Gold Daily and Silver Weekly Charts - Inverse Head and Shoulders Bottom Continues to Form

There is an inverse head and shoulder bottom forming up in gold, and even on the weekly silver chart now.

I have taken the liberty of putting some preliminary marks on the chart to show my current thinking of how it may shape up. If the formation does not continue to evolve I may change or remove them. But I thought now was the time to share my preliminary thinking from my own 'shadow chart.'

While the 100 DMA was taken out today in gold, I do not think it is all that predictive or important, except that a few traders may favor it as an indicator. There are much more powerful technical indicators at work now.

What I have labeled 'neck 1' on the gold chart at 1420 is much more important, because it not only marks the first tentative neckline of the inverse head and shoulders, but it also marks the breakout point from the short term uptrending channel in which gold finds itself now. Not to mention that it also breaks the intermediate downtrend. I have included a 'closeup' of this chart area for your convenience.

Next week is an option expiration on the COMEX. I have not followed the balance of puts and calls, because while it is still important in the short run, the paper game is quickly losing traction, as the leverage increases, and the actual pile of bullion at their disposal and their other vain imaginings become smaller and less relevant to the world of real people and things.

So lets see how it goes. Hope to see you Sunday evening, with a possible talk, or interlude of music, in between.

SP 500 and NDX Futures Daily Charts - The Necessity of Regulation To Insure Market Efficiency

"There are so many questions as to why, but each comes back to this: The markets are not set up to be 'fair and orderly' for investors; they are set up for the benefit of very fast, sophisticated pickpockets."

Jon Najarian, Blame HFT For Yesterday's NASDAQ Mess

Personally speaking, there is merit in saying that quite a bit of the blame rests with the SEC, which after all is responsible for regulating the markets and setting the 'tone' for their behavior, by action and example.

And of course the myth, promoted out of self-interest, that any and all regulation is bad, because people are naturally rational, long term in their thinking, and virtuous.   And therefore they need no governance but their own wills. Markets always and everywhere are subject to distortion and corruption by the powerful without transparency and the equal justice of independent regulation and the law.

"In questions of power, then, let no more be said of confidence in man, but bind him down from mischief by the chains of the Constitution."

Thomas Jefferson

Yes there is a balance to be struck, but reform is not to be found in the mindless tearing down of past wisdom in the name of deregulation for its own sake, except if one would prefer to have no place to stand when the cold winds of the powerful and the unscrupulous blow without impediment across the land.

NAV Premiums of Certain Precious Metal Trusts and Funds

I think that the explanation for the negative premium on the Central Gold Trust lies in its thinner liquidity.

For example so far today it has traded 90,000 units in the US, against 861,000 units for the Sprott Physical Gold Trust. A seller at 49.14 distorted the price a bit as the market slowly chipped away at the offer.

The Central Fund is more responsive to market changes, with units traded today at 734,000.

But I do think that the redemption feature at Sprott, though lightly used, makes a difference in value perception for whatever that is worth.

With the gold/silver ratio having fallen to 58 so far, it is obvious that silver's high beta has caused it to rally harder than gold at this point. That is normal and healthy for the metals overall.

The Center of the Gold Trading World Is Now In Shanghai

"If once you forfeit the confidence of your fellow citizens, you can never regain their respect and esteem."

Abraham Lincoln


"It is lack of confidence, more than anything else, that kills a civilisation. We can destroy ourselves by cynicism and disillusion, just as effectively as by bombs."

Kenneth Clark


"At the root of America's economic crisis lies a moral crisis: the decline of civic virtue among America's political and economic elite. A society of markets, laws, and elections is not enough if the rich and powerful fail to behave with respect, honesty, and compassion toward the rest of society and toward the world."

Jeffrey Sachs

Shanghai is emerging as the new center of the gold trading world, as the price shenanigans of London and New York discredit their exchanges, and accelerate the flow of gold from west to east.

The volumes on the LBMA and the COMEX are larger but misleading, because for the most part they represent the passing around of paper claims, at a leverage of 50 to 1 or more, against a diminishing pile of actual gold bullion.   They are now running on custom and momentum, but losing substance and confidence with every passing day.

This is the direct result of not allowing the market to set the price, and the moral hazard of not restraining overly cynical, if not overtly fraudulent, representations of value and risk. 

The market operation that took down the price of gold which we saw earlier this year on the COMEX was so blatant, so heavy handed, so patently obvious that it jarred the world markets, and had the opposite effect to which one might presume it was intended.  It was a bureaucratic over-reaction, panic more precisely, to the Bundesbank's request for the return of their national gold.

If the Anglo-Americans did not use this opportunity to secure the return of the gold bullion which had been leased out, it was a strategic blunder of epic proportion. It may be viewed in retrospect as the watershed moment in which London and New York squandered away the confidence of the world.  In their cynical and amoral self-delusion, and a contempt for other people, they assumed that maintaining public confidence is a function of being bolder and more skillful liars. Nicely played, gentlemen.

Integrity is the prerequisite for confidence, and bad behavior drives out the good.  A loss of confidence after repeated abuse is a genuine risk whether one properly accounts for it or not.

Weighed, and found wanting.

The original article from which this chart has been taken can be found here.