Why we choose to be in a manipulated market?

Everyone that trades in their hard earned fiat currency for both Gold and Silver do so because of the fundamentals reasons, debasing currency. While it may not be legal for us to counterfeit US dollars, the Federal Reserve can do it, hand the fiat to the banks and it is perfectly legal.  The banks that created the whole financial mess gets rewarded with bail out money, good job. (And the tax payers flip the bill with inflation)

So your holding Gold and Silver bullion and are in it for the long term as you know that the money supply is increasing on a daily basis.  Do not loose sleep over the price declines, over time both Gold and Silver will make new highs, it may take 6 months, maybe a year but they will go higher because the Federal Reserve and the Central Banks will continue to debase the currency.

For the short term and mid term PM prices, they can do just about anything, especially when you have a banking cartel, the CME, LBMA colluding together to suppress the price at the same time. It helps those that are 'stuck' in short positions that are underwater and those on the inside can front-run the markets with short positions on the futures exchange, puts on GLD and SLV and purchase ZSL, GLL, DUST.  It's easy money when you can hike margin requirements and are 100% confident that the commodity price will decline. Many banksters and insiders should be in jail for doing this, but there is 'Too big to fail' and Too big for Jail'. When you own congress, you get away with a lot of things.

What to do?  If your long bullion, don't worry and go to bed happy that you purchased more at a lower price.  I'm happy to trade in my fiat for Gold and Silver.  I need to find more paper to trade in.....what a joke.

I am long bullion that I am not going to touch until the Dow/Gold ratio is 2/1. Combine that with a Gold/Silver ratio under 20/1.  That is when I will start selling portions of my bullion.

If you trade short term / swing trade.  Take the money and run when you can.  When the RSI is above 80, set your stop up close. I was listening to a radio show where a guy mentioned 'Sell first and ask questions later'.  We should do the same.

Short covering rally

As expected, the shorts are covering after the sell-off last week. (The too big to fail bullion banks make loads of fiat/'money' on the upside and downside). If you can't beat them, join them huh?  We just need to know when the banks collude to sell off their futures contracts and when the 'crimex' increases margin requirements.  Not a easy job when your an outsider.

Below are 5 minute charts of Gold and Silver, both may have bottomed on Sunday evening futures trading and are in short covering mode (rally). Based on the charts, you just never know if this low will hold when the banks can bring the 'price' down on a whim.

Gold hits a low of $1535

Silver hits a low of $26.15

Nothing has changed fundamentally regarding both Gold and Silver. The monetary supply has expanded more since 2008 than ever before. If the U.S. Market starts to break further to the downside, the Fed may step in and offer up another 'QE' program in an attempt to 'stimulate' the economy again.  Albert Einstein quote:  'Insanity is doing the same thing over and over and expecting different results'.

Europe debt is completely out of control and the politicians/banksters essentially do not know what to do about it aside from fixing the issue with a bailout. Counterfeiting currency is illegal for citizens to do, but it is completely legal for governments around the world.

Trading your fiat for Gold and Silver is not a get rich quick scheme. The declines attributed to the bullion banks are an attempt to show people that PM's are not a good place to 'invest' and can loose 'money'.  These crooks can manipulate the spot price, but the free markets will eventually take over.  I will personally continue to accumulate as much PM's as possible when the prices declines as seen last week.   

Another buying oppurtunity

What can anyone say about the PM markets over the last 2 trading sessions?  Silver had a massive run up earlier this year and Gold ran up from July to August. Gold is up about 15% for the year and Silver is just under break-even.

Most people that purchase both physical Gold and Silver are in it for the long run as this bull market is not over, most guru's will agree with this statement.

If you are in PM's for the long term, there is no reason to worry or sell as the fundamentals have not changed. Look at the post below with the graph of the St. Louis Federal Reserve monetary supply. That is all you need to know to stay long PM's. All the governments know around the world is to fix a debt problem with more debt and they will continue to do so which is 100% positive for commodities.

Our friend Ben mentioned that the economy has "significant downside risk" which was enough to sink the PM markets and the bullion banks are eager to bring down the price. (And possibly cover massive short positions?)  The government does not want everyone to dump the US Dollar and buy PM's as a safehaven.  As the dollar drops, inflation will rise significantly and the government does not want that to happen at this time. (Election in 2012 and someone would like to be re-elected)

They want to make a statement to anyone that wants to invest in PM's - they are not a good 'investment' and you can loose a lot of money.  This is total B.S.   It's the manipulated Crimex/LBMA/Government paper/electronic market shaking out all of the weak hands in the market.  Those that are on margin and are highly leveraged, they are the ones that are forced to sell. With the Crimex margin increases, it will actually drive the price down a bit more next week.

I am personally buying more, little by little as no one can pick the bottom.  It's much easier to dollar cost average when you think the bottom is near.  At what price?  Ask the Crimex, LBMA, JPM, HSBC, Goldman, etc...  when they will start covering their short positions.  And if the Crimex has more margin increases in the future.  When you purchase an item for the home or when buying a car, don't you shop when the item you want is on-sale?  Well, this is a fire sale on Silver IMO, not so much for Gold.

1 year from now we will look back on the charts and see that it was a good time to accumulate and add to our positions.

Gold has dropped to the 100 day moving average, is under the bollinger band and is oversold. It can continue down under the BB for a few more days  before Gold sees a short covering rally.

Silver has dropped to the 38.2 fibonacci level and has bounced a bit before the close on Friday. Notice that there was no support at the 200 day moving average. It was sell, sell, sell on the futures market.  The Fib is drawn from the August 2010 low to the peak in April 2011.  Silver is also oversold and it will see a short covering rally next week.  Does it mean that $30 is a bottom?  No, especially when the CME hikes margins on their futures account.

As if PM's haven't dropped enough

From Bloomberg:   CME Group Increases Margins for Gold, Silver Contracts

CME Group Inc. increased the margin requirements on gold and silver trading after prices of the metals plunged in the last two days.


The minimum cash deposit for gold futures will rise 21 percent to $11,475 per 100-ounce contract in the speculative Tier 1 category at the close of trading on Sept. 26, Chicago- based CME said in a statement. For silver, the minimum cash deposit was raised to $24,975 from $21,600.

Comex is making it more expensive for speculators to trade after silver plunged the most since October 1979 and gold had its biggest two-day slide in 28 years. Open interest for gold options climbed to a record 1.46 million contracts on Sept. 21, CME said.

“It’s likely that more speculators will exit the market, adding to selling pressure in the near term,” Marshall Berol, a co-portfolio manager of the Encompass Fund in San Francisco, said in a telephone interview.

The CME last raised gold margins on Aug. 24, when prices fell 5.6 percent, the biggest slump since March 28.

Gold futures for December delivery plunged $101.90, or 5.9 percent, to settle at $1,639.80. In two days, the metal dropped 9.3 percent, the most since February 1983. The weekly decline of 9.6 percent also was the most since that year.

The 10-day historical volatility for gold jumped to 42.84 percent, the highest since March 2009, Bloomberg data show.

Silver futures for December delivery fell $6.477, or 18 percent, to $30.101 an ounce on the Comex, the biggest drop since October 1979.

PM Sell off....getting ugly

With the fed's 'twist' program (400 billion) and Obama's 447 Billion jobs program, both Gold and Silver should be in rally mode.  But hold on, some big banks need to cover their short positions... <-speculation.

Silver was off 11.19% just today to a closing price of ~$35.94, right at the 200 day moving average. It pierced right through the 23.6 fib level and the lower trading range box.

Gold was off 3.78%, -$68.30 and is still within a trading range between $1700 and $1900. Nothing to be alarmed about, especially after the run-up in July from $1478.

If you are not on margin on anything, there is nothing to worry about. After this sell-off, I'm expecting the PM's to be in rally mode towards the end of the year. The turn of the month may be the 'trigger'...?

The fundamental's haven't changed, there is more worldwide fiat debt now than ever before. And governments will continue to 'print' in a feeble attempt to fix a debt problem with more debt. As mentioned in a previous post, it's just a matter of time before all of the fiat chases tangible assets. When people are looking for safe haven, Gold will be the only game in town.  Silver will follow and there is not enough of it around fore everyone.

Looking back on these charts one year from now will show everyone that times like these are buying opportunities.

US Monetary Base - Direct from the Fed

One chart should sum up why you and I are invested in Gold, Silver and Mining Shares:

The graph above is from the Federal Reserve Bank of St. Louis website which is a monthly chart of the monetary base going back to 1910.

You can check out more data and info at their site:   St Louis Fed website

A weekly chart from ~1984 depicts the monetary expansion of the TARP program (787 billion) that was released in late 2008. Then QE2 (600 billion) in November 2010.

I've got to give the Fed some credit for actually showing this data and graphs for anyone to see. You would think that they would hide this stuff under the rug...

While Gold and Silver are not trading in 'free' markets at this time, it is only a matter of time before the 'free' markets determine the inherent price of both Gold and Silver.  (PAGE: The 'Pacific Asia Gold Exchange' is a step in the right direction)
I'm sure most of those that have been holding for years can hold onto their metals for a few more, between 2013 and 2015 should be very interesting.  It's a WAITING GAME...

Some may want to own at least one firearm for home protection going forward.

Gold Dow ratio

A long term chart of the Gold to Dow ratio (since 1973) depicts a major downtrend since the peak around 1999.  (How many ounces of Gold at the current price does it take to equal the Dow Jones Industrial average)

With the US financial markets taking a hit in July coupled with a run up in the Gold price, the ratio took a dive that broke below the March 2009 low.  The current ratio is hovering around 6.34 and is in a basing formation.

With Greece on the verge of default, it may not be long before the financial markets correct to the downside. The problem is that a entire country is defaulting and is the 1st domino to fall with others looming in the not too distant future. In 2008/2009, it was Bear Sterns / Lehman Brothers.  We are talking entire countries this time which may make the last downturn look like a small correction.

With governments throwing euro's at the problem (fixing debt with more debt), the flock to Safety / Gold should be the worldwide 'bet'.  Unlike in 2008/2009 when everyone was liquidating positions and buying the dollar/bonds, this time people will take their cash and purchase Gold.  The miners may be the only stocks that show up in the green.

One word about Silver: At today's price of ~$1820, a Gold Silver ratio of 20/1 is $91 Silver.  Many people believe that this ratio will go down to 16/1 or even lower.  The current Gold Silver ratio is around 44.  As long as it is above 20, Silver is a BUY!  We may not be able to purchase $30 Silver in 2012, so those on the sidelines may want to start loading up.

Gold and Silver -> trapped in trading range

Not much happening with both Gold and Silver as they are both in a trading range / pattern as seen on the daily charts for the past several weeks.

A fibonacci is drawn from the July low to the high produced last week.  The white box depicts the top of the range to the 50% retracement level which is around the $1700 level.  Gold may consolidate in this range until the end of this month for a potential breakout.  A breakout is needed to get the HUI index going again as the breakout last week looks like a 'fake out' now.  It's just a matter of time before the mining stocks start leading the physical metals.

Silver is also trapped in the trading range between the upper 30'es and the $42 area. A fibonacci retracement is drawn from the last run up to $48.82 (not seen on this chart) and the current trading range box is between the 61.8 to 23.6 areas.  If both Gold and Silver do not run up in September, I'm looking for a breakout to the upside in either Oct, Nov or Dec.

1 year return for Gold: 40.71%
Year to date return for Gold: 25.72%

1 year return for Silver: 92.32%
Year to date return for Silver: 28.53%

With those numbers, everyone holding the PM's should be very happy with their returns.  This is not a get rich quick scheme.  Everyone that has the patience to hold will be rewarded with spectacular returns. My 3rd phase estimation is between 2013 and 2015.

PM technical analysis

3 month daily chart of the World Gold Index.  A fibonacci retracement is drawn from the low in early July of $1478 to the recent high of $1920.  Gold in in a bullish technical formation with the short term 20dma above the mid term 50dma and the mid term above the long term 100dma.

But, Gold is also trading near the major upper trend line which is has stayed under for the last 10 years. (Seen in previous posts).   I'm looking for Gold to trade in a range between $1900 and the fibonacci 76.4 band for a short time before a breakout towards the upper trend line, possibly in latter part of Sept.  Even though September has the highest return for Gold out of any month, it has made a significant run from $1478 to $1920 within 9 weeks!

3 month daily chart of the World Silver Index.  One bullsh technical item to note is that the 50 dma has crossed over the 100 dma last week which gives the chart a full bullish formation.  This does not guarantee that Silver will go up, but it is a good sign.  (When the market is controlled by the bullion banks and the crimex/comex, just about anything can happen to the price on any day).

Silver has a small upward wedge formation indicated by the upper and lower trend lines.  This usually ends up with the price breaking either up or down through the trend line.  Silver is still undervalued compared to Gold based on the 1980 price as Gold passed $850 an ounce in 2008 and Silver has yet to pass $50 and we are in the latter part of 2011!  I'm looking for a break up unless the cartel wants to suppress it for the remainder of 2011...?  

Based on some of the articles that I have read, JP Morgan still holds quite a bit of Silver futures contracts in the short position.  I'm surprised that they did not cover the bulk of them during the last raid by the Comex that brought the price down from ~49 to ~32.   Guess they know that their friends at the fed can always bail them out...

1 year daily chart of the HUI Amex Gold Bugs Index.  The breakout has finally arrived!  Look for a continuation this week if the price of both Gold and Silver should trade to the positive side. The 609 level should now become support. The Gold and Silver miners that you may have been holding onto should start appreciating in price!

Next stop for the HUI Index is ~725 based on a fibonacci drawn from the low and high in 2010. (261.8 level is at ~725).

There is a FOMC meeting on Sept 20-21. We'll see what Ben has in store for us at that time.

PAGE - Pacific Asia Gold Exchange

Information on the new futures market in China and how it will affect the Gold markets, James Turk speaks with Ned Naylor Leland.

Gold near upper trend line

Weekly chart of the World Gold Index going back to 2002 with a trendline touching the major tops in the market.  2003, 2006, 2008 and now 2011.  Each time Gold has reached the upper trendline it has had a pullback. (Providing a buying opportunity)

Gold has been on a solid uptrend since the first week of July this year due to sovereign debt issues in Europe. What would bring the Gold price down with it entering the 'seasonal' period where the highest returns are typically seen?  Maybe a Comex margin increase?  Who really knows at this point other than the puppet masters at the Crimex.

Gold has penetrated the upper trend line only for a few days in the past and has come right back down.  The year to date return on Gold is around ~31.8%.  There is now a double top at the upper trend line which is providing major resistance. Trading sideways for a little while before another run past $1900 may be in the cards for Gold.  $2000 this year is a real possibility.

HUI breakout or fake out ?

Are the Gold and Silver miners breaking out or is it a 'fake out' ?  Below is a daily chart of the HUI - AMEX Gold Bugs Index.

The HUI Index broke above the last high of 609 that was produced on April 8th, 2011.  It went to a high of 622 and closed at 618 and change. Gold was up $47 and Silver was up $1.54 for the day.  It is speculated that the mining shares have been held down by hedge fund shorting and this may be coming to an end unless they want to watch their 'profits' dwindle away leading to potential losses.

As mentioned before, the solid junior, mid tier and senior miners all should have exceptional earning from the rise in both Gold and Silver.  This will not go under the radar of the money managers and hedge funds.  Look for significant price appreciation in select miners in the 4th quarter.  There will be plenty of trading opportunities for swing and momentum traders!

For those that wish to limit risk, look into the GDX and GDXJ as they are essentially mining share mutual funds that are liquid and easily tradeable. (The GDXJ are junior miners)  SIL is the Global X Silver Miners Index if you are looking to spread out your risk while owning Silver mining shares.  Visit the Van Eck website for details and holding for the GDX and GDXJ and the GlobalX website for detailed holding for the SIL.  Read the prospectus and contact your investment adviser before investing in any ETF or equity.

The decline in the US Indexes has been 'orderly' and there has not been a major crash since the end of QE2. One item to note is that the S&P500 was down 30 points and change on Friday while the mining sector was up. 

That tells us that investors are willing to take money out of other sectors and invest in the mining shares. That may be one of the few sectors that are actually going up while the market declines. The flow into mining equities may hold true until there is a major crash that will for those on margin to liquidate their holdings indiscriminately.  (Like in 2008)
(Side note on the S&P500 - The short term, mid and long term moving averages are crossing over to the downside that is setting up a bearish pattern, marked with white squares. Those with a 401k may want to take a look at what they are invested in)
 
With the appreciation in mining shares, they should catch the attention of computer algorithms which may place more buy orders of the shares.  This should push the sector even higher and the shorts will need to cover pushing them even higher.  For traders, look for a top in the RSI for both equities and ETF's for a signal to exit the trade or to tighten the stop. 

Disclaimer:  I currently own shares of SIL.

Gold Seasonals - September

A look into the monthly return of Gold in September over the last 10 years.