03 October 2011

Gold Daily and Silver Weekly Charts - Flight to Safety, at Least for Today

Bounce today on a flight to safety, a concept that is still valid except during option expiration periods and panic liquidations perhaps.

There is a growing difference between the physical market and the paper markets. At some point they will converge.

"So the Western central banks got together, leased out some gold and the bullion banks sold the gold. The central bank gold being unloaded by the bullion banks is not to get the best price, but to smash the price. The smartest way to sell the gold would be to do it in the liquid sessions. But the pattern during the decline was they were selling it in the overnight session when things are quiet. This was no different that what we saw at the end of April, beginning of May on that coordinated smash.

You have to ask the question, why would anyone sell at the most illiquid times? It is not to get the best price, it is to move the market in the direction you want to move it...

The Asians have been buying like crazy, all through this takedown they have been buying. We have seen massive premiums and bottlenecks in supply, they simply cannot get enough physical metal as the prices have dropped. The demand has literally been insatiable. As I have stated before, the central bank gold, which was used to sell the market down, has gone to vaults in Asia. That’s a one way trip, it doesn’t come back into the market..."

'London Trader' at KWN, Insatiable Demand for Physical Gold
The downtrend is still not broken yet.

The equity markets are going to keep hacking up hairballs until Benny and Mario Draghi, Jean Claude's successor, gives them the big fat bowl of monetary cream that they want.