The gold market has had a good run from the December lows, and the bullishness is building. There isn’t the cockiness and surety as there was in early November right before the election, when I was getting very concerned about gold if it traded above $1305. My approach to markets is the opposite of many, as I get concerned about markets when they get above certain prices (resistance), and get more bullish when they get below support. And coming in prepared everyday for the potential opportunities to enter or exit markets, stepping up and buying into weakness or selling into strength, rather than predicting where they’re going. If the trend is up, then my (brilliant) prediction is the market is going higher. So it’s about having a plan/outlook to buy into the backups in that uptrend. Breaking support areas doesn’t freak me out, as they are potential buying opportunities. But blasting thru resistance areas does freak me out, if I’m long. And several times recently, I’ve left comments about not wanting to see gold blast thru $1245 in an emotional spike, especially this past week on a timing basis for an interim high. PMs often have a surge to finish off their upmoves during the last several days of a rally. And silver lagging is not a concern, we heard the same concern off of the October 2008 low and the December 2015 low. It will catch up, and it’s the surges which are potentially the most worrisome. Just looking over the last 14 months, at the lags and the surges – it’s not the lagging which concerns me. Look at the surges into early July highs and the early November high – how is that bullish?
So to put things into perspective for the current situation, from that Nov. 1st post: “My belief has been gold will generally rally into the end of October, but it was in the first part of November when we have to get concerned about a secondary top. However we would continue to see some rally attempts. So here we go, November 1st and gold is getting itself into a bit of a pickle. It has gotten quite overbought and is seeing distribution coming in (blue arrow). So now, I will do some light selling of gold, and likely also do some shorting, if gold trades above a large (for now) resistance area around $1305 … Right now is a lousy time to be buying PMs.” The situation now is not as off balance as it was then, but for me, now is a lousy time to be buying PMs. A big back up from here would be the only thing that would entice me to add on to miners or silver, and a surge from here would not be bullish at all. The market could care less what my view is, so it’s just about waiting for the great opportunities, and this isn’t it.
I pay no attention to all of the focus on manipulation, except as a sentiment indicator, and as a potential buying opportunity. I gave fair warning, and ran this silver chart for several months, about buying silver below $15.75 – the aggressive buy zone on the silver chart. The other buy zones are for trading only. So while my approach is to use the “manipulation” as a possible opportunity, there are too many who focus way too much time on it. In an interview last week (posted below), they go thru all of the details of the “bullion banks” suppression/manipulation of gold last Thursday. And if these is true, then we can thank them for keeping gold from getting too off balance. And the weak hands should be especially grateful for keeping them from buying into a big price surge. In the interview, they discuss tonnage this and tonnage that. It’s unlikely Stan Druckenmiller, focused one bit on tonnage and manipulation when he bought gold in December and January. But one person who loves talking about tonnage is “Billionaire” Eric Sprott (is Billionaire his first name now?) He used that flawless method to be super bullish on silver in this article from April 2011, after it had well more than doubled in eight months and at around $46 was within a week of the almost $50 high. He had a vested interest in promoting silver with his new fund, but really? And now in this recent interview, he’s “encouraged” by the weakness in the $, because “Trump wants a cheaper Dollar”, and he’s “encouraged” by the big rally in the shares. And of course, he’s encouraged by the tonnage. There are other bullish stories out about PMs now like this one from Marketwatch discussing Druckenmiller’s purchase of gold. And there is a great comment in it from Druckenmiller, which sums up how to make this business so “simple”: “I wanted to own some currency and no country wants its currency to strengthen….Gold was down a lot, so I bought it.” There you go.
So the bullish stories are being trotted back out now, but what has happened to the stories which were running back in December, like this bearish Marketwatch story by a widely read columnist discussing how gold is certainly going lower. Or this December 2015 classic from the esteemed WSJ, which practically nailed the exact low, discussing how the Fed rate increase means lower gold prices. Of course only someone who works for the esteemed WSJ could understand the intricacies of the gold market.
Dave Kranzler: Gold has been in a steady uptrend since December 18th, bottoming at $1,131 after a four and half month price correction. Firmly back over the 50-day moving average, the price momentum appears to be a threat to the bullion banks who suppress the price of gold in the paper derivatives market on behalf of the Western central banks and, ultimately, the Bank for International Settlements (BIS)…
The banks must feel threatened by the recent activity in both physical and paper gold trading. This morning the price of gold was attacked in the Comex paper market after St. Louis Fed-head, James Bullard, delivered remarks about interest rate policy that should have propelled the price of gold higher.
At 9:54 a.m. EST, 3,927 April gold futures contracts (paper gold) were dropped on the Comex. Prior to this, the average number of contracts per minute since the Comex had opened was under 500 contracts. This is 11.1 tonnes of paper gold which hit the Comex trading floor and electronic trading system in a 60 second window. It represents approximately 30% of the total amount of gold the Comex vault operators are reporting to be available for delivery under Comex contracts – dumped in paper form in 1 minute.
“In addition, China’s demand for gold seems to be accelerating. Based on Swiss export numbers, 158 tonnes of gold was shipped to China in December — far higher than the numbers presented by “official” organizations tracking gold flows. Current premiums to the global market price of gold on the Shanghai Gold Exchange are running in the low teens. So far this week well over 100 tonnes of gold have been delivered onto the Shanghai Gold Exchange (SGE). Except for the PBoC (People’s Bank of China), all gold distributed inside China must first pass through the SGE.
The Western central banks will have a problem if the price of gold begins to take-off because they will lose control of their ability to control the price using derivatives. Perhaps in addition to the standard price containment operation on the Comex this morning, the attack on the price of gold in the paper market was in response to Eric Sprott’s comments on King World News yesterday:
“There’s no doubt about it if they (investors) keep coming in and buying that kind of tonnage. At some point they will look inside at what little gold is left in the Western vaults and say:
‘No mas. We can’t keep doing this at the rate that they are buying tonnage
because we will run out of gold.’
And if they see that they are going to run out of gold in a year or so, when do they raise the white flag? I have told you many times that the Western central banks have been making up for the imbalance in term of supply and demand by dishoarding their gold hoard surreptitiously.”
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