Gold & Silver: Deflationary downward wave

The last few weeks have been confusing. And that was the clear contradiction between the bearish price patterns that emerged in the case of  Gold  and  Silver  (and to a large top and a brutal wave of deflationary downward pointing) and the seemingly bullish Commitments of Traders (COT) structure in the precious metals sector. For the COT developments, we now seem to have an explanation, which we discuss later. But first let's take a look at the development of price patterns.

Inveterate cops talking excitedly about " the great buying opportunity" , which is currently present themselves after the recent price losses in gold. This is logical and understandable, since gold is trading now around $ 300 below the highs from August to September 2011, is oversold also located in the vicinity of his still rising 200-day moving average, also show the COT data and sentiment indicators is positive.

Make Despite all this, is in gold and silver just emerging price patterns extremely bearish impression. How can we in the 2-year chart to see for gold, has since reached the top's a big bearish Declining triangle above a clearly marked support zone between $ 1,520 developed and $ 1,530. If gold does not break this pattern with a rise above the upper limit (the red trend line on the chart), then break the gold price - which is practically marked the end of the bull market.

And the implication requires the insertion (or rather the rapid spread) of a deflationary downward wave - a wave that many countries will flood, where the worst consequences have so far been spared, such as the debt-ridden United Kingdom and the United States of America. If you want to know how bad it can be, then they look at the recent events in Greece and Spain. With food shortages, riots and burning cities, everything could be much worse.

At this point we want to respond briefly to the debate about deflation-inflation. The world needs a full-blown deflationary downward wave - and sooner or later they will get it. Her evolutionary purpose is the elimination of massive debt and derivatives mountains, which take over the world economy into the abyss.

Inevitably, it must come also to the elimination of parasitic institutions that have brought the current chaos along the way: the zombie banks and the " too-big-too-fail collaborations," their trunks - on rescue packages and other perks such as extremely low interest rates -. very deeply in the public coffers since jumped the crisis in 2008, the center of attention, try-established and powerful interests to block the necessary deflationary Cleaning - by money flooding, manipulation of the yield curve and by the mobilization of states / central banks cut interest rates to artificially - change place so they could continue to perform their powerful, privileged life and had more time to their bad debts on the taxpayer. But it seems for the time begins now. Their last trick was the secret financing of the ECB by the Federal Reserve - a desperate attempt to halt the collapse of Europe.

But the situation in Europe is now so bad that the success of these measures are doubtful. It appears that will happen the following: The bond holders will take a chance and respond to mass sales, after which the interest rates sky-rocket. And that happens this time in the U.S., so the whole bloated construct will collapse quickly. That will tell us the ominous patterns in  Gold  and silver. Blocking the necessary deflationary forces and the decisive action of powerful interests since 2008 have led to the further strengthening of deflationary forces, so that a dangerously explosive situation has arisen. In the short term remains to be scope for a recovery that gold to red reversal line of the could bring sinking triangle (see 6-month chart). We had positioned ourselves in the sector, just before this one week before slowly recovering from its lows.

At that time we had a very low-risk phase of the market - you could equate tight stops below the key support levels at the lower end of the triangle. The probability of such a recovery is increasing, because seems to be emerging a small head and shoulders pattern (see chart). We will try to bring moderate gains when gold approaches the red downtrend line - the rally should ever come that far. But consider the longer term, the triangle formation in the gold chart will probably be broken down, which would then likely to  Lead  to a severe slump.



The dollar charts are based at least in our estimation, that will soon come a deflationary downward wave. For as we see in the 4-year chart for the dollar index, the head and shoulders pattern was broken by recent above. It looks as if the index would be close to a strong upward movement, which could extend into the vicinity of the resistance between 87.50 -89 - ie in the range of those peak levels that were achieved in the years 2009 and 2010. The 2009 high was from the stampede into the dollar, to which it was due to the financial crisis in 2008.



As far as the explanation for the seemingly bullish COT for gold and even silver, we want to refer to the following observations, which were published before Christmas, on our website: Until now we were more or less automatically assumed that the large speculators (large specs) that appear in the Gold and  Silver  COT, were always wrong. So far, also seemed to be: When large speculators clearly their long positions back, that's bullish. This was a reasonable presumption that the last 10 years worked on for the precious metals markets as well.

Whenever the long position of large speculators reached high levels, corrected the precious metals, and when they fell back to relatively low levels, the precious metals turned into a positive, upward trend in order to be recognized again. And that was the reason why we took them mercilessly poke fun at and called them idiots and fools. But the large speculators over the years were really wrong? At least they were during the entire gold and silver bull market ever long. So one has to add the correctness sake, that they are not taken as a whole were wrong. In their total correct long-positioning, but they responded with enthusiasm to the interim market tops and too negative or conservative in the interim market lows.Although the commercials all the  Gold  and  Silver  bull market were over short, she earned money by the emotional behavioral extremes of the large (and small) speculators in the interim market tops and -. Benefited lows in recent weeks, however, a fundamental change in the COT structures for the gold and silver markets, in which case the number of established large speculators long positions in gold and in silver, very clearly declined strikingly clear. Virtually everyone (up to now we were even more) these powerful long retreat from the large speculators as clearly bullish sign is interpreted. 

If we look at the COT charts look but now we see that it is not is a normal decline -. Just in silver Considering that the large speculators all precious metals bull market had been on long, it could be their unprecedented retreat from the long positions (the first glance might be interpreted bullish) quite well for something else back: You may have the big speculators decided that either the gold and silver bull market is over or at least a brutal deflationary Selloff as 2008 or even worse threat. And that fits well to the negative impression, make the price charts for gold, silver and precious metals to date. In recent weeks, all of these charts had to suffer first technical break-ins - and we are aware that these intrusions may also be the result of a deliberate " Chart cleanup action" by the " Big Money" could be.

So far, the explanation that the large speculators " thin out" their positions ahead of a major bear market phase in gold and silver, pure theory. In any case, but it fits to the ominous patterns that emerge in Gold, Silver and EM equity indices. And it also fits with the horrific prospects for the year 2012. 2012 could be a year in which the cause for so long held back (and more and more debt derivatives significantly strengthened) deflationary forces finally chaos to the world markets and economies. 

This is the essential and bitter medicine that the world needs to get rid of their debt and derivatives goiter - and of parasitic institutions such as zombie banks and elite cooperation, every crack and everything into the abyss. There is another aspect influencing the gold and silver prices and consideration needs to find. And so the growing likelihood of a military intervention against Iran is meant. The " Axis powers" , ie Great Britain, Israel and the U.S. strive for a long time for hegemony in the Middle East, control, and that for geopolitical reasons and to the country's oil reserves can be. 

On the way to their long-term goals for this region in recent years made ​ ​ great progress. would be at this point to emphasize that the term " axis" is not used here condemning other than George W. Bush, of an " axis spoke of evil " . The term refers only to a nearly congruent military and political orientation of the elites of those countries and on their common goals. Middle East countries like Saudi Arabia and the UAE are as loyal client states already " on their side." States such as Afghanistan and Iraq who opposed the Axis, experienced invasions, they have been neutered and fitted with puppet governments. 

Remaining, the axis of hostile states are being undermined by this government to be overthrown - for example, in Libya, where the case was already successful on the stage and Syria, where the work is yet to make it. This is still waiting for a big ripe fruit on it, in to drop the basket of the Axis powers - and Iran. And of this fruit you will probably have to help with a stick, so they finally dissolves. From the perspective of the axis, there is nothing to lose and potentially much to gain if it provokes a conflict with Iran. 

With the help of more stringent sanctions, etc, etc. The thumb screws are tightened continuously. Moreover, time is short because the economies are the Axis powers due to excessive debt just before the collapse and the massive military machine may no longer be maintained for long. Would they be able to provoke Iran into a careless step, such as the blockade of the Strait of Hormuz, they would have the perfect excuse to Iran to bomb into submission and then remove all its military and nuclear facilities.

The creation an external enemy would immediately increase the popularity of local politicians, like Barack Obama, who can speak profile as a " hard man" , whom the American voters like. And 2012 is selected. In addition, you will also need a lot of equipment, weapons and ammunition during the dispersal of Iran. And that in turn is good news for the defense industry, received by the large orders to replenish stocks. Once Iran and Syria have fallen, the axis will control virtually the entire Middle East. One of the tasks, the UK, takes over as the leading member axis and begrudge member of the EU, by the way, the power limit of Europe. 

For this reason, the Brits blow again and again " sand in the wheels" when they load, for example, vetoed in contract decisions, just as only became clear. One factor may, however, the ruling in Great Britain " island mentality" to be. Older readers may perhaps remember the hilarious headline that was read many years ago in a British newspaper: " Fog in Channel, Europe cut off." What the British attitude was summarized nicely with the rest of Europe. Interesting also the setting of the Axis powers towards China and Asia generally. This became very clear a few weeks ago when China is hardly an enemy Verholen equated and announced that they wanted to ask as Australia's best friend, to form a military alliance against China's influence in the Pacific field. Apparently, Chinese and Asians are not generally welcomed in the club activities, and behind the niceties of diplomacy, they are regarded as strangers. 

Very similar to how we look at the Klingons in Star Trek One well placed to mention hardly that an attack on Iran most likely pull a sudden oil price leap would (also rising  Gold  and  Silver  prices would then be expected). For obvious reasons, the exact timing of an attack can not predict, of course - it could be in the next two months to be the case or before 10 months. With the onset of a deflationary downward wave of an attack is more likely, however, because under these circumstances, the politicians are looking for a distraction for the masses, they are united and stand behind the closed can. Even if from the Gold and Silver Charts expect heavy losses, one should not forget that an escalating Iran conflict could always price jumps call on the plan. 

In case we do not drop as early as expected in the deflationary abyss, then would be the best selection of raw material oil well. Because current supply constraints show effects that are still due to Produktionsdrosslungen after the 2008 financial crisis (like the well-known oil expert Dr. Kent Moors shows). Production was then moved back because of the low price range.This will keep oil prices stable and perhaps even provide for significant capital gains, provided that the deflationary downward wave does not hit before too. And those gains in the event of military action against, or would receive an additional thrust through Iran. On our website we will therefore deal with the near term oil and oil-related investments.

Silver Market Update
in the silver chart seems to find a very negative acting head and shoulders top formation graduated, reflecting heavy losses and therefore indicative of the occurrence of a deflationary downward wave. In recent weeks, the overall picture, however, by the COT structure and mood indicators (both of which make a very bullish impression) more complicated. For the reasons stated in the Gold Market update, it is assumed that the COT gives a very misleading impression of the current situation. 

In the case of a severe slump and losses could still achieve even worse mood indicators (ie even more bullish) levels. The top of the large head and shoulders pattern can be well seen in the 2-year silver chart.The remarkable thing about this pattern is that the " neckline" or the lower support line is perfectly horizontal, while the silver price at the end of its September-December EXACTLY bounced off day's low. This large top area appears complete, although indicating the price movements of the past few weeks that we will see a final rest before silver breaks through the support at the lower end of the pattern. 

It can hardly be said, making the bearish implications of this pattern could be stopped - by one point over the right shoulder at $ 35.70 would be a bullish development, but not convincing. It is probably better to tie up such a development in a trend reversal in gold: A break of the top line of the triangle would be sinking here may break the bearish pattern in gold and in silver.



Even if the longer-term silver charts look pretty rough, so the recent market movements lay in the short-term 6-month chart, even the possibility of a short term rally near. It seems to have been formed, indicating the progress that could penetrate even to the $ 33 mark on the recent low, a small head and shoulders bottom - before prices give back. One possible scenario is shown in the chart below. Shortly after the low was reached, we were just in a little risky market environment long, with a stop was placed just below the key support level and above the September lows. We will probably bring moderate gains should strive silver in the near future on the $ 33 mark. And depending on the then prevailing situation, we would then switch to the short side.





Source: Clivemaund.com 

Charting the gold price back to the year 1265

We have often seen requests to show the price of  Goldgoing back as long as possible. The graph shown below is a gold price chart, indexed in 2010 British Pounds and going all the way back to the year 1265.

To the surprise of many, the 'early 1980's gold price surge' is not the only time in history when gold exploded as America's game with inflation was almost lost. It appears that based on the surge in gold back in the late 15th century, there was actually quite a serious need for Columbus to go forth and find a source of gold, because last we checked Ferdinand and Isabella did not have Bernanke's money printers back then.


And yes, as Goldman says, there were no ETFs back in the 16th century to draw demand away from the real deal and into make-believe exposure.


And more or less the same in (synthetic) USD terms:








Source:  ZeroHedge 

 

'Gold may break records and hit $2000/oz in 2012'

NEW YORK (Commodity Online):  The year  2012 will be a grand year for gold, positioning the precious metal for its 11th straight year of gains, said Hunter Wise Commodities, a precious metal wholesale dealer firm. Although  Goldprices have fallen 16 percent since reaching a record $1,900 an ounce in September, financial analysts across the globe predict that prices will sky rocket in the year ahead.

Ed Martin, CEO of Hunter Wise Commodities, a leading physical commodity wholesale dealer in Las Vegas, said, “Conventional wisdom in the financial sector says that gold prices will rise, perhaps to new records, particularly in the latter half of 2012.”

Precious metal gold vacillated frequently in 2011—hitting some extreme highs and lows. Prices started the year at $1,412 an ounce, hit a low right out of the gate at $1,314, and then rallied to an intraday high of $1,923 an ounce.

September alone experienced a significant amount of activity, with  Gold  prices soaring to its record above $1,900 an ounce early in the month, dipping below $1,600 late in the month, rebounding strongly, and then falling below $1,600 in December. That's a 16 percent decline in three months, although the lustrous metal  is still up for the year  and sits at about $1,600 an ounce as of Dec. 22.

Recent concerns over the euro debt crisis have caused investors to switch gears and snap up dollars, causing the dollar price of gold to decrease.


“With the euro debt crisis still unresolved and the U.S. economy still weak, there are several factors that will continue to affect gold in 2012. Investing in gold traditionally offers a pillar of strength against market volatility and as a store of value.  Gold is expected to hit $2,000 an ounce in the second half of 2012,” Martin concluded.

Did the silver, gold bubble burst?

I like comparisons because - although history doesn't repeat exactly - I think it rhymes, and when I look at both charts seperately, I think both are very nice.

However, what if the Bulls are comparing the wrong asset to the Nasdaq Bubble? What if they should rather look at  Silver  prices?

Back in April, I felt silver was a Bubble, as price was going VERTICAL, which (as all good things) never lasts forever. The parabola burst in April, and usually, it takes a LONG time before the next move up will start (if it ever will).



Now how is that related to the Nasdaq Bubble?

Let's first look at how most (if not ALL) bubbles evolve.

--First, the Smart money comes in. They buy it because it's undervalued, and they see a lot of potential. The markets are not aware of this.

--Second comes the insitutional money. The institutional investors are now also aware that the asset has a lot of potential.

After the nice run up, price corrects. Everybody says: this is the end of the bull market, but actually it's a bear trap.

--When price resumes its uptrend, then comes the public: " look at what this asset has done over the last couple of years, it can definitely go higher" .

It starts with enthusiasm, then comes greed and eventually, we get a " New Paradigm" : Look at fundamentals, this is a 10 bagger from this point (forgetting that it already rose 10-fold).

Then the markets drop. The bulls say that it's just a temporary correction after the huge run up over the last couple of years.

Then the markets rise again. The bulls will say: You see, the bull market has resumed. This is the Bull Trap.

When suddenly price falls below the previous low, the chartists get scared, and stoplosses are being hit. More selling follows. Now everybody panics. Then they capitulate: " I've had enough of this. I'm sick of it, I'm out" . Usually, price drops too much, too fast. Eventually, price returns back to the mean.





We can clearly see this pattern in the Nasdaq " Bubble" of the 1990's:

In fact, the Nasdaq is not the only " Bubble" of recent times that has burst. Think about the Chinese stock markets for example, hereby represented by FXI (iShares China 25 ETF). Do you see how similar FXI behaved to the NASDAQ (even AFTER the bubble had burst)?



Now let's have a look at the " Silver Bubble" . It's following nearly EXACTLY the " Bubble Pattern" discussed above:



In fact, when we compare  Silver  to the Nasdaq, we get a much better comparison than when we compare  Gold  to the Nasdaq Bubble:



We might now get the " Bull Trap" , which means  Silver  might rise back towards $37-$39.

This would also be the target of the red channel in the following chart:



When price hits that level, and then turns down, the last phase of this Bubble can start: Capitulation.

There is one sector which I believe is at or very close to forming a " post-Bubble" bottom.



Source:  Profitimes