"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, March 31, 2011

Monthly Gold Charts - March 2011

Gold scored an all time high record monthly close!

Gold has now pushed solidly past the 75% Fibonacci retracement level from the 1979 high to the 2001 low in inflation adjusted terms. Note - that this chart uses the government's CPI number which is utterly useless but at least can serve as a type of benchmark against which to compare the current gold price in real terms.

Silver - 8 hour chart update

Range trade until it clears $38 and holds the level.

June Gold - 8 Hour chart

I am posting this chart up to try to get a better read on the volume being done in the gold pit. There is a defect in the software that I am using which makes it a bit tough during the transition between contracts from active or front month to the next most active which then becomes integrated into the continuous contract price and volume.

As volume drops off in the April contract it shows up on the continuous contract but that same volume is increasing in the June as it gets ready to become the active month for charting purposes. June will shortly be the contract employed when we do volume analysis on the continous contract but for the immediate time I am having to use a separate chart for the June to catch its volume readings.

Note that the last few bars are showing the transition to it as the most active contract. I apologize for neglecting to catch that my comments on the recent gold chart were the same as yesterday when it comes to the volume. There was a drop off in volume as traders were winding down positions related to the end of the month/quarter but volume picked up to more normal levels yesterday in the June.

Note that strong volume is anything over 75,000 contracts on one of these bars. Decent volume is anthing above 62,000 or so. These are 8 hour bar readings and not the total for the day so keep that in the back of your mind as you review this.

As you can see, there was decent volume driving the move towards resistance but once it got there bulls lost interest in pressing it through that level and volume has now subsided. I want to see what kind of readings we get in the June tomorrow as the new month begins as well as next Monday when we get the advent of a new week to see whether hedge funds are going to come back in and recommit fresh money to the metals.

Gold now at top of its Trading Range

Please see the chart below for my notes on the technical posture of the market.

Gold is now trading at the exact top of what I believe is a new and higher consolidation range bounded by $1440 on the top and secured by $1410 on the bottom. Until it can push decisively past $1440 on good volume, the range is still in effect.

Trending indicators are generating buy signals but those must be confirmed b a push through $1440 that maintains that level.

Open interest continues declining but that is a function of the completion of the end of the month/quarter book squaring by funds and other large traders with clients. Tomorrow starts a fresh month.

We may need to see the price action Monday to get a more definitive idea of where things are headed next depending on the willingness of traders to place bets ahead of the weekend. Many tend to avoid that not knowing what the weekend break might bring so we will just have to wait and learn what happens and observe how traders react to the advent of April.

USDA Stuns Ag Sector

This morning, USDA released its most current estimate of corn inventories as o March 1 and took many in the ag markets by surprise. They reported a total of 6.52 billion bushels in storage, down from last year's number at this time of 7.694 billion and well below the average of analyst estimations at 6.70 billion.

With an increase in usage combined with these lower stocks, many are expecting USDA to now drop season-end supplies to a record low. Current projected ending levels are at a 15 year low, the equivalent of perhaps 18 days worth of corn needs.

Corn locked limit bid on the opening of pit session trade and has been stuck there ever since. As I write this, there is a pool of well over 278,000 orders to buy in the two front months alone!

The reason I mention this is because these extremely high corn prices are not shutting off demand and that means price will need to rise yet higher. Translation - get ready for a continuation of high meat and chicken prices for the remainder of the 2011 growing season not to mention the rise in prices associated with corn in all products employing it.

With gasoline prices shooting into new highs for the year along with a report that is pushing the price of corn, beans and wheat all higher, the beleaguered consumer is not going to get any respite from the surge in food and energy costs any time soon.

Gasoline Prices set Fresh 32 Month High