Screwtape Files: February 2014

Buba Gold Fantasies

Buba Gold Fantasies

Slow Loris Larry

Those of us who follow the gold blogosphere, even sporadically, have now been subjected to a plethora of wild imaginings concerning the Deutsches Bundesbank’s (Buba’s) ‘repatriation’ of German gold from the NY Fed (and to a markedly lessor extent, noise concerning ‘repatriation’ from Paris).

You know what I mean: ‘The Fed refuses to let Germany have their gold back!’ ‘All 300 tonnes could have been flown to Frankfurt in days (or weeks at least).’ ‘That didn’t happen because the Fed doesn’t have the German gold anymore – the Fed sold, leased, or swapped (or hypothecated, or even re-hypothecated) it all long ago without telling the Bundesbank, and now cannot get it back (or at least not readily or easily or right away).’ ‘One can therefore definitely conclude that the all the Fed’s gold is also long gone, just like all the US Treasury gold supposedly held at Fort Knox or West Point.’. This list of unwarranted fantasies, declared stridently as absolute fact, could be elaborated, but that short list should suffice to remind you of what I am talking about.

Admittedly, neither the Bundesbank nor the New York Fed have been completely forthcoming about revealing what has transpired between them, and why they have now agreed to a seven year timetable to move 300 tonnes of gold from New York to Frankfurt (there was an earlier schedule of 150 tonnes by 2015), leaving it up to others to freely imagine why that could possibly be. Since seemingly everyone else feels free to make up all kinds of bizarre things in order to ‘explain’ what, according to their fevered imaginations, has been going on, why not me, too?

Greetings, friends-

I'm still sitting in cash since selling longs a little early at $1294.

Regular readers will see lots of my targets are being approached, as here:

and look here:

I like that rule about seeking strong trends and not sweating the first or last 10% (or 5%, or whatever) of any potentially major rally. As of yet, what's going on in gold (and silver) is still just a short term correction to a long, painful, and, as of yet, ongoing, bear cycle (I am, as you, gentle reader, may have guessed, long commas).

Case in point: I want to see one more red bar on these old weekly bellwether charts to be convinced this reversal might have more legs than the last 3. Didn't happen this week.

Could gold be acting any more predictably? Stopped right at the 144 (or 150) day moving average, or similarly, the 30 wk moving average (first two charts, below).

The question is, can it break on through to the other side?

I'm not convinced, and took profits on my longs, opened when my trademark weekly 3-line break charts (see third, fourth charts below) gave me the signal. Looking at those, we've seen three consecutive red trend-reversal bars before during this long bear stretch... a fourth (and especially a fifth) would be highly auspicious. A few more red bars, and the general upward trend since 2011 would be damaged. That would be a big deal. As of now, not so much. So I'm giving it a few more weeks before making any bottom calls.

Silver has broken through the long term log-parabola, though (see fifth chart below) -- so a very good sign.

Why am I not more bullish? (see chart after break)