World Of Wallstreet

Gold News Paragraph Of The Month

From the India Times (click here):

"Directorate of Revenue Intelligence (DRI) had last year recorded a record 800% increase in gold smuggling. This has led to fears of more black money getting infused into the economy as increased import duty and other restrictions are put on gold. 'The government is less concerned about black money as it is concerned about rising CAD [Current Account Deficit]. Black money in any case is not being accounted into the economy. Government would rather have white money shift away from gold to give a spurt to economy,' said a DRI official."

The whole article about increased gold smuggling into India is worth reading but that quote at the end of the paragraph is a real-admission giving a clear window into the Indian G-Man and what's really going on. Here's my takeaways:

• "last year recorded a record 800% increase in gold smuggling." - how does the India government gauge how much gold is being smuggled? This can't be accurate. The takeway here is: Because of gold smuggling, don't believe any official numbers about Indian gold imports any more.
• "The government is less concerned about black money as it is concerned about rising CAD [Current Account Deficit]." - this tells you a lot about how governments think about economic statistics. All politicians care about is looking good. They don't care about how the economy is actually doing. If the same amount of gold is imported, but now it is being smuggled, the real "Current Account Deficit" is unchanged, but the "official" Current Account Deficit gets better because the money leaving the country in the smuggler's pockets isn't officially counted. The Indian G-Man would rather have phoney numbers make them look good than for the government to get the tax revenue that is being lost because of smuggling. Compared to looking good, the G-Man doesn't give a rip about organized crime either. 

MontyHigh, www.worldofwallstreet.us

Gold Stocks Outperformed Gold Over The Last Month

Now that's a change.

MontyHigh, www.worldofwallstreet.us

OttoTrans Of "As Gold Is An Emotional Issue In India" ...

From time-to-time Otto Rock of IKN (e.g. http://incakolanews.blogspot.com/2013/04/mining-prs-and-ottotrans-part-69.html) offers a translation of what junior mining executives say and what it really means. Here's an homage translating a WSJ quoted Indian G-Man (link):

"Industry executives said the government may limit the amount of gold imported by state-run agencies such as MMTC Ltd. and State Trading Corp. of India Ltd.

'It's very difficult to ban imports as gold is an emotional issue in India. Any such move will also lead to a rise in the smuggling of gold,' the official said."

Here's what "as gold is an emotional issue in India" means: "as gold has been the only way of limiting G-Man plundering which has been going on consistently in India for millenia. "

When you've been ripped-off consistently for centuries its "an emotional issue".

If you read Indian history, you'll see that every century or two a new G-man (e.g. Alexander, Persians, Guptas, Mongols, Mughals, etc). sweeps thru plundering everything he can find. When that happens, hidden physical gold is the only thing that isn't swept away.

For example, the British G-Man directly benefited from the "crown jewel of the empire" in the form of tax revenues in the form of bullion money. These taxes were jacked up, especially on the peasant farmer, as soon as her Majesty really got a grip on the whole subcontinent (click here and search for tax and/or gold). There was a "giant sucking sound" as the gold went east to west.

A Hindu friend of mine told me the story of how his prosperous merchant family got out of what is now Pakistan during the post-colonial partitioning of India (when a new Islamic G-man replaced the British G-man in Pakistan). They got out with the gold they could carry (and nothing else) using some of the gold to pay and bribe their way. This is within living memory.

Indians have also been living with consistent, high inflation (the currently fashionable form of G-Man plundering) for decades. Intermittently it spikes to near hyper-inflation levels.

The Chinese, like the Indians, know a lot, both over the millenia and especially in living memory of G-man plundering. Perhaps that has something to do with their "emotional" attachment to gold.

The American middle-class is the most naive people in the world regarding G-man plundering (and gold). None of them have suffered any serious G-man plundering (except those south of the Mason Dixon) for centuries. They just don't get it. But might they get a life-lesson soon, good and hard.

MontyHigh, www.worldofwallstreet.us

Gold Seasonals: What If There's A Big Downturn In April / May

Ok, so here we are in the aftermath of that April / May 2013 downturn. Let's compare this with other recent years where there was fat, year-to-date low in April / May? Here they are (2003, 2004, 2008):

Here's my observations:

1. None of the downturns were as big compared to this years and these, unlike this year, came directly (or pretty directly) out of the bollinger band highs. So these are not that directly comparable.
2. Looks to me like all three of these somewhat comparable situations went on to make out of the upper bollinger closes (highes) prior to any post-mid-may lower lows.
3. Two out of three went on to really nice runs to the end of the year. Of course, the other case was 2008 when everything went to hell.

My overall conclusion is that the current situation is unlike anything else we've seen since the start of the bull market. I wish I could say more than that.

MontyHigh, www.worldofwallstreet.us

 

Once Again, Is The Gold Bull Market Over? And, What If It Isn't? Part 1

Now that we've had the big gold breakdown and the first bounce out of it, I guess its time to collect my thoughts on where we stand. Maybe you can help me with your own thoughts.

As you perhaps recall, I've been very, very heavily invested in precious metals including some long-dated gold call options (now out of the money), a good-sized chunk of semi-paper gold (Sprott's PHYS) and a bunch of junior producer gold mining stocks.

In addition to this, I'm holding some gold-money bullion, an expensive paid-off-house and am maintaining my quite lucrative CTO-level high-tech day-job. I've basically held over the last month with a little shifting around of the gold stocks. I didn't want to sell out at the bottom.

Clearly I have been long and wrong.

Now, I have a much higher risk tolerance than I would recommend to anyone else. I think that wealth is accumulated in investing thru concentration and is maintained by diversification. I'm still trying to accumulate. Despite the action of the last month my investing returns over the last 10 years remain over 200%. They were up nearly 600% when the all time gold price peaked in 2011.

I'm still at the point where the day job is "for fun" and not needed to make ends meet. I do not have to work another day for the rest of my life. For me, that is the line that my risk management has to hold and I've held it. So, I've taken a bigger hit than anyone would want to take, but have not "blown up".

I hope, dear reader, that you appreciate this candor which I don't think you'll find most other places. 

So, that's where I stand. Now, to my question: "Is The Gold Bull Market Over?". This is a critical question for me because I've been convinced that the Gold Bull Market was a singularly good place to concentrate investments. This was based on the idea that the manipulation of the gold market caused short term high-volatility (to manage mainstream investor sentiment to keep it out of precious metals) while managing a rise in the price of the metals resulting from the managed plunder of savings via negative interest rates. Nearly all of my short-term analysis was based on the idea that this managed trend was intact and that parallels from earlier in the bull market provided insight into what was coming up yet.

Let's start with a review of this piece from March 8, 2012: The Primary Trend... There's Nothing Like Gold. Here's the key chart from the piece:

Here's the summary of the post: "Rising consistently for a decade with just a minor downturn for the 'global financial crisis'. The 75 week EMA barely turned down during the crisis. There's nothing else like it."

So, let's see how that chart looks now:

Clearly the recent downturn is unlike anything else in the bull market except the 2008 global financial crisis. Unlike 2008, this current downturn is specific to gold. 

PRELIMINARY CONCLUSION: The gold bull market may not be over, but it is clearly not the steady, reliably rising market that it once was.

Feel free to leave me a comment with your thoughts, especially if you can link to a relevant chart or other empirical data to support your thinking.

Best wishes,

MontyHigh, www.worldofwallstreet.us

Here's the links to earlier posts of mine that I'll probably be referring to in upcoming posts in these series. These are mainly provided here to help me author those posts.

 http://www.worldofwallstreet.us/2013/02/gold-situation-arguably-worse-than-2008.html

http://www.worldofwallstreet.us/2012/12/once-again-is-the-gold-bull-market-over-and-what-if-it-isnt.html

http://www.worldofwallstreet.us/2012/11/chart-of-the-week-about-due-if-gold-bull-market-is-intact.html

http://www.worldofwallstreet.us/2012/09/is-gold-overbought-and-what-is-the-two-month-outlook.html

http://www.worldofwallstreet.us/2012/03/best-of-the-boards-danstraightmans-chart.html

http://www.worldofwallstreet.us/2012/03/gold-recent-work-revisited-with-updated-charts.html

http://www.worldofwallstreet.us/2012/03/the-primary-trend-theres-nothing-like-gold.html

http://www.worldofwallstreet.us/2011/11/letting-the-charts-talk.html

http://www.worldofwallstreet.us/2011/09/a-study-of-gold-bull-market-corrections-through-the-50-day-moving-average.html

http://www.worldofwallstreet.us/2011/09/current-gold-price-action-anybody-seen-this-before.html

http://www.worldofwallstreet.us/2011/09/a-study-of-gold-bull-market-corrections-through-the-50-day-moving-average.html

 

 

 

 

 

What's Happening With Chris Martenson?

I admire Chris Martenson and subscribe to his service, Peak Prosperity. By looking at the empirical data, the guy became convinced that Peak Oil was real and significant and took action. He published his "Crash Course" and quit his lucrative day-job to spread his thinking.

I particularly admire his synthesis of two ideas:

• The fractional reserve financial system will collapse without continued economic growth.
• Peak Oil renders continued economic growth quite unlikely.
• THEREFORE, "Life as we know it will change.". 

Now here's what I find interesting. Look at what he's been writing lately:

The guy has bought the Gold Antitrust Action Committee (GATA) thesis that "THEY" are manipulating the price of gold. The guy has mostly been writing about the financial system lately. The guy has always said that he'd follow the data where it led and this is where he is.

What does this mean? Well there are a bunch of possibilities, but I think it means:

• The data supporting gold manipulation is strong.
• Peak oil is showing up in the sharp reduction or absence of world economic growth and so that's what he's writing about.
• The financial system is really having trouble coping with that change and is resorting to all kinds of manipulations to keep itself from collapsing.

MontyHigh, www.worldofwallstreet.us

 

Gold Bugs Outside Of The Mainstream On Cyprus

I live outside of the heart-of-empire (Washington, DC). A friend at church is high-level bureaucrat with one of the large government pension administrations, one that manages money in the "mainstream way".

I asked this person about the importance of Cyprus and the seizure of depositor's money. The response was something like: "Are you kidding? Cyprus is a completely in-consequential pip-squeek.".

Meanwhile, the respected Mr. Gold (Jim Sinclair), is saying that this is Cyprus is the beginning of the biggest disaster of our lifetimes, e.g. "There’s absolutely no question that when it’s confirmed that the depositors’ loss of money is not a tax, not a new way of making things whole, but in fact the actual disaster that the global banking system is currently in, you will have a move toward physical gold greater than anyone on this planet now believes is possible.  We will also witness the beginning of a level of fear and panic not seen in this world since 1929."

I synthesize this justaposition as follows:

• The mainstream has discounted and basically forgotten about Cyprus.
• Its going to be a while before anything really crazy starts ripping the financial world apart.
• Sinclair is right about crazy things happening, but as usual with him, but just not right away.

MontyHigh, www.worldofwallstreet.us

 

Still In The System?

I am, according to Mr. Jim Sinclair's definition:

"Dear CIGAs,

We will expand on this over time, but you are “out of the system” if:

1. Your equities are held in certificate form.

2. You have no Federal retirement funds.

3. You have no CDs and investments in bonds.

4. You have modest money deposited among selected BRICs countries.

5. You store your own precious metals.

6. You have no mortgage obligations.

7. You keep cash on hand for 6 months expenses.

8. You have no consumer debt at all.

9. You have a small hobby farm for protein and veggies outside of where you are living with no mortgage debt, set up green.

10. You have a gas, diesel or electric car with high fuel mileage for the farm.

11. You have a generator with large fuel capacity for the farm.

12. You do not live in a major metropolitan area."

I'm posting this here so I can easily find it later.

MontyHigh, www.worldofwallstreet.us

They Are Printing Like Crazy, Why Isn't Gold Zooming?

This post from the admirable Jesse gives the answer, which I oversimplify as: "because the printed money is going to the Banksters who are hoarding it for themselves".

The post is the most important post I've read in months and months as far as advancing my understanding of the precious metals markets. Is there anything you have read, as far as investing goes, that are worth re-reading weeks later? Leave me a comment and a link.

MontyHigh, www.worldofwallstreet.us

Upcoming Gold Interventionals: Lookout For Monday And Tuesday

There's usually a takedown on Gold (and especially Gold stocks) on Monday (download the price history for GLD and GDX from finance.yahoo.com and dump them in a spreadsheet and see for yourself). Its started early this week because the big interventionals are Monday and Tuesday:

• Monday - Bernanke Speaks at the London School Of Economics (can't let gold let him look bad when he speaks).
• Monday - Cyprus is supposedly "saved" (or almost "saved").
• Tuesday - Durable Goods, expect "better than expected" headlines. 
• Tuesday - Cyprus banks supposedly reopen (only you can't take significant money out).

Nothing else significant next week. I'm expecting some under $1600 action next week (scare out the recent gold buyers) with a close above $1600 (as the physical buyers pickup whatever they can get).

What are you expecting?

MontyHigh, www.worldofwallstreet.us

Best Of The Web: Eric Sprott, Do Western Central Banks Have Any Gold Left??? Part II

Best piece of pure gold fundamentals I've seen in months: Eric Sprott, Do Western Central Banks Have Any Gold Left??? Part II

MontyHigh, www.worldofwallstreet.us

 

 

Gold Situation Arguably Worse Than 2008

Here's a weekly chart of the price of gold for this entire bull run to date.

The weekly RSI is now worse (lower) than at any previous point in the bull run and, specifically, worse than the depths to the global financial crisis.

In 2008, gold's RSI made three sub-40 plunges. The price of gold dropped 9.3% from the low of the first plunge to the ultimate weekly low coincident with the third plunge. An equivalent further plunge, if it follows from here, puts gold at $1432. The lesson here: The gold price may have significantly further to drop.

Let's take a look at the current price chart to see how that $1432 fits into the picture.

Green Line: $1432 coincides with very strong support in the form of the 2010 high price of gold. This seems like a very reasonable target that the price of gold could achieve very quickly with the selling that would occur on the price going below recent lows ($1520), BUT...

Blue Rectangles: Gold has been trading in a range since the 2011 highs and if the lows are blown out (sub $1520), the measured target is the low $1300s. Yikes! I need to manage risk so that I don't "blow up" if that happens.

Let's go back to the 2008 situation as a pattern for a reasonably painful 2013 scenario.

Here's a closer look at the three sub-40 weekly RSI lows of 2008. For the purpose of painting a 2013 scenario, I assume that the first RSI low is equivalent to this week's RSI low.

• It took 11 weeks to go from the first sub-40 weekly RSI low to the ultimate low (targeting May 10 2013 for the 2013 lows). LESSON: The pain could go on for quite a while.
• The drop into the first and second RSI lows occurred with high volume. The final drop occurred with low volume. This week's drop occurred with reasonably high volume. LESSON: This may not be the end of the pain.
• Volume seems pretty important judging the strength of post-low RSI bounces. LESSON: Lighten bounce-related trading positions at the end of the first week without higher volume than the previous week.
• Quite a nice bounce occurs eventually. Going out to the equivalent of the end of Nov 2013 we see a 23% price rise from the first low RSI price targeting an end of Nov 2013 equivalent price of $1955/oz. If the gold bull market is intact this is not an unreasonable target. 

Here's the second worst weekly RSI (after the 2008 weekly RSIs). From a Macro Economic / sentiment standpoint it seems closer to the current situation with the stock market hitting new highs after the worst of the Internet bubble crash occurring a year and a half earlier and with unemployment beginning to get better.

Gold arguably was hit in 2004 because systemic risk was deemed to be fading. That seems like the best explanation for the current gold price decline. The sentiment is that the system is no longer at risk.

In 2004, the weekly RSI low marked the 2004 price of gold low with a big run up in the price of gold occurring as inflation picked up in the second half of 2004 (look at the weekly RSI going overbought there). This seems like a likely scenario for 2013, in my opinion.

At this point, my own situation is: Don't invest like I invest. I'm pretty heavily leveraged to the price of gold (with options and junior gold producer stocks) and have taken a pretty big hit. I'm hoping to lighten on an upcoming bounce (which I think is coming) to the point where I can tolerate a gold price dive to $1432 and below and then ride out the rest of 2013 holding most of my options and junior producer gold stocks.

Best wishes to you, dear reader.

MontyHigh, www.worldofwallstreet.us

 

Sir Isaac Newton Screws Up The Gold / Silver Ratio

One often sees things like the following (from this evening's Harvey Organ post):

There's often this implication that, if the greatest scientific genius of all time says the price should be 15.5 oz of silver to buy one oz of gold, then that is the right value and, of course, silver is due out-perform gold by 3 to 1 sometime soon as the ratio reverts to the genius divined value.

Bet you never saw this bit of wikipedia's biography of Sir Isaac:

"As Master of the Mint in 1717 in the "Law of Queen Anne" Newton moved the Pound Sterling de facto from the silver standard to the gold standard by setting the bimetallic relationship between gold coins and the silver penny in favour of gold. This caused silver sterling coin to be melted and shipped out of Britain."

Pretty funny don't you think? Either:

• The world's greatest genius screwed up this one OR
• The world's greatest genius had some kind of hidden agenda that drove his policy setting.

Now, if you could buy an oz of gold with 15.5 oz of silver and all the silver left the country then that price was too high! Apparently you could buy an oz of gold for significantly less that 15.5 oz of silver outside of England. So, Sir Isaac screwed up by having his 15.5 ratio being too high! Silver bulls should be even more jazzed!

Now, this 1717 setting of the rate immediately follows the Spanish Hapsburg empire, funded by a flood of New World precious metals. So, one would guess that this low ratio has something to do with the relative richness of easily accessed New World mines at that time.

So, what the ratio of ore richness now a days. Let's look at underground mine reopeners that are pure gold and pure silver because they previously were uneconomic and now someone thinks they are economic. Thus they represent the marginal cost of producing another oz gold or silver.

Here's the first couple that come to mind:

• Aurcana's shafter mine in USA, TX - measured 8.5 silver oz per USA one (291 g/tonne).
• The ill-fated Metanor Bachelor Lake underground mine - 7.8 g/tonne.

Using these data points and assuming the cost to mine an underground tonne is the roughly the same we get an estimate for the ratio of the marginal cost of producing another oz of gold relative to an oz of silver. That yields a ratio of 37. I think this is a better target ratio for the modern-day gold / silver ratio than Sir Isaac's.

The ratio is currently 53 to 1.  So perhaps there is some more out-performance (say 40%) to look forward to when it comes to silver.

What do you think? This is my first post in a while, but at least its original and has some actual historical and empirical data behind it.

MontyHigh, www.worldofwallstreet.us

P.S.Here's another gold data point (this time a California re-opener): http://www.huffingtonpost.com/2012/12/17/california-molten-gold_n_2318534.html. From the company web site they are targeting 12.7 g/tonne resulting in a gold / silver ratio of 23. Better yet for silver bugs.

2013 Gold Options Expiration Calendar

For short-term trading a good thing to keep in mind. I'm posting this here because its not that easy to find and I keep an eye on it. I expect I'll be selling some covered calls this year.

MontyHigh, www.worldofwallstreet.us

Once Again, Is The Gold Bull Market Over? And, What If It Isn't?

First, I don't see any fundamental reason to think the gold bull market is over. Here's the bullish fundamentals that come immediately to mind:

• Nearly global negative real-interest rates - bullish for gold as there is no loss of "interest" from holding the metal.
• Nearly global intentional dilution of the currencies that compete with gold (US dollar, Euro, Japanese Yen, Chinese Yuan...).
• Unpayable government debt and commitments that are often "defaulted" on by inflating the debt away.
• Central bank gold buying.
• No substantial growth in gold-mine production.
• A global financial system that is inherently unstable and could collapse.
• The growing use of gold as the International means of payment for nation-states excommunicated from the Western Banking system (Iran, Libya, Venzuela, etc.).
• A continued falling of mined gold ore-grade with risining mining input costs (oil, steel, labor, government taxes, royalties, etc.).

What am I missing? Has anything fundamentally changed to end the gold bull market?

Of course, its quite possible to misjudge the fundamentals (as I did with base-metals in 2008), so let's take a peek at the monthly gold chart to see if anything has really changed.

Here's some observations:

• The moving averages indicate that the gold bull market has not broken and that the 2011 correction is not as grave as the 2008 financial crisis. Until the 24-moth moving average is broken (at least), there's not strong technical reason to think that the bull-market is broken.
• The 19-month rate of change (top panel) confirms that the 2011 correction is not as significant as the 2008 financial crisis in that the rate of change is higher than the depths of the 2008 financial crisis. The 19-month duration was chosen as the minimum duration that remained above zero thruout the 2008 crisis.
• The 12-month rate-of-change (2nd from top) is similar to the 19-month rate of change in that the 2011 correction is not as severe (still positive) compared to the 2008 crisis.
• The RSI is similar to the moving averages.
• CONCLUSION: The 2011 correction is not as severe as the 2008 global financial crisis and the 2008 crisis did not end the bull market. Therefore, the evidence weighs in favor of the gold bull market not being over.

Now, if its not over what can we expect, going forward? That's where the arrows above come in:

• Red arrows identify years ending with significantly less than double-digit gains (NOTE: years ended with negative growth thruout the bull market and, unless the Banksters pull a fast one over the next week, 2012 will end with positive, but less than double-digit gains.
• Green arrows identify the year-ends following-red arrows. They provide a historical basis for estimating the next year's gold price action if what follows this year-end is similar to what followed the red-arrow year ends. The results were:
  • 2002 - 24.5%, yielding an extrapolated closing price for 2013 of $2,064.
  • 2005 - 18.5%, yielding an extrapolated closing price for 2013 of $1,965.
  • 2009 - 24.0%, yielding an extrapolated closing price for 2013 of $2,056.
•  Gray arrows identify monthly closes which are not end-of-year, but like the current situation are are months ending with clearly less than double-digit year-over-year gains.

The table and graph that follows provides the following year's percentage gain for each monthly ending with the 12-month rate of change significantly less than double-digits.

I've been doing this kind of back-testing of trading systems for years now, and I don't recall ever seeing such a simple system provide 24 consecutive cases of double-digit gains spread over 13 years. This is an example of why I'm so "dialed-in" to precious metals trading/investing. The banksters' manipulation of gold:

• puts extra down-side "short-term" volatility into precious metals prices (take Tues/Wed of this week as an example) and
  
• blocks big one-day up price moves especially when fundamentally bullish events occur,
  
• BUT ends up with a more consistent long-term trend than any other market I've seen.

Of course, any expectation for double-digit future gains depends on the present bull market and its unusual price action continuing. It might be over. Do you think it might be over? Do your own due-diligence.

MontyHigh, www.worldofwallstreet.us

 

QE And The Price Of Gold

Hat tip to Harvey Organ and Zero Hedge for the above chart identifying when QE was previously announced in the USA. So, let's use GLD prices as a proxy to see what happens to the price of gold after QE is announced. Click Download 20121212gldqechart for my spreadsheet.

This first chart show what happenned immediately (well the first 60 trading days, roughly 3 months) after the QE announcement:

• 19 days out we see that QE is not a magic elixir for the price of gold with the price of gold falling steadily after the QE1 Treasury purchase (Orange) and the other three QEs staying basic flat.
• By 60 days out (roughly 3 months) only QE1 Mortgage Backed Securities (BLUE) shows any significant price rise. The price is basically flat for the other three cases.
• CONCLUSION 1: Don't expect an immediate jump in the price of gold just because of the QE announcement. 

The second chart shows roughly one year (250 trading days) out. A year out, all three of the QEs that started at least a year in the past show a double-digit rise in the price of gold with two of them showing quite substantial rises (but the two QE1 cover much of the same period of time). Who knows what the future will bring, but my best guess (and best investing judgment) is to expect a double-digit rise in the price of gold about a year from now. This is not investment advice. Do your own due-diligence.

MontyHigh, www.worldofwallstreet.us

P.S., Here's the same chart using the SPY ETF (dividends included) as a proxy for the S&P 500 (US large-cap stocks).

On the surface the results look very similar, but I'd note that BLUE and ORANGE cover basically the same period of time (2009).

P.P.S., Here's the same chart for gold miners (the GDX ETF):

 

Best Of The Web: Brent Cook On The Dismal State Of Gold Miners And Explorers

Here's a pretty valuable piece by Brent Cook if you are looking to Junior gold miners (as I am) for leverage to the price of gold. Be careful out there.

FWIW, I'm mainly concentrating on Junior producers now, with Romarco Minerals (R.TO), Rubicon Minerals and Golden Queen (GQM.TO) as my only advanced explorers. My top Junior produces are Rio Alta (RIO.TO), Semafo (SMF.TO, San Gold (SGR.TO), Troy Resources (TRY.TO), B2Gold (BTO.TO), Oceana Gold (OGC.TO) and New Gold (NGD.TO). Some of these should be classified as mid-cap producers. 

Warm regards,

MontyHigh, www.worldofwallstreet.us

Download 01 Breakaway Civilization with Dr. J

Download Start_ 2012-08-23 11_00_05

Download CPR-RBaker-15Sept12

Download 01 The Zelig of American History,201

 

Gold: 12 Month Rate Of Change

If you think the gold bull market is intact you might find the next graph encouraging.

Here's some observations:

1. Over the course of this bull market the end-of-month year-over-year rate of change has rarely been negative. CONCLUSION: If the bull market is intact, if you can hold for a year you'll have "made money".
2. The Rate Of Change has only been negative three times and one month later it jumped back to positive. CONCLUSION: Multiple consecutive months of negative year-over-year rate of change might signal the end of the gold bull market. Keep an eye out for this if you are invested in gold.
3. The worst the Rate Of Change has been has been -10%. CONCLUSION: A year-over-year rate of change worse than 10% might signal an end of the gold bull market. Keep an eye out for this if you are invested in gold.
4. The correction from last year's overextended gold run, from a year-over-year rate of change standpoint, is almost as bad as the 2008 price action and could end up worse. CONCLUSION: The gold bull market being intact is not a "sure-thing". Keep an eye on what happens next if you are invested in gold.
5. Green lines capture the one year performance of gold when coming down to a 5% or lower year-over-year rate of change (like it was for May, June, August, October and will probably end up at the end of this month). The table that follows provides those results in tabular format.

I don't know "for sure" that the gold bull-market is intact, but if it is then perhaps now is a good time to "go long". What do you think? This is not financial advice and everyone must take responsibility for their own investing decisions. I am long gold, silver and gold and silver mining stocks.

MontyHigh, www.worldofwallstreet.us

P.S., Here's my take on silver. It has a little bit better peformance in similar situations, but not enough for me to justify its extra volatility. I like gold better than silver right now. 

Gold Interventionals: Option Expiration Tuesday November 27

Bernanke also speaks Tuesday, but its doesn't seem like an important speech. Q3 GDP revision on Thursday.

I like the day after options expiration for entries. That's about when then need to control the price of gold for maximizing bankster gold option writing profits lifts with one last push down to get those who exercised options to dump their gold futures. That's my best guess on why the day after options expiration seems empirically attractive for entry.

MontyHigh, www.worldofwallstreet.us

Best Of The Web: Saturday Harvey... Great Again

Harvey has the best steadily published gold fundamentals commentary I've found. Its always particularly good on Saturdays. Its better than a $300/yr+ newsletter I'm currently subscribed to (but expect not to renew).

You are paying attention aren't you?

That's pretty rich about Austria's gold being gone, don't you think?

MontyHigh, www.worldofwallstreet.us

Gold: Why No Price Rise For Over A Year? Let The Mr. Biwii Explain

Here's something worth reading: http://biiwii.com/wordpress/2012/11/22/macro-geek-interlude/

Here's a teaser:

I think this one blog post is worth the price of Mr. Biiwii's annual subscription service NFTRH.

MontyHigh, www.worldofwallstreet.us

Gold: Brazil Central Bank Buys 17 Tonnes Of Gold... Is It Significant?

You can easily google headlines like this:

I saw one Internet commenter question its significance:

Here's my analysis:

• 17 tonnes per month / (2700 tonnes per year / 12 months per year) = 7.5% shift in the global demand/supply balance.
• In 2006, the demand supply balance of lead (pb) shifted 3% when Ivernia's Magellan Lead Mine was closed for environmental reasons. Of course, that was at the height of the pre-crash commodity run-up, but still this indicates that a 3% shift can be quite significant.
• The price of lead quadrupled (see below).
• Brazil's buying alone constitutes twice the impact of that mine closure (provided Brazil continues buying). Of course, other emerging market central banks can be expected to follow Brazil's lead increasing this demand/supply shift.
• I conclude that the Brail Gold buy is quite significant (bullish for gold, of course).

 

Here's another example of a sudden demand/supply shift: The Arabian Spring cuts off Libyan Oil production. The following graph gives us how much oil was cut off:

So, that's a 1.5 mbpd shift in the 85 mbpd global oil market. That's 1.8% shift or roughly half the shift of the closure of the Magellan Lead mine. Here's the oil price impact:

That's something like a 40% shift in the price of oil. A 40% shift in the price of gold targets $2400 gold. The Brazil Central Bank buying shift is four times bigger than the shift from the Arab spring. Yes, I think the Brazillian Central Bank gold buying is significant.

MontyHigh, www.worldofwallstreet.us

Chart Of The Week: About Due If Gold Bull Market Is Intact

The above weekly chart (click above chart for 1600 pixels of full detail) looks at cases where gold came down from an RSI overbought condition at a bull run high to or thru the RSI 50. It counts the number of months from the high until a new high appears.

There's a green rectangle for each such situation:

• Upper left corner is the high that gold came down from.
• Upper right corner shows the time when the new high was achieved.
• Lower edge gives the low of the correction that follows.

In the beginning of the bull run the highs were not very far above the 30 week moving average and it was 7, 8, 10 and 10 months until the new high appeared.

April 06 and Feb 08 were big affairs with plunges bigger than that of the fall from the Sep 2011 high. They also took a little longer to achieve new highs (16 months and 18 months). That would be Jan 2013 or Mar 2013 if the current correction turns out like those two corrections. So, we are just about due for a move higher in the price of gold if those corrections resemble the current one.

Going a year out from 14 months after those two highs yields price rise from $625 to $910 (46%) and from $990 to $1210 (%) giving target prices for November 2013 of $2490 and $2093 respectively.

Think the gold bull market is still intact and will stay that way another year? I myself don't see anything that has changed. Most importantly, we still have negative interest rates in terms of AAA rated bonds all around the world.

MontyHigh, www.worldofwallstreet.us

 

Upcoming Gold Interventionals: Look Out For Thursday

Coming up this Thursday two interventionals:

• Bernanke Speaks - "Housing And Mortgage Markets".
• CPI (Consumer Price index).

Gold must not be allowed to hint of monetary debasement on such a day. I'm looking for a 20$ hit.

Wednesday has October retail sales and the producer price index. These could move markets as well.

I expect I'll lighten some in-the-money Dec 2012 gold call options on Tuesday and roll over most of the proceeds into Dec 2013 gold call options (with some capital set aside for "stacking") on Thursday when gold gets pushed down.

This is not financial advice. Do your own due-diligence.

Calculated risk seems to post good previews of upcoming financial news, e.g.

MontyHigh, www.worldofwallstreet.us

Gold: More November Seasonals

Yesterday had a 2.2% drop in the price of gold. The chart the follows provides the November seasonals following a largish drop in November.

I see that the two years most like 2012 (2003 and 2005) had quite nice outcomes to the end of the month, end of the year and ok or excellent results to the end of November the following year. 2005 seems most like 2011 with its November being about a year out from the previous seriously overbought condition. Overall, I find the results for 2003 and 2005 encouraging. The averages for all years are also encouraging, especially the gains to the end of the next year's November.

I expect I'll be trying to roll-over my Dec 2012 call options by selling on any price strength and adding Dec 13 call options on any price weakness over the next two weeks. Buying gold with the intention to hold for a year seems attractive here to me with more buying on more price weakness, but this is not a recommendation.

The only year with truly disappointing results is this last year, especially the results to the year that follows. This year is not like 2011 which was correcting violently from a huge overbought situation in August 2011. Still another disappointing lack of price movement up come Nov 2013 will be enough data to make me seriously consider whether the gold bull market is over.

Best wishes to you dear reader and do your own due-diligence and trade smaller than you think is reasonable (check out GracelandUpdates.com),

MontyHigh, www.worldofwallstreet.us

Gold: Any Days Like This One?

 

Here's a simple chart for those who think the Gold bull market is intact:

In the current gold bull run there have been three earlier days like this, where:

• The Weekly RSI came down and touched or penetrated 50 from above AND
• Where the price of gold was lower than it was a year (52 weeks) earlier. I guess that means 2012 so far has been a difficult year for precious metals investors.

In the above chart, green rectangles capture what happened from days like today (according to the above criteria) a year forward. The three occasions are:

• Early january 2005 - commodities and real-estate were stronger for longer.
• May 2007 - the global financial crisis was not yet on the horizon.
• Early April 2009 - just at the bottom of the global financial crisis. 

The table that follows details what happened over the next three weeks (to where my Dec call options expire) and for the following year assuming next year is like the year following one of those similar occasions.

Let's look a little closer at each. The one year outcome for those three prior occasions were pretty impressive (see columns F and G) with little downside (see column K). The action three weeks out from here is a little sketchy (see columns H and I).

Of course the future is uncertain and there are no guarantees that what follows from here will resemble what followed those three earlier occasions.

Best wishes to you dear reader,

MontyHigh, www.worldofwallstreet.us

P.S. Here's the charts detailing the three earlier situations.

Gold: Upcoming Interventionals

There are three economic calendar events coming up in the short term that are likely to rise above the presidential election noise level:

• Friday, Oct 26 - Q3 GDP Report - as an political cynic, I expect this to come in "better than expected" and that will be used as an excuse to whack-a-mole gold down further.
• Wednesday, Oct 24 - Federal Reserve FOMC Report - don't fight the FED and don't expect much from gold (except some kind of push-down) when they speak. This will probably be low-profile as they don't want to look like they are trying to influence the election.
• Friday, Nov 2 - despite my sensitivity to recency bias, I expect a repeat of last month with a "better than expected" number. What's the point of being President and head of the executive branch if you can't push an obtuse, arbitrarily defined number in the direction you prefer. Not that anyone opposed to Obama will believe it, but it may help get a few extra leaning Obama supporters to actually show up and vote the following Tuesday.

In addition, Thursday Oct 25 is gold options expiration day. So Friday mornings are where I'm looking to deploy a little more capital if we get a further gold-price decline.

Regards,

MontyHigh, www.worldofwallstreet.us

Gold: More Pattern Matching

Ok, what in this chart does our current situation look like?

As I see it our current situation is:

• Around a year after correction from a major overbought run up.
• A correction starts after a nice recovery run hits horizontal resistance.

April 07 and Feb 09 look like parallels. Let's take a closer look with daily charts.

This correction could be a bigger, more long drawn out thing than I was thinking at the end of my earlier post this weekend (click here). At this point I don't expect to commence buying until we get darn near a $1700 price and then perhaps more when we get down near the mid $1600. And there is no need to rush things until well after the election is over and the "Fiscal Cliff" buzz starts sounding scary.

Longer term (looking at the first graph) from where we are now (3 weeks into the correction):

• April 07 + 3 Weeks To April 08 + 3 weeks saw a roughly 29% price rise targeting a price of gold roughly at $2200 a year out and
• Feb 09 + 3 weeks To Feb 10 + 3 weeks also saw a roughly 29% price rise again targeting a price of gold at $2200 a year out.

This makes me want to think longer term than just 4 months out.

Warm regard after posting rather heavily this weekend (too much time on my hands for the first time in a while).

MontyHigh, www.worldofwallstreet.us

Gold: Want To Understand How It Really Works? Listen To An Insider

In this recent post I asserted: "There are two ways (at least) of thinking about the growing mountains of unservicable debt (government and household) and the printing and injection of money into the too-big-to-fail banking system:

1. The banking system is in trouble and the Banksters are going to blow up soon. This is the mainstream GATA view as I understand it espoused by Bill Murphy and others.
2. The Banksters are still in control and are getting stronger concentrating and centrailizing power as more and more of the world becomes debt slaves and the debt slaves become further and further enslaved with debt. This is the view, as best I understand of Catherine Austin Fitts and Steward Thopson of Graceland Updates (my favorite subscription service).

I don't like the second view, but I think it best models the current situation. Leave me a comment summarizing your view and the data and thinking that supports it. "

Its pretty clear that I left out Jim Sinclair, the true heavy-weight of the gold community, as a proponent of view 2. He is the son of Burt Seligman (Jesse Livermore's partner), was the biggest player in the 1970s gold run and is the only true Wall Street "insider" who is speaking frankly to the gold community.

I find that his most penetrating and useful writings are quite dense and hard to understand. Still, I find that this recent Sinclair post is worth spending some time trying to decode if you have significant gold-related holdings.

Here's an example of the dense but useful writing: "I owned a metals dealer here and in London. I made a cash market for gold. I know about what I speak. There might be outside of the gold banks less than five people who understand the big short that is always being screamed about by the so called gold experts, and COT is a crock."

I had to break the underlined sentence down as follows:

• "There might be outside of the gold banks less than five people who understand the" == "Nobody understands"
• "the big short that is always being screamed about by the so called gold experts" == The big commercial (Bankster) short position in the COMEX gold futures commitment of traders report.
• "that is always being screamed about by the so called gold experts" == other gold community gurus believe this is a naked short position and that when the price of gold rises the Banksters will go bankrupt. Those gurus think this naked short position is used to suppress the price of gold.
• "and the COT is a crock" - thinking that the commitment of traders report accurately conveys what the banksters are doing and holding is completely wrong.

You'll have to read, study and decode the rest to figure out why Sinclair claims its wrong. I think that's worth my time.

Best wishes,

MontyHigh, www.worldofwallstreet.us

Did Adrian Douglas Of Market-Force-Analysis Get A Margin Call?

This is a scary post as the markets are dangerous and there's no telling where lightning will strike.

"Trade smaller than you think is reasonable. " and "It is a super crisis", Stewart Thomson.

"Do you see a man who is wise in his own eyes? There is more hope for a fool than for him.", Prov 26:12.

"A man who hardens his neck after much reproof will suddenly be broken beyond remedy.", Prov 29:1.

Adrian Douglas used to post all the time on GATA allied web sites. For example, click here, and look at the "all time great" published article trend:

• 2008 - 12 articles.
• 2009 - 19 articles.
• 2010 - 26 articles.
• 2011 - 4 articles.
• 2012 - just 1 article so far and that is from February.

The February 12, 2012 article concludes with: "The potential to turn a Junior Explorer into a company with significant resources could multiply the stock value as much as 100 times... This will be the next phase of the precious metals bull market as new equity pours into miners providing them with a flood of new capital that will seek out opportunities to grow the desperate need to increase precious metals.

Fortunes will be made in the coming frenzy as investors scramble to seek out scarce resources.".

I take this as as a "BUY GOLD MINING STOCKS, ESPECIALLY JUNIOR EXPLORERS" call.

The above chart shows that immediately after that last article was published:

• large-cap gold stocks tanked 30% and
• explorers tanked 45% and remain down 30%.

And Adrian Douglas has not been heard from since. Google News draws a complete blank.

Could Adrian be part of the 97% of the gold community that has been wiped out that Stewart Thompson of Graceland Updates (my favorite subscription service) talks about? Not everyone who has been wildly bullish in this 10 year gold bull market has lived to tell.

Its a little ironic that the two winners of Adrian's "Moron Of The Year" award that come to mind are still around and actively publishing:

• Jeffrey Christian - http://www.financialsense.com/financial-sense-newshour/guest-expert/2012/10/10/jeff-christian/gold-stock-performance-to-improve-going-forward

• Jon Nadler - http://www.kitco.com/ind/Nadler/20121019.html.

NOTE TO SELF: Watch "Hitler Gets A Margin Call" one more time. Trade smaller than seems reasonable for there but for the grace of God go I and there's no telling what may visit me.

I am not a market guru and don't trade like I trade. My risk tolerance is too high.

MontyHigh, www.worldofwallstreet.us

Gold Seasonals: Current 4 Month Outlook

Is the Gold bull market intact? I see no reason to think otherwise. There are two ways (at least) of thinking about the growing mountains of unservicable debt (government and household) and the printing and injection of money into the too-big-to-fail banking system:

1. The banking system is in trouble and the Banksters are going to blow up soon. This is the mainstream GATA view as I understand it espoused by Bill Murphy and others.
2. The Banksters are still in control and are getting stronger concentrating and centrailizing power as more and more of the world becomes debt slaves and the debt slaves become further and further enslaved with debt. This is the view, as best I understand of Catherine Austin Fitts and Steward Thopson of Graceland Updates (my favorite subscription service).

I don't like the second view, but I think it best models the current situation. Leave me a comment summarizing your view and the data and thinking that supports it. 

In either case the money-printing resulting in negative interest rates provides a simple fundamental basis for the continued Gold bull market.

First of all, if you don't care for short-term thinking and you are quite confident that the bull market is intact and isn't going to end anytime soon you can take quick peek at columns I and J in the table below and skip the rest of this. Is a 20%ish annual rise compounded from here enough for you? Just continue to buy and hold gold bullion.

I like to look at the short-term action for extra profits and to see whether things are changing as far as the bull market goes. Trees don't grow to the sky and even this gold bull market must eventually come to an end of some kind. I keep core positions in secure physical bullion and trade that fraction of my porfolio that I can tolerate "going to zero".

Regardless of why there is a Gold bull market, here's another post looking at the medium-term outlook for the price of Gold based. Its based only assuming that the current Gold bull market is intact and that past action fom similar situations provides insight into upcoming action.

In this post I look at the price action over the last 10 years from:

• The end of the next to last full week in October - that is, where we were yesterday.
• Four months forward to the end of the next to last full week in February.

When doing this kind of analysis, one must avoid cherry picking data. The start and end dates for this analysis are based on personal, practical matters:

• The start date is based on the fact that currently we've got a bit of price softness and I'm looking for a place to deploy some more capital.
• The end data is based on the idea that there are seasonal highs in the March time frame and I like to play GOLD call options to gain upside leverage and downside limited risk. The March options (which expire in late February) seem like a good trading vehicle as they are reasonably liquid. 

Here's the results in tabular form:

Here's a summary of the results in graphical form looking at what the extrapolated price action would be if the same percentage changes occurred starting with yesterday's closing price.

Here's some observations on the above table and graph:

• Column I, just buying without leverage at this time seems like a good option.
• Column B, buying and holding for the next four months seems like a good option.
• Cell G12 (and column G), there's good reason to expect that the all-time daily close high (around $1900/oz) will be taken out in the next four months. Only three of the last 10 years had percentage gains that would not achieve that if they occurred this year.
• Cells C8, C11, F8, F11 indicate that significant downside action is possible with possible downside price targets of $1549 and $1623. I don't expect this to happen because both of those years featured extravagant volatility which I don't expect in the short term, but this kind of price action is clearly possible. 
• Row 4 provides what happened during a reasonably quiet presidential election. It is the least bullish of the years. An upcoming low in the $1600s and not much upside action over the next four months is definitely possible.
• Rows 5 and 10, there are two years like this year with relatively moderate geopolitical and market volatility and with gold price strength in September and similar weakness at the entry point in time we are considering. I find these years to have the most predictive power regarding what could occur over the next four years. Would a price between $1850 and $2120 near the end of 2013 with a low between now and then of something between $1686 and $1712 be surprising to you?

This analysis leaves me feeling positive and looking to find a trading entrance.

Thank you for your attention. Feel free to leave me a comment regarding whether you find this kind of analysis worthwhile or useless. I find this useful not for "predicting the future" or "making a great call" but rather for visualizing what is possible and reasonably likely. I actually hope that not many readers find this useful as this kind of method gaining popularity would reduce or eliminate its trading utility.

MontyHigh, www.worldofwallstreet.us

Here are the graphs of each of the 10 years in order. I will be refering to them over the next few weeks to compare this year's action to other years. I consider 2005 and 2010 as most like this year, so far.

Chart Thoughts

Here's my thoughts based on a quick review of the charts. Consider:

• buying some S&P 500 call options - its gone down several days in a row and the election year seasonals are strong and Burt Dohmen of the Wellington Letter says stocks are going to launch if Romney is elected. 
• shorting GORO - production numbers should come out this week and they could trigger another disasterous stock price plunge.
• lightening up on OGC.TO - just looks too overbought among what recently were overbought gold stocks.
• putting in stink bids or AST.V - I think the mine will eventually get bid.
• consider buying those ROMNEY stocks I have in mind, including Hecla Mining.
• put in stink bids for some other favored gold miners (SMF.TO,
• U.TO looks absolutely dismal. Go back to finding some Uranium miners that "won't go to zero" and get ready to buy that as Uranium continues to fall in price. 

Just some ideas.

MontyHigh, www.worldofwallstreet.us

Sentiment Data Point: Tungsten Gold Bar Eruptions

I don't know what's going to happen with precious metals short term.

I know that technically gold, silver and gold mining stocks are overbought on the daily charts and have been for a while.

Now we are getting the fake tungsten gold bar stories again. Is there a correlation? Is this the mainstream media pulling in the suckers or something?

 

Well, using trends.google.com what do we see? What is the history of Tungsten Gold Bar eruptions?

The first real mention was in 2009. So, here's a gold chart from 2009 on annotated for jumps from zero (or near zero) in the Tungsten / Gold search counts (SEE RED ARROWS). Apparently trends.google.com hasn't caught this week's tungsten eruption.

So, what do you think? Is this current tungsten-gold-bar eruption bullish for the price of gold?

MontyHigh, www.worldofwallstreet.us

Gold: I've Never Seen A Gap Like This Before

I've been watching this graph night and day for around 4 years now and I've never seen a gap like this.

Is anything unusual going on? I am currently around unleveraged long 100%, so I'm glad its going up, but I'd be enjoying this more if I had not "lightened up" earlier this week.

MontyHigh, www.worldofwallstreet.us

Is Gold Overbought And The Two Month Outlook

By looking at the gold bull market for the last few years we might be able to get an edge on what is coming up for Gold. Non-insiders can't know with any certainty what's coming up, but comparing the current situation to earlier situations can provide an edge (a better guess/ understanding than others), I think. If you wish, you can follow along my review of the charts.

From a sentiment standpoint, I'm starting to see a rising tide of $3000-type gold targets that is the typical buzz associated with a short-term top. Also, all of the potentially bullish news that folks have been waiting for has come out and come out bullish for gold:

• ECB announces "unlimited" buying for the PIIGs (with conditions, but when push comes to shove conditions have, to-date, been relaxed).
• German Supreme court does not block ECB money-printing.
• Helicopter Ben announces unlimited money-printing in the form for QE3 (with the helicoptors properly positioned to drop the money on his bankster pals). 

What other good news could there be? In over-bought and over-sold conditions the absence of unexpected news is enough to end the overbought condition. Opposing news is not required. September 2011 is a good example of this. It was the absence of new bullish news, not the arrival of bearish news that ended that overbought run.

Personally, I've lightened up a bit, but am still leveraged roughly 2-to-1 to the price of gold (maybe 3-to-1 if you think gold mining stocks are leveraged to the price of gold).

So, let's take a quick tour of some charts. Here's the short-term all-in-one gold chart I look at a lot:

Here's what I'm seeing in this chart that looks overbought :

• (0) - Outside the upper bollinger band for four weeks or more. What followed was a sharp fall in 2011 with no real warning.
• (1) - The S&P 500 has been rising steadily for 3.5 months. It kept rising, but gold corrected hard in Mar 2012 with no real warning.
• (2) - Falling gold/silver ratio for 2+ months. Gold corrected hard in Mar 2012 with no real-warning.
• (3) - Gold price is nearly at round-number resistance ($1800) from which it has corrected hard twice and softely once. This counts as a possible warning of a correction.
• (4) - The daily RSI has been elevated for more than a month. Hard corrections followed this twice on this chart.
• (5) - The MACD black line (which has a proper name that I don't recall right now) has been rising without turning down for more than a month. Its turning down, even slightly, signaled all three recent corrections. 

My overall impression from this chart is that we are probably close to a correction and that the correction could easily fall down to the mid $1650s. Let's look at some more evidence.

Now let's look at the 2010 parallels. As you'll recall, Bernanke hinted at QE2 in August and actually announced it in November 3 (http://www.infowars.com/fed-announces-qe2/).

 

Here's what I see:

• Only three days of follow-thru after the Nov 3 QE2 announcement and then a $100 gold price correction. Percentage wise (7%) that would target something like $1673 if the fall comes from $1800. Three days would be this Tuesday.
• Two days without a higher-high was a pretty good sell-signal. I like this signal for overbought conditions although one does get false-positives.
• The fall was down near earlier support, near the 55 day moving average and down to a 50ish RSI. That would be, for 2012, something like $1650 to $1675.
• If QE2 is the pattern, one does not really need to worry about the price of gold "getting away" as you could buy anytime over the following 5 months and get a better price.
• Silver and the general stock market performed better than gold over the next few months following the QE2 announcement.

My overall impression from the two charts so far is that a correction is probably coming very soon and that it will probably take the price of gold below $1700 and that switching from gold to silver might make sense following the correction.

Let's look at some longer term weekly charts.

This chart shows that gold is not overbought by either the percentage deviation from the 75 week ema or by the RSI. The closest parallel to the current situation (spring 03) was immediately followed by a multi-week correction of the type anticipated by earlier charts. $1900 (the upper green line and previous highs) seems like a good target for what follows the anticipated correction.

September 07 is another parallel (in terms of the size of the straight up move of the RSI) and there a brief pause at the previous all-time highs was followed by a move up to new all-times highs.

September 05 is yet another parallel (looking mainly at the price action above the 75 week EMA) where there is a correction of the anticipated type and

My impression from this chart is that the current move in gold could just keep going and that even with a pause or a correction continued higher movement over the next couple of months is a likely scenario.

I guess that just about sums things up for me. At this point, I am:

• Expecting a likely, but far from certain correction down into the mid to up $1600s.
• Expecting higher prices in the 6 months time frame.

I expect my actions at this point will be:

• Physical precious metals - continued accumulation using recently booked profits.
• Precious metal mining stocks - no further lightening with accumulation should the expected correction occur.
• Gold futures options - significant lightening over the next two days with the booked profits going into Sprott PHYS gold ETF (and some gold coins) with an expected reentry with longer-dated options should the expected correction occur.

Guess I'm just not bullish enough to be a true "gold bug". This seems to be my destiny: Unable to conform enough to truly fit-in anywhere.

http://www.youtube.com/watch?v=LmOo_xmiQ84

MontyHigh, www.worldofwallstreet.us

 

Gold Seasonals For September

Well, things are quite nicely following the track from my previous post (click here), so let's focus in on the upcoming month. Here's my look at the seasonals (beginning with the beginning of the current gold bull market):

Download 20120902goldsepseasonals

I see that every year had gains for the month of September except two (2006 and 2011). Interestingly, even the September right in the middle of the global financial crisis (Sep 2008) had a gain for the price of gold. The years that didn't have gains were times when gold was reacting from recent heavily overbought, near parabolic rises. That isn't the case for this year, so I don't really see those years as having any predictive power for this year.

Four of the remaining seven years (see column E) ran straight up for the month of September without a significant pullback. The gains on average 7% (see row 15).

At this point, I'm long a bunch of Dec 2012 far-in-the money gold call options with a bunch of gold stocks and a good amount of physical gold and a little cash. I like my current positioning.

For non-discounted years with three or more consecutive solid red candles (2003, 2004, 2008) the average gains upon buying the close of the first white candle after such a fall was over 7% (CEL F14).

I like that story as well and I expect I'll deploy some of my remaining cash and go long with at the money or out of the money Dec 12 gold call options if we get three consecutive red candles this month.

Thanks for your time, dear reader. I hope it was worth your time. These posts are the primary analysis that I'm using to make tactical investing decisions.

MontyHigh, www.worldofwallstreet.us

Gold: Time To Take Some Profits?

Another one of my comparisons of current conditions to previous situations in this bull run. As you'll recall, I'm sitting on a bunch of Dec 12 in-the-money gold options. I've got to do something with these in the next three months.

The above shows the current situation.We have been consolidating since last summer's big run and have broken out over recent highs, the 150 day moving average and have been outside of the bollinger bands for 3 consecutive days. The RSI is above 70 for the first time in months and the gold/silver ratio is falling from multi-month highs. The S&P 500 is either forming a double-top or is about to break-out to post-crash highs.

Download 20120825goldcomparables

The above table gives my survey of situations that are similar to the current one. Here's some observations:

• Its interesting that three out of five took place at almost the same time of year as the current move (rows 3, 6 and 7).
• Surprisingly, 2007 seems most like the current situation (row 6) with 2005 being second most like the current situation. What makes them most like the current situation is the time of year and the duration since the previous big run up in the price of gold. Both had excellent 6 month outcomes. ACTION: Be ready to rollover to further out options if the situation tracks these two years.
• None of the five situations had a negative three month return (row J). ACTION: Don't take profits.
• All had six month gains with four of five being substantial (column M).
• There were good gains from a substantial fall to the end of the three month period. ACTION: Prepare to buy more on a substantial fall (e.g. down to the low $1600s). 

My overall conclusion is to hold at this point and add on a dip into the low $1600s. The situation seems pretty nicely bullish at present. To answer the headline question: No, now does not seem to be a good time to take profits.

Following my signoff, you can find the comparable charts for each of the prior situations.

Best wishes to you as you pursue gaining resources to be used to help to others.

MontyHigh, www.worldofwallstreet.us

 

Price Of Gold: Looking Forward By Looking Backward

I took a little time (even though I'm working 60+ hours a week on my hobby high-tech day-job) to do my own analysis of the gold market situation using my method of looking for parallels to similar situations earlier in the current gold bull market. Here's my end of last year outlook using this method:

Dec 29, 2011 - 2012 Gold Outlook Based On The 10-Year Historical Trend - MONEY QUOTE: "I expect a low around $1500 in January or February. I expect gold to end up around a little over $1800 at the end of 2012." -- NOT BAD GIVEN YEAR-TO-DATE.

Here's the reaction to this outlook on my favorite gold message board (click here). Unlike this web-site, readers provide comments on the message board.

Now is a good time for considering this because seasonally we are pretty darn close to the low of the year for the price of gold.

Now my out look is for the end of November 2012 because I'm sitting on a bunch of Dec 2012 gold call options. Here's my simple spreadsheet analysis based on looking at what happened from the end of the previous year to mid-july and from mid-july to the end of November:

Row 12 simply averages what happenned between mid-July and mid-November across the 10 years. That's a data point but averages are deceiving. If something like 2008 happens again we could see a sub-$1200 price of gold this year. YIKES! That (or worse) is a real possibility that has to be risk-managed. I don't want to blow up and go back to being a day-job wage-slave (or worse yet, unemployed).

Cell 8B is a strong data point for thinking that 2012 is not "2008-again". Gold was up nearly 15% year-to-date in 2008 while its only up 1.7% this year. 

The three years that are most like 2012 in terms of year-to-date gold price performance are 2003, 2007 and 2009. 2007's mass psychology ("stronger-for-longer", "great moderation") is light years away from 2012. 2009 (immediately after the crash) is closer to the current psychology with the expectation of another crash on everyone's minds. But I think 2003 is more like 2012 than either 2007 or 2009. The crash (Internet Crash) was recent but not immediate. I remember feeling like the good times would never return (a lot like I feel right now).

So, my expectations at this point are:

• Anything can happen including major downside gold price action (e.g. sub $1000 gold price).
• Seasonally we are near (or past) the bottom (column F).
• My best guess is that 2012 is like 2003 and my outlook is identical to the Dec 29, 2011 outlook only looking to the end of November rather than the end of 2012: "I expect a low around $1500 in January or February. I expect gold to end up around a little over $1800 at the end of 2012."

CAVEAT: I have a much higher risk tolerance that most people. To work on this condition, I'm subscribed to Graceland Updates. It is my favorite subscription service right now. I recommend it. Stewart Thomson (Graceland Updates author) considers this post's kind of "analysis" to be idiotic and considers the use of leverage and my use of call options (10% of networth on in-the-money options) to be lunacy. Two of his favorite refrains (which I find really valuable) are:

• "This is a super-crisis... trade smaller than you think reasonable".
• "A crisis has an end even though is need not have a solution".

Best wishes to you, dear reader. Thankyou for dropping in even though I'm not posting that frequently.

MontyHigh, www.worldofwallstreet.us

P.S. Here's a graph of the results of extrapolating mid-July to end of November in graphical form:

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Worse Than 2008? A Chorus Of Voices

I'm starting to hear a chorus of voices from people I respect concluding that we are on the brink of another 2008-like financial crisis. For example, I respect Chris Martenson. His headline: Get Ready: We’re About To Have Another 2008-Style Crisis (click here). I've been thinking its too soon for another 2008-like crisis, but these are people I respect and they are not perma-alarmists.

The chart below says that for gold, yesterday was worse than the depths of 2008:

Yesterday, as far as the daily RSI oscillator is concerned, was worse than 2008.

Following my usual modus-operandi, let's look at the situations that are closest to yesterday. There's two in 2008 and one in 2006. 

The circumstances in 2006 were different from today as the RSI low occurred right after an April 2011-like big silver and gold price run. 

Right now 2012 seems more like 2008 (perhaps worse). The above chart from 2008 says that the bottom for gold may not be anywhere close to being in for this year, but that, for the price of gold, 2012 could be another year where gold closes with a price that is higher than the close of the year before.

At this point, I'm holding my current large positions and will soon have some cash from a real-estate sale. I'm planning on adding more should we see prices down in the $1400s, $1300s or $1200s. I'm not anxious. I'm still enjoying and am pretty focused on my day-job, so I may not have as much of an investing/trading edge as usual.

MontyHigh, www.worldofwallstreet.us

"Silver Resource Corp" (GORO) NI43-101 Report

Gold Resource Corp did a press release of their NI43-101 report yesterday. GORO is my single biggest stock holding. Its also my single biggest investment winner since I bought in big somewhere in the $4/share range (more than a six-bagger).

I would say the numbers came out about as expected. Here's a quick analysis of the numbers. Italicised numbers are straight from the press release. All other values are calculated from those numbers, current metals prices and a market cap of 1.46B$.

I looked at the 7% g/tonne cutoff grade numbers because they claim to be a high-grade gold miner. Here's my observations (based on numbers in the spreadsheet)

• Cell F7 - Silver Resource Corp - GORO is much more (roughly 2 to 1) of a Silver Miner than a gold miner at current prices. 
• Cells L6, M6 - Either GORO is going to actually mine a lot more metals than is in this report or GORO is quite overvalued. Maintaining and increasing market value depends on exploration results. The deposit is open along strike and at depth and they have been drilling for months and found a third vein which will, over time, increase the amount of metals to be mined. In addition, GORO has other prospective properties nearby. Still, with GORO doing quite well recently on increasing production my main concern has been the lack of specific, individual drill-hole type exploration results. I expect that there is more metal to be mined and I remain an admirer of GORO's stockholder friendliness, mining and exploration competency, and the rocks on their properties. I expect I'll hold my current out-sized position.

MontyHigh, www.worldofwallstreet.us

Gold Price Manipulated Down By Bankster-Controlled Corporate Media

Is it a conspiracy or just a screwup? :) I vote screwup.

MontyHigh, www.worldofwallstreet.us

Bernanke Speaks: The Stick That Beats Gold Down

Lately, the excuse for a gold bear raid has been "Bernanke Speaks". This has been used effectively the last two months to spank me and my "go long the day after gold options expiration" trade. This month is different: Bernanke speaks on Gold Options Expiration day. So, the damage may be done prior to my usual entry point.

MontyHigh, www.worldofwallstreet.us

Gold Stocks Ready For A Pop?

Here's a variation on a chart I've been following. This time we include a gold stocks index.

Looks to me like for the four prior occasions where the S&P 500 became overbought relative to commodities ($SPX:$CCI RSI > 75) that not only did gold pop, but also gold stocks.

Here's a table with some details of the four prior events:

I consider these results to be reasonably bullish for gold stocks.

MontyHigh, www.worldofwallstreet.us

Best Of The Boards: DanStraightman's Chart

There's nothing I can add to this.

MontyHigh, www.worldofwallstreet.us

"i keep posting this chart because it really does tell the tale...

 

 

 http://www.caseyresearch.com/gsd/sites/default/files/US Debt.png

until the fundamentals change...i see this chart continuing to the upper right hand corner of the page...

 

they stop printing and expanding the debt and i will rethink but for now it is hold some..tade some...but never sell out of your core physical positions...

this ain't texas hold'em folks...

peace"

Best Of The Blogs: Saturday Harvey Organ "Most Bullish Scenario I Have Ever Witnessed"

I'm guessing you are already following Harvey Organ's free-as-in-beer web site if you've stumbled across my puny site. The saturday post is usually particularly valuable. Here's an excerpt that caught my eye from yesterday's post:

When Harvey Organ says "This is the most bullish scenario I have ever witnessed in gold", I pay attention.

 

MontyHigh, www.worldofwallstreet.us

 

Gold: Recent Work Revisited With Updated Charts

My recent analysis of the price of gold has been based on looking for situations earlier in the current gold bull market that parallel the current situation. This analysis has indicated that we are at or near an intermediate bottom presuming the bull market is intact. I think the analysis has some value and is on track. Leave me a comment if you think I'm off-base. I particularly enjoy creative, personal insults [NOT].

This piece provides a link to the previous post along with the updated key chart and accompanying text (in "quoted italics")  with a BOLD PRINT UNDERLINE summary of whether the historical parallels remain on track. I'll be starting with the most recent analysis and working backwards.

March 18, 2012

Let The Charts Talk...

Here's the updates from the above post (now a week old).

"Now we look at gold comparing the 30-year treasury recovery from the 2008 panic lows to the current recovery from 2011 panic lows. Here's some observations:

• In both cases gold consolidationed mostly above the panic treasury lows up until treasuries closed above the envelope (the return to normalcy) [see GREEN arrow].
• This return to normalcy happened in March in both 2009 and 2012.
• In 2009 this was followed by two more weeks of gold weakness as the treasuries continued to march higher. So, we could see another couple of weeks of gold weakness if the pattern holds.
• The move from the return to normalcy to the end of the year was from almost 900 to almost 1100. That's a 22% move targeting $2025 for the end of 2012 year close for gold if the pattern repeats.
• Stocks moved higher along with gold while the USD fell throughout the remainder of 2009. This could also happen this year if things start smelling better in Europe (stronger Euro/weaker USD) and they continue to ladel out monetary liquidity to keep in power the powers that be in France, Germany and the US (all of which have elections this year)."

THIS PARALLEL REMAINS ON TRACK, THE SUMMARY OUTLOOK IS UNDERLINED ABOVE.GOING OFF-TOPIC, I CONSIDER MITT ROMNEY GETTING ELECTED TO BE AN EXAMPLE OF "KEEP IN POWER THE POWERS THAT BE".

"The chart above shows each case in the current gold bull market where the weekly RSI touched 50 from above.In just about all cases (except 2008), such a touch was close to a short-term bottom in both weeks and percentage of price.

Green lines show cases that are similar to the current situation where a few months earlier gold significantly penetrated the 50 RSI, bounced back above 50 significantly (to around 60 but without touching 70) and again touched the RSI 50 from above. In four out of those five occurrances (Mar 05 being the exception), gold was with a couple weeks of a low price that has not been revisited since. This is just another reasonably independent anlysis of the current bull market showing that, if the gold bull market is in-tact, the price of gold is probably very near a bottom and about to significantly turn up. In the exceptional case of Mar 2005, the low that was never revisited was a couple of months in the future and only a couple of percent below the touch RSI 50 from above price."

SEEMS ON-TRACK WITH ANOTHER COUPLE WEEKS OF GOLD PRICE WEAKNESS TO GO. EXAMINING THE CHART MORE CAREFULLY I HAVE IDENTIFIED ANOTHER GREEN LINE (9/2006). A RESTATMENT OF THE OUTLOOK IS NOW: IN FIVE OF SIX CASES GOLD WAS WITHIN A MONTH OF A LOW PRICE THAT HAS NOT BEEN REVISITED SINCE. IN SIX OF SIX CASES GOLD WAS WITHIN 4% OF A LOW PRICE THAT HAS NOT BEEN REVISITED SINCE. THIS PUTS MY SHORT TERM GOLD OUTLOOK HAVING A LOW THAT IS NO LOWER THAN THE DEC 2011 LOW. 

"What was happenning to Gold and what followed after a significant overbought spike in the S&P500 to commodities ratio (say RSI > 77)? There were four such situations, in each case:

• Gold was consolidating an bull market (multi-year or all time) high.
• Gold was within a month of a low price never to be revisited.

Another independent analysis indicating the end of the gold correction is probably near (or here) provided the Gold bull market remains intact."

THE ABOVE REVISED CHART HAS THE GREEN LINES LINED UP WITH THE PEAK RSI VALUE (EQUIVALENT TO A WEEK AGO). I THINK THIS LEAVES US VERY CLOSE TO THE NEVER TO BE REVISITED INTERMEDIATE LOW WEEKLY CLOSE PRICE OF GOLD.

March 11, 2012

Gold: Where Have I Seen This Before?

"We see an overbought advance ending last summer and a wave pattern of consolidation since then. Here's the wave structure:

1. Steep rise from near the lower bollinger band to above (outside) the upper bollinger band.
2. A steep fall to below the 55 day moving average, but not to the lower bollinger band.
3. A rise above the 55 day moving average but not to the upper bollinger band.
4. A drop back to the lower bollinger band.
5. A rise back above the 55-day moving average but without forming a higher high than wave 3 and not touching the upper bollinger band.
6. A drop back to the 55-day moving average but not forming a lower low or getting near the lower band."

THIS WAVE STRUCTURE REMAINS INTACT ALTHOUGH WAVE 6 HAS CONTINUED DOWN THRU THE 55-DAY MOVING AVERAGE BUT WITHOUT FORMING A LOWER LOW OR NEARING THE LOWER BOLLINGER BAND.

"The move starting in Jun 2009 follows the pattern perfectly and even matches the current situation in terms of the month of the year of wave 6 (but is compressed in time overall compared to the current situation). The result having the head and shoulders perfectly meet its target in two months time. If this worked out for the current situation we'd see $1925 in mid-may 2012."

THE CURRENT SITUATION NOW EVEN MORE CLOSELY FOLLOWS THE 2009 PATTERN. THE UNDERLINED ITALICS TARGET REMAINS ON-TRACK. 

"The 2006 price action matches well with the current pattern. In addition to the wave pattern matching well, the extremity of the preceding up move (wave 1) in 2006 matches the up move during the summer of 2011. If 2012 is like 2006 we would see one more little downmove in wave 6 prior to forming the final bottom. I think this a real possibility for the next two weeks (with a target of $1650 or even $1630). The resulting action after the bottom was in was  a quick 2month rise to about the size of the right shoulder above the neckline and then 8 months (without a lower low than the right shoulder of the head-and-shoulders target. If 2012 follows this pattern we should see $1875 by mid-may and $1925 near the end of the year."

WE GOT THE ANTICIPATED ONE MORE LITTLE DOWNMOVE (SEE UNDERLINED ITALICS ABOVE) AND NOW THE PATTERN EVEN MORE CLOSELY FOLLOWS THE 2006 PATTERN. THE SECOND UNDERLINED ITALICS ABOVE TARGET OF $1875 BY MID-MAY REMAINS ON TRACK.

March 08, 2012

The Primary Trend... There's Nothing Like Gold

"Last week's little correction is hardly noticeable when you consider the big picture. I know of nothing that comes close to gold as far as being in a safe, consistent primary up-trend. I think I'll stick with gold and gold-investment vehicles as my primary investment theme at least as long as that 75 week average holds."

THE ADDITIONAL TWO WEEKS OF MINOR WEAKNESS DOES NOTHING TO CHANGE THE ABOVE BIG PICTURE. I REITERATE MY ABOVE ITALICS UNDERLINED ASSESSMENT: I know of nothing that comes close to gold as far as being in a safe, consistent primary up-trend.

March 01, 2012

Gold: Longer-Term After One-Day Hit... What If The Bull Market Is Intact?

THIS ANALYSIS REMAINS ON TRACK WITH AN AVERAGE 6-MONTH (END OF AUGUST 2012) TARGET GOLD PRICE OF $1896/oz.

February 29, 2012

Gold: What Next After A 4% Or Bigger One-Day Hit

EVEN THIS SHORT-TERM CALL WORKED OUT REASONABLY WELL WITH THE FIVE-DAY MOVE BEING -.4% WHICH MATCHED EXACTLY THE AVERAGE FOR SIMILAR EVENTS. THE EXPECTED FOLLOW-ON LOW WAS NOT REACHED SO NO TRADE ENTRY WAS TRIGGERED.

What think ye? I'm happy to be leveraged up a bit with gold mining stocks and dec 2012 $1500 gold futures call options with a core holding of physical metals in vaults. Of course, anything can happen including a downward plunge that does not rhyme at all with the gold price action of the last 10 years. This is not investing advice and I don't recommend that you trade like I trade.

MontyHigh, www.worldofwallstreet.us

Let The Charts Talk...

Here's my view of the interesting charts this week. I would say the work on gold has the most merit (see bold underlined text and the charts above that text). Comments follow each charts.

S&P 500 has broken out above resistance, next resistance is another 6% higher at the all time highs. That will be a third attempt on those highs and third attempts usually make it thru. If you are smarter than me, just hold on tight. Its too late for those who missed the bus to get on-board.

Banking stocks (a leading indicator) are doing even better than the general market and are overbought relative to the general market. What to do should this ratio change is significant, but for further study. Try the XLF:SPY ratio for a longer history.

Semiconductors (another leading indicator) and transportation stocks have not confirmed the S&P breakout above post-crash highs. Is this an inflation / paper rally?

30-year treasuries are now back in the normal range (crisis over) between the ema lower envelope and the ema 100.

Woulda, coulda, shoulda followed my own trading system and been long the S&P 500 since early October.

Now we look at gold comparing the 30-year treasury recovery from the 2008 panic lows to the current recovery from 2011 panic lows. Here's some observations:

• In both cases gold consolidationed mostly above the panic treasury lows up until treasuries closed above the envelope (the return to normalcy) [see GREEN arrow].
• This return to normalcy happened in March in both 2009 and 2012.
• In 2009 this was followed by two more weeks of gold weakness as the treasuries continued to march higher. So, we could see another couple of weeks of gold weakness if the pattern holds.
• The move from the return to normalcy to the end of the year was from almost 900 to almost 1100. That's a 22% move targeting $2025 for the end of 2012 year close for gold if the pattern repeats.
• Stocks moved higher along with gold while the USD fell throughout the remainder of 2009. This could also happen this year if things start smelling better in Europe (stronger Euro/weaker USD) and they continue to ladel out monetary liquidity to keep in power the powers that be in France, Germany and the US (all of which have elections this year).

 

The US dollar struggling with serious resistance around 81 while the previous two times it sliced thru that resistance. This coupled with Rickard's Currency War analysis (where he claims the US will intentionally debase the dollar to help unemployment) indicates that the scenario in the previous $TYX and $GOLD chart may work out as the USD dollar is intentionally kept weak.

 

The chart above shows each case in the current gold bull market where the weekly RSI touched 50 from above.In just about all cases (except 2008), such a touch was close to a short-term bottom in both weeks and percentage of price.

Green lines show cases that are similar to the current situation where a few months earlier gold significantly penetrated the 50 RSI, bounced back above 50 significantly (to around 60 but without touching 70) and again touched the RSI 50 from above. In four out of those five occurrances (Mar 05 being the exception), gold was with a couple weeks of a low price that has not been revisited since. This is just another reasonably independent anlysis of the current bull market showing that, if the gold bull market is in-tact, the price of gold is probably very near a bottom and about to significantly turn up. In the exceptional case of Mar 2005, the low that was never revisited was a couple of months in the future and only a couple of percent below the touch RSI 50 from above price. 

Well, that's what I'm seeing tonight, except for the S&P 500 to Commodities (CCI) ratio which is quite overbought in both the weekly and daily charts. Here's the chart I think is relevant to how I'm currently positioned:

What was happenning to Gold and what followed after a significant overbought spike in the S&P500 to commodities ratio (say RSI > 77)? There were four such situations, in each case:

• Gold was consolidating an bull market (multi-year or all time) high.
• Gold was within a month of a low price never to be revisited.

Another independent analysis indicating the end of the gold correction is probably near (or here) provided the Gold bull market remains intact.

When I started looking at charts this evening I was feeling some real trepidation about my gold options and gold mining positions. Now, after some decent analysis, I'm thinking that my positions are good ones and am feeling confident.

MontyHigh, www.worldofwallstreet.us

 

Gary Biiwii Technical Analysis Of My Top Stock Holding GORO

http://www.biiwii.blogspot.com/2012/03/weekly-chart-of-goro.html

I think its a fair assessment. I'm holding a tonne of Gold Resource Corp (GORO) for the long term because I think management is stockholder friendly and the rocks are significantly above average and in a politically safe place and I think there are a lot more good rocks to be found. I don't know of any comparable stock, although I admit that Rubicon (RBY, RMX.TO) has some really good rocks.

I don't mind if the stock price goes nowhere within a +/- 20% range for the next six months provided production keeps relatively on track with no big downside surprises (strikes, mine flooding, etc.).

What is your favorite gold and miner and what do you like about it? I'm short term cautious (but holding) on GORO because I think the overall stock market is overbought and I'm fearful there won't be enough oz in the upcoming NI43-101.

Here's what I think of Gary's newsletter service (and other services I'm subscribing to):

Gary Biiwii's Notes From The Rabbit Hole - a weekly commentary that uses technical analysis (with a lot of ratio charts) to create a macro view of the overall markets and individual markets. Often ends up with a summary of "I'm not sure what's going on". I think I've learned a lot (and continue to learn a lot) from Gary, but I do not closely follow his individual calls. However, if I'd paid more attention to him last year I would have had a much better year because he correctly perceived that Gold was way, way overbought last August and I didn't. So, I'm still hanging around learning. 

MontyHigh, www.worldofwallstreet.us

Gold: Where Have I Seen This Before?

Hat top to KevinT for some inspiration for this post. Its time for a little more of my preferred form of gold technical analysis: pattern matching within the current gold bull market. I like this because:

• It seems to mostly "work".
• It isn't very popular.
• It has a fundamental basis - that gold is in a long-term bull market but that its advance is manipulated by the Gold Cartel. The aim of the manipulation is not to stop the long-term trend, but rather to:

• manage perceptions keeping attention away from gold and what it is saying about their monetary debasement-supported preservation of their elite status and theft of middle-class wealth.
• harvest some money from the weak hands and traditional momentum and technical based traders, especially momentum traders who enter on "breakouts" with fixed size "stops". The manipulators love to run those stops.

So, here's the current gold chart.

We see an overbought advance ending last summer and a wave pattern of consolidation since then. Here's the wave structure:

1. Steep rise from near the lower bollinger band to above (outside) the upper bollinger band.
2. A steep fall to below the 55 day moving average, but not to the lower bollinger band.
3. A rise above the 55 day moving average but not to the upper bollinger band.
4. A drop back to the lower bollinger band.
5. A rise back above the 55-day moving average but without forming a higher high than wave 3 and not touching the upper bollinger band.
6. A drop back to the 55-day moving average but not forming a lower low or getting near the lower band.

Finally, waves 2, 3, 4, 5 and 6 form an uncompleted reverse head-and-shoulders reversal pattern.

Has this kind of thing happened before? The chart that follows provides a 10-year view of the gold bull market identifying potentially similar situations.

Going backwards in time I see a similar pattern beginning in June 2009.

The move starting in Jun 2009 follows the pattern perfectly and even matches the current situation in terms of the month of the year of wave 6 (but is compressed in time overall compared to the current situation). The result having the head and shoulders perfectly meet its target in two months time. If this worked out for the current situation we'd see $1925 in mid-may 2012.

2008 looks similar to the pattern but wave 5 (red line) did not rise enough to form a decent head and shoulder's neckline. From where we are to the equivalent of now, the 2008 action move quickly to the top of the bollinger band. For this year, that would be a quick move to $1800. After that the great 2008 financial crisis dragged gold down hard. Do you think 2012 will be similar to 2008? I don't it will because it is still too fresh on everyone's mind. Still something like 2008 could happen. The Greek default could be similar to Bear-Sterns. If I start feeling real fear in the next month or two then my estimate of probability of a 2008-like experience will also probably rise.

The 2006 price action matches well with the current pattern. In addition to the wave pattern matching well, the extremity of the preceding up move (wave 1) in 2006 matches the up move during the summer of 2011. If 2012 is like 2006 we would see one more little downmove in wave 6 prior to forming the final bottom. I think this a real possibility for the next two weeks (with a target of $1650 or even $1630). The resulting action after the bottom was in was  a quick 2month rise to about the size of the right shoulder above the neckline and then 8 months (without a lower low than the right shoulder of the head-and-shoulders target. If 2012 follows this pattern we should see $1875 by mid-may and $1925 near the end of the year.

The gold price peak of 2005 follows the pattern but not perfectly (see red lines). Wave 3 rises too high (to the top bollinger) and wave 4 does not form a lower low (a head). Still the result of the turn from where we are now is a two-month run to the height of the right shoulder above the neckline and with the price going higher thereafter. That gives us a mid-may target for 2012 of around $1875.

The gold price peak at the beginning of 2004 does not follow the pattern perfectly (see red lines). The difference is that wave 5 achieves a new multi-year high and wave 6 plunges directly to the lower bollinger band. Besides warning us that these patterns don't have to be followed, I don't think there is much to learn from this example.

The last example is the price peak of January 2003. It does not perfectly follow the pattern (red lines) in that wave 2 doesn't fall far enough, wave 3 is pretty small and wave 5 rises too far (to the upper bollinger band and much higher than the wave 3 top). Still have the wave 6 fall below the 55-day moving average is complete the bottom is just about in and a quick and sustained rise begins.

The table above summarizes the results. Here's some comments:

1. The outcomes from the two best matches 2006 and 2009 are quite favorable and indicate that either a bottom is in or soon will be and then within two months a very nice rise ensues with a good outlook for the end of the year.
2. The outcome from 2009 matches this year's seasonality and is the closest match.
3. There are no disasters in the cards, even with the situations that don't match closely provided you have the guts (and margin if you use margin which I generally avoid) to hold to the end of the year. Of course, for 2008 there was a tremenduous amount of guts required.
4. My sense is that it takes two hard down moves to really shake out the weak hands and that explains the six-wave pattern. I must say I was pretty uncomfortable myself (not so much with gold as with the global economic situation) at the end of the wave 4 down (end of 2011). Wave 6 doesn't seem to shake out too many people who made it thru wave 4.

Of course, there is no telling the future and the current analysis is based on the idea that the gold bull market is intact and that this kind of pattern matching holds water. I think the bull market is in-tact and I think the pattern matching has value.

I like where my gold investments are positioned. I used the manipulated downward price action Friday to add about 10% to my Dec $1500 gold options and I'm about as leveraged up as I expect I'll get (roughly 2 to 1 with one part gold stocks with no margin in my retirement account and one part those gold options in my trading account). My risk tolerance seems way greater than most and I'm not providing investment advice.

Still, I hope you find some value in this analysis. 

MontyHigh, www.worldofwallstreet.us

The Primary Trend... There's Nothing Like Gold

Here's one explanation for why I'm so fixated on gold and gold investing. Look at this chart:

Rising consistently for a decade with just a minor downturn for the "global financial crisis". The 75 week EMA barely turned down during the crisis. There's nothing else like it.

Not the general stock market.

Not emerging markets.

Not long-term US bonds.

Not crude oil, even with the Peak Oil idea, although its more consistent that stocks and bonds.

Not copper.

Not silver, though better than anything but gold.

Not the US dollar.

Commodities in general are the closest to gold as far as being in a consistent primary trend goes.

Last week's little correction is hardly noticeable when you consider the big picture. I know of nothing that comes close to gold as far as being in a safe, consistent primary up-trend. I think I'll stick with gold and gold-investment vehicles as my primary investment theme at least as long as that 75 week average holds.

MontyHigh, www.worldofwallstreet.us

P.S., Special thanks to Catherine Austin Fitts from whom I got the idea of "following the primary trend".