"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, June 12, 2012

Gold Market Continues to Reflect Currency Turmoil

Simply put - as the situation in Europe further deteriorates (yesterday the market YAWNED at the $125 billion Spain bailout), Italy is now coming into focus. Strangely enough, the US equity markets somehow think all of this is inconsequential as the bulls there continue to be giddy with delight.

Their attitude is best described by an old Steve Wariner song, "Some Fools Never Learn". You play with the fire, you're gonna get burned".

Considering just how tenuous things are, the degree of complacency that exists among equity bulls is nothing short of astonishing. The situation can best be described by looking at a chart of the VIX, or Volatility Index.

While the index has indeed risen from some of its lowest levels down near 14, it is still generating relatively low readings. Apparently traders could care less about potential headwinds; either that or they have already factored in what in their minds is a worse-case scenario. Personally, I think it is symptomatic of the Pavlovian response by this generation of short-sighted economic ignoramuses who believe in the allmighty power of modern Central Bank money creation to plaster over everything that dares arise that might challenge the comfort of the casino players, aka, hedge funds.

I suppose it will work until it just stops working one day and that will be that. Then maybe we will see some economic sanity prevail.

Back to gold however...  The metal was intially weaker early in the session but uncovered a strong surge of buying that some say was linked to the ETF. Regardless of the reason, the fact is that the metal is moving higher and once again looks like it is setting up a challenge of that tough overhead resistance level that comes in near $1620. If it can overcome the bullion bank selling at this level, it should once again make a run towards $1650 and test to see whether it can this time mount a breakout.

Downside support still looks firm.


  1. http://www.kitco.com/LFgif/aumay12.gif

    The Cartel has been conducting their raids every Wednesday for the month of May. Those numbers don't get reported until the CFTC releases its COT report on Friday - a week and a half after the CoT position is annotated Tuesday of each week.

    I can't help but wonder if the timing of the raids is related to the timing of the CoT report. After a Wednesday-Thursday raid, the Cartel has 5 days to clear those naked shorts off their books.

  2. whistling grizzly, well noted. Ten years ago, while posting to Vronsky's site, I coined the phrase, "Bash Wednesday" to describe the takedown of gold and gold stocks that occurred every Wednesday. I've observed the following as the standard short-term cycle in a gold bull market: Mon: down->up; Tue: up->down; Wed: down; Thu: up; Fri: up->down. Half_Monty

  3. when Ben announces QEXX and the DOW doesn't notice it in a downturn........the game is over and the BIGBADABUST is finally upon us.

    armstrong says oct '15 approx........sounds about right...... unless there comes a time when no one ever flinches in one of the repeated mexican standoff euro freakouts.

  4. COT shows that commercials hav been buying gold and silver.

  5. Hi Dan,

    If you don’t mind me asking, what do you think is a currently reasonable percentage one should have invested in gold?

    Thank you for everything you do.


  6. Hi Dan, I've been following your work here and your other work too and really enjoy it, please keep it up!
    It seems the words "the love of money is the root of all evil" is very true! Just think of all the people that get fleeced every time the markets are "managed" ! I just hope I can be a good steward of what God has given me!

    ps. could you give silver some more attention in your charting?



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