While we sit and watch gold and silver trade rangebound, I thought today would be a good day to look around for clues as to future trend.
So, let's start with gold and silver. On these hourly charts, you can see where the metals have now been stuck for over 8 trading days. The snapback rally from The Washout lows of 4/15 has stalled. What happens next will likely determine whether we see a continued rally into the summer or a fallback and retest of the lows.
Let's look first at the currencies. The 2-month rotation from the euro to The Pig has stopped but now what? Euro 1.32 would be the first thing to watch. A few closes above there would confirm that a move back toward 1.36 is coming instead of a fallback toward 1.28. Of course, additional euro strength would translate into POSX weakness and a drop below 81.
And in The Race To Debase, it's fun to keep tabs on the yen. Though there has clearly been a reluctance to drive price through "par", that's seemingly just a temporary phenomenon. And, once 100 decisively gives way, look out below!
Continuing our search for clues, let's now look at Copper and Platinum. Old DrC is more important in assisting the short-term direction of gold and silver so let's start there. Note the clear double bottom on this daily chart and then the bounce which has carried copper UP and through the trendline from the major selloff that began back in February. Now what? As long as copper stays above 3.30, it looks to continue to bounce back.
And platinum isn't anything to "write home about"...I mean, look at the 3.5 year range. Ick! However, note that it once again bounced off of $1400 support. This is encouraging and further suggests that the coordinated raids that drove gold through $1525 and silver through $26 were overdone and contrived. A rally now, back up through $1520 in platinum will portend higher prices for the PMs.
And, finally, look at crude. Note that, besides being stuck in a $15 price range for over a year now, since QE∞ was confirmed back in December, crude is UP over $10 or nearly 15%. Hmmmm. The massive, gigantic, global energy market for crude oil (difficult to manipulate)...which is (at least for today) priced in dollars....has rallied since December. At the same time, the comparatively tiny paper gold market (easy to manipulate) has declined by 15% from $1700 to $1450. <sigh> At any rate, IF crude can extend here and move back into triple digits, it will make it nearly impossible for gold to trade to new lows.
Conclusion: The Pig looks weak while the euro is trending higher. The Yen is about to drop sharply again. Copper and crude are rallying and look like they might be ready to extend gains. Regardless of the nonsense, computer-based, momo-chasing shenanigans, the metals look poised for a summer rally, not a further selloff.
OK, what else is there to talk about on this fine, spring morning? Let's start with this from ZH. Well, whaddayaknow? Chinese physical demand is on fire? You don't say?! Look, either this reverses or eventually this demand must be reflected in the paper price. https://www.zerohedge.com/news/2013-05-08/chinese-gold-imports-soar-monthly-record-insatiable-demand. Here's the most important chart from the story. And note that this is for MARCH. How high will the orange bar on this chart for April reach when it's updated?
Then, of course, there's this, too: https://www.bloomberg.com/news/2013-05-08/gold-imports-by-india-seen-topping-100-tons-for-a-second-month.html. And don't forget about Turkey and Russia and South Korea and Vietnam and...
And remember, all of the paper momos have neither the intention nor the ability to deliver. Therefore, at some point, they must cover. Throw in the fact that total Comex registered gold now sits at just 57 tonnes and the stage is certainly set for a significant squeeze/rally.
Echoing this idea is one of my two, favorite technical analysts, Citi's Tom Fitzpatrick. Read this immediately: https://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/5/7_Gold_%26_Silver_Setting_Up_For_Spectacular_%26_Massive_Surges.html
And the GLD continues to be drained. It has lost another 7.82 tonnes just this week. That's another 3+ pallets. You're led to believe that this is normal and logical. "Investors" are "reallocating" away from precious metals and the gold is simply being returned to AP vaults. But if that's the case, tell me again why the SLV inventory is up on the year while GLD is now down 21.6%. What if that's not the case? What if part of these "reallocations" are actually redemptions of paper for physical? Hmmm. When, eventually, "investors" come rushing back in, from where will the APs get physical gold to replenish the fund? (Maybe they can borrow some from the Chinese? They seem to have a lot.)
So, there you have it. You can get all freaked out and fall head-over-heals for the disinformation and SPIN regarding an "end to the gold bull market". But I ain't buying it! My story has been and continues to be that this is all a contrived selloff, initiated by The Gold Cartel when QE∞ was announced last September and confirmed last December. The goal was to shift as much as possible the paper burden and risk from the banks to the private sector (hedge funds, etc). And it's worked! Check this out. QE∞ was announced on 9/13/12. On 9/11/12, the CoT for gold looked like this:
- The Gold Cartel was net short 237,091 contracts. That's 23,709,100 troy ounces or a whopping 737 metric tonnes of paper gold.
- The Large Specs were net long 182,016 contracts and the Small Specs were net long 55,075.
As of last Tuesday the 30th of April, look at the difference:
- The Gold Cartel is now net short 95,563 contracts, a reduction of nearly 60%! And they've reduced their potential delivery obligation by 440 metric tonnes to 297!
- The Large Spec net long position has been cut in half to 97,052 and the Small Specs are actually net short 1,489 contracts.
- And if anybody doesn't have gold to deliver, it's the Small Specs. And they're short 148,900 ounces. That's over four and a half tonnes! That's 372 London bars or two of these:
The final move to all of this was the harvest of all the remaining sell-stops below $1525. This in turn led to additional Spec shorting into which The Cartel has been buying. And now it looks to be over.
Could I be wrong? Of course. Could the hammer fall again and prices make new lows? Sure. But it truly doesn't matter. Any further price weakness will only strengthen the banks' position and lead to an even sharper rally when The Specs are finally forced to cover.
So be diligent. Keep your wits about you and continue to stack. A summer rally from the April lows looks likely and imminent.