of those this week and are instead giving Eric and myself a bit of a break.
As many of you no doubt know, today's report both includes the sharp selloff associated with the previous Friday's jobs report. It also includes the sharp rebound that occurred on both Monday and Tuesday of this week. It does not include the wild action coming on the heels of this Wednesday's FOMC statement nor the collapse that occurred yesterday ( Thursday).
Here is what I am taking away from the report - speculators are using rallies in price to add to existing short positions. All three categories - Hedge Funds, Large Reportables and the Small Specs - remain as NET LONGS. This continues to concern me because it indicates a STUBBORN bullishness in the face of a deteriorating technical price chart. Any downside violation of that critical support level at $1180 thus has PLENTY of AVAILABLE FUEL to provide large amounts of selling.
If there is any capitulation occurring in the gold market, it is certainly not showing up in the composition of positions that the speculators are holding.
While I am on this topic, I am going to try, ONCE MORE, to dispel this pestilential notion that the reason why gold is CURRENTLY moving lower is because it is constantly being manipulated by the bullion banks at the behest of the Fed.
This concept, which I have written positively about in the past and to which I adhere during PERIODS OF RISING GOLD PRICES AND A SINKING DOLLAR, is already becoming quite old and wearisome. It seems it makes some feel better as they watch their life's savings evaporate into thin air while they loudly screech that the only reason that they are losing money on their gold and gold related stocks, is because the price is being manipulated.
It is notable that this cry of "manipulation" only works in one direction however, and that is when gold is selling off. When gold is moving higher, there is not a peep mentioned about the sharp rallies that sometimes appear because "after all, gold is only doing what it should be doing were it not manipulated".
Here is the problem with this view, at this stage in gold's bearish move lower - the facts simply do not support it.
I have put together a couple of charts to illustrate this. Let's start first with an excerpt from the Commitment of Traders data, both futures and options, going back to the beginning of this year, 2013.
What I would draw your attention to in particular, is the end of the month of October 2013. This is about the time that the latest fad known in gold circles as "the Flash Crash" began appearing. Whether stated or not, it is implied that there is a nefarious force working to suppress the gold price and this force is always the same - the bullion banks working to do the Fed's bidding.
Keep in mind that the argument goes something like this.... " You know, gold is in backwardation, meaning that demand for the physical is so strong that the only reason the paper price can be moving lower is because it is manipulated. Also, these FLASH CRASHES that occur during the thin market conditions of low liquidity mean that NO LEGITIMATE SELLER ( whatever a "legitimate" seller might be is left undefined) would be engaging in such action. Therefore, ergo, quod est demonstratum, the price is being manipulated lower. Why else would we see large offers coming out of nowhere?
Since it is always the bullion banks who get blamed for manipulating price, one assumes that it is they who are somehow behind this "mysterious" move lower in the gold price.
Regardless, I have maintained and continue to maintain, that it is speculative selling, namely HEDGE FUNDS or some other large reportable entities, that are doing the selling in gold and have been for some time now. I am also on record as stating that these same bullion banks who are constantly being blamed for everything nasty happening to gold, happen to be BUYING GOLD, not selling.
With that in mind, look at the above COT chart detailing the positioning of these large commercially-oriented players. This is their NET POSITION in the Comex Gold market. Now look at the date (Oct 29) in which they began to seriously draw down the overall size of their previously held net short position by BUYING contracts.
Over this interval, approximately a seven week time frame, there has been a reduction of over 37,000 in the net short position of the Producer category so that they are now NET LONG. In the Swap Dealer category, there has been a reduction of about 43,000 in their net short position. In other words, both categories have been NET BUYERS over the entire time frame during which, and this is important, gold has experienced a decline of some $115 in price.
Now look at the gold chart below to see the same time frame illustrated there.
This chart, unlike the COT chart above, covers through the end of this week, and not just through Tuesday this week. Since Tuesday the price of gold has declined even more losing another $30+ in the process.
Also, the CME Group, daily releases information detailing the delivery process for its various futures contract which still provide such. When it comes to gold, the December process has been ongoing. Out of the total 5,448 contracts Tendered or Issued ( by sellers who are delivering), J P Morgan, one of the infamous bullion banks, has stopped, or taken delivery of 5,106 of them for their HOUSE account, not their Customer account! That is no mean feat!
So what do we have? We have a source of data indicating a STEADY BUYING occurring by the large commercially-oriented players in the gold market so that their short positions are being covered even as they have moved to some LONG POSITIONS in the futures market so as to TAKE DELIVERY. One cannot take delivery of a futures contract if one is short the market going into the delivery period.
All this is taking place against a backdrop of falling gold prices while the SPECULATIVE COMMUNITY, is selling. Again, at the sake of excessive repetition, the specs remain as net longs but their net long position is declining as they bail out of gold and move to increasingly play it from the short side.
I should also note here that as the month of December has rolled around and the December gold contract has entered the delivery period, the number of OUTRIGHT LONG positions held by the Producer/Merchant/Processor/User category has increased from 89,853 to 90,760 as of this Tuesday. NOTE - this is using FUTURES ONLY data and not futures and options data because one needs a futures position on the long side to stand for delivery.
On the Swap Dealer front, the December long position has increased from 60,771 to 64,050 as of Tuesday this week.
It should also be noted here that as the longs take delivery of any gold, the futures long position is closed out ( as well as the short who was delivering) and the long positions (along with the short) will be reduced.
I want to also cover one more claim made by some who still refuse to accept the facts but will hold fast to their gold is always manipulated all the time thesis. Some claim that the bullion banks have been the ones recently selling gold futures to knock the price during the session only to then use the hedge fund selling that results as a way to BUY BACK or cover the shorts that they put on to precipitate the downward plunge in the futures market. The problem with this theory is that if the bullion banks were doing this ( and they currently are not), they would have to buy back all of those newly instituted short positions AND THEN SOME, in order to achieve the overall reduction in their NET SHORT position that the Commitment of Traders report details.
For example, if the bullion banks were to sell, let's say 1,000 contracts of gold, overnight in Asia and then wait for the inevitable hedge fund selling to show up so that they could then buy those contracts back, they would have to buy ALL 1,000 contracts or their NET SHORT POSITION would never budge. If they did not, let's say they bought back only 900 of those short positions, their TOTAL SHORT POSITIONS would increase by 100 contracts.
What the COT data reveals however is that the number of outright short positions of the Producer/Merchant category as well as the Swap Dealer category have been steadily SHRINKING since that October 29th date that I used as a reference point. Clearly this would not be possible if the bullion banks were only buying back some of these supposed short positions that are being claimed to be the source of the gold price manipulation. Even if they were buying back ALL of them, that would not be enough to REDUCE the number of outright short positions that they have on the books. They would need to buy back MORE THAN THE 1,000 in our example. In other words, they would have to buy 1,100 contracts after selling 1,000 overnight in order to show a reduction in their total short position of 100 contracts. Thus, they would consistently have to be buying large amounts of contracts ( much more than they are supposedly selling according to some) on a regular basis to give us this constant decrease in short positions which the COT report reveals. It would take some near miraculous feat for buying of that magnitude NOT TO DRIVE THE PRICE OF GOLD SHARPLY HIGHER.
Here is the simple truth about gold as it now stands - the bullion banks try to slow the rise of gold during those periods in which it is rising sharply and the US Dollar is sinking as part of the effort to keep the gold price from signaling any sort of distress, distrust or lack of confidence in the US Dollar and by consequence, the Federal Reserve's stewardship of such. Once the gold price broke below the key chart support level of $1530 in April of this year, the trend in gold turned from one of bullishness to one of bearishness. From that point, specs have been gradually abandoning the gold market and moving towards equities. This is why the price continues to fall, not because some nefarious force has continually been at work in gold since then.
At some point the price will reach a level in which the market views strong value. When it does, the willing buyers at that point and price will outnumber the sellers and the price will bottom and then begin to rise.
One last thing for those who listen in regularly to the King World News Metals Wrap on a regular basis. We are not doing one of those this week and are instead giving Eric and myself a bit of a break.
US GDP increases faster than expected
US 3Q GDP was revised higher from its initial 3.6% increase to a surprising 4.1% increase. The Commerce Department stated that a revision in consumer spending was behind the higher number. The data sent stocks on a tear higher as they set yet another record high. All is well as far as investors are concerned especially if the consumer is spending money. Again, I am merely repeating what the sentiment is in the market right now.
Gold seemed to draw a bit of strength from the number. The thinking was that the Fed's rosier assessment of the economy coming out of the recent FOMC meeting was being confirmed. That led some traders into thinking that if the economy is growing at a faster clip, job hiring will begin to pick up. If that were to occur, there might be some modest pickup in inflation.
Also, Asian demand for gold was stirred last evening as bargain buyers stepped up to grab the metal near 6 month lows in price. Coming at the chart point that it is, technicians are closely watching to see if the critical support zone near $1180 can hold. Gold will have to regain the "12" handle and maintain it to convince bottom pickers that they can wade back into the water. That will buy the bulls a bit of a breather but until they can take price back above $1220 - $1225, rallies will be suspect.
Short covering and bottom picking were the features in gold in today's session. Some shorts are closing out their bets on lower prices and taking their profits with them as they leave for an extended Christmas break. Many will not return until after the start of the New Year. Next week promises to be one of volatility as liquidity begins drying up in earnest. Do not be surprised if we see some strange moves.
By the way, just to have some fun with the Flash Crashers - Gold shot up sharply near mid-morning as some sizeable buy orders entered. One trader quipped that " No LEGITIMATE BUYER would act in such a fashion".
It never seems to end does it? We are even back to backwardation talk once again... sigh.... let's just say it once again - gold will bottom when it is good and ready to bottom. Not a minute sooner and not a minute later. Traders just take the market as it is and attempt to deal with that rather than dealing with conjecture and speculative theories. When the market becomes concerned about something, it will be reflected in the price. Until then, it is just a huge waste of energy attempting to keep up with the latest sensation in the gold market. Honestly, I sometimes wonder if some of these guys have a life outside of the gold price.
I have stated it before but will do so again - Gold is insurance against currency debasement. One buys insurance to protect themselves against unforeseen events HOPING that they will never have to use it. One does not buy insurance and then OBSESS over the policy. You buy it, obtain your peace of mind and then get about with the business of life. Owning gold provides you with the peace of mind that if events unfold that are deleterious to the health of the US Dollar ( if you are an American citizen - obviously citizens of other countries would be focused on their own native currency) your assets are shielded as much as possible.
It does seem to me however that those who keep yearning, pining, hoping, wishing, and even perhaps praying, for a higher gold price are yearning, pining, hoping, wishing and even perhaps praying for the house to burn down so that they can collect on the insurance policy. I find that rather sad. I am interested as much as anyone else in honest money and am more than ever concerned over the mounting US mountain of unfunded liabilities. That is why I own gold but I really marvel that so many seem to almost welcome the chaos that would engulf our society should the price of gold indeed reach some of the levels that many of these prognosticators assure us it will reach. As a father with children, I do not wish to see a society that would more closely resemble something out of a "Mad Max" movie just so that I could bathe in all the Dollars that my $50,000 ounce gold bar would bring me. There is almost a morbid mentality that would wish for such things.
Back to the technical charts - With the S&P 500 making new highs, traders are confirming that money flows are continuing to move into equities as the "go to" investment sector of choice. Until something occurs to change this psyche, I still think gold is going to face some serious headwinds to any sort of SUSTAINED move higher. There will continue to be rallies as shorts book some profits and bottom pickers emerge but the intermediate and short term trend remains lower until proven otherwise. I understand that some of those in the gold community will swear, curse and rant at me for saying this ( Norcini has crossed over to the Dark Side), but the market is what it is and that means accepting it and dealing with it if one is to make money as a trader.
By the way, I am thinking of temporarily changing the name of this blog to "Darth Dan's Market Views" and posting a picture of Darth Vader below mine to show the former Trader Dan and then the transformation to the reviled Darth Dan. When gold finally does bottom and resumes a SUSTAINED uptrend, then I can change the name back to Trader Dan once again with Luke Skywalker having rescued me and turned me back to the correct side of the force.
The HUI is seeing a bit of a bounce today as some shorts cover and some bargain/value buyers move in to take advantage of low prices. That being said, considering that the broader equity markets are soaring into new heights, that this meager bounce is all that the mining shares can put in for right now is rather disappointing. Unless we can see some more concerted buying efforts in the mining sector next week, the HUI is on track for the worst MONTHLY CLOSE since May 2005. That is even lower than the monthly close that occurred during the depths of the credit crisis in 2008. Very depressing stuff indeed.
At least bellwether Barrick Gold remains above that chart gap posted last Tuesday ( Dec 10). While it is not that much, I am sure the beleaguered bulls will take all the consolation that they can find right now. Maybe we will see some guys step in here and buy the miners in anticipation of a short pop higher. Year end book squaring could bring about some selling as investors throw away losers for the year to offset some of the gains that they have made elsewhere in the equity world. Once that selling is finished up, there might be a reduction in willing sellers at these levels, especially as the end of the year draws nigh and traders avoid putting on any sizeable positions as they wait for the advent of the New Year to do so. We'll watch and see what develops.
One more time for emphasis - be prepared for all sorts of strange and inexplicable moves in many of our futures markets. Traders are squaring books for year end and are moving to the sidelines to take some time off. That sort of thing is going to result in some bizarre price swings. Day to day gyrations do not matter as much right now as the longer term trends.
Gold seemed to draw a bit of strength from the number. The thinking was that the Fed's rosier assessment of the economy coming out of the recent FOMC meeting was being confirmed. That led some traders into thinking that if the economy is growing at a faster clip, job hiring will begin to pick up. If that were to occur, there might be some modest pickup in inflation.
Also, Asian demand for gold was stirred last evening as bargain buyers stepped up to grab the metal near 6 month lows in price. Coming at the chart point that it is, technicians are closely watching to see if the critical support zone near $1180 can hold. Gold will have to regain the "12" handle and maintain it to convince bottom pickers that they can wade back into the water. That will buy the bulls a bit of a breather but until they can take price back above $1220 - $1225, rallies will be suspect.
Short covering and bottom picking were the features in gold in today's session. Some shorts are closing out their bets on lower prices and taking their profits with them as they leave for an extended Christmas break. Many will not return until after the start of the New Year. Next week promises to be one of volatility as liquidity begins drying up in earnest. Do not be surprised if we see some strange moves.
By the way, just to have some fun with the Flash Crashers - Gold shot up sharply near mid-morning as some sizeable buy orders entered. One trader quipped that " No LEGITIMATE BUYER would act in such a fashion".
It never seems to end does it? We are even back to backwardation talk once again... sigh.... let's just say it once again - gold will bottom when it is good and ready to bottom. Not a minute sooner and not a minute later. Traders just take the market as it is and attempt to deal with that rather than dealing with conjecture and speculative theories. When the market becomes concerned about something, it will be reflected in the price. Until then, it is just a huge waste of energy attempting to keep up with the latest sensation in the gold market. Honestly, I sometimes wonder if some of these guys have a life outside of the gold price.
I have stated it before but will do so again - Gold is insurance against currency debasement. One buys insurance to protect themselves against unforeseen events HOPING that they will never have to use it. One does not buy insurance and then OBSESS over the policy. You buy it, obtain your peace of mind and then get about with the business of life. Owning gold provides you with the peace of mind that if events unfold that are deleterious to the health of the US Dollar ( if you are an American citizen - obviously citizens of other countries would be focused on their own native currency) your assets are shielded as much as possible.
It does seem to me however that those who keep yearning, pining, hoping, wishing, and even perhaps praying, for a higher gold price are yearning, pining, hoping, wishing and even perhaps praying for the house to burn down so that they can collect on the insurance policy. I find that rather sad. I am interested as much as anyone else in honest money and am more than ever concerned over the mounting US mountain of unfunded liabilities. That is why I own gold but I really marvel that so many seem to almost welcome the chaos that would engulf our society should the price of gold indeed reach some of the levels that many of these prognosticators assure us it will reach. As a father with children, I do not wish to see a society that would more closely resemble something out of a "Mad Max" movie just so that I could bathe in all the Dollars that my $50,000 ounce gold bar would bring me. There is almost a morbid mentality that would wish for such things.
Back to the technical charts - With the S&P 500 making new highs, traders are confirming that money flows are continuing to move into equities as the "go to" investment sector of choice. Until something occurs to change this psyche, I still think gold is going to face some serious headwinds to any sort of SUSTAINED move higher. There will continue to be rallies as shorts book some profits and bottom pickers emerge but the intermediate and short term trend remains lower until proven otherwise. I understand that some of those in the gold community will swear, curse and rant at me for saying this ( Norcini has crossed over to the Dark Side), but the market is what it is and that means accepting it and dealing with it if one is to make money as a trader.
By the way, I am thinking of temporarily changing the name of this blog to "Darth Dan's Market Views" and posting a picture of Darth Vader below mine to show the former Trader Dan and then the transformation to the reviled Darth Dan. When gold finally does bottom and resumes a SUSTAINED uptrend, then I can change the name back to Trader Dan once again with Luke Skywalker having rescued me and turned me back to the correct side of the force.
The HUI is seeing a bit of a bounce today as some shorts cover and some bargain/value buyers move in to take advantage of low prices. That being said, considering that the broader equity markets are soaring into new heights, that this meager bounce is all that the mining shares can put in for right now is rather disappointing. Unless we can see some more concerted buying efforts in the mining sector next week, the HUI is on track for the worst MONTHLY CLOSE since May 2005. That is even lower than the monthly close that occurred during the depths of the credit crisis in 2008. Very depressing stuff indeed.
At least bellwether Barrick Gold remains above that chart gap posted last Tuesday ( Dec 10). While it is not that much, I am sure the beleaguered bulls will take all the consolation that they can find right now. Maybe we will see some guys step in here and buy the miners in anticipation of a short pop higher. Year end book squaring could bring about some selling as investors throw away losers for the year to offset some of the gains that they have made elsewhere in the equity world. Once that selling is finished up, there might be a reduction in willing sellers at these levels, especially as the end of the year draws nigh and traders avoid putting on any sizeable positions as they wait for the advent of the New Year to do so. We'll watch and see what develops.
One more time for emphasis - be prepared for all sorts of strange and inexplicable moves in many of our futures markets. Traders are squaring books for year end and are moving to the sidelines to take some time off. That sort of thing is going to result in some bizarre price swings. Day to day gyrations do not matter as much right now as the longer term trends.
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