Gold Scents

Amazingly enough…or maybe it’s not so amazing, every time gold corrects we see the conspiracy theories flying thick and heavy. I’ve questioned these theories I don’t know how many times and I have yet to receive a logical answer. Now that I think about it, I don’t believe I’ve ever received any answer.

If gold is being manipulated by the powers that be how then in the world did gold manage to rise from $250 to over $1200? I have to say if someone is manipulating the price of gold they are doing a damn poor job of it.

I have to ask, when gold was rallying hard last November, where was the manipulation then? I didn’t hear a peep from the conspiracy crowd all month.

When gold was rocketing higher in late 2007 and early 2008 where, were the conspiracy buffs? Was there a conspiracy to raise the price of gold at that time?

How about the monster rally in 2005 and 2006? How could this possibly happen if gold is being suppressed?


Folks, here is the truth. Virtually anything can be tampered with in the short term. It happens all the time. But no one and I mean no one, can halt a secular bull or bear market. Case in point, Greenspan and Bernanke have printed literally trillions upon trillions of dollars in the vain attempt to halt the secular bear market and it has backfired every time. Just like it’s going to backfire this time too.


Let me show you three charts.

There’s nothing mysterious about the gold market. It’s simple, when the dollar is in its secular bear trend gold is in its secular bull trend. When the dollar is in a counter trend rally gold corrects or consolidates.

It really is that simple.

When gold gets extremely stretched above the mean it regresses, just like every other market in the world. Actually, regression to the mean is the one principle in the stock market, or any market, that you can bet the farm on.


When gold enters the final phase of a C-wave advance emotional traders spike the price irrationally far above the 200 DMA. Smart money, noticing what is happening, start selling. There’s nothing evil about that. As a matter of fact it’s just good commonsense.


Let’s face it, as long as the dollar is falling any attempts at manipulation will fail. When the dollar is rising gold either corrects or consolidates. I don’t see anything nefarious about that scenario.


As a matter of fact often, as the dollar is rising, gold just consolidates. That makes me wonder if there is a hidden group of gold bugs working to prop up the gold market when it should be falling. (wink wink)


I’d have to say unless you think some mysterious force is also controlling the currency markets and the law of regression to the mean, all in an effort to manage the price of the comparatively small precious metals market, I’m going to suggest one get on with the business of making money and forget about this manipulation nonsense.

Gold has been trading sideways/down since December. I see this large 5 month pullback as a bull flag and expect to see much higher prices for gold long term. But I don’t count my eggs before they hatch, so I continue to focus on the daily and intraday chart patterns for low risk trading opportunities.

Friday we saw gold close very strong for the day. It looks very much like a reversal candle but with the price trading under the mini head & shoulders neck line and with the US Dollar in rally mode again, I don’t think the stars are aligned enough for me to put money to work just yet.

Gold is currently trading in a major congestion zone. Until there is a breakout of this zone, I think setups will not be very accurate.

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The “Super Cycle” in Gold and How It Will Affect Your Pocketbook in 2010

Before you make another move in gold, watch this video.

There are going to be some extraordinary opportunities in the gold market, but only if you know what the “super cycle” in gold is doing. As we have seen lately, gold can go up and it can come down just as quickly. The key to success is knowing when the market is in a trough of a trading cycle.

Sign up for my latest gold video and I will share with you what I believe are the secrets of the “super gold cycle”. The Video’s are FREE just Click Here

Tim Iacono

As usual, when the gold price languishes for a while, it tends to get bashed by those who don’t understand it and think that, surely, after ten years and a 300+ percent gain, there can’t be even higher prices in store. But, as shown below in the Kitco Gold Index, that feeling is a distinctly American one recently as new highs in terms of other currencies were seen as recently as two weeks ago.
The two curves in the graphic are the gold price denominated in U.S. dollars (red) and the price in terms of the the U.S. Dollar Index (blue) which, for those of you who need a refresher, consists of about two-thirds the euro with smaller weightings for the Japanese yen, British pound, Canadian dollar, and a few other currencies.

The potentially very good news for American gold investors is that there appears to be a nice little “wedge” pattern developing over the last few months and these formations usually result in a big move up or down when they’re complete.

Gold Scents

Since March of 2000, the stock market has been and continues to be in a secular bear market. Beginning in March of 2009, the stock market entered another cyclical bull market.

This means our current stock market is in a relatively short term bull rally within a much longer term secular bear market decline. A really big bear market rally, so to speak.

This cyclical bull will serve to separate the second phase of the secular bear from the third and potentially most damaging leg down in the ongoing long term bear market.

By Jeff Clark, Senior Editor, Casey’s Gold & Resource Report

On February 24, Reuters reported that the Reserve Bank of India was “set to be a buyer” of the 191.3 tonnes (6.74 million ounces) of gold the IMF is selling. Although the bank wouldn’t comment directly on the possibility, they did say, “We are closely looking at the gold market… gold is a safe bet.”

The article then quoted an unidentified official from the China Gold Association as saying, “It is not feasible for China to buy the IMF bullion, as any purchase or even intent to do so would trigger market speculation and volatility.”

But the next day, Finmarket news agency in Russia reported that China “confirmed its intention” to buy the IMF gold. “Chinese officials have confirmed previous announcements from IMF experts and said that the purchasing of 191 tons of gold would not exert negative influence on the world market.”

While they’ve been silent since, both India and China have publicly hinted they want this latest batch of yellow bars from the IMF. There’s no way to know if a competitive bid would spring up between these two countries, but…can you imagine the ramifications if one did?

When India bought 200 tonnes of IMF gold last November 3, it set off a buying spree that saw gold rise 14.2% in 4 weeks. What if this time around, a couple central banks both want the gold for sale? What if China says to India, “Not so fast, guys. We’d like to bid on that, too…” and word of that clash leaked out?

Pure speculation, of course, but competing for gold purchases isn’t a far-fetched idea. This sale is not pre-arranged; it’s an open market sale. Also, there’s only so much to go around. These two countries have only a tiny amount of their reserves in gold. Throw in the fact that central banks worldwide are already net buyers.

A pretty delicious thought, wouldn’t you say?

The gold price dropped a tad on the IMF announcement, but is up 1.1% since then. It’s pretty hard to make a case that IMF sales will hurt the gold price. As I said a few weeks ago in my dirty jokes column, IMF sales tend to mark bottoms in the price and not tops. The World Gold Council reported that floor traders now consider $1,054 as a floor in the market. Why? That was the average price India paid for the 200-tonnes they bought from the IMF last fall.

Meanwhile, what is our government doing?

You’ll recall that that big spike in the U.S. monetary base in late 2008 was never before seen in history. The Federal Reserve basically doubled it overnight. Our economist Terry Coxon described it as “beyond unprecedented.”

So, they stopped that insane activity, right? Since December 2008, the monetary base has swelled from 1.69 trillion to 2.18 trillion, a 29% increase and another new record.

Printing paper money vs. buying physical gold. I don’t know about you, but I think I’ll follow China and India’s lead here, even if I have to compete for the price I pay for my gold.

Is $1054 really the bottom in the gold price? Check out our 4 clues in the current issue of Casey’s Gold & Resource Report here risk free.

Gold Scents

The rally out of the February intermediate and yearly cycle low has now traveled far enough and long enough that it is due to take a short breather. That breather would be in the form of a short term pullback into the midcycle low.

The initial move out of the July intermediate cycle low lasted 22 days before forming a short term top.

When the tech bubble burst in 2000, Greenspan tried to “fix” the problem by cutting rates and printing money. Fix the problem he did … well sort of! What Greenspan did was create two new bubbles in the credit and real estate markets to replace the tech bubble that had burst. Millions of jobs were created in these two industries. Much needed jobs to replace the ones lost as the tech boom came to an end.
I think we will all admit it was one heck of a party, but like all good parties there’s a price to pay. The Hangover!
The truth is the economic boom of the mid 2000’s was built on a lie. Instead of a foundation of productivity the last bull market was founded on an ocean of liquidity. That ocean of liquidity fostered risky investments and massive speculation. It was only a matter of time before the house of cards came crashing down. And crash it did. The world suffered through the second worst bear market in history almost taking down the global financial system in the process.
Apparently the powers that be have learned nothing from this near death experience because they are back at it again, printing, printing, printing in another vain effort to create prosperity with the printing press. I dare say the average 6th grader can understand that the act of putting ink on paper does not create wealth. It’s too bad our elected officials can’t understand this.
So here we are, we’ve survived the credit crisis and all appears to be well in the world. I’m here to say that all is not well. We now have a cancer growing under the surface of the economy many times bigger than the one Greenspan created. This cancer isn’t going to show up in real estate or credit markets, that bubble has already burst, never to be inflated again. No, this time I expect the cancer is going to flare up as inflation in the commodity markets.
Witness the strange resilience of oil at $80 despite a very strong dollar the past 3 months. Gold has been holding over $1100. Sugar is at multi-year highs. Copper is less than 15% from all-time highs.
The commodity markets are now poised to unleash a massive inflationary storm. I think there’s a very good chance that storm will strike this spring.

The dollar is now deep into a counter trend rally and in jeopardy of putting in an intermediate term top at any time. When it does the flood gates could break and we will have to deal with the unintended consequences of Bernanke’s actions.
Unfortunately, there are no painless cures for spiking inflation, especially in an ongoing recession. The cure is to let the market clean out the excesses. The cure is to raise rates and drain liquidity, to induce a recession. That course leads to 20%+ unemployment and a deflationary depression. Does anyone really believe our elected officials will choose the that course of action?
On the other hand, doing nothing leads to higher and higher inflation and running the presses faster and faster to stay ahead of rising prices, eventually culminating in a hyperinflationary event if government debt is allowed to spiral beyond the point of no return.
Unfortunately, I think it’s probably too late to stop the storm. Let’s face it, you don’t start turning the Titanic when it’s 100 yards from the iceberg. By then it’s too late and the ship is doomed.
The same principle applies with our economy. If the Fed waits until inflation starts to pop up it is too late. The damage is already done and there’s no going back. If the inflation Genie gets out of the bottle there’s no easy way to get him back in. I would argue that the commodity markets are already trying to tell us there’s trouble coming.
History has been crystal clear – every time oil spikes 100% or more within a year’s time, it has pushed the our economy into a recession. We already have a spike from $32 to over $80 and this is against a backdrop of high unemployment. The last thing we need in an economic environment that’s already under stress is surging energy prices again.
The question investors have to ask themselves is whether it’s more likely the powers that be will do the right thing, raise rates, drain liquidity and force the world into a deeper recession before inflation gets out of control or will they continue to kick the can down the road making the problem bigger and bigger?
Knowing human nature, my bet is that our elected officials will do whatever they have to do to avoid short term pain – even if it means compromising our future.
The storm is brewing. It’s time to batten down the hatches.
That means gold and silver!

John Townsend

The Smart Money Tracker

The Mess That Greenspan Made

It wasn’t much, but yesterday’s addition of 4.6 tonnes of gold to the “tonnes in the trust” at the world’s most popular gold ETF – SPDR Gold Shares (NYSE:GLD) – was the largest one-day addition since the middle of December.
As compared to last year at this time, there’s not much happening with the GLD inventory these days. Recall that during the first few months of 2009 they were adding gold bars like never before – a whopping 350 tonnes during just the first three months of the year.

The inventory is still about 20 tonnes below the all-time high reached last June, however, given what’s happened with the gold price in recent days, that could soon change.

From the 2001 beginning of the great secular bull market in gold, price has followed a predictable ABCD wave pattern.

This pattern has since played out five times. And on each occasion the C-wave has provided a spectacular performance. Gold’s C-waves of 2002, 2005 and 2007 yielded brisk gains of 18, 61 and 41%, respectively.

Fast forward to our current C-wave (April 2009 – present) and we find ourselves in either a C-wave that has surprisingly underperformed expectations (topping in early December with a modest 19% gain), or one that has yet to show its awesome might.

The question now is whether gold is still consolidating within a C-wave advance or whether a D-wave has managed to take hold.

On one hand the C-wave never really generated the kind of excessive speculation we normally see at C-wave tops. The silver gold ratio never spiked, miners never even got to normal valuations much less expensive, which is what would be expected as gold fever hits hard at C-wave tops.

The massive year and a half consolidation only spawned a meager 190 point new high? That doesn’t sound like a C-wave top to me. We had the most powerful A-wave, along with the weakest B-wave of the entire bull market so far and all it could gain was 190 points above the old highs? Hard to believe.

Trillions and trillions of dollar printed and thrown at the market and all we got was 190 points? Again hard to believe.

We even have a broken trend line.

Which ever way gold breaks out of the box should tell us were we stand. I will say that if this is a D-wave we should be getting close to the bottom. I would expect a test of the 65 week moving average and the $1000 mark will probably be about it before the next A-wave gets underway.

Gary Savage is currently retired and lives in Las Vegas. He is the author of the Smart Money Tracker, a financial blog with special emphasis on the gold secular bull market.