Monday, April 23, 2012


                         Sometimes Things Aren’t What They Seem

News out of Europe over the weekend means just one thing; economic conditions, despite all the happy talk amongst the politicians, are deteriorating rapidly. Seems the spin among the elite isn’t quite the view the bond and equity markets share.

So of course, this all carries over into gold trading; only not quite what you would expect. Asia opened very quite and remained that way into the European session open. In about 32 hours of trading we still had about an $8 range. That all changed as Europe opened and gold went down $7 in 3 minutes [1640 to 1633].

“Wake up everybody!”

My first question is what happened to the “Lemmings in Asia”?

“You know guys, disappearing like this every day is as annoying as it was when you bid it up every day. Geeeeeeeeeesh, get some consistency will ya?”

Of course, it wouldn’t be a normal day if the Central Planners weren’t in the market. After all, who besides them would sell 300,000 oz. of gold at the market through JPM on a consistent basis and keep doing it?

But there are crosscurrents as well that are hurting gold: most notably forced sales by financial institutions that need cash to meet margin calls on their sovereign European debt. You can only carry toxic [name your favorite European destitute government here] debt for so long before you have to sell something to carry it with leveraged margin.

Gold goes from manic state to recovery state in a matter of seconds; rinse and repeat and you have a pretty good synopsis of the last 7 days of trading. Going forward, things are just gonna get crazier as the Fed releases minutes of their Tuesday/Wednesday meeting on Wednesday afternoon.

With stocks crapping out and breaking some widely viewed moving averages [most notably the 50 day simple MA], US bonds yielding record lows, and Spanish 10 year debt at or over 6% yield, the trade is begging for QE 3 from Weimar Ben on Wednesday. If we don’t get it, or get some hint of it to come, 1600 looks like it could get tested.

Make no mistake; the Fed has no choice but to print more money. Forget the spin and realize if they take away the party punch the equity markets are going to melt down in an election year.

“Yea, like that is going to happen.”

At some point here, sooner rather than later, gold is going to explode to the upside and the Central Planners will have nobody to blame but themselves. Even they will eventually run out of money and find themselves the “chump” at the poker table.

Have a good day everyone.


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