Gold Whacked Over Technical Consolidation, Jobs Number and QE Consensus

Gold Whacked Over Technical Consolidation, Jobs Number and QE Consensus

Commentary for Thursday Sept 12, 2013 (www.golddealer.com) – Gold closed down $33.50 today at $1330.40. Gold drifted lower in overnight trading but fell off the cliff in the domestic market so we are now looking at $1323.00 support which was last month’s low.

Silver also followed gold lower down $1.02 at $22.10 and the physical trade today was almost missing in action so the public does not seem impressed.

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Platinum was down $31.00 at $1444.00 and palladium was up $2.00 at $692.00.

This from Chuck Butler (EverBank): “I need to talk about something upbeat. Well, I won’t find anything upbeat in the precious metals. Gold is getting whacked again, with the other metals falling in behind. Today will be the last Fed Head speech before the media blackout begins ahead of the FOMC Meeting next week on the 17th & 18th. Yes, it’s one of those 2-day meetings for the Fed Heads, so get the board games out, for they will want to renew their games of Battleship! The last Fed Head to heap his wisdom on us will be NY Fed President, Dudley. According to Reuters, there’s an 80% chance that tapering will be announced next week, and the amount will be $10 Billion per month. That’s about what I figured it would be, $10 Billion per month, which is why it will take a few months to feel its affects in the economy. And don’t forget, this doesn’t mean that Bond Buying is over with: $75 Billion will be bought this month, $65 Billion next month, and so on, and the increases in the Fed’s Balance Sheet will also decline, but will still be adding to total.”

So gold is being driven lower into the weekend because of a combination of this (the modification of the Fed Tapering Program), the Labor Department reporting a better than expected new jobless claims number (which might contain inaccurate information), and the continued technical consolidation which has been going on for sometime now. It should be apparent to all who called gold’s recent bottom that this most recent bounce (June/July) from $1200.00 to over $1400.00 was accentuated by the Syrian conflict and hopefully enforced by purportedly unrelenting physical demand. Perhaps but like I said yesterday this confirmation of the forming head and shoulders pattern should provide ample trading pause.

I did like Peter Hug’s (Kitco) comment that “short” may not be the place to be going into this weekend. Peter also mentioned how “heavy” the market felt which translates into “why are things so quiet” when we are looking for further confirmation of the established up-trend? Savvy traders like Hug can smell problems ahead of the curve which is why they trade for a living (not to be recommended for mere mortals). And his analysis is entertaining at least for the physical market because it adds a dimension of control for the average investor looking to buy a few bars of gold for the long term.

But it is not a trading strategy for the real physical world. I would also read into his comments that he thinks this latest sell off is overdone and the paper markets are taking profits garnered over the past several months and moving to the sidelines. So like I have been saying this past week the market has me worried but not convinced one way or the other: the reason being that the gold trade is sometimes driven by emotion more than facts and when facts are missing emotions run high. And high emotions always led to volatility.

The supposed confirmation by the Labor Department came down like a hammer on gold today but the conclusion by traders that QE was finished is premature. Further the emotional ride provided by the paper trade does not take into consideration the solid physical trade usually apparent in the month of September. Not to be mundane but this market is heading lower because technically the sell orders are reinforcing an already well established trend. Finally it is heading lower because the psychology surrounding gold ownership remains negative so any reason (rational or not) will be embraced.

Believe it or not this is good for those with the right intentions because this background will eventually set up a positive buying environment based not on speculation but on sincere ownership of the precious metals. How long will all this last? It is impossible to speculate but it will end much sooner than most believe because there are still plenty of physical buyers ready to pounce on lower prices.

Again my usual mantra: patience is needed…so buy for the long term: if you are nervous stand aside but don’t be disenfranchised because in the end gold will always trump paper. People like cheap but I feel under whelmed with this latest weakness because the walk in cash trade was weak and the phones were not really active.

Perhaps this latest break in prices will be acted upon on Friday or even Monday when things settle down and the public realizes the sky really is not falling. The CNI computers place my almost famous LA Physical Trade Business Number at “4”.

For those who have asked this scale is actually based on combined volume numbers and anything over “5” would be relatively busy. Everyone likes treasure but finding treasure is more fun than buying treasure. CNI is giving away (no purchase necessary) a dandy metal detector on our Facebook page: to enter the contest just “like us”. Of course this is shameless self promotion but the detector is the real deal (Garrett) like the ones used on the reality TV show Diggers. So like us on Facebook and follow us on Twitter @CNI_golddealer. Thanks for reading and enjoy your evening. These markets are volatile and involve risk: Please Read Before Investing

Written by California Numismatic Investments (www.golddealer.com).

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