Please click on the following link to listen in to my regular weekly interview with Eric King on the KWN Weekly Metals Wrap.
http://tinyurl.com/9qlcupa
Saturday, September 29, 2012
Friday, September 28, 2012
Gold Still Stuck near $1785 - $1800
Over the last two weeks, gold has had some difficulty clearing the stubborn resistance level beginning near $1785 and extending towards $1800, round number psychological resistance. It has poked its head into this zone but cannot breach it as of yet.
When examining the chart it is not difficult to understand the significance of this region. Note that there have been two occasions in the last year, one back towards October 2011 and the other earlier this year in Jan/Feb, when gold either punched through this level or came extremely near to it, but failed to close ABOVE it.
Look carefully at what happened the following week after the failure to extend higher - there was a downside reversal in both cases which led to a protracted period of falling prices that did not culminate until gold was near the $1525 - $1550 level. It was at this level, that we later learned, Asian Central Bank buying prevailed. That buying was of such size that it absorbed all of the speculative selling and then some forming the bottom of this now YEAR LONG trading range.
Gold is currently knocking right on the door of this upper boundary which is why it has heretofore been stymied.
There is something however that is at least hinting that this third time might be different. Notice those two previous attempts to clear $1800 were followed by those aforementioned downside reversals the next week. This week, following on last week's failed attempt to clear $1800 is different. We did get a significant down day this week which looked as if it might be setting up the same pattern of a downside reversal, but lo and behold, instead of a proliferation of sellers, we uncovered very strong buying which took the price well off the intraweek low closing the market up near the high of the week. Yes, it did not take out $1800, but it also did not fall apart.
I am looking at this as a potentially subtle hint that we might be able to extend higher in gold next week or at the very least, not break down technically as we have done previously.
This week's low, down just below the $1740 level therefore becomes quite significant from a technical analysis perspective. If we drop back down towards this level and gold bounces higher once again, the bears are going to begin covering. If the market can then extend the bounce and push into the zone $1785-$1800 and better that, it will touch off a wave of significant, and I do mean "significant" short covering that will initially send the price towards $1825- $1830. I think that if we get this, we will move quite quickly to the all time high up near $1900 before we pause.
If we violate this week's low to downside and especially if we close down below it, expect a sharp drop down to $1725 - $1720 and then to $1700 if that fails to attract some strong buying.
We will simply have to wait and see what early week action gives us next week as the market is now at a crossroads where both sides are either going to perform or have to yield the field of battle. Gold bulls do have the advantage right now based on the close of this week but they will need to stand their ground and push through the selling cap that is being imposed by the bullion banks/swap dealers.
When examining the chart it is not difficult to understand the significance of this region. Note that there have been two occasions in the last year, one back towards October 2011 and the other earlier this year in Jan/Feb, when gold either punched through this level or came extremely near to it, but failed to close ABOVE it.
Look carefully at what happened the following week after the failure to extend higher - there was a downside reversal in both cases which led to a protracted period of falling prices that did not culminate until gold was near the $1525 - $1550 level. It was at this level, that we later learned, Asian Central Bank buying prevailed. That buying was of such size that it absorbed all of the speculative selling and then some forming the bottom of this now YEAR LONG trading range.
Gold is currently knocking right on the door of this upper boundary which is why it has heretofore been stymied.
There is something however that is at least hinting that this third time might be different. Notice those two previous attempts to clear $1800 were followed by those aforementioned downside reversals the next week. This week, following on last week's failed attempt to clear $1800 is different. We did get a significant down day this week which looked as if it might be setting up the same pattern of a downside reversal, but lo and behold, instead of a proliferation of sellers, we uncovered very strong buying which took the price well off the intraweek low closing the market up near the high of the week. Yes, it did not take out $1800, but it also did not fall apart.
I am looking at this as a potentially subtle hint that we might be able to extend higher in gold next week or at the very least, not break down technically as we have done previously.
This week's low, down just below the $1740 level therefore becomes quite significant from a technical analysis perspective. If we drop back down towards this level and gold bounces higher once again, the bears are going to begin covering. If the market can then extend the bounce and push into the zone $1785-$1800 and better that, it will touch off a wave of significant, and I do mean "significant" short covering that will initially send the price towards $1825- $1830. I think that if we get this, we will move quite quickly to the all time high up near $1900 before we pause.
If we violate this week's low to downside and especially if we close down below it, expect a sharp drop down to $1725 - $1720 and then to $1700 if that fails to attract some strong buying.
We will simply have to wait and see what early week action gives us next week as the market is now at a crossroads where both sides are either going to perform or have to yield the field of battle. Gold bulls do have the advantage right now based on the close of this week but they will need to stand their ground and push through the selling cap that is being imposed by the bullion banks/swap dealers.
Tuesday, September 25, 2012
Gold Firm but Unable to Continue through Upside Resistance
Gold is trading firmly today as risk appetite is back on after a bit of a hiccup yesterday. Many investors/traders are growing a bit more sanguine about the impact of any QE program and are still concerned about slowing global economic growth in spite of Central Bank actions to stimulate borrowing and spending. That is leading to more two-sided trade in gold, and in silver I might add, as traders sort out clues to see which direction the economy might be taking.
Frankly, I think it is pathetic that we have reached a point in our nation's history that the actions of the Fed have so discombobulated common sense. No one knows whether to call "Good", "Bad" or "Bad", "Good", as far as any impact on the direction of the stock market. In other words, we really have reached a point where many traders do not know what to do with either good or bad news. If the news were to become too "good", traders are concerned that the Central Banks might not keep the liquidity spighots open as long as initial expectations. If the news were to become too "bad", traders would take comfort in the cornucopia of easy money but then how exactly is such "bad" news conducive to solid economic growth?
I personally have reached a point where I believe the US financial markets have become utterly useless when it comes to actually being an efficient allocator of precious investment capital. The signals are too distorted by Central Bank activity. Call me a purist but I believe that there should have been no QE whatsoever whether it was QE1, QE2 or QE3 as I do not believe the system would have crashed without it.
Yes, the large banks would have taken a huge blow and might have possibly failed but so what? There are many banks in this nation that are rock solid, with conservative and well-performing loan portfolios. All that would have happened is that the poor performing loans would have been either written off or sold for a fraction of their face value to some of these good banks.
I will be the first to admit that the blow to the economy would have been very severe, but I also believe we would already perhaps be entering the healing period instead of just making the current addiction even worse.
What we have now instead is an enormous money printing scheme that has heretofore a somewhat dubious record of achieving any lasting or permanent success. If you want proof, take a look at the Japanese economy and its stock market index I might add. The Land of the Rising Sun has never recovered from its failed experiment of propping up bad banks with its own version of QE.
As I have said before and will say again, the problems ailing the US economy or those of the Euro Zone or elsewhere, cannot be plastered over with bond buying programs and other government-type stimulus measures. These issues require STRUCTURAL REFORMS and among the number one reform is an end to the madness of spending money that you do not have. Spendthrift political leaders, in their desire to effectively buy votes for re-election, will spend their respective nations into the toilet before they do the right thing for their nation's long term prosperity and economic security. Hey, but why bother with that when you can spend the future savings of the children and grandchildren of this generation? They do not vote so who gives a damn about what we are bequeathing to them!
Back to gold however - while it is up today I am concerned that it looks to be stalling out up here. With the general public (small specs) holding the largest net long position on record there is a risk of downside stop hunting occuring if the short term oriented longs decide to start cashing in their chips. So far gold is merely flatlining along the next "STEP" on the chart. As you can see, it has worked sideways along these steps gathering energy before it then takes a sharp leg higher where it repeats the process. As long as support down at the most recent step holds, it will be okay as attempts to reach the sell stops will be thwarted by solid dip buying. However, if the dip buyers ease off for any reason, these stops will be vulnerable as a large number of small speculators are holding long positions entered into above the $1780 level. Those are underwater already so they remain liable to getting forced out if the market were to break below the $1755 - $7150 level.
I would expect any stop related selloff to generate some buying interest however especially down towards $1735 - $1725, the region labelled as "Secondary Support" on the chart.
The trend in gold is up until proven otherwise but that does not mean we cannot or will not experience temporary price retracements in the short term. That is a far, far cry from a trend reversal. Keep in mind that my perspective is that of a trader, not a longer term oriented investor. Unless you are very nimble and fleet of foot, leave the short term trading swings to the professionals. Acquire the physical metals on dips in price and then let nature take its course. By nature of course, I mean the feckless political leaders and Central Bankers of the West.
Incidentally, news out today shows that there has been some decent buying of gold by Central Banks, among them S. Korea and Paraguay. John Brimelow's excellent Gold Jottings details the tonnage involved. It does show that various Central Banks around the world are providing a solid demand base for the actual physical metal. This is a source of fundamental support that continues to exist underneath the gold market. Remember it was this type of buying earlier this year that thwarted the hedge fund shorts from breaking down the gold price when gold was flirting with the $1550- $1525 level. This buying was able to absorb a huge amount of the supply hitting the market.
Frankly, I think it is pathetic that we have reached a point in our nation's history that the actions of the Fed have so discombobulated common sense. No one knows whether to call "Good", "Bad" or "Bad", "Good", as far as any impact on the direction of the stock market. In other words, we really have reached a point where many traders do not know what to do with either good or bad news. If the news were to become too "good", traders are concerned that the Central Banks might not keep the liquidity spighots open as long as initial expectations. If the news were to become too "bad", traders would take comfort in the cornucopia of easy money but then how exactly is such "bad" news conducive to solid economic growth?
I personally have reached a point where I believe the US financial markets have become utterly useless when it comes to actually being an efficient allocator of precious investment capital. The signals are too distorted by Central Bank activity. Call me a purist but I believe that there should have been no QE whatsoever whether it was QE1, QE2 or QE3 as I do not believe the system would have crashed without it.
Yes, the large banks would have taken a huge blow and might have possibly failed but so what? There are many banks in this nation that are rock solid, with conservative and well-performing loan portfolios. All that would have happened is that the poor performing loans would have been either written off or sold for a fraction of their face value to some of these good banks.
I will be the first to admit that the blow to the economy would have been very severe, but I also believe we would already perhaps be entering the healing period instead of just making the current addiction even worse.
What we have now instead is an enormous money printing scheme that has heretofore a somewhat dubious record of achieving any lasting or permanent success. If you want proof, take a look at the Japanese economy and its stock market index I might add. The Land of the Rising Sun has never recovered from its failed experiment of propping up bad banks with its own version of QE.
As I have said before and will say again, the problems ailing the US economy or those of the Euro Zone or elsewhere, cannot be plastered over with bond buying programs and other government-type stimulus measures. These issues require STRUCTURAL REFORMS and among the number one reform is an end to the madness of spending money that you do not have. Spendthrift political leaders, in their desire to effectively buy votes for re-election, will spend their respective nations into the toilet before they do the right thing for their nation's long term prosperity and economic security. Hey, but why bother with that when you can spend the future savings of the children and grandchildren of this generation? They do not vote so who gives a damn about what we are bequeathing to them!
Back to gold however - while it is up today I am concerned that it looks to be stalling out up here. With the general public (small specs) holding the largest net long position on record there is a risk of downside stop hunting occuring if the short term oriented longs decide to start cashing in their chips. So far gold is merely flatlining along the next "STEP" on the chart. As you can see, it has worked sideways along these steps gathering energy before it then takes a sharp leg higher where it repeats the process. As long as support down at the most recent step holds, it will be okay as attempts to reach the sell stops will be thwarted by solid dip buying. However, if the dip buyers ease off for any reason, these stops will be vulnerable as a large number of small speculators are holding long positions entered into above the $1780 level. Those are underwater already so they remain liable to getting forced out if the market were to break below the $1755 - $7150 level.
I would expect any stop related selloff to generate some buying interest however especially down towards $1735 - $1725, the region labelled as "Secondary Support" on the chart.
The trend in gold is up until proven otherwise but that does not mean we cannot or will not experience temporary price retracements in the short term. That is a far, far cry from a trend reversal. Keep in mind that my perspective is that of a trader, not a longer term oriented investor. Unless you are very nimble and fleet of foot, leave the short term trading swings to the professionals. Acquire the physical metals on dips in price and then let nature take its course. By nature of course, I mean the feckless political leaders and Central Bankers of the West.
Incidentally, news out today shows that there has been some decent buying of gold by Central Banks, among them S. Korea and Paraguay. John Brimelow's excellent Gold Jottings details the tonnage involved. It does show that various Central Banks around the world are providing a solid demand base for the actual physical metal. This is a source of fundamental support that continues to exist underneath the gold market. Remember it was this type of buying earlier this year that thwarted the hedge fund shorts from breaking down the gold price when gold was flirting with the $1550- $1525 level. This buying was able to absorb a huge amount of the supply hitting the market.
Saturday, September 22, 2012
One Obviously Well Informed Deer
I could not resist posting a link to the following story.
This is one deer that every gun lover and hunter should pass up taking a shot at if they were to ever see it come into their crosshairs. Why? We need this deer to pass on its genes to its progency. Now if we could just get some more American Citizens to do the same maybe we could get our country back again!
Enjoy....
By the way, for any of you leftists who happen to read this blog, it's a damn shame that a deer's got more sense that some of you.
http://www.foxnews.com/politics/2012/09/21/texas-couple-snaps-photo-deer-destroying-obama-front-yard-sign/
This is one deer that every gun lover and hunter should pass up taking a shot at if they were to ever see it come into their crosshairs. Why? We need this deer to pass on its genes to its progency. Now if we could just get some more American Citizens to do the same maybe we could get our country back again!
Enjoy....
By the way, for any of you leftists who happen to read this blog, it's a damn shame that a deer's got more sense that some of you.
Texas couple snaps photo of deer destroying Obama front yard sign
A Texas couple determined to find out who had been damaging a sign in their front yard proclaiming their support for President Obama's re-election bid caught the offender on Wednesday. Tom Priem, a software support engineer in Austin, told FoxNews.com he and his wife, who live on a block where political signs dot front yards, were fed up with seeing only their Obama sign repeatedly defaced.http://www.foxnews.com/politics/2012/09/21/texas-couple-snaps-photo-deer-destroying-obama-front-yard-sign/
Trader Dan on King Worlds News Markets and Metals Wrap
Please click on the following link to listen in to my regular weekly radio interview with Eric King on the KWN Markets and Metals Wrap.
Friday, September 21, 2012
Euro Gold on Track for all Time High Monthly Close
Gold priced in terms of the Euro notched a brand new all time high today at the London PM Fix and came within a mere Euro of matching its all time high based on the futures charts. It is on track, provided it has a decent week next week, to finish out the month at an all time high monthly closing price. It will be extremely difficult for the bears to mount a SUSTAINED sell off in gold as long as this chart stays firm.
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