After the spectacular rally
of last Friday it is natural for gold to pause and consolidate
However, I wanted to make sure you could see the position of the
gold price with regard to
the intermediate trend.
This is the key resistance
which I referred to last week, clearly visible in the chart below.
The hedge funds were leaning very hard on the short side as we had shown
in some of the indicators,
and as several others had shown in the market structure through the Commitments of Traders Reports. And the bears had 'gotten
smoked' by the commercials
who hit them with a stiff short squeeze last
week. As Ted Butler remarked,
'manipulation goes both ways.' Yes it
does, but not in this
case, because Ted does
not understand even yet it appears
the basic underlying reality of the long term gold market, perhaps because he is so
focused on silver.
I think that the downward pressure, or bearish
manipulation if you will,
was greatly exaggerated by the trading
desks because of the key market
dates including option expiration. The ferocity of the rally was due to that pressure being relieved and turned back. It perhaps then could be
better described as 'the
end to the manipulation' than an active
The rounded bottom showed how resolutely the bears had pressed
on support, and how equally resolute
the market was in holding
its ground. If you coil a spring
long enough, eventually it may snap
Now we see how the physical delivery situation plays out in
June and July and if gold can
finally break the downtrend.
As I said, I do not think
that the next leg up may have such an easy time of it because the foundation of the market
manipulation is to suppress
the gold price for the sake
of a macroeconomic policy
being put forward by the
As several commentators
have pointed out, Kosares,
Coxe and even my lowly self among them, the great trend change in
the central bank attitudes towards
gold which had driven the twenty year bear market
with their organized selling has changed. Central banks are now net buyers of gold. It was their change in selling that marked the first turn in the market in 2000. And now that they
are buying we may see the next
turn, until the market clears, or until they try
to reinstitute a gold standard and fix the price at whatever valuation
they believe they can sustain
without provoking a
'black market' assault on
Make no mistake, they are still fighting the rally in gold every step of the way, not so that
they can stop it, but because they want to control it, make sure it is 'orderly.'
This is the underlying fundamental message of the market,
and you will not find it in the Commitments of Traders reports. But you
will find it in the kind of analysis and information being promoted by GATA for example. For the last fifteen years they are the only group, as far as I can see, who have 'gotten it right.'
And it is not clear to me at all that a number of gold commentators get this fundamental fact yet. At
some point they will, they will
all get it. But not until the price of gold is much higher.
But they may benefit from this market fundamental
without realizing why, when the reversion to the long term
trend occurs, and perhaps
with a vengeance. And so they can
ride the coattails of those
who do get it, and occasionally try to appear 'wise' and curry favor with the popular financial media with dismissive and even snide remarks.
There are great events at work in the global financial markets. Only those who
truly understand them will have the ability to profit in the longer term,
because they will not be buffeted
by the slick campaigns
and the jawboning of the Anglo-American
financial establishment which
has been using the creation
and distribution of fiat dollars as their personal piggybank for far too long.