Money Talk Daily

Here’s the latest from John Williams of ShadowStats.com. If you’re not following his work, you are not properly informed of economic matters. It’s just that simple.

- Inflation Remains Very Much a Threat
- April Year-to-Year Inflation: 1.1% (CPI-U), 0.9% (CPI-W), 8.7% (ShadowStats)
- CPI Decline Boosted Real Retail Sales, Re-Intensifying Recession Still Signaled
- April Housing Starts Showed Statistically-Significant Plunge

There is no point in looking for things that do not exist. If you are a technical analysis aficionado, the weekly gold chart is just ugly. Where do you look for support, over two years ago? Is support that distant in the past even relevant?

For those of us who still believe the fundamentals of gold and silver auger for much higher prices, we wait. It’s no fun. But to at least give you some encouragement, I’ll post a monthly chart going back several years. Now put your technical analysis hat back on and things don’t look too bad, do they?

If you want to day trade or swing trade gold futures, good luck. I can be of no help to you. As I’ve said before, I do not believe the precious metals are freely trading markets – too many gigantic players with virtually unlimited funds participating in what are relatively small markets with “interesting” motives.

If you can configure a plan for the long haul, I think you will be happy.

Here are the weekly and monthly gold charts. Click to enlarge them if you wish.

We often defer to the expert work of John Williams’s of Shadow Stats.  Reason?  It’s impossible to do any sort of economic forecasting without accurate data.  Is the government’s data accurate and free from manipulation for political purposes?  What do you think?  And before I get drug into a partisan dispute, let me say that I believe this problem exists regardless of which political party occupies the while house.

Here’s what Mr. Williams has to say:

- April Retail Sales Gain Was Statistically-Insignificant, Annual Growth Still Signaled Intensified Economic Downturn
- Dollar Fundamentals Remain Abysmal

And here’s how to get a subscription.

Now we’re getting to the point of erasing the damage done by that  horrific decline a week ago last Monday.  That does not mean we have a bullish chart.  It does mean the bears have been slowed down – for now.  A solid weekly close above $1,500 would be further evidence that the bears are losing control.

And well they should.  As we’ve repeatedly stated here, all sorts of factors are in place that point to an upcoming currency crisis in the U.S. and globally.  If you are going to be a bear in the precious metals markets, it would seem you need to demonstrate that central planners, especially international monetary officials as well as central bankers are incredibly skilled and are unified around a plan that will solve the enormous debt problems plaguing the global economy.

Good luck with that.

Click on chart to enlarge if desired.

Today gave up most of yesterday’s gains in gold.  Does this mean anything?  That depends on what you’re really asking.  If you’re looking at the big picture financially, the answer is no.  One day doeth not a trend make, as we’ve said here many times.  If you’re a wild-man (or woman), bouncing in and out of the futures market, I’m not sure it means much either.  Could we have a dramatic move in either direction?  Sure.  Which is more likely?  Weakness in gold is still the correct view short-term I would say.  Long-term?  Who knows how high it can go …

What kind of trader/investor are you?  What’s your time frame?  What’s your risk tolerance?  Answer those questions and a few others before you read much into today’s pull-back.

Click on chart to enlarge if desired.

The title of this article sort of encapsulates how I feel about the week past.  Two positives:  what started as a very ugly week for precious metals is over, and gold did manage to claw its way back above $1,400.  The snag is it seems like gold closing above $1,400 was something I was talking about a couple of years ago.

The daily chart shows gold’s tepid recovery from the disaster that happened last Friday and Monday.  It does give one hope that a bottom has been found,  but I’m not convinced.   This is a market that is not trading freely, a world financial situation in turmoil, and geopolitical problems that are severe.  To try to run a bunch of technical analysis on precious metals charts and make a firm prediction seems to be a waste of time.

The degree that you are on margin in any precious metals positions is the degree to which  you could get your head handed to you.  Beware of increasing volatility.

Click on chart to enlarge if desired.

Well, we’ve a couple of days of relief from the incredible pressure that’s been on the precious metals.  (Something our friends over at APPL can’t say.)  Of course, this is relatively meaningless.  Gold appears to be looking for a bottom, but there is no assurance at all that we won’t see a modest rise followed by another fall to form a double-bottom pattern. As we’ve discussed here, the forces impacting precious metals are severe – and not exclusively from normal market factors.

So, as much as I’d like to say otherwise, we continue to watch and see what happens. The world economic system is in turmoil. And the “iceberg” metaphor is appropriate – we’re only seeing part of the crisis.

Click to enlarge if desired.

One day does not a new trend make.  Is this a capitulation where pretty much all of the longs are now out of the market?  Is this a head fake with more downward pressure on the precious metals market by our “friends” the bullion banks about to recommence?  Recall that the major financial institutions are in business to make money – and lots of it.  And they can make money on either side of the market.  And they certainly do.

And there are other players in this battle as well.  China and Russia come to mind.  Of course the United States isn’t sitting this out at all.

So now what?  I’m still long, only with a smaller position than I had at the beginning of this debacle.  I wait and watch.

Try to control your emotions and think this thing through rationally.  Think about why we’ve had a bull market in gold since around 2001, what caused it, and what is the likelihood of those factors still influencing the markets, manipulation notwithstanding.

Click on chart to enlarge if desired.

Although Thomas Paine was writing about a different situation, the quote still applies.  Gold and silver have been smashed. And those who trade futures are out and licking out wounds.  Those who have physical are in better shape.  The chart shows nothing encouraging.  And the best I zcan muster is that this is an orchestrated Gold and silver have been smashed – worse than anything we’ve seen in many years.  Those of us who trtake down of the almost unthinkable measure.  The forces that will eventually compel a higher gold price are still there, yet they have been attenuated by almost unthinkable manipulation.  Ad to that the continuing crisis is North Korean, the tragedy in Boston, andn out favorite day of the year, April 15, and you have a hard time being optimistic at all.  Yet what is the consequence, give up?  Then what?  So we solder on.

Here’s the ugly picture, as if you haven’t seen it already.

Obviously today was not a day that brought joy to any gold bug.  It occurs to me to comment at this point that we want to avoid two extremes.

Extreme #1 – The precious metals market trades as a textbook free market just like we all learned in freshman economics.  It is simply interplay between buyers and sellers freely establishing an equilibrium price.

Extreme #2 – The precious metals markets are controlled by a secret cabal of those with mystical ties to ancient societies hell-bent on establishing a new world order with (fill in the blank) in charge.  Malevolent forces are being called into corporeal existence to rule over all.

It doesn’t take a lot of work to figure out that #1 isn’t true.  The markets for precious metals do not trade in any normal sense.  There clearly is manipulation as the price of gold is a signal flare indicating problems in the economy or lack thereof.  The global financial system is under incredible stress – no doubt more than we realize – and those at the helm of various major national and international financial institutions are not eager to have gold shoot up and consequently sound the alarm bell world-wide.  So they or those they sponsor are active in the markets.

Extreme #2 must be avoided to keep this in perspective.  I’m not interested in tin-foil hats or wild conspiracy theories that are so prevalent on the web.

There will be increasingly violent moves in precious metals as various sovereign entities acquire the metals, while various financial institutions, some government sponsored, attempt to hold the price down.  As they do sit on the price, however, they play right into the hands of those who wish to hold gold.  This situation will resolve itself at some point.  But the ride will not be smooth.

Click on chart to enlarge if desired.

While we enjoy another up day in the precious metals markets, keep in mind that we’re about a whole lot more than just gold & silver investing and trading.  If you look at that menu a bit down the page and on the left side you’ll see topics such as:

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Our weekly chart here shows support for gold holding nicely, so far.  Clearly there are value buyers of the metal who arrive on the scene when weakness appears.  End result is we likely have seen the bottom.  Of course, we cannot be sure of that, but the longer this support holds, the more confident we can be in purchasing precious metals.

And what’s the alternative?  Cash which is being created by our government and others in amounts unprecedented?  Not me.  Pile in to the equities market?  While the are some values there, I suggest those values might be found in the precious metals sector.  Invest at your own risk.  Government bonds with historically low interest rates?  I pass.

The global financial system is not stable.  Some nations are able to obscure that fact a bit better than others – for now.  Most people are busy enough with their own lives such that they don’t have time to make a detailed analysis of the risks inherent in various assets.  So the train rolls down the track until we have a derailment of epic proportions.  Will it be sudden or over a period of time?  I suggest both.  There will be a series of shocks over a period of time with a greater proportion of the population waking up with each train wreck.

Be careful out there.

Click on chart to enlarge if desired.

Our precious metals got hammered these past two days. That’s bad enough. Unfortunately, I tuned to a major television network where a newscaster was claiming that gold and silver were down because things in Korea are looking better. No wonder people don’t know what to do with their money.

Precious metals are off because select financial institutions working in concert with select central banks are sitting on the prices of gold and silver in an attempt to hide the financial crisis the world faces. The last thing they want is skyrocketing gold & silver prices calling attention to the insolvent state of commercial banking and national governments as well as the exotic financial derivative instruments that cannot be unwound.

The nice thing is this manipulation can’t go on forever.