Since it is abundantly clear that the chart-painting of May was in preparation for June, it's best that we take some time again today to look forward to the month ahead and make some projections.
Again, the painted pennants of May were designed for the sole purpose of inspiring Spec selling in June. The Cartel Banks use this Spec selling to buy, taking the other side of the trade and closing short positions. We saw this in last week's CoT data. We'll see more of it this week and in the BPR, as well.
All of this did not conclude with last week's $40 downdraft. Too much effort was made to set the table so there is almost certainly more weakness to come. Further evidence was presented this morning when a lousy ADP resulted in a measly $4 price rally, a rally which was almost immediately unwound back down. The result is the chart below. Recall what you know about holding patterns like this. Namely, they almost NEVER resolve themselves to the UPside. Think of those two 12+ hour periods two weeks ago where price was inexplicably held in a $2 range. What happened next? Downside. Well, what do we see here? Regardless of news, the price of gold has been held in a $5 range for three days!
For me, this simply confirms the fact that They are not going to allow prices to snap back higher...at least not yet. There's still work to be done and positions to cover. I laid this out in last Friday's podcast. Do you recall seeing this?
DATE LARGE SPEC NET LONG COMMERCIAL NET SHORT PRICE
6/25/13 +24,000 -35,000 very near $1180 bottom
12/24/13 +27,000 -27,000 very near $1180 double bottom
5/27/14 +73,000 -78,000 $1265
5/30/14 (proj.) +55,000 -55,000 $1251
5/30/14 projection based upon Wed-Thu OI drop of over 23,000 contracts
So, The Forces of Darkness will be working to cover shorts this month. That much is a given. But what else is going on? Let's look back at June 2013 (close of H1 2013) and December 2013 (close of H2 2013) for clues as we are now closing the first half of 2014. Let's also take the shifting GOFO changes into account, too.
As you know, GOFO was positive for 5,993 days of the previous 6,000 until the contrived selloff of 10/1/12 - 6/30/13 concluded. Then, after gold bottomed on June 28, 2013 at $1180, GOFO slipped negative for the first time since 2008 and stayed there for an amazing, 40 consecutive days. Over that time, price rallied nearly 18% from $1215 to $1430. Price then drifted downward as GOFO oscillated from negative to positive, culminating with a Double Bottom on 12/31/13 at $1180. GOFO had once again turned negative in late December and spent half of January in negative territory. It then flipped negative again on 2/4/14 and stayed negative or near zero until 3/17/14. From the low of $1180 on 12/31/13 to the high of $1392 in the wee hours of 3/17/14, gold rallied again by nearly 18%.
So, here we are. Just as in June and December of last year, a calendar half year is coming to a close with price being pressured and GOFO rates in positive territory. Knowing that these "markets" remain fully-controlled by The Bullion Bank Cartel, why on earth would we expect price action in June to be significantly different from June or December of last year? Oh sure, fluctuation by date will vary and GOFO negativity or positivity will vary, too. However, the song remains the same. Wash, rinse, repeat of The Spec momo sheep.
Here's a daily chart of the last 12 months of price action. Note that once GOFO flipped and stayed negative on 7/8/13 and 12/19/13, The Forces of Evil could not break price any lower.
Last June looked like this:
6/7/13: -$33, 6/13/13: -$14, 6/18/13: -$16, 6/20/13: -$88
Price then washed out and reversed on the very last day of the month, Friday 6/28/13.
Last December looked like this:
12/12/13: -$32, 12/17/13: -$14, 12/19/13: -$41
Price then washed out and reversed on the very last day of the month, Tuesday 12/31/13.
So, here's the deal. DO NOT get itchy to buy or get long...YET. Let this play out. Take the month off. Whatever. Since there is no reason that this month shouldn't work out just like last June or last December, just chill. Take a vacation (I plan to.) Turn off your computer. Raise a mountain of dry powder and wait. Lay in the weeds with full knowledge of what is coming and then pounce later this month. Don't be fooled by the first time GOFO slips negative. Recall that it did so on 12/9/13 only to move back positive on 12/12/13 before moving decisively negative on 12/19/13 ahead of the 12/31/13 Double Bottom.
Of course, in the long term, it matters little whether you add to your stack at $1240 or $1200. I get that. And anyone simply stacking should be sure to add on a consistent basis. For traders of metal and/or miners, however, the main opportunity awaits. Just give it time to present itself and don't get antsy.