Gold – 4 Oct

The typical pattern is holding in gold where price rises in the East and promptly falls on the open in London and later in New York. The flow of gold from West to East continues and shortages of physical are popping up throughout Asia. This shows the nature of the dilemma that the the West faces where gold must flow, but the very flow that they initiate must be curtailed before a run on physical occurs. Physical responds opposite to paper gold. The paper lovers in the West dump paper supply and increase the flow from paper gold. The physical lovers in the East use the opportunity that the paper lovers give them and they buy physical. This mechanism has to continue to maintain confidence in the Eastern mind that Western paper can indeed be converted into a real storehouse of value.

So with shortages in physical developing, it tells me we are either at or near a major low in gold. The price of gold will have to rise to stem flow of physical and allow physical bullion stocks to regenerate. the result of this seesaw action over time forms an ascending staircase on the gold chart. It reflects a managed deconstruction of the US dollar international monetary system. Two steps forward, one step back.

Technically a higher high was made with an outside down candle, where the high and the low exceed the range of high and low of the previous day. Typically an outside day is a reversal candle or a new trend setter if trend was neutral. 1675 is developing as strong resistance with a second touch that was summarily rejected. Support is 1585 and lower at the beat down low of 1535, where the 200 day moving average is also providing a floor. The 100 day moving average a 1643 is proving to be a magnet and must be cleared for a run to the 18 day moving average that is quickly descending. If the new uptrend can hold with any new swing low higher than 1585, 1705 is looking to be a critical price level with the 18 day moving average, currently 1730, coming into that area. It will be very constructive to the bulls to see price enter the previous trading zone between 1705 and 1920. Otherwise it looks like we will see a trading range between 1705 and 1535. As far as technical indicators go, slow stochastic completed the cross of the 20 level and suggests a price target of the nearest moving average, in this case the 100 day MA and the objective has been met.

I have been tossing around the idea of dropping coverage of the gold chart. My reasoning is that I really think trading is fraught with risk now and that a trader must somehow glean intent of the market manipulators more than the actions of a free market. I cannot do that myself. On the other hand I like to chart and the skill will one day again be a valuable one to possess. I will say this however, you had better be really good to trade this market. I am buying physical on dips, period. I suggest that anybody that cannot kick their paper habit should read FOFOA and understand Freegold. It will cure of a nasty habit that is hazardous to your health. If I had anymore cash available here, I would be buying with both fists.

Here’s PHYS, a 100% allocated gold bullion fund that should be utilized for those who have money trapped in 401ks and other retirement accounts that do not offer access to allocated gold bullion:

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