"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


Tuesday, September 6, 2011

Daily Comments

Another day of volatility furthered this time around by the meddling of the Swiss National Bank. Have you noticed by now that the only thing Central Banks these days seem to be providing is more confusion, uncertainty, and volatility?

I am of course referring to the SNB's attempt to fix its currency against the Euro and derail its strength. I remember a time (it now seems long, long ago) during which a nation longed for a strong national currency as a vote of confidence by the global investing community. It attracted capital that could be used for economic expansion and growing a manufacturing base, kept the cost of imported goods low and provided a stable price environment. Not any more - now it is a case of each nation outbidding the other in their attempts to cut the props out from beneath their own currency.

This attempt,which will inevitably prove to be a failure (see Japan's futile efforts as EXHIBIT ONE), introduced a dose of confusion that allowed the bullion banks to regroup, after they have been sent reeling as Asian trade took gold to an all time high overnight. Their fierce selling took the metal lower on the day, although it is moving higher in the aftermarket hours.

Keep in mind the comments I made the other day on the KWN WEEKLY METALS WRAP in which I remarked that the enemies of gold would throw everything, including the kitchen sink, at the gold market in an attempt to keep it below $1900 and attempt to paint a double top on the technical price charts. If they fail here, gold goes to $2000 before you can blink. The battle has been joined with the East bidding up the market and the West attempting to take it down. Batten down the hatches because the sea is not going to get any calmer here on out.

Also, watch for the ESF to try continuing propping the sagging equity markets. We are quickly reaching a point where the realization that the economy is spiraling downwards is dawning on more and more of the investing public, with the current crop of political leaders offering nothing but more of the same failed policies as a cure. Not only that, but the monetary authorities have nothing left to do except print more money as they are effectively zero bound. Translation - when all else fails, resort to market chicanery.

Back to gold however - after setting a new all time high overnight, it then retreated moving lower throughout the rest of the session before settling down on the day. Some decent buying surfaced near the $1860 level as bulls attempted to take the metal back above $1880 but the effort looks a bit half-hearted right now. They will have to quickly recapture $1900 to put the pressure back on the bullion banks.

Gold bears will try to shake out some more longs and see if they can get enough sell stops targetted to drop the price back towards $1840.

Silver acted as a heartbreaker once again in today's session as it once again could not muster enough upward energy to break free of the shackles being imposed upon it just shy of $44. Note that today it failed at the 61.8% Fibonacci retracement level.  Its short term uptrend remains intact however so as long as bulls hold it above $40, odds favor an eventual breach of resistance at $44. Currently it is bouncing back and forth between the 61.8% retracement level and the 50%.

The HUI added to its gains from last week further confirming the strong upside technical breakout, although it was pulled off its best levels of the session by the selling that hit the metals themselves. A second consecutive weekly close above 610 will be very bullish.

I will be most interested in observing the subsequent price action if the HUI comes back and retests the GAP area shown on the daily price chart. If the uptrend is going to continue and the shares are going to rapidly move higher, the shares comprising the index should find willing buyers that cause the price to bounce off that level and recover higher.


  1. Dan, thank you.
    Your contributions are invaluable.

  2. Wow. First cogent explanation I've seen online describing today's PM decline.

  3. thx Dan great info as usual.

    i created a blog to keep everyone up to date on the metals, constantly updated:


    hope u find it useful

  4. Thinking gold was going to break through $1900, last night I bought some. Well, I will have to wait a bit to recoup. Thanks for the info. I am buying the trend that is the important thing.

  5. Dan, why did GLD wait until 11am to begin selling off?

  6. Another smash today. But, it's not even a smash. There's just no bids in certain gaps from what i saw on my october gold contract?

  7. Thanks to all for the comments.

    Dfly - do not try to trade the October gold contract. the open interest and volume in there is too thin and the floor locals will nail you on stops. Work with the most active and most liquid contract, the December for the time being.

  8. how do i figure out which contract month has the largest open interest?

  9. dfly;

    the following contracts in gold will be the most active and liquid contracts depending on the calendar date.

    From the current most active month moving forward on out in time.

    December, February, April, June, August, December

    these are the months that you will want to trade. You will be moving out of the most active month about one week or so before the beginning of that calendar month unless you plan on taking delivery of the metal. For example, right now you will be in the December gold contract. Near Thanksgiving of this year you will begin looking to trade the February 2012 contract.


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