July 2013 metals preview

Thus far, I've been refusing media requests to call a bottom. However, I did tell my subscribers yesterday (and lucky members of the general public, today) that I believe we've reached a bottom in gold on a monthly closing basis, based on Fibonacci levels.

 However, I do expect the lows of this week to be re-tested in both metals at some point, if not this month (a bounce seems likely), then next. And frankly, at this point, I cannot in good conscience write this post, which will be read by millions of wide-eyed investors working hard to put food on their families, without acknowledging the prospect that the bull market in gold may be over. It seems mind- boggling that this proposition could be true, in the face of such pervasive corruption and arrogant parasitism, such hubristic folly and dysgenic idiocratization, but a continued move down to the $800's (and a year of $1000 as resistance) after a little dead cat bounce, in conjunction with new stock market highs and unemployment numbers down below 7%, wouldn't really surprise me.

There's been massive very-long-term chart damage on so many charts we've been looking at, e.g. stocks vs. gold, and this one:

Somewhat ironically, it's the charts which are tempering my gold-bullishness--not arguments based on economics. I generally try to read as many anti-gold pieces as pro-gold, but I find them unconvincing. Here was a pretty good one (picked up from Kid Dynamite's stock twits), with the major premise that people are starting to "understand how monetary policy works" and thus no longer fear inflation. But always with these guys, ample straw-man kicking going on. Can someone contra gold please stop pretending that to buy gold = to fear incipient hyperinflation ? Gold is not so much a hedge against inflation as it is a hedge against monetary disorder and corruption, and (for the small players who have power in aggregate) a vote against the thieves masquerading as public servants. The anti-gold commentators often have cognitive biases that seem as obvious to me as those of the perma-bulls they mock: they take official announcements and releases at face value while refusing to question the legitimacy of the enormous zero-sum transfer of wealth (and power) to the financial class (i.e. the gambling elite) in recent years. They are blind to this perhaps because they benefit from it, perhaps because they have been swimming in its axioms like fish that don't realize they're wet.

Here's one of many academic articles offering a big-picture perspective to what's going on:

Financialization of the global economy

The instability of the world financial system, starkly revealed in the recent debacle, is not the only problem it poses. Its secularly increasing dominance over the real economy is in itself a phenomenon that needs examining. The article traces the source of this increasing dominance not just to the increasingly leveraged and increasingly incomprehensible forms of intermediation between savers and those in the real economy who need credit and insurance, but also to the increasingly universal doctrine that maximizing “shareholder value” is the sole raison d’ĂȘtre of the firm and the promotion by governments of an “equity culture.” Some of the social consequences of financialization are exacerbating inequalities, greater insecurity, misdirection of talent, and the erosion of trust [emphasis added]

Sunday pre-game 6/23/2013

Footage from April 12, h/t ESPN

Emboldened that my first big trade since being choked out in April was a successful one (GLD and SLV puts when I predicted the updated chart from last week would break support after the Fed propaganda), I am now long 10 yr treasuries, long silver. Check out the ratio of yields priced in gold ounces (x10): unprecedented distance from 20-day EMA...

Note also that yields-priced-in-silver reached the same level as the metals bottoms of Jan 2011, right before the parabolic moves began.

Sunday metals pre-game, 6/16 [update]

Gotta be honest - I still can't get a read on these markets, so I'm still not playing.  Yes, we're near long term support, not only in dollars but in euros (see below), so in the past I'd be aggressively long here, no doubt. But since the major chart damage of April, I'm not at all confident any trends or support lines of the past decade matter that much.

I *am*convinced that until GDXJ (down 4.5% this week) and its ratios start to recover, any bullishness is simply unwarranted, so I'll keep watching those charts. I found it encouraging that Mish Shedlock is bullish on the miners (see "Mish buys a basket of miners"), as he's no permabull or metalstard, but a cautious and savvy investor (and a damn good commentator on the passing scene).

So here's the euro gold chart, daily and weekly:


A whistleblower who contacted me (at a Cleveland bus station) -- let's call this person "Instant Retch" -- really blew my mind. Turns out that the US Government follows my Screwtape posts fairly religiously. And apparently, my post back in March, when I unveiled the $DJIA:GDXJ three-line break chart and stated that the correction in gold would not be over until we see a reversal on said chart, created quite a stir in top circles.

Well, Instant Retch told me on Thursday night (we've had repeated rendezvous since that first encounter in the bus station) to take a screenshot of the $DJIA:GDXJ chart, which at that point was one day away from completing an all-important weekly three-line break. A"smashdown" was being planned for Friday to prevent what would have been the signal of a huge forthcoming rally!

June 2013 metals preview

Hello friends,

I'm posting sporadically here because I'm not trading the metals currently. No strong reason to be bullish, but then the short side is damn crowded and also fundamentally stupid (even if it has worked for lots of people of late). Betting against gold is not unlike selling life insurance to one of these poor ants:

As far as taking a long position is concerned, I'm not that stupid either. Not yet anyway, as I'd like to see some pretty emphatic evidence that the downtrend has changed.

So, as regular readers know, I've been looking at three-line break charts, which have a damn good track record at telling us when to start paying attention to gold again.

A quick GLD Dark Bullion Post (updated)

During the last week we mapped the Dark Bullion in GLD, similar to our SLV study. I've always been curious about what was happening with the inventory during August 2011 during that magnificent price peak, and here is an interesting look at that month. If you haven't already seen the mechanic and terminology, please have a read of SLV Database #5. The black band is bullion which was removed from the bar list, but which we confirm has been added back at a later time. Additionally, there is some color to show which of the inventory has a 'history' of being dark, for both visible and lost. The scale (measured in Fine Oz) has been adjusted to highlight the movements, but bear in mind the dark band only represents a small percentage of the total inventory held.

August and September 2011, clearly showing that the inventory from
the big million-ounce removals were actually returned to the GLD
inventory at a later date.