Golden Triangle

I wrote a piece over at Bullion Directory titled True Gold Fan Speaks of Future Price. In what was almost an afterthought, I drew a triangle on the chart and highlighted $1,306.40 as an important level that gold would need to move through in order to continue higher.

So, what happened?

The gold price moved just a little above the $1,306.40 level on the chart?

How close you ask?

The price moved to $1,307.00 - a little above our hastily drawn line, but still within the triangle.

Upon nearing the upper boundary of the triangle price has backed off a bit and is currently under $1,290.00.

If you haven't read the article over at Bullion Directory highlighted above, I would encourage you to do so.

The Pitchfan - a combination pitchfork and Gann Fan - used in the charts above points to some important levels that gold will have to overcome in order to move higher. The Pitchfan also gives an idea both in terms of time and velocity the relative difficulty the gold price will have to traverse through each shaded resistance level.

Bottom Line: The gold price looks to be taking at least a temporary breather today. Will be interesting to see if the ECB QE announcement (or non-announcement) will end up being a case where gold is bought on the rumor and sold on the news, or if it will push price higher. Regardless, gold still needs to break out of the triangle pattern in order to move higher. Until it does, I don't expect price to move up much more. In fact, if price doesn't crack the upper boundary, it might move lower for a bit - we'll see.

GLD - Head in the Clouds?

Does GLD have its head in the clouds? Well, not exactly. But, as you can see from the chart above, the price of GLD has been nearing the Ichimoku Cloud.

The Ichimoku Cloud is a pretty interesting, multipurpose indicator. If you want the full explanation please click here.

The short version is that when the price is below the shaded areas, or cloud, price is in a general downtrend. When price is above the cloud, it's in an uptrend.

The chart makes that pretty clear. You can see the big run higher in GLD and the subsequent decline in prices.

Since 2011, GLD has spent most of the time either below the cloud. The few times price has entered the cloud marked times of more neutral, sideways price action.

With the price of physical gold pressing higher, we could see price make an attempt to rise either to or above the cloud. You can't see it because it is obscured by the price bars, but if the blue line crosses above the red line then it could indicate further upward price momentum for the GLD.

It is also considered bullish for prices when the price crosses above the red base line. Price has spent at least part of the last two weeks above the base line.

As an aside, the above chart of the GLD cloud is almost identical to the chart of the Comex Continuous Gold Contract, so it is a pretty good stand in for the gold price.

Bottom Line: The GLD price has picked up some strength the past two weeks. The test will come when it bumps up against the cloud. Until price can move above the cloud strongly it's best to assume that the overall trend is still down.

Dollar Fan?

Ah, the beloved U.S. Dollar. There is a dollar fan here. No, not me, the fan above, or more appropriately, the Pitchfan.

What the heck is a Pitchfan? It's a combination between a pitchfork and a Gann Fan. It also can be used to get an idea about the velocity (or acceleration) of a price move.

For example, the dollar has been caught within the -1.000 level pretty much since the end of 2010.

This level, or band, is pretty wide and it has taken the dollar a pretty long time to move anywhere near the top of it.

I suspect the next band labeled -0.750 is going to offer some stiffer resistance to the dollar price moving higher. Why? Well, the dollar tried to cross above that level back in 2010 and 2011, but never could stay above it for any significant length of time.

It also doesn't appear to offer much support either. It appears that in the past when price has neared the -0.750 level it moved down through it fairly quickly.

Another thing I see as a challenge for the continued move higher in gold is the developing divergence between the U.S. Dollar Index (DXY) and the Commodity Channel Index (CCI). You can see each there was a divergence between the CCI and DXY (black line slopes down on CCI indicating weakness while DXY climbs higher as marked by lines sloping upwards), the dollar ultimately moved lower. You can read more about the dollar divergence at Dollar Divergence: Is Momentum Weakening?

One other thing about the above chart - I think the dollar price needs to convincingly move above the upper parallel line of the Schiff Pitchfork or risk reversing lower, at least temporarily.

It's difficult to put a time on when the dollar might move lower.

I believe a large part of the dollar's move higher owes to economic stress worldwide, but especially in the Eurozone. There is a lot of money looking for a "safe" (or at least somewhere perceived as safe) place to be parked. The U.S. Dollar is attracting this money seeking the proverbial safe haven.

So, all of that money sloshing around seeking a safe haven makes things, like always, a bit unpredictable.

However, unless the Commodity Channel Index turns back up and rises above the black resistance line to match the upward track of the dollar, I would expect - at some point - the dollar has to take at least a little breather.

Bottom Line:  Undoubtedly the dollar can go higher. Expect resistance in the area marked -0.750. Also, at some point the dollar divergence with the CCI should resolve. Unless the path of the CCI changes, it should resolve with a dollar move lower, even if it is only a short-lived move.

Postscript: On a weekly basis the dollar is looking a bit stretched - not that it can't go higher, but RSI has reached at or near levels not seen since 1997. Even a drop in RSI, as you can see from past history doesn't mean the dollar will drop for long. If the dollar can make a strong weekly close above $92.63, it could continue to advance in a similar manner to the 1990's to 2000's dollar advance. In fact, the dollar would only need to make it to the -0.382 level to have a shot at equaling the DXY level of  of the early 2000's.

HUI HUI

The HUI has got a nice bounce, moving from 146.00 to 200.87. It's nothing to sneeze at.

As you can see the move to 200.87 also broke a downtrend line dating back to September of 2012.

Yet, there are still a few tests to come:

1) Can the HUI break above the trend line dating back to August of 2013?

2) Will the HUI be able to break out of the Andrews' Pitchfork? Its current upper parallel channel is currently a little below 250.00.

Some of this will depend on whether the gold price is moving higher or if gold is approaching overbought levels and the price pulls back.

Gold Price Moving Higher? Another Perspective

#Gold: Technical Thriller! Update #FOREX by Technician on TradingView.com

An interesting look at gold by Technician at TradingView.

There's always more than one way to look at things.

I still tend to think gold is going to run into trouble before advancing too high.  Gold is looking overbought.

There are some other technical indicators that point to the gold price upward momentum weakening as well.

Regardless, I think it is always a good idea to look at various ideas and opinions about the gold price, or anything else for that matter.

Thought I would add this additional chart for yet another different point of view on where the gold price is headed.

Gold - Big Picture Review by yacine.kanoun on TradingView.com

Trade Agreements Mean Nothing for the Dollar

Image: pixabay

The gold and silver communities are treated to an almost endless stream of same old same old commentaries about how some Russian or Chinese trade agreement is finally going to be the final nail in the dollar coffin.

These stories, when printed, are suitable for papering bird cages with.

The amount of dollars used in actual trade is relatively insignificant. What the authors of these never-ending Yuan stories fail to realize, or to tell you, is that countries are looking for somewhere to park their money.

The only place big enough for the vast money flows to be parked in is the U.S. Dollar.

At some point the U.S. Dollar will be replaced by something else as the reserve currency, but it won't be because China or Russia sign their billionth trade agreement or because the Yuan becomes gold-backed.

These stories can be only one of two things:

1) Ill-informed;

2) Deliberately misleading in an effort to sell you something

Gold doesn't need these kinds of stories to justify buying and holding some of it.

There is real economic distress in the world. A Sovereign Debt Crisis is coming. It will be that debt crisis that will likely act as an impetus to move away from the dollar. You'll know it is getting nearer if other currencies start cracking up while the U.S. Dollar continues to rise. You'll know it is upon us when the debt crisis explodes and throws the world into a widespread economic panic - aka, a depression.

But, again, the shift from the dollar will have little to nothing to do with trade agreements and they are relatively unimportant. The endless stories covering these types of agreements is a waste of time. Once you read the first one, you have read all of them - and since trade is not the most relevant piece of the puzzle, you probably didn't need to read the first of these stories, much less the rest of them.

Why the Cheer-leading for Russia and China?

Image: pixabay

I read quite a few articles that circulate and are popular within the gold community. Some of these articles, especially those touching on the U.S. Dollar and its status as the reserve currency, seem to take a very positive view of Russia and China.

Of course everyone is entitled to their opinion. You can even express your opinion in some places still, although governments around the world seem to want to stifle dissent by creating a massive surveillance state.

Having said that, I'm puzzled by much of the cheer-leading for China and Russia. Perhaps some of the enthusiasm owes not so much to those countries themselves as it is a protest against the United States. If so, I can certainly understand. The U.S. has done, and continues to do many things that I am opposed to.

My question is, for those who cheer on Russia and China is, "How is the world going to be any better under widespread Russian and Chinese influence?"

I'm not one of those people who say my country right or wrong, or my country love it or leave it. I think people should be able to live where they want to. Curiously, however, I don't see many who cheer on China and Russia moving to either country. I believe in free markets and that people vote with their money and their feet. So, why aren't more people picking up and moving to Russia or China?

It's a bit of a rhetorical question. To me, the reasons are obvious. Many of the people who serially write positive pieces about both countries, and others who make positive comments about them and the "ever pending" decline of the U.S. Dollar, don't want to live under Putin or under China's Politburu Standing Committee of the Communist Party of China (the name certainly rolls right off the tongue).

The United States government certainly does it share of stupid things with regards to the economy. The Fed's incessant meddling isn't helping anything either. But the whole of China is, in theory, governed by a tiny communist committee. Russia is widely viewed as being controlled by a small group of oligarchs. A pretty good argument could be made that a pretty small group of people exercise control in the U.S. as well. I wouldn't argue against that view.

However, a few things come to mind. First, I don't think Russia or China come even close to the U.S. with regard to respect for property rights, innovation, respect for the individual, opportunity or freedom of expression. Certainly there are issues in each of these areas in the U.S. The U.S. is a very imperfect place.

But, for me, the question is would I trade this imperfect place for a life in China or Russia. The answer is clearly no. Would I trade the imperfect influence of the U.S. and replace it with the influence of China and Russia? No.

There are no blameless countries as there are no blameless people, but we all make choices what kind of people we prefer to associate with. Likewise, we all make personal choices about the country we live in as well. This doesn't mean I'm saying I will always remain in the U.S. But I am pretty clear that Russia and China aren't at the top of my list of alternatives.

On Critics and Criticism

Image: pixabay

A while back I wrote a series of what I called investor's diaries regarding the JNUG junior gold mining ETF. I won't go into the whole theory behind them, but the investment idea or thesis was that the price of JNUG seemed to be trading in a fairly regular cycle.

They cycle part of the idea I studied for a number of months and believed I had a pretty solid grip on. However, over the course of making the investment and writing about it I came to realize I had made a series of mistakes. You can read more about the mistakes in the diaries.

Of course mistakes are one of the ways we all learn. Unfortunately, or fortunately, that's the way I learn a good many things. I also tend to sort through my thoughts by writing about them. It's one of the ways I learn.

I understand that when you write something and put it out into the world, there is going to be criticism. It is often a healthy thing. It is interesting to find out what people disagree about and see things through another perspective.

The issue recently was when the criticism of one particular individual was used with malicious intent. It's pretty easy to find something wrong with many things that are written. It's easier still when the writing is of a personal nature about mistakes that were made.

It's not easy writing about mistakes. I suppose many people refrain for writing about their own mistakes in order to maintain the idea that either they don't make them, or their mistakes are minor in nature.

In a way writing about mistakes is the mirror opposite of the case study. Most case studies you read are pictures of perfection. They present a problem and solution for the problem that go off without a hitch. They are idealized presentations of a process that more than likely was a little bit painful and messy.

So, writing about mistakes is a bit painful and messy. Human beings often don't want to admit to mistakes. Even less, people don't want to make their mistakes public. On the other hand, sharing those mistakes can help other people learn from them, hopefully without having to repeat them and suffer the consequences.

But, back to the critic and criticism. One particular person decided to use the diaries and bad investment decision as a hammer whenever we had a disagreement. The error was dragged into conversations deliberately - I suppose either to embarrass me or in an effort to provoke me to anger.

It was, in fact, a bit irritating. The funny thing is, I was making the attempt to get along with this person, but he couldn't seem to let go of whatever he thought the dispute was. His actions taught me something though - he isn't the kind of person I want to be associated with. It's one thing to criticize. It's another to abuse the role of criticism and the critic by using it to tear down another person.

I have found over the years that some people believe they can only build themselves up by tearing others down. It never has made much sense to me. I can't become more by making someone else less. All I can do is try to learn from my mistakes and attempt to become a better version of myself.

Postscript: I forgot to link to a video by Chris Moody who posts frequently at TradingView. The title is How I Lost 18K...By Simply Being Lazy. I have to say a few things about the video. First, it's very courageous of Chris to post the video and reveal the very simple mistake to the world. Second, it's incredibly generous of him to share his mistake so others can learn from it. Third, Chris is very generous sharing his knowledge over at TradingView and I have learned a lot from him, but there is so much more to learn. I hate to admit it but seeing the size of his mistake and the simple error made me feel a little better about my JNUG mistakes. We all make mistakes. It isn't the mistakes that define us, but how we react to them that shows us what kind of people we are. By that definition, the quality of Chris as a person shines through.

SLV Nears Overbought Levels

The SLV is nearing overbought levels as shown in the chart above. Gold is slightly ahead of the SLV in this respect as it has already reached overbought levels.

We can use the SLV price as a proxy to the silver price since they tend to move up and down more or less in sync.

Looking at the chart above, we can see that the SLV is nearing the pink shaded area of the Hurst Bands. The pink band is the warning area that price is nearing an overbought level.

SLV still has a little ways to go before it hits overbought levels, finishing last week at $16.72. The Hurst Bands overbought level currently ranges between $17.17 and $18.27.

MACD is at levels not seen since July 2014, while RSI, at 68.1080, is nearing overbought levels.

The Hurst Oscillator at the bottom of the chart is simply a linear representation of the Hurst Bands seen at the top of the chart.

The next chart seen above is the same chart as the first, only with volume bars added.  At the far right of the volume bars you can see three days of volume above the 50-day moving average. Prices moving higher on strong volume is a bullish indicator.

A final interesting feature of this chart, although perhaps a little difficult to see, is that the SLV price has moved above the blue shaded Keltner Channels. This is an indication of strong upward price momentum.

Taking a look at the weekly chart of the SLV above,  it's apparent SLV has a ways to run before bumping up against overbought levels.

In fact, looking at the blue shaded Keltner Channels again, since August 2013, SLV has spent almost the entire time either within the channels or below them. Given that, expect some significant resistance if the SLV pushes higher around $17.38 (the current top of the Keltner Channels) and $17.86 (the current bottom of the pink shaded Hurst Channels overbought level).

If gold continues to press higher, it is likely that SLV and silver will both do so as well. Although SLV is nearing overbought levels, that doesn't mean that it can't become further overbought.

Bottom Line: Despite being near overbought, the SLV could still press higher. Expect resistance at $17.17, $18.27 and $19.01. Likely near-term support at $15.84 to $16.31 should SLV reverse lower.

Gold Priced in Euros, Important Dollar Price Resistance Levels

Gold priced in euros has surged since 12-21-2014, moving from €966.20 to €1,107.20, a move of €141.00 or 14.59%.

On the chart you can see the interesting dynamics:

A - The Dollar Index (DXY) has surged to $92.64, breaking above an important long-term resistance level of $92.63;

B -  Gold priced in euros has surged as the euro has plunged to €1.159, noted at D;

C - Despite the surging dollar (A), gold has moved higher to $1,276.90 (C) on the Comex (GC1!).
 

As seen above, the DXY managed a weekly close just above the important $92.63 level, finishing at $92.64. This isn't as impressive looking until you check it out as a weekly chart.

The last time the DXY reached $92.63 was November of 2005. The last time that the DXY was above $92.63 was in October 2003.

So, the DXY has just broken out of an over 11-year old channel.

We find ourselves in a situation where both gold priced in dollars and the dollar, as represented by the U.S. Dollar Index (of which a significant portion of the weighting is in euros) are moving higher at the same time. Martin Armstrong of Armstrong Economics provides an excellent explanation of what is happening:

We are in a very fluid period, which can be confusing, yet it is important to comprehend that NOTHING but NOTHING is ever PERMANENT. On the one hand, gold will eventually decline for its final low on the benchmarks. The only thing that will call that into question is a Monthly Closing ABOVE 1350. Yet, gold is rising WITH the dollar.

This paradox centers around a simple game – who has the confidence now.  Since the confidence is fleeing Euroland, then capital and confidence will move into dollar and Swiss franc. This means that gold will rise WITH the dollar and franc as a HEDGE against the Euro.

However, we will eventually reach that point more-likely-than-not on the benchmarks where the shift in confidence will take place and gold will then rise AGAINST the dollar. After the confidence has crashed against everyone else, then it will turn against the USA. This is when we will thereafter see the next solution as a one-world reserve currency.

Armstrong's observation that a monthly close of gold above $1,350.00 is the only thing that will call into question an eventual decline of gold to its final low on the benchmarks is interesting in light of the following chart.

Why is Armstrong's observation about a $1,350.00 monthly gold price close interesting? If you look at the above chart you will see that the gold price has traded within a Schiff Pitchfork for around a year. What is it going to take for the gold price to break out of the descending pitchfork and possibly move higher? Currently the gold price would need to move up to $1,350.00, or slightly above.

Previously I wrote about how gold has just entered the oversold range as indicated by RSI. Although gold can continue to remain oversold for a while longer, at some point I expect it to turn lower. The logical point, just looking at the pitchfork in the chart above, would be around $1,350.00.

If we left our analysis off here, it would be interesting, but let's add one more element. While the above chart has a Schiff Pitchfork, which acts to make the pitchfork descend less steeply, we can add a traditional Andrews' Pitchfork with a price trigger line for comparison.

We now have two pitchforks on the same chart - the darker colored one is the shallower Schiff Pitchfork. The second pitchfork with the steeper descent is the traditional Andrews' Pitchfork.

Concentrating on the Andrews' Pitchfork, you can see the gold price has made several attempts to break above the descending pitchfork, seemingly having more success after breaking above the top parallel channel back in November of last year.

However, what the gold price has not yet succeeded in doing is breaking above the black descending price trigger line that intersects the far right of the chart near $1,320.00.

Using information from both pitchforks and the Fibonacci levels yields some important gold price resistance levels to keep an eye on:

1) $1,295.40, based on the 0.236 Fib Retracement level;

2) Above $1,320.00-$1,330.00 (depending on if the level is tested sooner or later), based on the price trigger line;

3) $1,350.00 based on the upper parallel line of the Schiff Pitchfork;

4) $1,392.60 - the zero Fib Retracment level.

Bottom Line: The gold price has been gathering steam both in terms of the euro and dollar. However, gold priced in dollars is nearing some significant levels which will determine whether the gold price presses higher or reverses.

Gold Price Reaches Overbought Level

The recent big move in the gold price has moved gold into an overbought level on the RSI, as can be seen in the chart above. RSI, at 72.4305 on the daily chart is at its highest level since June-July of 2014.

MACD is also at levels not seen since around July of last year as well.

The last time MACD levels were this high the price of gold was over $1,300.00 per ounce.

At this point, the gold price is starting to look a little stretched.

On the above chart you can see Hurst Bands. The shaded pink area is the overbought area, while the green shaded area is oversold. The gold price has jumped far above the extreme level of the Hurst Bands. So, gold is extremely overbought. However, the gold price could remain overbought for multiple days, even potentially multiple weeks, so an overbought condition is not a guarantee that the gold price will reverse immediately.

What this does probably mean, however, is that the gold price could potentially struggle should it make it past the $1,295.40 (0.236 Fib Retracement) level and make a run toward $1,300.00 and then $1,350.00. At that point, as seen in the first chart, the gold price would be nearing the upper parallel line of the Schiff Pitchfork. I expect this to present significant resistance to the gold price moving higher.

Now, let's say gold were to overcome all of the overhead price resistance levels we have spoken of. After those levels, the next significant resistance level would be $1,392.60.

This coincides pretty nicely with the $1,395.40 level that was discussed in The Gold and Silver Cycles post. In that post I wrote:

If the pattern works like I think it might then I could see gold making another run toward $1,395.40 before moving lower again. I would then expect the gold price to have another echo move higher.

After moving lower again I would expect gold to stay in a multi-year channel between $1,077.00 and $1,274.00. The gold price probably doesn't break out of that channel until around 2022 or later when it will start a new bull market.

The post concluded with:

Beware the bear market rally until and unless the bull is confirmed. I won't have confidence that gold is in a durable rally until it crosses above $1,493.50 (0.50 Fib Retracement Level).  

My expectation is that gold will attempt a rally up to $1,390.00 or above. It's always possible it could stretch to somewhere above $1,400.00. Currently I believe that gold is going to turn back down somewhere near those levels. Should the gold price manage to move above $1,493.50, then I would have to reevaluate my reading of the long-term gold chart.

Bottom Line: Gold is oversold, but we may see the price continue higher for a while longer. Currently my expectation is that above the $1,390.00 level it will begin to encounter significant resistance and will likely reverse, although it may stretch out to over $1,400.00. Only a weekly close above $1,493.50 would cause me to reevaluate my long-term reading of the gold chart at this point.

The Gold and Silver Cycles

Price patterns have a funny habit of repeating themselves over time. This was one of the things that Alan Andrews put to good use in his use of action-reaction. I haven't yet taken the time to draw the action-reaction lines on the big run higher in silver prices of the the late 1970's and early 1980's.

However, I did go ahead and put the action reaction lines on the most recent silver boom that peaked in 2011.

Alan Andrews saw the repeating price patterns and made them quite clear on his charts through the use of action-reaction lines. Quite simply, he would take any important pivot high or low and draw a line from the high to low, or low to high.

Then, after that he would go back in time and find the next important pivot high or low. He would then take an exact duplicate of his first line and place it at the pivot high or low. The line would therefore have the same slope as the initial line. Afterwards the process would be repeated back in time to the other important pivot points.

Next Andrews would do something interesting. He would measure the distance from his initial line to the first price pivot where the first line to the left of the initial line was drawn. Then he would draw a duplicate line an equal distance (in the future) to the right of the initial line. That step would be repeated until all of the lines drawn to the left of the initial line had mirror image lines drawn to the right of the initial line.

What Andrews found was that price tended to make significant moves, either higher or lower, when they touched or crossed the action-reaction lines.

So, in the case of silver, what does that mean. My suspicion is that when price contacts the next blue slanted line, it's likely to move in the opposite direction of whatever direction it is moving in at the time. I'm thinking price will move down and, at some point, start rising somewhere near the final blue line, and move lower after crossing it.

Somewhere after the final blue line price will bottom - likely somewhere around 2022 or later. A final cycle low will be made and then a new bull market in silver will start.

So, What About Gold?

The pattern in gold, unsurprisingly, looks similar to the pattern in silver. Unlike silver, I did take the time to draw action-reaction lines to the mid-1970's gold low up until the 2030's.

One thing striking about the gold chart is how the 1970's bull market in gold looks like the little brother to the 2000's bull run.

If the pattern works like I think it might then I could see gold making another run toward $1,395.40 before moving lower again. I would then expect the gold price to have another echo move higher.

After moving lower again I would expect gold to stay in a multi-year channel between $1,077.00 and $1,274.00. The gold price probably doesn't break out of that channel until around 2022 or later when it will start a new bull market.

Basically, we're looking at approximately 23-year cycles for gold and cycle.

1976-1999

1999-2022

2022- 2045

It is possible that this rally in the gold price will be the first head-fake rally, to be followed by another smaller one in about 5 years or so.

As someone who holds gold and silver, I would love this particular action-reaction cycle to be proven wrong.

However, up until now the gold and silver prices have behaved more or less as expected.

Bottom Line: Beware the bear market rally until and unless the bull is confirmed. I won't have confidence that gold is in a durable rally until it crosses above $1,493.50 (0.50 Fib Retracement Level). 

Gold Price Breaking Out?

Ah memories! Remember 2011 when gold busted out. It seemed like nothing could stop its rise higher. In 12 glorious August days gold moved from a low of $1,678.10 to $1,909.30. In September it made one more push higher to $1,920.80 only to fall all the way back to $1,532.70 later that same month.

I don't say this to rain on the current parade. I would be very happy to see gold keep going higher.

It has been a very good run for gold thus far. Just this month gold has moved from a low of $1,167.30 to as high as $1,282.40. The move has been quick and sharp, especially over the past few days.

Gold has moved up six days in a row (assuming today is another up day). If you glance over the price bars, or volume bars at the bottom, you'll notice that isn't something that happens all the time.

Gold Breaking Out Again?

So, here we are again. I'm not betting for or against this year being another 2011 for gold. But gold is having a bit of a breakout moment. However, as revealed in the first chart, those breakouts tend to have consequences down the road.

I suppose this type of movement is akin to Newton's third law of motion:

When one body exerts a force on a second body, the second body simultaneously exerts a force equal in magnitude and opposite in direction on the first body.

There often tends to be equal and opposite price actions, and reactions as outlined by Alan Andrews and his ideas. Andrews is probably most famous for his Andrews' Pitchfork, but I am very partial to his expression of action-reaction in prices - it's something I'll be touching on in another post with the gold and silver markets.

Bottom Line: Gold has had a nice run higher. Given the past, it could run up further. However, the higher it runs outside of the extreme Hurst Bands shown in the first and third charts, the more extreme price pullback we might expect later on.

The Fork in the Road for Gold

Today the gold price jumped higher on big volume. While that is certainly a plus, gold still has quite a bit of work to do before we can feel more confident that it is in a renewed bull market.

Gold has essentially been trading within a descending Schiff Pitchfork since January of 2014. Note, I said descending.

Since September of last year gold had been unable to pierce above the mid-line (middle red line of pitchfork). To me that showed gold had very weak upward price momentum.

Today, it looks like that weakness may be on the verge of changing. I would really like to see what the gold price does tomorrow in order to have a better idea.

However, it the price is able to hold convincingly above the mid-line of the pitchfork, it would be a positive sign for the gold price.

Gold crossed another important "line" today also by moving above the 0.50 Fib Retracement Level of $1,235.30. This level had been giving gold some problems. So, again, the fact that gold was able to move strongly above $1,235.30 speaks to some strength that gold is showing that it hadn't been showing.

The next big tests for the gold price are $1,295.40 and then right around $1,350.00. $1,350.00 is right at the upper parallel channel of the Schiff Pitchfork and may present some resistance to any gold price run higher.

An additional obstacle to the gold price running higher is the RSI. While RSI isn't overbought yet, it is nearing overbought. RSI could become overbought and stay there for a week, maybe two at the outside, but it will limit gold's march higher at some point - probably right around the point that gold makes a run at breaking out of upper parallel line of the pitchfork.

An important thing to remember about pitchforks:

Andrews believed that market price action would gravitate towards the median line 80% of the time, with wild fluctuations or changes in sentiment accounting for the remaining 20%. As a result, the overall longer-term trend will (in theory) remain intact, regardless of the smaller fluctuations. If sentiment changes and supply and demand forces shift, prices will stray, creating a new trend.

So, it's much more likely than not that gold will remain in its current trend, at least until it doesn't anymore.

It's probably safe to take the day off from curbing your gold enthusiasm, but gold does have some work to do in order to break out of the descending Schiff Pitchfork.

Bottom Line: A few day move upward in the price of gold does not a new bull market make (am I channeling Yoda?). Until gold can convincingly break higher out of the descending pitchfork on good volume, we shouldn't assume too much about just high the price will go.

Gold Jumps on Big Volume

Gold has managed to string together three good days with volume above the 50-day moving average.

Currently the Comex Continuous Gold contract (GC1!) is above $1,260.00.

It's always difficult to say with gold whether or not we should expect this run higher to continue to run higher or not.

We'll look in some charts later today - including our Schiff Pitchfork chart - where we're at and where the gold price will need to move to in order to have a better idea if gold is just moving within a range or if it really has a chance of breaking higher.

Bottom Line: Gold has made a nice move higher. However, it's still trading in a range. Until it breaks out of the range on good volume we shouldn't assume too much about what this recent move higher means.

Gold Rally Sizzle Fizzles

Ah, alliteration. Gold rally sizzle fizzles. So, it looks like the gold price moon launch scheduled for today has been temporarily delayed.

Honestly, that moon launch has been sitting on the launch pad ever since precious metals came back down to earth back in 2011.

Don't get me wrong, I strongly believe it's a wise idea to own some physical gold and silver.

Just don't listen to the hype and hustle.

Funny too, despite the much ballyhooed stock apocalypse of 2015 that all of the cool kids are talking about, gold has been unable to crack through the important $1,235.30 (0.50 Fib Retracement) level.

Technicals are funny things. In the chart above the gold price has reached the extreme overbought Hurst Bands. It got a little above the extreme upper band and the price fell. Of course, that's how these fancy technical chart analysis tools are supposed to work.

For some reason, technical indicators don't seem to care how many stories are written about how much gold the Chinese have purchased or how imminent the death of the dollar is. There's a reason they call them stories I suppose, they're tales told to ourselves to lull us back to our sweet dreams of $2,000.00, $5,000.00, $7,000.00, $10,000.00 - heck, $50,000.00 per ounce gold. Let's just see if $1,250.00 or $1,300.00 is in the cards shall we? We shouldn't get ahead of ourselves.

It's darned well impossible to get those much promised gold moonshot prices without big gold volume. If you look toward the right-hand side of the above chart, you won't see spectacular volume as of late. That means big buyers aren't committed to taking any positions currently. Without big speculative buyers (sorry speculator haters) you don't get big moves in the gold price. That's the way it works in stocks (sorry stock haters). It's the way it works in pretty much all of your big markets. Gold isn't magical. There is a market for it and big buyers push the price around.

It's hard to launch a moon rocket from the inside of a box...

The gold price has been boxed up within a channel since September of 2014. The top of the channel is around $1,243.70 and the bottom is about $1,130.40. That's not too coincidentally close to where the Hurst Bands in the above charts extreme upper and lower bands indicate as well. So, it's a bit like a box inside a box. Go ahead, launch a rocket inside two boxes.

But wait, since everyone who loves gold seems to love China, make it Chinese Boxes...

Let's launch the gold moon rocket from a box within a box within a box. Why not? The above chart shows a pivot chart of the gold price.

Today's gold price is being held down by not one, but three pivot points. Something about trinities today huh? Anyhow, you can't see the pivot points clearly because they are right on top of each other - it's the blob right above the last candle on the chart. The closer the pivot points are together, the harder it is to break through the resistance.

Three of them on top of each other will be tough to break through. Right at $1,243.50 is the daily upper price pivot (it's beige colored). Funny how that daily price pivot matches up with the horizontal resistance line drawn on the chart plus the upper extreme Hurst Band, but this technical analysis stuff is just voodoo - I wouldn't pay any attention to it.

Surely the gold moon rocket will be lit soon and burst through the Chinese boxes soon. At least that's what so many of the happy gold hype sites say. After all, all of the gold is being moved from west to east, perhaps in Chinese boxes?

Bottom Line: You can believe who you want to believe when it comes to gold. I did suggest curbing your enthusiasm for a pending gold price launch yesterday. But hey, I'm just some guy with a blog. Perhaps some nice men from the Chinese government will come knocking on your door and offer to buy your gold stash for $10,000.00 per ounce.

Bonus: Surely this time the gold rocket will go straight to the moon:

 

Alternative Media Misanalysis of the Petrodollar and Russia

Dear Lord, please make the misanalysis of the Petrodollar and Russia stop. I think the Petrodollar and Russia (oh, and China two) are amongst the nearly always misanalyzed elements loved within certain elements of the gold and silver communities.

Zero Hedge joins the misanlysis fun with its piece Russia Just Pulled Itself Out of the Petrodollar. By the way, when someone figures out when elements of the freedom loving gold community fell in love with those paragons of freedom, free enterprise and property rights China and Russia, let me know.

But, I digress. As many of you know, the drop in oil prices, along with sanctions, has done significant damage to the Russian economy. Not surprisingly, in order to prop up their economy, they have had to crack open their foreign-currency reserve fund in order to help prop up the Ruble.

Somehow the logical actions of an economically wounded Russia has been construed to mean that the dollar is dead.

As Bloomberg reports Russia "may unseal its $88 billion Reserve Fund and convert some of its foreign-currency holdings into rubles, the latest government effort to prop up an economy veering into its worst slump since 2009."

Towards the end of the piece ZH adds...

And now, we await to see which other country will follow Russia out of the Petrodollar next, and what impact that will have not only on the world's reserve currency, on US Treasury rates, and on the most financialized commodity...

Yes, this hand waving article is about the "whopping" $88 billion that Russia is converting to Rubles owing to its economic distress. In terms of the dollar, Russia's actions don't even amount to loose change found under the couch cushion, yet we're treated to yet another hyperventilating article over the death of the dollar.

Sure, at some point the dollar will be replaced by something else - whether or not it burns like some seem to think / wish / hope is probably not the most probable outcome.

Right now there is no viable alternative to the dollar - not the euro, not the SDR, not the Yuan...there isn't anything ready to step up and fill in for the dollar. The Yuan is at best a decade, and more likely multiple decades from building out all of the requirements to be a legitimate all-purpose alternative to the dollar.

But, these kinds of articles from the alternative media that provide no context and merely pump out inaccurate memes are maddening to me.

Bottom Line: $88 billion the death of the dollar does not make. I made the decision a while back to reduce my media diet. Could only choke down so many of these "the end is near" pieces before I got conginitive indigestion.

Big Gold Price Moves Come With Big Volume

Pardon me for being Captain Obvious, but gold's big price moves - both up and down - came on big volume.

The volume today isn't much to get excited about.

If you look toward the end of the volume bars at the last ones that rose above the 50-day moving average, you can see a mix of green and red bars.

To me, that looks like either indecision or consolidation. There is a tug of war going on to decide if the gold price will go higher or lower.

Right now, it isn't clear which way the price will go. It has a little ways higher it could run. Perhaps it could make a run at $1,250.00.

The challenge for gold at the moment is that it is trapped in a box. It's going to be difficult for the gold price to move much higher. The price of gold has simply neared extreme levels on  technical basis. That doesn't mean, of course, that the gold price could not push the envelope and move yet higher.

But, the further gold stretches upwards past technical barriers, the more likely it is that, at some point, it will snap back and move towards an extreme technical level. With prices, as in life, you don't get something for nothing. You may be able to stretch the limits, but there is a price to be paid later.

Bottom Line: Gold might be able to stretch its price a bit more but, if it does, it will pay on the downside.

Gold Price Stretched

In Gold: Curb Your Enthusiasm, I wrote that the gold price was reaching extremes, hitting the upper extreme of the Hurst Bands.

Well, just because something is extreme doesn't mean it can't become more extreme, and this is what has happened this morning with gold reaching as high as $1,244.60 on the Comex this morning.

One thing about extremes though, the tend to balanced out on the downside. So, for example, if the gold price moves significantly above the extreme Hurst Bands to the upside, it will likely fall below the extreme Hurst Bands on the downside.

Things have a way of balancing out in the end.

Bottom Line: Gold may have a little bit of gas left in the tank to the upside, but whatever it adds above the extreme Hurst Bands on the upside will likely be taken away on the downside.

Golden Frustrations

Sometimes viewing the various twists and machinations of the gold community surrounding the gold price is simply maddening. I have been following them for a while. I have owned some gold and silver for the better part of the last 35+ years.

I have followed the various stories / memes surrounding the gold, and especially silver price during much of that time. My Dad used to receive one of the Kiplinger Newsletters back in the 1980's - this was several years after the silver price had deflated. Kiplinger was still pounding the drum for higher silver prices. Back then it was increased demand due to solar and photography that was supposed to life prices higher.

Kiplinger also pointed out how supply exceeded demand, as did President Johnson when he signed The Coinage Act of 1965. Yes, we have been running out of silver forever, if you don't consider the above ground supply, which will likely fill in the deficit for at least 200 more years. No, seriously, the above ground supply will fill the gap for around 200 years or so. That's even assuming there are no technological advances, substitutions, or that global warming doesn't do us all in and leave earth to the cockroaches.

Yes, I'm equally frustrated about all of the popular gold memes. Whether it's the idea that all of the gold is moving east or that the U.S. Dollar is about to be toppled any moment by the Yuan. Yuan? More like yawn. The Yuan is so far from toppling the dollar that the world may run out of silver before the Yuan tops King Dollar. Don't get me wrong, I'm no fan of the dollar versus the Yuan or anything else. I'm no fan of government, period. But when these things get repeated over and over, and they don't have a chance of happening anytime soon - probably not in my lifetime, your lifetime, or your children's lifetimes - I start to get irritated that these "ideas" keep popping up over and over again.

Oh, and so what if gold moves from the east to the west. Am I missing something. If I take an ounce of gold and move it from one side of the table to the other, does it become more valuable. Sure, theoretically if gold moves to China, India, Russia (the story goes) it will be in strong hands. Have you seen the Ruble price? Have you studied the bubble economy waiting to be popped that is China. Have you thought about China's bastardized communist system wrapped up within a crony capitalist system and thought to yourself, "Oh yeah, that's definitely going to work!" Because, apparently, there are people who think it is all the rage. What capitalism needs is more central planning...hmmm.

The dollar has been going bust for a long time. Harry Browne wrote about it in "How You Can Profit from the Coming Devaluation" back in 1970. His call for a dollar devaluation and advocacy of gold as a hedge against it were brilliant. However, Browne was also expecting a depression also, which didn't really come until the 2008 crisis, although it was papered over by the Fed. So, the dollar has been collapsing since it was born, just as the American Republic has been dying since birth. Paper currencies all get old and eventually die - the difficulty is trying to guess when that will happen.

It makes a lot of sense to buy and hold some physical gold and silver. It doesn't make much sense to listen to all of the stories about an imminent economic collapse. Could it happen? Sure. Could the Biblical Armageddon be right around the corner? Yes. But they are things that literally get talked to death. It doesn't hurt to be prepared, as best you can, for either eventuality. Beyond preparation though, you can't do much. Cheering it on like some who promote gold and silver won't make it so either.

One of my other frustrations with gold is gold analysis. William O'Neil, founder of Investor's Business Daily, studied stock charts going back to the 19th century and discovered a number of patterns that help predict if the general stock market, and individual stocks, are going to go up or down. Yes, there is plenty of technical analysis of gold as well, but much of that analysis is interwoven with whatever narrative the analyst (or who pays the analyst's salary) believes. It is hard to get an unbiased look at gold, but that is what is needed.

Instead, what the public gets are assumptions, memes, myths, suppositions, crackpot theories, propaganda, lies, bad analysis, and - on occasion - some sound analysis. Much of this, in my opinion, owes to the fact that gold analysis analyzes everything but the gold price itself. William O'Neil pointed to the importance of focusing on the thing to be analyzed rather than all of the other distractions on page 2 of his brilliant "The Successful Investor".

To be highly accurate in any pursuit, you must carefully observe and analyze the object itself. If you want to know about tigers, watch tigers - not the weather, not the vegetation, not the other animals on the mountain.

Gold analysis tends to do everything but look at the gold price. It's deemed as somehow unsophisticated to simply look at the gold price and volume, along with some chart patterns, and draw conclusions from them. No, you have to look at stocks, bonds, ratios, indicators, the economy, COMEX, position of traders, gold flow, and on, and on, and on. How often does all of that brilliant analysis work anyhow? How many analysts saw the top? How many analysts cautioned to wait for prices to fall further after the 2011 high? I daresay very, very few. And that's frustrating.

Bottom Line: There's a lot of very smart people giving not so smart gold analysis, and that is one of my golden frustrations.

Gold: Curb Your Enthusiasm

Leave it to me to be a party pooper, but the gold price has reached an extreme, hitting the extreme upper Hurst Band. I know, I know, it's supposed to be going up, up and away.

The world is going to blow up. There's a gazillion in derivatives out there just waiting to go supernova. The stock market is looking all wobbly and 2015 is supposed to be the the year of the Stockpocalypse. All of those things may be true, and they may be not, but my chart doesn't care the least little bit.

Notice too the volume bars at the bottom of the chart. Those final green bars are all on below average volume which indicates the up trend isn't likely to be all that convincing.

So, it looks as if gold is once again having trouble when it gets near $1,235.30 (0.50 Fib Retracement Level).

Bottom Line: Curb your gold enthusiasm for now. The gold price will likely make its way back down to the green band (or below) before it rebounds again.

The Gold Moon Launch Has Been Delayed

The gold price is trapped in a box. I'm not saying it is going to be trapped there forever, but it's trapped right now. The above pivot chart shows the price bars for gold on a daily basis. You can't see underneath the last bar, but there are two pivot points very near to the black horizontal line drawn at the $1,235.30 level. $1,235.30 is a very important Fibonacci Retracement Level - the 0.50 level to be exact - for gold. It's a level that seems to have given gold quite a few problems.

In fact, you can't see it on the chart, but you'd have to back to October to find the last day that gold finished above that level. There's a few other interesting things about this first chart. If you look at the bottom volume bars, you'll see a red 50-day moving average of the volume. The last three up days (green bars) in the gold volume are all on below average volume. That speaks to the conviction of this rally in gold, which is to say, until we get a daily higher, on above average volume, this rally doesn't mean all that much.

The next chart seen above is a weekly gold chart. You'll quickly notice a difference between the far right of the chart and most of the rest of the chart to the left. The right-hand side is generally a picture of a declining gold price. That' not a major newsflash by any means. There are two important indicators used on the chart. The first is a volume weighted moving average (the sometimes red, sometimes green line). Since the end of 2012, it has spent the vast majority of its time colored red. So, adjusted for volume, the weighted moving average is telling us that the trend in the gold price is down.

The other indicator shows if the bulls or bears are in control of a market. This indicator says the bulls are in control. So, this contrasts what the VWMA indicator above says. However, you'll notice that since 2012 control has traded hands many times, but that the bears have mostly had control. In fact, only one time - back in February of last year - did the bulls assert strong control. The current grasp of the bulls on this market is weak at best until price, volume, VWMA, or this bull-bear indicator says otherwise.

As an aside, the gold miners have had a pretty decent run so far in 2015. If you subscribe to Investor's Business Daily, you will see that the miners have (in percentage terms) been one of the better groups. However, as an industry group they are still way down the list of IBD's 197 groups. That means it would still be a risky bet to invest in gold or silver miners at this point, especially given that the stock market seems a bit wobbly right now.

Bottom Line: The Gold Moon Launch Has Been Delayed.

Bonus: Simulated Gold Moon Rocket Launch: