By: Michael_Noonan
The month of May is now on the books. The question is, can anything new be learned from them? Maybe not, but you would have to see them to understand why not. One qualifier to be added is, from our perspective, charts include all the known factors from those who have made a market decision. The basis for the decision-making may be fundamental, [including supply and demand], technical, [including technical supply and demand factors], a combination of the two, gut-trading decisions that may not reflect either and just be ego-driven, and finally, the uniformed, who believe otherwise but trade just the same.
We make no effort to dazzle anyone with fundamentals. There are those who are known to be expert in the field of precious metals who provide detailed analysis and reason for asserting why gold and silver should be trading at considerably higher levels. Their facts and figures are most impressive, but the current prices of gold and silver present a quarrel with their fundamental information. Our sentiments are with them, but our hearts remain with the charts.
Why? The market is the final arbiter of all available information, again, based upon the final decisions of the participants. There are many who argue that the price of both gold and silver are being manipulated, [and we are among them, actually standing in the front line of the collective accusers]. A few would argue that paper gold and silver prices are a sham and emanate from trading exchanges that are equally a sham. That may be truer than not, but those who take that position provide no meaningful alternative, as a guide.
We are keenly aware of the unprecedented demand for physical gold and silver, as it is certainly one side of the all-controlling supply/demand equation. Despite the world-wide unprecedented demand for the physical, it is the supply part of the equation that is being ignored, even if the supply element is being administered in fraud, as many believe to be true. Based on where the prices for gold and silver are trading, one has to accept and deal with what is, and one does not have to know what the definition of is is, either.
Let us assume that the price for gold and silver is being rigged and does not reflect a "true" relationship between the forces of supply and demand. Then one has to recognize and at least acknowledge that whatever is driving supply to keep PM prices low, it is succeeding. This is a more important fact of which to be aware until demonstrated otherwise. As a reader of charts, we must accept what they show, for in the end, that is all that is showing.
It may well be that central banks have no gold for delivery, and defaults are being called something else to provide cover for the lack of available PMs, and all deliveries are to be settled by fiat only. There is one thing for certain, and the charts reflect this, regardless of what anyone believes to be true, or not, the truth is neither gold nor silver can mount any sustainable rally. What does that say for all the "dazzling" fundamentals and demand?
Is there a difference between gold and silver prices, as reflected on the exchanges, and the price for gold and the price for silver? Yes. While we fall into the camp who recommend buying either physical gold or physical silver, or both, [and we say at any price], we also have to pay heed to the controlling forces of supply, for that is the dominating side right now, from a factual perspective.
To put it another way, expressed from market wisdom, "Don't fight the tape."
We hold that the higher time frame charts are more controlling than lower time frames. The month of May had a smaller range on increased volume. What this says is that the buyers were meeting the effort of the sellers, preventing the range from extending lower. The close, about mid-range the month, confirms this observation. That would be the qualified good news.
The bad news is all of the activity occurred under the close for April. Buyers did not have enough power to rally price higher. It takes time to stop a trend. So far, there is not enough evidence that the down trend has stopped.
The breaking of the support channel and longer term support line show just how much overhead resistance there is before gold can turn around. The weak response from last week's feeble rally could be problematic. Volume, [effort], increased significantly. For all that volume, last week's close was not much higher. Where was the payoff for the effort? There was none. Weak rallies almost always lead to lower prices as price moves lower to uncover demand.
We explained the significance of a wide range bar[s] as it relates to price, moving forward. [See Markets Provide Us The Best Information, http://bit.ly/18pk8yE, 1st paragraph after 1st chart]. While price has not traded lower after the semi-selling climax on 15 April, we would have expected a stronger rally than has developed.
The trading range can hold for many more days, even weeks, but the trading range from which price just broke was much stronger than the one now developing. The odds of it holding are small, for now. While charts are leaning lower, we add the following:
The reason[s] for buying physical gold are opposed to current charts, and actually opposed to all central banks and government interests, but we adamantly maintain the interests of the central bankers and corporate government are opposed to the individuals, those being "governed." One need only look to events in Cyprus, Greece, Ireland, a crippled Spain and Italy to understand why having physical gold offers the best financial remedy against those in power who have been abusing and/or misusing that power.
The power wielded by those who have it are prevailing, and those relying upon the demand side "sentiments" are underestimating the ability of those so willing to remain in power, at all costs, and those costs are being borne by those not in power...the reason to buy gold. Rather than repeat this after the silver charts, the same holds for those buying silver.
Unlike gold, silver traded under the April low. However, what deserves attention is the how price traded lower. The range was smaller and volume decreased. This tells us that the supply forces were [relatively] weak, or a lack of supply. Demand was not there to offset weaker supply, so this is not to make a case for no, or limited downside from here.
We would expect more sideways, and generally lower trading until there is evidence that the forces of demand can make their presence known. Supply has proven itself. Demand has not. It does not get any simpler, regardless of sentiments. Stick with the known facts.
The chart comments capture the weekly activity. When you look at the wide range bar down, seven weeks ago, and then gauge the subsequent inability of silver to rally against it, you better see how what remains lacking is strong evidence of a turnaround.
A clustering of closes indicates the forces of supply and demand are in balance. Since the April 12 and 15 sell-off lows, price has clustered, as seen in the rectangular box. We await the breakout imbalance that naturally follows.
The headlines touting much higher gold and silver prices may attract attention, but the attention is pandering to the sentiments of those who want to hear news supportive of their own belief system[s]. How has that been working out, so far?
Do not buy gold or silver because you think the price will go higher. Buy because all fiats are being destroyed, and it takes more and more fiat, if one chooses to hold that paper form, to buy the same ounce of silver or gold. [That has not been the case for the past 18 months.] Cypriots would tell you they would rather have paid much higher prices for gold and silver than have kept their fiat powder dry waiting for lower prices. Their remaining fiat holdings will not be able to buy anywhere near what they can now afford. That is what one has to consider as reality, from now on.
If anyone thinks it will not happen in the United States, or other countries still lying in wait, it is like playing a form of Russian roulette. The odds are in your favor, until they are not. Then you will know what it is like to be a Cypriot bank holder. There are no Black Swans, just people unwilling to see the warnings of darkening clouds.
We have acknowledged the eventual likelihood of much higher prices and support the sentiment, which is why our message has been constant: Buy either, or both, physical gold and silver, at any price, for when the day of reckoning arrives, they may not be 1. available, [Never underestimate what the government can/will do], or 2. only at prices that are considerably higher. Hence, better a year early than a day late.
At the same time, we have recognized the reality of the charts and to not buy futures while the trends are down. It is possible that the paper market may be destroyed before any buying "opportunity" presents itself. Paper trading becomes less and less appealing or even relevant. Always remember, if you do not hold it, [personally], you do not own it.
Has anything new been learned from the charts? Not much, for the trend remains down. A lot can be learned from the fact that they are down, relative to the reality of demand, and how that reality does not matter, at least for now. That is a powerful message. We see it as added reason for the constant buying of the physical.
Where? At any price.
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