Saturday 4 January 2013
China represents the East, as its insatiable demand for buying physical
gold continues unabated, while in the West, the elite's central banks
have pretty much depleted their physical holdings. In the war for gold,
both are still winning, but for vastly different reasons.
China and every other BRICS nation importing gold have been doing so
at cheaper and cheaper price levels, as the Western central bankers
have been conducting a clearance sale. Even the fixtures are being
sold, like JP Morgan's fire sale of 1 Chase Plaza for $750 million, about
half of its value. The building also happens to house the world's largest
gold vault, and it also located across the street from the Federal
Reserve gold vault. This gives China a "two-fer.". Now it can store the
gold in Manhattan and save shipping costs, and should the NY central
bank have any left, it just gets rolled across the underground tunnel.
The moneychangers have run their centuries old scam of storing private gold and issuing gold receipts, in exchange, making it easier for the
holders of gold to carry paper, convertible into gold upon demand,
instead of the physical gold itself. The moneychangers noted that the
owners did not demand their gold back, preferring to keep the receipts,
instead. The moneychangers began issuing receipts many times more
than the actual gold backing the receipts, creating "new money" and
the assumption of gold backing.
Paper alchemy was created, and it was highly profitable for the
moneychangers, which became central banks. It worked quite
successfully until several years ago when the elite's Ponzi scheme
began to unravel. Fast forward to 2013, and the central bankers of
the West are having trouble fulfilling the unprecedented demands of
physical gold from the East. One thing the Rothschild formula for theft
did not take into account was an opposing force greater than its fiat
China loaned Mao's gold to the NY central bank, and it would not [could
not] return it The gold was gone, loaned out, sold, we will not likely
know the true story, but it was gone. Paper was the name of the game
for the West. Physical gold, silver, and natural resources was, and still
is the name of the game for China and Russia. Both have been
dumping US Treasury bonds in exchange for gold, silver, and any other
asset that is not a derivative of paper. Because of the NY central bank
experience, China is out for revenge.
Russia has always been a known adversary and is winning against the
US by default, simply waiting for the US to self-implode, which it is
doing. Where China holds the majority of physical gold, Russia holds
energy trump cards over the US and its faltering scheme of the petro-
dollar. It is fast being replaced by sounder forms of collateral and
trade outside of the Western fiat scheme. The US has become
isolated. Russia has vast amounts of natural gas to supply Europe,
replacing, in part, oil.
How is the West winning in the war for gold supremacy? By default,
which is all it knows how to do. The entire Western world remains in
the financial grip of fiat obligations. Everything is dependent upon the
central banking system that is close to collapse. The fiat Ponzi scheme
is being kept afloat by China and Russia not forcing the totally insolvent
Western banking system to make good on its debts. Instead, China is
being rewarded by cheap gold prices and cheap New York real estate
that comes with the added bonus of the largest commercial gold vault.
We have pretty much stopped announcing "gold news," as in record
sales for silver and gold coins by the public, record imports of physical
gold by China and other countries to a much lesser degree,
disappearing gold reserves by COMEX and LBMA, how the demand
for physical ounces of gold by paper holders is at its highest number
ever, etc, etc, etc. All of the very valid demand side numbers that has
had zero impact on the price of gold.
Most of this article is presented in generalities, on purpose. There are
any number of other sites that go to great effort to present graphs,
details about gold and silver depletion, the number of coins bought and
sold by various countries, the number of tonnes China has imported,
guesses on how much gold China owns, predictions on where the price
of silver and gold will be next week, next month, pick a price, pick a
time frame, they are all over the place. The graphs are presentable,
the facts/figures are accurate, but the results are of no practical use
and have not been for the past two years.
Despite all of this recognized demand from every possible source, how
else does one otherwise account for the fact that the price of gold was
down 28% for the year?
The greatest, and only impact on the price of gold has been the central
bankers and their concerted effort to suppress prices, and a very
successful endeavor for the past few years. In this regard, Western
central bankers have been winning the paper battle on gold, but they
are also losing the most important war, economic dominance.
Because the natural laws of supply and demand does not apply to gold
and silver, the only way we can track the influence of endless paper
supply on the market is through the most reliable source, the market
itself, and the best way to track the market is through charts.
As an important aside, when we reference charts, we are not talking
about traditional technical analysis that uses artificial tools like moving
averages, RSI, endless broken trend lines, Bollinger Bands, whatever.
Instead, we apply the most important factors that best capture market
activity: price and volume.
Both of the larger time frames, the Annual and Quarterly on the left
side, below, suggest a lower low is more than likely. One does not
have to happen, but odds favor at least a nominal lower low in 2014.
The Quarterly chart looks bottom heavy for the past 3 Qtrs, and the
last Qtr shows a lower high, lower low, and lower close.
The monthly chart, on the right side, shows a labored decline over the
past 5 months, and the last 6 months have all been inside June's wide
range. We often mention how a wide range bar will often contain
subsequent bars, for whatever time frame, this one monthly. The lower
end close for December also increased the probability of a lower low,
next month, January.
Here are two separate forms of market activity that provide for
reasonable expectations into the future, not predictions, but
expectations. The wide range bar of June was the market telling us
to expect price containment over the next several months, and that
is what developed for the past half-year.
There was also a wide range bar in April, when a similar supply of paper
contracts was dumped onto the market, just as happened in June.
Price was contained for only 1 month, but the trend carried the market
The second piece of market information is the location of the close on
the Annual, the Quarterly, and the monthly. All indicated a higher
degree of probability for a lower low in the next time period. With this
information, one would know not to be in a hurry to establish a long
position in futures because a lower price was likely.
It does not matter what the fundamentals say. The market is providing a clue or clues in what to expect. It may not always happen, but we
are dealing in probabilities that tend to be fairly consistent.
Price did make a nominal low on the weekly, and it held the support
area established in June. With the close located in the middle of the
down channel, while price can still rally, it is unlikely to break upside,
at this juncture.
Last week, given the market structure, we said a nominal low was
likely. One occurred on both the weekly and daily, but we confined our
comment to the daily, [See Sharply Higher Prices? Be Careful What
You Wish For, first paragraph after first chart].
The down channel has been broken on the daily chart, but of all the
time frames discussed, the higher time frames are more controlling
than the daily. It could turn out that the daily activity will lead to
change on the weekly, then from weekly to monthly, etc, but what
we know most about market trends is that they take time to change
Friday's bar was the smallest of the last three rally bars, and that tells
us demand has weakened. With the location of the close near high-end on the bar, sellers were weaker than buyers. What needs to be
watched closely, next week, is how price reacts on any pullback.
If the bars are wide range lower on increased volume, expect more
continuation to the downside. If the bars are relatively narrow in
range and volume is less, then we have a stronger indication to expect
the pullback to be brief and lead to another rally attempt.
We do not have to know ahead of time, nor do we need to predict.
Instead, knowing how price and volume could develop, day by day,
we just need to be prepared for how price may develop, and react
accordingly. The market will give us the information needed on what
Silver is a slightly different story, according to the charts. It would not
be unreasonable to expect a lower low from the annual chart. The last
Quarter, 2013, was the smallest range in the past 4 years. What
matters is where it appears: at the lower end of the correction. The
reason why the range is small is due to lack of sellers, combined with
buyers meeting the effort of sellers sufficiently to prevent the range
from extending lower. It does not preclude a lower low, next Quarter,
but a rally could occur first.
The monthly shows how labored the decline was relative to the wide
range August rally. Here, again, we see a wide range that contained the price activity for the next several bars. December was a small range,
letting us know, just like the Quarterly, selling was weak, and buyers
were meeting the effort of the sellers. The buyers were able to keep
the range from extending lower, and also to close just slightly above
The trend has not changed, but we are seeing little pieces of
information that alert us to potential change.
The trend being down, and combined with bearish spacing, we know
that silver has a lot of overhear resistance that will likely stop initial
rally efforts from current levels. Until price moves out of the box, up
or down, the TR remains intact. Last week's reversal from lows, with
a strong close, did not rally much above the previous week's close.
This is a small red flag that the rally could be meeting resistance.
There is a cluster of closes over the last 7 weeks. This signals either
continuation lower or a reversal of the immediate trend. Until price
rallies and closes above the high of the box or declines and closes
under, there is no confirmation to be positioned, either way.
In the first box, left, it looked like price would rally higher toward the
end of October. Price gapped lower, instead, and created a lower box
TR, the current one. This is why we said there needs to be
confirmation, even though the weekly close in the above chart
"appears" as though the rally will continue. The daily chart, below, is
an example of why one needs to wait and let the market be the best
guide, eliminating guesswork and having to predict.
The conclusion we reach from the gold and silver charts is that price
may be forming a bottom, but it will take more time before a change
will take place, and that could take weeks, months, even Quarters.