Gold And Silver Still On The Road To A Low Risk Setup

From a post on gold and silver on Tuesday…

Very simply, if it’s an H&S it’s a minor one with a target to the SMA 200 or short-term lateral support. Gold has curled back up to test the underside of its SMA 50. A takeout of 1310 and then the March high could put yeller back in business. Otherwise, don’t personalize it. A test of the SMA 200 would be normal.

The H&S was not my thing. I tend not to get overly excited about short-term patterns and surely do not announce them far and wide to stir people up. It was a product of the gold community, some members of which have been flipping in head-spinning fashion between bullish and bearish views. I note it again because I don’t want that stink on me. The upside and downside parameters above were my stuff.

Per the NFTRH Trade Log, I shorted a chunk of GLD yesterday (while remaining long gold stocks and even more so, cyclical assets on balance) as gold poked the SMA 50 per the Futures chart below. Gold’s pullback today was not engineered by the Fed or da Boyz or da PPT, PtB, Trump, Mnuchin or some nefarious super algo. It’s normal. Okay, conspiracy mongers? N.O.R.M.A.L.

Click the chart for a clearer view of gold’s situation at the SMA 50. If it does not clear the March high the SMA 200 (at least) continues to yawn with its gaping maw. 1240 is also doable.

gold

Silver looks particularly lame, but ironically this is the metal I am expecting to bottom first with the question being the two noted (green) support areas. Don’t rule out 14.50.

silver

The Commitments of Traders have simply not been ready yet, despite declarations to the contrary coming out of the community lately. It’s the CoT trends that matter and they have not appeared complete to a contrary bullish situation.

Here they are as presented in NFTRH 546 (April 7) with the data as of April 2.

First of all, the Commitments of Traders trends do not yet appear complete. While moving in the right direction for an eventual low risk condition, gold’s CoT is more consistent with a top than a bottom. On a slightly positive note, small Specs finally started getting less bullish.

gold cot

The silver CoT is much better, but there is vulnerability in that it is not at an extreme, which is usually required to make a sustainable silver low.

silver cot

Meanwhile, there is much more to the story including the ratios of the miners to the metals and the all-important macro and sector fundamentals. The above are just two angles for analyzing a situation that requires several more to gain full perspective. It’s not as simple as ‘dovish Fed = bullish gold and silver and if it does not happen right away it’s manipulation!’

The process has been ongoing since gold became extremely overbought in relation to cyclical and risk ‘on’ US/global assets and markets. As suggested above, “don’t personalize it” and for crying out loud when you read stuff about China’s new economic growth * and its demand for gold (as is currently being promoted as a major gold price driver) tune that crap out!

I have been as constructive on China as the next guy (and probably before the next guy in the midst of the Trade War furor in Q4 2018), but the linkage to bullish gold, like so many other cyclical inflation-related promos is pure fantasy. The two situations can happen simultaneously as they did early last decade, but the old ‘China demand’ promo would at best drive other industrial and pro-economic assets (and also silver) better than gold. 

* And we can tap the breaks on the enthusiasm based on just 1 month of China PMI growth. Here’s the chart from NFTRH 546. The spike was in line with our constructive view, but there is more work to do.

china pmi

Check back to see my next post!

Best,
Gary Tanashian
Biiwii.com

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One thought on “Gold And Silver Still On The Road To A Low Risk Setup

  1. "I shorted a chunk of GLD yesterday"

    Speaking of this particular gold fund, I've been trying to do my due diligence into the SPDR Gold Trust (GLD). Anyone know why there is a clause in the GLD prospectus that states GLD has no right to audit subcustodial gold holdings? Why would the organizations behind GLD forfeit this right and create such a glaring audit loophole? I have not heard a single good reason for the existence of this loophole thus far. It also doesn't help that GLD claims to be fully backed by physical gold bullion but yet it refuses to give retail investors the right to redeem for any of these ‘claimed’ gold bullion. There are a number of other red flags as well from what I'm reading:

    "Did anyone try calling the GLD hotline at 866 320 4053 in search of numerical details on GLD's insurance? The prospectus vaguely states "The Custodian maintains insurance with regard to its business on such terms and conditions as it considers appropriate which does not cover the full amount of gold held in custody." When I asked about how much of the gold was insured, the representative proceeded to act as if he didn't know and said they were just the "marketing agent" for GLD. What kind of marketing agent would not know such basic information about a product they are marketing? It seems like they are deliberately hiding information from investors."

    "I remember there was a well documented visit by CNBC's Bob Pisani to GLD's gold vault. This visit was organized by GLD's management to prove the existence of GLD's gold but the gold bar held up by Mr. Pisani had the serial number ZJ6752 which did not appear on the most recent bar list at that time. It was later discovered that this "GLD" bar was actually owned by ETF Securities."

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