04 June 2012

Gold Is At Imporant Intermediate Term Resistance - Long Term GATA Has It Right

After the spectacular rally of last Friday it is natural for gold to pause and consolidate here.

However, I wanted to make sure you could see the position of the gold price with regard to the intermediate trend.

This is the key resistance which I referred to last week, clearly visible in the chart below.

The hedge funds were leaning very hard on the short side as we had shown in some of the indicators, and as several others had shown in the market structure through the Commitments of Traders Reports. And the bears had 'gotten smoked' by the commercials who hit them with a stiff short squeeze last week. As Ted Butler remarked, 'manipulation goes both ways.' Yes it does, but not in this case, because Ted does not understand even yet it appears the basic underlying reality of the long term gold market, perhaps because he is so focused on silver.

I think that the downward pressure, or bearish manipulation if you will, was greatly exaggerated by the trading desks because of the key market dates including option expiration. The ferocity of the rally was due to that pressure being relieved and turned back. It perhaps then could be better described as 'the end to the manipulation' than an active manipulation itself.

The rounded bottom showed how resolutely the bears had pressed on support, and how equally resolute the market was in holding its ground. If you coil a spring long enough, eventually it may snap back.

Now we see how the physical delivery situation plays out in June and July and if gold can finally break the downtrend. As I said, I do not think that the next leg up may have such an easy time of it because the foundation of the market manipulation is to suppress the gold price for the sake of a macroeconomic policy being put forward by the central banks.

As several commentators have pointed out, Kosares, Coxe and even my lowly self among them, the great trend change in the central bank attitudes towards gold which had driven the twenty year bear market with their organized selling has changed.  Central banks are now net buyers of gold.  It was their change in selling that marked the first turn in the market in 2000.  And now that they are buying we may see the next turn, until the market clears, or until they try to reinstitute a gold standard and fix the price at whatever valuation they believe they can sustain without provoking a 'black market' assault on their authority.

Make no mistake, they are still fighting the rally in gold every step of the way, not so that they can stop it, but because they want to control it, make sure it is 'orderly.' This is the underlying fundamental message of the market, and you will not find it in the Commitments of Traders reports. But you will find it in the kind of analysis and information being promoted by GATA for example.  For the last fifteen years they are the only group, as far as I can see, who have 'gotten it right.'

And it is not clear to me at all that a number of gold commentators get this fundamental fact yet. At some point they will, they will all get it. But not until the price of gold is much higher. But they may benefit from this market fundamental without realizing why, when the reversion to the long term trend occurs, and perhaps with a vengeance. And so they can ride the coattails of those who do get it, and occasionally try to appear 'wise' and curry favor with the popular financial media with dismissive and even snide remarks.

There are great events at work in the global financial markets. Only those who truly understand them will have the ability to profit in the longer term, because they will not be buffeted by the slick campaigns and the jawboning of the Anglo-American financial establishment which has been using the creation and distribution of fiat dollars as their personal piggybank for far too long.