Do you recall that last week I pointed out some interesting research on the monthly price of gold, from our friend Jeff Clark, that March was gold’s worst performing month of the year. I found that very surprising, but wrote that if gold finished this month “up” (hopefully $1,400) it would be a very strong bullish signal. So here we are, two-thirds through the months and where does gold stand? As of this morning, gold is DOWN $5.80 for the month. Looks like Jeff got it right. That said, gold is still up over $120/oz. since the first of the year. As you can see from the chart, above, gold has support at $1,310 but then will have to navigate back above resistance at $1,330 and $1,350 before it can make it’s assault on $1,400. By the way, the dollar was 79.38 last Tuesday and this morning it is 80.24. Don’t you feel great that in just a few days all is well with the dollar and no one needs gold anymore! All our problems are solved; thank you Janet Yellen!!! My feeling is that the current rally, since January 1st is NOT the beginning of the bull market run, but that will happen in the second half of the year. A nice rally, but still a bit early (unless one of the Black Swan’s throws everything into chaos, which is certainly a possibility now. That’s why one has to be early, not a day late.) Going into a Fed meeting, you can be almost 100% certain that “The Boyz” will take gold down, and since this was Janet Yellen’s first meeting, you could count on a dollar rebound and a take down in gold. Add the Russian/Ukraine conflict and “It all makes perfect sense, expressed in dollars and cents.” (Some of my favorite lyrics from Pink Floyd’s Amused To Death LP.) Now I don’t want you to think I’ve recently gone off the deep end, (Backwoods Jack said it happened a long-time ago) but isn’t it quite the co-incidence that gold is smacked-down nearly $70 shortly AFTER a large tranche of the Ukraine’s gold left the country (rumored to have gone to the U.S. Fed)? It seems logical to me that if Germany can’t retrieve their gold, why would one believe that the Ukrainian gold is safe or still there either? Could it be that this is the gold the Fed used to orchestrate this takedown on gold? Just thinkin’ out loud.
Last night my wife and I had dinner with a good friend Joey and his girlfriend at our favorite restaurant in Hollywood, FL. Joey is a trader with a seat on the Chicago Board of Trade. He makes a living trading interest rates, bonds and silver. For many years he traded silver in the “pit” which is where all the action used to be. Since 2008, everything there changed and the pit-guys were more or less forced out by computer trading on the screens (instead of buying and selling with hand written physical orders). Joey says the High Frequency Traders now own the silver market. There is no way for the small trader to compete with them. This would be true for gold and virtually any commodity.
My friend Trader David R says the Dodd Frank Bill is driving the banks out of the commodities business (JPMorgan just recently sold their physical commodities business) and that the liquidity will dry up and the hedge funds and their HFT will totally dominate the business. I asked Joey what that meant for gold and silver prices and he said with reduced liquidity and an absence of the small pit traders, there would be hardly anyone left to take the “other side of the HFT trade” and a few firms would dominate the markets (even more so than now). Sinclair warned that the “volatility” would increase and we certainly witnessed that the last few days with the dollar and precious metals.
But, as Bo Polny, Sinclair’s technical guru says – “I don’t care what the price of gold is today! The charts say gold will hit $2,000 by the end of the year!”
A friend of mine spent the afternoon with me yesterday. He was complaining that he lost a lot of money on the gold and silver that he bought “on my advice” two years ago. I feel bad – but not too bad because the million dollars he spent didn’t go to Miles Franklin, but the SLV and GLD in spite of my comments that this was the worst way to “own” gold and silver. His Wells Fargo broker influenced him.
In spite of our many conversations on what gold is and is not, he still doesn’t get it. So, once again I told him, gold is not an investment, gold is money. I asked him why he was in such a big hurry for the price of gold to rise? Of course the answer is that he thinks gold is an investment. I asked him if he wanted to collect on his fire insurance, his flood insurance, his auto insurance or his health insurance? No! he replied. Then why, I asked, are you in such a hurry to collect on your “financial” insurance? When the price of gold is $2,000 or $5,000 or $10,000 do you have any idea what will also happen to your “dollar-based” portfolio (worth over $15,000,000)? 15% in gold (and silver) should negate a lot of your dollar-based losses in the rest of your portfolio; that’s what I told him, for at least the sixth or seventh time. But I know, he still has no idea what I am talking about and in spite of the fact that I didn’t make a dime on his purchase, until it goes back up and he is making a “profit.” It is my fault that he is “losing” money on his insurance policy.
Such is life in the precious metals business and another reason why it a bad idea to try and help friends or family. “Help,” being the operative word here. If your suggestions make them money, they forget you told them about it. If they don’t, they hold you accountable. Just thinkin’ out loud (I’m starting to sound more like Bill Holter these days).