Gold Up on Short Covering, Bargain Hunting and Safe-Haven Buying

P.M. Kitco Metals Roundup: Gold Up on Short Covering, Bargain Hunting and Safe-Haven Buying

Monday January 05, 2015 2:03 PM

Gold prices ended the U.S. day session with solid gains Monday, boosted by short covering in the futures market and bargain hunting in the cash market—following a drop to a four-week low last Friday. Some safe-haven for demand for gold also surfaced Monday as U.S. and European stock markets sold off. February Comex gold was last up $15.90 at $1,202.10 an ounce. Spot gold was last up $12.70 at $1,203.00. March Comex silver last traded up $0.442 at $16.21 an ounce.
The gains in gold were especially impressive Monday, in the face of keenly bearish “outside market” forces. Nymex crude oil prices fell to a 5.5-year low of $49.95 a barrel. Meantime, the U.S. dollar index hit a 10-year high Monday. These two key markets continue to trend strongly in the opposite directions, and that continues to be a major negative force working against the raw commodity markets. However, many raw commodity markets, including gold and silver, have stabilized at lower levels and have begun to trade sideways on the daily charts. This is an early clue those commodity market prices may have bottomed out. It is my strong bias that 2015 will be a better year for the raw commodity market bulls than last year.
The Euro currency dropped to a nine-year low against the greenback Monday, mainly due to ideas the European Central Bank will act soon to stimulate European Union monetary policy. However, EU traders and investors are still worried about the debt situations of the smaller countries in the union--especially Greece and to a lesser degree Spain and Italy. European and U.S. stock markets were in part pressured on those concerns, which in turn prompted safe-haven demand for gold.
U.S. economic data due released Monday was light, but the pace picks up as the week progresses. The U.S. employment report for December is due out on Friday. This piece of economic data is arguably the most important report of the month. There are also other important U.S. economic reports out this week, and the U.S. Congress begins its new session.
The London P.M. gold fix is $1,200.00 versus the previous A.M. fixing of $1,192.00.
Technically, February gold futures prices closed near the session high today. Prices last Friday hit a four-week low. The gold bears do still have the overall near-term technical advantage. Their next upside near-term price breakout objective is to produce a close above solid technical resistance at last week’s high of $1,210.90. Bears' next near-term downside price breakout objective is closing prices below solid technical support at last week’s low of $1,167.30. First resistance is seen at $1,210.90 and then at $1,221.00. First support is seen at $1,200.00 and then at $1,195.00. Wyckoff’s Market Rating: 3.5
March silver futures prices closed near the session high today on short covering and bargain hunting. Silver bears still have the overall near-term technical advantage. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at the December high of $17.355 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $15.00. First resistance is seen at last week’s high of $16.48 and then at $16.75. Next support is seen at $16.00 and then at today’s low of $15.63. Wyckoff's Market Rating: 3.0.
March N.Y. copper closed down 520 points at 276.55 cents today. Prices closed nearer the session low today and hit another contract low. The key “outside markets” were bearish for copper today--a stronger U.S. dollar index and lower crude oil prices. The copper bears have the strong overall near-term technical advantage. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at 290.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at 270.00 cents. First resistance is seen at 280.00 cents and then at today’s high of 282.70 cents. First support is seen at today’s contract low of 274.40 cents and then at 272.50 cents. Wyckoff's Market Rating: 1.0.

By Jim Wyckoff

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Blame and Thanks

Monday January 05, 2015 17:58

Many financial pundits are saying that the nearly catastrophic decline in crude prices is at the heart of today’s steep drop in stocks. That steep drop is, in turn, responsible for a movement into gold, so goes the argument.
However, just as strong a case can be made for the continuing disequilibrium and lack of action in Europe, which refuses to actually institute a stimulus program although there has been much palavering about it. The Europeans, other than the Germans, Dutch and part of Belgium cannot stand up to the power of the German central bank. The lack of will is beginning to ruin Europe, and eventually will hurt the rest of the world.
Naturally, there is also very sluggish economic activity in Japan, China, Russia – for well-known reasons, Brazil and other parts of South America.
So, we can either give thanks or blame, depending on your semantics, to crude and/or the Europeans for today’s nice uptick. Pick.
On the more mundane level, short covering and bargain hunting should be looked at as the main source of the fever. Gold technically had to come off its earlier support at 1180, or head into a while new rend. A lot of individuals bet on its rising today, and it did not disappoint.
Another factor today is the return, and re-entry, to the markets of a lot of investors and traders who have been off for the better part of the last two weeks. Many are looking to “make trades,” to get into the game, so to speak.
We should note that equities are making an attempt to bounce off their lows for the day but failed. Commensurately, gold started to go the other way then regained its highs of the day and more. Oil, however, continues its death spiral. It will close below $50 per barrel on the day. 
Wishing you as always, good trading,

Gary Wagner

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Where are the Stops? Monday, January 5: Gold and Silver - by Jim Wyckoff

Where are the Stops? Monday, January 5: Gold and Silver

Monday January 05, 2015 08:44

Editor's Note: Professional traders have a very good idea of price levels at which buy and sell stop orders are located on a daily basis. And now you will, too! If pre-placed buy or sell stop order are triggered, bigger price moves can immediately follow. Most stop orders are located and placed based upon key technical support or resistance levels on the daily chart, which if breached, would significantly change the near-term technical posture of that market. Having a good idea, beforehand, where the buy and sell stops are located can give an active trader a better idea regarding at what price level buying or selling pressure will become intensified in that market.

Below are today's likely price locations of buy and sell stop orders for the active Comex gold and silver futures markets. The asterisks (**) denote the most critical stop order placement level of the day (or likely where the heaviest concentration of stop orders are placed on this day).
See below a detailed explanation of stop orders and why knowing, beforehand, where they are likely located can be beneficial to a trader.

February Gold	Buy Stops	Sell Stops
	$1,198.00	$1,180.00
	**$1,200.00	$1,177.80
	$1,203.90	$1,170.70
	$1,210.90	**$1,167.30
March Silver	Buy Stops	Sell Stops
	$16.095	$15.63
	$16.255	**$15.51
	**$16.48	$15.25
	$16.75	$15.00

Stop Orders Defined
Stop orders in trading markets can be used for three purposes: One: To minimize a loss on a long or short position (protective stop). Two: To protect a profit on an existing long or short position (protective stop). Three: To initiate a new long or short position. A buy stop order is placed above the market and a sell stop order is placed below the market. Once the stop price is touched, the order is treated like a “market order” and will be filled at the best possible price.
Most stop orders are located and placed based upon key technical support or resistance levels on the daily chart, which if breached, would significantly change the near-term technical posture of that market.
Having a good idea, beforehand, where the buy and sell stops are located can give an active trader a better idea regarding at what price level buying or selling pressure will become intensified in that market.
The major advantage of using protective stops is that, before a trade is initiated, you have a pretty good idea of where you will be getting out of the trade if it's a loser. If the trade becomes a winner and profits begin to accrue, you may want to employ "trailing stops," whereby protective stops are adjusted to help lock in a profit should the market turn against your position.
By Jim Wyckoff

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Jan 05 SSSSS This past week in gold Jack Chan

This past week in gold

Jack Chan
Posted Jan 5, 2015

GLD – on sell signal.

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SLV – on sell signal.
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GDX – on sell signal.
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XGD.TO – on sell signal.
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CEF – on sell signal.

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A multi month consolidation is in progress.
Summary
Long term – on major sell signal since Mar 2012 when $HUI was at 550.
Short term – on sell signals.
Gold sector cycle – up as of 11/14.
COT data suggests lower metal prices overall going forward.
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Jan 3, 2015
Jack Chan

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Jan 05 Gold Miner Oscillator - Jan 4, 2015 Denaliguide

Gold Miner Oscillator - Jan 4, 2015

Denaliguide's Summit
Posted Jan 5, 2015

With the GIMBO Oscillator (thin dashed line), the slower of the components here being crossed by the faster CARTEL~BUSTER!, to the upside, these two proprietary measures that created a Positive Set-up as of Oct 16, now showing Edson Gould's Speed Resistance Lines underneath the CARTEL~BUSTER!®. All the tests that this FASTER vs. SLOWER chart have seen are bested since October. AS a dual oscillator based on both BREADTH and VOLUME, “The Dragon” refused to be sucked in by the “Stink-Bait” offered by the clear price manipulation, alerting us 1 mo ahead of the PRICE LOW, and also what will likely turn out to be a Double Bottom on the GDX. Part of this Savvy is shown by the SRL's which are holding Firm showing the potential path of support they trace out over Jan, Feb and March, quite like what happened in 2014. While your coping with a train-wreck or getting your butt hammered on the line of Scrimmage, you often don't sense the larger moves you can see from the Coach's Box, so this may be a View for you to catch a glimpse of that.
We only get paid by our subscribers and it insures our independence interpreting our own measures since we wont get paid if you don't make money, so you can bet we watch this stuff like a hawk and change like one if necessary as well.

As you can see, Our GIMBO® Measure, there is not too much to guess about, as we see the GDX underneath breaking out to the upside form a Triangle as GIMBO continues to climb. I expect some more bouncing but IF Momentum persists bouncing upside, then TREND as currently established, the TREND will remain Valid!!

The Hydra Dragon, is a combination of the Faster Cartel~Buster!, and the slower GIMBO, so that when the Blue (Purple) is above the RED, we are in a LONG Mode, and in the reverse in a SHORT MODE is indicated. In the current position we are in a LONG MODE.

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Jan 05 Gold: A New Year, but a Long Road to Recovery Demeadville

One day up, 251 days to go. And Gold's first trading day of the year yesterday (Friday) was exemplary of Long positions being initiated even in the face of a surging Dollar Index, which of its own accord leapt out of the 2015 chute to close at a level (91.383) not seen since 2005. Gold did not open the year with a huge up day, closing just seven points higher from 2014's final 1183 settle, at 1190. But it was the conviction on Gold's BuySide to which we took heart, especially as the S&P 500's fireworks opening comprehensively fizzled out. A telling theme perhaps for the year ahead: out of worthless paper and into substantive wealth? Wouldn't that be lovely. Although one trading day does not a year make, so as to share with you the buying conviction in the Gold trade, the following chart is the full first session of 2015 as charted by volume, each "candle" in the series representing 2,500 Gold contracts traded. Red candles represent net selling and green candles net buying. And look at the buying power across the center of the chart during the 07:00 hour (Pacific Time), price pounding higher with one green candle after another. That's what we call "Big Boy Buyin'" right there:

So: 'tis a welcome start to 2015 for Gold, which was also a podium "top three" finisher as we turn to the final standings of the BEGOS Markets for 2014:

Observe the market at the top of the standings: the 1st place Bond. Its portended ruination has been anything but. And yet, one might pity the poor Bond, for 'tis the stock market that gets all the headlines, the S&P finishing a close 2nd place. But the Bond was the better buy, +12.8% (year-end yield-to-maturity 2.749%) vs. the S&P's +11.5% gain (year-end dividend yield 1.957% and "live" p/e 29.1x ... scary). Finally, contrary to popular opinion (aka: "those who mimic others without actually doing the work"), to round out our podium finishers in 3rd place was Gold , -1.8%, which also garnered the vaunted "Who Knew?" award for surprisingly not going to zero ("0") as would the nattering nabobs of Gold negativism have us believe. That said, I suppose one ought give some deserved due to the Gold Shorts, for had you shorted a Gold contract at the 2014 open of 1204.5 and bought it back at the 2014 close of 1183.2, you'd have made $2,130 (a 48% gain on $4,400 requisite margin) ... congratulations: have a banana. If instead you'd gone Long one Bond contract, you'd have made $15,626 (a far more impressive 676% gain on $2,310 requisite margin). To wit, a well-known investment bank is currently pushing its Bond products under the slogan: "Boring is the new Exciting". Still, all that said, we'll stick with Gold, thank you very much.
And as we next turn to Gold's weekly bars, their track is essentially that for the entirety of 2014, plus yesterday. Per the rightmost blue dots, the Long parabolic trend now has five weeks under its belt and 43 points of wiggle room with which to play. But as mentioned a week ago, (as well as in the website's Prescient Commentary), Gold's negatively-positioned daily Price Oscillator has a Market Rhythm Target of 1164, such that we're prepared to tolerate some near-term retrenchment, ideally to again be met with further buying conviction similar to that which we saw yesterday, and thus keep the Long trend alive:

Again in lending support to the notion that Gold has become thoroughly "sold-out", as most recently described a week ago via the dominate up-thrust of price's "mega-days", and as shown above with this year's opening BuySide conviction, let's revisit our broadest measure: price vis-à-vis its 300-day moving average. Here we've the daily tracks of the two for the last 10 years-to-date; and in viewing them on a logarithmic scale, the downside bent of the average appears to be flattening out:

Returning to the one-year time frame, with the passing of another month, 'tis time to bring up Gold's year-over-year percentage track and compare it to those of the Gold Bugs Index ("HUI"), the Philly Exchange Precious Metals Index ("XAU"), the exchange-traded fund for miners ("GDX") and the ever-rollickin' royalty company Royal Gold ("RGLD"). One might say the underlying equities entities are gathering strength toward surpassing Gold itself to the upside, their Golden lava beginning to rumble:

Now: as we move on to Gold's daily bars with their "Baby Blues" indicative of 21-day linear regression trend consistency, we've a special New Year's treat for you. A valued reader recently wrote in expressing a preference for the three-month display of the following graphic over the one-month display. We generally present those displays interchangeably as to whether we're stressing the overall ebb and flow of the blue dots, or zooming in on "the now". But in this case for kicking off the new year, we've blown the doors off the graphic to show the full year-over-year view. Successful trading is 50% borne of getting direction correct and 50% borne of judicious cash management. And as you can see below, trading with the rising or falling direction of the baby blue dots shall generally put one in good stead of trend, prudent account management being in the balance. As many of you know, the three-month views of the Baby Blues for all eight of the BEGOS Markets are updated daily at the website; however in celebrating the arrival of 2015, here for your New Year's viewing pleasure, is Gold's entire year-over-year display:

Next, 'twould not be apropos to commence the New Year without regard to Gold's pricing structure. So here we go with the defined strata, indicative of the terrific amount of upside work facing Gold. And just to get price back up into "The Floor", Gold would have to record an above-average year: the average annual change in price over the last 14 years is +12.293%, which would find Gold settling this year at just 1329. Gold's best year of the past 14 was 2007 in which it finished +31.348%: to repeat that performance in 2015 would put price by year's end at 1554 -- still in "The Floor"! But we'd gladly take it:

"But mmb, your opening scoreboard says Gold outta be 2460 right now!"
And so 'twill come to pass, Squire: 'tis simply "the when" and conservatively approaching "then" with a reasonable analytical assessment. To round out 2015 somewhere within "The Floor" as shown above would be an admirable achievement. As for price moving up and beyond 2000+ toward becoming commensurate with currency debasement, 2460 is hardly far-fetched: for surely as price has fallen by as many as 793 points from Gold's All-Time High (1923) in just over three years, so can it return back up with like swiftness, even more acceleratively so. 'Tis happened before, (for example the 755% rise in less than four years from 102 in '76 to 873 in '80: to repeat same from here puts price at 8993, just in case you're scoring at home). Nevertheless, in our taking a collective deep breath, let's turn to the present and the 10-day Market Profiles for both Gold on the left and Silver on the right, their respective trading supporters and resistors as therein labeled:

Thus, with the trading battles of 2015 and Gold's long road to recovery underway, we'll wrap it up here with these two notes:
1) EuroCurrencies: Within the context of the Dollar Index's having closed yesterday at a 10-year high, the €uro in turn has lurched down to a 4-1/2 year low, as the FinMedia put it "...on clear indications that the European Central Bank will soon embark on outright money-printing..." Naturally, neither you nor I are surprised by this, for 'tis been inevitable all along, and moreover 'twill in due course recur here StateSide as well. But the real eye-catcher yesterday was the Swiss Franc returning to parity against the Dollar. How cool is that? You can now embark on that ski vacation to glorious Gstaad and not have to do math as CHF1 now = $1. The rub, of course, it that what costs one Dollar here will set you back multiple Francs on your alpine adventure. For example, the tumbling Oil price may have our cost for one gallon of gasoline averaging $2.22, but CHF2.22 will barely buy you a litre's worth en Suisse: the one gallon equivalent there will run you CHF6.81 (which of course at parity= $6.81). Best to take the train.
2) California: Only our silly little State could come up with this. The powers that be are now requiring new chicken cage standards that allow sufficient space for the hens to move about, stretch their wings, and so forth. What's next for our poultry pals? Driver's licenses? Don't laugh: beginning yesterday, illegals (I'm sorry: "undocumented immigrants") can officially apply for them, the Department of Motor Vehicles bringing on more than 1,000 additional workers to handle the demand. I tell ya folks, in a State, indeed a world, that has gone certifiably stoopid, I hope you're stackin' plenty of Gold: 'tis the smart thing to do!

Cheers!

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Jan 05 Empire v Mere State AE

 Empire v Mere State

 

QUESTION: Marty, your insight into the failure of Austrian and Keynesian economics was really eye opening. At your conference you said that Adam Smith’s Invisible Hand applied internationally not just domestically. I believe I have reached the level of understanding you have been teaching us. It is indeed global and clearly everything is connected. Is China now in the early stage of Rome when it was growing in the shadow of the Greeks?
Happy New Year from Euroland
All the best
KM

ANSWER: Absolutely.China is in the current growth stage. It will take time. It took Rome 72 years to complete the second phase of monetary growth. Its first silver and gold coinage was struck in Greek denominations illustrating that the Greeks were still the financial capital of the world. Like an emerging market nation today who issues debt in dollars to facilitate their economy, the Romans adopted the Greek monetary system to facilitate trade.


Previously, the Roman monetary system began with bronze, for it was the metal of tangible value since it could be made into a plow or a weapon. Bronze coinage, known as Aes Grave, appeared during the 4th century BC and that standard weight system is still with us today. The Roman As was one pound and this was divided into 12 units called “uncia” or ounces.
Prior to the 4th century BC, the Roman monetary system consisted of just lumps of bronze known as Aes Rude. This form of money replaced cattle. This period of Aes Rude lasted about 309 years.
The Aes Rude is thus replaced with “official” government issued coins that were a standard weight system. This facilitated trade for it displaced the requirement of always having to weigh the crude lumps of bronze.

It was 211BC when Rome introduced the Denarius establishing its own monetary system distinct from the Greeks. Therefore, we have 309 years for Aes Rude, about 112 years for the Aes Grave, 72 years for the Greek denomination period, and then the birth of the Roman denarius.

The First Punic War (264-241BC) erupts over trade during this period of the Greek denominations that began about 280BC. The Second Punic War (218-201BC) is when Hannibal crossed the Alps and invaded Italy. This nearly succeeded, and we can see the impact in the monetary system. The Romans were forced to reduce the weight of the coinage from about 7 grams to under 5 grams, which was a reduction down to about 72%.

It was at this time Rome issued its first gold coinage, yet this was in keeping with the Greek standard of a stater. The Stater design was the Roman god Janus and the reverse is an oath taking. This was issued during the Second Punic War to impress the various Italian states to standby Rome for they had money and the oath taking was to demonstrate expected loyalty.

The evolution of the monetary system of Rome illustrates how empires rise. It also reflects that the dominant economy’s currency is ALWAYS used by surrounding nations. Consequently, history demonstrates WHY in fact QE1-3 failed to produce inflation for the dollars created were absorbed globally. Theories that only view the dollar from a domestic isolated perspective are incorrect and will always fail for that is not what history teaches us if we take the time to listen.

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