Gold 50 DMA Approaching Fast: Major Support Or Breakdown Level?

Tyler Durden's picture

With gold having dropped nearly $100 in a very brief period, as the Fed is doing all it can to prevent an all out gold rout (hey it worked the other way around too, and stopped the intended dollar free fall), spot is now a mere $13 away from the 50 DMA. Will this prove a material support level or will it be breached, leading to a cascade all the way down to the 950 previous support. For the latter to happen one can see the DXY going back all the way to 80 which the banks will certainly not be too happy to see. Alternatively, a collapse in spot will present a great accumulation level (at a cost basis below that of India, and other fringe CB accumulators) as Bernanke is still dead set on inflating trillions of toxic mortgages (the ones he is unable to collateralize the dollar with).

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Internet Tough Guy's picture

Looks like a replay of last year when the premium on physical expanded as the paper price dropped. 

If it goes the same way again paper price may drop under $1000 but physical will just be sold out; it's mostly sold out already. 

You may be able to buy paper gold under $1000. I wouldn't know, I never bought paper gold. And I never sold physical.

 

 

SilverIsKing's picture

There are a lot of people waiting to jump into gold on any correction.  I can't see it going below $1,000 given that it will seem like a good entry point for many.  If we get some news that creates momentum to the upside, then everyone will pile in then.
In other words, no three-digit gold and it may turn and head higher at any moment given the right catalyst.

Anonymous's picture

It's dangerous to assume that because you feel a certain way that everyone else does. I'm a buyer but not until the bounce off of 950 and then I'm only partially in. Heck even Kitco is saying that gold's going back to 1070. That's like a Realtor saying it's a crappy time to buy a house.

merehuman's picture

perhaps kitos/nadlers views are shaped by the same forces as other gold interests that wish to keep the price low so we can all get some. I thank them profusely. Due to other farsighted policies americans have more free time to actually have a life.  I had a business, sometimes it had me. Now i am free.

FREE AT LAST  !        OH shit how am i gonna pay my taxes?  Hahahahahha

 

WilliamShatner's picture

That's my assessment of Nadler almost to a "T".

He's a perma-bear on gold because he's a shill for Kitco's wealthy clients, and the last thing they want is him saying that gold is a buy at these, or any, level.  They want the price low so they can accumulate as much as possible on the cheap.  They can't rush out a buy huge quantities without driving the price to the moon, they have to do it in small amounts over time. 

Thus, Nadler is paid well to scare Joe Sixpack away from buying the gold the wealthy elite seek to buy for themselves.

Same thing with the Koreans and Chinese bad mouthing gold, saying it's too expensive right now.  Hell, maybe it is too expensive right now.  Maybe by 100 bucks or so, but what about next year?  Will it be too expensive next Christmas when it's at $1500 an oucne?

 

lsbumblebee's picture

That's okay. I'll just buy more at cheaper prices. Unless they're all out...or they stopped minting...or it's $100.00 over spot...or it's filled with tungsten...

Internet Tough Guy's picture

Well, they are mostly out. And they did stop minting. And the price over spot is approaching $100...

http://www.apmex.com/Product/1/1_oz_Gold_American_Eagle___Random_Year.aspx

 

lsbumblebee's picture

Good thing the spot price is saying everyone's selling!

merehuman's picture

you are assuming many people at the same time decided to sell their  gold when fundamentals indicate its the only safe place to put your value!? Are you blind? Do you not see the government ramp job before each t bill auction. There is a definite pattern, week after week.

Do you not hear the lies on MSM or is  that the only place you look for news?

Do i sound angry? You bet i am. Bad enough gov. and MSM lie to us, worse yet when we fall for it.  Thousand oz long silver. HI ho

lsbumblebee's picture

I guess you didn't hear the sarcasm in my voice.

Is this thing on? Testing...one ...two..

merehuman's picture

My apologies. Emotion overrode awareness of sublties

Hephasteus's picture

This whole caveat emptor thing is just getting a bit out of hand. LOL

delacroix's picture

the selloff in gold, was mostly paper gold. how can anyone believe the value of gold could be falling, when the availability of physical, has been drying up. the gold value is an anchor in a storm. the turbulance, is in the environment around it. the dollar is not gaining value. thats like    saying if I add some water to this wine, it will be better, and I will have more. nothing has changed. don't let this bullshit cause you to doubt yourself.   this is war, and we are fighting for our future. quit being pussies. a little bit of rough weather, and you want to run inside, and hide.  14 trillion and growing debt, reduced tax revenues, increased social safety net pressures, CRE and second wave of mortgage defaults in the pipeline. people curbing spending habits.bond market getting nervous, world trade down, derivatives increased 10% since market froze. totally distorted stock market, oh yeah everything is gonna be fine. I'll just sell my pm's and get some REITs, and some solid gov backed bonds, and some boeing and alcoa, and maybe some of that priceline, and other assorted outperformers. thats the ticket 

Anonymous's picture

+1000 - I could care less what paper gold is doing. It is a derivative and sits above cash on Exter's Pyramid. When the time comes, those who stayed too long will lose and weep. I love those snotty commentators who pronounce metals overvalued. A claim on nothing is what is overvalued.

nope-1004's picture

http://www.istockanalyst.com/article/viewarticle/articleid/3700065

 

Why Technical Analysis Points to a Drop for Gold Prices

John Roque, a technical analyst at WJB Capital Group, points out that gold has reached a +2 standard deviation above its 200-day moving average.

What does this mean?

  • 200-Day Moving Average: This is simply the average price over the past 200 days.
  • Standard Deviation: If you don't remember this from your statistics class, standard deviation is how much variation there is from the average (think of it as a bell curve).

A +1 standard deviation of any event occurs roughly 31% of time, while a +2 only happens 5% of the time (the flat line of the bell curve).

So in other words, a +2 standard deviation is a fairly extreme measurement. And in this case, it signals that gold is overbought.

But here's the rub: Since 2006, gold has hit a +2 standard deviation on two other occasions – and the price fell by 22% and 29% respectively.

There's another important indicator, too…

What the "Skew" and "Smart Money" Shows Us

Another indicator that shows gold is richly valued is the "skew" on options. Skew is simply the difference in volatility between call and put options that have the same strike price and expiration.

This week's edition of Barron's mentioned that the volatility of the SPDR Gold Shares ETF is higher for out-of-the-money puts than it is for calls. Just two months ago, it was the opposite. This suggests that people are buying more downside protection by way of put options than trying to take advantage of price appreciation with calls.

Action in the options market is often called the "smart money." Investors will often look to the options market to get an idea of where the "smart money" thinks the market is going. In this case, the "smart money" is getting increasingly cautious on gold.

jd2iv987's picture

wait til it hits 3 standard deviations....

 

and even if it pulls backs a bit and stays above the 200dma...down the road 2 standard deviations above the mean would be higher than where it currently is...doesnt indicate an inflection point...but probably does signal a consolidation...quicker the better.

 

gold's bull market doesn't end until the end of 2015.

 

 

merehuman's picture

Chart are useless in a manipulated market, true or false?

merehuman's picture

lies, lies , everybody lies in order to avoid confusion. You may be right, But theres no trust in anything! 

Thanks , The gold 20, 10, 5,1,year indicators all say inclined to buy more to me.

Besides its got a nice shine!

jd2iv987's picture

to every side of an options contract you have a buyer and a seller.

 

who do you think is selling the options to the smart money? the dumb money who cant get approved in their etrade account for riskier than level 1 options? let alone understand the idea of selling puts...especially in a large enough scale to skew a market.

 

on another note...a sharp retraction in the gold price would cause a lot of dumb money to notice...and would cause a lot of smart money to sell a shit load of protection to dumb money because the smart money knows gold is consolidating before it hits new highs..and so on and so forth. the dumb money primes the pump for new highs...always have...always will.

 

gold bull market doesnt end until the end of 2015...

 

 

merehuman's picture

At the coin shop today i was shown a 100 oz Silver bar. Thats all he was able to get.

He has sold several thousand ozs in the last few weeks. Its the only business in town thats doing well. If it werent for the casino there would be no activity here at all.

No  rounds, no 10 oz bars either. Cant get  them, when he does hes sold out same day.  Perhaps its cause we are somewhat isolated here on the coast, surrouded by hills and gated communities that you could drive right by and never notice. Its easily an hour drive to the next coin shop across the mountain.

When things go to hell we will hardly notice it . Gosh i love this place.

Oregon coast is the place to be .Bring your own food  LOL

BorisTheBlade's picture

I don't know what's behind those moves, but gold market was heavily manipulated for a long time and it still is. Fed should be happy to see that it's still able to expand its balance sheet in real terms, but for average investor nothing has really changed (unless you trust fiat money more than you did two or three weeks ago).

Ned Zeppelin's picture

I sold GLD at $1200, smelled correction coming, and figure I'll jump back in after this necessary but temporary correction.  The Fed must keep you guessing. Their work to get the dollar to reverse course is the culprit here, as well as the need to crack the whip and keep the Bernanke renomination on track.  Child's play. If gold gets to three digits for God's sake BUY.  2010 deficits are going to be awful, and the presses will be running night and day.  The formal announcement of QE II after the re-collapse in real estate is apparent by mid year will also trugger the run for the exits that will be marked by the ascent of gold.

As long as the printing presses run to hide the debt destruction (and the continuing QE that has institutions buying Treasuries and the Fed buying their inventories of GSE) gold will be a "buy" as the objective marker of where we stand in the relativistic world of fiat currencies in decline.   

dark pools of soros's picture

what are your thoughts if the Amero is introduced?  will that create a nosedive in both the dollar AND gold at that point since the powers that be will have a fresh new tool to manipulate and cook up?

So what would trigger the gold bugs to finally sell and lock in some type of profit/wealth from all the hording?

Internet Tough Guy's picture

Gold is wealth. What would trigger 401k-ravaged stock bugs to finally sell stocks, buy gold and lock in some type of wealth?

jd2iv987's picture

the problems with gold lie in the fact that people dont trust whether or not their contracts are going to be honored.

 

its up vs all currencies...not just the dollar.

 

 

merehuman's picture

Thank you for confirming my thoughts. I am proud to be a goat amongst the sheep and welcome company.

WaterWings's picture

If trading isn't your livelihood this is quite a tennis match.

trav777's picture

well I remember the day LEH blew up..they were massively net short gold.  So if the deflation comes back, just gotta wait for the banks to start dropping.

kaiserwongze's picture

Meanwhile, the smaller PM stocks, such as EXK and NXG and TGB, have barely pulled back at all.  Time for gold share outperformance?

SDRII's picture

why would they when they discount high single digit gold already

Anonymous's picture

Ahhh there's nothing like gold to get people worked up. Even oil doesn't do it like the yellow metal.

Most posters here are far smarter and far more successful than me, so I have a couple of questions. I would appreciate answers. I'll try to check back but I have a short attention span, so no promises. Here goes:

1. Those of you who say that you can't buy food with gold, why do you say this? Can you buy food with 100 shares of Citi, or a straddle? What is it that makes the dollar money? Is it just a law that says we have to accept it or is it emotion and confidence? If it's the latter, what happens if the confidence evaporates? The reason I ask is that the people I know who are buying physical gold have already lost confidence in the dollar, right? I mean, I don't have any because Krugerrands look too much like those stupid ass presidential dollars. I keep fearing I might drop one into a vending machine. If i was smarter, I might get some, because I'm losing confidence in the dollar as well, in spite of what I think will be a prolonged bounce. Hey, maybe I can still get some... Hmmm. Ah, but then I'd have to worry about whether it was tungsten or not. Okay, enough about that.

2. Since the value of any security is the discounted present value of it's future cash flow and since future cash flows are predicated on how well the company deploys assets, how can you determine what anything is worth when government has made it legal to make up asset values? Do you think more assets are overstated or understated? How do you know?

3. One last one. This is for the really smart people here....the one's who can see the future. Why is it that every successful trader eventually blows up? Leeson blew up, LTCM blew up. Livermore blew up. Pickens blew up twice, once in natgas and then in oil dumb sonofaiatch. Rogers wrote that silly ass book about riding around the world on his motorcycle, but with the stuff he spouts if he goes all back in I have no doubt he'll blow up too. Same with Soros. Just wondering....is it inevitable?

I'm so confused. I thought Obama was going to work for me, not Goldman Sachs. I think I'm just gonna go buy some Winchester shells, or maybe Remington's.

jd2iv987's picture

3. One last one. This is for the really smart people here....the one's who can see the future. Why is it that every successful trader eventually blows up? Leeson blew up, LTCM blew up. Livermore blew up. Pickens blew up twice, once in natgas and then in oil dumb sonofaiatch. Rogers wrote that silly ass book about riding around the world on his motorcycle, but with the stuff he spouts if he goes all back in I have no doubt he'll blow up too. Same with Soros. Just wondering....is it inevitable?

 

not if you are actually able to learn... most traders at least once they become successful tend to narrow their focus. Rather than expanding their focus to understand why something is currently taking place...they tend to think that its continuation is inevitable. after a 51.6 year bull market in real estate(meaning good times for all...as we blew up the balloon) its very hard for any of the lessons learned from before and during the depression to be passed through to todays generation.

 

the lack of actual experience and extremely high level of arrogance among the new generation of wall streeters and the governments inability to not shoot itself in the foot undoubtedly shows its coming to an abrupt end.

 

ill stay very short fixed income...most specifically treasuries...and long equities and commodities because they will at least reflect inflation.

 

 

 

 

 

 

 

 

merehuman's picture

as long as we can ask questions.....

What happens to society when the average worker having earned callouses

and other work hazards sees large money go to someone on Ophra or the stockmarkets which shoveling paper for paper make millions in hours?

Or the ball players salaries etc. free money by our count! As a tradesman i feel devalued and almost useless in society. None of my employees  valued their labor or product, only their time . Life is short, who wants to waste it working?

And why make a product if only price is respected, not quality.Thanks China!

Gold= quality      dollar =doubtful

Masked Man's picture

By the time I reach social security retirement age (presuming the social security system still exist) the minimum retirement age will be 75 or thereabouts. Chances are I will be dead before then. Why break my back if I'm never going to collect? Plus higher federal taxes are in our future. Who wants to work to pay taxes?

nevket240's picture

Why would he work for you.

He works for his employers. The self-serving filth of New York. GS & JPM are the US Government. When was the last time taxpayers were looked after???

Vale 1776.

regards

delacroix's picture

get yourself a bag of junk silver,  pre 1963 coinage

crzyhun's picture

This is a tough one. The run up was parabolic for a month, up to last week. There are too many weak/patsy hands in the game. They just lost their short hairs.

Those in for the long pull, well, this is not to, to bad. Reading the charts is like tea leaves at my gramma's house around new years- matter of in- terpretation. MA's, envelops, fibs, macd's, etc., are worth assessing. IT all depends on your game plan, manipulation or not.

I'd say that the gld is holding up under a bit of stress. There is buying under the market. Stay tuned- the revolution will be televised

Gordon_Gekko's picture

Gold might take a peek (or perhaps do an intraday spike) below the 50 dma, but won't go lower than $1080. Unless you are able to predict the future, I would suggest start buying somewhere around the 50 DMA/$1100 area. Below $1100, buy at will. Those who don't own any Gold, I would suggest them to buy it right the fuck now. Those waiting for $1000 Gold (or even $1050) will be waiting FOREVER.

Anonymous's picture

All the certitude of a religious zealot. The sign of an amateur, and someone who is way too emotionally invested in their book. And I say this as someone who has made money on both the long and short side of precious metals.

Studies show that those who are the most certain of their predictions about the future make the poorest forecasters.

Anonymous's picture

I'd be interested in reading that study... care to share?

I love the logic by the way because it sort of implies that those who are not too sure about their predictions make the best forecasters.

What's the value of prediction from a guy who thinks that potentially it might conceivably, but with no strong probability reach 1100?

Be convinced of your predictions otherwise don't place a trade or open your mouth, because the market has a way of convincing you that you are wrong all the time, so if you are shaky to begin with, you might as well start looking for another field of study. This does not mean you should stick to your guns no matter what. Apply discipline but place trades with conviction.

merehuman's picture

One bird in the hand is worth two in the bush . Whish is more fun? 

nevket240's picture

I'll take the one in the hand. The 2 in the bush sound like dykes.

regards