Ok well today we learned a ton where gold and silver stand-
1- We know that the Fed's actions going forward are not supportive for higher gold and silver prices
2- We have confirmation that the gap from 4/15/13 is MAJOR resistance. There will be no higher prices until that gap is filled and then stays above it. This applies to both gold and silver, no gap fill, they aren't going higher.
3- The sellers, while they have gold and silver in a downtrend, do NOT have the resolve yet to break down silver and gold from this area.
4- The longer and more time is spent here by gold and silver bouncing off those lower levels and stay away from them, the less chance they have of slipping lower.
Those are the key take away points for today. In closing, gold and silver are broken assets. Neither the buyers nor the sellers have shown any resolve. Until one of these shows up, gold and silver will remain locked in a downtrend, volatile, subject to wild price swings in this range.
Tomorrow would give the sellers a chance to follow through with more selling, but if the price action from today was any sort of indication, I tend to think they wont or it will be a very feeble attempt.
More of the same, as we come in from the overnight futures into today we see both silver and gold putting in their respective bounces. There is also the possibility that today, because of market condtions, this jump up gets faded by days end. We'll see.
Note they are nothing but bounces,,, neither gold nor silver are gaping up over yesterdays high. As the session progresses, things could change but I expect this continued up and down and a lot of volatility for a while going forward.
Eventually, this will be broken, but it will take some time.
Same ole, same ole. Both silver and gold continue in their downtrends. No resolution yet and we can see that in our proxies, SLV and GLD.
SLV- lower high, but no lower low, tho just barely.
GLD- lower high, but no lower low
Volume is really low, and as I have mentioned before, pretty much this is where day traders and scalpers are playing around. No major money is stepping in here.
Just a slow train wreck, and really the biggest factor that is needed here is time which will let us know, eventually, in which way does this finally break.
Like most of us here, I'm a PM enthusiast and even though I'm not a trader or play the market I like to understand what's going on with the market. I appreciate Yup's daily inputs on how he sees it fluctuating and where its at and where it might go. I found the video which I think explains (in laymen terms) the technicals on the latest PM smack down and where it stands. If any info is completely absurd, please comment.
Yup, is there any validity to this short article which comments that the gold price could go parabolic if there is a short squeeze on the "shorts" since hedge funds have made "the biggest bet ever" against gold by taking Comex gold shorts to all time highs?
Yes Miggs, short squeezes do occur and happen and we have been seeing that in gold and silver.
I;ll be back in a second to expand on how that works. But remember how I talk about retracements, that's how those work and why they occur.
More in a bit, I am working a few nonrelated PM trades and come back with a brief mid/late AM summary. But I'll also address this, which is a very common occurrence in many assets across the board and many times is a daily occurrence.
Ok, so today, its more the same, endless chop, within a confirmed downtrend.
looking at our proxies, GLD and SLV- thus far we have- GLD, lower high, but no lower low
SLV, lower high, but no low, same as GLD.
Eventually, this chop will come to an end and we will get some sort of move that breaks us out of the range we are in. Again, as I have stated, we have very strong resistance above us.
Now, the short squeeze. This is a rather common occurrence that happens and many traders take advantage of these situations.
This can happen in stocks, bonds, commodities, anything that's had a rapid and hard fall. Generally, as the trend continues, everyone and his brother tends to lean in that given direction, many times those piling in tho, are late, that is they started selling short AFTER the move commenced. Then, along comes some sort of short term temporary event that scares everyone out, that is they have to cover their positions.
How do they cover? When you sell short, you borrow that asset. In order to cover the line short, they must BUY back those assets, lets say its a certain stock, they must on the open market buy back those shares, thus pushing up the asset, and its a huge move, as all the buying comes in.
These folks who are covering by buying, tho, are NOT holding on to these shares. They are simply getting out of a losing position. The same with gold and silver contracts and those staying short. They are not buying to hold, they are not buying because they believe its going higher, they simply got squeezed out of the position they had.
We could certainly see a squeeze in silver and gold, it could happen. Will it help the price over the long term? No, because it would end up flopping again.
One final note- many times the financial media or press use the terms "over sold" and "over bought". Please dont be followed by those terms, that are very very old. They mean nothing and have no technical merit nor fundemental merit.
I have seen assets depressed and sold for days, months, years. Conversely, I have seen assets bought for days, months and years. Only the market decides when something is finally done moving in its trend, whether up or down. Please don't think that because gold and silver have been sold and are in this long downtrend, that then it means their turn around is imminent. I would refer you to other commodities, such as coffee. Just take a look at whats been happening there.
So yes, its a rather big trade right now being short silver and gold. There could be a squeeze, but how FAR it gets, that all depends on how many days to cover as well. I would say in the past couple of days tho, a lot of the short comers to selling silver and gold have been squeezed out.
IF I left anything out or didnt make sense, need more clarification on this, please ask me again, and i;ll do my best to clear up any confusion. Just doing several things at once here.
I say BS. Any significant short squeeze will be settled in cash, not metal and I think most people realize this. Hence the disconnect between physical makets and cash. Is the added benefit of leverage worth the risk that you my have to settle for cash rather than metal? The answer is yes if you are a hedge fund seeking profit. If you are dealer or depository and must deliver the goods then the answer is definately no.
A few other subjects that might help in getting a larger picture of the subject
Pesca Luma not going to come online and they are also getting fined by Chile
Kennecott land slide shutting down operations
Watch GLD and SLV Inventories Serious downtrend in GLD inventory They are being drained quickly.
After the Dumping of tons of Gold PAPER on the market a couple of weeks ago, demand and premiums rose dramatically around the world. Premiums Seem to have mellowed a bit here in the States. But in places like Hong Kong, Dubai and other places around the world that demand and premiums keep increasing.
I watched the vid this morning, yes that's a reasonable view, pretty much in line in what I have said. So yea, thats a pretty fair balanced look.
A couple things I would say to keep things in context- the COT he refers to, that is the Commitment of Traders, just remember that report has some lag to it as it is released and changes from week to week. Therefore, one week of data doesn't give a clear picture of whats going on in real time.
Which brings me to my other point, which I have stressed repeatedly- this is going to play out over TIME. Take the data referred to in this video, by the COT report, pretty much spells out what we have seen in price- not much yet in the way of lower prices, but no real push either by the buyers to step in and push gold and silver higher.
Therefore, we could remain locked in this range for some time until the market decides what to do next, which, you being locked in a downtrend isn't what you want to see if one is looking for a turn around in prices. It was also VERY telling how this week, gold made a 2nd attempt to get into that gap and was hit very hard, immediately smacked down.
Not a bad vid tho. I am glad he pointed out how momentum can carry things farther than most expect, in both directions. In this case, we can see it in the heavy selling of gold and silver, mining stocks etc. I like to say "the path of LEAST resistance" as I was taught, because that's how price acts, price really, once it catches steam in one direction, it just keep going.
Well, clearly there's a lot going on in the silver and gold markets, globally. But when it comes down to gold and silver, the overwhelming determining factor of whats happening to them is price. As we have seen, these PMs are stuck in a very strong downtrend for the time being.
Miners face issues all the time, yesterday Barrick and Silver Wheaton received their bit of bad news from regulators in Chile, but again, that sort of thing happens to the miners all the time. I believe this week Freeport also had some issues come up.
I;ll circle again back to the importance of price over anything else. These points you mention, yes many could be taken as supportive of gold and silver. Yet, none of these really had an impact on getting prices higher this week. You mention Dubai, which is a very big gold hub in the middle eat. Yet, their markets still are such a tiny slice of the overall markets, the same with Hong Kong.
The best and true indicator of what happens with gold and silver going forward is its price action.
I completely agree with you the important thing in the metals market is price action in determining demand or lack of demand for any commodity. I just was pointing out a few points that I believe to be very important. But getting true price discovery in a heavily manipulated market is difficult at best.
And after the beat down a couple of weeks ago on that now infamous Friday and Monday in April with the PAPER Gold Dump demand rose dramatically around the entire planet. Even here in the States. With a dramatic rise in premiums. I only used Dubai and Hong Kong as examples and did not want to type out a list of places around the world where the explosion in metals buying had begun to take place. It has tapered off somewhat here in the US as can be seen with the some what lowering of premiums But demand goes unabated around the rest of the world.
I must ask a question that gets right to the heart of any in depth metals discussion. You are obviously Very well versed in the metals market and have spent a lot of time studying it.
Do you calculate Market Manipulation in with your study's of this very small market?
I only ask because some see the market manipulation and some do not.
The fines from Chile were just a little more icing on a very bad cake. The dispute over ownership of the land itself at Pesca Luma is the cake itself.
well.... I tend to stick to the dictum that no matter what, the market has the final say and sets the price. I steer clear of any talk in regards to manipulation, I don't think about it and I really don't factor it into my trading.
Throughout the years, I have seen the talk and accusations, theories and assumptions. However, for me, none of it would make me any money, a lot of it is always rehashed and repeated, its like a wild goose chase. I remember many years ago where there several documents that made accusations against Barrick gold for manipulating the price along with some Canadian banks, it looked very damning.
But what came of it? Zippo, nada. Just fumes. Nothing at all happened. Its just something that is always talked about, but nothing is done, nothing happens. Therefore, it doesn't figure into anything as far as the markets are concerned. That in turn means I don't pay attention to any talk nor do I spend time speculating on how it could impact the price.
I will say this tho- IF the time comes where there's concrete proof of manipulation, I am sure that market would digest this and the impact would be profound.
You have to remember, that taking such stands, especially in financial markets would be detrimental to my livelihood. Example-
Suppose I took out a 100K position in GLD after the recent dip. I take the stance that what happened was just pure manipulation and the price will come back. Thereafter, the price plummets even more and I lose a 1/10th of that position. What have I gained by insisting and going against the price action? Would I have not gained more by selling short the metal, that is positioning myself as the price dropped?
So from a speculators view point, the price action is the best one can do.
The one saving grace for PMs, especially for gold,, is that it saw some historic all time highs. Silver didn't do that, but gold did. This quite possibly might help gold from returning to its previous lows. Remember, price has memory and at a certain point, run into points of strong support and the market will feel that the gold price reflects the correct price for the economic conditions going forward..... and this is where being patient and giving time to the situation will reap rewards.
So we start the week with more of the same,, up, down, chop chop and chop. Nothing definitive to tell us where price is going, nothing to say we go higher and certainly no idea yet if the price will be pushed lower.
A look at our proxies-
SLV- higher high with a lower low over Friday
GLD- same here, higher high with a lower low.
Only time is of importance in these kind of situations. Via the time element, we will eventually get some sort of move. Remember, until we see the gap fill above tho, gold and silver are going no where... and yes, both silver and gold continue to be locked in a downtrend, which in turn favors a continued decline in price.
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Posted 05/23/2013 09:39 am
