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.

Chris Hedges: Days of Destruction, Days of Revolt

The video starts after the introductions.

"Unfettered, unregulated capitalism...turns everything into a commodity, human beings become commodities, the natural world becomes a commodity, that it exploits until exhaustion or collapse. In essence it cannibalizes itself, and this is the process that we are undergoing."

Chris Hedges

The essence of statism, of the far left or the far right, is to objectify the individual and diminish their value to some measurement held by the state itself.

This is what can turn market captialism into corporatism and then fascism, often in a reaction against the rising of the people against economic repression of crony capitalism and corruption.

Hedges helps to illustrate this. He is certainly further to the left of my own more centrist views, but I find his perspective interesting. And certainly a refreshing perspective given the corporatist and dehumanizing skew to most modern American dialogue where all creation is weighed in the balance of money.

Gold Daily and Silver Weekly Charts - Did We See A Bottom In Gold Today?

"Quite unexpectedly, except perhaps among a handful of long-time gold advocates, gold is quietly and gradually moving back to its centerpiece role in international reserves. Stretched and threatened financially, nation states have begun accumulating gold for the same reason private individuals do -- as portfolio insurance to cover a wide assortment of economic uncertainties.

What's more, this restoration has not occurred formally as a result of an international agreement as has so often the case in the past, but informally as a natural evolution in the way nation states think about and react to the long-term value of currency reserves. As such, it suits the times and suggests an authenticity that is likely to transform the gold market at its core.

In my view, this swing in the supply-demand fundamentals will come to be recognized in future years the most important gold market event since the Central Bank Gold Agreement (CBGA) of 1999 -- the accord that many believe kicked-off the secular gold bull market."

Michael Kosares, The Most Important Gold Event Since 1999, USA*Gold

Quite a few of the uncivilized entered the markets today, and sparked a rally in gold and silver in what appeared to be an obvious 'flight to safety' and also a powerful relief rally after the awful pounding the metals and the miners had taken into the Comex expiries and delivery dates. 

Some of the dividend paying gold and silver stocks had impressive gains even moreso than the metal, with at least one royalty trust up 11 percent or so.   Yes I flipped one from yesterday, and even trimmed my entirely outsized bullion positions bought on the dips back to something a little more 'normal' and comfortable. Of course I never touch my long term holdings in place since 2000. It is not raining nearly hard enough yet.

During hard times a solid dividend paying miner is hard to beat, unless you get lucky with one of those lottery tickets known as junior miners.  When the right time comes I hope to be there.  But for now I will play it a bit more safe. I see more potential downside in stocks until the banks step up and print it up harder. No telling how well they will fare against the splash from across the sea.

After a triple spiked test of support, the gold market went vertical today, marking perhaps what might be regarded by some of the more astute as a well-rounded bottom. I live for days like today.  Much of this was due to a reversal of the sheer manipulation for short term gains, that broke in the face of the unfolding global currency crisis.  Bam!

Never underestimate the power of the CFTC to stand idly by while the markets, taken in hand by the titans of Wall Street, degenerate into something that resembles a round of golf at the Piedmont Driving Club, or an impromptu fight club meeting at the New York Athletic Club.

Well, boys will be boys, in proportion to their toys. 

Chart-wise follow through is everything. Yes we have a short term rounded bottom, and the potential for much larger formations including a broad cup and handle the likes of which we have not seen in quite some time.  But do not underestimate the baseness of desperate men accustomed to having their way.

But first things first. We must see if gold can break the intermediate downtrend and then establish at least a broad trading range, which will form the lid of the potential cup.  It could happen in a rush, given some exogenous trigger event and the right convergence of circumstances, but I suspect it will be a long and arduous climb, fought in stages and levels. 

Chart porn-wise, the cup and handle, should it work, would take gold well over $2,000 by year end or so, and probably set up a new leg into the 3000's.

But that is all speculation. Time to do the hard climbing work for now, one day at a time.

Have a pleasant weekend.

SP 500 and NDX Futures Daily Charts - Something Wicked This Way Comes

"The yield on the 10-yr Treasury is at a record all-time low and the yield on the 30-yr Treasury - the Big Daddy - is below it's lowest point during the Lehman crisis. That's not just warning signals flashing, that's the equivalent of financial nuclear air raid sirens going off.

What this means is that the liquidity is being sucked out of the global financial engine and is going into Treasuries and precious metals."

Dave in Denver

It's getting ugly out there.

Is the beach growing larger, or is that just the ocean of world liquidity receding dramatically ahead of something else?

A snapback rally here and there will not surprise me.  So be careful about leaning too hard on any shorts, if you should be one of those nickel chasers. 

The economic outlook is fairly poor and unlikely to get better. The Republicans certainly would not like to see a recovery this year. Anyone who does not think so please smoke your Jimson weed outside. So the US is standing on a one-legged stool, propped up largely by monetary inflation without significant reform and restructuring.

This is not your father's recession, more like your grandfather's depression. But the children ruling the world capitals have not quite gotten that yet. Or perhaps they do understand it, but just have not yet figured out how to play it for their greatest personal advantage.

These pampered princes and princesses who are talking austerity, and stop whining, and other such posturing (Madame Lagarde for example) are playing with fire, but just do not know it.

It may not take long but that will change, and become a whole other story and a turn of the page of history.