Money Talk Daily

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.

It’s just plain a lousy chart if you are a bull. Look, I hesitate to even post these things because somebody might actually conclude something from it and take some sort of action. If you wish to do that, you’re on your own. I offer no assurance that gold will move in either direction.

Nevertheless, for some reason we peaked out short term at around $1,475 and fizzled out after that. I continue to believe that the paper market for gold is not a freely trading market. Thus, I’m not sure what good technical analysis is. If there are market forces that can sit on the bid or go massively short, how are you to determine where those support and resistance levels are? It’s not going to appear on your favorite financial news channel. And trying to divine where those points are from chart reading is likely to be unproductive. You may feel like you know what’s going on, but feelings are a poor substitute for solid research.

That said, the economy is not fixed, the recession of 2008 never ended, huge debts continue to be accumulated by central governments in amounts unprecedented, forces within those governments remain at loggerheads as to what should or can be done. And then people believe that this will all work out okay. It’s not going to work out okay. At some point, central governments and central banks will no longer be able to keep all the plates spinning. And when those things come unhinged, it will be breathtaking. And then you’ll see these precious metals charts go vertical. When will this happen? I don’t know, but I doubt it will be more than a year from now.

Here’s the depressing chart for your enjoyment which can be enlarged by clicking on it if desired.

These are frustrating times for gold bugs who, seeing the fundamentals for gold being strong, yet see the metal languishing.  The world remains in various stages of multiple financial crises, however thinly disguised those crises may be.  They make the case for much stronger precious metals prices and mining stock prices.  In fact, some might argue that the mining shares are ridiculously low in price.  Yet arguing with the markets can be an expensive and nerve-wracking project.  The prices are what they are and we must deal with that fact.

That brighter days are ahead for precious metals bulls seems to this writer to be almost a given.  There is no such thing as patching over financial problems forever.  The magnitude of the problem correlates directly with the magnitude of the required resolution.  That being the case, the resolution to decades of financial mismanagement is not going to be pleasant.  If you’ve found a better haven for weathering that storm that precious metals I’d love to hear it.

Click on the weekly charts below to enlarge if desired.

If you’re surprised you shouldn’t be.  Resistance is turning up right where we expected.  It needs to clear $1,475 in order to make an assault on the 50-day moving average.  Clearly the bulls, having gotten taken to the woodshed a couple of weeks ago, are in no mood to challenge the bears – yet.  And there is no rule stating that another nasty downdraft couldn’t happen.

Again, we await some form of positive catalyst to get gold back into a solid bull market.  And that means gold rising by about $150 to get above $1,625.  I don’t think this will be a smooth process.

Check chart to enlarge if desired.

It’s taken a week or so, but the losses gold sustained on Monday two weeks ago have been recovered.  Of course, we’ve not begun to deal with the equally ugly losses the Friday before that.  If you look at a daily chart, gold has been living under its 50-day moving average for several months.  This is not even close to the kind of action bulls want to see.  Yes, some technical indicators have flipped positive in the past couple of days.  But for starters, this thing has to get above $1,500 and hold that at minimum.  Then we need to close above $1,540 so we’re above the 50 DMA.  Next is the biggie – getting above $1,620 and staying above that.  Each of these accomplishments will tend to flip the hedge funds into a buying mode as opposed to selling the rallies.

I would anticipate a continuous bombardment of negative opinion against gold from the typical media sources.  Believe them if you wish.  Likewise, if you believe there are brilliant, magnanimous people in high government and financial positions working solely for the best interests of the citizens of their countries, that’s your privilege, too.  Good luck with basing a financial strategy on that belief.

Click to enlarge chart if desired.

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.

Okay, so today erased yesterday’s losses which erased Monday’s gains.  It is clearly constructive to see the market on a daily chart start to move up.  Backing up a bit for a longer term view to look at a weekly chart doesn’t inspire a lot of confidence – yet.  Sort of like many of our political and financial leaders…

The financial crises are real, and to some degree, non-fixable – at least not using any conventional tools.  And to get off track a moment, who would have ever thought a health care system would be enacted into law that hits senior citizens?  Something is very wrong financially in the U.S.A. for that sort of legislation to make it into the law books.  A good reason to hold precious metals?  I think so.

Click to enlarge chart 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.

So we start off the week with another up day for our precious metals.  I don’t trust this so-called rally, however.  That’s not to say a lower price is in our future, just that we can’t rule out a double-bottom pattern appearing.

Our fundamental reasons for holding precious metals remain intact. In fact, it’s not hard to build a strengthening case for holding precious metals.  So it boils down to a matter of guts.  Have you done your research?  Do you have a plan that includes actions to get you out of the way if things don’t go according to plan?  If not, you’re playing with fire – especially if you are in the futures market for gold or silver.  Beware volatility.

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.