"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


Wednesday, February 20, 2013

Euro Gold Below 1200

Since July of 2011, forays in gold priced in Euro terms, have been met with solid buying on approaches towards 1200. Only ONCE over that time period did gold end the week below this psychological support level. There was no downside followthrough however and the price rebounded the following week moving back towards 1320 before faltering. The week is still young but the gold price has now fallen below this level with today's sharp move lower.

Some of what we are seeing today in gold is tied to selling ahead of the release of the FOMC minutes for January. Traders/Investors continue to fear a more hawkish tone to the minutes with a rising number of voices perhaps calling for an ending to the QE program sooner than expected. That remains to be seen given the extremely tenuous state of this so-called "recovery" but this is the current thinking for whatever that is worth.

It is no different over in Europe where many believe the worst is now behind the region and has been the case over here in the US, money flows are moving into equities and exiting gold for the time being. Any reversal to the downside in the equity markets there, and here as well, would change that mentality quite rapidly were that to occur.

There is a spike low down near the 1150 level made in September of 2011 that is the last line of bullish defense for the euro gold bulls should the weekly close be below the 1185 level. In a sense, this corresponds closely to the $1550 - $1530 zone on the US Dollar priced gold chart. Bulls would not want to see this level give way without an intraweek recovery as it would portend even lower prices

As far as the US Dollar priced gold chart goes, support at $1600 was crushed with the market attracting fresh short selling on the break below last week's low just under $1600. There is no support just below today's session low on the chart until price nears $1565. Below that, should it fail, is the $1550 level. That one is a biggie. Should it not stem the bleeding, gold is going to test $1535.

Some data providers are showing that the 50 day moving average has already managed to cross below the 200 day moving average, the infamously known "Death Cross". My data does not yet show it although it will probably do so within the next day or two. Either way, technical analysts will view this as further confirmation of a bearish trend in gold prices.

The ADX that I have been including recently picked this up much sooner than the death cross occurence itself. It continues to rise with bearish momentum increasing as it has picked up the fund flows OUT OF GOLD and FRESH SHORTING. The market has fallen rather sharply 7 out of the last 8 trading sessions, so it is perhaps due for a bit of a bounce but expect rallies to be sold unless gold can get back above $1640 for a bare minimum. Even at that, bulls will not be out of the woods until price can move past $1660 - $1665. The bears are currently in the driver's seat.

Physical market buyers of size as of yet do not seem to be interested in moving in right now. Let's see if we can spot their footprints when they do.

I should also note here that the Continuous Commodity Index or CCI, has been getting worked over rather harshly the past week. That is continuing this week. I am getting reports of several large funds and banks exiting commodities due to the sector's poor performance over the last year.

Have to hand it to the elites at the Fed - they have managed to conjure into existence with QE1, QE2, QE3 and now QE4, trillions of dollars out of absolutely nowhere without the least bit of negative impact on commodity prices ( for now!). They have concocted a perfect world in which equity prices move steadily higher, interest rates remain stable at ultra low levels and commodity prices, while higher than several years ago, show no significant impact from the huge increase in liquidity.

Brace yourselves for the potential for some wild price swings when those FOMC minutes are made public.


  1. Dear Dan,

    It's possible that many overleveraged bulls are also being flushed right now with the accelerating downtrend.
    If we live in a manipulated PM market, as seem to confirm both Petunia and Jim Sinclair, then, given the fact that time is of the essence for the bears fighting fundamentals here :
    - bears will probably try to push their advantage even more during the flush, and target the 2012 lows.
    - physical buyers will wait for the flush to continue in order to buy at lowest possible price for long-term investment.

    Since the technical situation greatly deteriorated in the past few days, especially yesterday when we broke the 1600 $ support zone, do you think it likely that we'll flush down all the way towards 1480 $ (the 38% Fibo retracement of the whole 750 $ - 1920 $ move)?

    A break of 1530, now only a few pips below, may provoke a new waterfall of panicked and disappointed gold bugs.

    Do you have any hint about your most likely scenario? (I know I'm asking a lot here :))
    Thanks for the great updates,
    All the best,

  2. Me again, just FYI, did you notice on SILVER charts (here is the link), how we bounced everytime on the Fibonacci retracements, after a big red daily candle?
    Everytime they stopped the hemorragy.
    Now we are bouncing on the 78%.
    I'm venturing a small long position here once more, targetting 30.70 (around the 50% Fibo and the top of the channel).
    I don't encourage to do the same, just thought this configuration was worth noticing.



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