Breakout or Fakeout?
That's the big question today? There's all sorts of lousy economic news out there, which is weakening the dollar and USDJPY, which in turn is driving the metals higher. So, is this a breakout to new highs or just another fakeout before a massive Gold cartel raid?
And that's the dilemma this morning. For the past two weeks, I've been giving you that chart with the trendline that goes back to New Year's Eve. This line was pressing up against what was clearly a Cartel-painted cap. And now today...the day before the BLSBS...a BLSBS that will be used for the next 10 days to rationalize/justify whatever Mother Fellen announces on March 16...prices break to the UPside. Not only is gold back above $1250, but silver is back above it's 200-day MA, too. See here:
And what I can't get out of my mind is October 28. Back then:
- Gold had been aggressively capped for two weeks at/near its 200-day MA
- Silver was also being capped at its 200-day
- Both Cartels had recently built up massive NET short positions defending these levels
- That day brought the conclusion of an FOMC meeting with Fedlines at 2:00 pm
- And both gold and silver rallied. Gold did NOT make new highs but silver did, reaching all the way to $16.38 and seemingly drawing in every last single Spec long
- Here's the post from that morning: http://www.tfmetalsreport.com/blog/7237/pre-fedline-rally
- Price was immediately smashed at 2:00. This began just another Wash-and-Rinse cycle and price declined for the next six weeks, all the way to new lows.
I trust that you, my dear reader, can clearly see the obvious parallels.
So, what to do, what to do??
However, there does appear to be a major difference this time...and I'm not talking about sentiment or the HUI or the economy. As present, and as opposed to last October, and it's the all-important USDJPY.
Back in late October, the yen had already fallen sharply while gold was still hanging around its 200-day. Check this chart from the post of October 29. Can you see the relative gap between the two?
Here's a paragraph of text from that Oct 29 post:
"Since this remains the case today, it is incumbent upon us to watch the yen for clues as to the "relative" price of gold and the long-term trend. To that end, check the chart below. This is not the regular USDJPY but the inverted JPYUSD...the same forex pair as shown on the chart above. Note that, over the past two months, the yen is virtually unchanged at present but gold is slightly UP. Therefore, in forecasting how far gold might fall in this current Spec wash cycle, why not look to where gold was the last time the yen was at these levels? Hmmm. Looks to me to be around $1115-1120."
So, is this the case today, March 3? Not so much. The yen continues to rally and it's inverse, the USDJPY, continues to fall due to all of the reasons we routinely discuss here. Below is your current chart:
Therefore, I'm going to try to split the difference. They may try to raid tomorrow and I expect ole Hampton Pearson to cheerfully spout an NFP that mildly "beats expectations". However, even if price IS smashed, I DO NOT expect a full onslaught of selling...at least not yet. If anything, price will be driven back down toward the primary trendline, maybe even to the blue secondary trendline. From there we'd have to tread water and rebuild ahead of the March 15-16 FOMC.
However, there's also a possibility that the BLSBS will slightly miss expectations. This would cause a rally in the metals tomorrow and prices would close at new weekly highs for 2016. This would engender even more buying next week.
So, in splitting the difference, I'm trying to adjust the one trading position that I have left. At present, I still own one April gold $1300 call. I bought it three weeks ago and I'm up just a little bit on it. Instead of outright selling it today, I'm attempting to create a spread. This limits my downside but caps my upside...splitting the difference, you might say.
One more thing to watch today are the ass-kicking miners. I have a last in the HUI of 171.40. This is UP 5.52 on the day and is also new highs for 2016. Let's hope this continues, too.
Here are a few fun links for you to review:
And there's still time to register to join us for A2A with Alasdair Macleod at Noon ET today. As usual, we'll record the call and post it this afternoon in lieu of a podcast. https://attendee.gotowebinar.com/register/1122918404265611268
Have a great day!