Yuck. This week is turning out to be one that I'll want to forget. I had thought/hoped it would be a volatile week with new money finally flowing back into the PM pits. Wrong! Just the same old, same old.
For a few, fleeting moments on Monday, things looked pretty good. Gold was pressing up against resistance at 1680 while silver was making another charge at 32.80. The POSX was weak and it looked like we were ready to roll. What happened? Well, we got our clues yesterday in the open interest report from Monday. For those who missed it, I mentioned the report in the comments section of the new "Wicked Witch" video:
"Gold, which was UP $14 yesterday, saw total OI fall by almost 2,000 contracts. Lots of Cartel short-covering drove the rally. Between Friday and Monday, gold rose almost $25 in price yet total OI fell by almost 5,000 contracts. We are clearly seeing a continuation of the pattern where gold is rising primarily due to Cartel covering, not new spec money inflows. Look for the resistance area between 1680 and 1705 to hold price in check for a while longer.
Silver lacked excitement, too. Total OI fell by 1,400 contracts even though silver was UP 60 cents on the day. It would seem that the move yesterday was almost entirely upon the backs of EE short-covering and not follow-through buying related to front-running the additions to PSLV. This does not bode well for the very short-term price of silver. $32.80-33.00 will likely continue to serve as a cap for silver price for the time being."
Today's action confirms these thoughts. Don't forget, too, that tomorrow is option expiration day for the Feb12 contract. Gold will probably swing around 1650 for the next few days like that level is some sort of magnet.
At any rate, we're certainly not seeing the rush to the upside that I was secretly hoping for this week. Instead, this week just looks to be the continuation of the recent trend. Money flows in one day and then The Cartel and The EE suck price back down in the days that follow. Until and unless we get some technical breakouts and/or a strong fundamental change (like QE3), the pattern will likely continue.
You should also review again these two charts from Monday as the time since has only served to validate them.
For now, The Pig isn't helping things, either. We had the big drop from 82 to just below 80 but the commodity sector failed to really respond. Now, as speculated on Monday, Pigatha is bouncing from the lows and appears headed back up toward 81 or so.
And, just for fun, take a look at this chart of the ES (mini S&P 500). With all of the turmoil and uncertainty in the world, the last thing you would expect would be a simple, low volume melt-up in equity prices. However, when the only entities left trading the market are the PPT and Primary Dealers attempting to front-run it, this is what you get:
Finally today, a few odds and ends. First up, this fun video someone found of Glenn Beck. In it, Glenn cites a theory from a Rutgers University professor that "The Wizard of Oz" was actually written as a metaphor for the battle regarding sound money arguments of the late nineteenth century. Hmmm. I don't know about that one but its worth watching if only for what happens at the end.
Someone just asked me for an updated weekly chart of gold. Here it is. Note that the "pennant" will be closing soon. Since none of the fundos have changed to disrupt the now three-year old pattern and trendline, I fully expect the pennant to be broken to the UPside.
Lastly, as you know, loyal Turdite "fortinbras" has a job that takes him all over the world. He sent me this picture earlier today. Fortinbras, DuranDuran and a Big Yellow Hat...all in Bratislava. What a combo! He promises more pictures as he travels the globe. I can't wait!
OK, that's all for now. Hang in there! TF