Gold and Silver – Monthly, Weekly, Daily Closes. The Story.
The month of May is now on the books. The question is, can anything new be learned
from them? Maybe not, but you would have to see them to understand why not. One
qualifier to be added is, from our perspective, charts include all the known factors from
those who have made a market decision. The basis for the decision-making may be
fundamental, [including supply and demand], technical, [including technical supply and
demand factors], a combination of the two, gut-trading decisions that may not reflect
either and just be ego-driven, and finally, the uniformed, who believe otherwise but trade
just the same.
We make no effort to dazzle anyone with fundamentals. There are those who are known to
be expert in the field of precious metals who provide detailed analysis and reason for
asserting why gold and silver should be trading at considerably higher levels. Their facts
and figures are most impressive, but the current prices of gold and silver present a quarrel
with their fundamental information. Our sentiments are with them, but our hearts remain
with the charts.
Why? The market is the final arbiter of all available information, again, based upon the
final decisions of the participants. There are many who argue that the price of both gold
and silver are being manipulated, [and we are among them, actually standing in the front
line of the collective accusers]. A few would argue that paper gold and silver prices are a
sham and emanate from trading exchanges that are equally a sham. That may be truer
than not, but those who take that position provide no meaningful alternative, as a guide.
We are keenly aware of the unprecedented demand for physical gold and silver, as it is
certainly one side of the all-controlling supply/demand equation. Despite the world-wide
unprecedented demand for the physical, it is the supply part of the equation that is being
ignored, even if the supply element is being administered in fraud, as many believe to be
true. Based on where the prices for gold and silver are trading, one has to accept and deal
with what is, and one does not have to know what the definition of is is, either.
Let us assume that the price for gold and silver is being rigged and does not reflect a “true”
relationship between the forces of supply and demand. Then one has to recognize and at
least acknowledge that whatever is driving supply to keep PM prices low, it is succeeding.
This is a more important fact of which to be aware until demonstrated otherwise. As a
reader of charts, we must accept what they show, for in the end, that is all that is showing.
It may well be that central banks have no gold for delivery, and defaults are being called
something else to provide cover for the lack of available PMs, and all deliveries are to be
settled by fiat only. There is one thing for certain, and the charts reflect this, regardless of
what anyone believes to be true, or not, the truth is neither gold nor silver can mount any
sustainable rally. What does that say for all the “dazzling” fundamentals and demand?
Is there a difference between gold and silver prices, as reflected on the exchanges, and the
price for gold and the price for silver? Yes. While we fall into the camp who recommend
buying either physical gold or physical silver, or both, [and we say at any price], we also
have to pay heed to the controlling forces of supply, for that is the dominating side right
now, from a factual perspective.
To put it another way, expressed from market wisdom, “Don’t fight the tape.”
We hold that the higher time frame charts are more controlling than lower time frames.
The month of May had a smaller range on increased volume. What this says is that the
buyers were meeting the effort of the sellers, preventing the range from extending lower.
The close, about mid-range the month, confirms this observation. That would be the
qualified good news.
The bad news is all of the activity occurred under the close for April. Buyers did not have
enough power to rally price higher. It takes time to stop a trend. So far, there is not
enough evidence that the down trend has stopped.
The breaking of the support channel and longer term support line show just how much
overhead resistance there is before gold can turn around. The weak response from last
week’s feeble rally could be problematic. Volume, [effort], increased significantly. For all
that volume, last week’s close was not much higher. Where was the payoff for the effort?
There was none. Weak rallies almost always lead to lower prices as price moves lower to
We explained the significance of a wide range bar[s] as it relates to price, moving forward.
[See Markets Provide Us The Best Information, http://bit.ly/18pk8yE, 1st paragraph after
1st chart]. While price has not traded lower after the semi-selling climax on 15 April, we
would have expected a stronger rally than has developed.
The trading range can hold for many more days, even weeks, but the trading range from
which price just broke was much stronger than the one now developing. The odds of it
holding are small, for now. While charts are leaning lower, we add the following:
The reason[s] for buying physical gold are opposed to current charts, and actually opposed
to all central banks and government interests, but we adamantly maintain the interests of
the central bankers and corporate government are opposed to the individuals, those being
“governed.” One need only look to events in Cyprus, Greece, Ireland, a crippled Spain and
Italy to understand why having physical gold offers the best financial remedy against those
in power who have been abusing and/or misusing that power.
The power wielded by those who have it are prevailing, and those relying upon the demand
side ”sentiments” are underestimating the ability of those so willing to remain in power, at
all costs, and those costs are being borne by those not in power…the reason to buy gold.
Rather than repeat this after the silver charts, the same holds for those buying silver.
Unlike gold, silver traded under the April low. However, what deserves attention is the
how price traded lower. The range was smaller and volume decreased. This tells us that
the supply forces were [relatively] weak, or a lack of supply. Demand was not there to
offset weaker supply, so this is not to make a case for no, or limited downside from here.
We would expect more sideways, and generally lower trading until there is evidence that
the forces of demand can make their presence known. Supply has proven itself. Demand
has not. It does not get any simpler, regardless of sentiments. Stick with the known facts.
The chart comments capture the weekly activity. When you look at the wide range bar
down, seven weeks ago, and then gauge the subsequent inability of silver to rally against
it, you better see how what remains lacking is strong evidence of a turnaround.
A clustering of closes indicates the forces of supply and demand are in balance. Since the
April 12 and 15 sell-off lows, price has clustered, as seen in the rectangular box. We await
the breakout imbalance that naturally follows.
The headlines touting much higher gold and silver prices may attract attention, but the
attention is pandering to the sentiments of those who want to hear news supportive of
their own belief system[s]. How has that been working out, so far?
Do not buy gold or silver because you think the price will go higher. Buy because all
fiats are being destroyed, and it takes more and more fiat, if one chooses to hold that
paper form, to buy the same ounce of silver or gold. [That has not been the case for the
past 18 months.] Cypriots would tell you they would rather have paid much higher
prices for gold and silver than have kept their fiat powder dry waiting for lower prices.
Their remaining fiat holdings will not be able to buy anywhere near what they can now
afford. That is what one has to consider as reality, from now on.
If anyone thinks it will not happen in the United States, or other countries still lying in
wait, it is like playing a form of Russian roulette. The odds are in your favor, until they
are not. Then you will know what it is like to be a Cypriot bank holder. There are no
Black Swans, just people unwilling to see the warnings of darkening clouds.
We have acknowledged the eventual likelihood of much higher prices and support the
sentiment, which is why our message has been constant: Buy either, or both, physical gold
and silver, at any price, for when the day of reckoning arrives, they may not be 1. available,
[Never underestimate what the government can/will do], or 2. only at prices that are
considerably higher. Hence, better a year early than a day late.
At the same time, we have recognized the reality of the charts and to not buy futures while
the trends are down. It is possible that the paper market may be destroyed before any
buying “opportunity” presents itself. Paper trading becomes less and less appealing or
even relevant. Always remember, if you do not hold it, [personally], you do not own it.
Has anything new been learned from the charts? Not much, for the trend remains down.
A lot can be learned from the fact that they are down, relative to the reality of demand, and
how that reality does not matter, at least for now. That is a powerful message. We see it as
added reason for the constant buying of the physical.
Where? At any price.