While 2-3 weeks is more reasonable, I think gold might be ready to run until October, but I still think the penant may need to put in 1-3 more small weekly bars before a big move.
$945 is still the vulnerable point, but I don't think we'll breach this level again.
I'll also point out the strong breakout in the SM Friday. The ECRI continues to climb. The upward movement in the SM is VERY powerful. Gold is probably ready to take off along with the SM, and my guess is that it will be at the expense of the dollar, which is getting ready to plunge.
What is sm? I know about ecri and their work bt i don't subcribe direct, I get updated time to time thru a third party economist etc through their work. I know from past experiences that ecri models have been accurate thus far.
NumbersUsa, FairUs, Alipac, CapsWeb, and TeamAmericaPac
It too me a little while to figure out POG = price of gold.
Just checked support and resistance levels. Although it's not much of an indicator, resistance levels are are encouraging.
Support is at $951.5 and $942.9, but resistance levels are $963.6, $972.1, and $992.8. What's unusual is that the 3rd resistance level is set to high, at the $990 target. It's fairly unusual to hit R3, but it could be a great follow-on move to Friday's rally.
I made my first big wager in gold in the fall of 2004. Now, the outlook for the dollar looks even more bleak than it did then. Of course, it is now costs me 2x more of my earnings to invest in gold (versus late 2004). The system is slowly but surely falling apart...
Clive Maund has noted continuing positive factors for gold:
-COT commercial interest has shifted to the longs for the past 2 weeks, even if still high on the short to long ratio.
-SM has started another up leg and going with it are oil and copper. In that environment gold has been typically following. These are inflationary pressures formed by too much M0 and other money aggregates. Green shoots notwithstanding, toss enough gasoline on to a small fire and it will turn into an inferno.
-The dollar has been bouncing off the upper down trend line formed over the past 6 months. The dollar still looks like it has a 5th down leg to complete. The Treasury can only support TBonds or the Dollar. And the TBonds are more important in the overall scheme.
-Gold's best seasonal season begins in a few weeks. There is little time for the commercials to trash the gold price in other than a quick head fake.
-Continuing compression of a 20 month corrective pattern now culminating in a descending triangle. The action has gotton almost mundane but has stayed within a tight range in the $900's. The trading bands are constricted. A breakout one way or another is due very soon. The fiat crowd is expecting a slam down into the $800's or lower again. But everything else above says gold's next visit with $1000 could be sooner than we think. Almost no one (outside of those crazy gold buggers) would be expecting such a thing in September. Is MoneyLA's 1050 gold express boarding at the station now?
I get this newsletter from OptionsXpress every day, and saw something notable, which I highlighted in bold:
Traders got inkling from the API energy stocks report that Crude Oil inventories had fallen last week, but not even the most bullish energy traders expected the 8.397 million barrel draw in U.S. Crude Oil stocks that the Energy Information Administration (EIA) reported this week. In addition, the EIA reported that both gasoline and distillates stocks also fell last week, despite a moderate uptick in refinery utilization. Sharply lower Crude Oil imports were behind much of the declines in Oil stocks, which fell by 1.417 million barrels per day last week. Although the market reacted quite bullishly to the inventories report, there are some who believe the sharp drop in imports signals continued weak demand by refineries which are operating at well below capacity due to overall weak demand. The big question both Crude bulls and bears must now answer is whether rising oil prices will act as a break on any economic recovery. If they do, then Oil prices may have risen too quickly given current economic conditions. This is especially true should Chinese Oil demand begin to ease once the vast economic stimulus provided by the Chinese Government runs its course. Traders should also be aware of the movement of the U.S. Dollar. A weakening greenback has sparked increased interest in owning commodities, especially by institutional traders as an inflation hedge. With a large number of traders holding short Dollar positions, any change in trend could spark massive buying in U.S. Dollars, which in turn could force traders to begin selling commodities, including Oil, as strength in the Dollar would make Dollar-denominated Commodities more expensive for non-Dollar buyers and potentially curtail demand.
Looking at the daily chart for October Crude Oil, we notice prices are holding above both the 20 and 100-day moving averages, which gives Oil bulls the edge. However, the failure to take out the highs of 75.27 may be a sign that the bullish momentum is beginning to lose some steam and a sizable correction may be forthcoming if resistance is not taken-out soon. The most recent Commitment of Traders report shows speculators net-long about 125,000 contracts as of August 11th, but this was just before we saw the wild price swings that occurred during the past several sessions. This price action may have shaken-out weak longs, especially smaller speculative accounts. There are several support points at the 20-day moving average (MA) near 71.30, the uptrend line near 68.42, and the 100-day MA near 65.45. The 14-day RSI is reading a moderately strong 60.08.
A rising oil price in the 1970's didn't have all that much effect on already poor business conditions. Oil continued to rise regardless. The monetary inflation cooked in years earlier forced commodities up. It still comes down to the debate of whether we have inflation or do we have deflation? Inflation doesn't care if the business conditions are bad or good, it can occur either way. But hyper-inflation occurs during lousy business conditions, not the good times.
Today's prompt drop of gold from $953 to $933 sure did seem strange. Very much like a low stop clearing gambit. The bankers want to scare as many people as they can out of gold asap. This week has 2,5,7 yr auctions Tu-Thursday as well as gold futures and options expiration on Wed/Thursday. Should provide more fireworks. I would expect a better point to buy later this week. This will allow the bankers to dump a pile of shorts at a profit and rebuy the longs for the next move up.
Today's prompt drop of gold from $953 to $933 sure did seem strange. Very much like a low stop clearing gambit. The bankers want to scare as many people as they can out of gold asap. This week has 2,5,7 yr auctions Tu-Thursday as well as gold futures and options expiration on Wed/Thursday. Should provide more fireworks. I would expect a better point to buy later this week. This will allow the bankers to dump a pile of shorts at a profit and rebuy the longs for the next move up.
roadrunner >>
The rub is if the economy starts cooking, the fed will raise interest rates. That's a bummer for gold because rising interest rates will weaken it and strengthen the $$. edited to add that todays strength in the $ resulted in weaker prices for PMs.
"Poets are the unacknowledged legislators of the world." PBShelley
I wasn't expecting the big dip but I can't say that I'm surprised. $945 held up very well though. $960 is a more troublesome resistance level that I expected, and I'm beginning to think that the focus will not be $990 but rather $965. I drew both resistance levels on the chart, plus the penant. I took advantage of the dip today to load up. I'll only be concerned if the bottom leg of the penant is breached.
The bounds of the penant appear to be $965-970 on the top end and $935-940 on the bottom end.
I was looking at the hourly volume charts and found an interesting pattern, which has been discussed before but I've never seen anyone quantify. Around 5am or 6am, the candles generally have the highest volume of the day and the largest 5 or 6am candles for August have been:
8-2: Small Red candle 8-3: Sm Red candle 8-4: $6 green candle 8-5: sm red doji 8-6: $4 red candle ($8 range) 8-7: $3.5 red ($13.50 range) 8-10: $7 red 8-11: $3 red ($5 range) 8-12: $1 green ($4 range) 8-13: $1 green ($6 range), followed by $4 red 8-14: $13 in 4 red candles from 5am-8am, in increasing volume 8-17: $3 red ($6 range) 8-18: $2 red 8-19: $1 red followed by $8 green 8-20: $4 red 8-21: $10 green ($14 range) 8-24: $4 red, large red candle at 10am though
13 red candles at 5am vs 4 green, and the red are usually quite large compared to the greenies. (Times are Pacific) I don't know what conclusion to draw other than that most volume clearly occurs at this time and it has generally been negative, although the price of gold is down only $8 for the month, and it is a doji at the moment. I think it's easy to conclude that this is when the institutional activity takes place.
On the wire tonight, Bernake is expected to be nominated to a 2nd term.
Support for Tues is at $933 and $945.8, with resistance at $955.8.
The rub is if the economy starts cooking, the fed will raise interest rates. That's a bummer for gold because rising interest rates will weaken it and strengthen the $$. edited to add that todays strength in the $ resulted in weaker prices for PMs.
The FED can do all it wants with "their" inter-bank lending rates. What really matters is the real interest rates that are driven by the world. When it's time for longer term rates to start rising, they will rise, regardless of what the FED's rates are fixed at. In fact, the FED typically follows the interest rates set by the rest of the world. They are a follower rather than a leader. Rising interest rates are generally a booster for the price of gold. Trend long term interest rates (or the FED's rate) over the past 40 years and it will closely resemble the gold chart. Anything can happen in the short term with the dollar or interest rates. During the 1970's the gold price shot higher and higher with rising interest rates. It finally took double digit rates all the way to 1981-1982 to kill gold. Long term rising interest rates will push gold much higher. This would typically occur with a weakening dollar in order to induce investors to buy.
Steve Saville makes the point that even with bank lending/reserves locked down, the govt and FED have easily maneuvered their way around the banker log jam to create additional credit, money, and stimulus. That means inflation and it has already been reflected in the price of equities and commodities.
With the Comex opening up at 8:20 AM EST, those times you list are right at the start of gold futures trading.
Bernanke was one of the guys responsible for constructing the current financial mess when he was a Gov. of the FED Bank of NY and an Economic Advisor to the President. Some now give him credit for preventing a 2nd depression. An interesting way to look at it I guess.
i think there has been a split of looking at the DOW and equating that with the health of the economy. also with all that money floating around how can it become more valuable to loan without more smoke and mirrors?
Gold is doing alright this morning, but struglling at $950, $947 is holding tight. The 5am candle was green today. S&P has climbed steadily since 1020 at midnight to about 1035 right now, looking like it is ready to breakout to 1040.
Silver doing really well, up $.25 since midnight and Palladium has really been the star performer of the last week of so, up to $291. Which is odd... because I bought some palladium last week so it should be going down.
One newsletter I subscribe to just said: "There’s shocking news coming out of the gold markets. Hedge funds are dumping their gold fund shares—especially GLD (the SPDR Gold Shares fund)— and buying physical gold instead. If you own shares of the GLD gold fund, you’re holding a ticking time bomb. I recommend you switch to physical immediately!"
Not sure I believe it, I haven't seen anything else to correlate this to.
<< <i> That means inflation and it has already been reflected in the price of equities and commodities.
With the Comex opening up at 8:20 AM EST, those times you list are right at the start of gold futures trading.
Bernanke was one of the guys responsible for constructing the current financial mess when he was a Gov. of the FED Bank of NY and an Economic Advisor to the President. Some now give him credit for preventing a 2nd depression. An interesting way to look at it I guess.
roadrunner >>
I agree that inflation is in the cards. How much of that is baked into the price of gold already is a concern. If there's a shortage of commodities to come, gold will have to participate on the upside one way or another. A strong dollar suggests moderate or weak gold prices though. If you recall, the run gold had to 1000 last year was predicated on the slumping greenback.
"Poets are the unacknowledged legislators of the world." PBShelley
Hummmmmm...they just announced yesterday that there would be no COLA increases for two years. Since COLA for Social Security is directly tied to the government reported inflation just what is going to happen here...are they going to decouple that requirement that the COLA and inflation are tied? If they do have reported inflation and the COLA is still linked to that number then they have to raise the COLA. This will be interesting to watch.
One newsletter I subscribe to just said: "There’s shocking news coming out of the gold markets. Hedge funds are dumping their gold fund shares—especially GLD (the SPDR Gold Shares fund)— and buying physical gold instead. If you own shares of the GLD gold fund, you’re holding a ticking time bomb. I recommend you switch to physical immediately!"
I'm aware of one major hedge fund guy shifting out of GLD to the tune of billions but not others. Paulson's hedge fund recently took out a large stake in GLD. Then again, the larger shareholders like himself may have first dibs on the real gold if it comes time to part ways or bail. The "little" guy with under 100,000 shares only gets paid off in paper or similar valued paper gold. It's been said over and over that the trading in the gold ETF's doesn't make sense with the ease in which they move inventory in and out. And there is nothing in the prospectus that says they can't used paper-based assets as equivalent gold. Any references to "gold bullion" have long been removed. Considering that the banks and brokers leveraged out homes and other "assets" to the tune of 50-1 or 100-1 would tell me that it is almost a certainty that they have done it to some extent with gold and silver. This is especially true since the biggest players on the Comex are the custodians of the GLD/SLV. Means, motive, opportunity.....of course they would do it. They'd be stupid not to since the Treasury, FED, and SEC would all tacitly support any operations that put a lid on the price of PM's. I wouldn't even trade GLD for a day. With my luck, the one day I trade would be the same day when it gets a run on it or the SEC suspends trading on it.
From James Turk:
"GLD presents its financial statement in 10-K reports filed with the Securities & Exchange Commission, and these are revealing. GLD's balance sheet states its major asset to be: “Investment in Gold”. It does not say just: “Gold”. This classification declaring GLD's asset to be an investment in gold rather than gold itself provides an easy hurdle to meet for auditing purposes.
Investments in gold can be nearly anything gold related, and for example, include gold certificates and other promises to pay gold. GLD does not have to prove to its auditor that each share in issue is backed by gold in the vault. Rather, all GLD has to do to satisfy its auditor is to simply show them an account statement (i.e., a piece of paper) from any subcustodian or sub-subcustodian that says gold is owed by them to GLD.”
I concur that the dollar is the primary driver of gold over the past couple of years. But gold has also closely tracked the interest rates on the longer term bonds. The dollar and bonds have been tied together as well. Though going forward the ties between these could disappear/reappear at any time.
The consolidation continues. While the pattern is loaded with energy and can go any time, I'm starting to think that gold will be suck between $940 and $960 for another week or two. Here's an interesting article that talks about gold sentiment, and how it is at a low right now. This is of course, a key ingredient for a big price run upwards, although it's maybe a little superstitious.
Here's the URL since the censor has a problem with it:
The consolidation continues. As in my previous post, I think the POG may continue to oscillate between $940 and $960 and could probably do so through the end of next week. Sep 10 is being called out as a turning point by multiple sources so there may be two more weeks of nothing. But at least the summer doldrums are almost over.
I'm starting to believe that with the news coming out this week that the spark for higher gold will be an announcement coming out of China regarding their debt holdings relating to the reappointment of Bernake, the FDIC running out of money, and/or the increased federal deficit numbers.
The treasury auction has been going OK. Mediocre demand reported for the 2 year notes, but at the lowest rate of the year. Gold may be able to pop up a little once the auctions are over.
<< <i>The consolidation continues. As in my previous post, I think the POG may continue to oscillate between $940 and $960 and could probably do so through the end of next week. Sep 10 is being called out as a turning point by multiple sources so there may be two more weeks of nothing. But at least the summer doldrums are almost over.
I'm starting to believe that with the news coming out this week that the spark for higher gold will be an announcement coming out of China regarding their debt holdings relating to the reappointment of Bernake, the FDIC running out of money, and/or the increased federal deficit numbers.
The treasury auction has been going OK. Mediocre demand reported for the 2 year notes, but at the lowest rate of the year. Gold may be able to pop up a little once the auctions are over. >>
Agreed. The sideways pattern that I have "preached"--I want to be a reverend now instead of a professor--LOL, for the last 2 months, will most likely be resolved within the next 2 weeks.
I am getting conflicting "hints" from the other currencies--Euro, Yen, Pound, Aussie $, as well as the industrial commodities.
At times like this I prefer to be an investor--and let the pattern resolve, rather than a speculator and "guess". Whichever way it moves it will be substantial so there will be still be time the catch the train either way.
More sideways action, as expected. There's a lot of pent-up energy in the pattern, it's ready to go any time now. The only question is when...
One thing that I think is important for th next jump to take place is for sentiment to change. I posted the article a few days ago about sentiment changing. I ntoiced that prices for gold coins have come down this week in the PCGS price guide... buffaloes, libs, saints. Nothing huge, but clearly investors are getting frustrated with this trading range and the sideways action. The pump is primed.
The pump does indeed look nearly primed. For the past several days the gold stocks have been tried to be pushed down but have responded with snap backs. The trading bands on about half the major gold stocks are about as low as they have been for the past 6 months. A few have been flat lined in very tight ranges for weeks. The others are heading towards lower levels quickly. A few of those have started to move higher with the bands starting to turn up. Volume has appeared to turn on quite a few as well. GDX, GLD, SLV, and Gold to Silver ratio are following somewhat similar patterns. Stoch, CCI, W%R, Aroon, Trix, Macd, RSI, all support further upward potential. Bond and dollar action supporting as well, at least for now. TBT has paralleled intermediate term gold action.
I see a lot of promising chart action with these stocks and very few if any negative indicators......fwiw. I had every intention of adding more this morning but gold was already gone by the open. The charts told the same story at 3 pm yesterday, so my mistake for not doing the buying at that time. I did take advantage of the my buy in AUY yesterday and sold it this morning. Hopefully, will get another chance to buy some back. ______________________________
Edited for COT summary ending 8/25:
Dollar and Gold futures reversed the course of the past 1-2 weeks. The dollar increased the long to short comm. ratio from 1.79 to 2.10 by adding 2146 longs and dumping 934 shorts. The banks may now feel the dollar will stage a recovery for a while.
Gold increased the short to long commercial ratio from 3.51 to 3.57 while increasing open interest by 5K. 6800 net shorts were added. The waters are muddied up once again.
As expected, Gold could not make it through $960. I sold 1/3 of my position and I hope to buy it back on a dip Sun night or Mon Morn. Not sure whether to buy at $950 or 954, not sure how low it will go on the next dip. Although I might be patient and see if it touches $945 again. Gold will probably not be ready to move up significantly until Mon night or Tuesday.
Now the only question in my mind is if gold will be ready to move this next week or will it wait until the following week. I'm putting my money on the following week.
Equities OTOH, look ready to go on Monday. S&P is ready for a nice move higher, to at least 1060.
Normally if the SM is up, gold is up, but I'm not sure gold will follow this time. Guess we'll see. The ECRI leading indicator is at incredible highs right now.
I'm still short the S&P at 945 so you are not making me feel any better by that ECRI talk.
I shifted some of that short position to the short latin america area.
I'm still short the oil and gas market also. Got in a little too soon on the short side and am feeling like one of Jesse livermore's storys of his shorting excitement.
Keeps the thinker ticking thats for sure.
NumbersUsa, FairUs, Alipac, CapsWeb, and TeamAmericaPac
I agree that there's a lot of talk and signs that indicate that the SM should be going down... but there's an undeniable force pushing equities up. I still expect S&P to hit 1060 sometime fairly soon, but what happens after that I don't know.
But the markets never seem to go the direction that they *should* go.
A hit to the US dollar will continue to propel stocks upward as well...
I'm still short the S&P at 945 so you are not making me feel any better by that ECRI talk.
I shifted some of that short position to the short latin america area.
I'm still short the oil and gas market also. Got in a little too soon on the short side and am feeling like one of Jesse livermore's storys of his shorting excitement.
Keeps the thinker ticking thats for sure. >>
What happens if the Chinese slow their purchases of US Treasuries? (Don't tell anyone---they've slowed down their purchases as their exports too the EU grow increasingly larger than exports to the US).
"Poets are the unacknowledged legislators of the world." PBShelley
<< <i>Why bother giving up your position to trade $10 swing and pay taxes and commisions? >>
It ends up being a 4 digit gain, which is worth doing for me. The $7 RT commission is nothing. The taxes come no matter if I sell this week or two weeks from now.
Made 8% ($720) on a several hour swing of Yamana on Friday and happily gave the brokerage their $26 round trip fee and nada to the IRS since this is a brokerage IRA trading account. Bought back those same shares a bit cheaper this morning on the smackdown then sold them right back a short time later. I sense some further downside coming. Seeing that this is the last day of the month which often moves against gold, a second smackdown this afternoon would not surprise me. Tuesday, Sept 1st is a new month. Nice to have no bond "auctions" this week!
I'm thinking the opposite. I think the downside movement is done for the day, and that the rest of the day will be flat or up. We're already down 2 support levels, a third is probably unlikely. I think today's move down has only energized the pattern. The S&P500 is at a VERY solid support level of 1013, and as long as it holds, I think gold will hold $950.
My plan worked out, although I wish I would have tried for $945 instead of $950, but I can't complain. I'm back with a full position at $950, and although I hate to do it, I'm long on a very small S&P500 contract at 1015. At this level it makes sense because 1013 should hold and I can use a tight stop at 1011.
Silver and Palladium are really doing well or holding up well.
My move was more for safety than anything else. In fact at the end of the day I purchased some Kinross which took a -5% hit this morning. It seems to be on the rebound now with decent technicals. Still only taking little steps here. Encouraging was the drop in the GSR to the upper 63 level even as gold plumetted somewhat, silver held up pretty strong....a positive sign imo as that's where it dropped to a short while back when gold hit $971. Forum dog TRE has been conducting a stealth move the past week giving support to the idea that when the worst of breed is moving up, the others are probably on their way or soon to follow. I've noticed that TRE is a leader when it comes to smackdowns as it oftens gets hit a few days or a week before the majors and intermediates see the same thing. Conversely TRE often heads up first.
In closing above key $14.80 resistance level, silver is looking even better. The dollar was repelled pretty easily from the upper 78's and it's still not clear if it is still capable of another good up move this next week or two. Gold bounced off the key $942-$944 that had sucked it down so many times before, another bullish sign. That prompt smack down looked to be another planned stop sweeping operation.
With end of month number massaging behind us, Sept offers something new... a new thread for one.
<< <i>> Am I the only guy in this forum who isnt obsessed with the day to day up and down ticks of PMs?
No, you're not alone. I watch it and then I don't watch it and then I eventually watch it again. I've got maybe 1/2 of one eye on it now. >>
I know for certain that when I turn on the news in the morning, the Dow and Gold/Silver will either be up or down. Been doing this so long, I just look at PM if I remember. Used to trade it several times a day.
As for hedge against inflation, I think the best advice I can give my son is to get educated and always have a source of income. Forget about inflation/deflation and hedges. The best security is ownership of knowledge that people will pay for.
Comments
$945 is still the vulnerable point, but I don't think we'll breach this level again.
I'll also point out the strong breakout in the SM Friday. The ECRI continues to climb. The upward movement in the SM is VERY powerful. Gold is probably ready to take off along with the SM, and my guess is that it will be at the expense of the dollar, which is getting ready to plunge.
http://ProofCollection.Net
What is sm? I know about ecri and their work bt i don't subcribe direct, I get updated time to time thru a third party economist etc through their work. I know from past experiences that ecri models have been accurate thus far.
The ECRI index is available for free here.
http://ProofCollection.Net
Thanks for the Link and also for clearing up that mysterious acronym.
Just checked support and resistance levels. Although it's not much of an indicator, resistance levels are are encouraging.
Support is at $951.5 and $942.9, but resistance levels are $963.6, $972.1, and $992.8. What's unusual is that the 3rd resistance level is set to high, at the $990 target. It's fairly unusual to hit R3, but it could be a great follow-on move to Friday's rally.
http://ProofCollection.Net
-COT commercial interest has shifted to the longs for the past 2 weeks, even if still high on the short to long ratio.
-SM has started another up leg and going with it are oil and copper. In that environment gold has been typically following. These are inflationary pressures formed by too much M0 and other money aggregates. Green shoots notwithstanding, toss enough gasoline on to a small fire and it will turn into an inferno.
-The dollar has been bouncing off the upper down trend line formed over the past 6 months. The dollar still looks like it has a 5th down leg to complete. The Treasury can only support TBonds or the Dollar. And the TBonds are more important in the overall scheme.
-Gold's best seasonal season begins in a few weeks. There is little time for the commercials to trash the gold price in other than a quick head fake.
-Continuing compression of a 20 month corrective pattern now culminating in a descending triangle. The action has gotton almost mundane but has stayed within a tight range in the $900's. The trading bands are constricted. A breakout one way or another is due very soon. The fiat crowd is expecting a slam down into the $800's or lower again. But everything else above says gold's next visit with $1000 could be sooner than we think. Almost no one (outside of those crazy gold buggers) would be expecting such a thing in September. Is MoneyLA's 1050 gold express boarding at the station now?
roadrunner
Traders got inkling from the API energy stocks report that Crude Oil inventories had fallen last week, but not even the most bullish energy traders expected the 8.397 million barrel draw in U.S. Crude Oil stocks that the Energy Information Administration (EIA) reported this week. In addition, the EIA reported that both gasoline and distillates stocks also fell last week, despite a moderate uptick in refinery utilization. Sharply lower Crude Oil imports were behind much of the declines in Oil stocks, which fell by 1.417 million barrels per day last week. Although the market reacted quite bullishly to the inventories report, there are some who believe the sharp drop in imports signals continued weak demand by refineries which are operating at well below capacity due to overall weak demand. The big question both Crude bulls and bears must now answer is whether rising oil prices will act as a break on any economic recovery. If they do, then Oil prices may have risen too quickly given current economic conditions. This is especially true should Chinese Oil demand begin to ease once the vast economic stimulus provided by the Chinese Government runs its course. Traders should also be aware of the movement of the U.S. Dollar. A weakening greenback has sparked increased interest in owning commodities, especially by institutional traders as an inflation hedge. With a large number of traders holding short Dollar positions, any change in trend could spark massive buying in U.S. Dollars, which in turn could force traders to begin selling commodities, including Oil, as strength in the Dollar would make Dollar-denominated Commodities more expensive for non-Dollar buyers and potentially curtail demand.
Looking at the daily chart for October Crude Oil, we notice prices are holding above both the 20 and 100-day moving averages, which gives Oil bulls the edge. However, the failure to take out the highs of 75.27 may be a sign that the bullish momentum is beginning to lose some steam and a sizable correction may be forthcoming if resistance is not taken-out soon. The most recent Commitment of Traders report shows speculators net-long about 125,000 contracts as of August 11th, but this was just before we saw the wild price swings that occurred during the past several sessions. This price action may have shaken-out weak longs, especially smaller speculative accounts. There are several support points at the 20-day moving average (MA) near 71.30, the uptrend line near 68.42, and the 100-day MA near 65.45. The 14-day RSI is reading a moderately strong 60.08.
http://ProofCollection.Net
Today's prompt drop of gold from $953 to $933 sure did seem strange. Very much like a low stop clearing gambit. The bankers want to scare as many people as they can out of gold asap. This week has 2,5,7 yr auctions Tu-Thursday as well as gold futures and options expiration on Wed/Thursday. Should provide more fireworks. I would expect a better point to buy later this week. This will allow the bankers to dump a pile of shorts at a profit and rebuy the longs for the next move up.
roadrunner
<< <i>
Today's prompt drop of gold from $953 to $933 sure did seem strange. Very much like a low stop clearing gambit. The bankers want to scare as many people as they can out of gold asap. This week has 2,5,7 yr auctions Tu-Thursday as well as gold futures and options expiration on Wed/Thursday. Should provide more fireworks. I would expect a better point to buy later this week. This will allow the bankers to dump a pile of shorts at a profit and rebuy the longs for the next move up.
roadrunner >>
The rub is if the economy starts cooking, the fed will raise interest rates. That's a bummer for gold because rising interest rates will weaken it and strengthen the $$. edited to add that todays strength in the $ resulted in weaker prices for PMs.
The bounds of the penant appear to be $965-970 on the top end and $935-940 on the bottom end.
I was looking at the hourly volume charts and found an interesting pattern, which has been discussed before but I've never seen anyone quantify.
Around 5am or 6am, the candles generally have the highest volume of the day and the largest 5 or 6am candles for August have been:
8-2: Small Red candle
8-3: Sm Red candle
8-4: $6 green candle
8-5: sm red doji
8-6: $4 red candle ($8 range)
8-7: $3.5 red ($13.50 range)
8-10: $7 red
8-11: $3 red ($5 range)
8-12: $1 green ($4 range)
8-13: $1 green ($6 range), followed by $4 red
8-14: $13 in 4 red candles from 5am-8am, in increasing volume
8-17: $3 red ($6 range)
8-18: $2 red
8-19: $1 red followed by $8 green
8-20: $4 red
8-21: $10 green ($14 range)
8-24: $4 red, large red candle at 10am though
13 red candles at 5am vs 4 green, and the red are usually quite large compared to the greenies. (Times are Pacific) I don't know what conclusion to draw other than that most volume clearly occurs at this time and it has generally been negative, although the price of gold is down only $8 for the month, and it is a doji at the moment. I think it's easy to conclude that this is when the institutional activity takes place.
On the wire tonight, Bernake is expected to be nominated to a 2nd term.
Support for Tues is at $933 and $945.8, with resistance at $955.8.
http://ProofCollection.Net
The FED can do all it wants with "their" inter-bank lending rates. What really matters is the real interest rates that are driven by the world. When it's time for longer term rates to start rising, they will rise, regardless of what the FED's rates are fixed at. In fact, the FED typically follows the interest rates set by the rest of the world. They are a follower rather than a leader. Rising interest rates are generally a booster for the price of gold. Trend long term interest rates (or the FED's rate) over the past 40 years and it will closely resemble the gold chart. Anything can happen in the short term with the dollar or interest rates. During the 1970's the gold price shot higher and higher with rising interest rates. It finally took double digit rates all the way to 1981-1982 to kill gold. Long term rising interest rates will push gold much higher. This would typically occur with a weakening dollar in order to induce investors to buy.
Inflation vs. deflation
Steve Saville makes the point that even with bank lending/reserves locked down, the govt and FED have easily maneuvered their way around the banker log jam to create additional credit, money, and stimulus. That means inflation and it has already been reflected in the price of equities and commodities.
With the Comex opening up at 8:20 AM EST, those times you list are right at the start of gold futures trading.
Bernanke was one of the guys responsible for constructing the current financial mess when he was a Gov. of the FED Bank of NY and an Economic Advisor to the President. Some now give him
credit for preventing a 2nd depression. An interesting way to look at it I guess.
roadrunner
Ben was given a 2nd term "pass"
Silver doing really well, up $.25 since midnight and Palladium has really been the star performer of the last week of so, up to $291. Which is odd... because I bought some palladium last week so it should be going down.
One newsletter I subscribe to just said: "There’s shocking news coming out of the gold markets. Hedge funds are dumping their gold fund shares—especially GLD (the SPDR Gold Shares fund)— and buying physical gold instead. If you own shares of the GLD gold fund, you’re holding a ticking time bomb. I recommend you switch to physical immediately!"
Not sure I believe it, I haven't seen anything else to correlate this to.
http://ProofCollection.Net
<< <i> That means inflation and it has already been reflected in the price of equities and commodities.
With the Comex opening up at 8:20 AM EST, those times you list are right at the start of gold futures trading.
Bernanke was one of the guys responsible for constructing the current financial mess when he was a Gov. of the FED Bank of NY and an Economic Advisor to the President. Some now give him
credit for preventing a 2nd depression. An interesting way to look at it I guess.
roadrunner >>
I agree that inflation is in the cards. How much of that is baked into the price of gold already is a concern. If there's a shortage of commodities to come, gold will have to participate on the upside one way or another. A strong dollar suggests moderate or weak gold prices though. If you recall, the run gold had to 1000 last year was predicated on the slumping greenback.
I'm aware of one major hedge fund guy shifting out of GLD to the tune of billions but not others. Paulson's hedge fund recently took out a large stake in GLD. Then again, the larger shareholders like himself may have first dibs on the real gold if it comes time to part ways or bail. The "little" guy with under 100,000 shares only gets paid off in paper or similar valued paper gold. It's been said over and over that the trading in the gold ETF's doesn't make sense with the ease in which they move inventory in and out. And there is nothing in the prospectus that says they can't used paper-based assets as equivalent gold. Any references to "gold bullion" have long been removed. Considering that the banks and brokers leveraged out homes and other "assets" to the tune of 50-1 or 100-1 would tell me that it is almost a certainty that they have done it to some extent with gold and silver. This is especially true since the biggest players on the Comex are the custodians of the GLD/SLV. Means, motive, opportunity.....of course they would do it. They'd be stupid not to since the Treasury, FED, and SEC would all tacitly support any operations that put a lid on the price of PM's. I wouldn't even trade GLD for a day. With my luck, the one day I trade would be the same day when it gets a run on it or the SEC suspends trading on it.
From James Turk:
"GLD presents its financial statement in 10-K reports filed with the Securities & Exchange Commission, and these are revealing. GLD's balance sheet states its major asset to be: “Investment in Gold”. It does not say just: “Gold”. This classification declaring GLD's asset to be an investment in gold rather than gold itself provides an easy hurdle to meet for auditing purposes.
Investments in gold can be nearly anything gold related, and for example, include gold certificates and other promises to pay gold. GLD does not have to prove to its auditor that each share in issue is backed by gold in the vault. Rather, all GLD has to do to satisfy its auditor is to simply show them an account statement (i.e., a piece of paper) from any subcustodian or sub-subcustodian that says gold is owed by them to GLD.”
I concur that the dollar is the primary driver of gold over the past couple of years. But gold has also closely tracked the interest rates on the longer term bonds. The dollar and bonds have been tied together as well. Though going forward the ties between these could disappear/reappear at any time.
roadrunner
Here's the URL since the censor has a problem with it:
http://www.market watch.com/story/contrarian-analysis-is-positive-for-gold-2009-08-25
(remove the space)
http://ProofCollection.Net
try this link variation instead
I'm starting to believe that with the news coming out this week that the spark for higher gold will be an announcement coming out of China regarding their debt holdings relating to the reappointment of Bernake, the FDIC running out of money, and/or the increased federal deficit numbers.
The treasury auction has been going OK. Mediocre demand reported for the 2 year notes, but at the lowest rate of the year. Gold may be able to pop up a little once the auctions are over.
http://ProofCollection.Net
<< <i>The consolidation continues. As in my previous post, I think the POG may continue to oscillate between $940 and $960 and could probably do so through the end of next week. Sep 10 is being called out as a turning point by multiple sources so there may be two more weeks of nothing. But at least the summer doldrums are almost over.
I'm starting to believe that with the news coming out this week that the spark for higher gold will be an announcement coming out of China regarding their debt holdings relating to the reappointment of Bernake, the FDIC running out of money, and/or the increased federal deficit numbers.
The treasury auction has been going OK. Mediocre demand reported for the 2 year notes, but at the lowest rate of the year. Gold may be able to pop up a little once the auctions are over. >>
Agreed. The sideways pattern that I have "preached"--I want to be a reverend now instead of a professor--LOL, for the last 2 months, will most likely be resolved within the next 2 weeks.
Knowledge is the enemy of fear
http://ProofCollection.Net
I am getting conflicting "hints" from the other currencies--Euro, Yen, Pound, Aussie $, as well as the industrial commodities.
At times like this I prefer to be an investor--and let the pattern resolve, rather than a speculator and "guess". Whichever way it moves it will be substantial so there will be still be time the catch the train either way.
Knowledge is the enemy of fear
One thing that I think is important for th next jump to take place is for sentiment to change. I posted the article a few days ago about sentiment changing. I ntoiced that prices for gold coins have come down this week in the PCGS price guide... buffaloes, libs, saints. Nothing huge, but clearly investors are getting frustrated with this trading range and the sideways action. The pump is primed.
http://ProofCollection.Net
<< <i>Decent move up this AM... >>
Yes, I suspect we're stuck at the $960 wall again for the day. Woudl love to be wrong though, but I don't see it punching through on Friday.
http://ProofCollection.Net
I see a lot of promising chart action with these stocks and very few if any negative indicators......fwiw. I had every intention of adding more this morning but gold was already gone by the open. The charts told the same story at 3 pm yesterday, so my mistake for not doing the buying at that time. I did take advantage of the my buy in AUY yesterday and sold it this morning. Hopefully, will get another chance to buy some back.
______________________________
Edited for COT summary ending 8/25:
Dollar and Gold futures reversed the course of the past 1-2 weeks. The dollar increased the long to short comm. ratio from 1.79 to 2.10 by adding 2146 longs and dumping 934 shorts. The banks may now feel the dollar will stage a recovery for a while.
Gold increased the short to long commercial ratio from 3.51 to 3.57 while increasing open interest by 5K. 6800 net shorts were added.
The waters are muddied up once again.
roadrunner
<< <i>
<< <i>Decent move up this AM... >>
Yes, I suspect we're stuck at the $960 wall again for the day. Woudl love to be wrong though, but I don't see it punching through on Friday. >>
It punched through! $960.72!
(x2,Meltdown),cajun,Swampboy,SeaEagleCoins,InYHWHWeTrust, bstat1020,Spooly,timrutnat,oilstates200, vpr, guitarwes,
mariner67, and Mikes coins
Now the only question in my mind is if gold will be ready to move this next week or will it wait until the following week. I'm putting my money on the following week.
Equities OTOH, look ready to go on Monday. S&P is ready for a nice move higher, to at least 1060.
Normally if the SM is up, gold is up, but I'm not sure gold will follow this time. Guess we'll see. The ECRI leading indicator is at incredible highs right now.
http://ProofCollection.Net
I'm still short the S&P at 945 so you are not making me feel any better by that ECRI talk.
I shifted some of that short position to the short latin america area.
I'm still short the oil and gas market also. Got in a little too soon on the short side and am feeling like one of Jesse livermore's storys of his shorting excitement.
Keeps the thinker ticking thats for sure.
But the markets never seem to go the direction that they *should* go.
A hit to the US dollar will continue to propel stocks upward as well...
http://ProofCollection.Net
<< <i>Proof,
I'm still short the S&P at 945 so you are not making me feel any better by that ECRI talk.
I shifted some of that short position to the short latin america area.
I'm still short the oil and gas market also. Got in a little too soon on the short side and am feeling like one of Jesse livermore's storys of his shorting excitement.
Keeps the thinker ticking thats for sure. >>
What happens if the Chinese slow their purchases of US Treasuries? (Don't tell anyone---they've slowed down their purchases as their exports too the EU grow increasingly larger than exports to the US).
<< <i>As expected, Gold could not make it through $960. I sold 1/3 of my position and I hope to buy it back on a dip Sun night or Mon Morn. . >>
Why bother giving up your position to trade $10 swing and pay taxes and commisions?
<< <i>Why bother giving up your position to trade $10 swing and pay taxes and commisions? >>
It ends up being a 4 digit gain, which is worth doing for me. The $7 RT commission is nothing. The taxes come no matter if I sell this week or two weeks from now.
http://ProofCollection.Net
<< <i>
<< <i>As expected, Gold could not make it through $960. I sold 1/3 of my position and I hope to buy it back on a dip Sun night or Mon Morn. . >>
Why bother giving up your position to trade $10 swing and pay taxes and commisions? >>
A good trader knows a bird in the hand is worth 2 in the bush. Even if you have to share the bird with the IRS.
Knowledge is the enemy of fear
roadrunner
My plan worked out, although I wish I would have tried for $945 instead of $950, but I can't complain. I'm back with a full position at $950, and although I hate to do it, I'm long on a very small S&P500 contract at 1015. At this level it makes sense because 1013 should hold and I can use a tight stop at 1011.
Silver and Palladium are really doing well or holding up well.
http://ProofCollection.Net
And this is part of the conflict that I wrote about last week. Copper and aluminum look poised for correction.
Edited to add......last week 100% of the DOW components were above both the 50 and 200 dma. In March the reading was 0%.
Knowledge is the enemy of fear
In closing above key $14.80 resistance level, silver is looking even better. The dollar was repelled pretty easily from the upper 78's and it's still not clear if it is still capable of another good up move this next week or two. Gold bounced off the key $942-$944 that had sucked it down so many times before, another bullish sign. That prompt smack down looked to be another planned stop sweeping operation.
With end of month number massaging behind us, Sept offers something new... a new thread for one.
roadrunner
<< <i>we need to start a Sept topic >>
It's already there.
http://ProofCollection.Net
<< <i>> Am I the only guy in this forum who isnt obsessed with the day to day up and down ticks of PMs?
No, you're not alone. I watch it and then I don't watch it and then I eventually watch it again. I've got maybe 1/2 of one eye on it now. >>
I know for certain that when I turn on the news in the morning, the Dow and Gold/Silver will either be up or down. Been doing this so long, I just look at PM if I remember. Used to
trade it several times a day.
As for hedge against inflation, I think the best advice I can give my son is to get educated and always have a source of income. Forget about inflation/deflation and hedges. The best
security is ownership of knowledge that people will pay for.