Thursday, October 1, 2009

Two Steps Forward, Tip-toe Back

Son of a .... Not to worry. Our short squeeze of the CRIMEX goons took it on the chin today. "Safe-haven" buying in the Dollar kept a bid under it all day and pressured the Precious Metals a tad. Did he say safe-haven buying in the Dollar? LOL! Yes... But The Squeeze IS looming. $1009 Gold and 16.91 Silver remain key areas of resistance, and both must fall to send the CRIMEX shorts into the Hell from whence they came.

The following chart essay on Gold price consolidation is excellent, and a must read. It also lends support to my case that today' short position on the COT is reminicent of that which existed in the Fall of 2005. If you have family and friends that need further convincing that Gold is today's top investment sector, show them this excellent essay:

Gold price consolidation analysis
There are many analysts right now looking at the COT information and claiming the commercial net short position is high and a correction in the gold price is imminent. Let’s now briefly take a look at what the net commercial short positions were as a % of the commercial open interest (COI) as each of the new highs were being made post consolidation:

  • 2003: 26 Aug 03 – 59% net short (% of COI)

  • 2004: 26 Oct 04 – 58% net short (% of COI)

  • 2005: 20 Sep 05 – 62% net short (% of COI)

  • 2007: 25 Sep 07 – 54% net short (% of COI)

  • 2009: 15 Sep 09 – 63% net short (% of COI)

Each new run in the gold price has always started with a commercial net short (% of COI) position of close to 55% or above. ... We have seen this time and time again. There is no question the risk of a shake out in the gold price is highest when these commercial net short positions are at these level. As you can see however, this characteristic also corresponds with the most significant moves higher in the gold price.

Another record high for gold
James Turk
An important event occurred yesterday, September 30th. Though it has received little attention, it warrants mention, and for this reason, I now highlight it.

Yesterday gold closed on the Comex in New York at $1,008.00. It was gold's highest ever monthly close, as we can see on the following chart.

New records are always important. In this case, it confirms that gold's uptrend in US dollars continues. Think about the significance of this event. Everyone who measures the value of the gold they own in terms of the US dollar is now showing a gain in their gold holding.

Though gold has not made a new monthly record high against other currencies, I suggest being patient. It will happen soon enough, given that central banks around the world continue to debase national currencies. Every currency is falling against gold, some are just falling faster, and the US dollar in this regard is 'leading' the pack - I should say, falling the fastest.

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