27 July 2010

Gold Daily Chart; Shock and Awe for Comex Option Expiration

Today is yet another Comex option expiry, and the metals, which have been subject to bear raids for the past week, were hit hard and heavy from the New York crowd. This is also the "roll" week, as anyone not intending or funded to take delivery of August gold has to be out of their long positions by the end of the day Thursday.

Why anyone would bother to invest in Comex options is beyond me, or Comex futures for that matter, given the position abuses it tolerates. While we welcome Bart Chilton's stirring message of reform, we'll have to wait and see what the actions taken by the CFTC in position limits and disruptive manipulation are. I think the traders on the NY commodities exchanges have given Bart their answer to his proposed changes, and put him in his place.

Besides the usual market manipulation generally seen around key events like the end of quarter or an option expiration, what reason is there for this incessant capping and smackdowns of the precious metals? Is it a simple question of confidence in the dollar? Surely it is not because of the $30 billion being made available for subsidized small business lending. Or are their preparations being made for another large round of Quantitative Easing II, or even the pre-emptive bombing of Iran? It is hard to say, since the fraud option has been on the table as an instrument of US policy since the 1990's at least.

Obama has proven to be a good talker for reform but a very poor performer when it comes to curbing the excesses of his supporters and contributors at the large corporations particularly in the financial sector. This taints his entire administration.

At 11:00 AM

Here is an intraday update on the Gold Daily Chart. 1166.50 is an important level because it marks a prior low. We have reached it intraday today, so we would look for some support and a potential double bottom.

The formation as a 'cup and handle' is still valid, with the retracement less than 50% off the final high (1154 would be 50%) but there are other formations worth considering. We'll keep an open mind on that depending on how this week finishes.

Unfortunately for Larry Summers, Ben Bernanke, and their friends at the BIS, they have not yet figured out how to print physical gold, silver, and the world is reaching the point where it might start simply ignoring the New York markets with respect to essential commodities such as basic materials, oil, foodstuffs, metals, and the like, as they become increasingly irrelevant, fraudulent, and Orwellian. And then where will the financial engineers be, except with no more excuses and no place to hide?