Micromanaging the Price of Gold

From last weekend's NFTRH41:

Anecdotally, I see a gold sector that has quieted down considerably. That is good. Things now seem to be in the realm of chartists micromanaging the decline, looking for trend lines and projecting downside targets, support, etc. With each passing week, we hear less and less about the vaunted Inverted Head & Shoulders pattern that was imagined in gold in response to immense inflationary policy by our friends in government. These are all bullish proceedings, but you must have patience and keep in mind that, as galling as it will feel to inflation believers, there is downside potential prior to the real bullish price objectives, the next of which is 1300.

I spoke too soon. The pattern is gaining some attention this week. But this time, the attention includes some of the negating kind, for the reasons I illustrated two months ago; drum roll please... no prior downtrend. This from an NFTRH subscriber:

Hi Gary: For the longest time, you were the only person that I saw who was claiming that gold's weekly intermediate term chart was NOT an inverse H & S. And believe me, I read tons of articles with corresponding TA calling the pattern an inverse H & S, and this has been going on for months. I never saw anyone else who was thinking along your lines in that regard until now. Don't know if you saw it but Merv Burak, a certified market technician (CMT) wrote an article yesterday and the particular points he made were as follows:

'As for the intermediate term pattern, the left and right shoulders can be seen on the right side of the chart with the reverse head in the middle. Unfortunately, I DO NOT subscribe to these being reverse head and shoulder patterns. They are more legitimately potential double top patterns which I had talked about previously.

Head and shoulder patterns are trend reversal patterns and therefore for a reverse head and shoulder to be present (suggesting an upside break) you would have had to have had a bear market move leading into the pattern. For a normal head and shoulder the lead in trend would have been a bull market trend. In neither of these cases do we have a bear market leading into the formation of the pattern and therefore we DO NOT have a reverse head and shoulder pattern.'

The full article can be found here. Regards, Bruce

I have given up trying to figure out why the gold price is so intensively micromanaged by people who would claim it is the only real money on earth. If it is real money, then it is not just another FOREX play to be paired off with other plays and charted into oblivion. As I have always written, and as was taught to me by a real gold guru, 'gold is not about price... gold is about value.'

Obviously Mr. Burak is looking at it from a technical perspective and is telling it like he sees it. I have not read his material in several years but from what I recall, he is not afraid to put forth his unbiased technical view, whether right or wrong. That is what TA is all about. It must stand separate from fundamental views. Insofar as one needs to manage the price of gold for trading and working a world full of 'plays' out there, then this is the way to go about it. With deeply held beliefs firmly in check while TA and sentiment analysis guide the way.

Well, it has been a while so I guess I will do a little micromanagement of the gold price myself. Actually, nothing has changed whatsoever, but this can serve as a review. Here we see the weekly chart of gold. Months ago I published this post negating the inverted H&S but showing another bullish potential, an ascending triangle with its ultimately bullish objective of 1300. This level has been our target in NFTRH all along, but... and in this case the 'but' is crucial to players and casino patrons far and wide... the lower uptrend line needs another successful bump for the pattern to be actualized. Failing that, I have noted a support level at or just below 700 that should be bought like mad by anyone who needs exposure but loves a bargain. Then again, when you are talking about value in a monetary world gone mad, I would think that the need for exposure surmounts the desire to get a steal.

A somewhat uneven symmetrical triangle has been added to the mix, but there is really no functional difference between the two patterns. They both need a test of the lower line and they both ultimately target the 1300 area. Bullish objectives could still be many months out. The weekly MACD is not pretty and implies room to drop to the lower uptrend line.

Now, having had the 'gold is not about price, gold is about value' mantra hammered home to me several years ago when I was but a fledgling gold market player, I have truly found this simple concept invaluable in managing my tack with regard to the various market plays. That is because even though gold may (emphasis on may because there will likely come a day when the metal surprises everybody and tells we TA geeks to go jump in lake) decline in the near term, its ratios to the various assets of hope and positive correlation are what count (or should count) for gold stock traders and for macro market forecasters.

I am bullish on gold. I am certainly not telling readers to be bearish on it. I am simply asking you to be aware of the potentials for its price, both to the upside and the downside and of the timeframes that are likely. It is a good bet that when gold finally does launch for real, it will do so without some of its most would-be ardent believers aboard. It will launch amid fear and agony. That's the way this market works.

Comments

[dieuwer:]

For gold and silver I like to use a "seasonal" investment approach:
if you look at the charts posted above, you will notice that gold, but more so silver, have an impulsive move UP at the end of the odd year ending during the first half of the next (even) year.

Start of impulse: Jul 03, Jul 05, Jul 07; Tops: Jan 04, May 06, Mar 08.

Therefore, I think the odds are very high we will see the start of an impulse NOW, with a top during the first half of 2010.

Jul 15 12:56 PM

[przem23:]

interesting,.. precisely when the MACD was 'stinky'


On Jul 15 12:56 PM dieuwer wrote:

> For gold and silver I like to use a "seasonal" investment approach:
>
> if you look at the charts posted above, you will notice that gold,
> but more so silver, have an impulsive move UP at the end of the odd
> year ending during the first half of the next (even) year.
>
> Start of impulse: Jul 03, Jul 05, Jul 07; Tops: Jan 04, May 06, Mar
> 08.
>
> Therefore, I think the odds are very high we will see the start of
> an impulse NOW, with a top during the first half of 2010.

Jul 15 01:25 PM

[Gary Tanashian:]

That is a great observation diewur. But I think the idea that gold will grind and consolidate over the next few months meshes well with your theory. Perhaps even touching the rising trend line however briefly. This could be the mother of all consolidations and at whatever point it decides to terminate, the upside is going to be historic. There were consolidations before the last two impulses and this is a time of building pressure.

But then again, I don't micromanage the price of gold. :-)


On Jul 15 12:56 PM dieuwer wrote:

> For gold and silver I like to use a "seasonal" investment approach:
>
> if you look at the charts posted above, you will notice that gold,
> but more so silver, have an impulsive move UP at the end of the odd
> year ending during the first half of the next (even) year.
>
> Start of impulse: Jul 03, Jul 05, Jul 07; Tops: Jan 04, May 06, Mar
> 08.
>
> Therefore, I think the odds are very high we will see the start of
> an impulse NOW, with a top during the first half of 2010.

Jul 15 02:11 PM

[DONE_SONZ:]

If charts were so reliable,then everyone would be rich.Trust fundamentals over charts.

Jul 15 02:51 PM

[Gary Tanashian:]

I for one do and always have. Which is exactly why I sleep tight through all the price gyration. Ho hum when it comes to the ancient relic of value.


On Jul 15 02:51 PM DONE_SONZ wrote:

> If charts were so reliable,then everyone would be rich.Trust fundamentals
> over charts.

Jul 15 03:11 PM

[GMiki1:]

Another analyst says it's a cup and handle. So, go figure. And today both gold and silver took a nice pop up. Up? Down? Sideways? Round and round we go...

Jul 15 03:23 PM

[ArbyH:]

What occurs tomorrow does not always correlate with what we see today.
There are many factors that could affect gold and silver prices moving forward:
1. Technology and industry creating specific usage additional demand for all metals, especially as we seek less oil dependence.
2. Decreased mining output of silver. While China produces more gold.
3. International Trade debt, Government debt. Corporate debt, and last but not least Consumer DEBT!!!! > Collapse? Where does the relief come from? Who taxes who and gets what from the other at what cost? I saw a guy at the WSOP making huge houses of cards. How often do they fall under any kind of stress? First one part crashes and then the rest crash too.
4. International consumer purchasing increases for both gold and silver jewelry, and due to wealth protection of monetary risk aversion. If any serious confidence hic-ups occur anywhere, there will be a world-wide collective mad dash to acquire precious metals, a serious a bum rush to gold and silver.
The reason Obama got the job is because of our people's faith in his confidence, but deep down we all know what a bugger bear we have created for poor him to solve. I hope he can maintain the clarity of mind and the leadership presence to pull it off. He is a busy man, but I would like to talk with him, smoke a bowl.

5. There is never peace in the valley. It doesn't have to be "win or die" even though the world is getting smaller and it feels like we are all in each other's back yard.
a. The Korean peninsula. Will North Korea continue to sell arms to our potential adversaries, and saber rattle us into a conflict?
We have sold more weapons then they have though... so who is the culprit? Were our actions more sound, or predictable?
b. Iraq, will we leave when the time comes? They are more than tired of us, but Sunni (smarter minority) vs. Shia (herdish majority) tribalism conflict runs deep and chaos could erupt as we leave. Saudi Arabia supports the Sunni's and that is the only reason we are still there. Honestly, a democracy was the last thing they needed there. It was social Darwinism that had put the Sunnis on top. Tito held Yugoslavia together until his death, the same strength in leadership is required in Iraq. The Mid-Eastern culture respects a charismatic person, not a faceless rule of democratic vote. For a hundred generations they have been conditioned to listen to their clerics and follow their guidance in all things.
c. Afghanistan religious tribalism; backward, zealous and unconquered as far back as anyone can say. We are going to exhaust our country's military and financial reserves trying to change that rock? For what? A foothold in the region? Who cares? The culture clash, both ours and theirs, in the Mid-East is beyond our comprehension and insurmountable. Need I give examples?

d. Who's next? Where is the next zealous nut ball who wants to poke the bear's nose, or catch the eagle's eye? That Dragon is starting to stand up too. “Who is that trying to start an oil bourse, or talking about the dollar no longer being the world reserve currency? That would upset the whole applecart. We can have none of that. Do we fight you, or maybe we can bribe you to keep our game intact?”
Restraint is a good course of action if you can get away with it. Our foreign relations should resemble a pot luck dinner. In that everyone brings some good food, all eat, share some pleasant conversation, let the kids play, play some music, and then sincerely wish everyone well and leave until next time. They don't reveal, or ask us to solve their problems. We don't pry into their affairs, and we certainly don't offer to beat up their neighbors. Respect all around is maintained.
"Trade with all, entangling alliances with none" Thomas Jefferson and more recently Ron Paul.
Yes, we have bought too many F-22s that have critical flight failures every 2 hours. The military industrial complex tail can stop wagging the dog anytime.
Let us take all the profit out of the criminal justice system, and the military mission and requirements. If we have to have a draft then that should tell us that the empire BS has gone too far. Any military action not in our own direct defense is a waste of finite resources, and plays on our people's patriotism.
6. Wherever the economic situation becomes dire, there will be domestic unrest, crime and suffering that might lead to detention centers to control large groups of dissidents. Civil rights are lost as governments preserve themselves at any cost, maintain order, and control the populace. Isn't that what makes them so dangerous? "Gated community" takes on a whole new level and meaning in an extremely security conscious world. It becomes easy to justify the personal RFID chip and total immersion onto the grid giving one access to health, financial, travel passport, employment, and all government services. Never forget that the access to the grid can be switched off at the government's desire and that the RFID comes with the GPS locator beacon for them to come find you.
I now can hear you say "Not me! I won't allow them to RFID me!!!" Well, if that is so then that takes you off the grid and you are going to need plenty of gold and silver where you are going.
There are many eventualities that could cause gold and silver to rise moving forward. How much of this falls into the Bilderberg globalist plan of a New World Order?
Change is a certainty. Where that change will take you is the question.

Jul 15 03:34 PM

[dieuwer:]

The fun thing about investing in gold and silver, is that you actually have the option to hold your investment in your hand and look at it :)
From time to time, I polish some silver coins and bars on a Sunday afternoon and am very pleased with the result afterwards. It will be hard to sell them when the bull market in precious metals is over...

Jul 15 04:02 PM

[ArbyH:]

dieuwer wrote: "The fun thing about investing in gold and silver, is that you actually have the option to hold your investment in your hand and look at it :)"
Absolutely

"From time to time, I polish some silver coins and bars on a Sunday afternoon..."
Major mess up - you don't polish numismatic coins

"It will be hard to sell them when the bull market in precious metals is over..."
Some people make it happen, some people watch it happen, and just say "what happened?"

Add: Iran as 5 d. above and contemplate for yourself on all the ways that could go wrong... ...and with Isreali guided missile boats on the way.

Jul 15 04:14 PM

[kohalakid:]

ArbyH--

Your #2 is not correct, at least for 2008.

2008 silver mine output was the highest in 10 years according to the Silver Institute.

Jul 15 04:17 PM

[The Recusant:]

Since half of the investors are fundamentalists and the other half are chartists, wouldn't it make sense to follow both? They both are the people investing and pushing prices around. Even if one did not believe that either school was valid, one must follow the crowd. So much for random walks down Wall Street.


On Jul 15 02:51 PM DONE_SONZ wrote:

> If charts were so reliable,then everyone would be rich.Trust fundamentals
> over charts.

Jul 16 07:32 PM

[odessa88:]

whoops cleaning them demolishes the value of the coins .


On Jul 15 04:02 PM dieuwer wrote:

> The fun thing about investing in gold and silver, is that you actually
> have the option to hold your investment in your hand and look at
> it :)
> From time to time, I polish some silver coins and bars on a Sunday
> afternoon and am very pleased with the result afterwards. It will
> be hard to sell them when the bull market in precious metals is over...

Sep 16 11:51 AM