Tag Archives: Gold

Around the Web

By Biiwii

Market Analysis, News & Opinion From Around the Web…

 

Precious Metals Risk Management

By Biiwii

[edit]  Profit booked on JDST and partial DSLV.  Off to NFTRH.com for an update.

As noted in NFTRH 352:

I thought about releasing my JDST position on Friday because it is very profitable and because it appears that capitulation is in the air. But then I thought about the margin clerk and all those names he may be preparing to call upon on Monday. I thought about how my main intent is not to profit from the precious metals decline but to be intact for buying its bottom. I am not now nor never have been a bearish trader of great skill.

I released a portion of JDST on Monday’s pukage because it had me weighted too net short (ref. the bit above about my lack of bear trader skills) after Monday’s big shoe dropped.  I thankfully kept the rest of the position, which is today at a 100% profit.  But that is still not the position’s primary objective.

Due to this disgusting chart’s measurement, I decided to buy 3x Silver short DSLV (now nicely profitable as well) a couple days ago as silver bounced.  After discussing the favorable trend developing in the gold and silver CoT structures last weekend #352 noted the following bearish technical situation in silver due to a loss of critical support.

silver

The CoT are simply representations of what the various traders are doing on balance. The ‘commercials’ (incl. a large contingent of companies within the gold industry) tend to be net short but that does not force the large speculators to buy. These large entities buy, gold sector promoters tout it and then the whole thing gets cleaned out. Don’t personalize it. That is emotion. Use it. Anyway, technically silver can easily swoop down into the 13’s if a capitulation event comes into play. Understand that these price objectives on Au and Ag are not predictions; they are measurements.

I expect the macro to turn over the next several weeks to few months.  But for right now a process needs to finish up in the precious metals.  We will need to see what the heretofore perma bulls are saying.  Some have already switched bearish, which is positive.  But others continue to live in denial and I think this process wants to address that.

So I use the bear funds as hedges with a plan to (very) slowly add quality junior miners/exploration near the targets we have laid out, and hopefully these bear funds turn out to be profit vehicles if I can use enough patience and get the timing right.  So we’ll see how that goes.  They could be sold about 2 minutes after this post goes up or they could be held into a final swoosh.  They are dangerous vehicles, however, and not for long-term holds.

I don’t pretend to be a fancy trader because I can be a Keystone Kop in that area sometimes.  One thing I do pretend to be is a hard core risk manager and that has been working out very well.  Hopefully soon, the other side of ‘risk manager’ can emerge.  That would be ‘risk taker’ when RvR gets compelling (ref. Q4 2008).*

* As noted a million times already, the macro funda (for US players, anyway) are not currently what they were in Q4 2008.  Not nearly, as long as the stock market remains aloft and Treasury yield spreads remain depressed, and as long as market participants take the Fed seriously.

Proper Seasonal Gold Chart

By Michael Ashton

In an excellent (and free!) daily email I receive, the Daily Shot, I ran across a chart that touched off my quant BS alert.

goldseas

This chart is from here, and is obviously a few years out-of-date, but that isn’t the problem. The problem is that the chart suggests that gold prices rise 5.5% every year. If you buy gold in January, at an index value of 100, and hold it through the flat part of January-June, then you reap the 5% rally in the second half of the year.

Continue reading Proper Seasonal Gold Chart

More MSM & Gold

By Biiwii

Today’s entry in the wrong headed gold obsession sweepstakes is…

4 reasons gold got caught in a perfect storm –MarketWatch

They even have a picture of a golden girl in a tiny little bikini bottom.  Okay, so MSM are not all bad I guess.

Gold is suffering a major meltdown. Prices for the yellow metal have dropped to their lowest level in more than five years, and the downdraft didn’t relent Monday, with futures recording an eighth straight session of losses.

The Chief market strategist at something called CMC Markets (what’s his middle name, Michael, Matthew… Milton?) is trotted out to tell us why gold sucks so much.

Over the past week, “a number of events and trends have come together to create what looks like a perfect storm for gold,” said Colin Cieszynski, chief market strategist at CMC Markets.

He listed 4 significant influences:

1). Reduced demand for defensive havens
The “risk of an imminent Grexit has passed for now,” and political tensions around the world also appear to be easing with the completion of the Iran deal and the U.S. “reopening diplomatic relations with Cuba,” said Cieszynski.

The usual reasons for the public to believe; Straw Men, all.  Just picture gold bugs clinging to their stupid metal and when Iran finally got done, they puked it up.  I criticize some gold bugs but on average, monetarily speaking, the real ones make the average market participant look like a casino patron and little more.  Any dumb rationalization will do as to why a market does what it does, for the average casual participant.  Say what you want about gold bugs, but they are most definitely not casual.

2). Reduced need for inflation hedges
With Iran preparing to return to the oil market amid a continuing supply war among other producers, the price of oil has tumbled back toward $50 a barrel. That means “headline inflation looks likely to remain subdued for some time,” Cieszynski said.

Oh my gawd, did he really say that?  Do not fear Uncle Buck, dear gold bugs.  In the best investment (gold mining) scenario Unc and Gold can each be firm.  Go ask Bob Hoye, he’ll tell you why.  The macro funda are incomplete as of 7:01 US Eastern time on Tuesday July 21.  That is because inflation is still in play as stock markets benefit.  It is when the inflation fails that the macro is going to turn.

3). U.S. interest-rate liftoff and U.S. dollar rally
The risk of financial crises in Europe and concerns that China could spiral out of control and disrupt the world economy have eased dramatically, “keeping the Fed on course toward interest-rate liftoff.”

That is a consideration, and I think gold is pricing in tighter monetary policy at this time.

4). China and gold purchases.
China on Friday released data on its gold holdings for the first time since 2009. Gold reserves rose by about 60% from 2009 to 1,658 metric tons, which would have been great for gold, “except that gold only represents about 1.5% of China’s forex reserves and this percentage has not grown in the last six years, crushing hopes China would save the gold market,” said Cieszynski.

Enough with the China demand crap.  It was worth ignoring when it promoted by perma bulls and it is worth ignoring now as a bearish fundamental.  For every seller there is a buyer.  Anyone who was buying the China/India “Love Trade” bullshit that has been churned out there through the bear market got exactly what they deserved and learned a great lesson.  That has value.

MSM Working Gold Hard

By Biiwii

MSM mainly reflect back to us the ‘news’, what is or has happened.  MSM, especially MSfM, never give the straight scoop ahead of time when it is actionable.  Anyway, gold is down big this morning (partially recovered) and it’s pig pile time in the financial media.

This screen shot is taken from the Live Gold & Silver page of the much improved Live Charting menu above.  Very nice tools there now for all markets (more may be added).

gold

For its part, here is MarketWatch chiming in to help investors realize that gold could keep on crashing.

This is what could keep gold crashing

Clearly, the precious metal hasn’t been helped by Friday’s news that China isn’t holding as much gold as originally thought and by signs the Fed will go ahead with an interest-rate hike. But ponder this question from WSJ’s Jason Zweig, posed in a commentary as gold settled at five-year lows Friday (and kept falling Monday): “So why, even as Greece has defaulted, the euro has sunk against the dollar, and the Chinese stock market has stumbled, has gold been sitting there like a pet rock?”

This Zweig thing seems to be everywhere.  Viral.  Some guy putting out a contrary indicator media piece years after it would have been useful and it is viral?  Well, in the opening segment in this week’s report we addressed this before moving on to the analysis.

Let’s Talk About Gold

“From a contrarian’s perspective, this is the kind of stuff that is going to help empty the still over-bullish side of the boat (after it capsizes) and temporarily break the gold obsession that is hard wired into so many people (it’s just a pet rock, after all). Here we have to remember that when the MSM trumpets, it is selling headlines. Who buys the headlines? The public. Who is always wrong at important turning points? The public.”

Check out the whole segment linked above.

Precious Metals Extremis?

By Biiwii

The precious metals, which happen to be my anticipated next big macro (long) trade have been bearish since HUI lost 460 for the last time back in oh, what, 2012?  And that was being lenient.  Not being a cycles guy, I was not able to time the top.  I merely observed support parameters and informed NFTRH subscribers of technical violations first, and early eLetter readers subsequently as well (the eLetter was launched after the bear market began).

So now here we are, with the precious metals doing what they usually do when looking to end a bear phase; they are becoming extreme, as in waterfalling…

gdx

There is a solid contingent of analysts and writers now bearish on the precious metals.  There are also the perma-pom poms and idiotic hallucinations like the “drop dead gorgeous bull wedge” on GDX above (it failed as expected about 15% ago).  There have still been too many of these guys out there, obsessing on the precious metals every step of the way calling play-by-play for transfixed gold bugs.

Anyway, what there also is is an HUI target from 2012/2013 of around 100, based on the old monthly H&S top.

hui.mo

This is cross referenced with a gross looking pattern on the weekly chart.  Below is the blown up view of a more detailed chart, showing the pattern.  Here’s the NFTRH 351 excerpt that went with it…

Below we blow up the above chart (no pun intended) to show the breakdown.  The little pattern measures roughly 210-150 = 60; 160 (breakdown point)-60 = 100.

 What I find interesting here is that for years now, the big H&S top on the monthly chart has had a target of 100 (+/-).  While nothing in TA is set in stone (it’s an art based on probabilities, not a science), confluence adds to the probabilities.  The weekly and monthly charts each have independent patterns indicating the same general target.

hui.wk

For years now the sector has been bearish, but at the same time, being a macro trend trader (i.e. my desired mode is not this daily and weekly trading I have had to do in the mature stock market bull, it is to try to anticipate a big new trend or macro theme and be positioned for it) I am thinking like a predator or hunter, as has been advised in NFTRH.

In a situation like this, all you can do is have patience and your best laid targets and plans.  I hold exactly 5 junior miners (as of this writing), all of which have charts that are vastly better than HUI and GDX (and GDXJ for that matter) above.  I also have been shorting NUGT and holding JDST for full protection against what has been an uninterrupted bearish technical view and an incomplete macro fundamental view.

I know that NFTRH subscribers are prepared and hope that eLetter readers and website readers are prepared as well to the extent they have been able to read gain information and between the lines.

While I have conflicts going on (like the still <barely> intact Semiconductor market leadership vs. the deplorably bearish looking Palladium-Gold ratio) I think we are heading into Extremis, Q4 2008 style.  Timing?  Not sure.  Only regular work will help tell that story.  A short-term bottom could come about in the PM complex at any moment, before THE bottom.  However, THE bottom could come sooner rather than later if that waterfall continues to spill.

Regardless, whether it is measured in hours, days, weeks or even months still, it is time for the real gold bugs (the ones who long ago tuned out the cartoon characters the sector holds aloft) to be ready to act.

Gold CoT Nonsense

By Steve Saville

A lot of nonsensical commentary gets written about the Commitments of Traders (COT) data for gold (and silver). The information in the COT reports can be used as an indicator of gold-market sentiment. Nothing more, nothing less. It cannot validly be used to support the theory that “commercial” traders (primarily bullion banks) have been conducting a long-term price-suppression scheme.

One of the most important points to understand with regard to the positioning of traders in the gold futures market is that the group known as speculators drives the short-term price trends. This is made apparent by the following chart, which was created by Saxo Bank and linked at the article posted HERE. The chart clearly shows that, with only a few minor discrepancies, over the past three years the net position of speculators in the COMEX futures market (the black line) has moved with the gold price (the red line). More specifically, it shows that speculators start adding to their collective net-long position at price lows and continue to add until the price makes a short-term top, at which point they become net sellers and their collective net-long position begins to decline. The process is self-reinforcing, in that a rising price prompts buying and a falling price prompts selling by the trend-followers within the speculating community. Note that a chart stretching back well beyond 2012 would show the same relationship.

Continue reading Gold CoT Nonsense

Real Reason for Oil’s Dip…

By Tom McClellan

Gold Shows Real Reason for Oil’s Dip

Crude oil prices following gold's pattern
July 07, 2015

Crude oil prices had been hovering around the $60/barrel level since late April 2015, seemingly held at a quiet hover.  But it has just recently broken its hold on that price level, with a move downward that has been attributed to the economic uncertainty in Greece.

Continue reading Real Reason for Oil’s Dip…

Ritholtz on Gold

By Biiwii

I linked Barry Ritholtz’s gold bug swipe along with other items in an Around the Web post.  Anything linked (or republished from guests for that matter) on this site is to be taken as 100% their view, not mine.  You, the reader are tasked with using your own brain to consider, discount or ignore any of it as you see fit.

What do I think of Ritholtz’s view on gold, personally?  I think ole’ Barry is picking some easy, low hanging fruit to use up virtual ink over at Bloomberg, per his contract (real or implied).  I mean really, gold did not react to Greece and he takes that as a negative for the metal?

The fact that gold did not do what legions of promoters and fear mongering pitch men insist it is supposed to do is a positive, not a negative.  It brings us closer to the resolution of the bear market as opposed to delaying it with fear mongering promotions (ref. last summer’s Russia-Ukraine-Ebola triple play of unsound ‘fundamentals’).

Gold Shrugs Off Armageddon

“I thought gold was an investor’s best friend during Armageddon.”

Really Barry, I think that you have gotten caught up in a personal ‘back and forth’ with the more unsavory of the gold bug “community”, as Daddy Gold Bug Jim Sinclair calls it.  You are using the same cartoons in reverse that the worst of the “community” uses when it tries to stir fear and greed in naive cult members followers.

As those of us who actually care about reality (as opposed to media-driven hype) have tried to point out repeatedly over the years, gold is not about Armageddon (Bird Flu, Ebola, Cyprus, Greece, war, death, destruction or any of that crap).  Gold is simply a marker, a barometer showing the state of confidence in the financial system and its managers (Central Banks) at any given time.

“Further reducing enthusiasm for gold is the gradual improvement of the U.S. economy. Despite forecasts of imminent collapse, the major economic data — including employment, wages, spending, housing, autos and consumer sentiment — have all trended higher over the last five years. Tales of an impending depression were greatly exaggerated.”

I could not agree with you more, Barry.  Back in 2012 we began gauging big breakdowns in the technical case for precious metals and by January of 2013 we (well, NFTRH) cross referenced the ratio of Palladium (cyclical) to Gold (counter cyclical) with a ‘channel check’ of the Semiconductor Equipment industry to put forward a view that an economic bounce – beginning in manufacturing and later to spread out to the services sectors – was likely to come.

I am a gold bug.  I saw the “improvement of the U.S. economy” when it was appropriate to see it, ahead of time.  When you obsess on the other kind of gold bug, the media star with the Armageddon-like predictions and inflammatory ‘analysis’, or Kool-Aid drinking hate mailers, you do a disservice to your readership because you only present the other side of something that is not real to begin with.  You in essence stand up a Straw Man and periodically set fire to him, really to no one’s benefit.

“Regardless, gold seems to [be… jeez msm, edit much?] going nowhere fast. Feel free to send me an e-mail explaining how wrong and stupid I am. I have an archive of all the messages warning me that gold would teach me a lesson in humility. “You’ll see” these e-mails smugly assure me, “your comeuppance will be here any day now.” My plan was to respond to each on its fifth-year anniversary with a chart showing the performance of gold versus all other asset classes and the details of how much money has been lost.”

Gold is going to be relevant again when confidence wanes and the current boom cycle starts to show its age and reveal its unsound origins.  Until then, gold is a dumb rock that people can hold as insurance and nothing more.  That is all it ever was, anyway.  But that does not sell in the mainstream media to mainstream people.  Cartoon-like depictions of half insane Luddites clinging to that dumb rock do.  Media stars lampooning those Luddites do too.

Hype in the “Community” is Always Punished

By Biiwii

IKN has been pointing out the stupidity of some Apple Watch gold consumption hype and most recently, the non-flight to quality amidst Greece blah blah blah… He is at least as sensitive as I am to this stuff.  More so, maybe.

While I have personally tried to tone down the criticism of the cartoons in the gold “community”, I find it difficult with one writer in particular leading the naive into the GDX (with its “drop dead gorgeous bull wedge”), into the Indian Wedding and China demand stories and as a topping on the cartoonish cake, the ‘US jobs will drive inflation so make like the smart money and BUY GOLD before the big institutions do!’ garbage.

I get irritated by this stuff.  Some people call me sanctimonious (while cherry picking and misinterpreting a chart I put up) and I call myself judgmental, for sure.  That is not really a great trait to have, but at least I know who and how I am.  Speaking for the defense, this is mostly applied when I think that people are being misled to their potential harm by stuff that they are reading and assuming is authoritative.

News flash:  Nobody writing on the internet in general and the financial media in particular, is authoritative.  Present company included.

Last year at this time Ukraine, Russia and eventually Ebola were stoking up.  NFTRH kept a constant warning in force that the rally in the precious metals complex was happening for the wrong reasons (i.e. trade it, but don’t bite on the b/s).  Right out front beating the bull drum were some of these entities about which I am highly critical today.  The result for last summer’s unsuspecting true believers?  New freaking lows in gold, silver and the miners.

It was interesting because last summer NFTRH experienced a temporary net decline in subscribership.  I thought it was just a typical summer drop off, but I also could just feel certain gold aficionados in the base getting fed up with me.  You can always sense when gold bugs start dropping off.  It tends to happen when I don’t tell them enough of what they want to hear.

This summer (so far, anyway) there has been no drop off and indeed there has been a slight increase in net subscribership.  The only way I can explain it is that we have been fully prepared every step of the way for the bearish things happening to gold, silver and the average* miner.  That along with the fact that we have been bullishly managing markets that have deserved to be managed, unlike the precious metals to this point.

In other words this summer I am not being punished for being negative because precious metals prices are not running upward, making charlatans with nicer things to say look like gurus.  People are valuing what is, as opposed to what they ideally might want to be.  Oh and also I think that the last several years have been a process of winnowing the real hard ass gold bugs out of the base and leaving a group of well rounded market participants.  I like that.

This is not a ‘trash the precious metals’ post.  Changes are coming, but first you need to be intact, have several macro fundmental and technical indicators cross referenced and in line and be prepared to be brave when the sheep (funny how the most dogmatic “community” on earth calls regular people “sheeple”, isn’t it?) are being sheared.

* I am fully aware that there are standout exceptions, which is why I currently hold 3 junior gold stocks (alongside a short against NUGT).

Around the Web

By Biiwii

Market Analysis & News From Around the Pipes…