31/07/2010 by Philinje.

Nice move up after my last post. Let’s see what happens by end of Tuesday.

Gold and silver are down on a monthly basis in July, especially in Euro. Some consolidation ahead?

Posted in Gold | Print | No Comments »

30/07/2010 by Philinje.

Gold has bounced off the slide earlier this week, which happened on options expiration day, not surprisingly. But the bounce is weak and gold is struggling to regain the $1180 area, which was key support.

Next Tuesday seems to be a key turning date for equities and gold. Once scenario is gold makes it up to $1185 or so then heads south again. Or it could hit its 200-day moving average around $1150 and move up into mid August. But either way, it seems like gold could take a hit later in August so be cautious.

There are some indications that equities are nearing a turning point that could see big lows into October. Be extremely cautious with equties and by association, gold stocks.

As mentioned recently, in fact right before the big decline this week, the banks could make every effort to take down gold prices before position limits come into play. Since the end of year is traditionally strong for gold, July and August are the last chance for easy wash-outs.

Posted in Gold | Print | No Comments »

25/07/2010 by Philinje.

For the alternate view to my last few posts, read this:

http://www.gold-eagle.com/editorials_08/nielson072010.html

This author say the summer decline has gone away. Maybe, but what about a big decline in equities causing de-leveraging?

Posted in Gold | Print | No Comments »

25/07/2010 by Philinje.

For those familiar with Casey Research, there is a free article of the Gold & Silver Report that you can read here:

http://www.gold-eagle.com/editorials_08/jclark072010.html

This shows the lowest, average and smallest levels of decline to expect this summer. That means this month and August. The smallest declines have already been exceeded. Here are the average and lowest levels:

Gold - $1127, $968

Silver - $16.39, $12.78

Are the lowest levels likely? Not enough to hold your powder dry. As I said last time, I can see $1040 as a stopping point in gold. The reasons are:

- that is the level of the last all-time high in 2008

- that is the level of the Head and Shoulders neckline, meaning the bulls will defend it tooth and nail

- that is for all intents and purposes just above $1000 and I suspect even if we touch $1000 it will be brief

So there you have it. Again, trading is not recommended. But if you’re like Jim Sinclair, you could sell 1/3 near a high and load up again on sudden plunges. That’s trading but it’s only 1/3. The plunges may be brief.

Posted in Gold | Print | No Comments »

25/07/2010 by Philinje.

The new financial regulation bill made it into law last week and the Commodity Futures Trading Commission now has some teeth. Read this GATA article:

http://www.gata.org/node/8854

Chilton is a vocal member of the CFTC and the upshot is they have 180 days to enact position limit regulations. What this means in a nutshell is that the extremely concentrated short position in silver by JP Morgan, and the highly concentrated short position in gold by 4 banks, will be under fire. In all likelihood, within 180 days or less, these banks will have to reduce their short positions.

That of course is good news, but it also means that these banks are more motivated than ever to take the price down so as to suffer the least pain. Now, if buying pressure stays high, the banks will do what they did over the last two weeks and start covering shorts in earnest, which has given some strength to recent price weakness.

See the latest Commitment of Traders chart:

http://futures.tradingcharts.com/cotcharts/GC

If you go to this page you can see the COT charts for any metal, and silver in particular is a key one:

http://futures.tradingcharts.com/metals.html

The way it looks to me is that they are starting to reduce their short positions, but there is a long way to go yet. I think this adds support to the idea that gold and silver might see some hard drops in the near future. The point is, if there is ever any market activity that causes a little loss of confidence in gold, the banks will do everything possible to bring the price down and run the stops lower. If they time it right, like they have over the years, it won’t be that hard to scare the small specs.

So be prepared to see some stomach-churning drops over the next few weeks. Summer weakness could combine with a big scare in equities to let these guys do their dirty business. If you agree, then there could be some great buying opportunities.

On the other hand, if buying pressure remains strong, or some kind of world event causes people to flee to gold, then we could see the short-covering rally of all time. There is nothing like time pressure to cause panic, even among professional traders.

The more likely scenario is that prices will weaken as these guys make every opportunity to get out at lower prices. My view of the most likely target is $1040, as that represents extremely strong support. If that is taken out, we could see $950 or even as low as $800. But in terms of likelihood, I think $1040 is a reasonable expectation.

The current bounce may be on its last legs. The Euro popped briefly on Friday but then sank as the details of the bank stress tests were absorbed. Here is a good piece on that:

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/7907600/Bank-stress-tests-too-little-too-late-says-City.html

Most likely the Euro has peaked at 1.30 and is headed lower. That could mean weakness in equities and strength in the dollar. And unfortunately, weakness in the Euro is not helping gold as much as I had hoped.

Some people see a possible rally in equities, from a contrarian perspective. But sometimes it just feels like a big move has to happen because of the combined weight of everything, including sentiment. I’m a big contrarian too, and to me the surprise factor will be about how big a drop it turns out to be.

The good news for gold is that it will probably bottom sooner than equities and 180 days from now the price could explode. Be prepared.

Posted in Gold | Print | No Comments »

22/07/2010 by Philinje.

Looks like Bernanke did a masterful job of underscoring all fears about the American economy AND firing up the dollar by mentioning an end to accomodative policy.

It looks like gold took its cue from the end of reflation and dropped, meaning it is back to being a risk asset. So there goes the theory about inverse correlation with the Euro.

The main movement in markets at present seems to be into bonds and the Yen, and to some degee the dollar (probably being driven by purchases of US Treasuries). At this point, a bout of deflation in the US is being viewed as baked into the cake. Gold might not drop so hard, and might even bounce up a while longer short term, but it’s looking vulnerable.

The wildcard sems to be oil. It’s gyrating wildly like it wants to desperately move higher but then turns around a moment later like a schizophrenic. What a crazy chart. Maybe that’s an indication of how bullish sentiment is breathing its violent last gasp.

Anyway, if anyone is trading gold, which is generally not recommended, be cautious and there could be a good buying opportunity coming up. Selling some now or soon all depends on entry levels but having some cash on hand is not a bad idea as we enter the eye of the storm. In general, any core positions below or near $1000 are probably fine, so don’t bother trading.

Posted in Gold | Print | No Comments »

21/07/2010 by Philinje.

If you’ve been reading rumors about the new reporting regulation in the health care bill, which some people construe as impacting gold and silver purchases, here is a good article on the details, which references a Casey article on the subject:

http://www.thedailybell.com/1224/All-Gold-to-be-Tracked.html

To me, it sounds like the regulation affects companies, not individuals. And it only affects gold and silver in the way it affects any purchase by a company. I talked with a reputable gold dealer recently and they are not concerned about this, but of course they would say that. Anyway, it’s voluntary just like tax returns. Sure, a law means it can be enforced, but enforcing something like this seems way out of scope of an already bloated and inefficient government that is overloaded with more and more regulations generating more and more reports.

Posted in Gold | Print | No Comments »

21/07/2010 by Philinje.

So far, my theory about gold and the Euro seems to be proving true. As the Euro topped at 1.30 and then begain to decline yesterday, gold reversed off its $1175 low.

Though the correlation is far from perfect, and it is not the case that gold and the dollar are perfectly in lockstep, on the whole a loose correlation seems to be there. I have not heard or read anyone talking about this fundamental shift from the dollar to the Euro. It’s just something that I’m observing.

Regardless, it seems the odds are increasing that gold might be due for a tumble sometime soon. Equities are not looking good and if they should swoon, gold will likely take a hit. Maybe not that big a hit. Best case, $1150. Worst case, $950. If it goes anywhere below $1040 for a length of time, the inverse Head and Shoulders will be invalidated.

Supposing that the inverse correlation with the Euro continues, then I can’t see much potential upside just from that relationship. The dollar is really losing its luster as all the economic data point to a big slowdown and a possible return to Quantitative Easing. So the Euro may go back to being the anti-dollar and not move a whole lot lower.

By that time, maybe the inverse relationship with the dollar will come back as the dominant influence. Between now and then, we might have a repeat of late 08 when de-leveraging caused everything to decline. Maybe this time too the dollar will spike, but probably not as much as the Yen. And maybe gold will function as more of a safe haven than it did then, because currencies are getting more worthless in general.

Anyway, it’s time to be cautious. Gold might have a bounce here and then things could get ugly. Or it could ease off slightly and then head up again. Or it could keep heading up. But end of July is probably not a strong time for gold and it could be vulnerable to a pullback.

Posted in Gold | Print | No Comments »

18/07/2010 by Philinje.

While waiting for Monday’s action in the Euro and gold, here are a couple of articles from mainstream sources that give overall views on gold:

http://www.bmgbullion.com/lib.pl?rm=show_document&record_id=721

http://opinion.financialpost.com/2010/07/16/can-gold-be-a-haven-for-all-of-inflation-deflation-and-stock-crash/

Note that mining stocks are more vulnerable to a large correction should equities tank.

Lets see what happens early this week.

Posted in Gold | Print | 4 Comments »

16/07/2010 by Philinje.

The theory I’ve been developing for over a month is that gold is tracking the Euro more than the dollar, inversely. In other words, as the Euro goes up, gold goes down. That also means as the dollar goes up, gold goes up, but not as directly.

In other words, the old inverse relationship with the dollar has shifted to the Euro. This may be temporary, and all theories are pointless in the face of blatant manipulation. But it makes sense. The last surge in gold was due to panic in Euroland. Now that that’s subsiding, the safe haven flow into gold is subsiding as well, especially among European investors.

The truth is, gold and the Euro are always in an inverse relationship, as is true with gold and every currency. It’s just a question of emphasis and leading influence. Not long ago, the dollar exerted more influence.

For a sobering view on the dollar and the state of the US economy, check out this article from the UK:

http://www.telegraph.co.uk/finance/currency/7893238/Feds-volte-face-sends-the-dollar-tumbling.html

What we’ve seen over the past few days are sudden moves up and then down in gold, as if it is caught in a cross-current. My guess is the demand for gold is still strong but the currency influence is caught between the Euro and the dollar.

I am personally worried about gold stocks at present because it looks like equities might be rolling over, possibly into a big drop. Here is one reason for this view:

http://www.gainspainscapital.com/

But the gold stocks have been less volatile than general equities and to some degree have separated from them. So we’ll see. They are taking their cue from gold more than anything these days.

The big question is where does gold head from here? I think we may have hit a peak in the Euro today, precisely at 1.30, as I had speculated a couple weeks ago. If it turns around from here, that could be good for gold.

But the dollar is looking fatally weak so that might not happen. In which case, if the dollar continues to drop, we can hope that gold will start taking its cue from the dollar again. No sign of that recently but maybe a shift is occurring.

Looking at the Yen pairs, it’s clear that risk aversion is rearing its head again. The Euro and pound have not made much progress against the Yen and are at major resistance levels that not long ago were major support levels. So I lean toward the Euro dropping. And maybe that will be good for gold.

We’ll see soon enough.

Posted in Gold | Print | No Comments »