Gold & Precious Metals

Financial Treachery & Harsh Consequences

However, treachery with permitted bank and bond fraud, rigged financial markets, naked short ambushes, flash crashes, and lawsuits that convert criminal procedures into standard low business costs all have resulted in profound consequences. ..

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4-30gj

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Gold Fights For $1500″ as the “Fed Meets….

Screen shot 2013-04-30 at 4.37.27 PM….and Friday’s Job Report provides more bullish fuel to the “Golden Race Car!”
 
  1. Recently, many bullish gold analysts have started questioning their own theory that money printing causes inflation.
  2. Commodity prices have fallen, despite accelerated QE. I would argue that money printing does cause inflation, but only if what is printed overwhelms the assets that are destroyed, in global markets.
  3. The Fed continues to buy billions of dollars of illiquid and arguably-worthless OTC derivatives each month, with printed money. If the Fed printed more money than what is required to purchase those assets, inflation would likely be much higher than what it is now. So far, that’s not happening.
  4. Quantitative easing is not the same thing as just printing money and pushing it into the banking system.
  5. The inventory of marked-to-model OTC derivatives held by commercial banks is gigantic, so it could be many years before serious “cost push” inflation envelops America.
  6. The Fed believes in a business cycle that lasts for about 8 years. The last cycle probably ended in 2007, which means that the current upswing could continue to about 2015.
  7. From 2015 onwards, the Fed is likely to become much more dovish than they already are, in an attempt to counter a likely downturn in the business cycle.
  8. The actions of global central banks, in the 2015-2022 timeframe, are likely to usher in cost push inflation. Clearly, investing in gold requires lots of patience!
  9. Please click here now. You are looking at my monthly “big picture” HUI chart. I’ve lighted the price zones where gold offers value with blue HSR (horizontal support & resistance) lines.
  10. Also, note the action of the Stochastics indicator. I call this situation, “Close, but no cigar!” A crossover buy signal for long term investors has not yet been generated, but it’s very close.
  11. Many bank economists and technical analysts are stating that the current gold rally will fail, and gold will break the lows near $1320. It’s hard to know how such a decline would affect gold stocks, but I doubt it would be a positive experience for investors.
  12. Put options are like fire insurance; nobody likes to pay the premiums, but if there is a really serious fire, you’ll be glad you bought them.
  13. If you are afraid that gold could fall and break the $1320 area lows, you may want to consider looking into this type of insurance policy, for your portfolio.
  14. Cash is another form of insurance. The gold market is probably many years away from offering a “back up the truck” type of market to investors.
  15. I wouldn’t be overly concerned about drawdowns (gold is a high quality asset), but some cash should be kept on hand, so you can buy more gold if it goes surprisingly lower.
  16. In the short term, gold stocks are grinding higher, but volume is a big concern. Please click here now. That’s the GDX daily chart. Some technical analysts see a bearish flag pattern in play.
  17. On up days, volume has been stronger than on down days, but the overall pattern is one of declining volume, and that’s bearish.
  18. My “stokeillator” is highlighted at the bottom of the chart. It suggests that even if gold stocks are “doomed” to make fresh lows, the rally could continue further.
  19. Please click here now. This chart provides a closer look at GDX, using 2 hour bars.
  20. Note the top of the price gap at about $32. If you were able to buy some stock at lower prices, I would book some profit at $31.90, $33.50, and $35.25.
  21. Many physical metal enthusiasts have noted the enormous surge in demand in Asia and at mints around the world, but most bank analysts are projecting lower prices.
  22. I think gold needs to consistently trade above $1500 to put some real fear into the bears. So far, that hasn’t happened.
  23. From the $1590 area highs, gold fell about $270, to the $1320 zone. It’s retraced about 60% of that decline now, and Fibonacci traders are probably quite aggressive sellers in the $1480-$1500 area. I suggest very light selling now, and more between $1500 and $1550, if we get there.
  24. Gold probably can get over $1500 on this move, but only if both the FOMC meet and Friday’s job reports provide more bullish fuel to the “golden race car”!


 

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Thanks!  

Cheers

         St

Stewart Thomson

Graceland Updates

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The Great Gold Train Robbery of 2013

imagesAsian Buyers, Goldman Guys And The Wizard of Oz…

“Buyers Scour Asia for Physical Gold,” proclaimed a headline in theFinancial Times — in a story buried on page 18, because it relates favorably to gold and gold bugs. 

Though it was exiled to newspaper Siberia (Section II, to be precise), the Financial Times article vividly detailed a scramble across Asian markets for yellow metal. 

Indeed, per the Times’ report, “Asia is witnessing one of the strongest waves of physical gold buying in thirty years.” The Times article used terms like “feverish buying,” as well as “gold rush,” just a week after a massive selloff of paper gold…

News of Asia’s frantic gold-buying raises a legitimate question. What happened to the “gold is dead” meme from the week of the crash? (I discussed the gold sell-down last week.) Wasn’t the apparent selloff supposed to mark a turning point for gold? Isn’t the tide receding for what every good student of Economics 101 has learnt is merely a “barbarous relic,” per John Maynard Keynes? 

Yet strong Asian gold demand is contrary to Western convention. When the price of something falls, goes the rule, it’s because people are selling product, not buying it, right? Then again, what exactly tumbled in price last week? 

There’s a new truth apparent in the marketplace. There’s paper gold, reflecting so-called “contracts” that change hands on a trading venue operated by CME Group, called COMEX. And then there’s the real McCoy of physical metal, which trades hands on gold exchanges across the world. These are two quite different things. 

Of course, in its recent news account, the Financial Times described the scramble for physical metal. The sense of surprise in the Times — of an overall market disconnect — may be because that newspaper’s celestial view of macroeconomics is fixed upon “stars that went dark and cold a decade ago,” to quote the inimitable Conrad Black. 

In other words, the Financial Times has never been much of a trumpet for gold as more than just another asset class, like orange juice futures or real estate investment trusts. You buy gold, sell it, trade it. But there’s no need to take delivery. It’s not as if gold is money, right? 

Yet now, when it comes to the market for the real element — atomic number 79 — and holding it in your hand: what do those gold-loving Asians know? 

No Fools, Those Goldman Guys 

Perhaps the physical buyers, in Asia, were merely ahead of the curve of respectable opinion, so to speak. Because not long after buyers from Mumbai to Shanghai started snapping up gold with complete enthusiasm, the nice people at Goldman Sachs posted the following announcement: 

“We have closed our recommendation to short COMEX Gold, as prices moved above the stop at $1,400/toz. We have exited the trade significantly below our original target of $1,450/toz, for a potential gain of 10.4%. The move since initiation was surprisingly rapid, likely exacerbated by the break of well-flagged technical support levels. Our bias is to expect further declines in gold prices on the combination of continued ETF outflows as conviction in holding gold continues to wane as well as our economists’ forecast for a reacceleration in US growth later this year.”

Oh, you don’t say? 

Gold’s Disconnect, and Blowback 

When people dumped “paper gold” over the past few weeks — sellers that included the aforementioned Goldman — they made quick gains, but they also committed a strategic error. That is, as people dumped COMEX gold contracts in unison, some apparently engaging in naked shorting, or “selling” gold over which they had absolutely no control. Then came the golden disconnect. 

Perhaps initially, the market plan was to break (if not “brake”) the rising demand for physical gold, by knocking down the price of paper gold and pocketing a fast gain. It’s like robbing liquor stores, but without having to wear a ski mask. And of course, one should never do anything dishonest unless it’s perfectly legal. 

Still, sellers — perhaps unintentionally — triggered a new run on physical gold that shows no sign of diminishing. The new buying spree in Asia appears to be the physical gold blowback. Is this the beginning of the end of paper gold? As gold shines, is paper burning? 

A Cross of Paper — Death of COMEX 

Just to be clear, sellers drove down the paper price of gold, and inflicted grievous wounds across the rest of the metal space, too — silver, copper, platinum, etc., and almost all of the mining plays. 

The pullback was awful, across the overall resource sector. Sellers left proverbial pools of blood in the streets — Wall Street, Bay Street, Howe Street and Main Street. Long-holders got nailed to a “cross of paper,” to paraphrase William Jennings Bryan. 

But those COMEX contract sellers must not have foreseen that physical demand for gold in Asia (and across the world, truth be told) would spike after a pound-down. Whoops.

Look at it from another angle. There’s no way that any physical gold market — CME Group, especially — can arrange delivery of enough product to cover all the contracts out on the street. We have a disconnect from the “market” price of paper gold, versus what people will pay for physical metal in the souks of the world. 

In this respect, the paper gold market — embodied by COMEX — has been exposed as a mere platform for price manipulation. (Some people might call it a “fraud,” but I’m not here to quibble over semantics.) 

It’s like Dorothy pulling away the curtain in the Wizard of Oz — a book about the gold standard and bi-metallism, by the way. 

Off to See the Wizard 

Let me digress for a moment. Author Lyman Frank Baum wrote the original book, The Wonderful Wizard of Oz. The book, published in 1900, was whimsical. But among other things, it poked fun and caricatured the gold and silver debate in the U.S. in the 1890s. More broadly, Wizard was an allegory about life and political populism in the U.S. in the 1890s. 

Author Baum had a keen eye for the gold-silver debate because he knew something about the subject. Baum was wealthy, and heir to serious family money that came from the 19th-century oil fields of Pennsylvania. So he took the idea of debased currency and ran with it. 

Just look at just the title, The Wonderful Wizard of… Oz, where “Oz” stands for “ounces.” I’ve heard that in the real story, the “Emerald City” of Oz was a city of gold. (It became emerald when MGM Studios made the famous Depression-era movie in 1939.) The yellow brick road was a metaphor for gold. Dorothy’s slippers were silver in the book, and changed to ruby in the movie. 

The Tin Woodman stood for the urban workers of America, who were left out in the cold and rain by the forces of banker capitalism. The Scarecrow stood for the farmers — and recall that he had no brain, because many East Coast snobs thought farmers were dumb hicks, ripe for the picking. The Cowardly Lion was a dead ringer for William Jennings Bryan, who made good speeches, but could not stand up to the entrenched big guys. 

The Wizard was all smoke and mirrors, reflecting the political classes as a bunch of charlatans who promised much and delivered little. 

Hey, Wizard is a children’s story. It’s not a cookbook for what ails us today. If there are any real answers in the Wizard book, it’s along the lines that things aren’t what they may at first appear. And the common people — workers and farmers — are smarter and nobler than the elites think.

At the end of the day, COMEX is revealed as just a shadow market. The curtain has been pulled and there’s nothing to back it up. COMEX is okay for “trading” gold, as long as your only goal is cash settlement. But if you want delivery? Real metal? Elemental gold? No way. 

Looking ahead, let’s watch what happens. The next step in the paper gold market is to alter the rules for COMEX settlement. I expect to see any semblance of a “delivery” requirement will simply vanish. 

The COMEX is just a paper exchange now, with people trading computer code. There’s more “real” economic activity generated by betting on horses, because horses are flesh and blood critters. Now, COMEX gold contracts have turned into something like the stuff that hired hands shovel out of the stables. 

The recent gold crash was the beginning of emancipating real gold from paper gold. We’re about to see a “real” price for gold, coming from the bottom up and not the top down. I suspect that we’ll see a solid price rise for gold, over time. The market bullies who deal in paper products have just punched themselves in the nose. 

Gold’s Lehman Moment? 

The scenario actually reminds me of 2008, when Lehman Brothers crashed and burned. The fall of Lehman set off a modern financial crisis of historical proportions. 

The recent crash in the price level of paper gold established nominal prices far below the international physical price. To the extent that COMEX has any product for delivery in the pipeline, this gold price excursion will drain it out. COMEX is toast, at least for gold. 

What comes next? Will COMEX be the next Lehman? Will it crash and burn, too? Maybe, but in the end it doesn’t matter if you’ve been buying and holding physical metal — as I’ve been advising for over six years. Or perhaps COMEX “gold” will just fade away, because it has lost credibility as a trading platform. At this stage, who needs it? 

Looking for Protection 

Still, as the big elephants fight this out, where does the small investor go for investment safety? Well, own physical metal, to the extent you have it and can obtain it. Cash is good, at least in the short term. But cash may not do so well, as the gold price rises in a relative sense. 

We also get back to shares in “hard asset” companies — large, mid-sized and (some) small mining firms with high grades, cash in the bank, low costs of production (or a short pathway to production), and cash flow. That, and management that’s not too slow or stupid. 

One day, we’ll look back on this period as the Great Gold Train Robbery of 2013. The sellers thought they were getting away with a quick heist — sort of a smash and grab of COMEX contracts. Yet instead, the bust appears to have freed gold from its paper constraints. Looking ahead, gold prices could rise beyond your wildest expectations. 

That’s all for now. Thanks for reading. 

Byron W. King 

P.S. July 11, 2013 could be gold’s reckoning day. But instead of heading into a pit of despair like most main-stream analysts would have you believe, the metal could jump tenfold, virtually overnight. What could cause this cataclysmic gold event and why is it more important today to place your bets than ever? Click here to find out the full story.

 

One Nation (Under China) — DO NOT MISS THIS SHOCKING VIDEO! 

34 Year market forecaster issues the most dire warning of his career! He has just exposed the truth, and it’s far too shocking to get mainstream airplay. The most controversial forecast of the decade could be pulled down any moment … 

CLICK THIS LINK to view it now!

 

Gold Traders and Investors GET READY TO RUMBLE!

On April 12th I wrote a blog post titledPrecious Metals Melt-Down, and How To Manage It.I talked about how gold, silver and gold mining stocks have been flying under the media radar for over a year and that they were not catching the attention of traders, investors and the public anymore. I also said it would take some sharp price action (breakdown or rally) for it to be front and center again on TV, Radio and Newspapers.

But since gold has plummeted 17.5% dropping from $1600 down to $1320 per ounce with silver and gold stocks falling also they are now headline news once again. This move has caused some serious damage to the charts when looking at it from a technical analysis point of view. Below are some basic analysis points that show a new swing trading entry point.

The Technical Traders Chart Analysis:

Broken Support – Once a support level has been broken it becomes resistance. Gold is trading under a major resistance level.

Momentum Bursts – Since the April 15th low, gold has been setting up for another short selling entry point. Remember the market tends to move in bursts of three, seven or ten days then price reverses direction or pauses. It has now been 10 days.

Moving Average Resistance – Gold has worked its way up to the 20 day moving average which can act as resistance.

Bearish Inside Bars – This type of chart pattern points to lower prices. When there is a big down day followed by 3, 7 or 10 up days inside the price action of the down bar we can typically expect another sharp drop which tests the recent lows as shown with the arrow on the chart.

Screen shot 2013-04-29 at 6.11.30 PM

Gold Short Selling Conclusion:

In short, gold is setting up for a low risk entry point that should allow us to profit from lower gold prices. Using an inverse ETF like DZZ or even the gold mining stock inverse ETF DUST could be played. These funds go up in value as the price of gold falls.

While I expect gold to pullback, I do not think it will make another leg lower. Instead, a test of the recent low or pierce of the low by a few bucks then reverse and start building a bullish basing pattern before going higher.

Get My Book Free and Learn How To Manage Your Trades, Money & Emotions:http://www.thegoldandoilguy.com/trade-money-emotions.php

Chris Vermeulen

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The Most Bullish Gold CoT Report in Recent History

Today’s CoT gold report is clearly the most bullish report in recent memory (click HERE or on image for larger view):

Screen shot 2013-04-29 at 5.45.41 AM

…..read more HERE