Six Things for Gold Traders to Watch
Tags gold
Here are six things I'm personally keeping an eye on to gauge the direction of the price of gold:
1. COT report. AceFX shared with us gold COT data. This report shows that commercial traders -- generally believed to be "smart money" traders involved in day-to-day operations of the commodity in question -- are short gold. The commercial traders are increasingly short while others are increasingly long; in such a scenario, when the non-commercials run out of fuel in their trend, they will start liquidating, and the commercials can see this as an opportunity to add to their short positions and push the market further down.
Below is the chart Ace shared with us in the thread he started on this subject.
2. Consolidation on daily chart. Below is a daily chart. We see consolidation via a pennant formation -- a formation that often precedes a sharp breakout. Accordingly, I think there could be a sharp breakout if the market can break above resistance at $980 or support near $925.
3. US banking system still under stress. US banks are still failing, and more may be on the way. Bank failures increase the need for safe havens, which gold, with its long history of serving as a stable monetary commodity, can provide.
4. The Federal Reserve is still aggressively monetizing. The Federal Reserve has stated they will continue to print money and buy assets through the end of October. Additional money creation without the creation of additional productivity stands to devalue the currency, and is the kind of event that can precipitate a run on a currency. Currency devaluation, particularly when it stems from monetary policy put forth by governmental/quasi-governmental agencies, is bullish for gold, as gold is regarded as a hedge against currency devaluation resulting from central banking policies.
5. Financial fraud rising. Courtesy of Jesse comes the chart below, which shows that financial fraud is rising in the US. Fraud weakens the US dollar and the political economy it stems from, and thus could be seen as bullish for gold.
6. Financial Fraud in Comex. Comex recently permitted gold futures contracts to be settled not only with physical delivery, but with delivery of shares of gold exchange-traded funds like GLD. GATA explains how this inflates the amount of paper gold, much of which may not be backed by real physical gold. This may result in a split in the gold market -- prices for physical delivery and prices for paper gold.
I personally am a big fan of Bullion Vault, a broker who sells physical gold. Click the button below to learn more about them.
1. COT report. AceFX shared with us gold COT data. This report shows that commercial traders -- generally believed to be "smart money" traders involved in day-to-day operations of the commodity in question -- are short gold. The commercial traders are increasingly short while others are increasingly long; in such a scenario, when the non-commercials run out of fuel in their trend, they will start liquidating, and the commercials can see this as an opportunity to add to their short positions and push the market further down.
Below is the chart Ace shared with us in the thread he started on this subject.
2. Consolidation on daily chart. Below is a daily chart. We see consolidation via a pennant formation -- a formation that often precedes a sharp breakout. Accordingly, I think there could be a sharp breakout if the market can break above resistance at $980 or support near $925.
3. US banking system still under stress. US banks are still failing, and more may be on the way. Bank failures increase the need for safe havens, which gold, with its long history of serving as a stable monetary commodity, can provide.
4. The Federal Reserve is still aggressively monetizing. The Federal Reserve has stated they will continue to print money and buy assets through the end of October. Additional money creation without the creation of additional productivity stands to devalue the currency, and is the kind of event that can precipitate a run on a currency. Currency devaluation, particularly when it stems from monetary policy put forth by governmental/quasi-governmental agencies, is bullish for gold, as gold is regarded as a hedge against currency devaluation resulting from central banking policies.
5. Financial fraud rising. Courtesy of Jesse comes the chart below, which shows that financial fraud is rising in the US. Fraud weakens the US dollar and the political economy it stems from, and thus could be seen as bullish for gold.
6. Financial Fraud in Comex. Comex recently permitted gold futures contracts to be settled not only with physical delivery, but with delivery of shares of gold exchange-traded funds like GLD. GATA explains how this inflates the amount of paper gold, much of which may not be backed by real physical gold. This may result in a split in the gold market -- prices for physical delivery and prices for paper gold.
I personally am a big fan of Bullion Vault, a broker who sells physical gold. Click the button below to learn more about them.
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Great Article
I agree gold's going to break out, the more I read and the more research I do (and the more friggin money that gets pumped into our system!!!!) something is gonna happen, and its going to happen fast. Found you by way of your post on the Google Group for GLD.
Thanks again for the great read.Posted 08-19-2009 at 09:10 PM by Unregistered [Show Appreciation] What's This?
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I agree. Gold is showing a long term acsending triangle. It appears a breakout to the upside is likely.
EktraderPosted 08-20-2009 at 07:25 AM by Ektrader 
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Thanks Simit, that's a nice summary, I agree, that a breakout is very possible, and when I see that heavy weights like you and Ektrader agree, I can feel much better.
The COT report really worries me, though. There is lots of talk in gold bug forums, that gold and silver prices are manipulated by the banks. There is also some evidence, that some of the institutions like JP Morgans hold larger short positions in gold and esspecially silver than they are legally allowed. The SEC doesn't seem to care.Posted 08-20-2009 at 01:20 PM by freiheit
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hey ek,
the one thing that concerns me about the triangle is that i view it mroe like a symmetrical triangle, so i think it could be argued as bullish or bearish. but we will know soon enough when gold starts to test those converging trendlines.
hey freiheit,
yes, i'm concerned about manipulation. this is the first time i'm seriously considering exiting some of my paper gold positions and moving entirely into physical gold with bullion vault. however, i want to see if we are going to break out of that triangle and to which side.Posted 08-20-2009 at 01:26 PM by Simit Patel 
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Hey simit,Quote:Originally Posted by Simit Patel
hey ek,
the one thing that concerns me about the triangle is that i view it mroe like a symmetrical triangle, so i think it could be argued as bullish or bearish. but we will know soon enough when gold starts to test those converging trendlines.
hey freiheit,
yes, i'm concerned about manipulation. this is the first time i'm seriously considering exiting some of my paper gold positions and moving entirely into physical gold with bullion vault. however, i want to see if we are going to break out of that triangle and to which side.
I agree with you from that standpoint but if you look further into the past, you'll see that that price point was tested already so that would give the triangle more of a flat top. Anyway, we stil a have to wait for a break. I'm not totally conviced yet either. By the way, check my new vid on ascending triangles!
ektraderPosted 08-20-2009 at 02:36 PM by Ektrader
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gold price manipulation?
well, let's leave 4 vacation (3 weeks!) and see where will the gold price quote then :-)
gold price manipulation? well, the most gold bugs forums, gata, gold & silver analysts etc. speak/write about that 100%-sure-issue like about religion .... but is this evil manipulation (to the downside, isn't it? sorry, just kidding :-) really sooooooo bad? hell, why does no one buy the manipulated & soooo cheap paper gold futures and requests physical delivery later on? there are many hedge funds specialized on arbitrage trading out there, isn't it?
and last but not least, what are the production costs for new gold deliveries? well, i do own stocks of sooo many gold/silver producers & explorers aaaaaaand i do subscribe for all of their newsletters ... even if i do not read more than the headline often i do remember that the cash costs per 1 oz @ goldcorp's red lake properties / canada are below $300 (that's $280 or the like!!!), there are many producers with cash costs between $300 - $500 ... and even the south african producers who have to dig really deep do not produce above $600/oz i think (sorry, i'm 2 lazy 2 look up the correct numbers
... it looks like work!)
==> is $940 per 1 oz gold really such a low + manipulated price?
just my 2 cents,
jaro.
ps: goldcorp's red lake minePosted 08-20-2009 at 05:43 PM by jaro g.
Updated 08-20-2009 at 06:07 PM by jaro g. [Show Appreciation] What's This? -
gold price manipulation?
[QUOTE=jaro g.;bt2229] hell, why does no one buy the manipulated & soooo cheap paper gold futures and requests physical delivery later on?
just my 2 cents,
jaro.
hey jaro,
now physical delivery is not even required, they can deliver ETFs. Commodity exchanges can dump gold debts on ETFs | Gold Anti-Trust Action Committee
i think there is manipulation with gold, people have been trying to inflate the supply of gold for a long time -- even back when countries were on the gold standard, banks would try to claim they had more gold than they actually did. counterfeiting money is a very high profit margin business, it seems likely to me that humans will try very hard to get a piece of that.Posted 08-20-2009 at 06:07 PM by Simit Patel
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thx simit,
but what about the production costs (see above, e.g. goldcorp's red lake about $300 per 1 oz) => ???
j.Posted 08-20-2009 at 06:44 PM by jaro g.
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hey jaro,
production costs may be $300/oz, although i have no idea what other costs are like (i.e. distribution, markup by retailers/exchanges, etc), so i'm not sure what the final price should be. for this reason i think it will be increasingly important to see what the spread is on physical coins or ingot (big bars) vs what comex is pricing it at. if the spread grows and gets really out of line, to the point where there are two markets, i think that would be very revealing.Posted 08-20-2009 at 07:08 PM by Simit Patel
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