By popular acclaim I return with the doughty October 2012 4hr spot gold chart analysis, the chart that caught the attention of the editors of this august blog, the chart that propelled me into the limelight as the chronicler of the remarkable trading strategies of S Roche, the chart that has served S Roche so very well... until it didn't.
Can you spot the moment?
UPDATE: April 18 Chart Added...keeping the dream alive!
UPDATE: Please scroll down...
This was the chart with which Roche rose to international acclaim as a trader, technical analyst and blogger. He watched it for hours and tended it lovingly, teasing from it the riches he had long desired and believed he so thoroughly deserved. He created smaller versions of it, with shorter time-frames to allow him to build on the secret knowledge he had acquired and increase his phenomenal rate of return....
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| Preparing for a bounce off the lower channel, Roche fails to see the obvious.....
Eschewing his blogging responsibilities to better focus on trading Roche became immersed in the trader chatter, absorbing all the lessons from the greats, The Masters Of The Markets...well, those that Tweet anyway, harnessing their insights to better perfect his ever more numerous trades based on this magical chart which spoke to him alone: short this upswing, ride it to the channel line then go long on the bounce...
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| Notwithstanding that the Fibonacci Fans had been providing a guide..... |
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| Roche is surprised when they continue to provide a guide...spooky huh? |
UPDATE: April 18 10.37 GMT
The bleeding is staunched courtesy of Roche's endless search for a new
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| When one channel fails another door opens... |
Never say die!
60 comments:
Gutsy post. Kudos to you.
quality post!
What's a chart? Is that like a shart?
Yes Jojo, in this instance we have a rare example of just that.
As I always boringly say "I'm always right until I'm wrong" The trouble is my timing is crap.
They also say "A fool and his money are soon parted" I'm somewhat of an expert in this field.
Nice post. I'm sure we're all hurting.
... the bounce is almost as frustrating as the free-fall. Are we to presume that the 16 trillion worth of above-ground gold was suddenly and briefly worth 10% less than it was previously (with delta measured in the trillions)? The market says it, but I say Shenanigans.
p.s. My hat off to you, Mr S Roche for your sheer honesty.
Warren,
Until the "Cyprus gold template" is dealt with conclusively it may well be that 10% is an under-estimate. Next up Portugal with 380 tonnes. The fulcrum appears to be $1400.
The mis-handling of Cyprus, in every respect, gives me greater confidence in George Bernard Shaw's admonition to trust gold over the tendencies of politicians.
It has been an interesting few days.
Much excitement in certain parts of the internet over a little market correction. Is this it they all scream! Their naivete and ignorance of their bias is most amusing.
They watch the daily flows out of GLD, not even grasping the point KD made (i.e. GLD losing tonnage as shares are redeemed is normal).
Of course they are driven to such levels of anticipation by the speculative writings of some of the world's flakiest forecasters.(GLD only lost a few tonnes yesterday by the way, indicating the selling dried up, and had a similar cluster of large sales around the bottom in 2008 too).
My local dealer confirms that physical gold is still flowing nicely, and people have been buying this dip with enthusiasm, which is good to hear. No changes to premiums from the refiner she uses, and no delays in delivery. Business as usual. (although she has done a few billion pound deals recently at £32,999 an ounce....;)).
One day will be 'the day', but that day will be accompanied by lack of faith in currencies, broad panic, and there's no sign of that at the moment. Today gold is up, whilst copper and crude oil are down again. It's fairly obvious what the markets are telling us here. Economic contraction looms large. Just watch what happens as the markets realise the Fed et al will have to move up a few gears in the QE-mobile. It won't be paper gold crashing!
Re Cyprus and its gold (S Roche), don't buy the hype, here's a more reasoned view:
http://www.moneycontrol.com/news/market-edge/why-fearscyprus-pigs-dumping-gold-baseless_853238.html
I'm glad you're amused, SugarLover, perhaps your love of something as toxic as sugar has contributed to your inability to fully parse the data which shows that the GLD arb opportunities over the last few months do not A.) adequately explain the removal of physical from the fund and B.) do not tell us to whom the physical has been transferred.
What happens at "local dealers" is inconsequential, and in any event, one can readily find explanations that fit any bias when invoking the behavior of small precious metal concerns.
@S Roche
I like Kyle Bass's quote on that:
"Buying Gold Is Just Buying A Put Against The Idiocy Of The Political Cycle. It's That Simple!"
Always gives me a chuckle to read that.
"Can you spot the moment"
F-in classic!
Milamber
@ KD,
I was away from the world this weekend, so couldn't get you the cables. But I just want you to look at one. I just picked this one (there are many others) for you to take a look at.
My questions for you are as follows:
1. As a trader, if you had this information when it was actionable, does it change your behavior?
2. I think the term "manipulated markets" is a code word that has all sorts of different connotations depending on who is saying it (and when). Rather, I think that the markets are managed. Do you concur with this view?
3. If, yes to #2, do you think that the gold market is still managed? And if so, for what purpose?
Thanks again for your time.
Milamber
Thanks Sugarlover,
I read the link and remain unconvinced. The writer mentions the 780 tonnes of the PIGS, whilst that overhang would take some time to work off, (remember the slow progress through the IMF 405 tonnes), it breaks a basic tenet of the Euro as support for gold, in my mind, and the next shoe to drop would be Italy (2,451) and France (2,435).
The way these lunatics operate by floating bad ideas, denying them and then implementing them, has cast a pall. At under $1400 as I write the price confirms this. I don't notice any rush to resolve this doubt, as if putting Euro gold on the block ain't no big thing. The price will tell us how this is to be resolved.
For those with faith in the independence of Central Bankers in the Euro zone I recommend this article from March 31: http://www.cyprus-mail.com/features/nation-s-anger-homing-central-bank-governor/20130331
S Roche,
I don't know why you think a Eurozone government was able to sell the gold reserve in order to spend the money or buy back debt.
They aren't. The Eurosystem's gold is a monetary reserve, and a gold sale would be a reserve operation, to be decided by the ECB executive board.
By the way, if I was Cyprus and I were so desperate that I wanted to use the gold, and if the ECB agreed, I would use the gold as collateral for a loan rather than sell it.
I cannot rule out that there will be some gambit and someone would lose some gold (doubt it would leave the Euro zone though), but the purpose of the gold of the Eurosystem is to replace the dollar in international settlement at some point.
The crash of the gold price has nothing to do with the European gold. London trading volume is in excess of 2600 tonnes per day. How far do you think you get with Cyprus' 13 tonnes in trying to lower the price?
Victor
Nice post! Fair play to you.
And we've all been there with one trade or another... I bet even KD, not that he'd admit it... ;-)
JdA
Thanks Victor,
My view is that the market was reacting to the "template" of Cyprus's gold being sold and looking forward to other sick European economies' needs, rather than 12.9 tonnes from Cyprus.
I agree with everything you say about the sanctity of European gold, which is why I am stunned that they put it on the table.
If anyone has another plausible explanation for this dramatic gold price drop I would like to hear it.
And put on your thinking cap as you read this:
"In the week ending 12 April 2013 the increase of EUR 1 million in gold and gold receivables (asset item 1) reflected the purchase of gold coin by a Eurosystem central bank."
http://www.ecb.int/press/pr/wfs/2013/html/fs130416.en.html
So a Euro CB buys gold coin last week instead of any sales.
Hmmmmmmm.....
h/t @aliceemross
Milamber
@S Roche,
The writer of that link shares my view that it probably won't happen.
Perhaps a lower (paper) gold price may be the result of this (perceived) cloud hanging over the market. A lower gold price is more of a threat to the current paper market than a higher one, so maybe the cunning central bankers at the ECB know exactly what they are doing. Plus, I am sure the Americans are hating the mention of national physical gold that could trade between creditors and debtors, just as they hated it in the Kissinger/Burns era.
@Sugarlover,
Per Reuters last Thursday: http://uk.reuters.com/article/2013/04/11/uk-cyprus-gold-idUKBRE93A11W20130411 the idea came from the European Commission.
All that stands in the way is a political hack, per my link above.
Draghi did it.
http://nationalinterest.org/commentary/japan-leads-global-easing-rush-8351
Nope.
Draghi said this:
'Any decision on whether Cyprus will sell some of its gold reserves "is going to be taken by the [Cypriot] central bank," European Central Bank president Mario Draghi said Friday.
"What's important, however, is that what is being transferred to the government budget out of the profits made out of the sales of gold should cover first and foremost any potential loss that the central bank might have from its ELA [Emergency Liquidity Assistance]."
So, firstly he is saying the decision is not going to be made by a politician but by the Cypriot central banks, and then he is saying, even if you sell it, you won't get much out of it, as we're going to take our ELA losses back first (so, effectively Cyprus would gain little financial benefit).
The ECB aren't stupid, not at all. Well played again Mario!
@SugarLover,
A sale is a sale. It is on the table. But, not at Mario's behest, no, not at all, no no no no noooo, it is up to a former finance professor at Leicester U appointed by the previous government. Gimme a break!
I really do recommend this article about the independent Cyprus Central Bank Governor: http://www.cyprus-mail.com/features/nation-s-anger-homing-central-bank-governor/20130331
In it you will find: "he was doing everything in his power to keep the insolvent Laiki Bank afloat allowing it to build up a €9.2 billion debt to ELA" [until after the elections].
My view is that it's payback time, Cyprus's gold is toast, and that puts the rest of it on the line too. I would like to be dissuaded of this view. A run through $1400 tomorrow and $1600 by the end of the week would do that. Until then, if gold can't take out $1400, the gold of the FNPIIGS is on the block.
In this scenario, the moonshot will be delayed.
Ok, well we will all have to wait and see what happens in due course.
Interesting times.
Thanks SL, I put this view out there to test it, not to be a dick. My default position is long gold, which of course I am but I will go flat around $1400 again and watch.
I too am long gold, but mine just sits safely in vaults, biding its time, ignoring the ups and downs.
Good luck.
Dogshit, Roche. I'm curious where you put your stop and if you flipped short?
And it's not a worthy dedication for Duggo. Not in the least bit. No matter what a trader does to qualify risk, or determine his/her next play in a market where you don't get to decide which cards get dealt next, his mind is made for him because he believes the game is decided in advance. Too bad it's not - the market I see has many many opportunities. Oh well...
FT, yes, the above is an abbreviated version to avoid the biting criticism of a friend of mine, who described S Procheimian's earlier work as "posting your golf score-card". Ouch.
I flipped short, then long, then short, then long and on and on.
Duggo likes charts, no?
An alternative explanation for the gold move, systemic collateral issues:
http://www.alhambrapartners.com/2013/04/15/we-have-seen-gold-prices-act-like-this-before/
This could tie in with the extraordinary events in JGBs, where the correlation between implied interest volatility and gold is spooky. ZH posted a chart Friday with a follow up Monday.
S Roche,
would you consider the possibility that without some subtle and regular support by certain central banks, the gold price would naturally look as it does today, or even lower. That during the past ten years, the price was deliberately managed upwards (rather than downwards as GATA and friends claim)?
Now this price support was withdrawn around the end of 2012 and the price of gold (which is primarily the price of credit denominated in ounces) does what it naturally does: price in the fact that we are in deflationary times.
Yes, having a coin or few is a very good idea if you expect deflationary times. But not London gold. That's bank credit in a funny unit.
And, no, physical gold does not trade at a premium to paper gold. This will continue as long as there are still banks who allocate your paper on request. The price of $100 in your bank account is the same as that of a physical $100 note. Until your bank runs out of cash. But even then, there will be no short squeeze. It is just that they close their doors and some are still out there in the dark.
Victor
Victor,
Yes I would, as I have seen the tape painted in both directions so I would assume this happens at all levels of participation. It stands to reason, central banks with meaningful gold reserves would be as equally against a collapsing price as a runaway price.
Why was the support withdrawn at the end of 2012?
S Roche,
the following is just a wild guess: Because there was some gentlemen's agreement to give the developing countries more time to buy some, and to allow China to support the dollar for that period. You can verify in the TIC data whether is it true that China has stopped buying US government bonds. You cannot verify whether there was such an agreement. It may even have been a tcit understanding. One party (Europe) seeing China wanting to buy and just giving them the time, even without any specific meeting.
As I wrote, what goldbugs are trading is not "gold, the commodity" (that's an unsuitable point of view because already physical above ground stock is 60 times annual production, and so it will never behave like a commodity), it is not "gold, the tangible and valuable item" either, but rather "gold, the currency".
The difficulty with "gold, the currency" is that its price not only depends on capital flows into and out of it, but also on credit volume etc. As a medium for international settlement and adjustment, bank debt is of no use, and you rather need payment in full. "Gold, the valuable tangible item" can do this, but "gold, the currency" cannot.
So they need to get rid of "gold, the currency". Just as with anything that's over-leveraged, the easiest way of dealing with it might be to leave it alone and just let it deflate.
If this is the course of action (who knows?), it will be very disturbing for goldbugs who are desperately awaiting some sort of short squeeze. Sure, "gold, the commodity" would eventually give you that squeeze. Unfortunately, "gold, the currency" won't.
Victor
Victor,
Thanks, that's interesting. None of those in a position to do so want to blow up the system.
Along those lines, I note that N Korea is toning down the bluster, I wonder whether gold got caught up in the quid pro quo to China for helping with that.
It's a strange game, gold. In the short term almost no one actually knows why what just happened, happened; and whoever they are who do know, they are not saying.
I followed a comment on Dan D's blog to another blog run by Bill, and found this piece interesting, given the events of the past few days in the markets, and in Boston, and the ricin letter.
The world is not perhaps as it seems.
http://wwwtheworldandeverythinginit.blogspot.co.uk/2013/04/recall-this-essay-dhs-insider-report.html
S Roche,
None of those in a position to do so want to blow up the system.
That is the consensus view, and yet I imagine all the key participants know, even if few will ever admit it, except in alternately opaque and subtle ways, that the system as presently constituted, namely one where the planet's chief reserve asset is a derivative of the planet's primary medium of exchange is dying. So, from where I sit with my bag of popcorn, it seems reasonable to conjecture that with each passing day the chances increase that one or more members of the select community that does not want to be seen to deliver the coup de grace will find that it is, at the very least, in their interest, and, at the very most, a matter of survival, to finish the dying creature off.
@ Archer,
What's the saying?
"He who panics first, panics best."
Milamber
Exactly, Milamber. A state change in The Nash Equilibrium is coming.
Is QE itself causing the paper gold price to fall, as banks have to repo gold as they can't find any other quality collateral?
http://www.alhambrapartners.com/2013/04/15/we-have-seen-gold-prices-act-like-this-before/
This makes sense, a repeat of what happened back in 2008. If it is the case, then it's Catch 22 for the Fed.
SL,
I found that fascinating and am still studying it, but I sent it to two people immersed in that world and they both said that they doubted it is the case.
Still searching.
And a follow-up...
http://www.alhambrapartners.com/2013/04/16/gold-follow-up-cyprus-wasnt-first/
Just trying to follow some breadcrumbs....
http://www.realclearmarkets.com/articles/2013/04/05/with_chaos_increasing_the_fed_must_cease_targeting_100243.html
Is there a push towards a 'crunch' by certain entities?
http://ds.thomasmurray.com/opinion/collateral-shortage-looming
A day of reckoning perhaps?
Coincidence?
http://scottskyrm.com/2013/04/repo-roundup-april/
@ SL,
Thanks for the links. I found them very interesting.
Milamber
Congratulations S Procheimian on your success!
If the sign of success for a "blog" article is the number of comments then you truly have been successful.
I was flattered that you had read my ramblings about "charts". I was a lover of charts and know only too well how the "Die Lorelei" siren call of charts can lead to disaster on the rocks of reality. It happened to me many times.
I found that if only I could produce another chart (20 or more) I would truly have captured the secret of prediction.
I eventually found that by altering the parameters legitimately I could produce any result I wanted. My subconscious knew what I wanted and produced it to back-up my incorrect evaluation. Have you ever wondered why trend lines are drawn where they are?
Never-the-less charts do give comfort (much like a rabbits foot) and make the "chartist" feel he is using his intellect to control events.
+1 duggo
Your ramblings garner more respect with each reading. Love it.
Duggo,
Thank you, you are very kind to overlook the shameless click-baiting in the title which has obviously attracted this attention.
On the shoulders of giants...
Duggo,
(Part Deux, in which I increase the comment count to assist your survey)
Roughly one third of the comments are from Roche, making this post ineligible for the comment-contest.
Incidentally, BREAKING NEWS:
Silver Doctors is reporting today they have found the original 1981 article in The Globe detailing the theft of 7,000 tons of gold from Fort Knox.
The journalist, Bob Borino, is better known for his Jan 18 1983 article in The Globe: "UFO Bases Found in Antarctica"
http://www.123people.ca/s/bob+borino
I'm beginning to think that Silver Doctors, King World News, GATA, BrotherJohnF plus umpteen others are just part of an ongoing Tolkien adventure.
The plucky forces of good (the little people with their Silver and gold amulets) ranged against the dark forces of Modor (the land of the Fed, JP Morgan and Goldman Sachs).
If the plucky BrotherJohn can destroy the "one ring" at Mount Doom then the evil will pass.
Bit players are numerous in this saga including FOFOA who plays Gandalf. Jim Sinclair who plays Elrond.
Max Keiser plays Gollum (looks like him as well). Plus a host of other bloggers.
It's all fantasy just to keep us amused while events that we no nothing about take place.
Duggo, as the fantasy unfolds, it will pay to reflect on everything we see and hear. Very little will be true:
http://www.youtube.com/watch?v=sBWl6TrB9lc
http://wwwtheworldandeverythinginit.blogspot.co.uk/2013/04/recall-this-essay-dhs-insider-report.html
http://s2.dailypaul.com/282328/proof-boston-marathon-bombing-is-staged-terror-attack&sss=1
Duggo,
You are right, I have come to the view that, with few exceptions, they do more harm than good among the general populace. The few sensible ones are lost in the crazy hoopla.
It would appear many are misunderstanding the GLD drawdowns, and Kid Dynamite is an expert in this area, and has recently posted this:
http://kiddynamitesworld.com/when-your-precious-metals-blogger-doesnt-understand-how-etfs-work/
Very useful information, showing that unless GLD continues to lose inventory through a sustained rise in the gold price, there is nothing to get excited about at all.
When do STFU return from Spring break by the way ;)
Charting Gold vs Dollar
http://bullandbearmash.com/index/free/
On the run to 1900 it made no sense unless viewed from high altitude. Worth the bookmark now.
SL,
Normal programming will resume shortly. Between overthrowing governments. shilling for banks and all the usual mundane stuff we are a little behind schedule.
SugarLover wrote:
unless GLD continues to lose inventory through a sustained rise in the gold price, there is nothing to get excited about at all.
I don't know how you define a sustained rise, but over the last nine trading days, as "gold" has rebounded smartly from its recent lows, 164 tons of physical has been removed from GLD. The truth is no "sustained rise" will be possible if GLD's recent loss of physical is extrapolated even over a mere 54 trading days when 990 tons of physical will, by then, have been removed.
Long before that amount of physical goes bye bye the fund will be shut down.
Archer,
You make an interesting observation and one that we should all keep an eye on, but the last 8 trading days for which information is available, has been quite volatile, with intraday falls which could have been GLD "hot-money" liquidations.
There could well be a transitioning away from GLD, favoured by Money Managers, towards other forms of gold ownership. This will be very interesting to watch unfold.
Further to my point regarding GLD sell-offs, it has only been the last two trading days when the US market has not sold off gold (ie, price falls), during GLD trading hours. All other price rises were outside NYSE hours. This could be options expiry related, and then we have the FOMC next week where gold usually has to take a bath beforehand, out of deference to our financial masters.
Archer, you should read the KD article in full.
We had GLD inventory flat/rising during a large part of 2012, whilst the gold price fell from $1900 to $1500.
It's not as exciting as you and many others imagine.
I've read it all, SugarLover. I stand by what I've written.
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