The Death of the Gold Bull May Be Greatly Exaggerated -- Miner / Bullion Ratio at an Extreme Low

There was an opinion making the rounds today from a chief strategist named Suttmeier that the gold bull market was over because the 50 day moving average has fallen below the 200 day moving average for gold, commonly called a 'death cross.'

Interestingly enough he calls for a trading range, and not a further significant decline in gold, but rather a 5% trading range 'for years.'

During the financial crisis in 2008 gold corrected and consolidated for about one year. In each of the prior three 'death crosses' on the chart the period was about three to six months.

Below is a longer term gold chart that shows that the 50 day moving average has fallen below the 200 day moving average at least four previous times since 2003.

Each time this happened it has marked a consolidation and correction that resulted in gold moving another leg higher and sometimes sharply higher after a prolonged correction. This is climbing the classic 'wall of worry.'

Perhaps it will be different this time. But not based on anything I have seen in technical analysis such as this. 

The fundamental drivers of the gold bull market not only remain intact, but seem to be even more compelling based on the fact that central banks have turned net buyers for the first time in over twenty years, as well as recent events in the currency wars regarding the value and security of sovereign debt, which is exactly what the substance of a fiat currency is:  sovereign debt of zero duration.

Thanks to my friend Nick Laird of Sharelynx.com who has one of the best and most diverse collections of online charts around.

If Europe should collapse and bullion enter a protracted trading range, one might consider buying mining shares of high quality that pay dividends, as they are now quite cheap as shown by the XAU - bullion ratio in the second chart.

As a reminder, in times of crisis I tend to find a safer haven in bullion than in miners, and in gold rather than silver. So let's see what happens in the Greek elections this month, and in the next Fed meeting shortly afterwards.

I tend along with others to think that the central banks must print money to secure the current banking system.  That is the raison d'être of a fiat currency system: to be versatilely expansive in repairing the holes made from the inevitable speculative excess caused by crony credit expansion by the Bank for its friends. But in the short term these markets are hardly tied to fundmentals or efficient allocation of capital.

As a reminder we might see a few more antics tied to the June futures contract this week.

May 29
QO - June 2012 COMEX miNY Gold - Last Trade Date
QO - June 2012 COMEX miNY Gold - Settlement Date
GC - May 2012 Gold - Last Trade Date
GC - May 2012 Gold - Settlement Date

May 31
GC - May 2012 Gold - Last Delivery Date
GC - June 2012 Gold - First Notice Date

June 1
GC - June 2012 Gold - First Delivery Date

Greek 'Aid' Is Really Enhanced Vendor Financing and Foreign Bank Bailouts

“They don’t want to kill us [the Greek people] but keep us down on our knees so we can keep paying them indefinitely.”

Eva Kyriadou

The similarity to the Icelandic situation is striking.  Greece must deal with the problem of decoupling from the Euro, but other than that the scenario seems fairly straightforward.

Greece needs to assert their independence, and have the will to make it 'stick.'

In the manner of 'mailing in their keys' on an underwater home and the burden of an outsized dodgy loan, the Greek people should consider mailing their eurozone membership back to the ECB and their friends in the Banks and Wall Street hedge funds c/o Berlin, and suggest that the conquest of their country might have to proceed by more conventional and overt means if they want to take the country's sovereign assets and income.

An investigation of all the debt deals would be a first rate idea, with plenty of public disclosure of the corruption and cronysim that was involved between public officials and the banks.

NYT
Athens No Longer Sees Most of Its Bailout Aid
By LIZ ALDERMAN and JACK EWING
May 29, 2012

PARIS — As Greek membership in the euro currency union hangs in the balance, it continues to receive billions of euros in emergency assistance from the so-called troika of lenders overseeing its bailout.

But almost none of the money is going to the Greek government to pay for vital public services. Instead, it is flowing directly back into the troika’s pockets.

And so, the €130 billion, or $162.2 billion, European bailout that was supposed to buy time for Greece is mainly only servicing the interest on the country’s debt — while the Greek economy continues to plummet.

If that seems to make little sense economically, it has a certain logic in the politics of euro-finance. After all, the money dispensed by the troika — the European Central Bank, the International Monetary Fund and the European Union’s member governments — comes from European taxpayers, many of whom are increasingly wary of the political disarray that has beset Athens and clouded the future of the euro zone.

As they pay themselves, though, the troika is also withholding other funds earmarked for keeping the Greek government in operation...

Read the rest here.

Gold Daily and Silver Weekly Charts - Gold Chart Shows About 10,000 Contracts Dumped in Quiet Market

I felt this bear raid coming on the tape, from the action I was seeing. I cannot express it better than that.

So I had sold my silver bullion trading position and trimmed back gold, adding a hedge in the first hour of trade.

The hit came around mid-day after the European close as you can see on the 5 minute June futures chart.

One does not drop 11,000 contracts in a ten minute period in what might be called a reasonable trade.

The Dr. Evil Strategy and Some Targets

Will the CFTC investigate, asking the seller why perchance they did this? No, and that in itself speaks volumes.

But the solution is not to try and trade these scandalously under-regulated markets, but instead to hold long term investment positions, preferably as far away from Wall Street as is possible.

I had suggested last week that calls that the 'bottom was in' might be premature. It is in the established playbook to hit the futures hard at least once after an options expiration which we had last week.

The shorts are trapped, especially in silver, and they have powerful friends in the government and the media. There are some very worried people out there. Big things may be coming.

Swiss National Bank Considers Capital Controls

SP 500 and NDX Futures Daily Charts - The Well Tempered Clavier

Geithner and Bernanke are playing a tune for us on the US equity futures markets, with the lead vocals coming from the SP 500 June contract.

Can you name that tune?

I do not think they can hit the high note without a serious bump of QE to sustain them. And Benny may provide it, if somewhat stealthily, mid month around the time of the Greek elections.