On Shaky Ground
I feel like I must apologize for doing this to you. No sooner did I hit the "enter" button last evening on the previous update did the PMs begin to swoon. In hindsight, it's clear that last evening was when word began to trickle out.
Let's see...the dollar is down. Crude is up. Copper is up. The grains are up. The PMs are way down and have been beaten down in stages since last evening. Why? Let's just say the The Turd will be stunned...no, flabbergasted...if margin hikes in gold aren't announced before 7:00 pm EDT today. The way that today's selling has come in waves is entirely consistent with trading patterns from previous days where hikes have been announced. The criminal C/C/C lets a little word out to their friends in advance and down she goes! Not only are longs getting liquidated, they're getting turned into shorts for maximum gain. That's 2X selling pressure and more than enough to flatten anything in its path.
Considering a gold margin hike is a given at this point, the questions to ask yourself are:
1) How big of a correction is coming?
2) Could this end up being a "sell the rumor, buy the news" type of event?
I have a last in the Dec gold of $1830. The high last evening was 1917.90. (NOT coincidentally, the early evening Globex high on 8/11, right before the previous margin hike, was 1817.60. Almost exactly $100 lower.) This means we are already down about 4.6% from the highs! The correction after the last hike was almost exactly 5.001%. A 5% correction here would take gold back to 1820. Hmmm. That number sounds familiar. 1818 is the former high and should now act as support. A 10% correction would be about 1726. Wow, that's an interesting number, too. The low after that last margin hike was 1725.80. Whaddayaknow...
The 1818 level really is pretty important technically so we need to see gold hold it there. I suspect that a greedy EE will jam it through 1818, though, and if 1800 fails, you're going to see gold trade all the way down into 10% correction territory. At that point, it would make for another compelling opportunity to get long again.
Silver's a different story, It's getting dragged back with gold today as the fast-buck HFT algos are quickly selling away the same silver they just bought back on Friday and Monday. I can't imagine it's getting its margins raised too, but, who knows? Maybe The Forces of Darkness will try to hit the daily double. We'll see. If the margin hikes are in gold only, then you'll likely see some recovery action in silver tomorrow. At any rate, I'd like to see silver hold above 41.70 for the rest of the day. I'd said just yesterday that the EE might get greedy and try to take silver all the way down to 41.50 and, if they did, 41.50 would be a "tremendous opportunity to buy". I still feel that way. Let's see how this plays out over the next few hours and into tomorrow.
OK, that's it. I've had enough of this for today. I think I'll head to the gym and burn off some stress. TF