Gold – 12 Dec

If you’re trading paper gold, you had better be trading short. Otherwise you are simply being robbed. I bought on the Bollinger band and paid the paper price for physical gold in the form of 1 oz. Canadian Maples. What a bargain! you may say, “well dummy, nice job! You just said if we are a trading we had better be short, and you just went long.” Interesting, but no, I indeed did go short PAPER gold. I went short by going long physical! Paper gold price like the charts below is starting to diverge from the physical price in markets positions of size. This will continue to the extreme when a Comex gold contract will have no value at all. It takes confidence in the ability to deliver physical gold on demand for the futures market to function. That confidence and the confidence in the clearing mechanisms associated with the exchanges are heading for the crapper.

Today’s lower low has established a new short term downtrend as price closed on the Bollinger band. Technically speaking support has held at 1667. A move lower tomorrow certainly sets up a run to chart support at the 1600 level, with the 200 day moving average just above that area. It is a rare occasion for price to test the 200 day MA, and really has happened just a handful of times in the last 10 years. If we in fact can make it to support at 1600, I will buy again. On credit! Resistance is the convergence of all the shorter term moving averages around the 1720 area, and then the last swing high at 1760. None of the technical studies are indicating extremes.

The wider view shows price breaking down through the bottom of the symmetrical triangle. The 200 day moving average at 1612 awaits.

Notice previous close approaches to the 200 day MA.

The line in the sand for support on the weekly chart is the 45 week moving average in blue and is just now reaching 1600. RSI can go just a point or so lower before it is back down to a level where reversals have occurred. It looks to me that 1600 is the worst case scenario barring a collapse of the paper markets. In that case this chart is meaningless and your physical gold price will be undetermined. Good luck finding anyone rational willing to part with physical under that situation. The risk is being out of physical and in paper, either short or long!

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