Robust Bounce For Precious Metals Market
Jeff Nielson
November 27, 2009
There was some quirky behavior in the gold market - as a consequence of the market-shock from the announcement by Dubai World that it was essentially defaulting on its debt. The first reaction of the gold market was a move up, although gold gave up those gains over the course of trading on Thursday.
Then there was the much more suspicious move in the gold market the day after the announcement - which (by pure coincidence) occurred when U.S. markets re-opened after the U.S. Thanksgiving. Gold plummeted over 5% in essentially the blink of any eye. It then bounced back nearly as quickly.
This "delayed reaction" reeks of the gold-sabotage operations for which the anti-gold cabal have become famous. However, the powerful rebound of not only the precious metals, but also the precious metals miners has provided a vivid illustration of the waning power of that cabal. Ambushing a market which was clearly caught over-weight on the long side is precisely the sort of attack which has been overwhelmingly successful in the past.
Those traders who got slapped-down as gold was pushed down through their stops would typically became "gun-shy" after their losses - with the Manipulators using such trepidation to either push the gold market down further, or to at least hold the market down, and prevent the exact sort of snap-back rally we are witnessing Friday.
What is clearly new (and unsettling to the cabal) is that this time there was no fear preventing buyers from jumping in and using this large "blip" as a buying opportunity. What is personally more gratifying for me was the bounce-back in the mining equities. As I mentioned in a recent commentary ("Gold Market Strong, but not TOO Strong"), the gold perma-bears had taken a lot of delight in pointing out that the miners had not been leveraging the gains in bullion, itself.
They stated the false "conclusion" that this indicated that the precious metals sector was over-extended. In reality (and as I pointed out), the fact that the miners had not leveraged the recent gains in bullion actually signified the fact that this sector was a long ways away from any significant top. If the bears had been right - that under-performance by the miners represented weakness in the sector, then we certainly would not have expected both bullion and the mining equities to rebound so powerfully.
As things stand at the moment, this yo-yo movement in the gold market has been nothing more than "the pause that refreshes". Gold (and silver) has shaken-off its over-bought technical status, and faster than the mainstream talking-heads could point to "technical weakness", that "weakness" is already past.
This event marks the first significant "test" of the precious metals bull market since gold blasted through the $1000-barrier for the 3rd (and final time). It has passed with "flying colours". Meanwhile, a cash-strapped U.S. government is now pleading for U.S. banks to repay some of their borrowed money - as the total collapse in government revenues has every level of the U.S. government falling short of even dramatically lowered estimates.
These revenue "surprises" for the various levels of the U.S. government are exactly what we would expect in an economy publishing grossly fraudulent statistics on GDP, unemployment, and inflation. And this trend can only accelerate - given the fact that the U.S. economic "recovery" was created out of simply telling larger lies about the U.S. economy.
With the U.S. federal government pressuring banks for loan-repayments, this in turn, has led to speculation that the U.S. financial sector will be facing another round of massive dilution. Thus, on a day when precious metals were targeted for attack, it is U.S. markets which are looking vulnerable.
The aberration of a dead-cat bounce for the U.S. dollar and an up-tick for the U.S. Treasuries bubble also leave those markets poised for a steep sell-off. With everything in U.S. markets looking over-bought (and overdue for significant corrections), my expectation is that the precious metals sector will reassert its strength - with a return to a more slow-and-steady climb likely for next week.
What is more exciting is what lies ahead for the miners. The strength of today's rebound in mining equities is a demonstration of "hunger" for these companies which I haven't seen since 2006. I was fortunate enough to add some shares on a pending "buy" order (which got filled before I woke up today). Hopefully other bulls were also able to use the attack by the anti-gold cabal to their advantage, as well.
Today appears to be another signpost that we have entered a new era in the precious metals market - an era where the anti-gold cabal is capable of nothing more cooling-off this sector (and healing it, technically) while bulls get the opportunity to open new, cheaper positions. This is the precise opposite of those previous dynamics, and a further illustration that buyers are now in firm control of this market.
Conversely, as the cabal tried to force their advantage today, it is they who have been caught in positions which were quickly "under water". The less-adept "speculative shorts" who (in better times) were allies of the cabal (providing added momentum to their attacks) are now a liability to this group. It is these shorts who are now regularly getting caught in "squeezes" - which have powered gold through various resistance-levels again and again through this fall rally.
As the other "shorts" in this sector get hammered again and again, we are getting very close to the point where these traders are permanently frightened away from this sector (or onto the "long" side), or simply wiped-out altogether. Life continues to get much lonelier for the cabal.
Jeff Nielson
www.bullionbullscanada.com
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