We had planned on writing about China’s emergence as the world’s new superpower, while the United States keeps sliding into Third World status, but we cannot escape the more cogent political implications/ramifications of the diverging paths between the two countries. Actually, the United States has turned direction from a positive influence to a negative one with almost all other countries in the world. There is no other country aggressively pursuing war and human rights violations more than the United States is, today. The US has engaged in perpetual warfare with one country after another in the Middle East: Iraq, on totally false pretenses, [Weapons of Mass Destruction]; Afghanistan, [seeking control […]
Author Archive: Dan Norcini
This is the reason I have been bearish on gold now for some time – the charts are indicating that bearish pressure is building in the market and is hinting at building across all three time frames. It is imperative for gold bulls that the price recovers strongly before the end of this year to prevent heading into the New Year with a strong bearish bias. What worries me about gold is that the hedge funds still remain NET LONG, even if that position has shrunk to relatively low levels. That means that there remains more than enough firepower to take this market lower if those remaining long positions have to be jettisoned in the event of a breach of downside chart support.
The current monetary system, with the US Dollar as the Reserve currency is fatally wounded but what is there realistically to replace it at this point? Answer – nothing! From the standpoint of gold, this helps explain why the metal keeps sinking lower. With the US Dollar not falling apart, the urgency to own the metal is subsiding among Western-based investors.
Technically, market remains range bound between an overhead resistance zone noted on the chart and a support zone beneath the market which extends to psychological support at round number $1300 and to just below that level which is where the market bounced early in the session last Wednesday when the FOMC statement was released. For gold to have a chance at moving higher now, it will need to take out that $1332 level. Whether it is setting up a large range trade between $1375 and $1305 or so remains to be seen. If it is repelled by $1332 – $1330, it will be seen as a strongly bearish reaction. The bulls bought themselves a bit of time today but they have a lot of work to attract some fresh converts to their cause.
In short, we are pretty much back to where we were prior to the FOMC. This morning Fed governor Bullard managed to do what many in the Fed have been doing since May of this year, namely, jawboning the markets and setting them up for another possibility of tapering later this year. What has it been, 2 days since we got that FOMC press release and here we already are talking about starting the Tapering once again. Good grief!
In regards to gold, it is scooting higher as a large number of shorts were forced out with today’s surprise move by the Fed. It did take out that overhead resistance at $1330 which is a positive and is also now trading above $1350, another resistance level. There is $1360 which I am watching right above where it is currently trading to see how it handles that.
Gold, after looking like it was going to try to push through $1400, swiftly succumbed to selling pressure in spite of the strength in the Euro. It sure does seem as if that “14″ handle is proving to be difficult for the metal to hold right now. Same goes for silver in the sense that maintaining itself above the $24 level for any length of time is also elusive.
Here we are talking about a nation that is running over $17 TRILLION in its national debt and there are those who are dense enough that they want to own more US Debt as a SAFE HAVEN. Gold has run into some pretty good selling at the highs made back in late May/early June after putting in some sizeable gains since Thursday of last week. Working against further gains in today’s session is the weakness in the mining shares.
It was a trifecta plus ONE against gold in the latest trading session. At some point the supply/demand equilibrium becomes unbalanced and price needs to rise to adjust it. For the shorter=term oriented traders – gold is knocking on the door at the very top of the range but still has not forced it open.
I wanted to provide a quick update for those who are following the “backwardation” talk out there. The futures market has still not entered a backwardation state but it is just about there. Also, thus far I have not seen anything that would signal any problems with the delivery process for the August gold contract but one thing that does stand out is that J P Morgan continues to be the consistent, large stopper of gold for their “House” account. Morgan is acquiring a lot of gold.
The market is in a trendless phase – the downtrend has been interrupted but rather than an uptrend starting, the market is consolidating (moving sideways) with a negative or bearish bias. Without a rising copper, palladium, aluminum, tin, zinc, price it will be up to gold to bring buying into silver with those who do so focusing more on its role as a monetary metal. While talk that inflation pressures remains subdued dominates current thinking, the grey metal will underperform gold. I still like to watch copper prices to get a better sense of what silver might do.
Throughout most of the session day, gold was consolidating its recent gains. There was some chatter that some physical market demand, notably out of China, had eased off and that had some short-term oriented longs booking profits after realizing some nice gains. That selling, combined with some fresh short selling was serving to hold the metal in check throughout most of the session. Late in the day however, as the mining stocks caught another gust of wind higher, the metal surged upward breaking the 50 day moving average.
Gold is adding to its gains from the Asian session last evening in impressive fashion as the climb today has been steady and methodical. It has all the appearances of a strong short squeeze accompanied by an inflow of new long positions, which is exactly what this market has been needing to propel it higher. If the speculators start falling back in love with gold again, the rally will have further to run.
Gold was stopped cold in its tracks at the psychological round number resistance level of $1300. It had initially reacted to Ben Bernanke’s comments, by moving smartly higher. During the Q&A session which followed, gold was slammed lower by a wave of very strong selling. Think about it this way – the QE will continue as long as the economy needs it. Okay – what is new about that? We have seen this QE going on for some time now and to the minds of most market participants, there is still no real inflation threat looming on the horizon. What is there to make them waver the least in their convictions that inflation is benign? Answer – there isn’t anything… YET.
In light of the recent apparent reversal by Fed Chairman Ben Bernanke when it comes to the timeline for any TAPERING of the Fed’s Bond Buying program, I felt it might be a good idea to take a look at where gold stands on the technical price charts. From a pure chart perspective, the current move higher in gold is nothing more than a rally in an ongoing bear market. Remember, a market can end a trend without necessarily beginning a new trend in the opposite direction right away.