"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, April 24, 2012

Gold chart and some comments

Gold remains in a sideways trade above strong support emerging below $1630 and continuing down towards $1620 and below.

As suspected from the price action and the inability of the paper shorts to break through this support, we learned that several foreign Central Banks have been very active buyers of the metals on these breaks in price. I see nothing on the horizon that would lead me to believe that anything has changed in regards to these Central Banks and their desire to acquire gold during these periodic bouts of weakness. I repeat for the sake of emphasis - Central Banks do not CHASE GOLD PRICES HIGHER - they buy when prices drop and only when prices are moving lower. It is only the brain dead hedge fund managers who are servants to their gods, the computer algorithm, who sell gold as it moves lower hoping to profit from momentum based moves.

In many markets this strategy works relatively well for them; however, gold is not just another market. It is the currency of last resort with no liabilities attached to it and certainly no connection to the Western Powers which are presiding over their own financial downfall by their insistence on papering over their structural problems.

To force some of these newer paper shorts out, we are still going to need to see gold climb ABOVE $1680 and stay there on any dips lower. That will be the signal that there are now buyers who do not mind paying up for gold.

The gold shares, as exemplified by the HUI continue getting more and more undervalued in relation to gold itself. At some point, these shares are going to be the trade of the decade. You now have to move as far back as early 2002, a FULL DECADE AGO, to find the shares at this level of valuation against an ounce of gold. Heaven help the shorts in these shares when the tide reverses - there will be no one left to sell to as they try to cover.