THE SECOND SHOE DROPS

                                     Gold Looks Good Huh?

With the world in the condition it is in, how many more $40 drop [or more] “shoes” are still out there waiting to be liquidated? Mind-numbing boredom in the gold trade day-after-day for weeks; then Boom! All it took was 7 5M candlesticks and it was mission accomplished.

I’m going to repeat this because I think it is important: forget the Central Planners for a minute [if you can]; think more about the GLD. GLD is the ETF [exchange traded fund] that is in the top ten of gold holders in the world. Gold has been higher 11 years in a row. The market is now within about $40 - $50 of the 2011 close [1563].

What happens when all the “Ma & Pa Kettles” of the world decide it’s time to take some profits from holding gold the last [pick a number between 1 and 11] years. How does GLD sell [within two days for settlement] tonnes of gold into a weak market without absolutely killing it lower? And if that happens, won’t lower prices induce more panic selling?

Fact is, since the GLD was formed gold has been higher every year. Maybe, just maybe, we get to see what happens when the other 800 lb. gorilla in the room gets seriously grumpy and needs to sell. Think it could get a little ugly?

“Oh boy.”

Everybody [meaning blogs and pundits] talks about the day when there is no offer and gold is bid at $3,000 / oz. and there are no sellers. OK, how about when you wake up some morning and Europe is wall-to-wall riots and gold is $350 / oz. lower? If you own gold and the GLD is selling 1,000 tonnes of gold with more to come, and you own some gold yourself, what do you do? You gonna just sit there? [Maybe, but I doubt it. Why do you think it is called panic selling?]

First and foremost I am a trader. When I come to the trading table [pit or electronic] all my senses are on alert. I don’t buy hype; I try and look at things objectively and the quickest way I can make money via the algorithm. Right now, gold looks very, very sick and reminds my stomach of the early 1980’s. Talk then was exactly like it is now.

Maybe gold goes ballistic from here and ends 2012 at $3,000 / oz. All I’m saying is be prepared for something a lot lower than where we are at now.

Opinions kill.

Have a good day everyone.

-vegas

SURPRISE!! POLITICIANS HATE GOLD

                                     Got Gold Chalky Soetero?

Let’s see, trillion dollar deficits per year as far as the eye can see? Check.

Oil prices rising driving inflation? Check.

Weimar Ben printing money like no tomorrow? Check.

Along with the Fed the BOJ and ECB printing money as well? Check.

You and I both know the table is set for gold to spiral higher rather quickly in the near future. The political gold cabal has literally thrown the “kitchen sink” at the market and all they got the market down is about 8% and about 13% from the all time high last September?

“That’s it? That’s all you got to show for the market manipulation of JPM & HSBC; the margin shenanigans of the CME; the stealth drops in the wee hours?

Seasonally speaking, March is usually a weak month for gold, with the lows generally seen mid-month. If that holds again this year, then the lows around 1632 will hold and from here we will base and go higher.

As I have stated in earlier posts, my only fear for gold comes from going lower on the year [1562] for the first time in 11 years. Selling could materialize rather quickly from the GLD and all the moving average lemmings who would sell. If that happens, who knows where it would stabilize.

Having said that though, emerging market Central Banks are strong buyers of physical gold at these levels, and with all the rumored selling of Weimar Ben and the gold cartel, how much more can they throw at the market before they are forced to capitulate and buy much, much higher?

The world is printing money at a record clip that would make the old rulers of Zimbabwe blush. It’s only a matter of time before the dam truly breaks and prices race higher. A close over 1802 / oz. and the gig is up. Sometime in 2Q 2012 and I think this gets taken out and from there the fun can truly start on the upside.

Be patient and let Chalky’s policies make you rich.

Have a good day everyone.

-vegas

WELCOME ZOMBIE EUROPEAN BANKS

                                    I Would Say Definitely Not

“We got a margin call? You mean the ECB wants more collateral against our worthless soverign debt crap government securities?”

“Duhhhhhhhh - I guess we’ll just sell our gold!”

As www.zerohedge.com  has so importantly pointed out, “the ECB has increased its margin calls on European banks by EUR162 million this week…”

So, just where do you think these illiquid, bankrupt banks are going to find the scratch to cover this? [Hint: sell gold.]

In addition to this zombie mentality, while everyone is focused on the sell off, USDJPY is quietly rallying quite strongly, thus hammering the Yen against the U.S. Dollar and causing all kinds of problems in the cross trade in the Pacific Rim; especially China.

Did somebody just say China??

Yea, I did and its implication is maybe the growth won’t be there like everyone thinks going forward. Can you say weakness in precious metals? How about AUDUSD?

Right now, we are less than $75 / oz. from being lower on the year. Gold has been higher 11 years in a row. I raised this issue in a previous post about the possible effects of the ETF GLD; what happens when millions of people hit the sell button and redeem their GLD shares thus forcing the fund to sell spot gold in a hurry (2 day settlement)?

If you think having a bunch of banks sell gold to the tune of a few hundred million Euros can “rock the bullish boat” in gold, what do you think happens if hundreds of metric tones hit the market in a matter of days? [Hint: it won’t be pretty.]

Don’t get me wrong, I’m not predicting here; what I am doing is trying to point out that every market has 2 sides and to not get pig-headed and think gold can only and forever go higher each and every day.

The irrefutable financial fact is that Chalky Soetero continues to run the U.S. economy in to the ground while running record monthly, quarterly, and yearly budget deficits. Weimar Ben is printing money like there is no tomorrow; hell bent on keeping the stock market from declining so as to make you feel “prosperous”.

 This is centrally planned trading.

We all know governments all over the world hate gold. It prevents them from debasing currency and thus buying votes and promoting crony capitalism.

So, welcome zombie banks to the selling spree in gold. What history will eventually show is that you sold the wrong asset. Some people just won’t listen.

Have a good day everyone.

-vegas

THE OTHER SHOE

                                 Slip Or Get Hit; Take Your Pick

As I stated after last Wednesday, look out for the other shoe as it drops.

Meanwhile in Asia tonight, I’m sure the lemmings will be out in full buying force thereby ensuring a test of today’s low by the time the U.S. session gets rolling.

“Guys, listen to me: stop buying this stuff every night. Give it a rest so we can bottom out here. Geeeeesh!”

The major problem trading gold today was risk management. Most of the day was involved with “the 15 minute cha-cha”: up, up cha-cha-cha; down, down cha-cha-cha.

“$5 down, $6up, $7 down, $8 up cha-cha-cha; Hey, I’m not stepping on your account toes am I? Well, have a cookie! HEY, I thought you wanted to dance?"

So, where do you put your stop in this hyperbolic mess? Looking at a 5M candlestick today should convince you that $3 - $5 / oz. stops would have gotten your account hurt. So what do you do; go to $10 stops or $15 stops? If so, and you by chance get taken out; please explain to me how you plan to make it back? [Hint: you can’t]

Today’s action I define as “the flying wedge of death”; each break and subsequent rally get bigger, thereby creating a wedge that gets bigger [thus stopping you out on each one].I have always treated these types of days the same (no matter the market); I walk away and don’t trade. And that’s the reason I didn’t trade today.

I want to bring up the issue of the 800 lb. gorilla in the room. I’m referring to the ETF [Exchange Traded Fund] GLD. This ETF is one of the world’s largest holders of gold bullion, with holdings of thousands of metric tones.

What happens if millions of people redeem their shares and want to get out? Where do you go to sell hundreds of tonnes of gold because you have redemptions to fill within 2 days?

Gold has been up 10 years in a row. There has not been a bear market in gold SINCE the inception of GLD. Nobody really knows what will happen if the public sours on gold and decides to go someplace else with their funds.

I may buy breaks, but I don’t buy waterfalls. What we saw last Wednesday [Feb. 29,2012], when gold broke over $100 / oz., and a little bit today as gold broke about $30 / oz., will seem like child’s play when gold eventually enters another serious bear market.

I’m not saying we are there, so don’t read into or between the lines. I still think gold hasn’t seen its high in this cycle, but next time you have the urge to try and pick a day trade waterfall bottom, think of the traders who lost 50% + of their accounts last Wednesday and whether or not it is worth the risk. I’m saying it emphatically isn’t.

Have a good day everyone.

-vegas