Wednesday, May 16, 2007

Behind Every Dark Cloud, There Is A Silver Lining

We have a battle on our hands. It’s the battle for the price of gold to reach $700, and it is just the latest clash in a long war being fought between gold and its perennial antagonist - the gold cartel.

Who is the gold cartel? And what are they trying to accomplish? The gold cartel is an alliance of governments and a few bullion banks. This group is led by the U.S. government. Though their aims are different, their congruent interests put them on the same side. Here’s what they are trying to do.

Please take the time to click on the headline above and read this entire piece by James Turk. Not only is it insightful, but it will lift your spirits on an otherwise dreary day today. This is a must read.

I don't know that I was completely taken by surprise today, but the US Dollars reaction to today's Housing Data and Industrial Production data was certainly befuddling. I hardly think these numbers are worthy of the reaction they got. Just yesterday everybody was pooh-face the dollar because the inflation numbers were tame. Isn't "low" inflation supposed to be good for the Dollar? And "high" inflation bad? Yesterday I thought a strong economy was bad because then the Fed would not cut interest rates, and a rate cut is bad for the Dollar and good for the stock market. But today a strong economy is good for the Dollar and good for the Stock Market? Oh my head hurts!

NOTHING has changed people...NOTHING! Every month we go through the same drill...the same "monthly" data reports. And with every report we get the same blah-blah: "This signals that and because it should." It's ridiculous! Not one of these data "lies" is going to change the inevitable facts of monetary fate: The US Dollar is going to go down the toilet; Silver, Gold, Oil, Base Metals, Corn, Wheat, Sugar...ALL Commodities are going to go to the Moon. It's not going to happen tomorrow OR next week OR next month for that matter. But it is going to happen. But before it does, Gold has to clear $700 an ounce first and the Dollar has to fall below 80 on the USDX index.

If you read James Turk's brilliant piece above you will see that we have faced many battles with the Gold Cartel thus far to date in the secular bull market in Gold. And Gold has won every battle. And Gold will win this one as well.

Today's action in the Precious Metals was NOT pretty, but it wasn't ugly either. Both Gold and Silver took body blows, but have managed to remain standing. Silver is getting woozy. Both experienced volume spikes as they engaged support. Gold at its 100 day moving average, Silver at it's 200 day moving average. Could this be a blow off bottom? Previous bottoms have been set on volume spikes as the weak throw in the towel and the strong add to their positions. Silver had the added benefit of major Fibonacci support at 12.73. Surprisingly, Silver's Stochastic remained bullish. It's not a lot to hang one's hat on, but only a fool and his money parts ways here. Selling weakness is foolish. Buying strength is foolish. Unfortunately, when it comes to the Precious Metals, reverse psychology usually reigns supreme in decision making as to when to buy and sell. Nobody wants gold when it's cheap...everybody wants it when it's expensive. Go figure... If you were going to sell a portion of your Silver position it should have happened with protective stops at the 50 day moving average and at the 13.39 Rat Trap, as advised here, when Silver was trying to crack dem Rat Bastids at 14.04. Today was a bad day to sell Silver, or Gold for that matter.

Think about it...For several weeks, in the face of relentless central bank Gold selling, Gold refused to back down. It's resilience in the face of this endless stream of supply was quite remarkable given last Springs response to a similar dumping of Gold on the market by central banks. And then today, on some marginal at best Housing data and Industrial Production the Dollar has a 38 pip pop and suddenly the sky is falling? LOL! This smells like dem Rat Bastids pulling the bids on the Comex so they could sweep out all the stops bellow 666 Gold and 13.03 Silver...and in the panic, steal your Precious Metals from you. If the Industrial Production number was so spectacular, why didn't Copper rise today? If housing starts were up so significantly, why didn't Copper rise? Just more weak shorts covering in the Dollar today. And the weak bulls in the Precious Metals threw in the towel at the worst possible time. The Precious Metals shorts need your metal to cover their shorts [and their ass]. And if you sold out today, you are guilty of aiding and abetting the enemy...good luck getting your metal back.

We have a lot of work to do to repair the technical picture in Gold and Silver. It is not never is. Why? Because the Fundamentals DO NOT LIE. They are stronger today than they were one year ago...and they will be even stronger one year further on up the road. Silver has been a buy it's last 5 times it has "dropped in" on it's 200 day moving average. I don't see any reason why this time should be any different.

Silver Resistance: 12.95 / 13.03 / 13.10
Silver Support: 12.87 / 12.81 / 12.73
_________________________________All prices SPOT

Gold Resistance: 664 / 666 / 670
Gold Support: 662 / 660 / 655

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