"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, January 3, 2012


It certainly appears that hedge fund managers are hungry for gain this year as they used data coming out of China and India as a reason to plow idled money into commodities and jettison the Dollar. "SAFE HAVEN" was anathema to begin the New Year's trading as bonds are being pummelled in today's session.

The surge in money flows pushed gold and silver sharply higher with Silver leading the gains (as we have said repeatedly - Silver will outperform gold anytime the RISK trade is back on) as it is currently trading near $29.60, up some 6% to start out the New Year. It still remains below $30 however and until it does, stronger hands are going to look to sell silver rallies.

Gold is acting very impressively as it has been able to push through the $1600 level and maintain its footing over this psychological resistance. A good finish to the day (needs to stay over $1600) and it has a good shot at running to $1620 where stronger-handed shorts are going to be waiting for it. If the bulls can absorb that selling, then this thing has a real shot at pushing all the way back towards $1650, which will be the indicator whether or not we can get a trend higher to commence. A short term bottom is in however - now, we will need to see whether the metal can build enough buying momentum to kick it out of a range and into a trend.

There still remains enough of a contingent of traders who remain very leery of bad news out of Europe and until that number dwindles down further, some are not going to be convinced by one day's trading gains, even though those gains are strong.

Aiding the cause of both metals is the recovery in the HUI which has managed to get back into that year-long trading range bounded by 600 on the top and 500 on the bottom. It seems that some of the same funds that were accumulating the shares last year came back in late last week and continued buying this morning. That is a good sign that the bulls were able to thwart a huge bear raid and force some short covering by frustrated shorts as the flows into the sector did not disappear as they had been hoping. The price action is telling us that the same big buyers of the shares are still bullish and see value when these things move lower. The big question in my mind is whether or not they are going to be able to recruit sufficient allies to their cause to really enable a change in the trading range pattern which has defined this sector for more than a year now.

Part of the rally in the commodity sector is being fueled by a sharp rise in the crude oil price as Iran jawbones more nonsense about shutting down the Straits of Hormuz. Let them try as such an event, while it would disrupt world oil flows, would affect their economy far worse. What else are they going to export - pistachio nuts?

I might be a bit more nonplussed than some by all this chatter as I remain very skeptical that Iran would be able to sustain a closure of these straits for very long. My guess is that the Iranian leader needs to gin up local support to take the mind of the opressed Iranian citizens off of their pathetically lousy economy.


  1. Thank you Dan for your timely posts.

    Have a Happy, Healthy, and Prosperous New Year!


  2. Isn't that last sentence a satirical analogy to the USA? ;-)

  3. Risk on is right Dan. All that fresh ECB cash is looking more and more like stealth QE. Let's review:

    * ECB - stealth QE via the shitty banks. check
    * Japan - active QE - check
    * U.K. - active QE - check
    * U.S. - passive QE (via swap lines, etc) - check
    * U.S. - active QE in the on deck circle - check
    * China - active QE - check
    * Bullish economic news - check
    * Copper - up - check

    Would have liked to have seen gold close in the 1610 area, but those scumbags kept it pinned at 1605 all day. They are going to get theirs though, because the bullish action should continue. If we can get the EUR/USD over 1.31 we could see a very nice squeeze. Somebody is going to recognize that gold should be trading at 1700 right now, given the general environment. The last piece of the puzzle is to get the EU periphery 10 year debt yields lower, and UST yields higher. Then it's off to the races.

    I'm heading for the doors before S&P Friday though, even though those creampuffs could surprise with only a 1 notch downgrade of France, which would be longer term bullish. The psychological effect of a soverign debt downgrade of the entire EU could change sentiment in a heartbeat. It's probably better to be short/neutral heading into S&P Friday weekend, but for now... party on

  4. Dan, Just to hear you say "RISK ON" gives me hope that the metals will do well. The last two weeks of December or all forgotten, forward into a new year with bright hope for "RISK ON"!

  5. If and when the big banks ever get honest enough to stop this phoney baloney shorting process and gold will start its ascent to Jim Sinclairs 2000+. Big Gov will never let this go, and will continue to utilize them as they have become quasi govt entities. This battle will continue until the public wakes up, and/or Euro and Asia help out. Thanks for the charts and analysis Dan. This year is shaping up to be the battle we have been awaiting on since the 2008 "systemic meltdown".

  6. as we all wait stackin' n smiling for the day coming soon as it will be AGAIN like it was in july-sept. when it was RISK OFF--GOLD UP!!!

    debt ceiling senate wars coming again!

    EU prints overtly to keep from blowing up or blows up n prints overtly to cover banks as PIIGS blow up.....in march

    going to be quite a year, Dan, with more than its share of unknowns and surprises.

    happy new year

    you are a gentleman and a scholar and i salute you once again.

    still my homepage.


  7. Setup well for a nice squeeze later in the day. You know damn well the bulls want to push the S&P through 1300. First 5 days of January set the year and all that nonsense. Loyal to the acting President no matter what.

    So what they gonna do? My guess - push the EUR/USD up to 1.31, which should set the algo's on a huge frenzy buying gold and silver. Just look at the bullish action at 1.295 !!

  8. Happy New Year Dan!

    To follow is an excerpt taken from a previous comment I posted on Trader Dan:

    September 30, 2011 9:26 AM

    rhomethyrst said...

    "Hi Dan,

    As always, thanks for your analysis!

    It’s buying season for precious metals. The banksters and heggies may push the prices down as far as $1250/$24, but it won’t save them. They will lose ground, and batta-boom…the metals will sky rocket!

    Plain and simple, austerity won’t work.

    My take is it's buying season for precious metals."

    - END -

    QE3 is in the works today, as we live and breathe in January, 2012. And yes, Iran has nuclear rods, too. And, "growth for the sake of growth is the ideology of a cancer cell."


  9. Hi Dan,
    Great call on the crazies in Iran. I think you are right on the money.
    Esra Star.

  10. Looks like the S&P Friday crowd is repositioning right on time. Back to deflation mode for a few days. Well, it was nice while it lasted.

  11. Here's the trends I've noticed the last few days that I'm trying to trade around:

    * The London 11:30 Gold fix beat down has been worse than usual.

    * The Crimex 1:30 beat down has been MUCH worse than usual.

    * Hong Kong buying, London dumping

    Risk is clearly off. Let's see how far down they can take it.

  12. Dear Trader Dan,
    I am curious to know at what price would you consider that the recent move down on gold was "a hook" - so to speak? - meaning a move to break the trendline and take you out of your position. As a former trader - a whipsaw - was perhaps the move I redoubted the most.
    This market reminds me of a flight I once took with my family many years ago. My youngest was 4 years old - she was the only one on the flight to be visibly and audibly laughing as we swooned in the air pockets.
    The entire English-speaking world has written off the euro project as a failure - so it can be no surprise that the price of a lingot (kilo bar) is closing in on its best prices of december - today 41290 euros per kilo.


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