Gold Cup and Handle Targets 1490 On a Breakout, With New All Time Highs Likely In Silver

A reader, David B, has suggested that I remind you all of the big cup and handle of 2010, with its subsequent breakout run higher in 2011.   The bottom of the first big retracement was on the August 2010 gold option expiration on the Comex.

I admit that being preoccupied with other things, and not wanting to get ahead of ourselves,   I have merely been plugging in prices for you, and not discussing the progress of the cup and handle.  Since I have had several emails about this, I thought a brief discussion now might be worthwhile.

First as a reminder, here is the cup and handle of today.  The target on a breakout is 1490.  I have included that notation, admittedly in the 'small print' for many months.

I will fill more things in, such as initial targets and retracements, once the formation is activated and confirms its viability with a breakout.  The fundamental driver could be a break in the free gold float in London and a short squeeze in search of physical supply, and a deleveraging of 'paper gold.'

In the very last chart I show how silver broke through 19 and ran to break above 40 in the same time period.  If we get a breakout in the weekly cup and handle in silver that is working itself out on the charts I think a new all time high is in the cards.

Let us not get ahead of ourselves.  The price must breakout over the topmost slanted trendline in green in order to be activated.  Thinking about what may or may not happen next sets us up for a disappointment and does not lend itself to 'get right and sit tight.'

So far I have not been particularly surprised by anything that has happened.  If you refresh your memory about the prior cup and handle you will see why.

Patience is our ally, and time is on our side. Change is coming, slowly but surely, and at the end, all in a rush.

And we'll always have rock n' roll, moondogs.

Below is a chart of that prior cup and handle from the year 2010 which initially targeted 1375 and then 1455.

And below that is a picture of its fulfillment early in the year 2011.

But we'll always have rock n' roll.

Speaking of being preoccupied with other things, I will be spending most of the afternoon at hospital with herself, getting her sorted out and prepared for the next steps, so there may be no updates tonight.

Charts at 3:30 PM - Fractal Cup and Handles - Hard Tutelage of Lessons Unlearned

"Our mistakes have become our secrets. Editors and journalists tear up with a guilty air all that reminds them of the party promises unfulfilled, or the party ideals reproaching them. It is true of our statesmen that socially in evidence they are intellectually in hiding. The society is heavy with unconfessed sins; its mind is sore and silent with painful subjects; it has a constipation of conscience.

There are many things it has done and allowed to be done which it does not really dare to think about; it calls them by other names and tries to talk itself into faith in a false past, as men make up the things they would have said in a quarrel. Of these sins one lies buried deepest but most noisome, and though it is stifled, stinks: the true story of the relations of the rich man and the poor in England."

G. K. Chesterton, Eugenics and Other Evils

Taking visitors back to the airport.

Notice how the gold chart looks like it might be forming a little 'fractal' cup and handle on the larger handle. And even this bottom formation appears to be embedded in a much larger cup and handle.

For you non-technicians, this merely means that gold may be forming an epic bottom that will result in a push to much higher prices.

But let's take this one day, and one chart formation, at a time. Right now the push through the psychologically important $1300 level is more important.

Silver is looking particularly attractive on the charts.

Someone remarked to me yesterday that gold was following the USD/JPY almost tick for tick. I have not looked at it but it would not surprise me since gold is being traded as a currency by speculative traders and central banks in the 'crosses' as I have noted.

But unlike paper money, in which a sovereign technically 'can never default' because they can print more and often obtain enough power to make their actions into laws, those who engage in the longer term abuse of gold will find that they cannot so easily manipulate a money that endures and exists in its own substance, and which cannot be replicated except by deception and the abuse of power.

 History is littered with the practical defaults of sovereigns through inflation and devaluation.  But these are lessons unlearned by a generation of willful moderns.

Have a pleasant evening.

Gold Daily and Silver Weekly Charts - Off We Go Into the Wild Blue Yonder

Gold and silver got some legs today, following through in a reasonably well-behaved manner to the upside in this current trend channel, which can be easily seen on the chart.

It is challenging its old nemesis, the overhead resistance at 1270 which has been capping rallies for several weeks.  I suspect gold will be breaking out to the upside once it can clear that resistance, and take a crack at running up to the top of the trend channel which is around 1310-1320 about the place where I think gold may meet it.

The cup and handle is looking good, but will not activate until we break out and stick a close through the top of this trend channel which nicely defines what is a slanted cup.

Last night I took a look at a different chart for gold that indicates that if the cup and handle does activate, it will reach its next big battle around the 1550 level, which is the lower bound of the trend channel that it had been in prior to the breakdown in price and the bear market which seems to be near ending.

Gold and silver are manipulated markets, being traded as currencies and abstractions, especially with regard to gold.   As you know I am expecting the pressures on the 'gold float' to assert their dominance over the highly leveraged paper markets at some time around midyear, maybe with the June contract.

However, forecasting markets that are rigged by determined financial engineering with a relatively free hand to do naughty and perhaps even foolish things is difficult.  So we ought to be prepared for a broader range of the usual outcomes from charts like these.

The buck went down today, most likely on the weaker than expected GDP estimate, and the likelihood that any Fed rate hikes will be short lived indeed.

Silver is not the leader at this point, as that role is being fulfilled by gold.  I don't think that says anything about a precious metals bull market.  It seems to indicate that this rally is being driven by more monetary issues particular to gold, and the structure of the physical gold market, than a general inflationary move in commodities.

You can see this if you chart up the ratios of gold to various commodities and metals with a commodity component like platinum, silver, and the CRB itself.   Yes at some point that may correct, but right now gold seems to be leading, and I think there are good reasons for it that are more secular to gold and the structure to its bullion demand.

People who say that supply and demand do not apply to gold because of the big store of it above ground are making the mistake of neglecting price.  And that is a big mistake.  Just because gold is in a vault does not mean  it is for sale at whatever price the wiseguys may choose to set for it.  This does not mean that their metrics are wrong.  Rather, the market is multidimensional, and in their mocking of other measures they set themselves up for the very narrow viewpoint that they deride.

So, all in all, it was a good day for the precious metals and miners.  Let's see if we can build on that.

Mary was released from hospital today, and is now in a rehabilitation facility out further in 'the country' where we live which is nice.  I expect she will be in there for some time but visitation is easy.  Her speech is improving rapidly but she has no conscious control of her right arm or leg.

We had a bit of a shocker yesterday from the unexpected death of my father-in-law back in Ohio.  That is why I said I was not sure how I might be posting.  He simply died of old age, peacefully with his children at his bedside after falling ill in the morning. He was a carpenter, a veteran of the Army Air Corp during WWII in Europe, an avid golfer, of Pennsylvania Dutch (Mennonite) heritage, a simple, honourable man.

Have a pleasant evening.

The Next Battleground for Gold Will Be At 1550 If the Cup and Handle Formation Completes

If and when gold breaks out of this cup and handle formation, which is a matter of probability and not certainty, the next real battleground in a new bull market will be around $1550. One of the more interesting variables will be the manner of any breakout, and the 'time' it takes to reach a minimum measuring objective.

This is quite appropriate as 1550 marks the major support level for the channel in which gold had been moving prior to the recent bear market.

A successful cup and handle formation, should this occur, would mark a bottom for gold and quite possibly a resumption of another leg of the bull market.

It will be interesting to see how the future movement of gold as a cross to the US dollar may unfold. If the money masters were wise, they would permit it to rise back into the old trend channel and seek to find a balance in the wagers with the available physical supply.

However, wisdom so often being overlooked by power and overwhelmed by it, we may have to consider that a 'break' in the market may precipitate this activation of the cup and handle and therefore the next move higher, and a challenge to 1550 that completes rather more quickly then might otherwise happen.

In seeking to extend control and overreaching, people sometimes bring about the very circumstance that guided the fear that led to their overconfidence and misjudgment.

O, what a tangled web we weave when first we practise to deceive!

Walter Scott, Marmion

And this is what continues to muddy the waters in too many markets these days.  That there has been and continues to be manipulation of prices of too many important benchmarks and assets is no longer a serious question for open minds.    There are still too many minds that remain stubbornly, or wilfully, closed to the necessity for reform.   It is not the original offense but the overreach and coverup that knocks holes in the edifice of established power.

Rather, what remains puzzling are the details: the extent of it, the actual players who are involved besides the usual suspects, and of course, any motivations that may exist then the mere greed for illicit and outsized trading profits.

Gold Daily and Silver Weekly Charts - Management of Perceptions

Gold took a $20 hit after the European close today, moving down from 1250 to 1230.

And the theme of the day seemed to be 'buy paper, don't worry' with the pushing of the SP 500 futures, even though techs kept threatening to roll over here on weak to bad earnings reports.

Silver managed to hang on to the $17 handle which was very good news.   I am watching the NDX for stocks and silver for the precious metals to get a better idea of where these asset prices might be moving in the short term.

The charts are fairly obvious if you look at them.  Nothing new has really developed.  Silver seems to have activated its cup and handle with the breaking out above the rim, and so far so good there.

Mary moved her fingers and toes on her right side this morning, her fingers while we were there last night for the first time.  It was the prettiest thing I have ever seen.  Next week we have a minor surgery to provide a permanent drain for her cerebral fluid called a 'shunt' and then hopefully she will be released to an inpatient rehab facility.

Have a pleasant weekend.

Stock and Precious Metal Charts At the End of Day - Silver Cup and Handle

Stocks were mixed today on weaker than expected home sales and some poor reports from finance and the tech sector.

The US dollar turned lower, and gold and silver 'popped' in a two step rally. Gold stands a little over 1250 and silver is hanging on to the 17 handle.

Today is the NY primary for President.

The Bucket Shop was relatively quiet yesterday with a few gold deliveries, and a bit of a build in the deliverable gold in the warehouses over the past week, back up over 550,000 ounces.

Silver is shining a bit, and on the weekly chart below has 'set' a cup and handle formation.  Now it must hold these gains and move higher.  If it can do this I would think silver will test that old support level around 19$ and try to fight its way back into the old trend channel.

In the chart on the right you can see the year to date performance of gold, silver, the SP 500 and NDX.  Silver is the leading asset.

Have a pleasant evening.

Gold Daily and Silver Weekly Charts - The End of March Madness?

"Let's imagine that mainstream economics wasn't a make-it-up-as-you-go-along discipline."

Dean Baker

Gold and silver bounced back today, as the pricing of risk was marked a bit higher, with stocks retreating a bit, but again in otherwise dull trading.

In terms of the developing chart formation, the 'cup and handle,' it is like watching paint dry.

Let's see how we work this short term bounce out, and if any longer term patterns can be established, because right now the trends are stocks up and gold down.  But we have just bounced off major support and resistance lines.

Yesterday's NCAA basketball championship between Villanova and the University of North Carolina was one of the best college basketball games I have ever seen.   And I am not a big college basketball fan, watching much more Formula One and Barclays Premier League with my son these days in comparison, but it was a real contest from start to the amazing finish.

We had a 'hard freeze' last night that played havoc with the flowering trees.  And we should be quite cold again this evening.   Well, this is still early Spring.

Have a pleasant evening.

Gold Daily and Silver Weekly Charts - April Fools' Day

The Non-Farm Payrolls Report this morning was a mixed bag, with enough different kinds of data to provide material for both the hawks and the doves.

The dollar initially rose and stocks dumped, in sympathy with global stocks overnight action, especially the emerging markets.

But at some point Wall Street decided it was all good, and the word went from desk to desk that 'the Fed's got our backs, come what may. So don't ask why, just buy!'

And so US stocks climbed for the rest of the day on slow but steady buying, and after initially being slammed hard lower, gold recovered, as did silver, which managed to hold on to the 15 handle.

Speaking of handles, gold is now doing what I wanted to see in terms of setting a proper handle for the potential 'cup and handle' formation.

Look carefully at the gold chart below, and the way in which the price is moving within the longer term trends.   I do not know what is going to happen, but it certain helps to have a well-marked road map.

Stocks are jammed up into some more substantial overhead resistance, and with earnings season coming up, the Fed will have to provide more support than smarmy whispers of easy money for financial assets, and let the real economy fend for itself.

And when this latest bubble, third of this cycle, collapses like the rest, more substantial edifices to greed may fall than just some personal fortunes and pensions.

Have a pleasant weekend.

Gold Daily and Silver Weekly Charts - Shenanigans for Option Expiration, Silver Cup and Handle

"Let us take things as we find them: let us not attempt to distort them into what they are not.  True philosophy deals with facts.  We cannot make facts.  All our wishing cannot change them.  We must use them...

Let us attempt to understand it.  Let us not disguise it, or explain it away.  It may have difficulties; if so, let us own them.  Let us fairly meet them: if we can, let us overcome them."

John Henry Newman

On the bright side, option expiration antics aside, silver has set a proper handle, but has yet to 'activate' it by taking out 16 with some authority, and refusing to give it up.

Granted it is a little harder to see on the weekly chart that I use, but it is clearly there.  Now, follow through and a move higher is everything.   If it can succeed, we are probably looking at a run towards a twenty handle.

There was little activity at The Bucket Shop for deliveries, and the warehouses were their usual quiet selves except for silver, which again is spurred on by CNT and their wholesale business.

I suspect that before all is said and done, at least one of the big bullion banks, and probably not the one that immediately comes to mind, is going to be caught up in a scandal as bad or worse than that of MF Global.  Remember them?  Have you ever wondered what happened to Mr. Obama's friend Jon Corzine, who with some help from his friends was caught blatantly taking customers' money to cover his losses?

Have a pleasant weekend.