"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


Monday, April 30, 2012

One Minute Chart of Gold - 7,501 contracts

By request of a reader S Roche, I am providing a one minute chart showing the enormity of the trade in gold early this morning (4-30)

Monthly Gold Charts

Isn't it amazing that some are so ready to call for an end to the bull market in gold. From a monthly chart perspective, there is nothing to indicate such an occurrence.

In 2008, the CLOSING MONTHLY GOLD PRICE dropped 26.5% from its best to worst level before it renewed its uptrend.

More recently, gold has dropped a mere 14.4% from it bests closing monthly level to its worst level reached with a handle of "15" in front of the gold price.

Keep in mind that purely from a long term technical chart perspective, the metal remains in a solid uptrend.

As a side note - for those of you would never seem to grow tired of castigating me for using the phony government CPI data in calculating my inflation adjusted gold price chart, please make an attempt to restrain yourself. You are always welcome to create one of your own and send it to us for publication which I will gladly to do.


Traders continue to chatter about the so-called "FAT FINGER" trade in gold that occurred early this morning, a trade which dropped the gold price $15 in minutes and consisted of an order of 7,500 contracts. Many seem to agree that it was a trade placed in error.

The problem is that we also witnessed a similar surge in the volume done in the nearby silver pit at the exact same moment. Note the time right after the 5:00 AM hour (Pacific time) on the following 5 minute chart and see how large the volume was compared to that for the remainder of the session.

No matter who did the trade, ( I remain of the opinion that this was a raid designed to knock the metal lower in hopes of creating a cascading running of downside sell stops), the fact is that it failed miserably. Besides, if it was a "FAT FINGER" ( a trade placed in error) how did the same fat finger knock silver down so sharply? Was that too a simple "error".

Note how both metals recovered the losses and added some additional gains even with the mining shares weaker and the broader equity markets lower. Even copper was lower today for a while before it too moved higher.

I still believe that traders are becoming more convinced that another round of QE is coming sooner rather than later. At least that is what is being reflected in the price action.

Gold Takedown Rejected

Take a look at the following 5 minute chart and note especially the volume readings posted below each individual price bar. Look just past the 5:00 AM Pacific time hour and you will see the enormous volume spike accompanying the sharp downdraft that occured in the gold price dropping it $15 in the course of minutes. Analysts are still grasping for an explanation.

The most common is that it was another one of those "fat fingered trades". Have you ever noticed how many fat fingered human beings apparently camp out in the trading community. Last time I checked a skinny finger could hit an "enter" key just as easily as a fat finger could.

My view on this is that gold's psychology changed late last week as it begin seeing some seriously interested buyers whose entrance back on the long side was able to take it up through a minor chart resistance level near $1650 and set it on a course to test overhead resistance at $1680, a key chart level. That is a no-no in the world of the Western Central Banks who cannot tolerate this rebellious upstart of a metal telegraphing to the entire world the failure of their attempts to paper over the problems ailing both Western Europe as the US.

That called forth reinforcements to take the price lower to try to corral the unruly upstart and put it back into the box. As you can see, the selling was met with more buying that completely erased the losses and then added some more gains for good measure.

We are right back to being in position to try to tackle $1680 again. Weakness in the mining shares however is working once again to dampening excitement in the actual metal.