Gold Market Related Stories

Mainstream news outlets are now echoing three interconnected stories regarding the gold market, which months ago could only be found among contrarian sites. This made me suspicious. . .

The first story is the "safe haven story". . .

"That's part of a widespread flight to safety that has seen investors dump anything perceived as risky — stocks, oil and currencies like the Canadian dollar — and put their money into investments that are perceived to be safer."

The writer compared the recent volatility prior to the 2008 housing bubble . . .

"'Investors are suddenly waking up to the risks in the market, pretty much like what happened in 2008,' said Robert Cohen, a portfolio manager at Scotiabank's Dynamic Funds."

It seems that they're cooking this story for something big . . . Will there be a big crash before there will be a spike? I can't avoid thinking this way after reading too much content about gold rigging. . .

I suspect that gold will really drop below 1000 USD that will make gold bugs capitulate and lead the financial analysts malign the PM sector once again. . . There is too much good news that make me suspicious. . 

" 'Many gold watchers think the stage is set for bullion to take aim at all-time highs. Citing investor fear that's currently pervading the market, "gold could not only reclaim $1,800 to $2,000 an ounce but actually move substantially higher," said ABC Bullion's chief economist Jordan Eliseo in an interview with the Australian Broadcasting Corp.' "

Source: Gold price over $1,200 has bullion buyers sure rally will continue

And then we also have been hearing a lot about this claimed trend change leading to the "gold-bull story". . .

"The monthly chart of Gold continues to give the most clarity on its prognosis. We have written about the importance of Gold holding support at $1180-$1200/oz, which it did this week. A monthly close above that support adds greater confirmation to a change in the primary trend. Gold has near-term upside potential to $1285/oz which marks monthly resistance and contains the 40-month moving average. Note that weekly resistance is at $1294. In addition, there should be very strong monthly resistance at $1330." 

"The odds favor Gold and gold stocks continuing to move higher before a correction begins. . . . Gold has upside potential to $1285-$1294/oz. The counter-trend moves within very strong trends occur quickly. Gold declined from $1264/oz to $1192/oz in less than three days while the miners (GDX and GDXJ) have corrected 9-10% twice in the past ten days. Unless Gold and gold stocks fall below Thursday’s lows then we should anticipate higher prices in the short-term. A bigger correction will come but not yet."

Source: When Will Gold and Gold Stocks Correct?  

"Now gold looks headed for $1314. A daily close over $1210 today will be bullish for next week." 

"Bullish over $1214.00 with $1234.70-$1249.70 and $1263.60 as price target 

Bearish below $1207 with $1199.90-$1194.80 and $1189.60 as price target 

Neutral Zone between $1207.00 and $1214.00"

Source: Asian Metals Market Update

"The upside action we’ve seen in precious metals since mid last month has been impressive. But what’s even more impressive is the fact that, generally speaking, we’re seeing mostly sideways trading and consolidation after each big upward move. That is traditional bull market behavior, and new buyers of both paper and physical are coming to this market at a rate that is exceeding the ability of the cartel to keep prices down. It appears that last month, the cartel was forced into a 'managed retreat' posture, to use GATA Chairman Bill Murphy’s term."

Source: 

Expert Analyst Warns Collapse of Paper Silver and Gold Manipulation May Be At Hand!

And as a result, we are told that investors are flocking into the PM sector. . .

Source: “Own Some Solid Currency, In Other Words … Gold” Warns Faber

But despite of these three stories, we have here a cautious gold bug. . . 

"However, I would surmise from our conversation that I am at least somewhat more open to the possibility that gold will blast off from $1280 without looking back, leaving in the dust all who were hoping to accumulate bullion and mining shares on weakness."
"Doug describes himself as agnostic on gold but nonetheless maintained a large short position for several years as a hedge against his Treasury portfolio while bullion was falling from 2011’s bull-market top near $1920. Last July, however, he began to accumulate gold near $1060, about $14 higher than the eventual bottom that was to occur in December. He did so partly for technical reasons, calculating that a 50% retracement of the 2008-2011 bull would bring gold down to around $962. His initial bids were nearly $100 above that level because he wasn’t looking to get in at the exact low, but to start accumulating gold when it looked like a good bargain." 

"My trading bias turned aggressively bullish in January with gold trading near 1090. More recently, for a short-term trade, I told subscribers on Wednesday night to jump on the April Comex contract at 1212. . ."  

". . . it has been my practice over the course of gold’s long correction to give rallies the benefit of the doubt to the extent possible. While we kept the $815 target in the back of our minds as gold fell, we were ready to put our skepticism aside if the hourly chart turned bullish. This time, however, I am being especially cautious – not out of fear that I will overestimate the rally’s power and longevity, but that I will underestimate it. We’ve become so used to bullion rallies that spike and then detumesce rapidly that this may have inured us to the real McCoy if and when it comes. If the current rally is indeed the real deal, we should see this confirmed by thrusts that turn minor “Hidden Pivot” rally targets into chop suey. The most immediate of them lies at 1280.00, whence, as noted above, a tradable pullback would become very likely. If the April contract makes short work of it, however, that would further shorten the odds that the rally is more than the bull-trap tease to which we’ve become accustomed. Moreover, and as I detailed here a week ago, an uncorrected push above the 1308.00 ‘Matterhorn’ peak recorded in January 2016 would turn the weekly chart impulsively bullish for the first time in years. That would provide the strongest evidence we’ve seen to date that the bear market begun in 2011 is over." 

"Whatever happens, it was predictable all along than any bull market in gold would develop in such a way as to leave even bullion’s most devoted supporters skeptical. Assuming the rally continues to make its way higher by fits and starts, on low volume and without a sustained push, you should start asking yourself now whether you might be in the group of war-weary gold bugs that the bull is trying hardest to fool." 

Source: Is a Bull Market Quietly Gathering Strength in Gold?

And this story appears to be a confirmation of my suspicion . . . 

"Gold will plunge to US$725 approximately by the end of March 2016 then go parabolic to US$3,500 approximately sometime between November 2016 & February 2017!"

It sounds like a combination of Phoenix Capital and Sol Padha. . . . continued rally of the USD and DJIA. . .

Source: 

Gold & Silver To Plummet By End of March – Then Go Parabolic!

And finally, listen to an expert in Chinese gold market . . . but his story is not about China. . . . It's Venezuela. . .

"Venezuela’s economy is in dire straits. Adding to failing economic policy by the government the country gets nearly all of its export revenue from oil, of which the price has declined roughly 70 % since 2014. Venezuela’s foreign exchange reserves are dwindling fast, from $24.2 billion dollars in February 2015 to $14.8 billion dollars in November 2015, while Inflation is said to be triple-digit and Credit Default Swap (CDS) data shows that traders see a 78 % chance on default, according Reuters. In an effort to avoid catastrophes the BCV has a very strong motive to employ its official gold reserves."

Will this decision of Venezuela to sell its gold holdings avert the current rise in gold price? This reminds me of UK announcement sometime either in 2000 or 2001 that floored the price of gold . . .

Or will it have a positive impact on gold price in view of fact that Venezuela's gold has been taken from LBMA's vault?

"Reuters wrote Venezuela’s gold involved in swaps does not enter the market. I beg to differ. Normally, in a swap the gold is sold spot from the client to the dealer in exchange for dollars, while both parties agree to reverse the purchase at a future date at a fixed price. If the gold is physically moved during the swap depends on several factors. Because Venezuela had repatriated 160 tonnes of gold in 2011/2012 this metal left the London Bullion Market Association’s chain of integrity."

It will have a positive on gold price if the crisis in Venezuela's economy will aggravate all the more the deteriorating economy of the world. . . 

"Obviously Venezuela is in a tight spot. The country is trying desperately to survive on its last reserves and the bullion banks seem to offer shark deals. How long this can go on is anyone’s guess." 

Source: 

Venezuela Exported 36t Of Its Official Gold Reserves To Switzerland In January

Gold News Today

1. Iranian International PM Exhibition

". . . the Eighth International Gold, Silver, Jewelry, Watch and Related Industries Exhibition will be held from February 16-19."

". . . companies from Italy, China, Turkey and Britain will take part in the upcoming exhibition."

Source: http://www.irna.ir/en/News/81953697/?

2. Gold marching to $1200 per ounce!

". . . the suggested technical setup for Gold to make the run from 1076 (back on Christmas Eve) up across 1200 is happening, . . ."

". . . that upswing for Gold is clearly welcome, (obviously well overdue), and gives some foundation to our year's target being the upper 1200s, ideally above 1280 which is the upper band of the 1240-1280 resistance zone. . . marking this past week as the strongest percentage five-day up move since that ending 28 October 2011 -- over four years ago -- on which date Gold settled at 1743, (a level that we'll inevitably again see):"

". . . we place a 'value' on Gold in two ways, the FIRST being borne of common sense as portrayed by currency debasement . . . The SECOND is the reality that Gold, being one of our five primary BEGOS markets, behaves relative to how the other four components (Bond, Euro, Oil, S&P) are flexing. Indeed all five of the markets are constantly reacting to how each of the others are doing, for example the S&P moves subject to the cost of debt, the cost of currency, the cost of hard asset protection and the cost of energy, (all of which redound to companies' bottom lines, and ultimately your managed dough). . . . price right now is at an extreme high, . . . . The last time Gold was this high (113 points) above the smooth line was on 27 January of 2015, from which price dropped by over 100 points in the ensuing five weeks. But this time 'round, the momentum of Gold already closing in on 1200 is such that we sense a near-term pullback ought be more muted:"

"Further, 'tis helpful for Gold when Big Players are on the Buy Side. In the last few weeks we've read of Russia and China respectively adding better than 20 tonnes to both of their stacks. . . . we learned just a week ago of die Deutsche Bundesbank continuing its repatriation promise, last year transferring to Frankfurt 110 tonnes of Gold from Paris, plus better than 90 tonnes from beneath New York's Federal Reserve building."

". . . Fed Vice Chair Stanley Fischer stated 'The world is an uncertain place, and all monetary policymakers can really be sure of is that what will happen is often different from what we currently expect.' "

". . . Haruhiko Kuroda says they stand ready to move rates still further sub-zero, whilst over at the European Central Bank, President Mario Draghi says they shan't 'surrender' in combating low levels of inflation, the case for more accommodation coming in March. . . ."

"The level of Federal StateSide debt has just topped $19,000,000,000,000, . . . We carefully calculated the effect on the price of Gold were all that debt to come due at once, but after going through an entire box of pencils, . . . we gave up."

Source: http://www.gold-eagle.com/article/golds-swift-price-ascent-already-closing-1200?

3. Jason Burack of Wall St for Main St

Topics he discussed: 

a. NIRP coming to US

"Some members at the Federal Reserve talking about copying Japan and experimenting with negative interest rates."

b. Source of NIRP idea

"Where do negative interest rates come from? (Hint: They come from Marx’s labor theory of value and Marx’s and Keynes’ views of a '.savings glut' in an economy)."

c. The banking sector

"Bank Stocks Look to Be Collapsing and predicting an imminent stock market crash and large global financial crisis."

d. Liquidation of sovereign wealth funds

"Many sovereign wealth funds are selling their stock positions to go to cash to pay off debt in their home countries."

Sources: 

http://thenewsdoctors.com/fear-the-bust-bank-carnage-precious-metals-bull-returns-welcome-to-dystopia-15/

https://www.youtube.com/watch?v=s0CGSPIMVFg



4. From Peak Prosperity as of 5 February 2016

"It appeared that nobody wanted to be short gold going into the weekend.  Since the dollar rallied strongly too, gold's big move higher on Friday was especially impressive."


"This week after two days of hesitation at the 200 MA, gold broke sharply above the 200 and rocketed higher for the next three days, with the heavy volume in tandem with last week's COT report indicating that the shorts are being steadily squeezed out of the market."


"Gold is approaching its previous high at 1191.70 - at the current $20/day rate of climb, gold will be testing this level Monday.  Now I don't really believe we'll have another $20 day come Monday; its hard to know just how many shorts remain after the last three days of price action, but this is why I have been saying that 'the COT report shows a bullish stance for gold.'"

"All that said: gold is now extremely overbought: RSI-7 is 88, which is a very high reading, and usually suggests a top is coming soon.  Now is a high risk time to buy gold.  Price at COMEX could keep rising, but corrections off these sorts of near-vertical moves can be vicious."

"After consolidating above the 50 MA, the miners screamed hgher this week - GDX rose an incredible 18% in three days, blasting through the 200 MA and causing the shorts to flee in terror.  GDX showed strong buying towards the end of day on Friday, just like with gold.  The GDX:$GOLD ratio is back - way back in bullish territory.  Volume in the last three days was immense. . . . I really can't say if there are shorts left or not.  But they certainly have had a terrible last three days."

"On the weekly chart, GDX has clearly snapped its downtrend line, and has managed to close (just barely) above the middle spike in the 'double bottom' reversal pattern - thus confirming the bullish double bottom by a slim margin.  Its an amazing move for one week; I do not think we should expect a repeat performance next week, but the miners have definitely broken their medium term downtrend by this week's price action.  A double-bottom is a strong reversal signal.  Long term, the miners remain quite cheap - although buying this high is probably not the wisest move as a short-term retracement off this near-vertical move could be substantial."

"Miners leading the metal is what we like to see in a bull move for gold, and that's what we are seeing now.  Much of PM is now over the 200 MA.  Next step is a 'golden cross' - but that is likely months in the future."

"In spite of - and also because of - the large moves in the miners and gold, I believe a reversal is probably in the cards for the near term. . . . It is more likely that this is about a normal "gold cycle" of the sort encouraged and shaped by the commercials.  We can't know this for sure until we get the COT report next week, . . . When RSI values get into the high 80s, its time to be careful, not reckless."

"The market could surprise me and break above that previous high at 1191.70.  You just never know."

Source: http://www.peakprosperity.com/comment/191371#comment-191371


5. Gold Exchange in India?

"In line with the Shanghai bourse, the proposal envisages gold-importing agencies to sell gold only on the exchange's platform, bringing transparency in pricing and premiums, and leading to a formal mechanism to measure the flow of imports into the country."

Source: http://www.business-standard.com/article/markets/clarity-likely-soon-in-bullion-market-116020800026_1.html

PSEi Bear Market

PSEi topped at 8,136.97 last April 7, 2015.

After 2 months, on June 9, 2015, the first down leg was 7,272.36, an 864.61 decline.

And then after 2 months again, on August 25, 2015, the 2nd down leg was 6,603.19, a 669.15 decline.

The 3rd down leg happened 5 months after on January 21, 2016 with 518.91 decline at 6,084.28.

In the coming months and a year or two from now, I am projecting that the three remaining down legs will be completed. I just don't know exactly when will this happen. I am anticipating the following drop:

4th down leg - 5,400

5th down leg - 4,800

6th down leg - 4,200

  

Bear Trap?

With recent stock market sell-off, I encounter two sets of popular recommendations. For those who are bullish, "don't scare yourself" and "buy the dips" are their favorite recommendations and they see price drop as an opportunity to add to their position. On the other hand, for those who are bearish, "sell the rallies" and "it's now time to exit the stock market and buy the bonds" are the two most typical recommendations. Whose voice is correct?

Photo Credit

After reading Adam Hamilton's "Bear Trap for Bulls," I wonder how many investors listened to his warning about the danger of the tech bubble. Now that we are in a far bigger bond bubble, I am just curious if his 2000 article has something to say this 2016. Here's two paragraphs from his article: 

He said that both investors and traders forget "that just as real life bears are extremely intelligent and cunning, so are bear markets. The 'goal' of the bear market is to lure as many bulls as possible to their doom. In order to accomplish that devious stratagem, a bear market usually takes years, slowly breaking individual investor sentiment over the inquisitor’s wheel of ever accumulating losses. The initial drop of the DJIA in 1929 from 381 to 199 was 48%, and took about two months. . . Here is where it gets REALLY provocative. From the temporary bottom of 199 in November 1929, the DJIA retraced 55% of its losses, closing near 300 in April 1930. The bull was back, right? Wrong! Contrary to a cacophony of bullish predictions, the DJIA plunged into a gut-wrenching dive and burned in over two years later. DJIA 300 would not be seen again until 1954, an amazing 25 years after the dead cat bounce!"

"I suspect, in the light of history and investor psychology, a big, hungry, and mean bear is hiding out in the rocks surrounding the financial markets. He is up high and out of sight, and is silently licking his chops, a blood lust in his eyes as he eagerly salivates over the fat and tasty walrus tech stocks lounging below. Always retaining the crucial strategic advantage of surprise, he will strike when the timing is right for him, and when the perceptions of safety in the tech herd are the strongest. He hasn’t eaten for almost thirty years, and his rage continues to multiply exponentially. He is biding his time, laying in stealth, and the walruses have no fear. Make no mistake, however, the bear will have his way when he considers the timing right!"

Plundering the Nations and an Interview with Alex Stanczyk

I recently stumbled with Koos Jansen who blogs about China's gold market. After browsing his articles, I observe that his articles are solid, and so I decided to track them down, particularly those that would be of interest to me and would provide me a guide in my own trading and investing. In this post, I just want to summarize the contents of his 7 July 2013 and 9 September 2013 articles.

In the first article, "Chinese press on gold and the dollar hegemony," Koos Jansen narrates three things: (1) that China is well aware about the relationship among gold, oil and the USD, (2) that China knows the subtlety how the US plunders the world using the USD as world reserve currency, and (3) that China is well-informed about the role of gold in the approaching global financial reset.

I got three key insights from reading the above article: (1) QE is actually a subtle form of stealing the wealth of nations, (2) Gold, oil and commodities have positive correlation, and (3) Gold and the USD index has negative correlation.

To my mind, three things have been confirmed. First, whenever the price of oil and commodities are down as it is today, this shows that the outlook of investors about future economic development is negative. Second, USD rising is an indication of deflation. And third, the price of gold rising shows that the people no longer trust the existing financial and political system and they are looking for ways to protect their finance from an approaching crisis.  

The second article is an interview with Alex Stanczyk for him to share his opinion about the gold market in general and the China gold market in particular. As for me, the most interesting part of this article is the letter from the Federal Reserve that Alex sent Koos. 

I just want to limit myself to the three questions raised by Koos Jansen. They are related to China's gold market, gold trade cycle and gold manipulation as of 2013. 

As for China's gold market, three things caught my attention: (1) three reasons why the Chinese government encouraged its citizens to own gold, (2) Weiqi, an unusual game , and (3) gold as China's priority investment. 

Alex shared three reasons why China has been so aggressive in its gold accumulation campaign: (1) to divert capital from real estate and equities into gold, (2) to prepare the people in case inflation threatens the economy. In this case, gold stabilizes the society to prevent civil unrest, and (3) in case of economic crisis that the people are in need of cash, the government would gladly buy the citizens' gold. That would increase the government gold reserve, which is consistent with their national gold strategy.  

To explain the importance of Weiqi, let us quote what Alex said:

There is this game that the Chinese play, it’s called Weiqi (pronounced Way Chee), and it’s similar to chess. In Weiqi you have to surround your enemy slowly and lay a trap, and than close the trap all at once. That’s the way the Chinese think, they don’t really disclose what their plan is, they just move tiny pieces around the board in a seemingly incoherent way, but when all the pieces are lined up that’s when the trap is sprung. All of the government party leaders play this game, and the CEO’s and chairman of China’s largest businesses are all part of the party. 

Knowing the importance of Weiqi, it now makes sense to me why the moves of Chinese government seem disconnected. Reading popular articles written by western economic and financial commentators, it appears to me that the gold market is going in the direction according to China's "incoherent" plan.   

As stated above, one of the reasons for China's aggressive gold accumulation campaign among its citizens is the diversion of capital from real estate and equities into gold. This shows that for the government gold is a priority investment. This is in line with the government's overall purpose that in the span of five years beginning 2013, the "plan is to curb real estate and equities investment and get more people investing in gold." Knowing this, it now make sense why recently numerous bad news are coming out related to China's real estate industry and the stock market, and yet when it comes to gold, China is still keeping the western world in the dark.   

As for gold trading cycle, Alex thinks that the bottom is already done and that the fundamentals remain intact. This implies a bullish trend for gold since then.

And then finally, concerning gold manipulation, Alex sent Koos a letter from the Federal Reserve proving that for the Fed, managing the price of gold is a must "to maintain control of the global currency system".  Arthur F. Burns, Chairman of the Federal Reserve wrote this letter on June 3, 1975. In this letter, we see that the primary concern is about placing a "ceiling on the gold holdings of an individual government," a position that the Federal Reserve favors. Reading this letter, I realized at least four things: (1) the Fed does not like gold to be part of the monetary system. It also does not like gold to have a market price, (2) the Fed's position is different from the US Treasury as to gold ceiling, (3) the Fed is a socialist institution, and (4) the Fed wants a monopoly of inflation. 

     

Is 2016 good for gold?

This article basing on astrology claims that 2016 is good for stocks and bad for gold. Another market analyst shares a bullish sentiment for stocks, but not necessarily bearish for gold. But as for me, though I think 2016 is good for gold - bullion, coins and mining shares, I worry that as a result of market volatility as 2016 starts, gold is receiving unnecessary publicity. However, my positive perspective about gold was shaped by three anticipated events this 2016:

1. After reading several gold investment articles, I am expecting that this April 2016, gold pricing power will shift from both COMEX (New York) and LBMA (London) to SGE (China). 

2. For investors who are willing to wait until October, we will see the impact of the official acceptance of Yuan into the IMF's SDR on the international monetary system. That could be a signal of the long-awaited financial reset where the USD will be revalued. 

3. Lastly, after the November US election, one expert claims that the USD is also expected to decline. I think that will also be good for gold.

2016's Top Performing Sector

There is no suitable day to write a 2016 prospect about gold market than December 31, 2015. Adam Hamilton did this when he wrote his article, Fueling Gold's 2016 Upleg on last year's final day. After reading his article, my conviction has been strengthened that I made the right decision when I bought shares of a gold stock the day the price of gold went down in anticipation of FFR hike. In this article, I just want to share five key insights that I got that made our writer conclude that "gold stocks should be 2016's top-performing sector."

1. The price of gold suffered big blow as a result of QE3. Gold's average price in 2012 according to Hamilton was 1169 USD per ounce. Since then, its price went down as the Fed started manipulating traders' sentiment with its "open-ended" QE3, meaning a QE that "had no predetermined size or end date." With the uncertainty brought by QE3, both gold speculators and investors turned bearish on gold as a result of capital migration levitating the stock market. So far, such sentiment could be justified. What's illogical for Hamilton is the continued belief of both speculators and investors that even the gradual decline of QE3 that finally ended on October 2014 was still bearish for gold. He asked: "If the largest inflationary event in world history was ludicrously very bearish for gold, then why would the end of QE3 prove bearish as well?"

2. The recent FFR hike is bullish for gold. Adam Hamilton studied the performance of gold in relation to Fed's rate-hike cycle since 1971. He came to the conclusion that gold performs best when FFR entered near gold's secular lows, and rate increase is gradual. And such is the case that we have right now. 

3. FFR increase will demolish the false basis for selling gold. As already noted, gold bearish sentiment is irrationally based on both QE 3 and its cessation. And then the rate hike was added as additional basis for such emotional response. However, contrary to expectation, the price of gold did not collapse after the Fed decided to end 7 years of ZIRP last December 16. Hamilton describes it this way; ". . .the Fed actually hiking rates for the first in 9.5 years, ending 7 years of ZIRP, will serve as the acid test to shatter these false notions."

4. Normalization of gold prize this 2016 is inevitable. As both speculators and investors will realize that FFR increase won't slaughter gold, this will cause them to return.

5. There are three stages of gold buying that will take place in the coming months and years. The first stage will be initiated by gold futures short speculators; the second stage by gold futures long speculators, and; the third stage by gold investors themselves. 

Though I didn't completely understand the numbers involved in Hamilton's computation, what follows are the only numbers that made sense to me. He said that in order for gold futures short speculators to cover their shorts, they have to purchase 102.1k contracts or 317.6 tonnes of gold, which is a 139% increase in gold demand. As for gold futures long speculators, they need 98.8k contracts or 307.2 tonnes. And then finally as for gold investors, in order to change the 0.115% "ratio of the value of GLD's holdings to the S&P 500's collective market" to 0.475%, they need to increase their holdings more than four times. 

Reading financial information like this, I think it's better to position oneself as early as this time before this 2016 gold rally starts.