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Thursday, April 4, 2013

The Gold Era Is NOT Over!

Those that follow headline BS rather than the message of the market will have the pockets picked. We've seen this headline before, but once again, the Gold Era Is NOT over.

While the headline maximize fear with disinformation, such as the Gold Era is over, they mask the transfer of paper control behind the scenes. The recent decline should send gold's DI (chart 1) already concentrated above 60% higher and potentially above the previous peak of 81. This rise will help 'the boys' cover their short position into weakness. NL%OI (net long as a percentage of open interest) currently at -18.25% remains well below the 2008 low of -12.87%. In other words, “the boys” could use a little help from friends in high places. Watch this number improve as the snipers, also present in the gold market, target the weak standing unprotected in open ground.

This game of control will be played until trading margins reach 100% and the cash market becomes the physical market. Prudent investors and traders, out of respect of the paper game, must wait for a trigger event(s) (TA based technical trigger) before acting on any bullish or bearish setups (chart 3). When the price stick, currently yellow, turns green, a TA trigger will be generated. Until then, the message of patience towards precious metals, while boring, redundant, and likely frustrating for the bulls, still applies.

Chart 1: Gold London P.M Fixed and Gold Diffusion Index (DI)

Chart 2: Gold London P.M Fixed and the Commercial Traders COT Futures and Options Net Long As A % of Open Interest

Chart 3: Gold ETF (GLD)

Headline January 2011: Is Gold's Golden Era Over?

Gold certainly is cheaper these days, having fallen 5.7% in 2011 alone. But investors who rush in now could be setting themselves up for disappointment.

Classically a hedge against inflation, gold morphed into a hedge against economic collapse during the financial crisis and rallied strongly last year as fears mounted of a double-dip recession in the U.S. and a debt crisis in Europe. Those fears have largely eased, though gold did rally Friday on turmoil in the Middle East. By and large, investing in gold is once again a bet on global inflation.


Headline April 2013: Is the 'Gold Era' Over?

Gold fell to a 2-1/2 week trough on Tuesday, moving down with other precious metals due to a session high in the dollar index and better appetite for assets seen as higher risk, such as European stocks.

Silver also dipped to its lowest since mid-August at $27.53 an ounce, while platinum and palladium lost more than one percent.



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