"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, September 24, 2013

Gold Finds a Few Friends near $1300

As many already know by now, gold had been moving steadily lower throughout the New York trading session when a late-in-that-session small wave of buying brought the market back off its worst levels and actually allowed it to trade on the plus side of unchanged for a brief moment. I am unclear as to what the reason was that caused the bounced but it did occur rather rapidly and without much fanfare or fresh news that I saw. My thinking is that some shorts who faded the move higher on the release of last week's FOMC statement, decided to ring the cash register when the market traded down both into a technical support level on the chart. Also, the market had completely surrendered all of the gains it put on related to that same FOMC release and then some. Perhaps the thinking was to go ahead and book some gains and wait for another bounce higher into which to sell.

It did not hurt gold also to have the HUI, which has been falling faster than Obama's approval ratings, finally manage a bounce higher today. That, more than anything, seems to be to have been the catalyst for the move higher off of the lows at the Comex.

Technically, market remains range bound between an overhead resistance zone noted on the chart and a support zone beneath the market which extends to psychological support at round number $1300 and to just below that level which is where the market bounced early in the session last Wednesday when the FOMC statement was released.

For gold to have a chance at moving higher now, it will need to take out that $1332 level. Whether it is setting up a large range trade between $1375 and $1305 or so remains to be seen. If it is repelled by $1332 - $1330, it will be seen as a strongly bearish reaction. If that is the case, I would look for aggressive selling that will test the bottom of support down near $1296.

The bulls bought themselves a bit of time today but they have a lot of work to attract some fresh converts to their cause.

With copper and silver both lower today, with crude oil moving lower and with the grains not managing more than a bounce higher at this point, any inflation issues that might be seen originating from the commodity complex are nowhere in sight at the present time.

Also, in what has to amount to an amazing slight of hand feat, the Fed, through its various talking heads, has managed to drive down that all important yield on the Ten Year Treasury note away from what I believe they are viewing is the DANGER ZONE of 3.0% yield. More than anything else, I believe that they are watching this very closely and will fine tune their comments and statements into corralling this particular instrument. Expect to see the DOVES appear on any approaches by the Ten Year back to that level.

Along that line, I believe gold will be ultra sensitive to this as well since it was talk about a rising interest rate environment that has been hurting the yellow metal.

And lastly, hats off to Senator Ted Cruz for doing whatever it takes to remove this albatross which should be known as the "UNAFFORDABLE" Health Care Act from around our collective necks by mounting a filibuster in the Senate.

Just yesterday I received the "good news" how affordable this abomination is for me personally with an increase of $850/year, IF, I can even keep the same plan which remains unclear at this point. My agent tells me he has been talking to all of his clients and giving them the bad news for the last two weeks. No one is happy about it, and I mean, No one and yet the political class tells us that we are stuck with it as the establishment Republicans actually are spending their energies not to get rid of this job killing, freedom sapping mess but instead are attacking Senators Cruz and Lee who are trying to get rid of it.

They are just as much to blame as the Democrats who saddled us with this pile of excrement in the first place. Ironically, the Unions, who have an unholy marriage with the Democrat Party, are furious that they are not getting waivers to opt out of the thing. Serves them right for promoting it and spending their hard-working members' dues to shove it through the Senate and into law. It is the members who are the ones who will get hurt the worst from this terrible, ill-conceived and horrendous law. Maybe, just maybe, this will be another body blow to the union leadership as their members wake up and realize how poorly served that they have been.

Oh and if that were not enough, we are back to reaching the limit of the governments' borrowing ability once again. Sigh - what an empty shell the United States has become of its once great, proud self. The way things are going, the NFL will stand for the NATIONAL FLAG FOOTBALL LEAGUE before long. They will probably do away with the Super Bowl and replace it with a "Completion" Bowl for every single team so as to make sure that no one feels left out or bypassed.


  1. No worries Dan you and other families abroad are considered " glitches ". Pardon my shameless self promotion. Nice to see the market down and miners up for a change, I've learned to walk away now and come back hopefully surprised at what I see with these markets. ... Shameful really


    1. dear dan
      please understand how vital your wise and witty daily commentary is to me.
      each day you write, your cutting edge gets only sharper.
      please keep up the good work, and know that legions of us out here, back you strongly.
      you are my daily elixir!

  2. Dan -

    I do not get it. If oil goes up $850/year, or corn costs me $850 extra a year gold goes up. But if healthcare costs go up $850 per year - gold goes down.

    Educate me, please

    1. @jms- Just remember, if you don't think about eating, replacing worn out clothes, dining out, purchasing tickets or big ticket items, visiting the dentist, doctor or optometrist, or driving to any of the above sites, then it's the old cliche'- "out of sight, out of mind", or "what you don't know can't hurt you" all the while it's first come(to the printing press), first served(including political action commitees or PACS, lobbies, special interest groups, groupies and gropers, "slush funds", vulture, private equity and hedge funds, entitlement funds, subsidies, dark pools, loopholes, tax exemptions and government takeovers such as Fannie, Chrysler and GM

    2. jmsvett;
      welcome to the sometimes bizarre world of government managed statistics. As long as "the herd" is convinced that the government's numbers on inflation are trustworthy, they will not be concerned about inflation no matter what happens in the real world. It is all about sentiment and that is why the Fed works to manage sentiment by using their various Fed governors to manage public perception.

  3. Well said: "They are just as much to blame as the Democrats who saddled us with this pile of excrement in the first place." To late for the bathroom, it's all over the place now.

  4. keep your physical gold & silver, stash some cash and wait things out. I don't see what else to do. I used to trade in the markets but I just can't see it now.

  5. " we are back to reaching the limit of the governments' borrowing ability once again"
    Maybe it will be gold positive, for a change?

    In terms of T.A, it's indeed not shiny for the bulls from my perspective.
    1333 first resistance still seems unbreakable. Where is the strength?
    On a weekly time unit, last candle was a spinning top, representing indecision...a signal indicating the market's direction would usually be a close outside the spinning top, so if we close the week under 1290, you undestand what it means... simultaneously, the MACD is still blocked by its propagation axis, and the CDUR is going down, which is not an incentive for prices to go up. So, it's very easy for me to imagine a drop towards the 1275 area support zone, which is the 62% Fibonacci retracement of last wave up, and also a horizontal support zone at the moment, as well as the inf bollinger band on a daily time unit.

    On a daily time unit, well, not brilliant either :(
    The Cdur goes down as well, BOTH bollinger bands are now going down, and the MACD (9 20 7) is NOT crossing, which is an additional bearish signal. Mooo. I see no reason to go long here. I'm waiting on the sidelines.

    Remarks :
    - to decide when to trade, I compare at least 2 time units, the lower time unit being 4 to 5 times faster than the upper one. If I have a buy signal on the upper (slow) time unit, it should be confirmed by the lower one first. Example : Weekly and Daily time units.

    - I'm using Bolinger Bands to see in which phase the market is in. There are 4 phases. 1 : horizontal bands, range or squeeze. 2 : diverging bands. 3 : bands trending the same way. 4 : bands contracting.
    We are now in Phase 3 in daily unit. They are going down, along with prices. Usually, it can be interesting to spot the moment when we enter Phase 4, because as the lower Band will reverse, it will be a SUPPORT and you can go long. I'm watching an indicator to ANTICIPATE the reversal of the bollinger band and getting into Phase 4 from the previous 3 to 4 candles. Right now this indicator is hardly starting its cycle down, so it's not in position to tell me that phase 3 will stop any time soon. Once again, it's only an indicator, but it doesn't help me either to decide to go long. So...wait, wait wait it is for me regarding the long side.

    1. P.S : for beginners, initiation to japanse candlesticks.
      They give more d├ętails than simple closing prices.
      I recommend you to use this representation in your charts and get used to the most usual signal formations.

    2. P.P.S : on very short time units, let's not forget the title of Dan's post. The bright side is that the 50% Fibonacci retracement level of last move up (1180-1340) is holding, at around 1306 $.
      So as long as a support is holding...it's holding!
      I'm not playing very small time units now and the context seems to fragile to make me confident going long there, but at least, we still have a nice support under our feet. If gold must go to 1220, it first must go to 1275, and it first must go through 1300, which it didn't yet ;)

    3. There is also the options expiry for Gold futures today. Is it possible that gold may rally afterwards for this reason alone, despite other bearish signals that you mentioned? Maybe overnight or tomorrow?

  6. making statements regarding Senator Cruz dark past i guess is prohibited.

  7. Dan, many years ago with the recovery from the gold 2008 fall - I remember you mentioned or alluded to a market in a bull market finds buying support near the Daily 40 RSI - have you noticed the gold daily chart - for some reason that came back to me - the last correction found buying support at 40 RSI for both gold and silver - this correction is looking very similar. Far too early, but if a break out over 1440 happens RSI would go above 60 - like the last rally in August - could we be seeing a transition in the PM's - Silver chart is more noticeable. $HUI, GDX, GDXJ - all the same pattern showing up with RSI up moves over 60. Any thoughts?

    1. Adrian;
      Thanks for the post... yes, the RSI is generally a good indicator to gauge whether a market is trending or is sideways. For me, when it comes to gold, I am focused more on these horizontal resistance and support levels right now. The reason is because gold is range bound and not really going anywhere. It needs to clear some overhead resistance levels and break free of those if it is to actually trend. That will push the RSI above the 60-65 level which would confirm a trend or at least a breakout and a leg higher.

      Until we see either downside support or overhead resistance give way, this thing is range bound and will be challenging for most guys to trade unless they are shorter-term oriented in their approach and are willing to spend the hours necessary to catch the top and bottom of the range and trade accordingly.

  8. Support finally holding, and 1335 is breaking.
    Indecision is within the weekly unit spinning top of last week.
    Daily, it can go anywhere within this spinning top, especially if Bollinger Bands are contracting in a Phase 4. So I'm waiting, because it's too random for me at the moment.

  9. The worst part is that this was intentional to usher in the next phase we know as nationalization, aka single party payer. That was the real end game for pushing though such a mess.

  10. One un-named gold company operating in Africa now down to a $2 handle from a $4 handle post FOMC.

    A lesson learned that these juniors can get destroyed quickly if the Fed decides to utter some "words" unfavorable for the gold sector.

    The amount of money lost in this group now far exceeds the money lost in the 2008 stock market crash.

  11. Whipsaw Wednesday; Tough trading today; just do not like seeing gold outperform silver and platinum; looks like Autumnal Equinox did not amount to much as far as turning mkts; very, very tough in here to get a handle; swb in sparks

  12. Mark, I don't mind so much your daily reminders of how foolish we all are for investing in the gold mining sector. But please stop with the falsehoods. Saying "The amount of money lost in this group now far exceeds the money lost in the 2008 stock market crash" is just plain nonsense. The GDX is down about the same from its peak, within a few percentage points, as the S&P 500's 2008-2009 collapse - both dropped about 60%. Meanwhile, if we want to talk about specific sectors, the financial stocks (XLF) dropped over 80%. If we're talking actual dollars, not percents, I'm sure there was MUCH more lost in the general stock market in 2008-2009 than in this unloved sector the last couple of years. And sure some juniors are getting crushed - but I haven't seen a large mining company go to zero yet, like so many of the big financials did in 2008. So give it a break already...

  13. The end of month nears; the end of the quarter is significant also.
    Even more so is the end of the fiscal year and commencement of the new.
    October sees the new $100 bill released on the 8th and joint UN/NATO exercises.
    There are the debt ceiling and sequester decisions, higher government debts, possible "shutdowns" of departments and pensions, and the downplayed truckers strike and march on DC e.g. http://www.huffingtonpost.com/2013/09/20/truckers-shut-down-america_n_3955406.html among other things...

    1. You bring up these points and I think they are valid considering what moved gold in Aug. 2011. If things are different and they may be we will have to see.

      Mark as always makes veiled but easy to decipher swipes at Sinclair.
      He is the promoter of gold that he wants the apologies from. He is right about the stockmarket however but his obsession with gold and his gloating makes his accurate observations less than more. Gold should be higher.

    2. Concord; Mark is just jerking all of your chains; he trades one mini silver contract every month or so; relax, he is quite interesting to listen to regurgitate nothingness; swb in sparks

    3. Steve,
      I agree he is great at sticking in the needle and smart.

  14. After I opened the Halloween candy bag to sample the quality, even though Halloween is a month off yet, I needed my reading glasses to see the labeled ingredients through the microscope.
    My friend threw out a full bag of potato chips after opening it- the chips weren't visible unless you searched for them.
    If you don't think about eating, replacing worn out clothes, wiping your arse, purchasing prepared meals, tickets or big ticket items, visiting the dentist, doctor or optometrist, or driving to any of the above, then heed the cliches'- "out of sight, out of mind", "what you don't know can't hurt you" and "first come(to the printing press), first served(i.e. political action commitees/ PACS, lobbies, special interest groups and, "slush", vulture, private equity, hedge, pork-barrel, off-budget and entitlement funds, bank subsidies, dark pools, tax loopholes and exemptions and government takeovers such as Fannie, Chrysler and GM etc.
    TBTF companies need cash infusions and suspension of GAAP rules so their reeky balance sheets/ books need not be judged by their cover. They leverage up whatever downsizing brings and mergers and acquisitions and derivative tipoffs fall into their newly embossed laps.

  15. Dan, the long bond seems to have put in a bottom and is making higher highs on the daily, weekly (if it holds up this week). How sensitive of rates going back down is gold towards this and should bode well for the metal, should it not? Or is gold's bearish picture going to overshadow low rates again (assumign it continues)? Thanks for all your help.

    1. Unknown;

      The way I see it is a rising interest rate market is generally negative towards gold UNLESS there are serious inflation pressures out there. Gold does well when REAL RATES are negative (less than the official rate of inflation). If however REAL RATES are positive, then that tends to work to the detriment of gold because it indicates that bond investors can obtain a REAL RATE of return above and beyond the rate of inflation on their bonds. Since gold is a non-interest-bearing asset, it is hard for it to thrive if investors can obtain a better return on their money elsewhere that to their way of thinking has no risk.

      In a falling interest rate environment, that generally indicates a deflationary environment. Gold tends to fall in price during such times but holds up better than something like silver for example.

      When it comes to gold, the big thing that will cause it to move higher is a lack of confidence in the currency or monetary system which is always accompanied by inflationary pressures.

  16. ok so i finally found a simple explanation of the differences between the different precious metal mining indexes...i was mainly interested in comparing the HUI and the GDX....so the HUI is for large/medium caps and the gdx is for mediums....so i guess HUI is better for a general idea of gold mining direction...but then gdx is useful cos it represents NUGT and DUST...nobody was asking but me, but i thought id relay this on anyway....if im incorrect or anyone feels like adding any info, hesitate not...


  17. Hi Guy,

    For gold to have good rally, the price need to establish 1360 as based and dollar 80.30 range..

    I checked gold in term is small country the technical prospective is not strong.

    For example when gold price was at 1300, the gold price in term of Thai baht is 20010 baht ( future contract) now the gold is 1336 and in term of Thai baht is only about 19870 baht ....

    I like to use small country as my indication of the strength of the market.. and it is amazing accurrate.

    Base on this I still have some doubt of the strength of this rebound eventhough it is trading above technical 1330 ... if there is true strength, the market should shoot up strongly by now..

    Anyway ... i currently out of market ...


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