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Submitted by Konrad Urbanowicz on Saturday, May 4, 2013 - 23:32.
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We are like Samson right now, "eyeless in Gaza." We can hear and feel but it is hard to see on a fundamental basis what is going on in the precious markets.
Count on one thing, though. Traders and investors will be selling hard into any price increase we see short term, so markets will be turning one way or another quickly. It is a time to harvest your profits when you feel as if you have enough to take off the table.
Another laudable development today is the wringing out of emotion from the market. Trading on emotion is never a good idea. (It is different than trading on your gut instinct. Emotional trading is usually based on either fear or greed.) Today calmer heads are prevailing.
The purchase of physical gold overnight in east Asia helped to stanch the bleeding substantially and gold held steady for much of the day, although late this afternoon in New York it has wilted a bit.
The bargain hunters have hunted and now they are selling their positions and consolidating gains. Everyone is also waiting to see if gold has found a new floor or will tumble below 1300.
Silver was revived by end users stepping in as hedge buyers to protect prices in the future. Those prices can bleed over to everything from electronics to automobile to jewelry. Manufacturers must have a stable price. So, some who had been burned earlier this year are buying at bargain prices. If you had bought silver at 27; a good time to buy would have been when prices dipped below 23, for instance.
There are theories abounding as to why gold fell so sharply. Goldman Sachs, which has for months now been talking down gold as if it were an insulting in-law, claims it is because the Cyprus debacle might force other shaky European economies to sell their gold holdings to cover debt. Never mind that the Cyprus news is old by market standards. And never mind a bigger, more powerful country - say Spain - wouldn't agree to be a Cyprus in a million years.
The use of the term "technical selling" is a bit of a cop out, because, after all, human beings, the greatest computers, are also buying and selling in the marketplace. Indeed, there are often clusters of sell (or buy) orders around key support or resistance areas. Big institutions do not rescind those orders based on whether the second cousin of the King of Inner Slobovia had gas after dinner last Sunday. Those orders go through come hell or high water. The massive institutional investors wash like a tidal wave over the markets.
Goldman also is touting the improvement in the U.S. economy, which their analysts feel will prompt the Fed to cut short QE3 stimulus. Yet, while we know there is some dissension on the voting board (the federal Open Market Committee), the dissenters are nowhere near close to gaining a majority.
But... but... but... we seem to be getting the same mixed signals on the American economy we've been getting for at least a year; Europe is worse off; and now China has joined those of the slumping shoulders.
We keep asking, "What's changed?" The answer is so far, "Not much, fundamentally."
Something did change. Four or five institutions around 6 months ago made (baseless) bets that gold (and silver) would go down. They talked that point up and gold began going down. Then trapdoors were sprung.
It bears repeating what we said yesterday: In every calamity there is an opportunity. During the California Gold Rush, Levi Strauss, although never lucking out in mining, became a millionaire selling blue jean work pants to miners.
As always, wishing you good trading,
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Gary S. Wagner - Executive Producer