"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


Friday, August 10, 2012

Gold right at the Top of its Recent Trading Range

Gold has pushed to the very top of its recent trading range as it works within the confines of its consolidation pattern noted on the chart below.

It either mounts a solid breakout this time around or it will fall back towards $1600 and slightly below once again.

I have noted that for the last 5 weeks or so, the lows have been slowly creeping higher hinting at market strength. It simply needs a spark, something to ignite it and push it past the strong selling pressure emerging between $1620 - $1630.

Today's strength is predicated on news out of China showing its economy slowing also. Traders are expecting the Chinese authorities to therefore be more inclined towards further monetary accomodation there also.

However, bond yields are moving lower today and equities are flat to lower suggesting that traders are hesitant to read too muchn into the Chinese news. The focus continues to be on Jackson Hole at the end of this month and early September for the ECB. My guess is that neither one of these Central Banks is going to do anything on the bond buying front.

As a general rule of thumb, the 4th quarter tends to favor a stronger gold price which is helpful to the cause of the bulls. The summer doldrums however are in full force as volume in the gold pit is pitifully low. In such an environment, relatively small orders are able to push prices around rather easily resulting in times at some wild swings. Right now watching gold trader is about as interesting as watching paint dry.

The HUI has pushed strongly past the resistance level at 420 and is now on course for a push towards the 440 level.

The HUI to Gold ratio continues to improve with the mining shares leading the bullion price for a change.