"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Wednesday, November 5, 2014

HUI Long Term Chart

The West Greets Gold with More Selling

The selling kicked off in gold last evening when the comments from the Bank of Japan's Kuroda hit the newswires and has not let up as trading moved into the West.

Please refer to the chart I posted last evening showing the various support levels for the metal. The first zone of support, near the $1150 level, has been shattered conclusively. Gold now looks to have its eye on the psychological round number of $1100.

As usual, the gold perma-bulls are screaming their usual nonsense about "Flash Crash" once again. Funny how we never hear a peep out of these nitwits when we get what I have contemptuously dubbed, "the Reverse Flash Crash".

The point they are making is what? That big sellers unloaded on the metal during the Asian trade? And this is supposed to be proof of what?

Has it ever occurred to these Johnnie one-notes that there are some longs in SERIOUS trouble in the gold market? The latest Commitment of Traders report showed large speculators overwhelming LONG and WRONG in the gold market ( and this does not even include the over the counter markets). They are abandoning gold in droves.

The assumption that these perma gold bulls sites make is that "this would not be done if a LEGITIMATE SELLER wanted to ensure the best possible price". Again, who says that a trapped long wants the best possible price? The only thing a trapped long wants is "OUT".

"GET ME OUT before I am ruined" is what the motivating force is behind such moves.

I have to shake my head at the appalling ignorance that somehow passes for sound analysis in the gold bug community when it comes to the breathless commentary on gold whenever there is a sharp fall in price. Those of you who are regular readers at this site are keenly aware of what has been transpiring in the soybean markets of late. I have been especially detailed in discussing the meal markets in particular. If you want to see a market in which one group was "engineering a reverse flash crash" ( My words denoting sarcasm) just go back and look at the price chart of December meal. Panicked shorts were saying the same things as panicked gold longs were saying: " GET ME OUT AT ANY PRICE BEFORE I AM COMPLETELY RUINED".

These huge volume spikes speak of fear, panic and devastating losses all being compounded by margin calls from busy margin clerks at the various brokerage houses.

The idea that somehow huge sell orders in gold indicate the presence of "market manipulation" is patently absurd. We see this sort of thing all the time in the futures markets as one side or the other gets run over whenever a key technical support level gives way to the downside or a key technical resistance level is taken out on the upside.

Of course those that are on the winning side of a market move are going to press their advantage. That is a REGULAR occurrence in the futures market and is simply how they work. Ask the feeder cattle bears who had been obliterated by the bulls in that market since late August until only just recently if the ones doing the buying were interested in "buying at the best possible price". That one should even venture to ask such an insipid question would betray a breathtaking ignorance.

The simple facts are that gold is in a bear market and those who remain long are losing tremendous sums of money. Some have had enough and are done with the metal from the long side. Expect to see more of this the longer it takes gold to show any signs of stability. Each fresh push lower will take its toll, both psychologically and financially on the remaining longs. Bears will push until the downside momentum slows and then they will halt their selling. It really is that simple.

At some point the bleeding with temporarily halt and a respite will follow. Objective traders will watch key indicators to see if they can discern where and at what level.

I might point out here at the risk of incurring even more wrath from the gold cult members, but in the hope of waking some of them up, that their whistleblower hero and priest, the one who keeps regaling them with claims of special insider information about "massive gold buying", "massive rally of epidemic proportions", etc,. has once again proved to be nothing but a bag full of hot air. Wake up out there. Gold is in a bear market. That is what you really need to realize.

Until such time as the charts indicate a true bottom and a true turn in the direction of the main trend, rallies are going to be sold. Maybe the US Dollar will become weak, maybe inflation will begin to become a problem, maybe the commodity sector will turn sharply higher, maybe the GLD will start showing strong inflows of money with rises in its reported holdings, maybe this and maybe that, but until you see something on the fundamental front change that favors sharply higher gold prices, just remember a very simple but always ignored axiom: " The trend is your friend".