"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, April 19, 2013

Gold sees Strong Short Covering in Asia

Last evening here in the US, while watching the gold price action, it was evident that the reports of strong physical buying spooked a fair number of weak-handed shorts. In watching the price climb, once gold poked its head above $1400, but especially $1402 or so, the stops got hit and up she went. Volume picked up as the stops were continuing to fire, until the market ran out of steam up near $1425 where it began to retreat.

That was the high point for the session. Once trading moved into New York and the PM Fix was over, with India and the rest of Asia now closed, bears were able to take the metal down below $1400 again before the pit session closed. However, in the after market it has been floating back above $1400 once again.

I would have liked to see this thing hold onto a handle of "14" but at least it closed firm even though it was down some $106 for the week.

We have some technical chart points now to work with on this market. Support is in the zone noted extending down from $1365 and below while resistance is last evening's high near $1425.

A couple of things can be said about this chart. First, the more ominous news - the chart is displaying a near picture perfect BEARISH FLAG FORMATION. (That formation is shown in BLUE). If this market were to somehow break support on the downside after showing a pattern like this, it would portend the possibility of another $200 drop before all is said and done. I shudder to think what that would portend however for the global economy because it would signal that the Central Banks and their money spigots have failed completely in the battle against deflation. If that were the case, the stock markets globally would implode.

Having said that, based on the type of solid demand mentioned this past week, I find it very hard to believe that this week's support zone will not hold. Again, if it does not, we are all in for a world of serious hurt.

The positive news from the chart is that the market has gone down to this support zone THREE TIMES this week and on each and every visit down there, it has encountered more buying than selling! Bears surely want to break it lower but they could not.

The other thing is that the HUI showed some signs of life this week after getting the snot beat out of it nearly nonstop over the last two week period. If this index can manage to somehow claw its way back above the 300 level, I would feel much more confident saying a long term bottom is in on that chart. That remains a good ways above the current level however with its close just shy of 270 this week.

Again, I strongly believe that since the mining stocks led this market lower on the way down, they should be the first to turn if this market is going to head back up. Why? Because it will signify the RETURN OF INVESTMENT MONEY into this gold market.


  1. Where do you see the long term low for Gold ?

    Im a believer and read Marc Faber's recent piece where he says we could see a major low soon.

  2. Atta Boy Danno, you have some, I repeat some, very good news. As I drove home tonight I saw we landed at 1406...after the NY Close. NICE>
    I really believe that if we see last weeks lows in gold violated and the 200 downside you are correct we will visit the Oct 2008-March 2009 scenario ONLY IN FAST MOTION, so expect some more interntational Sirens to go off..We will print to infinity if we have too.

  3. i believe gold will go down more than 1200 dollar

    i know you will say not possible because the mining have just cost for exttracting gold ca,800- to 1200 us but nobody care if they close , goverments need cheap gold first to buy ,but if you put all peaces together you will see and understand that all central banks of this planet for the first time are Printing unlimited money , and money exist
    because gold exist ,when you have a virtual gdp,virtual money,very high unemployment only gold is money ,money you can print so muchyou want but can we print golddddddddd ?
    In coming weeks is very important the magic number 1315 usd
    for the weekly close on friday 7.30 pm in europe 1.30 pm new york time ,a close below will setup a nice samba.good luck from italy tony

  4. Long time reader, first time writer...found you from King World News and love your detail and neutral take on PM trading instead of just promoting it infinitely; cos ive been destroyed in the mining shares. I think/hope 1320 is the bottom-ish and i read elsewhere 1260-1280 is the ultra bottom, but regardless, my worry is: if we get deflation and a general market crash as happened in 2008 (before th huge monetary expansion and gold rise), what happens to gold before the explosion and inflation-money printing rise....i thought gold would go down with everything else but it already has been bombarded...do you think the Precious metals and their shares wil disconnect from the general stock market before any potential defmation/crash occurs..i hope so..my strategy is to hold onto a decent mining company for a few months till gold rises and its new highs...long-term safety play of mine..may do some trades in betweeen though. thanks

  5. Thank Dan!

    Appreciate and admire your analysis and balanced perspectives.

    Steven Wood; It certainly is outrageous when you see headings such as "Sinclair- the US will be cyprused & we will see $50,000 Gold"

    What would I know. Perhaps, Mr Sinclair is right! It just seems unlikely, and the more and more he (Sinclair) makes commentary to this effect, the more and more I look to Dan to get a balanced perspective and I'm hoping all the readers here do the same.

    Thank you!

    1. I think the idea is that all the money in all the accounts in banks over the insured limits can find their way into gold and therefore it can be any price on the upside. It just doesnt make any sense that it would be lower. None at all. So once some triggers are hit on the upside, it can be 3500 or much higher. All it has to do is take out some higher number, say 1800, and the sellers will have lost all their advantage and the race is on. But obviously, until that happens, its around 1400 and all the higher numbers look like they are light years away. Of the 500 tons sold on this decline, will see how much of it is available for delivery on the june contract. Or even enough to ship to Germany. If not enough, then 1540 will fail to stop the next advance.

    2. (changed my name from Steven Wood)

      yeah its a little annoying when you see gold tumble a couple hundred bucks and then it moves up 40 in one day and you'll see headlines like 11,000 gold...i remember that one too on KWN..im sure they're right on their argued principle, like theres no floor to the dollar so theres no limit to the gold price potential - Peter Schiff slaughters everyone he argues too, its just in the meantime some of us get slaugtered, especially in the mining shares, but thats alot more risky than the counterparty-riskless metal...its true though, if confidence is lost with some black swan in america which is inevitable, eventually, than stops can be hit on the way up and we could see 3000 - 8000 dollar gold or whatever sooner than expected...im thinking of throwing all my stuff in NUGT, leveradged GDX to make up for the butchering i endured.

  6. Steven, SilverReport and Arnie;

    I strongly believe it comes down to confidence in the system or in the respective currencies of each various nation. Keep in mind that we are using a monetary system based on nothing of particular value except for confidence. If this confidence gives way, for any reason, then gold will respond.

    People will need to FEAR that their money is being ruined and then they will try to preserve it. In the past this has led to them buying Dollars in foreign countries such as Argentina during its crisis. It could be the swiss FRanc, etc.

    But if the major Western Central Banks were to lose the confidence of the MAJORITY of investors in their nations, the question then becomes what currency would they move to? The Yuan is too small, too illiquid to serve as a safe haven. for that matter, outside of the Dollar, and the Yen, and to a smaller extent, the Euro, none of the major currencies are deep enough or liquid enough to serve that role.

    Gold will see money inflows if that were to occur especially if people begin to suspect that their retirement plans, 401K's, IRA's are going to be grabbed by the politicians. We need to stay vigilant to watch these people because we are talking about them preserving their monetary system which allows them to continue to rack up huge deficits and keep spending even more!

  7. Thank you for taking the time to explain, Dan!

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