“Woe to the land whose king is a child and whose leaders are already drunk in the morning. Happy the land whose king is a nobleman, and whose leaders work hard before they feast and drink, and then only to strengthen themselves for the tasks ahead”. (Eccl 10: 16-17)


"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat


Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput






Friday, April 12, 2013

Massive Put Option Buying in GLD

News late in the session today, after the close of pit trading at the Comex, revealed a surge in the number of put options being purchased on the gold ETF, GLD. That news seem to further undercut the price of the metal after it had managed to claw its way back above the $1500 level to end the pit session.

Once the news hit about the GLD put options, the price just sank and sank and sank to the point where it not only reached an initial downside support level at $1480, but went right through it, trading as low as $1476 before the damned bell rang to finally close the screen trading and end the miserable session.

Based on what I can see at this point from those put option purchases, these guys are now looking for $1400 gold. Also adding to the mix of things is news that the CBOE Gold VIX (yes, there is even a VIX for gold) added 39% today, a record one day increase in percentage terms. It seems as if gold owners are now looking to purchase insurance on their insurance. How in the hell did we ever get to this place?

One thing I want to point out is what I feel is yet another contradiction in terms. Just this week, gold, priced in terms of the Japanese Yen, put in a 33 year high (possibly an all time high, I am not sure). Why did it do that? Simple - the Bank of Japan, in conjunction with the current political leaders of Japan, have embarked on a very public, very up-front, not at all covert policy, of deliberately debasing their currency in order to generate inflation of 2%. In effect, they are going to debauch the Yen in order to funnel everyone and their dog into Japanese stocks and real estate.

Now what do you think Japanese bond holders/potential buyers are going to think of all this? Why they are obviously quite concerned because they are buying or holding financial assets that throw off a fixed rate of return which is practically zero when their own political and monetary leaders have made it clear that they are going to follow policy which makes those same financial assets worth less than they currently are trading for, not to mention that the currency in which they are denominated is going to lose its value at the same time.

So here is what happened as a result. The yield on the Japanese 10 year bond went from 0.52% to 0.63% this week. How? Holders of these government bonds decided to get rid of some of them. The supply was larger than the demand and thus the price of the bonds fell meaning the interest rates went higher. The reason that they decided to sell bonds was based on expectations of inflation while holding a fixed rate investment.

Yet, at the same exact time that these Japanese institutional holders/buyers of government bonds are expecting inflation to pick up, gold in yen terms, after making a fresh 33 year high, completely does an about face and falls so sharply that, if the month of April were to close of this Friday, it produced a BEARISH DOWNSIDE REVERSAL pattern on its price chart after just having made a brand new high two days ago. I ask you, does any of this make the least bit of sense to anyone with a mind that can analyze and deduce things? How do we go from being concerned about inflation and a currency debasement to a mere two days later, throwing away anything that remotely looks like gold if we are Japanese investors?

Here is the chart...see if you can figure this out. My brain is no longer able to do so. In the world in which I try to live, 2 + 2 = 4. In this brave new financial world in which we live, it equals 5. Then again, maybe we will see this thing climb higher next week and spare us all from having to retake mathematics.




If the big boys and their elite pals were trying to cook up an opportunity to get long the gold market by shifting the largest speculators on the planet into selling, they have managed to do just that.

The Commitment of Traders report of this week is useless since it captured none of this drastic selling that occurred today. My guess is that, based on the volume of trading that occurred today, we have seen a further build in the hedge fund net short position in silver and are very close, if not there already, to seeing the hedge funds actually net short gold for the first time in a decade.

I never thought I would live long enough to see a world in which the very concept of money has been rendered so utterly meaningless. Money, the way I learned it, was a store of value. If "money" can now be created out of thin air, in unlimited quantities, with ZERO implications, repercussions or consequences, then we have indeed entered a new era in which prosperity can be created by a Central Bank, independent of manufacturing or any capital industry whatsoever and in which governments are unlimited in the amount of that money that they can spend. We have also seen the very notion of a bear market in stocks rendered completely obsolete. From this point forward in history, stocks will never go down and debt in itself has been transformed into an non-entity.

In short, every single thing we have ever learned from history is no longer applicable. Modern economics, monetary matters, etc. are need to be updated to reflect the new reality of Central Bank dominance. Pity John Law, he lived and died a few centuries too early. He was a man ahead of his time and a true genius, and would have been sainted had he only lived long enough to sit on the board of the FOMC.





59 comments:

  1. Dan, if that is the case why on earth should we follow your TA? Is it time to find a different occupation?

    ReplyDelete
    Replies
    1. SRSrocco;

      You are free to pursue any occupation your heart desires the last time I checked. All I can tell you is you ignore these technical levels that I chart out at your own peril. The hedge fund algorithms will bury you if you choose to play in these markets and ignore key chart levels.

      Delete
  2. Dan I don't play with paper. You're one of the good guys. However at some point in time you have to realize TA is completely worthless in a rigged market.

    A child can offer different support and resistance levels. What is the real value of that?

    ReplyDelete
    Replies
    1. SRSrocco;

      I do "play with paper" however as a living and therefore the knowledge of where these various technical levels are located is essential for one's success. A rigged market still leaves a footprint and the ability to read that footprint is what keeps one from become a casualty when trading. When a support level gives way, for whatever reason, it means you get out if you are long. It is that simple. Arguing with a market, any market, is a recipe for a very short career in my profession. SAme goes for an overhead resistance level. If you are short and it is taken out , you cover.

      I will admit that most people should not play on the Comex but that does not mean a physical market buyer should be oblivious to what takes place there. If I want to buy the real metal in any size and I can interpret the price action in the futures market or in the gold ETF GLD, and that tells me that the metal is heading lower, I have the luxury of waiting on my buys and picking it up cheaper.

      Delete
    2. Sounds a bit like the voice of desparation to me...
      today once more, TA proved extremely efficient by showing the support level of 1540 as a very key level which should hold, or else...
      We saw the or else.
      I had a stop loss at 1537 and escaped from the mess, thanks to TA.
      After that, during panic selling or capitulations with very high volatility, supports and résistances are easily broken. Even so, the market chose to stop at 1475, which is not a random spot, as it corresponds to the 38% Fibo retracement of the long-term rise of gold. As Dan said, ignore TA at your own risks.

      It's not because it's more difficult to drive a boat within a huge storm that you should throw away your compass, your sails, and your engine.

      Delete
    3. We understand what both you and Dan are saying. HOWEVER what some of us are saying (And I have been saying it for more than a year HERE on this blog)is:
      Why on earth do you want to follow TA when the same TA is manipulated by outsiders. YES you can get in or out following TA but you are not an investor anymore (using both fundamental and TA) but just a slave trying to get some bread crumbs or save your skin from the elite's actions. If this is what investors want to do, good for them but for me it is everything BUT educated choices.

      I was ready to start a few months ago a blog where I would have asked fellow investors to STOP buying or selling any type of investment. The idea was to say: enough BS from the manipulators. Let them play by themselves and watch them killing each other. I decided not to do it for now because greed and foolishness are part of human nature and there is no way to change it except when the pain is unsustainable .
      I have not been buying or selling any of my shares. I am waiting for the dust to settle. It will one day soon. I do not expect governments to stop the rigged game because they are part of the game. I am waiting for the sheeple to wake up and the way it goes around the world this time is coming sooner than you think.

      And Hubert Du Haut, I do not agree with your statement:
      "It's not because it's more difficult to drive a boat within a huge storm that you should throw away your compass, your sails, and your engine."

      Your statement is wrong because any fisherman would tell you that "No way I am driving my boat when a HUGE storm can be started at anytime, WITHOUT A WARNING by someone who doesn't care if I will survive the storm" This is what we are dealing with today: Storms with no warning because the creators of these storms do not care about the consequences of their actions on small (and large) investors.

      Delete
    4. Hubert,
      It's all right if they don't want to go into the storm and trade by this weather.
      I was talking to those who decide to do so : then trade small, take volatility into account, and don't get rid of TA.
      But sadly, most gold community are NOT traders, and are NOT prepared to this kind of seloff, panicks, capitulations.
      For some of them, it is their first time, and they are already taken in the middle of the storm with long positions, and don't know what to do.
      It's too late for them to go back to the shore, unless you suggest them to sell everything now with a loss.
      All in all, TA is to me a great tool to see inflexion points in a market, and it helped me a lot, but one must know how to use it, and that's why Dan is here and he created this blog, isn't it?
      Yet it's true that TA can also point at the symetry down of the 1540-1800 range, which would mean 1300 $ for gold. One must know it is a possibility and take it into account when buying gold, in order not to sell everything in panic or disgust at the lows.
      Once again, all I was saying is that TA helped me save the day on friday by selling most of my remaining longs at 1537, and buy bak a bit ar 1480. That's how I'm trying to survive in those troubled waters and I don't see how I would without any instruments. But it's only my opinion, of course.
      Respectfully,

      Delete
  3. "Pity John Law, he lived and died a few centuries too early. He was a man ahead of his time and a true genius, and would have been sainted had he only lived long enough to sit on the board of the FOMC."

    Brilliant.

    ReplyDelete
    Replies
    1. NOT, this only shows just how corrupt our current system is. John Law had to try and escape in the dark of night BUT our current banking criminals flaunt the law in every way while laughing at the dumbed down plebes.

      This is absolute power corrupting absolutely just prior to total collapse.

      Delete
  4. The politicians had the same attitude in Argentina in the 2001(ish) hyperinflation. The corruption had built up over decades and the people finally popped.

    Only to stray again but a lot of wealth traded hands.

    ReplyDelete
    Replies
    1. The population of Argentina just acted like sheep. Despite the extreme betrayal, many continue to support the political apparatus and institutions. They are like people in the US who continue to support the politicians at the local, state and national level even though their votes don't count and they are betrayed in the most extreme ways. Many people will use the - i vote the lesser of the evil 0 rationale. These are people wearing blinders. The Naderites, Libertarians and Green are also run by the US intel agencies. People just stay dumb about the world around them.

      Delete
    2. It's almost like TPTB are trying to bring everyone to the same complacent, mental state throughout the world so they can stamp out individual, free thinking.

      A world full of boot lickers.

      Delete
  5. Dan,

    Are those heavy transactions involving physical gold or just paper gold? Correct me if I'm wrong, but didn't TOCOM halted the trading for palladium in February 2000? Will the same "incident" also happen with Gold?

    ReplyDelete
    Replies
    1. AbQK;

      it is all paper gold on the futures market at the Comex. I keep hearing reports of very tight physical market but I need to see that confirmed with the price action over at the Comex and we are not seeing it thus far.

      The mining shares have been correct at signaling a sell off so my thinking is that not until those things bottom out will we see the metal bottom. It might be a long year for gold bulls. The Central Bankers have the entire world chasing stocks higher and ignoring pretty much everything else.

      Delete
    2. Eric de Groot is suggesting that the Dow can run well into 2014 and the commodities complex won't turn significantly until 2016?? Do you agree with this?

      This could be a long COUPLE of years.

      Correct me if I'm wrong but as it regards to silver, didn't the market consolidate for 4 years between '76 and '80?

      Delete
  6. Dan, is the gold bull market over? What does this feel like compared to 2008 and other past major gold corrections, if you can remember and were trading at that time?

    ReplyDelete
    Replies
    1. jc1965ca;

      Officially gold has now entered a bear market, that being defined as a correction off the peak of more than 20%. I am not sure how deep this price will set back before finding support.

      The 200 day moving average does not come in until near the $1433 level and that seems like a logical target for starters now that the support levels at $1500 and $1480 have not held.

      What is different about this is that in 2008 we bottomed when QE1 was announced and implementation began. Here we are at QE4 and we are still moving lower. I am not sure what it will take to dispel the idea that the Fed can fix everything by creating money out of thin air.

      Delete
  7. If I were Cyprus, I would be buying Gold with every financial trick I could muster, all the time delaying the announcement that I was leaving the EuroZone.
    Then I would welcome back the Russian Billionaires and the beaches would be spectacular.

    ReplyDelete
  8. simply frightening.

    I am not a trader, more of a buy and hold....very bad strategy. My faith has been shaken, investing using fundamentals is over.
    I should have just taken my savings and gone to Vegas, at least I would have gotten free drinks.

    I have no idea what to do now.

    ReplyDelete
    Replies
    1. Jesse Livermore quote: Be right and sit tight. He made money in his sitting, NOT his trading.

      I don't trade myself and just endure these corrections. It hurts but you haven't lost anything until you sell.

      Delete
    2. Dean, gold is not an investment but insurance against the stupidity of governments and central banks. I hold it because I see stupidity in all western governments that makes be believe the current financial system is doomed and the government is going to Cyprisize everyone to try to keep it going. The people in power are narcissistic psychopaths. Gold is my insurance policy.

      You must live by first principles because they will win out.

      My advice is to wait a while and then buy more gold and silver.

      Delete
    3. @Dean: Bad day on paper and you question your convictions and your deductive reasoning. You are part of the herd and will not be able to hold tight. Sell and take your losses. Gold and Silver are money, they will be money when the ponzi ends. IMHO the metals market was beaten down because a big event is on the horizon, could be an increase in QE, could be a U.S. debt downgrade, could be Cyprus, could be Japan, could be Saudi Arabia opens currency swaps with China, etc..lots of big events in motion.

      Delete
  9. I have only physical gold and silver and I am already way under water. Up to now I did not sell because I was expecting a re-bounce from the 1550 level.
    Now I have to sell with big loss or hedge it somehow and hope the trend will reverse sometime. I can not take any more loss.
    Can anybody advise me what is the best way to hedge physical gold?
    I am concerned going short on GLD because possible short squeeze.

    ReplyDelete
    Replies
    1. Dear kris, I am not Trader Dan, so my answer is worth what it is worth and reflects only my personal opinion.
      Your answer says it all, as I think many are in your case.
      Many expected 1540 to hold and are now driven by their emotions leading to despair and capitulation.

      My advice : don't start being led by your emotions in this time, and especially, don't revert your positions all the time or you will get crushed. Don't go short now, it is already too late for this game. You could lose on both ways.
      Now I understand that you are NOT leveraged in gold as you own physical, which is good.
      My question to you : if you are not leveraged, why do you hold gold? Is it to make a quick short term profit in dollar terms, and now you are frustrated that it turned into a loss? Then sell.
      Is it to protect yourself on the long-term by keeping the only currency which cannot be debased or undergo a sudden unexepcted hyperinflation even which I witnessed many times, in Iran in 3 days, or a brutal devaluation during a weekend?
      If so, KEEP your gold and stop watching the prices.
      Gold is a safety.
      Too bad you could have bought it a bit cheaper, a bit more, at lower prices.
      But if the reason is protection and keeping some real assets, keep it, don't sell in the middle of the panic, even if Gold may reach 1400, or 1300.
      It is a 10% correction from current prices.
      Is it worth selling and seeing prices reverse upwards towards 2000 $ eventually?
      Everythin is possible.
      Consider it calmly during the weekend.
      No leverage is already a great thing.
      Prices plummet because many crazy bulls were OVER LEVERAGED and MUST SELL in a panic right now.

      Delete
    2. Thanks for your response Hubert.

      Well for me the biggest problem is not that gold broke down the important support level although that's bad enough in itself.
      My main concern is that recently it completely ignored the fundamentals which previously were the driving forces of the gold bull (e.g. it did not respond to QE4 at all, ignored Cyprus, etc)
      It fell through the main support on no news just after a few days of the pathetic unemployment report which should have been a catalyst to a rally.
      If these fundamentals were unable to stop the fall what is going to reverse the trend?
      We hope that gold will turn back quickly but beyond hope I can't see anything which would do the job.
      Gold's behavior became totally disconnected from its fundamental driving forces. That's my biggest concern.
      The printing presses are working harder than ever and yet gold is not only free-falling but officially entered into a bear market.
      As opposed to equities gold's real value is purely decided by the perception of the market and right now that perception seems to be badly damaged. We have a commodity which is totally unresponsive to fundamentals and also have very bad technical prospects.
      The technical damage can be reversed but I am not sure whether the damage to the perception of gold's monetary role can be reversed too.

      Delete
    3. "My main concern is that recently it completely ignored the fundamentals which previously were the driving forces of the gold bull (e.g. it did not respond to QE4 at all, ignored Cyprus, etc) "

      PAPER gold ignored the Fundamentals.
      What about PHYSICAL demand?
      (gold and silver coins from US mints? Physical demand from India? Purchases from Central Banks?).
      Jim Sinclaid said it all in one sentence : this is the war between paper and physical.
      We shall see who will prevail in the not so long term when all the shorts must be covered.
      Yet, short term, I'm not saying that the bleeding is over.

      Delete
    4. To be honest I don't give a damn about what Jim Sinclair and his mates are saying anymore. They are just as clueless as myself about how far gold will fall. They talked me into gold in the first place and now my lifesaving is going down in the drain. They were always promoting gold as an investment which sure as hell will skyrocket to the moon. They were right until gold was in a bull market. Now the table has turned and they will be consistently wrong as the gold bubble is popping.
      They were always optimistic because they were smart enough to get into gold around 2001 so it was their best interest to pump the bubble as big as possible. This is as far as they managed to pump. Now we the clueless latecomers are paying the price. I just can't see how can anybody be still optimistic about gold's future right now. The bubble has popped. Wake up and execute damage control. As painful as it is to exit now for the latecomers like me, waiting will make it even worse. As it has already did. If you keep listening to the Jim Sinclair, Mike Maloney, Peter Schiff alike gold-pumpers you will loose everything as gold is heading now to lower and lower.

      Delete
    5. Totally disagree.
      Gold is going higher because on the long-term, market is driven by Fundamentals, not technicals.
      Emotions, greed and panic, plus manipulation, can create volatility on the short-term.
      That's what's happening now.
      US and Co need money to cover their increasing debt and déficits.
      They don't want you to store it into gold.
      They want you to keep it into dollars.
      So they scare you out of gold with volatility.
      That's what Sinclair confirmed.
      But yes, I think it made a blunder by committing himself recently into the end of the correction. He made a lot of followers disappointed and doubtful of his hole analysis.

      Delete
    6. Kris, I am an engineer where you live and die by first principles (first principles are those things that are always true, like gravity). First principles tell you where your expected measurements should be. When you see a first principle not work it means there is some other force that is working hard against it. The further away from the first principle's expected value, the more ENERGY it requires to hold it there. In the world we live in it normally takes 10x more energy to double the distance away from the expected values so there is a practical limit to how far things can move.

      Back to gold ...

      It sounds like your fear is that the first principles of the market (i.e., the fundamentals) have been negated. This is not true. What is happening is that TPTB have injected enormous amounts of energy (i.e., short positions) to distort these first principles (i.e., money printing makes gold go up). This effect is predictable and there are two possible outcomes: (1) more energy (i.e., gold shorts) will be injected into the system and the price will go down; (2) more energy (i.e., gold shorts) will be injected into the system and the system will crack (this is inevitable at some point); (3) the price will go up (this is inevitable). Both (2) and (3) must happen at some point we just don't know when. Please don't make an emotional decision because that was the plan all along.

      Recognize that TPTB are losing control because they are acting out in broad daylight instead of behind the curtain. This is even being announced on the corrupted mainstream. This means that more people will become aware and front run TPTB and then they will lose control. [Dan, why don't you teach us all on how to see those tracks in the charts?]

      To me, gold is an insurance against the criminal TPTB and I hold it that way. When the distortion stops or even slows, then the first principles (fundamentals)will recover. The best way to help this stopping is to buy more physical and ignore the paper market.

      Delete
    7. Thank you Curtis - an excellent method of explanation.

      Delete
  10. I conceive feeling to have the accumulation that you are card. penny stock information

    ReplyDelete
  11. Excellent posts and comments. Clearly the paper markets are insane at the moment. We really have stepped through the looking glass. Seems to me that the Fed and her bloated army of zombies are winning the war. Although doublethink is a powerful weapon you need only remember that gold and silver retain purchasing power over the long term. Fiat currency does not. The Cyprus grand theft is a bell tolling for all private bank accounts. The Fed & the BOE have even published docs discussing seizure of private bank funds. This smash of the metals is all about scaring you into selling, they want both your metal and for you to buy stocks or US treasuries. Don't fall for it. Just think it through...what will you get in return? Paper which is increasingly being devalued. By all means perhaps you could even average down by buying more metal, but if your position already scares you the just short the USD as a hedge. Long gold short USD. In my case I am way underwater on my phyzz, and even convinced my mother to buy too when prices were much higher, but honestly? I believe the news that the world is MASSIVELY indebted and history proves govts try to inflate debt away or default. Either way paper money dies. The time to sell your phyzz has long gone, now is the time to buy more or hold.

    ReplyDelete
    Replies
    1. jasa?, "Long gold short USD"? I could be wrong but this doesn't seem to be a hedge at all given that if you were long gold, you'd be in the red if you bought at higher levels, and if you shorted USD, you'd also be in the red given it's been going up since the 72 level(USD Index).

      In contrast to your advice, Jim Rogers is long gold and long US dollar. So even though on paper, some of Jim's gold that he may have purchased at higher levels are in red, at least he hedged his position by going long the US dollar and made money there.

      Respectfully,

      Delete
  12. Hello again,

    Well it was not a usual boring day, so I'd like to share my thoughts a bit further.

    1) WHY DID THE "UNTHINKABLE" HAPPEN?

    - precisely because it was "unthinkable" by many. When the unthinkable happens, it fosters short-term panic selling from the stunned community of believers. This "unthinkable" feeling is amplified by the fact that some respected and trusted gold community leaders such as Jim Sinclair nearly "commited" on the fact that this level was unbreakable. Jim wrote that the correction would end before his birthday end of march. Then that the bottom was in. Problem is many people took it as a guarantee and now don't know whom to believe, whom to trust. They feel betrayed, they lost trust in a "guru" whom they were following without fully understanding why they should hold gold. Only they chose tho remember that he said that the correction was over. So of course, it's feeding despair, disgust feeling, emotionally driven actions i.e panic selling. It's a shame because it's not because Sinclair was wrong on a short term price movement that he is always wrong about everything is said, especially, he is totally right imho about the end game and the final price of gold. But some will think "once wrong can mean wrong about it all", doubt, and sell.

    - because this long-term horizontal support near 1530 was technically so visible that a huge number of bulls accumulated above this level, with probably a lot of leverage, listening to GREED, comforted in their feeling that the risk was small, as the probability of breaking 1540 was very low, confirmed by Jim Sinclair and others. As a result, now they MUST throw in the towel and FORCE SELL their losing long position, before their whole capital is swallowed and they end up as road pizzas (to use Dan's expression).

    - because on the other hand, the breaking of the same support created a new inflow of Sell orders from the short hedge funds.

    - because if I'm a central bank, be it Russia or China, with LONG TERM planning of purchasing physical gold, why should I hurry to support the prices when I expect the above to happen and I can buy even cheaper a few days / weeks later? Cheaper means more gold. I'll just wait for gold prices to plummet first.

    - because many actors do not take into account the Fundamentals any more to make a trading decision. Their decision is essentially TA based. They manage a huge amount of money. The breaking of 1530 level coincides with gold "Entering a Bear Market", "Going from Neutral RANGE to a DOWNWARD Channel", without a support Under their feet anymore. This SIGNAL is enough to make them revert their positions and sell.

    - because this support was the ultimate last one of this obvious 1530-1800 range which comforted the bulls. Now all they see Under their feet is a cliff with no idea where this will stop. This adds again to panic --> selling.

    - because it's the interest of very high manipulators to create this panic. Gold is the thermometer and concurrent of dollar. PM shorts are huge from the commercials, who will make a huge profit by creating such a panic. They do have deep pockets.

    Note that all the above criteria create panic which ends into immediate selling action. In other words, this is not a long-term selling of gold price. This is a short term violent cleansing. Short term may mean days or it may mean weeks. And few months to repair huge technical damage. It may mean 10 $ more OR 150 $ more. BUT it remains short term for a long-term investor.

    ReplyDelete
  13. 2) WHAT HAPPENS NOW?

    - Because the sudden surge in volatily is taking so many gold investors off-guard (drop of 100 $ in 2 days!), and panic selling feeds itself, driven by EMOTIONS overwhelming LOGIC, it is very hard to predic where the waterfall will stop. During panic and mini-crashes, supports have a tendency to be broken like butter by a hot knife. Majority of traders Under estimate the potential of the drop. Some try to re-enter the market too eearly on new supports (1480 this time?) and then sell once more when they see that this support also doesn't hold, which feeds the bleeding. This is what capitulations are made of. Emotions take control. Panic sets in. Traders who see their capital melting by the hour lose control of logic. The very ones who were planning to BUY at an oversold market will now sell even more, as they just CAN'T STAND THE PAIN of seeing their capital vanishing so quickly.

    - The key is not to panic, to think rationally AND to play small, i.e a manageable portion of your capital, so that the huge increase of volatility will not make you go wild and sell in a panic as you see your capital disappear. Admit the possibility that gold may drop towards 1300 $ and assume only the long position you can manage Under those circumstances if you want to stay long.

    3) WHAT DO I SEE TECHNICALLY?
    Maybe it's just a nice wish, but I traced long ago the possibility, not of a horizontal range, but of a flag slightly downwards, joining precisely the first tops and bottoms. The support of the flag is at 1470 $, in the zone of a fibo at 1475 $.
    So there is still a chance that this Flag is validated and that Gold bounces on it (an intraday drop below the 1470 but close above 1470 will respect the flag imho as it is long-term chart).
    Now, with such an increase of volatily, prices can go wild BOTH WAYS and ignore most supports and résistances for a while, so I'll be very careful anyway, but let's just say that if 1470 HOLDS, then to my point of view, we are still in a range/flag upwards configuration and the war is not lost yet. Let's see on monday...so that's it for my personal point of view of the recent events. Happy to share with all of yours during the pause of this weekend.
    Wishing you a nice weekend,

    ReplyDelete
    Replies
    1. http://s23.postimg.org/hak2k4qmj/gld_mt.jpg
      The rationale behind my "flag" theory and the support at 1470, see red circles.
      That's not much but it gives me a small hope of rebound.

      Delete
    2. http://s4.postimg.org/r5npwnucd/slv_mt.jpg

      same for silver. I don't encourage you to buy right now. I'm just saying, maybe these support levels could hold after all.
      And I'm definitely adding : at the close, because with such volatility, intraday doesn't mean much given the time scale of these charts.

      Delete
  14. Thanks for the information Hubert.
    A good percentage of my portfolio is in Gold, divided between physical, paper physical and gold miners. It is the miners that have done the most damage.

    Everything is looking very grim right now. I used to think I was being so astute by not following the "herd". Yes, I did buy gold as insurance but I also bought the shares to make money and get a good return on my money. So far the insurance part has proved to be un-needed and the return on money....well....no need to go there.
    Like many of you I am at a low point that is hard to even describe.
    This has the potential to do irreversible financial damage to me, at my age recovery may not be possible.

    What do we have now? The DOW appears to be unstoppable, consumer discretionary stocks have soared. Not only do we have a jobless recovery but the recovery also does not require the participation of energy or raw materials....a miracle!
    The investing world makes the most crooked casino look safe and prudent.

    I plan to hang on at this point...is this wise? or should I sell and at least get some of my capital back? I have no idea at this time, I can tell you that I feel almost physically ill about it.

    ReplyDelete
    Replies
    1. At this point, you must consider that gold may drop towards 1300 $.
      How nervous will you be about it if we reach that spot?
      Will you sell?
      Can you sustain the pain or is the potential loss too big?
      If so, sell a bit now. Up to 50% of your position, and don't buy again at higher prices if market V bounces.
      Then if Sinclair is right about his long term target of 3500 $ and above, you'll still make a good profit and erase the losses in the long term.
      And you'll feel better in the event that gold drops more, you'll have some cash safe for later on.

      Delete
  15. This comment has been removed by the author.

    ReplyDelete
  16. The evidence for this 'bail-in' can be found in the Bank of England's own documents as the following except illustrates from a document dated 10th of December 2012 - http://www.bankofengland.co.uk/publications/Documents/news/2012/nr156.pdf

    In the U.S., the strategy has been developed in the context of the powers provided by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Such a strategy would apply a single receivership at the top-tier holding company, assign losses to shareholders and unsecured creditors of the holding company, and transfer sound operating subsidiaries to a new solvent entity or entities.

    In the U.K., the strategy has been developed on the basis of the powers provided by the U.K. Banking Act 2009 and in anticipation of the further powers that will be provided by the European Union Recovery and Resolution Directive and the domestic reforms that implement the recommendations of the U.K. Independent Commission on Banking.

    Such a strategy would involve the bail-in (write-down or conversion) of creditors at the top of the group in
    order to restore the whole group to solvency.
    Both the U.S. and U.K. approaches ensure continuity of all critical services performed by the operating firm(s), thereby reducing risks to financial stability. Both approaches ensure
    activities of the firm in the foreign jurisdictions in which it operates are unaffected, thereby minimizing risks to cross-border implementation.

    ReplyDelete
  17. If you are a saver rather than a trader, here is some perspective to help calm your nerves:

    1. Gold has just gone on sale! Go down to your coin shop and get you some.

    2. Someone has been draining literally tons of physical gold out of GLD over the past couple of months. Yesterday alone, 23 tons of metal was removed from the trust (1.9% of the total). Clearly, some big players prefer physical metal to paper shares.

    3. Read FOFOA.

    ReplyDelete
  18. "Money, the way I learned it, was a store of value. If "money" can now be created out of thin air, in unlimited quantities, with ZERO implications, repercussions or consequences, then we have indeed entered a new era in which prosperity can be created by a Central Bank, independent of manufacturing or any capital industry whatsoever and in which governments are unlimited in the amount of that money that they can spend".
    -Sounds like Socialism to me. When a central powers(Bullion Banks,Government and their proxies) controls the movement and price (ownership transfers during price routes such as just occured)
    Here is my take for what it is worth.
    In 2008 when large commercial banks lost control, Central Banks Saved the world. QE took gold on its next carpet ride.

    VERY IMPORTANT. Gold bottomed 10/20/2008; stocks continued sideways triggered a final avalanche Feb 2 and bottomed 3/2/2009.
    If I am hearing Dan correct, and it appears that commodities are all being hit, 18/20 domestic indicators showing downward trend, Europe in complete disaray, JPY cratering, US disposable income depleted and job creation nil.
    I for one am not running from current crushed positions into a potential wipeout coming in the stock market. Might go to cash. Seems like a time for waiting.
    How do they maintain confidence in this recovery so that the stock market does not tank?
    That is the question I pose to Dan.
    Is this next?

    ReplyDelete
  19. Or has Bernanke changed the definition of the word "Money". Bernankes Revenge on Paul. Gold the only asset that sits out this continued ride. If that is the case then it has to be one of two things.
    Complete and total corruption between Fed and Bullion Banks and Hedgies.
    or two.
    The mindset of humans starting thousands of years ago has shifted in the last 5 years.

    Which is it?

    ReplyDelete
  20. I ask the question - will this be a v recovery.

    The answer- yes because the PTB have manufactured another D wave and A waves follow and D waves an usually test the all time highs.

    Is this likely ? Can we expect a v recovery?

    ReplyDelete
  21. Dan, can you opine on this. Is this realistic?

    ReplyDelete
  22. Smells kinda ratty.....

    http://www.nanex.net/aqck2/4159.html

    ReplyDelete
  23. If you read Monty Guilds latest weekly comment the outlook for the US stock market is as Pollyanna as can be.
    Monty made no mention of holding gold in his latest. I suspect that next week he will be recommending an exit from gold.

    He also did not indicate that any kind of danger may lie ahead in US equities, economic recovery is here to stay, nothing but blue skies ahead.

    Monty is part of Jim Sinclair's circle of trusted analysts...can we say opinions are diverging?

    ReplyDelete
    Replies
    1. Economy does not equal stock market. Market could keep flying while economy could end up sucking.

      Recent example is 2009-2011. Economy sucked. Stocks nearly doubled.

      Delete
  24. Seems to be currently suspended animation economy. Stocks supported with money pumping and mass media support with Hedge Fund backing slow recovery. This is not fundamental economic driven economy with capital expansion. Commodities especially currency diverse precious metals driven down by mass media, low inflation expectations. So why is inflation hedge currecy devaluation protection being pummeled right now and Stocks continuing higher. I do not understand. Which is it? If history is correct and predictor you would have to say the stock market will fall. Can Ben get his perfect world forever, NO WAY, one way or the other the divergence will converge into either deflation or inflation. That is how Dan sees a currency problem. How do you suspend economic laws forever?

    ReplyDelete
  25. I have not read all the comments. But what nobody is pointing out is this. Gold fell because GLD PAPER was dumped. Not the real stuff. From many reports I have read and listened to, GLD is worthless because basically the gold has been hypothecated, not once , not twice, but many times. So these GLD certificates are basically worthless, and anyone with half a brain has been dumping them like crazy for the last six months. Real Gold on the other hand, a real bar in a safe, a real coin, real shares in a Gold mining company is another thing entirely. The price of Gold reflect in the east is different for that reason. They have been buying real gold, not paper hypothecated and hypothecated again and again. With China leading the way, countries around the world are not trading in dollars anymore. Most recently Australia and now France. These countries now trade in real commodities and /or real gold.

    ReplyDelete
  26. I love reading these posts! Extreme pessimism, panicking, all the hallmarks of a bottom or coming bottom. The more gold falls the more bullish I'm getting. This bull market is not over. It will be over when every post I read on this blog says to buy gold, it will be over when we see gold rise in an extreme parabolic fashion, it will be over when real interest rates are positive, it will be over when we go back to money backed by gold and silver, until then enjoy these stunts that the elite pull on you, and carry on living.

    ReplyDelete
  27. Some food for thought for all Metalheads. I'm not going into the cobweb of fundamentals in this comment, because they are obviously a screaming buy! So on to TA...

    Ingnore the GLD charts as it is a second road on a back road from the main road of paper derivatives, and it only trades 25% of the waking hours in a Week.

    Go to Netdania and pull up the Weekly Gold. Insert studies ADX (8) and (DI) 13. Take note of the current setup. ADX is falling out of bed with a negative DI. This current whack a mole move is WEAK. It is the same ADX and DI setup we had back at the 2008 Lows, scroll back the chart and see..

    ReplyDelete
  28. Hi Dan. Specifically on the topic of the PUT buying on GLD...

    The Buying on Weakness numbers for GLD on Friday showed a 146 Billion Block Trade inflow. Topping the Buying on Weakness list at WSJ for Friday. I can't imagine that Mom and Pop were buying on Friday. That seems like a pretty serious inflow from large money.

    Just curious how you interpret that? Could large money be moving in and just buying safety via PUTs? Or am I way off on that?

    Thanks!

    ReplyDelete
  29. sorry million. 143 million. Coffee still brewing...

    Anyhow, it topped the chart.

    ReplyDelete
    Replies
    1. MikeH;

      About all I can say is that the put buying in GLD was quite large. Some of these guys are buying protection against longs held (hedging those positions) while some are looking for more downside for purely speculative reasons.

      Delete
  30. Dan Norcini: I really appreciate and am glad that your blog exists in the midst of the multitude of various and sundry gold and silver advocates. Your blog whether right or wrong has one important attribute and that is that IT'S ALWAYS AN HONEST SYNOPSIS.

    Whether you appear on King World News or some other interview I know that you are simply looking at the data and explaining to the best of your ability what is going on right now.

    Thank you.

    THE NEWS UNIT dot COM

    ReplyDelete
  31. Definitely agree with what you stated. Your explanation was certainly the easiest to understand. I tell you, I usually get irked when folks discuss issues that they plainly do not know about. You managed to hit the nail right on the head and explained out everything without complication. Maybe, people can take a signal. Will likely be back to get more. Stock Market Tips

    ReplyDelete
  32. Thanks for sharing this great piece of information. Do keep us update with some more great information.....Comex Tips

    ReplyDelete