"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, April 15, 2014

China Demand News, Lessening Ukraine Tensions Sink Gold

Last evening I posted the news concerning the World Gold Council's report about Chinese gold demand for 2014. Please see that post for the details.

Also, chatter continues to surface that China's economy is slowing. Now whether or not that is indeed the case can be argued, ( I tend to think that it is because of what is happening with the price of copper )  but many traders are viewing such talk as bearish for the price of the metal. The reason? If the economy slows the thinking is that there will not be as much money around with which to buy gold. Along this line is news out of China that its money supply grew only 12.1% in March compared to the same period the previous year. The People's Bank of China has a target of 13% growth. This is the first time since April 2012 that the target has been missed.

Another way of saying this is that Chinese credit growth is slowing and that has the buyer of both base and precious metals spooked ( palladium and platinum have been running on Ukraine issues ). This is the reason that silver is getting whacked with an ugly stick today and why copper is swooning once again.  

Traders are going to be watching the GDP numbers for China due out overnight here in the US. This will more than likely be a market mover for copper.

Remember, I am just telling you what the market is trading on; I am not saying it is gospel truth so please, gold perma-bulls, keep the nastygrams at a minimum.

Related to this are reports about Chinese use of gold for collateral in financing business deals. Estimates vary about this but the Financial Times reports that the WGC estimates it may be a high as 1,000 metric tons. That is not an insignificant number!

Today, if that were not bad enough for gold, traders interpreted President Putin's call for talks for a diplomatic solution to the situation in the Ukraine as a lessening of tensions. That is taking some of the risk premium out of gold although traders are reluctant to press it down below support at this time as that situation is anything but resolved. Still, any ratcheting down of tensions is negative to gold.

It must be kept in mind by those who buy gold based on geopolitical events that this is perhaps one of the most riskiest of reasons to buy the metal. I have said it before and will repeat it - price rises in gold due to geopolitical events can and will evaporate just as quickly as they began. Remember that when you bet the farm on more "end of the world as we know it" talk coming from the gold bugs.

Most seasoned traders look to sell such rallies knowing that once the event is full priced in, there is no longer any fuel for a further rally unless things worsen beyond what the market has currently priced in. It is the old adage of "buy the rumor and sell the fact".

From a technical perspective, nothing has changed in relation to gold in one iota. It is still in a broad trading range. Our old friend, the $1280 region continues to define the lower portion of the range while the top of the range has been pressed lower towards $1320. To change the complexion, one or the other level must give way. If the bulls can break through this week's high, they should be able to reach $1340 where another test will occur. On the bottom, a breach of $1280 would portend another drop of $20 towards $1260. Support is layered in $20 increments.

Once again the usual claptrap about GOFO and backwardation in gold has surfaced. Ignore it and listen to what the market is saying. Gold is range trading - no more and no less.

By the way, for those of my European friends who trade the yellow metal, Euro gold has support near the 930 level. Resistance is near 960 followed by 980.

A quick look at silver by request.... notice that while the metal has bounced off its initial level of chart support shown by the upper red rectangle, it has as of yet, been unable to move convincingly above it. A close BELOW $19.50 and the odds favor a move down towards $19 once again.

The metal remains below its 50 day moving average, which is bearish. Also, the ADX, while it has been steadily falling indicating the lack of a clearly defined trend is showing some subtle signs that is has stopped falling and may be getting ready to rise. If, and this is a big "if" at the current time, we see it breach $19 and be unable to get back above it, the ADX will be rising indicating the potential for a fresh leg lower in the metal. That would set it on course to fall towards $18.35 - $18.20.

On the grains front - soybeans continue moving higher as that tight old crop carryover situation here in the US has resulted in a bidding war for available supplies, in spite of the fact that the big S. American crop is now workings its way into distribution channels. The market is ensuring a huge acreage number for this season here in the northern hemisphere. Farmers are no doubt going to oblige.

The beans seem to be pulling everything higher including wheat and corn, which is off to a slow planting start this season. I personally have learned to ignore all that talk about "slow plantings" because too many of these newbie traders have never seen a piece of modern farm equipment but the fact is that the market still reacts to this sort of talk so one has to respect it. As mentioned in a previous post, I am hopeful for large and healthy corn and bean crops this season up here as our livestock and poultry producers need a break from this high priced feed.

The Euro failed at 1.39 and has now fallen to 1.38. There is some support on the charts near the 1.37 level. If that fails, we could see the beginning of a trending move lower for the Euro.

One last thing - any of you hog producers out there, please be mindful about what I wrote this weekend about 4th quarter hog prices. Don't let the wildly bullish talk from some who keep talking about how "cheap" 4th quarter hogs are in relation to the summer months beguile you into missing out on locking in some excellent profits. They are cheap for a reason!

Traders - keep in mind that I am speaking about producers who have to manage price risk and can secure good to excellent profits in their expected production with strategically placed hedges. They must take a different approach to markets than we speculators.

There are several option strategies which can be employed. Talk to your broker if you have any questions. One can secure price protection on various percentages of expected marketings while keeping some open as "gambling stocks" in the event of higher prices later this season. Just be careful as a great deal of uncertainty remains in this market and that is causing some wild swings in price. That will continue until the market settles this virus issue one way or the other. If you roll the dice betting on nothing but higher prices, your odds of getting it right are 50-50. I would not want to bet the farm on that especially if I had the opportunity to guarantee myself some good profits and thus sleep well at night.


  1. Two fresh threads in one morning...thanks.

    My comments from the last thread apply to this one as well.

    Looks like we'll be seeing video footage of explosions and rioting coming of out the Ukraine anytime now.

    I'm a little suprised gold and oil has yawned at the escalation...so far. I fully expect a disproportionate response by Putin but who can blame him?
    Reports of increased troops on Poland and Romania borders should start to trickle out in the coming weeks.

    Kiev is the center of Ukranian gravity for the moment but it's grip and reach seem tenuous...unless they're getting some dedicated "help" from NATO/US.

    Stay tuned.

    1. Whatever happens on earth: short gold and silver !!! You WILL be rich that's nearly sure my friend !

      People here will sell their own mother for a 10k trade gain !

      But here people are different from the nasty people of wall street : why ? Because there is quote from "Archbishop Chaput" ; living for trading is obviously moraly banned from a very basic point of view but people here knows better, they do not have egos here !!!

    2. Roger Dupont,
      I really feel sorry for you man. How lonely it must be to blame the entire world for your shortcomings. It's easy to understand why you clutter this blog ranting and raving to the small collection of bears that reside here as it's one of the only blogs on the web that approaches trading with an objective opinion and doesn't subscribe to the chicken little dogma that the sky is permanently falling and that the markets are rigged against the hucksters/permabulls. Waste your negative energy with a bottle of hand lotion and leave us sane people be please!!

    3. "living for trading is obviously moraly banned from a very basic point of view"

      I can already hear your clever arguments on the matter, oh yes, maybe you already started with the very objective "People here will sell their own mother for a 10k trade gain !", but please, tell us more and develop.
      I'd like to read it from you before answering.
      Why is trading morally banned?

  2. Yes, I too believe in buying a little here of the yellow metal. Not much but RUT did breAch 200 dam and if... big if.. escalation explodes on UKRAINE, and CHINA starts on a lying path like the good ole USA, then we can all lie together about how growth is just around the corner.

    1. Gold is the money for the world little people, it does not succeed when blood is in the street fortunately.

      Gold is the currency for people to be free from banksters and politicians but it is indeed a very tough journey...

    2. "Gold is the money for the world"

      Please name a few countries where gold is legal tender and not illegal to use as a direct currency under modern capitol controls?

  3. That's it!
    I just completed my first algo, and I will trade automatically thanks to this program...I thought it would be based on Dan's stuff, but I found his master.


    1. You are ready to build the gold calf in the honour of the Trader Dan : the guy who is trading for living : try to work for wall street in a HFT company : that is good for your wallet, your chick and your dog : go go go my sheep !

    2. Is your algo based on the amount of alarmism you see in the news?

    3. Come on guys, I was just joking here about Zerohedge formula.
      Did you watch the link?

      Roger, if trading is not a honorable way of living for you before God, the list of other not honorable jobs must be quite long indeed.
      Except from farming and let me guess "producing something real and useful for the community" or sthg like that, should everyone feel shamed about their job?

      How much unemployment rate would satisfy you to reach your criteria?

  4. http://i62.tinypic.com/fp9h74.png

    This is a map of the results of Ukrainian 2004 presidential elections per region.
    There is no need to be wizard to understand where the deeepest blue regions want to be.
    Russia has little legitimacy beyond those regions.
    But integration of the two extreme east regions just as for Crimea seems totally natural. In fact they probably should have seceded simultaneously.
    Now is too late for that.

  5. Don't know about you lot but I just wish gold would get on with it and stop faffing around this 1200-1400 range and just get the final flush out (probably below $1000 to crush all the bloody bulls) then we can get back to a proper Bull market.
    Just give up bulls, get a good old fashioned washout to break the back then off we go

    1. Gary Churchill, that's what my dry powder is waiting on and we may be starting the phase downwards sooner than most think. Silver would be a gift if gold crashes under 1000.00 in the near future. I'm hoping to pick some up at the 12.00 level. Fingers crossed.

  6. LOL...So now, the gold bug community is spinning the World Gold Council's report by saying "Demand is flat from extremely high levels, thus they will be still buying huge amounts of gold" ....LOL these folks are religiously attached to their gold as they worship their golden calf.......Ezekiel 7:19 is coming for them…..

  7. Its obvious after all this time that the only thing that matters in trading is making profits. And Hubert has shown how nicely that can be done. But for all others, this needs to be said about gold. Its not like other markets in this sense. Cattle has the inventory report and cattle on feed reports to show the supply and demand. The grains have their reports as do oil and other commodities. These reports indicate supply and demand but nothing about price. In golds case, does anyone know what the supply and demand is? Lets assume that there is no gold in the US. Its never been audited. Does it matter? I think I have the answer. It doesnt matter now at this price. It will matter if gold takes out 1540.

    1. It matters not what gold price is, on an insurance point of view, everybody should have a bit of physical gold with him, not for speculation, not for profit, but for mere protection.
      I join Sinclair on that one.
      Those who cry out loud about about their losses in gold are those who bought too much of it. Not their fault, they were told everywhere that the end of the world was coming (not necessarily untrue, let's wait for 24th of july this year) and that only gold would survive the tide of the ocean paper coming 'within a few weeks now"

  8. Dan,
    Thanks for addressing silver today in your latest blog it's much appreciated. As far as the latest ring tale chimpanzees that have shown up slinging dung at you go. Just pity them because they have no clue whats going on in the world and their money will continue to dissolve into ashes. Like the old adage says.. " A fool and his money shall soon part."

  9. Wait a minute - are we saying China isn't buying gold 24/7 till it hits $50,000/oz?! Shocker.

    Also my observation with gold is it's bid up on war tension, then regardless it sells off as capital goes elsewhere. Then tension in the Ukraine never really ended but gold is still showing more signs of downside since 1392. Even this rally from 1280 has been on declining volume and today's sell off was on large volume.

  10. The ongoing conflation of people who are bullish on gold in the medium-term with those who trade is pathetic. The irony is that few "goldbugs" trade at all.

    With respect to China and gold, the best reporting by a wide margin arguably comes from Koos Jansen. Here's his latest analysis:


  11. http://i61.tinypic.com/vwr2wh.jpg

    Gold, 2 day timeframe.

  12. I am certainly not bettering my life on GOLD right now, purchasing a little, as most can attest, we are seeing a bit of chaos and right now the dollar has been extremely volatile. I don't believe that any person on earth can say for sure that they KNOW what will happen tomorrow. In that light a small insurance play fine for me. I do believe SOME hedgies and their ALGO EGOS WILL GET SLAUGHTERED and cost themselves jobs, other people's money, and eventually end up in mental institutions, better yet, potentially become suicidal.
    Greed, intellectual pride have a way of destroying the overconfident.

  13. By the way appears China just printed a slight beat, on GDP ......barely. who knows what is behind any number, Adjustment, or birth death ratio. I am not sure the counters even know. The media has a lot of confidence in these gov't stats. By the sounds and sights of cities, neighborhoods, and tension sure doesn't feel like a Damn bit of recovery is occurring to me anywhere. Good luck all.

  14. Debt however keeps rising and by the looks of the Fed Basen report, still vertical

  15. On a usual daily time unit, I won't feel happy until prices close above 1306 $, because this is the mlh inf of the upwards pitchfork on this time unit on my chart.
    And closing below 1305 looks like a simple pullback to me.
    I'm waiting to see if prices can reintegrate the daily upwards pitchfork they left yesterday.

  16. Ongoing "collapse" and "endgame" continues in the mining sector as TRX grinds its way back down towards $2.00.

    Meanwhile, Tesla still at $193 even after sharp correction.

    Stay in the System.

  17. At these prices the trx cfi will receive 250.000 rsu shares this year. Jim will reward himself 100.000 rsu shares. That is after selling the 20% of the trx float he once owned for tens of millions of dollars and for which he paid 6 million dollar according to the 2002 annual report.

    When jim was crying out " this is it" in 2011 and pontificatinghow he would " do nothing" in response to goldman sachs price predictions before the crash, he had already cashed in.

    Nice guy.

    1. Jasper;

      This is a pretty serious accusation. Can you provide any sort of documentation for this? Thanks...

    2. The 2002 annual report says jim and associates got 20% of the shares in the new company. The boards salaries got raised by 200 to 500% after the 2011 private placement. Steven van tongeren compensation went from less then 100.000 to 550.000 after the 2011 pp. The corporate secretary say hew salary raised from under 100.000 to well over 200.000. They get compensated mainly in rsu. Jim included himself in the rsu programm as well. Check canadianinsider to see how many rsu jim awarded himself recently. Check sedar to see how many millions shares jim sold from 2003 to 2011. Its all fact dan.

    3. Jasper;
      That is incredibly depressing to learn; very, very depressing.

      There are a lot of people who stuck a good portion of their retirement incomes in that company waiting for the "to the moon" rally which never happened.

      I cannot tell you how deeply saddened I am to learn this. It is beyond distressing.

    4. You have no idea how much i and others appreciate your blog dan. The balanced view you offer is worth gold. I have the utmost respect for the level of integrity you have consistently shown throughout the years.

      I wish i were wrong on trx but it is what it is.

    5. Jasper;
      Thank you very much for those kind words. I am sincerely honored by those.

      We certainly live in a generation which no longer seems to have a sense of virtue. That is what bothers me even more than the issues often cited for our financial woes such as our enormous levels of debt. Frankly I would worry a lot less about that if I felt the society as whole still possessed a love of virtue and a sense of honor and integrity. Those qualities will see you through many a difficult crisis.

  18. True to form, the first casualty in conflicts and wars is the TRUTH. We of course are speaking of the fluid Ukrainian situation. As far as I am concerned, let them have a referendum on what the hell they want to do. And the same thing goes for Catalonia and Scotland. Ketchup Kerry and the POTUS need to stay the hell out of things, and that is all from sparks.

    1. If Texas could vote, there would be one less state in the United States. They dont like anything going on in washington. And neither should any other state.

    2. Agree Steve and Arnie Both. But soon will be time to migrate to either Libertarian states which develop their own trading mechanisms (have to be near food growing regions. Hopefully there are people out there with large capital that will let a hard working man work for a living. Really great articles today on the current system which is failing. I put up the links below. When the Fed took over this cancerous debt, the system changed right there and then. We are now living in a non reality. Period.

  19. Mark,
    Please read these two articles. The best articles I have found to what is happening in the US. They (FED and Big Banks) sat in a room and decided that they would give all the power to the banks bail them out and render the US Citizen helpless. If they lose a job..done unless they work several jobs. No bailouts for them. Second, the Crony Capitalist came along and started saying that (IMMELT) come on people get over it. There is no getting over this cancer. It is done just a matter of time.
    Well Mark are you on the inside and know that the only thing that Banks, and Fed is going to allow to increase in value is stocks, regardless of valuations and currency devaluation. Continued lies about capital formation.
    I know I have worked in the commercial lending business for 30 years and have seen nothing as far as growth. ZERO< ZILCH, NADA..

  20. This is why first important asset to own is Gods word. Period. He is the best protector of souls. Living breathing souls, not those lying cheating BLM, BLS, USDA, FED, CB's, Crony Capitalist companies. The next assets to own when this melts down are hard assets, stocks.
    Dan thanks for the website. You are a true gentleman and one who is a god given gift on earth.

  21. Otherwise we should default on debt, establish a hemispheric trading bloc, a new currency, build a new system and keep all warmongers, bankers, and progressive libs out. Otherwise the bankers and this government will end up taking it all.


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