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Michael Noonan Edge Trader Plus Michael Noonan is the driving force behind Edge Trader Plus. He has been in the futures business for 30 years, functioning primarily in an individual capacity. He was the research analyst for the largest investment banker in the South, at one time, and he... More
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  • Gold And Silver - When Fundamentals Fail And Charts Prevail 2 comments
    Nov 16, 2013 3:38 AM

    Saturday 16 November 2013

    There is a decline in the number of reads in our articles that do not
    provide a fully developed "fundamental" story about why gold and silvershould be much higher in price, [but are not]. Relying upon charts to
    more accurately capture the developing "story" does not capture the
    imagination of as many readers, for whatever reason. We attribute
    this to Confirmation Bias where a reader wants to read an article that
    confirms his/her beliefs. The accuracy/validity/truth may or may not
    be true, but is satisfies an emotional need for affirmation.

    The true story of gold and silver is a simple one. There is a recognized
    and acknowledged shortage of supply in opposition to the greatest
    demand for both precious metals, for at least in recent memory, if not
    all time. Current prices are in total disregard to the fixed law of Supply v Demand, or perhaps more accurately stated, in total defiance of that law. It is the most reliable of truths that when demand is in far excess
    of supply, price goes higher.

    This has not been the case for precious metals for the past two years,
    as central banks have been actively suppressing prices in order to
    preserve their fiat currencies, particularly the Federal Reserve's
    "dollar." In our last article, Cognitive Disconnect Between Physical and
    Paper, we covered several aspects that addressed political/central
    banker motives that account for why gold and silver are not rising in
    value.

    It is all about money, following the money, for money is power, and
    those central bankers currently in power face losing it. Desperate
    people do desperate things, and the power-hungry will destroy all
    currencies to keep themselves where they are. Even they know the
    clock is ticking. Repeating statistics, dwindling exchange supplies, etc, etc, etc, has done nothing to otherwise explain why PM prices remain
    low.

    Fundamentals are relative, charts are absolute. They accurately
    reflect all that is going on, regardless of reasoning/motivation. A few,
    or some, the number[s] do not matter, have no regard for the validity
    of PM charts which reflect a bogus paper market. To an extent, the
    paper markets are bogus, but the number of contracts being sold are
    large, much larger than buyers, and this ironically reflects the reality
    of supply v demand.

    As to the physical, China being the largest buyer for whatever is
    available, there is no reason for China and the other buyers to want price to go to higher levels when they can be buying so cheaply. The suppressed prices may even be an accommodation to China and others to compensate for the depreciating/disappearing "value" of toxic bonds the US has been dumping on the world for so long. That game is over, but no one has a fix on the time line for ending the fiat currency Ponzi
    scheme and reverting back to some kind of gold-back currency
    sponsored by China and the other BRICS nations.

    Right now, the charts are letting us know that higher PM prices are
    unlikely to occur anytime soon. Barring some kind of "overnight
    surprise" that will shock the markets, odds favor lower prices over
    higher prices unless and until demand shows up in chart activity.

    Whenever a trend is down, the onus is on buyers to create a change.
    Right now, that is not happening. We show the bearish spacing, a
    sure sign of weakness and one of sellers being in control. The 50%
    retracement level is also shown, and the August swing rally failed to
    reach that level. A half-way retracement is a general guide used to
    measure the relative strength/weakness of a trend. In a down market, when a retracement rally cannot retrace to the half-way level, it is a
    sign of greater market weakness.

    There is a small possibility of a low from the last week of June, and
    there have been two potential retests that have held, so far. If this
    lower probability proves out, it is unfolding in a weak manner, which is
    no surprise given what was just explained about the character of the
    market's overall weakness.

    Assume for the moment that we are looking at a possible low, because it is developing slowly, even under this scenario, it will take much more time for buyers to turn this market around. Should price go lower still,
    then the time frame for a turnaround will be extended even more.

    This is a weekly chart, and it take more time and effort to make a turn in trend.

    GC W 16 Nov 13

    The fact about the daily gold chart is that it continues to make lower
    highs, and that is a characteristic is a down trending market, so the
    message here remains clear. There was a high volume strong rally in mid-October. The bar is marked "D/S," Demand over Supply. This
    positive expression of demand was erased by the 4th bar from the
    right. Another fact is that the October rally effort was totally
    retraced, last week. Both are signs indicating the weak character
    of the gold market.

    GCZ D 16 Nov 13

    Silver is not faring any better. Regardless of whatever positive
    fundamental consideration one can advance, the chart structure is
    telling us silver is struggling. We see evidence of that from the bearish spacing, supportive of overall weakness.

    Also, note the location of the last two little swing high rallies. The last one, 3rd bar from the right, is a lower swing low, a sign right there, but both fall short of rallying half-way in the down channel, once again,
    echoing weakness.

    As with gold, the June low has the potential of being a bottom, but it
    needs more confirmation than we are seeing, to date.

    SI W 16 Nov 13

    The arrow pointing to the sharp increase in volume, and the poor close on the bar, at a support area, resulted in a price gap up from the
    close, next day. It could be a small bear trap. Friday's close was
    upper end on the bar, and that says buyers won over sellers for that
    day. The only caveat we hold is how price has been unable to rally
    from support right away, as it did at points 1 and 2. Weak rallies lead
    to lower prices, so buyers better step up on Monday, or silver can
    break current support.

    The best feature about buying physical gold and silver is that charts
    do not matter. Just keep on buying, especially at these lower prices.
    These low levels may last for some time, but timing is less of an issue
    for accumulating tangible assets that cannot be debased and have no
    counterparty risk. Beat the central bankers at their own game.

    SIZ D 16 Nov 13

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Comments (2)
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  • theshareminator
    , contributor
    Comments (14) | Send Message
     
    "To an extent, the paper markets are bogus, but the number of contracts being sold are large, much larger than buyers, and this ironically reflects the reality of supply v demand. As to the physical, China being the largest buyer for whatever is available, there is no reason for China and the other buyers to want price to go to higher levels when they can be buying so cheaply."

     

    This is an interesting point. Are the significant number of ETF sales from Chinese holders in a concerted effort to reduce the PoG in order to buy physical cheaply? Most commentators suggest the US govt are orchestrating the devaluation of gold but who does it serve if not the Chinese? I enjoy articles, they add a different element to the mix on this site.
    17 Nov 2013, 10:06 PM Reply Like
  • edgetraderplus
    , contributor
    Comments (61) | Send Message
     
    Author’s reply » I am not aware of who specifically is responsible for the number
    of paper contract sales, although it has been alleged to be a large, well-known Wall St participant. It is Wall St, not the gov't that is
    behind the suppression on PM prices.

     

    Given how "dirty" Wall St/gov't/central bankers are in how they
    operate, no one on the outside will know for certain. Forex trading
    may also play a role, by virtue of the fact that money can be made,
    and that is all that matters to Wall St.

     

    Thank you for the comment.
    18 Nov 2013, 10:38 AM Reply Like
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