Sunday pre-game 6/17

 As I've mentioned over the past few months, I haven't been following the PMs too closely lately, though I've tried to keep postings as current as possible. Charts are great for analyzing relatively free markets. As in lots of individuals on both the supply side and the demand side, all looking out for their own interests, leading to emergent patterns in prices, sometimes providing hints of probabilities of future outcomes. In current markets, we indeed have players looking out for their own interests, but unfortunately, they are juggernauts with so much power to drive things their way, so much more information to know what will happen in advance, and, most importantly, almost complete impunity from being held responsible for their malfeasnace, that we might as well be the diddlyshits in Rome waiting for the Council of Cardinals to release smoke signals reflecting their choice of Pope (except that the smoke signals were generally not released to fool us into panicking so that our pockets could be better picked). A priori, the shenanigans can be expected to be especially egregious in the PM markets, insofar as PMs are a natural replacement for the fiat regime that has so enriched the undeserving scum that defend it. PM investors look at the sickness around them and conclude that this can't possibly last. But that may or may not be true. Adam Smith's quote, "There's a lot of ruin in a nation," may be apropos here. Remember, the first rule of good parasitism is to keep your host alive and relatively functional.

So, while a big move in gold should happen--and I am positioned for it--who knows when or even if it will occur. Gold shot up during the debt ceiling fiasco of August 2011, after which things have gotten palpably worse, yet here we are well below the 200-day moving average ($1680). There's no reason to be bullish in gold at least until we get back into the purple channel below, which now crosses the 144-day MA, at $1650. It's been strong resistance for months now.

Looking at my old silver chart, we see that the pink zone I once hoped would continue as support was resistance last week:
This is not a pretty chart.
 Continuing with silver, I've circled the triple crossing point below at $22. If we can get past it, I will start building up a silver position again in my trading account.

The weekly chart looks capped: 6 straight weekly closes at the same price should raise the suspicions of anyone with a functioning cortex. On the bright side, though, in the 8 weeks after falling through the grey wedge, one could've expected much worse, and that's a potential sign that there's a nice floor (reflecting physical demand) being built at the not-too-shabby $28 level.

Back to gold, a similar floor might have been made at around the 21-month MA that I've been looking at for several months now.

The rough daily Fibonacci equivalent of the 21-month MA, namely the 377-day MA, has held fairly well, as I bet on months ago:

Gold is at an all-time high relative to the $CCI chart
Silver relative to $CCI looks to be ready to break out of a long-term wedge

Weekly gold in euros spent a week outside the grey trend line, which really surprised me at the time, but the move wasn't confirmed, and it's been tracking it closely in the weeks since then:

The HUI bounced off of important support and looks poised to return to the grey dotted line that reflects its trajectory since the gold bull began. Note how much more spread out the closing prices have become in the second half of the chart below:

Finally, the "10-year yields paid in silver chart" which I continue to follow closely fell almost 4% this week.


GM Jenkins said...

You gotta hand it to the Indian finance minister, saying outright "we don't want Indians buying gold." One of the creepiest aspects of Western finance is the pathetic concerted attempt to pretend gold is just a shiny thing, like pretty beads, whose valuation is as random as the valuation of pretty beads.

Warren James said...

Fully agree with you there, GM.

"said there is a need to spread financial literacy to encourage people to invest in market instruments."

Must. Keep. Ponzi. Market. Alive.

I guess they will keep pulling those levers frantically until they stop people choosing to hoard their wealth. I mean, really .. how dare people make their own decisions about their own money ...!. I would laugh if I were not crying.

Anyway, they seem to be doing a good job of it if the recent Indian gold import data is true. I have wondered recently if that is largely a coordinated effort to help ease stress on physical gold outflows.

Warren James said...

I do recall reading somewhere that the Indian obsession with gold does do something weird with the country's balance of trade, and hence I understand the frantic lever pulling.

But at the end of the day, it all comes around to GM's statement above, that if gold is really so unimportant as made out, then it shouldn't be important to try and influence the flow. And it should still remain the choice of the saver as to what vehicle they use for their wealth.

The irony of it all is that by choosing gold, millions of 'just-getting-by' indians have done better in gold than many 'well-informed' westerners have in the stock market.

So all in all, the call and machinations to persuade indians from not buying gold is sheer brazen ignorant deceitful arrogance. If the vast unwashed hordes chose to save their wealth in property (or pretty beads), these people would not be trying to persuade them not to do it, no, they would in fact be tripping over themselves, fanning the industry to benefit from it.

No, gold is special by the fact they don't want us playing with it. We may not have all the tiny details, but the stuff is starting to shine through the many cracks in this god-forsaken wealth-pump we sometimes mistake for a financial system.

GM Jenkins said...

Great points, Warren. You really fleshed out all the reasons why that article bothered me enough to post it.

Edwardo said...

There is a kind of corollary to the lamentable comments by the lame Indian finance minister. Bear with me as I try to explain.

Otto Von Bismarck was said to have observed that "One should never believe a rumor until it is officially denied." Well, he would've known. Equally, when a finance minister says buy, one should strongly consider selling, and vice versa. In any case I imagine that the effect of this useful idiot's attempt to herd people into financial quicksand will have the opposite effect of that intended. After all, gold is for saving, and the stock and bond markets are for losing one's hard earned, er investing.

GM Jenkins said...

Trader Dan at KWN making my point better than I did. Funny stuff:

“As someone who has actively traded these markets for over two decades, I find what our markets have deteriorated into to be very distressing. Here we are with the most sophisticated markets on the planet, and all traders around the world are waiting for a statement from the Fed and looking at a single word in that statement (the word was ‘very’) to determine what they are going to do.

These markets are no longer functioning as efficient allocators of capital. Investments aren’t even entering into the equation anymore. The markets have instead become a casino, where the roulette wheel is spun and traders place their bets wherever they think the ball is going to fall. That’s what we’ve deteriorated into.

As we move forward through history and people look back on this period, they will marvel at how the investment community could have degenerated into a bunch of Pavlovian dogs.”

Kid Dynamite said...

Warren, GM,

I'm not sure, But I'd guess that the reason THEY don't want you buying gold is because doing so is DEFLATIONARY... yes. let that sink in.

As I've tried to explain numerous times in prior threads, inflation may generally cause a rise in gold prices, but the converse, despite the repeated assertions to the contrary, is NOT true: higher gold prices do NOT cause inflation.

in fact, if everyone poured their money into gold instead of into productive assets, there would be no economic growth... think about that effect in a country like India... Or China... and it makes sense that they "don't want Indians buying gold." Of course not: they want Indians investing in tech companies... in biotech, etc...

*productive assets*