Still bullish on GOLD

Save money for college tuition? Ben Bernanke said his son, who is in medical school in New York, is likely to rack up $400,000 of student loan debt in the process of getting his degree. In the same meeting, Ron Paul also shot a silver bullet to the vampire. Ben said you can have silver but it's just not US currency.
The chart below explains how to save for college tuition. Ben should know that before sending his son to school.

We are not in Gold or precious metal standard. That's true. Ben keeps on lying about inflation (per Ron Paul). That one needs your own judgement. The chart says save tuition in Gold anyway.

Here is some more reading on Supply Demand and others from Morgan Stanley via Zero Hedge.

Stay Long Gold

I have to admit I am a fan of CNBC's Maria Bartiromo. When I was watching her, I found this. It is a must for all serious and prudent investor. Jim Grant is the editor of Grant's Interest Rate Observer.

Jim says the FED is manipulating the market to achieve desirable macro outcome. The FED is dulling the market sensors of risk in the entire marketplace, by pressing the interest rate. The FED should learn the lesson from 1920-21 depression. (and don't forget 1929 and 1930s right after.) Then comes the classic conversation:

Maria Bartiromo: "What are the alternatives?"
Jim Grant: "Capitalism is an alternative for what we have now. I highly recommend it."
Maria: "We all do."
Grant: "No we don't."
Maria: "The Federal Reserve may not."
Grant: "We ought to be discussing an intelligent move to a sound currency by which i mean a currency that is based on a standard and not at the whim and the discretion of a bunch of mandarins sitting around Washington D.C."

I don't disbelieve it

Gold is stronger than I thought again. I exit too earlier and missed about 20 points. Busy is not a good excuse. It is actually my bad judgment. I thought it could not pass 1130 which was the 3/16 high. Not to mention multiple MA, 50% since 1226 and 61.8% of this round all in 1140 neighborhood. Gold end up took the March high and is challenging 2010 high now.

Anyway the breakout need to be respected. I think 1175 is a good number as Andrew (purple), channel (orange) and fib all meet there. Should I take the trade? Yes I think so. The breakout is powerful, but the internal needs some work. 1155 is Jan high and 1160 is 61.8% (blue). With overbought condition like this, I don't think crazy bulls will push it thru. I expect GC stays in the range of 1135-1155 for a while. Any dip below will be a buy. Time series clearly says 4/16 top. It worked perfectly since last Oct. It should work this time as well. 

Dreamed plan: buy dip around 1135 friday, sell 1175 within 1 week.

Interesting Chart Comparison

On Nov 27, Gold opened at 1194, then moved up a little bit and recorded a new history high at 1197. Upon the Dubai news, Gold dived to 1138.4, then end up managed to close at 1179, leaving a shadow of more than 40 points.  It is a strange pattern, 60 point candle with 20 point body and 40 point shadow. How is the market going to interpret the strange candle?

Reading:

1. The dip on 11/27 measured 61.8% of the rally started from 1100 level, then hit 1197.

2. Gold resumed rally and marked a new history high at 1227.5 4 days later on 12/2.

3. Crashed since 12/2.

Gold Chart:

With help from my Chinaman, I noted similar situation happened in Shanghai before.

1. SSEC started from the previous swing low at 3060 and peaked at 3450 on 7/29. Then on 7/29 after made a new high, the index dip to 3215, which is also 61.8%.

2. Rally resumed and marked a new high 4 trading days later to 3485 on 8/4.

3. SSEC made significant retracement since then to 2640, which is 50% of a larger pattern, and spent 3 months consolidation.

Guestimation:

Gold will follow SSEC to go down for the next 3 months, first struggle around 38% at 1105 then find support at 50% retracement at 1065 level.

 

Epic Rally Over

Friday, the U.S. Labor Department said nonfarm payrolls fell by just 11,000 last month, slowing down from a downwardly revised 111,000 drop seen in October. In addition, the unemployment rate edged lower to 10% in November from 10.2%. Given the interest-rate implications, the jobs report was a boon for the dollar, with a stronger dollar weighing on commodities prices, including gold and oil, as well as commodities producers. Market got confused after the release, with the dollar and equity rose, followed by the stock pulled back a little bit. In recent months, whenever the positive economic data, the dollar will go down. It can be explained by carry trade: investors borrow U.S. dollars to buy stocks, commodities and other higher-risk assets; the dollar falls and the riskier asset price rises. Recently FED continues to keep low interest rates in the sign of economy recovery, for the reason of high unemployment rate. Therefore, the positive employment data naturally lead to an expectation of tighten monetary policy.
The current market sentiment is no longer standing on solid long side. Gold is in serious overbought condition for a while. A correction is due on the sharp rise of dollar.
The two main reasons that are supporting the surge of gold are questioned.
1.    Rate. Expectations of long-term the dollar will continue to depreciate.
2.    China. Senior officer of the People's Bank of China made a public statements to be alert the gold bubble.
 However, the medium and long term, we do not believe that gold's bull market to an end. Even if the U.S. unemployment rate fell to 10.0%, figures are still very bad. Any tighten monetary policy and a stronger dollar will hurt the U.S. economic recovery. To protect against the weak U.S. dollar, the Chinese still need to buy more gold to diversify their foreign currency reserves. The key is timing and price.  Fundamentals, the market still need to restore confidence in the following few trading days, gold prices will continue to rise later.

Technical analysis:
Daily: I believe 34 ema is the key supporting line, which is currently around 1135. If the rally is over, how deep can the retracement be? The start of this run can be identified as 957 in early Sept (refer to my previous chart).

From 957 to 1226, we see a fib support at 1125 area. I believe we have good support here.

Weekly: sma  4/9/30 are important, and they happen to be around  1150 1100 1000.
Monthly, if this month we closed below 1140, then it will look like top.

Gold? New high? Why you are surprised? 11/23/09

Gold?
New high? Why you are surprised?
People said this may be a manipulative move. Someone picks a low-volume time in the market to move the price to force people to buy in a panic. I am panic now. I am holding longs and I want to add more.

Usually gold and dollar have inverted correlation, simply because gold, as well as other commodities, is priced in dollars. But history also tells us if in financial and economic crisis, fundamental favors gold. It will move on all alone. This is the beauty of gold as compare to other commodities. Since this depression, investing structure has been changed a lot. People are now more in favor of physical investments. What will you favor? Gold the physical yellow metal or some derivatives from aig? In recent weeks, we see gold keeps on making fresh new highs even when dollars had meaningful bounce such as Friday.

Strong $? What a joke. You think Ben can defense $ by just talk some talk? It is just to provide some bargain power for Obama’s Asian visit. As long as interest rate stays low, there is no strong dollar nowhere. The fact is dx had been rejected couple times at 20ma. How strong it is?

All the reasons for long I pointed out are still there.
I want to add the China play. Well, nowadays I have not seen any research report not have China in it. This is how important the country is. All hard numbers indicating China has already got out of recession. I expect China to be the largest gold consumer in 2010.
Decrease of the use of hedge is another driver. Since 2001, gold miners have decreased hedging for about 90 million ounce. In q3, gold hedge dropped to 11.5 m. In theory, the reduction of hedge helps the gold spot price.

Now the chart reading:
Weekly and monthly charts are very strong. On daily chart, we still have HH HL. The possible H&S is gone. BB is expanding. Target remains at 1200.
However I expect some small bounce of dx recently, thus gold may range another 2 weeks or so. Overall since 1100, a lot of speculators jump onto the boat. They may take profit at any time. Also for Xgiving long weekend, a lot of funds will reduce their positions. I will hedge my longs.
Today's range could be 1154-1168.I will add long below 1155 with stop at 1146 and short high with stop at 1169.

Quick update on gold

Since my weekly target of 1150 had been reached, I think it is necessary to check the market again.
14 trading days in Nov. 11 up with 8 historical highs. This is the transcript of Gold. (Per stockcharts, today is the 3rd black day. Actually today COMEX recorded slight gain for gold.)
Today, mixed econ data pushed $, and beat gold down to 1129. but gold still managed to close above 1140.
Considering Friday, and possible uncertainty over the weekend, I will trade the range of 1130-1150, and I will hold a small long position over the weekend by sell couple puts.
Again I still think we will see 1200 this year, and very likely early Dec.

Gold Reading

Gold is enjoying one of its best November, up 6.3% for 1st half of month; adds trend likely to continue. Below are some reasons that I can think of:

1. Seasonality
Per Barclays, "Approximately mid-Nov to early Dec is a strong seasonal time for gold with an impressive track record over the past three decades."

2. Liquidity and inflation
Central banks around the world won't easily be able to exit the vast amount of liquidity they've pumped into their respective economies w/o any price. Here is the catch: "Inflation remains a real concern." That should mean continued support for gold, often used as an inflation and dollar hedge and more broadly seen as an alternative currency. As investors flee the $, they are moving into higher yielding currencies, hard assets like gold and other commodities as well as equities.

3. Risk preference
Bernanke's assessment of the economy of today reinforced a view that the Fed will likely keep US interest rates at ultra-low levels for an extended period. Despite weak US consumer confidence data, risky assets such as equities and commodities have rallied. Liquidity seems to have drowned the market's fears. The lower dollar and rising risk appetite also boosted other precious metals. Although gold put in strong gains, silver, platinum and palladium, which are more heavily used in industry than gold, advanced more in % on the weaker greenback combined with economic and automotive news.

4. India / China effect.
India bot 200 tons of gold at $1045. Now the world is eyeballing at China. Currently China has only about 1050 tons of gold, or $37b, or <2% of the reserve. The question is should they buy it at this high level? This is another test that the Chinese gov needs to face now.

5. USD: I am expecting a new low THIS WEEK. I think 74.8 cannot hold.

6. Chart reading
macd strong with expanding histogram, break upper bol, sto overbought but no big deal
This week's target 1150 with support 1128. I will buy dip at 1113.