Gold chart and comments

Gold continues moving in a broad sideways pattern, unable to breach overhead resistance centered just below the $1840 but remaining above longer term support just above the $1760 level. The current short-term bias is negative until it can at least climb back above $1820.

Thus far forays down below the $1800 level have been met with quality buying in the physical market so this will need to continue to hold it from moving lower through $1760. Should these buyers step back a bit in the hopes of picking up the metal a bit cheaper, we could see it lag down towards the $1730 - $1720 region where one can expect to see very active buying occuring.
There is still some of this risk aversion selling occuring in gold (that is very easily seen in silver) but that is more a function of traders raising cash on their losing equity positions by selling their only winner, namely gold. In watching the price action today it seemed more a matter of a lack of eager buyers rather than any large scale fresh selling. That allowed price to drift lower until it triggered enough downside technically-related sell stops which then took it through $1780 before getting a bit of a light bounce up.

If you look at the copper chart, you can see that today it crashed through a former strong level of chart support. On the weekly chart, it has confirmed a double top pattern but that will not be totally confirmed unless it closes the week below the $3.85 level. Chinese buying had been keeping copper well bid below $4.00 but that buying disappeared today. The 100 day moving average, another key technical level, is now within easy striking distance for the bears. If they can take it down through that level, Dr. Copper will not be telegraphing good economic times ahead anytime soon.

There was also a hit to the unleaded gasoline market as well as crude oil. GAsoline is moving down towards a significant chart support level near the $2.60 region. Weakness in the grains is also evident. The result of all this is to bring the Continuous Commodity Index ( CCI ) back down towards the lower part of its now 5 month long sideways trading pattern.

This widespead selling across the commodity complex is a function of fears concerning the stability of the European Banking system which is reeling from its exposure to sovereign debt from that region. Investors are rightfully fearful of a contagion effect and a subsequent slowing of global economic growth. This is being reflected in severe weakness in the Euro, which as you can see from the price chart, is flirting very dangerously with falling below the 100 Week Moving average. It dipped briefly below this level last week but then recovered by the close of trading Friday and averted more serious damage. That respite was brief however as it has started off this week on a troubling foot. Unless it can rapidly recover above this level, it looks like a move towards 1.30 is in store. That would put even more upside in the US Dollar leading to further pressure across the broad commodity sector.

Take a look at the following chart and you can see where the safe haven money has been flowing over the last month. This is the gold/bond ratio. When the line is rising, gold is the safe haven of choice compared to bonds. When the line is falling, the bonds are the asset class of choice. Ever since the Central Bank organized hit on gold earlier this month, gold has been underperforming the US long bond. This is no doubt much delight to the Federal Reserve and to the Treasury Department, the former of which MUST HAVE LOW LONG TERM interest rates to prevent any further shocks to the already "on-life-support" economy; the latter of which cannot AFFORD to pay higher borrowing costs without worsening the already hopelessly incurable federal debt situation.

The HUI held fairly well today considering the weakness both in the equity markets and in the precious metals but it does need to clear 610 and hold that level if it is going to have a shot at the recent all time high once again. Downside support is initially near 600 followed by strong support near the 580 level.

Trader Dan on King World News Weekly Metals Wrap

Please click here to listen to my regular weekly radio interview with Eric King on the King World News Weekly Metals Wrap.

http://tinyurl.com/4529abz

 

 

HUI bounces from key support level

The mining shares were hit rather hard this week with a bout of selling after the HUI made a new all time high but the price action still looks very good considering where it saw the buyers stepping up.

If you notice on the chart, the region marked as the "GAP and GO" - That constituted a gap higher above the former all time high ( A very bullish development). Normally, on a subsequent price reaction lower, one would like to see this gap region function as a level of chart support which sees the buyers come back in and bid prices back up again. That is indeed what did occur the first two trading days of this week. Price moved down through the gap on both days, but then recovered prior to the closing bell with the market closing either at the high end of the gap or just above it. However, Wednesday of this week saw this sector succumb to a large amount of selling which pressed it lower throughout the day and prevented it from recovering near the closing bell as it had done the previous two days. That bode for further weakness in the next session and that is exactly what we did get. Thursday saw a sharp spike lower across the entire sector; however, buyers showed up in large numbers, so much so that they took the price all the way back to the opening level. That is bullish price action.

What I am taking notice of is the fact that this spike lower took the index back down to a key technical chart level, 580 to be specific, a level which had effectively held the mining shares from moving higher for the better part of this year. According to the basic premise of technical analysis, a broken resistance level undergoes a change of polarity and should then serve as a level of chart support on any subsequent retracement lower in price. Today's gains on top of that spike off of the 580 level substantiates the 580 level as a critical chart support level.

You will notice that the same gap region, the GAP and GO, which formed early this month, and then subsequently failed to hold prices on the way lower, served as a resistance level to today's move higher in the shares. That too is technically significant. What these shares now need to see from a bullish standpoint, is for this former gap region to be bested and for prices to rise through this level and then hold above it. That would set the index up for another test of the recent all time high.

If the index cannot get through this former gap region, then the most likely path for it moving forward is a period of consolidation with the 610 level capping gains on the upside and the 580 level attracting buying on the downside. Such a development would signal that we are going to try a period of base building before attempting another assault higher.

Silver Chart Update

Silver continues to hold very firm at the horizontal red line drawn in on the price chart. Each time it has moved down to this level, a level which I might add is the intersection of TWO important support levels, it has drawn out solid buying and then moved higher. This region is a former congestion zone which seems to attract buyers and forces shorts to cover. The longer this impasse continues, the better for the bulls as it is basically base-building here.

Everything's Okay - Western Central Banks find Dollars to feed stressed European Banks

Pity some of the poor banks of Europe - it seems that they are having difficulty finding others to loan them Dollars at a "reasonable" rate of interest. If I did not know better, I would say that they are being unfairly discriminated against merely because they have laughably pathetic balance sheets. Oh and did I mention that they have boatloads of Greek bonds hiding in there somewhere as well?

No worries however - the posse is right around the corner, riding to their rescue to save them from the usurious money lenders who would do them wrong. Yep, once again the Central Banks come running to the rescue of the pestilential bankers who continue in their parasitical role of leeches and ticks, sucking the life blood out of the financial system whenever their own greed and stupidity ensnares them in a web from which they are unable to extricate themselves.

"HELP! HELP! We might fail and take you all down with us UNLESS..."

The story never does seem to change does it?

Somehow this is supposedly good news for the global stock markets but then again I basically gave up trying to make sense of the insensible every since the bailouts began when Lehman collapsed back in the summer of 2008.

I think a rewriting of our school books on the causes of lasting prosperity are long overdue since what I learned back when is obviously out of vogue. Nowadays all that is required is liquidity, lots of liquidity. (I am reminded of that scene in the original "The Matrix" move when Neo and Trinity go to rescue Morpheus from the clutches of Agent Smith and need, "Guns, Lots of Guns" to do so). Substitute suitcases of borrowed-into-existence money and you get the general idea as to what is now considered the essential ingredient for true prosperity.

That brings us back to gold once again as it continues under assault from the Central Bankers who seemed deathly terrified of it making its way to the $2,000 mark. Ever since the takedown in the wee hours of the night as chronicled here    http://traderdannorcini.blogspot.com/2011/09/central-banks-waging-war-on-gold-at.html   gold has been on the defensive. That assault intensified near the $1880 level and it is that level which has thus far proven to have been unpenetrable.

Failing there, it subsequently retreated to a chart support level near $1840, which failed to stem its bleeding whereupon it then dropped to test the next support level near $1820. That too failed as did psychological support at round number $1800. It is now flirting with the next support region centered near the $1780 level. Failure there and it should try to test the level near $1755. Beyond this there is not a lot in the way of chart support until it gets down near the $1725 - $1730 region. We will have to see where the big buyers related to the upcoming festival seasons in Asia make their appearance to stem this latest setback in price.

Before gold can hope to get anything going to the upside it will have to recapture $1840.

The HUI is moving down towards stronger support near the rising 40 and 50 day moving averages. Once it failed to move back up and away from its former "gap and go" window near 608 after retesting that breakout level, technical selling has now taken it lower as some discouraged longs liquidate and some fresh short sellers reappear. It will take a push through 615 - 620 to see some of these new short sellers squeezed out.

Meanwhile, it has bounced off the level near 580, a level which some of you might recall had proven to have been incredibly stubborn overhead chart resistance for most of this year. It was not until this level was decidedly broken to the upside that we were able to see any strong move high in the mining shares. Now it is serving as downside chart support, which if it holds, will be very friendly indeed. This level also now closely corresponds to the rising 40 day moving average, a level at which some funds like to buy if they are playing the market from the long side.

In Memory of those who lost their lives a decade ago today

Over the weekend, a ceremony was held to dedicate a memorial to the citizen heroes of United Airlines Flight 93, who gave their lives to prevent that plane from being used as a weapon in the massive attack against our nation this day exactly ten years ago. Their selfless efforts are now memorialized in a field in Shanksville, Pa, where the downed airliner crashed into the ground killing all aboard. Who knows how many other of their fellow citizens were saved by their courageous actions of that day.

Both former Presidents George W. Bush and Bill Clinton gave deeply moving speeches at that commemoration, which I am linking to here for those who might want to take a bit of time out of their schedules to remember their sacrifice and to also reflect on where you were that day and the emotions you were experiencing as you watched the reports coming out of New York City, Washington DC and of course, Shanksville, Pa.


http://townhall.com/tipsheet/danieldoherty/2011/09/10/presidents_bush_and_clinton_give_eloquent,_moving_speeches_at_flight_93_memorial_dedication_in_pennsylvania

Trader Dan on King World News Weekly Metals Wrap

Please click here to tune in to my regular weekly interview with Eric King on the King World News Weekly Metals Wrap.

http://tinyurl.com/3mm6srv

 

 

Swissie Gold and Euro Gold setting all time highs

US based analysts continue to approach the gold market with blinders on as they focus exclusively on the US Dollar price of Gold and draw all their views of the market from that perspective. An apt comparison would be looking at the Dollar price of RICE and extrapolating future price action for the global price of this international food without even considering its price in Japan or Malaysia for example. This is shortsighted at least and foolish at worst as it betrays a flawed understanding of the role of gold in the international arena and its function as the currency of last resort.

With the vast majority of Central Banks around the world embarking on policies and practices designed to deliberately debase their respective currencies, those investors around the globe seeking to protect their wealth from such depradations are buying gold. That is why it continues to make one new high after another across a variety of global currencies.

Consider the price of Gold in Swiss Francs or "Swissie Gold". Ever since the SNB decided to debauch their currency and kill its historic safe haven status, gold has been soaring in terms of the Franc. Do you think that those Swiss who are financially savvy were going to sit idly by while their Central Bank plundered  and looted their wealth?

Or consider the chart of Euro Gold, Gold priced in terms of the Euro. It too is making one new all time high after another. It is responding to the circus in Europe as the monetary authorities and political leaders there provide living testimony why one should not "put their trust in princes". The resignation of the ECB's Stark is yet another straw on that camel's back.

Think citizens in Britain have any more confidence in their leaders than the rest of the Euro Zone? Guess again!

Judging from the price action of the US equity markets this morning, the investing community has as much confidence in the Obama Administration's efforts to create jobs and turn the economy around as the passengers and crew of the Titanic had in their captain to save them from their collision with that  enormous iceburg. This is the reason that while the Central Bank attack on gold continues, they have not been successful in derailing it. No one trusts the hapless clods to fix anything.

Do you get the distinct impression that there seems to be a rising lack of confidence across most of the globe in their respective governments?  Personally I shudder to think where the S&P 500 would be without the surreptitious buying of the Exchange Stabilization Fund.

Considering the debacle unfolding in the equity markets today, the HUI or mining shares index, is once again holding remarkably firm as this sector contines to outperform the rest of the broad market.

Not surprisingly, the US Dollar has become the safe haven currency for the time being not based on any merits of its own, but only because the alternatives are even worse. It is attempting an upside breakout above a key chart level in today's session would which confirm a bottom is in for the intermediate term as it flirts with the 25% Fibonacci retracement level from the decline that began last May. It still looks like a rally in an ongoing bear market however. It could push as high as 79 - 80 on this leg if it sees some follow through gains next week but I frankly would dismiss any long term sustained strength unless it could convincingly clear the 81 level.

In the meantime this Dollar strength is engendering selling in the commodity complex by the hedgie algorithms once again. This is where some of the pressure in SILVER is coming from today. For the time being, the slowing global economic growth theme is currently outweighing the fears of currency debauchment when it comes to commodity pricing.