Sunday metals pre-game, 8/25/2013

Hey folks, I'm back after a short misadventure. I owe Louis Cypher a big favor, as he kindly put me in contact with a young Thai woman whose generous ministrations expedited my getaway from Samphanthawong, where I had run afoul of some Chinese nationals. 
(Long story short, the phonemes "pu shay," which I uttered for reasons beyond my present recollection, apparently translate to "Death to your mother.")

Apart from all that, I confess to some metal fatigue setting in. Maybe some mental fatigue too, but luckily they make drugs for that.  Speaking of which, I did recently send a money order for Metalfinil, a new boutique drug that purports to trigger artificial excitement in gold and silver trading. It's endorsed by Eric King. But it hasn't arrived yet... I have to write to Gonzalo Lira, who is apparently behind the project.

Anyway, maybe fatigue isn't even the right word; it's more just confusion where to get dependable info. I think it's pretty clear JPM (to name just one example) is an agent of Fed policy, as well as a basically criminal enterprise operating in plain view. Central banks and bullion banks also obviously care about the price of gold (they buy and sell the damn thing, for starters). Means and motive for massive manipulation? Check and check. But, then, the people who have proven to actually know what they're talking about don't seem too concerned about this, basically playing along with (if not outright propagating) the view that the market is more or less fairly operated. 

Then, there's the GOFO/backwardation jazz that's been flooding the metals space of late, which means everything or nothing or something in between, depending on whom you ask. Big thanks here to Warren, S.Roche and Slow Loris Larry for keeping the ball in play, because I must confess: I haven't the slightest clue what any of it might mean. When I try to follow careful explanations proffered by others (see VtC's recent one here in the comments), my eyes slowly glaze over -- it all sounds like mumbo jumbo to me. (I refer, of course, to Dr. Mumbo Jumbo, the late Professor Emeritus of Economics at the People's College of Cameroon, whose work has been widely discredited since his death by crocodile under suspicious circumstances in 1978).

But all that said, the two charts I've been closely following since February worked like a charm.

GM's advice: Buy gold at three line break:

GM's advice: Buy silver at three line break: 

But that said, I actually sold half my gold position Friday and plan to dump all my silver longs this week and buy some puts (I'm thinking $25 is a possibility first). I'm playing it safe ... Both metals are overbought (RSI at 70), both are at +5% of their EMA envelopes (e.g. gold here:)

I still expect this chart to hit the top of the opening wedge:

And two hugely important long term charts in which major trend lines were violated very recently look ready to reverse.

First is the DJIA priced in gold:

And then, of course, this long term gold chart:

 When huge trend lines are broken, you don't usually get a quick reversion to the same old. So my advice would be to be careful out there -- there seems to be a lot of euphoria developing, when gold hasn't even cracked $1400 again...


Kid Dynamite said...

lol @ "pu shay"

Louis Cypher said...

I have a few more to add to your list :)

GM Jenkins said...

Sold all my silver longs at $25. I think $26 might be in the cards, but I like to stick to the plan. Still holding on to half my gold longs (I'll hold till $1375) as there might be some Syrian bullshit that blasts it off with crude and I don't want to miss it.

Warren James said...

re: Syria situation + relationship with Gold price, strikes me that things are 'back to normal' as in, US military pushing around political oil states, accompanied by a steadily rising POG.

Feels like 200# all over again. This is just another can kick, IMO. Eventually they will run out of countries to invade.

p.s. I keep revisiting Bill Murphy's 'gold doubling' rhetoric from late 2012, it's even sadder in late 2013 as it was back then. Louis' article still makes me smile.

S Roche said...

War, apparently, is a fade:

@mortymer001 said...

Hi, Lemurs and family,
I just thought about giving you a heads up.

"A lookout on the Pinta, Rodrigo de Triana (also known as Juan Rodríguez Bermeo), spotted land about 2:00 on the morning of 12 October, 1492, and immediately alerted the rest of the crew with a shout. Thereupon, the captain of the Pinta, Martín Alonso Pinzón, verified the discovery and alerted Columbus by firing a lombard."

Everybody knows Christopher Columbus sailed in 1492 East and re-discovered America.

This was in time when at my country Charles University in Prague celebrated its 144th B-day and most likely meanwhile there in some dark tomb old scrips and maps of Vikingrs of their voyages and studies of quality of grass at Newfoundland were gathering dust.

Here in Nordics the short summer is over so I sit here and there behind screen and try to get more tanning from monitor and this came on my keyboard almost a month ago:

I had a deeper look and then good laugh.

(The idea why is well known to your visitors)

I just thought you may like it.
In an act of self-promotion and total ignorance form others I thought some may like to know :o)

Btw, was Fisher the first?
No way.

Aneurin Williams expounded the same idea 28 years before than Fisher:

“The Government upon lowering the mint-weight [of the sterling] will find its stock of gold more than equivalent at the new rate to its outstanding notes, and would have a surplus of gold against which to issue new notes. These as soon as put into circulation would of course increase the volume of loanable capital, and so tend to reduce the rate of discount. They would moreover, either in the hands of the Government or of some one deriving from them, constitute a fresh demand for commodities and labour, and so again tend to stimulate trade and prevent the fall of prices. In an exactly corresponding way an increase in the mintweight would tend to correct a rise of prices.” (Williams 1892a, p. 281).

Was He The first? Who knows... Maybe there was some another unknown economics who will never get his credit.

Is the idea silly? That has to be determined by others I fear. Euro indeed looks similar to this concept. Sweeden in thirties used some similar way successfully. Time is short and so I leave you with this...

Btw, this topic is well known in modern economics and there is plenty of study material for those who do have sensitive skin to sun exposure.

Does it change anything? I do not know, I am just a man using google and my rare free time.

Thanks and I hope it helps to some

Nice research, have been following ever since.