Gold – 30 May

Manic behavior in paper gold. Risk on, risk off. Is gold a safe haven? Is gold a risk asset? Is gold manipulated by TPTB? IOW, same shit different day. The technicians are saying the gold bull is over because we have a death cross, the 50 day moving average crossed below the 200 day MA. The hard money gold standard crowd says nonsense and a bottom is in. I say both may be right. The technicians may indeed be correct and the paper gold bull may be over. If that is the case we should see the paper gold price fall substantially and head toward zero. This will indicate the collapse in confidence of paper gold, not physical gold. The following charts depict price history for paper claims to physical gold, not physical gold itself. When Freegold is upon us these charts will paint some nasty waterfalls.

If the Hard Money Socialist crowd is correct, confidence in paper gold as a viable alternative to ____________ will be restored and the paper gold price will rise and resume its multi-year up trend. TA is only as good as the underlying fundamental analysis. Paper gold is not going to plunge because somebody figures out how to fix the USD international monetary and financial system. It plunges on approaching Freegold. Don’t try to game it. As the paper gold price plunges, real gold goes into hiding. You will never get an opportunity to trade those sickly dollars for bullion.

To the chart. We have a short term neutral chart with a higher high and a lower low. Resistance is definitely the down sloping 18 day moving average and support is the 1530 level. We continue to move sideways within a trading range between 1600 and 1530.

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The wider view shows price right in the middle of the multi-month down trend channel. The only thing that suggests this trend may change is the divergence between MACD and price. The blue trend line has a positive slope while price is flat between the defining points of the trend line. RSI remains below its trend line. The Bollinger bands are rapidly contracting and speak to a possible increase in volatility coming soon.

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The weekly chart shows a descending triangle that is normally a bearish topping continuation pattern. A confirmation of that would be a fall down to the 200 week moving average and a significant step toward Freegold. A fail at the 1530 support level sets up support at the Fibonacci 38.2% retrace around 1450. Stochastic, a leading indicator, has hooked and taken on a positive trajectory. If it completes its cross of the 20 level price will target the nearest moving average, in this case the 18 week moving average or the 1660 level. Price has been outside of the Bollinger band and odds suggest it will move back into the bands. Price is finding support at the 100 week moving average. Interestingly enough, the chart has only recently lost its most bullish possible configuration where all moving averages are in alignment as support from the shortest duration to the longest duration. The 18 week MA has now moved below the 45 week MA.

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The monthly chart shows price at support from the 18 month moving average. Back in 2008 we violated this MA support and approached the 45 month moving average before reversing. A similar move suggests paper gold would drop to the low 1300s. Fibonacci support for the entire paper gold bull market is at 1282. RSI is still above the levels found during 2008, as well as stochastic. Are condition of the $IMFS as bad as they were in 2008? I say worse.  Conclusion: if you have some dollars you want to get rid of, I would say do it now. Physical can be had and is a screaming deal at this price.

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