March 2013 metals preview

 I'd be very surprised if gold has a daily closing price below $1530 this month. At any rate, I'll be looking forward to taking long positions with any dip below $1560, and more aggressively the lower beneath that it may go.

I figure the average trading price for gold this month will be > $1575, perhaps >$1600. Given that the average price has fallen for 5 months straight, a more dramatic low would be absolutely unprecedented for this bull market. Of course, "this time could be different," and anything can happen, but I prefer betting against such possibilities, especially with the fatuous bearish sentiment permeating the PM markets. In fact, there's a lot of idiocy permeating all "markets" these days - an idiocy painful to bear, in the same way that Stockholm Syndrome is disturbing to witness. Plainly, if you don't see the financial markets as primarily a vehicle set up so that clever sociopathic parasites can steal your money with impunity, you're the proverbial sucker at the poker table.

Though I'd be surprised if there's a violent sell-off this month, I still don't think the post-2011 correction is over. These "three line break charts" (for explanation, see last week's post) should give us a clue when the correction may have ended. In short, keep your eye on the mining stocks. The weekly GDXJ ratio with the Dow Jones Industrial Average has displayed a three line break to the upside right at every good upswing since pre-QE2. (Note that GDXJ was first offered in late 2009; I would know, as I bought a shit ton from $22-28 for my core stock portfolio when gold had just broken $1100. I haven't sold a single share, so I'm sitting on 40% losses, though gold has averaged well over $1500/oz over the past 3 years. Go figure.)

My theory on the miners is that they're just about the only sector that the Exchange Stabilization Fund (a.k.a. the Plunge Protection Team) isn't pumping full of hot gas. So they are performing how lots of stocks would be performing in a deflationary environment. That's why their ratio with other stocks appears to have some significance.

Interestingly, the GDXJ:GLD ratio tells us when to buy and sell silver. Note if you bought and sold the three line breaks, you would've entered the 2011 upswing in August 2010 and sold the very day before the May 2 "We killed Osama!" crash. Since then there have been a couple of failed silver breakouts, but using this approach, you would have limited your losses a good amount.

If I may also add a word about Jim Sinclair. He has plainly lost it. If the gold bull market is officially over, his recent ramblings will be seen as an obvious tip off, since it is not in the nature of this world that unhinged prognostications ever come about. If his guarantee that gold will break out after his birthday (March 27) did not suggest to his friends and family that some kind of intervention is necessary, his latest post surely must have:

You must join my Comet Gold Resistance Movement, a golden militia armed with courage to do just one thing. Do nothing, stand still in positions in gold without ant debt, and ignore the enemy of fear within and gold banks without ... Join my Comet New Normal Gold Resistance Movement, a true non violent but armed militia. This is the way to protect yourself and thereby get to the other side still holding the preeminent currency.
In two weeks I will have printed certificates signed for you representing membership in the Resistance, but without your name or other identification. There will be no meetings, no charges, not even expenses. When you are long your good gold companies, mining money, and your physical gold at a sound $4400, protected from the inflation we are already experiencing multiplied by a minimum of 25, you will know your Resistance membership and your mindset will have gotten you there.


Out of the woodwork said...

If I may offer a mild defense of Old Jim: I don't believe he anywhere promises a 'breakout' on his birthday. Rather, he suggests the downward pressure on PMs will end by then. Because it's his birthday (the dear old loon), or because March 27 is also the day the continuing resolution extending the budget expires and he expects Congress to “resolve” things in a way friendly to gold (the canny old bastard)?? “Comet Gold Resistance?” I'm going with “endearing eccentricity”....

Gary Morgan said...

I agree that the gold price has very solid support down at these levels.

Many have failed to realise that whilst gold was a 'risk on' asset during the crash in 2008/09, it has been firmly 'risk off' in recent times, hence when the stock market bear does resume, gold will be well bid. Gold miners also have a lot of caching up to do, and if gold doubles from here, I am expecting the miners to at least treble.

I too am supportive of Jim Sinclair, he talks a lot more sense than some of the more speculative bloggers out there, plus he seems a really nice guy too.

GM Jenkins said...

Thanks for the comments, and alright, point taken, perhaps I was being a little hard on Sinclair.

In other news, gold and equities are flat and miners are down over 3%. I always short bullion heavily (with tight stops) in these situations. As I've mentioned on several occasions here, the trade has not failed me yet. I shouldn't have to add that it may fail this time, especially with conditions so oversold.

Anonymous said...

He keeps telling me I'm part of his extended family. If I wasn't so long in the tooth myself I might very well ask him if he has put me in his will.
After all you must keep it in the family and being part of his family I want my share of his Gold.

If my mother was still alive I would now be having a very serious heart to heart with her and asking her what she had been up to with Jim.

Still I is keeping all of our Gold..... my "precious". We likes our shiny glittering "precious".

Anonymous said...

This is off topic (as usual), but was so interesting I thought it should see the light of day somewhere...


Seems freegold debate can't handle realpolitik at all.

Fascinating stuff.

Biosci said...

Hi GM,

Over what timeframe does a gold drop follow a miner drop? A day? Week? Just curious.


Anonymous said...

Nice post, GM.

I have to say, I'm feeling pretty good about my bet with Turd at the moment... But I wish he hadn't been such a wimp and bargained me down from an ounce of gold to just $100... This is like taking candy from a baby... ;-)

Also quite happy about all my calls from last year to exit PMs (at $1800) and go into stocks. I do recall getting quite a lot of abuse for that... ;-)

That said, I think we might not be far from a switch. So I might be dumping stocks and entering PMs again soon. We'll see... Although I'm now retired, I did promise to post again if I bought gold... so watch out... ;-)


Anonymous said...

@ SugarLover

Had to look at your links, especially the second one.
quote:- "FOFOA's comments section is generally very high to outstanding". I had to laugh.
FOFOA is interesting but the people that comment seem to be full of their own perceived "intellectual superiority" endlessly debating the finer points of nothing important, without any sense of humour.
Of course I'm just a simpleton so what do I know.

GM Jenkins said...

duggo - turns out that the Comet Certificate is a promise of a share of his gold cuff links collection

Biosci - it generally happens after the COMEX closes or the next day. There was a very short dip below $1570 on Monday, but overall the trade wasn't a winner this time. I should've added above though that there have been a few times where gold just continued to chop sideways; by 'never failed me' i meant my +~0.5% stop has never been triggered.

Thanks, JdA - you have been on the money over the past year and your posts have also helped my outlook. Since I'm a metals "True believer", there's some inertia in the bullish direction that needs to be fought and overcome at times. Looking forward to seeing your next step.

m4cher said...

First of all, thanks for speaking up against the crowd of gold and silver delusionists out there! Pretty tough finding some realists on the internet ;)

I wanted to point your attention to an interesting chart, showing a massive h&s patter on the hui:

this seems like potential disaster...

Would love to hear your thoughts on that (and by you, I mean all of you!)


Anonymous said...

I think Captain Hook's 338 call on the HUI might be it for the carnage. The shorts reversed on dime this morning. It's been apparent the professionals want to short the S&P and long the miners, but that 4 billion in daily POMO mana keeps squeezing them.

S Roche said...


Fred Hickey is no slouch:
@htsfhickey: Intraday reversal! Huge volume in gold stks. GDXJ vol. highest since record on 5/16/12. Signaled exact bottom. Gold 1550 to 1790 by Oct 2012

m4cher said...

same source, but still pretty eye opening charts, dont you think?