The Bullish Case For Gold: Indicators Suggest Gold Has Laid the Groundwork for a Substantial Rally

For those who care about gold such as myself, in the just released CFTC data for the week ended Tuesday, speculators went net short for the first time since December 2001 when gold was priced at $275 an ounce. It’s tough to find a more contrarian indicator.

Peter Boockvar


"They run all away, and cry, 'the devil take the hindmost'."

Beaumont and Fletcher, Philaster, or Love Lies a-Bleeding

The one thing that gives me pause is the current interest rate actions by the Fed. They *could* delay the rally until it becomes almost overwhelmingly inevitable.  They do tend to do that sort of thing.

Timing is primarily an issue for those who are trading with leverage and for short term profits.

The Dow/Gold ratio is now back to pre-crisis levels (chart not shown).

As compared to 2002, the 'free float' of gold is tighter now, and central banks are net buyers rather than sellers.  Physical gold may be more of an issue than normal, as opposed to the unwinding of paper positions after a multi-year price manipulation.

At this point one might 'get right and sit tight' in the usual measured way, and wait for the banquet of consequences to be served.

And finally, the gold/silver ratio is now at a recent high.   It may go a little higher, especially in the event of a currency crisis.

This suggest that IF gold rallies, then eventually silver will kick in with a vengeance and provide some outsized gains.   But if the gold rally is a result of a crisis, silver may lag, and perhaps substantially.  If it is in reaction to inflation, they get ready for a ride on the silver rocket.

I like to read Ted Butler's commentaries on silver, and he is saying much the same thing with regard to the composition of the Comex positions. 

Dave Kranzler at Investment Research Dynamics sees the gold and silver in a similarly bullish setup with some slightly different reasoning.  I like to obtain multiple perspectives from different indicators.

I am waiting for my charts to signal their move, with confirmation, and hopefully to provide a new and workable formation to gauge the extent of any reversal and breakout from this long trading range we have been in since the 'cup and handle' formed and then failed.

Stocks and Precious Metals Charts - Symphony For The Righteous Destruction Of Humanity - Privatizing Afghan War

"What does Dr Copper want to tell us?  The metal with the PhD in economics is now in a bear market, down 21% from recent high in June.  Dr. Copper is signaling us that global contraction is now in motion."

Dr. Harald Malmgren


“'Whoever is naive, let them come here,'
says Wisdom, to those who lack understanding.
'Come and eat my food,
and drink the wine I have prepared.
Forsake your foolish ways, so that you may live,
and progress in the ways of understanding.'”

Proverbs 9:4-6, The Consequences of Accepting Wisdom or Folly

Gold and silver both bounced higher today as the dollar trended lower.

Gold has been trading in the currency crosses, as a currency.

And those who trade in those markets know that they are notorious for overshooting on moves.

The reasons for this have to do with the heavy leveraged used, and the few major players that tend to dominate, and who love to throw their weight around at the expense of the smaller speculators.

It is hard to realize that gold is up almost $25 from the overnight low of $1159 it put in the other day. And silver is up about $.80.

Stocks managed to move a little higher in a relatively quiet stock option expiration.

Trumpolini is considering a plan to 'privatize' the war in Afghanistan, replacing the US military with a private mercenary army under the command of Blackwater's Erik Prince, reporting directly to Il Donny himself.

Perhaps a sticking point with be a golden Trump logo on each mercenary's helmet.   Branding.

And then there is this, from Albert Edwards at Société Générale:

"Make no mistake, whatever the macro-idiosyncrasies of Turkey, the key to the current turmoil that is spreading into EM generally, is Fed tightening and the strong dollar. As we have repeated ad infinitum, since 1950 there have been 13 Fed tightening cycles, 10 of them ended in recession and the others usually saw the EM blow up – such as the 1994 collapse in the Mexican peso. The Fed always tightens until something breaks."

We're not in Kansas anymore, Toto.

Need little, want less, love more. for those who abide in love abide in God, and God in them.

Have a pleasant weekend.

Stocks and Precious Metal Charts - Slow Down - Lessons Unlearned

“There are two ways to be fooled. One is to believe what isn't true; the other is to refuse to believe what is true.”

Søren Kierkegaard


"Narcissists are unstable and go through repeated cycles of self-destruction, with other people usually paying the heft of the price.   Narcissists tend to be divisive, vindictive, confrontational, aggressive, hate-filled, raging, incoherent, judgment-impaired, and irrational. 

Narcissists are junkies: they are addicted to attention and will go to any extreme to secure it.   Narcissists are liars, confabulators, and miserable failures, although some of them are geniuses at disguising the fact that they are, in fact, losers."

Sam Vaknin

Stocks rallied as Walmart posted 'better than expected' results.

Nordstrom also beat after the bell, further juicing enthusiasm for retail trade.

Gold and silver were bouncing quite a bit from the overnight lows, but ended up with a little more modest gain over the close from yesterday.

The precious metals are utterly oversold. They are setting up for a bottom and a major rally. Timing of these markets is for pros who don't need any help from me, other than prayers.

If you have not seen it, they are industrializing insider trading in Washington.

We are truly in times of increased wickedness, when lying and breaking of oaths becomes a commonplace, almost fashionable.

Like dishonesty and abuse of customers became all the rage on Wall Street not all that long ago, and has come back faster than the economic recovery.

Slow down, and take stock of your life. Most are hurrying towards some ever-retreating future, and become utterly caught up in the fads and enthusiasms of the day.

Need little, want less, love more. For those who abide in love abide in God, and God in them.

Have a pleasant evening.

Stocks and Precious Metals Charts - Je Vois Tout - Appearance Designed to Mask Reality

"Caution in handling 'generally accepted opinions' that claim to explain whole trends of history is especially important for the historian of modern times, because the last century has produced an abundance of ideologies that pretend to be keys to history, but are actually nothing but desperate efforts to escape responsibility.”

Hannah Arendt, The Origins of Totalitarianism


"Flattening of the yield curve is happening so slowly no one noticing the 2s-10s gap is now 24 bps. Meanwhile yields on 30s are back to 3.02% & falling. Trump and media are talking pickup in US growth, but global institutional investors not buying it, and see trouble in the rest of world."

Dr. Harald Malmgren

A brief respite, to unload the recent acquisitions from the car, has allowed me to at least post updated charts (and more fulsome commentary later in the evening).

As you can see, the metals were hammered a bit today, out of proportion to strength in the US dollar at least, which finished mostly unchanged.

That tells us something about the price action, right here, today and tonight.

As you may know, I think that there is more to this than meets the eye.

The problem is that the denouement is very difficult to forecast in time, so trading ahead of it, in anticipation of it, is only for the nimble.

For mere mortals, it is a more reliable strategy to get right and sit tight.

Stocks were weak, led lower by tech which is debubbling just a bit with regard to the real world results.

Never have so many lied so much for so few.

Have a pleasant evening.

Stocks and Precious Metals Charts - Bananas - Stock Option Expiration On Friday

“But you can't make people listen.  They have to come round in their own time, wondering what happened and why the world blew up around them.  It can't last.”

Ray Bradbury, Fahrenheit 451


"The shepherd drives the wolf from the sheep's throat, for which the sheep thanks the shepherd as his liberator, while the wolf denounces him for the same act as the destroyer of liberty."

Abraham Lincoln

Stocks managed to rally today.

US Dollar and paper are being viewed as safer investments given the relative strength of the US economy and the current interest rate tightening bias at the Fed.

Gold and silver had a dead cat bounce after yesterday's steep declines.

Let's see if that bottom starts forming around here. Indicators suggest that it might.

There will be a stock option expiration for August on this Friday. I have included that calendar below.

Being a tour guide for the relatives was a bit tiring today, but great fun nonetheless.   There is nothing better in life than the company of simple, honorable people, salt of the earth.

Need little, want less, love more. For those who abide in love abide in God, and God in them.

Have a pleasant evening.