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Wednesday, April 8, 2009

Gold, Silver: Failed at Support

In Gold, One More Push… I wrote: “One more push down, to about $890, should unleash serious selling...

Sensing a vulnerable market, the powers that be have already started moving to push Gold down. Rumors of significant IMF Gold sales have started hitting the wires.”

This prediction actually caused a couple of the uber Gold bugs to have an instant seizure and throw a temper tantrum in the comment section. Both Gold (GLD) and Silver (SLV) then immediately did drop through support…

GLD broke support around $890… and it did unleash serious selling. Support around $850 and the rising 200 day EMA (green line) halted the slide. Yesterday resulted in a gap fill. With that complete and the $890 area now resistance, expect some consolidation before another leg down. The target is about $810.

SLV broke all support, falling below absolutely everything. The 200 (green line), 50 (red line) and 20 (blue line) period EMAs were all smashed. The rising trend from November 2008 was violated and the 38.2 Fib around $12.60 as well. The target is about $11.00.

Evidence of global deflation is starting to mount. Commodities will get it from both sides. First further reduction in demand will result in lower prices. Second, deflation will result in lower prices.

This won’t just affect GLD and SLV, but other commodities such as Oil (Rising Bear Wedge, Break Down).

Swiss slide into deflation signals the next chapter of this global crisis: “Watch Switzerland closely. It is tipping into deflation, the first Western country to succumb to Japan's disease.

Swiss consumer prices fell 0.4pc in March (year-on-year). Swiss CPI will be minus 1pc at least by July, nearing the level where spending psychology changes. By the time you have a self-feeding spiral, it is too late.”


TheWolf said...

Goldbug or not, I´m not as bearish to gold as you are.
I´m sure this is just a healthy pullback after a failed brake of the kilo-level. Pullback, build some strength and then we go with force to brake 1000.
Bye the way, global deflation?
I don´t think so, with this massive moneyprinting all over the world we should be more worried about hyperinflation. You make the classical error of confusing CPI with inflation. CPI merely consists of pricechanges of DVD-discs from Korea(South I think but I´m not sure), CPI is just the consecuence of inflation.
Inflation is something else, it is the growth of moneysupply and deflation the contraction of moneysupply and the moneysupply in the world is not contracting, far,far from it.
Great blogg otherwise!

Anonymous said...

Hey Ben,

If I remember right, you said when gold goes over $1,000 AND you are hearing whole economys explode, then you will jump in. That still the plan?

Btw, Ian Gordon is predicting gold at $4,000 when tshtf.

Anonymous said...

A useless commodity, other than for dazzling mens' eyes, clouding their minds, and for stoking their avarice, vanity and pride.

The Trooper said...

Re: Wolf

Maybe I'm wrong, but if the money is being held by the banks (and it is), wouldn't that reduce the veolcity of money and contribute to deflationary pressure? Also, debt is being destroyed at least as quickly as money is expanding (to my knowledge).

Anon 5:17pm - many uses for gold, both industrial and financial.

Ben Bittrolff said...

@ Wolf and Anonymous,

Yeah, as I posted the plan is still to pound long Gold ABOVE $1k IF the world implodes...

Wolf you're confusing NARROW (or high powered) money creation with broad money creation. See:

Trooper has it correct. The banks are hoarding.

Anonymous said...

RE: Anon. 5:17 PM

I knew somebody would call me out on that. Of course gold is irreplaceable in many industrial and technical uses.

It is also true that the uses set out at 5:17 PM above can be valuable for getting things done, too: that is, the latter part of the phrase contradicts the very assertion with which it commences.

The Trooper said...

Ben said: "IF the world implodes"

I must admit I'm a only a year-old neophyte to much of this, but find it all incredibly intriguing. This may be a stupid question, but what would be the first signs (or next, given current state) that the world has imploded? What's the red flag that screams "this is it, time to duck and cover"?

John Pingel said...

Deflation still on the table until credit expands dramatically. Only after credit expansion comes inflation again. Meanwhile plenty of time for gold to get back down to 650 and shake profits out of all the retail gold bulls.