"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


If it is not obvious by now, it should be -an attempt by the Central Banks of the West to derail the rise in the gold price is currently underway.

I mentioned in my midday comments that an effort would take place to prevent gold from moving beyond $1900 in an attempt to paint a double top on the daily price chart and induce a round of technically related selling from speculators on the long side.

This effort can clearly be seen in the following ONE MINUTE BAR CHART which reveals an enormous spike of 4,000+ contracts in the middle of the evening during a time period in the gold trading not normally known for this sort of volume. The question must now be raised - if this was a hedge fund blowing out of a long gold position, why wait for such a low liquidity environment in which to execute to trade knowing full well that by so doing, one would be guaranteed the worst possible exit price for the trade. Also, since the price of gold has been RISING and NOT FALLING, why would any gold long be forced to unload a position. It certainly is not under any duress from price action.
We can probably eliminate this as the cause therefore since only the rankest of fools would attempt such a thing.

The next question that must then be raised is if this were a hedge fund doing the selling to establish a fresh short position, why would they sell in such size at such an hour guaranteeing themselves to be filled with a fresh short position at the worst possible price by selling into a hole? The logical answer is that they would not do such a thing.

By the process of elimination and due to the fact that a major attempt by a Western Central Bank (the Swiss National Bank) to deliberately debase their currency occurred less than 24 hours previous to this selling barrage, added to the fact that an obvious raid took place on gold knocking it down below $1900 during the time frame in which the Swiss Franc devaluation was announced, this huge sell order must be therefore traced back to the Western Central Banks which are now going after the gold price in an attempt to cloak their utterly incompetent, impotent and predictable response to the current economic woes of the West.

To assume that the ECB, the Federal Reserve, the Bank of England, the BAnk of Canada, and any other major Central Bank of the West did not have previous knowledge of the plans by the Swiss National Bank to debase the Franc is to live in a fantasy land and be devoid of all sound wisdom. Of course they knew beforehand as something of this importance would not be done unilaterally by the Swiss.

The attack on Gold is therefore an effort by these modern day alchemists who are attempting to achieve prosperity by magically altering slips of paper into something that might constitute value in the eyes of the beholder to discredit the yellow metal and send it carreening lower.

China must be watching this with both disgust and delight. Disgust in seeing the depths of corruption that ails the Western monetary system and delight in the fact that the machinations of these conjurers is providing a discount in the price of the metal which they will be more than pleased to accept.

Take a look at the following chart and tell me with a straight face that this is NORMAL trading action. Any trader worth his salt knows this chart looks amazingly like a chart of a currency facing INTERVENTION PRESSURE from a Central Bank

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.