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Gold Sitting at Ledge of 2-Year Support Cliff

EconMatters's picture




 

By EconMatters  

 

 

A Rough Start for 2013

 

Well Gold hasn`t had a particularly good start to the year, in fact, a good pairs trade would be going long the S&P 500 and short the Gold market for a nice 12% return in two months. But many Gold Investors are not yet ready to throw in the towel for 2013, and some even have targets in the 2000 an ounce area, and think this pullback, although significant, represents an excellent buying opportunity. 

 

A Buying Opportunity?

 

Well, all those waiting for a pullback to get long on this Gold trade now have their opportunity. The real question is whether this is a good place to buy, or the proverbial “Catching a Falling Knife”? I put some charts together, and I will let you decide that one for yourself. Just watch for key technical levels that break, and protect yourselves with stops, and you will survive with little more than some flesh wounds if you are wrong. 

 

Charts Galore

 

 

 

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Thu, 02/21/2013 - 13:00 | 3263726 MaxThrust
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Thanks for the Charts.

 

I am waiting to buy three Kilos and have now decided to hold off and see where this latest downward move ends. as someone posted above $1280 looks good.

Thu, 02/21/2013 - 11:20 | 3263246 rsnoble
rsnoble's picture

If $1500 breaks $1400 will be in play and hard to break.  And like I posted elsewhere this could be gold players front running a market crash/correction. Time will tell.  $1500 is a solid support line and will be hard to take out if reached and would most likely bounce off it at first.

Thu, 02/21/2013 - 11:29 | 3263197 The Continental
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Technical analysis is worthless when applied to a manipulated item such as gold. In the 1960s, the central planners (manipulators) were far less imaginative in their suppression of gold in the face of dollar inflation from chronic US trade deficits. Johnson’s reaction to the rising silver price, to dump US multibillion ounce silver bullion reserves onto the open market to no real avail, illustrates how having power does not equate to having intelligence or wisdom. By the late 1970s the market was holding the US government accountable for its excesses as reflected in the dollar prices of gold, silver and oil. A full decade would pass before the sins of the past would be punished. Today is different. TPTB have gone totally virtual. They realize that perception is everything. If the thermometer says it’s freezing, you will feel cold, even though it be steaming hot. All of the economic indicators are cooked, manipulated, adjusted, massaged; in short they are not connected to reality. TPTB can paper short gold with massive leverage and drive the price down – they don’t need no stinkin’ bullion. They know what technical indicators you worship and they break them, one by one. They are suppressing the 10-year bond with massive leverage through derivatives. You are starving to death; but I convince you with false lab tests and a loaded scale that you are healthy and gaining weight. You believe it and feel good – right up to the point when some unforeseen stress comes out of nowhere and hits you and you crumble, an emaciated bag of bones. Then reality hits, when you didn’t see it coming. You were sick and dying all along.

 

This debt-based Ponzi we are living through is in the terminal stages of exhaustion. The system is starving for growth and credit. The old debt sucks the life blood out of the system as fast as it can be created. TPTB will not accept jubilee. They will not accept a reality-based write down of their notional assets whose price is a fiction in their avaricious minds. They fix and massage and fake the economic indicators and insist that the economy is healthy and growing, No, it is dying. Look at your young people: in debt, no jobs, no prospects, no upward mobility. They are the canary in the coal mine. There is no escaping the reality of the credit reset. We cannot move forward until the old debts are marked down to reality and everyone accepts the necessary pain to correct the imbalances from past sins. There is only one way through this malaise, and that is through gold.

 

Thu, 02/21/2013 - 10:44 | 3263098 ebworthen
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Santelli saying the Dollar index is at a six month high.

Gold at six month low, not a coincidence.

The Gold/Dollar index is inverse since Feb. 1st.

Thu, 02/21/2013 - 10:41 | 3263081 Gold Dog
Gold Dog's picture

Every day I go to the park to feed the pidgeons, to my dog.

Who is who in today's fucked up world?

Dog

Thu, 02/21/2013 - 10:12 | 3262973 BlueCheeseBandit
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I wasn't sure whether to buy more gold and silver now, then I read EconMatters.

I'm calling my guy right now.

Thu, 02/21/2013 - 09:58 | 3262880 Shell Game
Shell Game's picture

Is it just me or does that last chart really look ripe for some scary parabola?

Just a thought on physical......I love you don't have to worry about those damned 'stops' the paper world has to worry about because of its volatility, which is inversely proportional to the quiet stillness of the physical store of value.  

Thu, 02/21/2013 - 09:54 | 3262854 ebworthen
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Very nice charts, thank you.

Gold hasn't done this since....2008? (fourth to last chart).

This could be the signal to get out of Gold, or possibly signaling the big correction in equities (so hold on).

Thu, 02/21/2013 - 09:59 | 3262887 Shell Game
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I've read the signal to 'get out of [paper] gold' for years now...

Thu, 02/21/2013 - 10:06 | 3262926 ebworthen
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I was being coy.

I'm holding on to physical and buying more if it hits the 200 DMA.

With the unprecedented amount of fiat creation by central banks worldwide, PM's are the only store of real value past water and land.

I think it is signaling a coming BIG correction in paper equities of all kinds and sectors, especially that fourth to last chart - I'd love to see it overlaid with the DOW or S&P.

Thu, 02/21/2013 - 10:34 | 3263057 TruthInSunshine
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If the sequestration of 85 billion USD is allowed to take place, given that it amounts to a very significant 1/3 of 1% of the annual U.S. Budget, it will destroy life as we now and have forever known it.  /sarc

Thu, 02/21/2013 - 10:37 | 3263065 tarsubil
tarsubil's picture

Correct. It will instantly result in the world exploding in a way very similar to what is depicted in the beginning of the prophetic film "Team America: World Police."

Thu, 02/21/2013 - 10:57 | 3263137 TruthInSunshine
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Just to be clear, the 85 billion in sequestration is roughly equivalent to 1/3 of 1% of the U.S. Annual Budget, in terms of how that MASSIVE (/sarc) 85 billion of cuts is 'spread out" over a period of years.

Rick's correct:  If Obama is promising hell & firestorms should sequestration of a miniscule % of our massively bloated, inefficient, wealth-destroying 3.8 trillion USD Budget, take place (especially when 1.1 trillion of that 3.8 trillion budget deficit is "borrowed" on the national credit card and added to the aggregate debt, piled higher and higher, continuously), we're truly farked.

Thu, 02/21/2013 - 09:47 | 3262834 TahoeBilly2012
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Every upwards price spike in gold starts with a nasty cleanout, no? Why would any think they are sitting pretty versus setup for price spike whacking. I think the smart money drives it down and gets out while passing the shorts off to the chumps.

Thu, 02/21/2013 - 09:46 | 3262832 drdolittle
drdolittle's picture

On the other hand, Central banks sold at the low. Should you be opposite guy and sell when they're buying?

Me, accumulating. It will always have value and, as the grocery shopper/bill payer in the family I'm well aware that inflation does exist.

Thu, 02/21/2013 - 09:44 | 3262823 drdolittle
drdolittle's picture

Buying phizz at this price. Don't think I'm wrong but as a conservative chap, I have assloads of cash on hand.

 

As a question, since the stock market is obviously rigged, besides lead, guns and PMs, where to put your assload of cash?

Thu, 02/21/2013 - 10:14 | 3262980 ebworthen
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Arable land with a water supply.

Thu, 02/21/2013 - 12:15 | 3263546 DaveyJones
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and skills, basic, timeless skills. 

Thu, 02/21/2013 - 10:34 | 3263059 tarsubil
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Water filtration systems and local network to serve as a posse.

Thu, 02/21/2013 - 09:43 | 3262821 drdolittle
drdolittle's picture

Buying phizz at this price. Don't think I'm wrong but as a conservative chap, I have assloads of cash on hand.

 

As a question, since the stock market is obviously rigged, besides lead, guns and PMs, where to put your assload of cash?

Thu, 02/21/2013 - 09:42 | 3262813 Henry Hub
Henry Hub's picture

Questioner -- "What's holding up the gold market?"

Indian Guru -- "The gold market sits on the back of a giant turtle and can not fall."

Questioner -- "Well what's holding up the giant turtle?"

Indian Guru -- "Actually, it's turtles all the way down!"

(Credit to Bertrand Russell)

Watch out for the fucking turtles on the way down!!

Thu, 02/21/2013 - 09:22 | 3262748 jldpc
jldpc's picture

Obama's job approval today hit a 3 year high TODAY. Go figure. This is the ultimate assurance that t he long term thesis is intact. The dollar will be devalued big time but over a long time. Just not now. The stock market topped out 2 days ago. Margin debt by hedge funds was at an all time high this month. Gold was a major support of the margin debt; so was oil. oil ran up and gas screamed up on the futures marketsfor two months. When the top blew off; gold was the first thing to be liquidated by the margin clerks. Calm down. Most governments are buying gold to increase their reserves. Same time all the currency devaluers are making expectations of the dollar to increase; for months and years to come - equals big pressure on gold. As long as the Euro and Yen are going down because of failing economics; perception will force gold liquidation on fears of extended dollar rise. None of this is political or conspiracy based. Just because you wake up every 24 hours - human time line - does not make the economic time line the same as yours. The inevitable outcome couls be years or even decades away. Rome did not fall in a day; neither will  the USA. In the meantime, do not confuse theory with reality; and hoping the end result will occur soon is dumb.

Thu, 02/21/2013 - 09:34 | 3262783 Mr. Hudson
Mr. Hudson's picture

Max Keiser had on a guest who said that Russia and Iran are creating a "petrol dollar", or "gas dollar'; paper money backed by oil and gas. If this is true, this would kill any hopes of a gold backed currency.

Thu, 02/21/2013 - 10:08 | 3262958 Shell Game
Shell Game's picture

A word of caution.  When people come to believe gold is 'too expensive' to buy, when they don't truly understand it's primary role as store of value extraordinaire, they come up with every reason in the book why it shouldn't be used. 

Beware personal agendas from talking heads, especially when their view coincides with MSM views..

I go with what history teaches - 1) high velocity commodities make terrible money, and 2) the quiet SoV of gold has made very good money for thousands of years.  

Thu, 02/21/2013 - 09:52 | 3262851 gaoptimize
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If that were true, how come Russia has become the leading gold importer?

Thu, 02/21/2013 - 12:54 | 3263657 JOYFUL
JOYFUL's picture

Total confusion of topics...

right now Russia has the option of turning returns from the sale of it's energy products into gold...just as China can choose to turn the returns from it's manufacturing exports into same....both are exercising their option programmatically.

USA/UK/FRANCE/fill in your choice of formerly first world debtor here don't have that choice...they are slowly but relentlessly forced to give up their gold to stave off their debtors...

the inevitable devaluation of their currencies will result in the petroleum products of Asian trading bloc partner states being only available to them for gold/silver/or marketable commodities(which with the exception of Canada and Australia, the west no longer holds much of territorially)

Germany will move to the new Eastern orbit...and probably integrate successfully...joining those countries which had the foresight to protect their currencies from massive devaluations and hyperinflation.

As for the rest of the west...there's little point of worrying about a 'gold standard' when you're living out of a cardboard box.

Thu, 02/21/2013 - 13:02 | 3263738 DaveyJones
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here in the US, we call it the gold spray paint standard

good post  

Thu, 02/21/2013 - 12:17 | 3263518 DaveyJones
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that's not inconsistent with the system breaking down and a run on dollar hegemony

there will be a vaccuum period

the gas coin is new

the gold coin is a little older

 

Nice GATA post:

Adam Taggart: Gold's regular morning mugging Section:

12:09p ET Wednesday, February 20, 2013

Dear Friend of GATA and Gold:

Adam Taggart, colleague of market analyst Chris Martenson at the Peak Prosperity Internet site, today notes with some wonderfully annotated charts what he calls "Gold's Regular Morning Mugging" on the New York Commodities Exchange.

Of course this mugging was noted long ago by GATA consultant Dimitri Speck and the late GATA board member Adrian Douglas, who found that despite its great run up over the last decade gold almost always has gone down during Western market hours --

http://www.gata.org/node/8919

-- and Taggart draws conclusions similar to theirs.

"It's hard to swallow that these charts are evidence of a free and efficient market," Taggart writes. "Otherwise, a pattern this predictable would be quickly removed as traders and HFT algos piled in to a 'sure' bet.

"Instead, this is behavior one would expect to see if powerful interests wanted to suppress the price of gold: Hit the price hard and early at the start of the trading week to prevent the price from building upward momentum, as well as to make capital think twice before entering the gold market.

"Who is doing this selling at the market open? Is it TBTF ("too big to fail") banks making profit on large short positions? Is it the Fed, through proxies, keeping the gold price contained so as not to signal how badly QE is devaluing the dollar? Allegations swarm across the Internet that it's one of these -- or both. But we don't know for certain. The exchanges don't make that information available to the public.

"But while these charts are not enough evidence to prove that the gold price is being manipulated, they sure exhibit the symptoms one would expect to see if it is. So the big question is: If the precious metals market is being manipulated, is it wise to be in it?"

Thu, 02/21/2013 - 10:28 | 3263042 tarsubil
tarsubil's picture

They love bling?

Thu, 02/21/2013 - 09:31 | 3262779 tip e. canoe
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solid analysis, agreed.    the fact that gold is the major support of all this margin debt should be a major clue as to the long-term security of one's so-called stash.

Thu, 02/21/2013 - 09:10 | 3262713 Aegelis
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In the morning I look forward to charts and coffee.  I need to re-think my life.

Thu, 02/21/2013 - 09:02 | 3262693 Phat Stax
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In my several years of reading ZH, I have seen many a reference to the inflation of Zimbabwe, but none to the Confederate States of America. The CSA was a real American example.  While the CSA was not in the same league as Z, inflation was 90 fold in the southern states by 1865 compared to the start of the war.  There were also plenty of guns then, but it didn't matter.

I worked once with a woman married to a descedent of an old Richmond family.  The family reportedly became permanently divided as a result of their investments at the start of the war: half of the family invested patriotically by buying the bonds of the CSA, the other half of the family bought gold.  The patriotic side held the gold side in contempt for not doing "the right thing."  Today, the gold side of the family is... well you can imagine.  The bond side are working class... she is married to that side and said that both sides are still estranged to this day.  True story.

Thu, 02/21/2013 - 09:34 | 3262792 Shell Game
Shell Game's picture

Good story.  They say the War of Northern Aggression literally pit brother against brother.  As you mentioned, it showed an example of what a monetary default could look like and how families could splinter.  But, it also gave us our first look at an American dictator.....important lessons for today. 

Thu, 02/21/2013 - 08:42 | 3262651 NoWayJose
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It almost looks like someone leaked the Fed minutes two weeks ago to ghe big banks, and they started shorting gold. It will be curious if yesterday is the low and gold bounces from here.

Thu, 02/21/2013 - 09:08 | 3262697 El Hosel
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Gold goes from $600 to $1800, pulls back and goes sideways for a couple years around $1500.... Nothing to see here yet, $1280 is the 50% retrace of that last huge rally...Just sayin

Thu, 02/21/2013 - 09:54 | 3262859 midtowng
midtowng's picture

Unfortunately I have to disagree. I don't want to sell my gold, but a $50 drop from here would chase me out of much of my PM holdings.

Thu, 02/21/2013 - 09:41 | 3262812 Shell Game
Shell Game's picture

$1280 gold would put silver at a $20 retest.  I'd be happy with that..  ;)

Thu, 02/21/2013 - 10:23 | 3263017 SmallerGovNow2
SmallerGovNow2's picture

got a truck i can borrow?  I'll be needing two at that price...

Thu, 02/21/2013 - 10:25 | 3263026 Shell Game
Shell Game's picture

..and trailer.  Have a hard time backing the damned thing up, but I will for $20 silver!  ;)

Thu, 02/21/2013 - 08:37 | 3262640 CPL
CPL's picture

Best way to play the market right now.

  • Get out of all paper (ETN, ETF, USD)
  • Don't ever look back.
Thu, 02/21/2013 - 08:15 | 3262605 Quinvarius
Quinvarius's picture

I trust the math:

http://research.stlouisfed.org/fred2/series/BASE

Gold has a long way to go before it is high enough to counter that growing mess.

Thu, 02/21/2013 - 10:30 | 3263047 ebworthen
ebworthen's picture

Nice steady ramp from 1984 onward, even when things were supposedly "good".

Agree with you on the Gold valuation versus fiat printing.

Thu, 02/21/2013 - 10:29 | 3263044 Gold Dog
Gold Dog's picture

Quin,

That graph looks just like a hockey stick!

Dog Gretzky

Thu, 02/21/2013 - 09:29 | 3262767 SamuelMaverick
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Last year the StLouisFed had to re calibrate this graph because the monetary base literally went off the chart !!!

Thu, 02/21/2013 - 08:08 | 3262602 forrestdweller
forrestdweller's picture

just be careful and conservative. invest one third of your money in physical gold and silver, one third in a house with a plot of land, and keep one third in cash at home or in a reliable small bank that does not do any speculating.

that might not get you a big profit, but it's relatively safe i would say.

Thu, 02/21/2013 - 08:02 | 3262594 miro1a
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If you were "in charge" of a fiat system and knew full well it was about to collapse, and you knew that all fiat currencies would be revalued and backed by gold going forward, and you were trying to accumulate as much as possible before the collapse, wouldn't you collapse the price one last time in a major way to get your hands on as much cheap physical as possible before the artificially low paper price caused the inevitable run/shortage?  I'm thinking that it is inevitable that there will be one last major drop before the spike up.  Is this it?  I don't know.

Thu, 02/21/2013 - 08:05 | 3262596 GetZeeGold
GetZeeGold's picture

 

 

Well....it's exactly what I would do.

 

Thu, 02/21/2013 - 09:01 | 3262691 El Hosel
El Hosel's picture

Maybe they are trying to change the mind of the Germans. Once they  see how "risky" and "volatile" gold is Germany  might tell the Bernank to go ahead and keep the German gold, its just not worth it.

Thu, 02/21/2013 - 07:57 | 3262588 Notarocketscientist
Notarocketscientist's picture

Gold will crash with all other assets as the deflationary spiral kicks into high gear.

Then when the stupid bastards who have been saying 'you can't eat gold' realize it is the ONLY SAFE ASSET out there - they pile into the trade.

The only question I have is how long does that take - buy more now - or wait a bit more for a bigger drop before stepping in.

I suppose it doesn't much matter because at some point 1600 bucks is gonna look like peanuts

Thu, 02/21/2013 - 09:03 | 3262696 Watauga
Watauga's picture

I hear all the time about the deflationary spiral, but this week my gasoline went from $3.59 to $3.89, my heating bill is up 20% even though we have had the warmest winter in memory, bread, eggs, milk, cheese. . .  all groceries are up at least 50% in the last year or two. . .   I am not seeing this spiral. 

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