Saturday, March 2, 2013

Sit Tight And Be Right

Big movements take time to develop... Men who can both be right and sit tight are uncommon. - Jesse Livermore
If you look at a long term chart of gold, you'll see it's forming a giant "wedge" formation:


You can see the price of gold "basing" in the $1525 - 1550 area.  We know based on the huge import premiums vs. the world spot price in India, China, Indonesia, Viet Nam and other Asian countries, that the big physical buying countries are aggressively buying gold on every price dip.  This is physical gold that is removed from the global trading supply and disappears into Central Bank and private vaults.

At some point, the paper trading markets in NY and London will not be able to contain the free market forces of supply and demand.  In this country, February was a record sales month for U.S. Mint silver eagles.  

I wrote an article for Seeking Alpha which discusses a very important technical indicator that has always worked in periods of "extreme" highs and lows.  You can read about that and another indicator that is signalling that this current price correction is nearly over:  Patience Will Be Rewarded

Finally, downward "wedge" formations like the one above almost always "resolve" with a big move to the upside.  Typically, the size and duration of the move higher is proportionate to the length of the base of the wedge. 


  1. I hope your right. Been brutal watching the action lately. If you not, so be it. Once committed to physical, just doesn’t make sense to retreat and go back into a fraudulent system. If you can’t see that the system is a fraud and cheats every fiat holder, well you deserve what you get in my opinion.


  2. Note recent sharp turn up here very early 2013:[1][id]=BASE&s[1][range]=10yrs

    Is it heading here,Feb/2014, a mere 12 mo away?

    (BTW, chart & link in article goes to only mid-2011 ie it was old even when the article was written)

  3. Old video but interesting....

    Beppe Grillo about money as debt ENG ( part 1 )

  4. According to your chart Dave $1700 would be the break out on the upside & $1500 on the downside. I would be inclined to book some profits on a break of the $1500 level. After $1500 looks like $1309 and $1155 are the next major support levels. Taking profits on a break of $1500 would allow for fresh purchases at those afore mentioned levels. As far as fundementals, overall sentiment is negitive which is positive, but as you know markets can stay irrational longer then investors can stay solvent. Lets hope for the best but, prepare for the worst.

  5. Las Vegas Sands says "likely" violated U.S. corruption act

    (Reuters) - Las Vegas Sands Corp (LVS) said it "likely" violated the federal Foreign Corrupt Practices Act, which outlaws the bribery of foreign officials, according to a Securities and Exchange Commission filing on Friday.

    The filing marks the first disclosure by the casino operator, controlled by founder and billionaire Republican donor Sheldon Adelson, that is was under investigation.

    The SEC subpoenaed company documents in February 2011 relating to its compliance with the antibribery act while the U.S. Department of Justice also advised Sands it was conducting an investigation, the company said in its annual report filing.

    "There were likely violations of the books and records and internal controls provisions of the FCPA," the company said.

  6. Mayor Bloomberg: Don’t Panic About the Sequester
    At midnight tonight, a bevy of steep spending cuts will hit the federal government unless Congress and the White House agree to an alternative deficit-cutting proposal. Although the national media has been relentlessly focused on this deadline, Mayor Michael Bloomberg said it will only affect New York City if the so-called “sequestration” continues for a significant length of time.

    “It depends on how long,” Mr. Bloomberg said on his weekly WOR radio show with John Gambling. “If it lasts a few weeks, no. If it does, yeah. We get 10 or 12 percent of our budget from the federal government, not all of that is going to be cut back, but there would be effects–not good effects. But in the context of, ‘Is anything going to change tomorrow? Are we going to run out of money tomorrow?’ I’m sure I’ll get that question at the [next] press conference. No.”

    Furthermore, while saying the federal deficit does indeed need to be curtailed, Mr. Bloomberg argued the United States could owe “an infinite amount of money” and there is no specific amount that would cause the country to default.

    “We are spending money we don’t have,” Mr. Bloomberg explained. “It’s not like your household. In your household, people are saying, ‘Oh, you can’t spend money you don’t have.’ That is true for your household because nobody is going to lend you an infinite amount of money. When it comes to the United States federal government, people do seem willing to lend us an infinite amount of money. … Our debt is so big and so many people own it that it’s preposterous to think that they would stop selling us more. It’s the old story: If you owe the bank $50,000, you got a problem. If you owe the bank $50 million, they got a problem. And that’s a problem for the lenders. They can’t stop lending us more money.”

  7. Beppe Grillo says Italy may soon have to pull out of euro
    Beppe Grillo, the comedian who was the big winner in Italy's election, suggests Italy may have to abandon the euro and go back to the lira, and renegotiate its gigantic debt

    In an interview with a German magazine published on Saturday, Mr Grillo said that “if conditions do not change” Italy “will want” to leave the euro and return to its former national currency.

    The 64-year-old comic-turned-political activist also said Italy needs to renegotiate its €2 trillion debt.

    At 127 per cent of gross domestic product (GDP), it is the highest in the euro zone after Greece.

    “Right now we are being crushed, not by the euro, but by our debt. When the interest payments reach €100 billion a year, we’re dead. There’s no alternative,” he told Focus, a weekly news magazine.

  8. the guy from is a blog I follow, as he is insanely accurate. He is saying gold is about to bounce up, and rally up huge very soon in the next few months.

  9. I wish I could be patient. But the current problem is that gold and silver are sitting on the downside support. If gold breached $1500 and silver broke $26, floods of momo selling would be attracted. I really feel nervous at the moment.


    He just updated his gold and silver charts, and they are very bullish.


  11. Dave, why do you view the pattern as a falling wedge (which is indeed supposed to break to the UPside), when from your support lines it looks much more like a descending triangle (which is supposed to break to the DOWNside)? Your wedge isn't falling at all; instead the triangle's lower line is just about straight and its upper one descending.

    I do agree with you gold should break to the upside, but I don't think the pattern supports that view at all, unfortunately. Since I also think gold is heavily manipulated, I don't put much weight on the pattern, but I don't think one can come out with a +positive, upside+ view from looking at this pattern either.

    1. You have to visualize the pattern extending out further. Actually, the pattern is about as "wedge-ish" as you can get. I just hasn't completed and probably won't.

      Look, I'm not a big chart guy because everyone looks at them and I find the analysis quite simplistic. But mechanical hedge fund programs and lemming retail traders live by them, so they can become self-fulfilling over very short periods of time.

      This particular formation will likely break up way before it gets a chance to complete.

      Read this:

    2. Dave, do you think the miners will follow gold's turn? The GDX:Gold and GDX:Spy ratios are ridiculously low on long-term scales. I've been shifting quite a bit of my investments into GDX and added more today. Yet, I must admit it's getting uncomfortably hot in the kitchen.

    3. We're witnessing a statistical "black swan" with the sell-off in mining stocks in terms of sentiment, valuations and hedge fund shorting.

      I don't know when it will turn around and go the other way, but we will likely see a "black swan" run to the upside.

    4. Dave, wouldn't something like TGLDX, the Tocqueville Gold Fund, be a better choice than GDX? It has consistently outperformed the ETF over the years, and seems to have great experienced management led by John Hathaway. BTW, Hathaway wrote an excellent analysis of the current situation on KWN the other day:

  12. Retail demand for silver coins is a completely useless "indicator" of anything other than how many small investors want to own silver coins. In other news, Golden Minerals is a worthless POS and always will be.

    1. The ability of the US Mint to meet the demand for silver is an indicator of the physical supply of bullion as is the premium for the coins over physical bullion price. In days gone by coins sold at the same level per oz or at a discount.

      AUMN is Sprott supported stock. Bob Moriarty has been saying ofr weeks that the collapse in the juniors is Sprott managed funds vommitting up their holdings because of redemptions. Either that is true or Clevinger like BreX has been salting the drilling results and using corporate funds to salt the grades for the Velardena's ores. This is possible given the variability and sudden changes in yield, one moment high in gold and the next moment high in silver. These grades coming through at key points on capital raising projects and then suddenly falling away without real explanation.

      So there you have it either it's redemptions in the Sprott funds or the company is a scam both are possible.

      However if it is a scam, it is a very bad one. as the price hasn't risen very high on the upside and the downside has been very long. in my experience scams are meteoric to the upside and short on the downside.

      Could be that the discounted share issue with rights was just a smokescreen to allow more time for the backers to pull out and short the share further. But volumes haven't been that heavy and i don't reckon the backers have got their new back yet alone their old.

      Someone should put this company up for sale as I don't reckon their is much belief left in the management.

  13. Berkshire Profit Advances 49% on Buffett’s Derivatives

    Net income rose to $4.55 billion, or $2,757 a share, from $3.05 billion, or $1,846, a year earlier, Omaha, Nebraska-based Berkshire said today in a statement. Gains on derivatives surged to $1.4 billion from $163 million.

    Buffett, 82, uses index put options to speculate on long- term gains in stock-market indexes in the U.S., Europe and Japan. Those bets added $2 billion to profit in the fourth quarter before taxes as Japan’s Nikkei 225 (NKY) Stock Average rallied.

    “The probability of Berkshire ever having to take a loss on these contracts is very low” because they won’t be settled for years, said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business, who has taken groups of students to visit Buffett in Omaha.

    Buffett’s Letter

    “These derivatives have provided a more-than-satisfactory result, especially considering the fact that we were guaranteeing corporate credits -– mostly of the high-yield variety -– throughout the financial panic and subsequent recession,” Buffett wrote in his annual letter to shareholders.

    and he couldn't have done it without qe....

  14. Skeptics Questions on Gold Manipulation W/ GATA

  15. "A lot of gold bugs, gold and stock investors of mining stocks are starting to give up which can been seen in the price and selling volume for these investments recently. I am a contrarian in nature so when I see the masses running for the door I start to become interested in what everyone is unloading at bargain prices.

    Gold is now entering an oversold panic selling phase which happens to be at major long term support. This bodes well for a strong bounce or start of a new bull market leg higher for this shiny metal. If gold breaks below $1500 – 1530 levels it could trigger a bear market for precious metals but until then I’m bullish at this price. I think we could see another spike lower in gold to test the $1500- $1530 level this week but after that it could be off to the races to new highs."

    1. HL, I used to like this stock bought at $5.50 into a recovering all silver miner with limited hedging (50% of base metal production) that always produced losses on the balance sheet. I liked it because it was a pure silver play. Highest ratio of silver in the majors, good North American assets, a no debt policy after earlier fiasco's. Just an all round good asset with cash in the bank finance numerous internally generated developments from it's extensive land bank.

      Now!!! $750m of gold!!! $500m of debt, a share price capped below $5.00 until June because of the conversion options !!!!!. This company barely made the Baker's salary last year and it's got $500 m of debt. It's got raise $ 50m from a share issue. Absolutely no money for internally generated development, AURIZON is bound to come with significant merger costs which will eat up any cash generated by the recovering mines.

      I thought Baker was a recovering alcoholic but it appears he was just gearing up for a bigger binge. Where do they find these CEO's.

  16. Post from The Cara Community:

    McEwen Mining (MUX) held a call to discuss the impact of Argentina's move to repatriate all future oil, gas and mining-related export earnings to Argentina. One caller threw out a bomb...

    "Apparently Goldman Sachs offers a derivative that is 'long gold' and 'short exploration sector'. The notion is the exploration sector is worthless with an intrinsic value of zero and <10% of exploration {stocks} are good companies with good management, good projects, and cash. It is these stocks with decent trading liquidity that are the proxy for the exploration sector to execute this trading strategy..."

    The caller said he wasn't positive the derivative product existed.

    Asked if McEwen's management could look into naked short-selling and if Goldman uses loopholes to execute this strategy.

    The caller stated he's heard hedge funds have testified that "...when they were looking to find hard to borrow stocks, Goldman could easily accommodate them..."

    Considering how the sector has been smacked down, interesting if nothing else.


  18. Pawning your portfolio
    Wealthy investors are using their stocks and bonds to get large loans

    With loans still hard to come by, wealthy investors are embracing a somewhat surprising and potentially risky strategy: pawning their stocks and bonds.
    Using what’s known on Wall Street as “non-purpose securities-based loans,” these investors are using their portfolios as collateral to borrow large amounts—often six figures and up—that can be used for anything from buying a rental property to paying off a hefty tax bill.

    Big brokerages like Morgan Stanley, UBS and Raymond James say the pace of this lending is growing at a much faster rate than its close cousin, margin loans. Those loans allow investors to borrow against the value of their securities in their brokerage accounts, but the proceeds are traditionally reinvested in the market.

    Margin loans are frequently available to investors with smaller balances but tend to be more expensive and don’t come with perks like the option to fix rates.

    Morgan Stanley estimates that non-purpose loans have been growing “at a double-digit clip” for the past four or five years while margin loans have been flat or down. “In a tight credit market, you can get this money quickly and easily,” says David Kanigan, head of products for Morgan Stanley’s private bank.

    That convenience comes at a cost, warn financial advisers. Investors can typically borrow 50% to 95% of the value of the stocks and bonds they pledge, but if the value of those securities falls below a certain level, brokerages often demand investors immediately pay back the loan or pony up additional collateral. While investors may have a few days to respond, if prices drop too quickly their brokerage can even sell out an investor’s positions without permission.
    “It could really blow up” if there is another crash or sharp correction, says George Middleton, an independent financial adviser in Vancouver, Wash.

  19. "IBISWorld recently updated its Global Containerized Shipping and Logistics Industry Market Research Report, which noted that for the past five years, the sector has struggled after growing for years before the recession.

    However, because of the economic downturn, those with logistics jobs noted that lower global industrial production led to fewer goods that needed to be moved, causing industry revenue to fall 0.6 percent every year between 2007 and 2013, dropping to $166.1 billion.

    "Once the demand fell away, though, shipping lines cut routes and staff," said analyst Lauren Setar, "and many pulled some of their fleet out of the water to remain viable during the downturn."

    Looking forward, the report noted that certain segments of the industry are expected to press on, introducing new operational processes to their business. In the shipping sector, this includes building larger ships to grab hold of the lowest cost structure and get a leg up on competition."

    Not just Gold but also FOOD. Stock up while you can.