The bigger question is: Why? Why was "The Iron Dome" held so desperately in place for two weeks in November? Then, after the Black Friday breakout, why has gold been so savagely and consistently beaten backwards?
It's hard to say for sure and I'm certainly open to hearing your suggestions. To me, The Iron Dome represented a critical line of defense. Once above $1735, the only remaining hurdle for gold was $1755 which, not coincidentally, is exactly where the Black Friday advance was halted. Once through $1755 and it is clear to everyone that gold is headed back to and through $1800. Maybe it's more complicated than that, though? Maybe there are massive derivative positions to protect? Maybe price is being held here as BBs desperately attempt to repay underwater leases ahead of QE∞ and skyrocketing prices in 2013? Again, it's hard to say for certain and I look forward to reading your theories.
Another reason for the brutal, two-week smackdown is this: At the close on Black Friday, gold was above all of its moving averages which, from a purely technical standpoint, made it very attractive to the momo-junkies. Now that it has been successfully broken down, it has fallen through its 20-day ($1726), its 50-day ($1737) and its 100-day ($1701). The only remaining line to challenge is the 200-day which is near $1671 and this is very likely where we are headed. But I think we will bottom there. Why?
- $1672 is where gold bottomed on November 2nd.
- Gold rarely plunges or soars through the 200-day. It usually bounces.
- The $1675 area is the median line of the entire 2012 range of roughly $1550-1800. Trade has often centered around 1675 as price tries to determine which way gold will trend next.
And I have to believe that the next trend in gold is higher and toward the top of the range, not lower and toward the bottom. Absent some deflationary spiral (which global central banks have been fighting against for over 4 years), the trend as we enter 2013 is toward much more quantitative easing and fiat devaluation. Much more. To the tune of total debt financing by The Fed. Add to this the unquenchable and growing, global desire for physical metal and you get rising prices and an UP trend, not gold languishing again below $1600.
Now I must admit that silver ain't looking too hot here. It had held in there much better than gold but the action this week makes the chart look kind of lousy. The 12-hour chart has been painted with a classic-looking failure at $34.30. Price ran up on Black Friday and then was beaten lower. It tried to immediately recover but it subsequently rolled over again and now it's breaking down. Not good. Though it has been holding $32.80, I expect price will fall into the broad 32.20-32.80 support zone and that may not be it. Silver is now below its 10, 20 and 50-day MAs so it is at least possible that it be pressed down toward its 100-day, near $31.75. That line coincides with horizontal support so any steep selloff should end near there. Boyohboy, IF that were to happen, I'd be backing up the truck. NONE OF THIS discourages me or alters my opinion regarding silver's prospects for 2013. Just remember (and it is the holiday season), like Cousin Eddie says, "The Cartels got a little Mississippi LegHound in 'em. Once they set on ya, you best just let em finish."
I've got to run now to get ready for the webinar this morning but before I go, I'll leave you with the latest Keiser Report as ole Max visited yesterday with our pal, NN-L. Great stuff, as usual.
Speaking of the webinar, it begins at noon EST, about an hour from now. Both Andrew Maguire and Paul Coghlan will be speaking so I strongly encourage you to listen in. There's still time to register for both the live call and the recorded playback. You can do so here: https://www1.gotomeeting.com/register/240678176
Have a great day!