2012.02.03 Gold is oversold is corrected by a rally. USD overbought is corrected by a fall. Gold may rally a bit before bounds down. USD is going to be gaining again.

2012.01.27 Gold is oversold, U$ is overbought. Both due for a correction. It does this week. This is a correction within a correction. The major up trend of gold and down trend of U$ does not change but the short term has reversed. Gold correction may continue next week after the breath before the weekend. Note that gold recovers as soon as the China markets (stock and gold) open. Next week will tell how much these gold up and U$ down will continue. I believe there could be a bit more gold down and U$ up. However, gold and silver have shown strong sign of accumulation.

2012.01.21 USD is not giving any hint on its natural movement; i.e. just on supply and demand only. It is driven by artificial elements from the financial reponses to the countries' policies. Gold is driven by fear factor in an adversely manor. Because gold's success, it is being sold to save the other parts of portfolio that lose money to face mutual fund redeemption or international payment. On top of all these, there is the speculative action. USD's trading range can as wide as 74-89 which is a huge cycle. Gold is much less in percentage. The move recent recovery of the gold price does not disagree with the long term upward trend. By insisting the attached relationship between gold and U$ will just another bias that we may have to give up. The chart shows the strong detachment of these two asset classes. USD has 75% possibility to hit 89 while gold to climb to U$2,000. This observation is in agreement with the inflational model and the weak value of the currencies in the USD basket.

2012.01.14 The top of precious metals are in. It is no need to deny. The better question is whether the precious metals rally is over. So far the correction is about 15% which is not proportion to the huge gain in the past. The leads to the observation of overbought. A correction is in order. If so, have we see the bottom. The continuous lower low and lower top tell us the decline continues. We also have to observe the trendline which is the momentum. Two trendlines need to be consider. A very long term and a mid term. The chart above shows the mid-term. It shows a gain of 200% in 4 years which is way much for any normal gain. Lets put the argument of whether this is reasonable aside. When this happens, they will be used as the mean to cover any short fall or margin call by hedge funds. As the indicators shown, we are not hitting the bottom yet and the bottom could be around U$1,500.

2012.01.06 Huge volatility that does not mean much.

2012.01.02 Today, we look at the relationship of gold and gold shares using the spot gold price and HUI. First chart shows the ratio goes much higher than the lowest ratio of 2 when there is financial crisis. Two spikes are shown on the chart: one during the burst of the high-tech bubble and another during the end of 2008. Despite the good performance of HUI which makes a 150% gain in 15 years, the yellow metal is doing better. The trend seems to end with a bang. Now we are running up. So there may be a drop in gold share price or parabolic shoot of the gold price.

2011.12.31 A new year rally for Canada but not much for the States makes the situation commodities bias. Strength of the USD breaks above 80 can substain for a while until year end settlement finishes. U$ will exhibit the tour of power enforced by the Euro bond auction which should cause selling of U$ to buy Euro. This does not materialize.

2011.12.27 Gold and precious metals have a correction. How serious is it compared to the most recent past or further? During the 1970s, gold corrected to the tune of more than 30%. In 2008, gold started the correction before the peak of the financial crisis. It ran from thigh high of U$976 to U$709 or down 27% in a period of 4 months. This time gold start the descend in September at U$1,901 to the recent low of U$1,571 or 17%. This is a mother bear correction for gold not papa bear correction so far. Observing the strength of U$, this correction has not done. More may come for another month for another 10% or more.

2011.12.23 There is no Santa Claus rally for precious metals. USD makes them weak. Next week should not have major surprise when the big wigs are on vacation.

2011.12.17 Gold continue to fall. Will it halt next week? After the correction of 11%, there is a chance for the shortie to take profit. But the fact is that the trade is thin for the last week. The selling is done in a very concentrated tactical maneuver. The volume is less than 7%. From the strategic perspective, shortie wins the war using the thin trade. When gold was corrected from $1,912, it fell 20% to U$1,523. If gold continues the recover next week, it could be over but Friday is the day to balance the book. There is 80% to continue to fall next week. So we have to pay attention to the near bottom. This is a glass bottom. How does it reflect on the retail investors? GLD shows accumulation with some profit taking. This is natural. Silver and platinum, as usual, the collateral damage alongside with gold’s misfortune. We should assess the current situation very carefully at the year end. Investment holds a lot of money but not as much as trade settlement which forces some gold holders to liquidate either for window dressing or pay the bill which is irrelevant to what gold should be priced. We should not use a number to gauge the end of the correction. Gold did not recover from the fall from U$1,900 level. The rebound above U$1,700 was just a correction relief and gold continues to fall. The above chart shows gold is oversold now. Will it halt is depending on what? The H&S formation says it will fall further. So the next resistance should be U$1,410. We have to accept this possibility.

2011.12.10 The detachment of gold and U$ confirm once more by the recent action. USD is pushing very hard to break 80 with the help of more debt in U$ funded either through the Euro bond or international settlement. The double top of USD has 80% to break. The only thing that to avoid it completely will be the strengthening of other currencies such as British Pound or Euro. None of these have the strength to do it for the meantime. Despite the strength of the U$, gold is not being depressed. From the chart above, it shows gold has been overbought. Profit is taken. Now it sinks back to the blue zone. It is still too close to the upper bound of the channel. There is 20% room to move down further or 50% moving sideway. This leave it 30% to jump up. The 30% is backed up by the momentum.

2011.12.03 Precious metals react differently to the situation. Gold rebounded. Silver react weakly. Platinum has the worse response. Platinum to gold ratio is now 0.88. This is significant. If platinum is regarded as industrial metal, the economic outlook is no good. But we have to refer to palladium; another industrial metal. In bottoms out at U$560 with a double bottom. To reverse the down trend, it has rally above U$680. It will remain volatile until January.

2011.11.26 Precious metals do not have a traditional strong start in the winter. It had a set back. This is a surprise for those who count on the rebound during November/December. The Euro crisis creates the linked pair trade sell to save the margin call for stock fall and weakness of Euro. Precious metals are the collateral demage. Gold fell 2% in U$ but only quarter of a percent in C$. There are two support lines for the gold. The first one is in play. Silver is much worse because it broke down U$32 again without much fight and seeking support at the lower $29. The market is very random.

2011.11.18 A meaningful correction for the gold but it holds above U$1,705 support line. Silver still struggles with the resistance at U$32; backfilled. Major movement may happen after new year.

2011.11.11 Gold pulled back and then rebounded above U$1,706. Silver also moves above U$32. These are the indicators that the precious metals rally resumes even when U$ rallies agains Euro. Gold and silver are detached from the U$ but there are paired trade to impact the paper precious metal. These impacts do not change the long term trend. Until the end of the year, gold can still be traded between U$1,600 to U$1,800. However, this is just trading sideway not correction. At such level gold producers make huge profit.

2011.11.08 Where are we as far as gold and oil is concern? Are we out of the wood? The answer is yes. Both have crossed above the 200MA. This is a strong message for the commodity investors but the under tone is inflation with higher demand of energy. Silver is close but not there yet. So everything seems rosy from technical perspective. How does this reflect the economic crises of country default in Europe? The rally of oil proofs once again the West is not dominating the demand only. Even with the change of free price fuel in China, the demand remains firm.

2011.11.04 Gold bug should be proud this week. Gold holds above the U$1,705 resistence. Silver is also a winner that holds above the U$34 line. Champaign should not be out yet because the stock market could be volatile. The volatility still can push whatever has good gain in this year. We may need to wait for platinum to gold ratio go back to 1 first. Now it is about 0.93.

2011.11.01 The reality sinks in; the Greek plan is not a plan. It does not only facing the Greek's resistance to give up entitlement but also create more inequality between who can live outside or inside the law of land. The deal is based on the perception that Greek will accept the terms and condition the IMF and ECB laid down without the consultation of the reality. The purpose is to put up a good show to save the skin of the German and Franch banks who hold most of the Greek bond before and during the crisis. China is standing outside the fire ring watching the side show carefully. It is not necessary that China is short of money to save her local government debt; it is the matter of timing. It is not ulgy enough. Comparing this to the plot in John Perkin's Confession of Economic Hitman, the West is doing the job for Chinese. When the debt crisis is here, the stock market retreat. The global stock markets lower by 2-3% and 4% at the low point. For hindsight, last week was the perfect time to sell high. When this happen, the commodities come down as the results of paired trade. Gold did not make any dramatic break up any resistance so it could retreat back to U$1,600 or lower. Silver broke the resistance of U$32; it has 90% staying above the $32 although it looks much volatile. Copper pulled back to just below U$3.50. It would be essential to hold above the U$3.50 but there is nothing to do with the economy. The other casualty include WTI. It sank below U$91. This will be temporary. The major player should be NG. The price keep on pushing up following the seasonal trend to near U$4.00. Worth to mention is platinum to gold ratio has sunken to 0.92.

Updated at the end of the day: While gold dipped below U$1,700, it resurfaces at the day end. Oil did not budge and did the same after submerged below U$90.  The stock index did not do the trick to pull down commodities completely. This is specially supported by the HUI which gone down slightly by 1.70. CGSI is up 10.04 2.5% and UGSI only dipped 0.56 0.1%. Choice of the horse is the trick to win the battle.

2011.10.29 The Greek problem is not solved but the money flood gate opens. The flood moves the Euro so U$ goes down because of the Euro based bond is sold. Relatively, gold has a rebounce. There is no confirm bottom out for gold. It can be doing a sideway. The chart above showing gold is hitting the upper channel or overbought. This leg for gold could be short. Silver is much strong. It is up 12% by the week while gold is 6%. Fluctuation range will mean 10%. So 6% does not mean a move.

2011.10.28 The market performs in a very confusing and out-of-box mode. With the higher debt, the consumer spending will be limited that is the basis for the reduced oil demand. However, oil jumps back to U$90 range with a 4M barrel stock increase. When the market reacts different from conventional wisdom the news or the reaction should be in question. In case of oil, I question the news. The more important story is told by the following chart:

Platinum to gold ration is rising from 0.91 to the level of 0.95 in just in two weeks. The rise is just as fast as the fall.

After few months of dramatic fall of silver, it has broken the U$32 resistance. When it happens, it bolts to U$35. Copper is back above U$3.5. Quietly NG jumps 8% this morning. Is the old man winter here already?

2011.10.22 Gold and silver are facing a big challenge in short term by its technical. Gold is at the bottom of the H&S. Silver is facing the U$32 resistance. If gold breaks down, it will seek resistance at U$1,470. Silver will able to hold the current position until a very stiff breakup. With the "strong" U$ softing but not much, gold and silver remain very soft and vulnerable. This winter may not be the friend of precious metal until after the Christmas.

2011.10.14 Has gold bottomed? This is a key question. Even in mid-term, gold will continue to rise. Our study should focus on whether gold hit bottoms in next few months. Within 12-18 months (mid-term), gold could better current level. We cannot easily study the demand of gold from COMEX because it is paper. We can check out the GLD. GLD is forming a head and shoulder patent which could be the sign for a short term correction. GOLDC-I also shows a resistance at U$1,670. The chart shows the closing at U$1,683 does not reverse the current down direction of the PF calculation. But why there is a correction when central reverse the policy to buy gold? We have to agree that gold is not just for gold bug. It is used as the counter weight of paired trade. When the market is not doing well or the mutual fund is being redeemed, you have to sell the most valuable assest. The volatility causes the fall of the gold. By year end, when window dressing kicks in, the volatility will be much higher. This could buck the traditional trend of high gold price near year end. This should be a delay rather than discourse. Should the major indices rally which is doubtful becuase of the economic situation, gold will move up. On the other hand, silver lost its lustre. It faces a very stiff resistance at U$31-32. All the attention is being diverted. It is a good tome to accumulate.

A special note has to add that gold to platinum remains near 0.91-92.

2011.10.07 This week's precious metal movement is complex. USD carries on the momentum makes it the prime investment choice. It is the lesser of two evil; Euro and U$. If Greek default or has a hair cut, Euro is basically down the toilet bowl which is a huge advantage to U$. U$ will not stand still to let its partner to push up U$. During the panic situation at the beginning of the week, gold falls. At the end of the week, it more less attracts much less attention which allows the beginning of base formation. The great thing is the bottoming starts before touching the resistance. The U$-C$ spead went positive to the U$. C$ is below par as the result of higher U$. But this U$ rally is virtual that does not completely reflected on gold. After a few weeks of gold/USD synchronization, the detachment is obvious. It is as sudden as the pegging. Gold's bottom remains weak. If there is enough hot money, gold could sink further. This chance is 40%. The reason that upside is 60% because GOLDC hits the lower channel. Silver is facing strong reistance up at U$32. If U$32 can be broken, it will challenge the U$60 target. One thing should be mentioned is the gold to platinum ratio. It sank to 0.91 on Friday. This shows gold is very strong.

2011.09.30 Gold and silver stay in the dog house. USD rules. Are we out of the wood yet? It may be a little while long. Seasonally stock market will rise that reduce the use of gold during margin call. There is some sign that gold fall through the channel. Still need to exercise caution. USD is too strong.

2011.09.28 Celebration has to wait. It is not a good day after a half hearted rally. Yesterday's gain are sent back and more. Market volatility is weighing to the down side. Mother bear is playing with the investors.

2011.09.27 Precious metals have a dead cat bounce; or not. A drop of very 10% without a period of repairing will betray the technical and fundamental analysis. After violation of technical level, repair period must elapse to ensure the wound is healed. When a major drop happens, the supply and demand shows a metastable. To go back to stable equilibrium will also take a lot of time. We should pay very serious attention to gold which at one point leaped about U$80 but at the end of day only return to U$1,650 or up U$22. Silver do better but only stay put at U$31 level. WTI is the strongest. At the dawn of the day, it rests at the gain of 3.7%. All commodities stock slides at the end of market despite strong gain in the morning. The close to 300 point gain of Industry only keeps half of it to have a gain about 150 at the end of the day. Lets do not celebrate yet. Tomorrow will be the same level of volatile perhaps to the down side. Gold stocks indicate the rally in gold is not convincing. HUI down 0.6%, CGSI down 1.6% and UGSI down 0.9%. People are selling on rebound.

2011.09.24 Last week we discuss about the possiblity and the probability of a correction. When you deal with probability, it does not say it must or will. There is a chance; no matter how big or small. This week we experienced panic attack on the gold and precious metals. Gold fell 9.7%, silver 23.8%. This is not number without meaning. Here we believe correction should be considered by amplitude (the $ value changed) and percentage. Imagine the moment technician looking at the fall of one quarter of silver, one should dump silver and they did. SLV-N had a 225% volume of its 200 day average. Is it caused by U$'s rally? It most probably associated with the conservative move for funds and margin call than anything. What next? History shows us three possibilities. The falling may continue and turn all precious metals believer upside down. For rapid fall, there may be a rapid ascend. The last possibility and we should pay more attention is to the trend line. Gold gone vertical and rose way above the trend in the gold vs U$ charge. In this and the GOLDC-I charge, gold is now sitting in the trading channel. There is no immediate high probability to drop out of the channel because energy level is balancing. If there is political action, gold could continue the fall. This will be the least action the politician would have time to do.

2011.09.17 Is gold due for a correction? If we believe gold is catching up the inflation it is not. If we look from the perspective of momentum it should. Correction is mechanism to adjust the energy in the system. With the excitement on gold spent, gold price needs a plateau to start another rally. The trend line will remain so that we can check when it returns to the normal course of rally. If the trend line is adjusted, we change the perspective to believe a new trend is formed. Continuously adjusting the perspective will lost the reference. People continue to equate gold to currency will lost the perspective because they gold will not be a reference currency anymore. Reference currency and circulation currency have different purposes, functions and behaviors that should not be mixed. In the short next few week, gold could gyrate around U$1,800 to U$1,900 until the USD becomes steady whether up or down.

2011.09.10 USD is strong; it closes at 77.22 at the end of the week.This recent new high happens when Obama intends to inject close to U$500B into the American enonomy to grease the wheel which now got stuck again and again.  The above chart shows the complete detachment of gold and USD. The relationship has been broken but there remains linkage but this link is weak. Silver and gold are at a holding pattern but maintainining a strong position with a very wide trading range. Platinum to gold ratio has been hoovering just under 1 now. Platinum is at a plateau. Gold has to consolidate a while until it is closer to the blue line. USD has broken out of the trading range. It may form a new trend. Between world's reserve currency (i.e. highe value) and improve economy (i.e. cheap), one has to go. The high USD value is involuntary. The low USD value is reality and what American government wants. With the introduction of Pan Asia Gold Exchange PAGE (http://panasiagoldexchange.com/) gold price will be pushed up higher by the PAGE. The gold market senses that and starts to form a plateau that could catapult. This has been confirmed by a bottom signal for gold future and SLV.

2011.09.07 At close today, the performance of gold and gold stocks are at two different poles. Gold future dipped below U$1,800 to U$1,791 and finished at U$1,817 from the start of day at U$1,880; down 3%. HUI up 2% while CGSI and UGSI are symbolically up fraction of a percent. A recover from the low of down 2-3% to a fractional gain with gold lost about 5% in last two days. Gold stocks can be sitting on a turning point. It could start the rally any time.

2011.09.07 After two days (3 days for out of America) of sold off, stock markets around the globe stabilized and make some 1+% gain. During this period of Chaos, USD jumped above 75 and flirting 76 yesterday due to Switzerland action selling off as much as needed to keep its exchange rate with other currency down. This makes the U$ more expensive. Gold is weakening and trading within the range between U$1,800 to U$1,900. For the meantime, USD is saved from breaking down below 74. Even with the help of financial systemmatic break down, the demand for U$ will remain high to either repatriate the money back to US or settle the debt by U$. Stock market can rally after the fear subside but the rally will be very selective to selected individuals that could provide income or show steady revenue during the storm.

2011.09.06 Gold was brilliant in the morning; rose above U1,900. At the end of the day, it retreated to U$1,870 level. The market went down but not imploded. When the lost of indices were more than 100+ points, gold stock bloomed. As the indices recovered some of the lost, gold stock shrink but all managed a gain. Gold near future end of the day closed at U$1,874.40 down U$25.60 or -1.4%. HUI rose 3.75 +0.6% to 621.78 down about 13 point from the high of the day 634.85. CGSI and UGSI  gain 6.96 (+1.5%) and 2.76 (+0.6%). This is an obvious change of attitude towards gold stock because the market down and gold down but not good quality gold stock. We should have a much closer watch at the gold stocks.

2011.09.04 It is common theme among many entertainysts that U$ is a fiat currency. The litmus test they use is that you cannot ask for one oz of gold with U$35 which is the official rate set by the government before the gold window is shut. What should be the exchanged rate between the U$ note and gold is one fair question one should answer. Today, let's look at the other side of the equation. Do you need to allow the free exchange of the gold and the note? This act is contradicting the purpoase of money reserve. Money reserve is to back the whole monetary system and the money in circulation. As we all know that the money in circulation is physically more that the amount issued. During economic activities, such as letter of credit, businessmen create money. House owner does not have the money to buy the house can create money to buy it through mortgage. Mortgage is the money created and circulates in the system. By removing the gold reserve, it will cascade to create the deflation effect and restricted the normal operation of business. Therefore, cashing in the gold is not a reasonable request for any gold standard monetary system.

Returning to the gold reserve situation of US Government. Although the Fed is in a denial state to allow the audit of the gold holding and the exchange of the gold, we missed a major act the US government can control the price of gold to prevent it to make the gold rocket. The way entertainlyst to calculate the price of gold is by dividing the amount of US government's official obligation through the sold treasury by the amount of American gold reserve. Some also includes the social and welfare obligation such as heath and social security plans. Using this formula, the gold price will be at the tune of U$6,000 to U$12,000 according to the article "The rise and fall of US confidence" by World 2011.08.30. The mechanism of reserve is to set a balance restrain to grow the money in circulation. Issuing government bond or treasury note is a form of money creation that beyond the control but have the effect of money supply. Without an official valuation of a currency to a reference currency such as gold, will easily devaluate the currency. The reserve does not have to physically permit the free exchange of backing reserve and the currency. It is a misunderstanding and the exchange will collapse any reserve currency. The currency can partially back up by gold and a basket of other currency. This is not a precise way to compute the value a currency but has been accepted de facto. This creates a recursive dependency because other currencies are also calculated on the value of U$. None the less, adding gold to the money basket of USD will prevent the rise of of gold price as predicted by many analyst to the U$6,000 level even with war. While many people explaining how gold valued during the war time when they do not have the first hand experience. The truth is that gold did not have a fair price during the war. It was traded at a shocking percentage of the perceived value for those who use gold as currency. It was commonly use one piece of gold to exchange whatever you wanted. The price is not set by you but the seller of the merchandize. Who can sell can hoard the gold and makes great fortune if they could wait and keep the gold until peace time.

2011.09.02 USD, oil and gold have a strange behavior for last few Fridays. On Friday, they popped up to a much higher level. Oil changes the trend today but gold and USD firm up on Friday as last few weeks. Gold and USD are the assets that people seem unwilling to risk because they don't have a firm idea what could happen around the world. Silver is coming back but slowly this time. Silver only adds 4% from last week. But there is a wildcard, gold and platinum has the ratio of 1:1. This is the second time in two years and there may be a slight chance to have a less than 1 ratio. This happens when gold is rising rather than falling. If this ratio maintains, the industrial demand of platinum and palladium continue to mount. Palladium has a quiet rally that it gains 2% this week and 48% in one year. Comparable to gold. As discussed two weeks ago, we need a correction before the rally resume the vertical climb. The vertical climb is back again. With the recovery of rally together with other precious metals, this rally will be explosive in coming weeks. The magnitude is huge.  If this is a preparation, the preparation is for the lost of something.  With all the financial crisis mounting around the world, the crisis could be the implosion of some economic system. This implosion is not sudden. It is a choice and all signals are received except some retail investors.

Going back to the action of gold. We may have the correction passed under the bridge but the high pole situation has to be digested. It could very possibily range bound between U$1,800 to U$1,900 for sometime.

2011.08.27 A reversal on the direction of gold price is a shocker and also a market maker. The rally of the gold is out of control that creates a significant of margin call to the shorties. The raise of margin at COMEX is not a major event. The new margin is U$9,450 per 100 oz of gold. In another word, you have to put up margin of 5.25% using the gold price of U$1,800. The voilatility of the gold market is about 2-4% on a daily basis. This is actually a daily margin. In comparison, the volatity was about 5% per month. This margin rate remains too low for the trader and does not reflect the real function of margin. We should see the event two ways. As soon as the margin changes, margin call triggered. The first reaction is to balance the book by selling. Some could be just forced selling. As soon as the margin has been satisfied, the shortie was in panic mode to continue the cover the short. The trade during the last few days was only 30% of the 200 average volume. But before that the volume was about 2000% of the 200 daily volume average from July 14 to July 28. Someone is trading up from the gold price U$1,600. When the gold hit U$1,900, the margin increases. It happens after 20% rise in gold price by a 22% rise in the margin. Is this unexpected?

Looking around, gold is continue to reflect the inflational mode while the USD is continue to bouncing around 74 when all the USD basket currency are raising to the bottom. This is not exactly what the Fed wants if Fed is driving the devaluation of the U$. Here we are seeing a very strong resistance to go below 74 but when it happens, 71 will be the next resistance. Analysts like to match gold price to lower USD. In some way, it seems to be right. But the rate of change will be significantly deviated in the near future.

By the behaviors of the gold and USD, we see the U$ will not peg to gold. Gold will be an asset class of its own. Silver will follow the gold price rally soon as it establishes a strong support around U$40. This time, the U$60 will be surpass and we can see U$90.

2011.08.25 Gold bug shows more colour today. No more pamper. The market is biased to the inflational. Precious metals are coming back cautiously. Nobody is dare to do big movement. Today's gold jumped from the low near U$1,700 to the end of day at high point. Volume for gold future is low for the last few days; only 30% of the 200 day average. The low volume amplified the voilatilty together with the margin increase. The market is contradicting itself by the rise of USD by 30 bps to 74.25 and the rise of precious metals. Dr. Copper is sitting on the fence of U$4.00.

2011.08.24 Gold drops one hundred dollars today back to the U$1,700 zone. This is the correction we may want to see before gold rally.

2011.08.23 Dow Jones Industry Index rallied 300+ is not abnormal. But USD refuses to go down much below 74 is a mystery while oil recovered. Gold advanced from below U$1,700 to above U$1,900 in 3 days bounded to have a correction. So does silver. Gold dropped to U$1,830 level a one point but manageed to recover to U$1,859 at 6:00 p.m. Dr. Copper does not fall. Everything is moving in all directions. It is the destination we can foretell not the side trips.

2011.08.22 Well it is official to go into the U$1,900 territory. This is very interesting because the U$1,800 supposed to be a very strong resistance level but with the help of the Europe debt crisis, it melts away like butter. Spot gold closed at U$1,905.70 and the gold future End of Day closed at U$1,898.20 with the interday high for the future at COMEX hit U$1,900.90. The after hour trading pushes beyond this high and hit U$1,910.60. Silver future and spot reach U$44. So the precious metals are crazy. Even WTI crude went up after peace of Lybia is almost there. The more interesting is USD holds on to the 74 level. All are difficult to discern. As pervious indicated, silver's movement can be fast from here to re-challenge the U$50. It took gold three trading days to move from U$1,700 high end to U$1,900. Siver can just do that. From here on, inflation is hinted by the market. If so, the ratio of Dow Industry to Transport can continue to be low.

2011.08.21 The commodities market did not take a breath during this weekend. The following shows gold, silver, platinum are all in action. Oil and gas are disappointing as usual during the night. One of the important ratio is the the platinum to gold. The traditional ratio is two to one. There were two period platinum and gold are close to one. One is during the low point of gold during the late 1970's. The other was when gold slumped in 2008. Both happens to be the very low point of the period after the correction. Now gold is on rocket fuel but it is on par with platinum. What does it mean? Correction: On December 16, 2008, the ratio did sank to a low of 0.973 but in the month of October 1996, it was just a thread higher than 1. See the other chart. Since than, gold started the rocket engine.

2011.08.19 Gold stealthily leaps over the U$1,800. This may either come back to bite it like silver leaped over U$40 or overshoot above U$2,000. U$2,000 is a much more psychological resistance than anything. The momentum is strong and the market is helping. Silver gets the help from gold and get back to U$40 territory again. It will stay and attempt to take U$60. As gold getting more expensive, silver and platinum will be the next target. If silver or platinum are stored in vault, it can jack up the price far much faster than gold because the surplus in the market for wealth storage is not high.

2011.08.12 On August 10, gold hit all time high in U$ and C$. Then it pulls back. From the chart above, we see gold went literally vertical. This is not heavy because profit taking will happen to turn some quick money. A U$100+ pull back is needed. A U$150 pull back is possible. However all in all, precious metal is healthy. On interesting observation is that, the U$-C$ spread is not just trending down but also widening.

2011.08.05 Gold made all time high and pulled back slightly. Silver pulled back really hard. Both in sympathy with the market crash. USD holds on to 74 with the help of its allies who devaluate their currency so fast that U$'s free fall is not enough. This is at least a mother bear. Next week it could reduces to a teddy bear but there is a lot of damage.

2011.07.29 Silver has recovered but failed to hold on. Gold is pushing on. After finding the footing in U$1,600 territory, it will advance to the U$1,80 (U$1,791 technically speaking). Silver will catch up after the breath. This week's gold close is true because it is the historic high of gold in U$ and C$.

2011.07.24 Off prime time trading is not necessary the mainstream trading. Yet, it is great time to observe how some people are thinking. As long as the volume is respectable, the trend is tradable. Many worldwide panic started as the night trading of North American and day trading in Asia. The metal world has been returning to the East. So we should respect the precious metal direction. Tonight gold stared off with a high jump of U$18 to U$1,618. By this time, it is settle down at U$1,613. This makes the gold to silver ratio just a hair below the 40 because silver action is vicious, especially next 10 days. Oil hands tight around U$99 no matter what the analysts say.  Copper is also very stubborn. What do these mean? The Fed will be in panic mode to shutdown all these to prop up U$. It will repeat whatever is needed to kill the commodities. Only this time, the BRIC is watching with pens and cheque books in hand; ready to buy what is falling from the sky. Will Fed care about the BRIC to mop up the commodities. This is not a question of mopping up to squeeze the commodities price. Last time, it killed Lehmann Brothers which frozen hundreds of billions of commodities in custody accounts. When Fed let open a gap, woozed out some at lower than fire sale price because people need money. These paper commodities have completely detached from the reality but it will drag down the investor without making a dent to the inflation number.

2011.07.22 After the rest, gold and silver continue the rally. There is a lot of doubt in silver left alone gold. But silver returns to above U$40 in a thrust jump. Gold is holding on the U$1,600 battle. This will be a keeper. The big fight for gold remains to be at U1,730 while silver at U$48.

2011.07.20 Excitement was cooled down when gold dipped below U$1,600. As discussed in previous notes, the breaking of U$1,600 has no technical significant but the psychological. Now the gold bears can come out to sing and dance. Gold had 3 very active sessions. So rather than short covering, it could be the shorties sell off for profit. On the other hand USD falls to 74 range. There will be money movement which could help the precious metals. But the killer could come from WTI's surge to U$98 range. The judgment call could be made tomorrow. Updated at end of day: The picture enhanced at the end of the day. Gold satisfies the psychologist's demand to go back above U$1,600 with silver over U$40.

2011.07.18 Gold closes above U$1,600. So what  happens next? The answer is nobody knows. With gold peeks above U$1,600, the psychological barrier may be broken but there is no technical achievement until U$1,737. This is like silver went up but hesitated in front of U$50. Why the levels are so far apart? It is because the base is much bigger. From U$1,560 to U$1,737 is only 11.4%. It is slightly higher than 10% which is almost the rule of thumb for any up or down movement. Even we don't know what is going on but there are some tell tale signs. First, silver follows the rally but at a much faster paste. It has broken down the gold to silver ratio to below 40 and rose above U$40. Last time, the silver action after U$40 was very fast. It took 11 trading sessions to peak at U$49 before fell back. So in the next two weeks we may see the firework again. If it falls back without breaking above U$49 barrier, then we have a double top. It will be a couple of months to break such barrier until the high season of precious metal. Is gold pushed up by weak currency? By supply and demand? Or by panic? First, COMEX's gold trade is very active for the last 3 sessions. All above 100,000. This is very high. Silver has two very active session that were more than 40,000. If the volume continues, then the rally can continue. This seems a short covering to avoid delivery. If so, after the avoidance of delivery, the price can pull back. If the pressure to deliver continues, there will be major firework.

Previously, I believe the gold shares start to outperform the metal once the gold break the psychological barrier. HUI jumps 9 point today. Now, if gold can hold above U$1,600, panic short covering will happen. When shares rise, it can push the metal high because it gives the illusion of higher demand. But these are investment demand and has nothing to do with the metal. On the record, today's commodities deserves a picture to mark the occasion.

2011.07.15 Gold has broken the very important resistance at U$1,556.40 at the end of April. After broken up, it continued to capture the higher ground this week with the weekly close of another historic high at U$1,590.10. This many is impressive because many other weaker currencies are having gold in record high too. The most impressive one is gold made the all time high in C$ at C$1,543.01. Silver has been dumped but its return was quick. At the beginning of the week the gold to silver ratio was 42.18 and today it dropped to 40.55. Watch out the revenge of silver. From now on, the comparison of gold price to U$ will become less and less meaningful. However, we cannot discount their interaction because they are usually pair traded assets. U$ is very strong. Its technical is at the junction of a H&S that supports its higher movement. We may see some panic short covering of U$ short. Some very panic short covering that worse than silver. What will happen from here? It is the same old story. Nothing goes in a straight line; take silver as an example.

2011.07.13 After gold made the historical high in U$ and it does not retreat. But I am sorry, due to the weakness of U$, it does not make the record high in C$ even there is an advance of U$10 or 0.7% gain because the exchange lost 0.5%. Silver should catch the eye as it gone up 2.8% for the future which is in the wild zone again. If the world economy is getting worse but the commodities continue to rally, disposable income is getting less and less. Update: At the end of the day, the gold made the historic high in C$1,523. Of course, it made the historic high at U$1,581.80. Silver has an explosive jump of 7% to U$38.13 which lowers the gold to silver ratio to 41.47.

2011.07.12 Gold is on the first page news headline today. It made the all time high close. This is not a easy task. The U$850 record high in 1980 was interday. At close is at U$540. Today, the close is still all time high in U$ but not in C$. It is only C$4 shine from the record of C$1522. Not a bad day when USD is at 76. Is this the story telling people that U$ is safe heaven and money moves to U$ for wealth storing or there is another reason to have gold shot high with the U$ is high too? It is not just the U$ get rally, so does the WTI and copper and NG. There is bad news; Ireland will need another bailout. Why commodities rise when the economy comes down. Where are the entertainysts? Is this the sign of inflation? If so what causes it? And the more important question is in term of what currency, the inflation is reflected?

2011.07.09 This is a reactive action that gold jumped 3.9% WoW. Silver 8.4%.What do they respond to? The debt situation of American, Greek and PIIGS are well documented. QE does not work. It is pushing a string. China will bail out the world's debt with her U$3T FX reserve. Technically, we see a bottom buy for GLD-N on May 5, 2011. Since then, gold and silver did not fall through the recent low support. The reflection of the ETF are from the speculators. It does not mirror the supply and demand of the underlying commodities completely. There is a not very firm linkage on the demand of the commodity and the ETF. Since the ETF has "purchased" the metal, there will be no additional demand. However, when the interest increases, ETF will increase its holding that will create real demand. The fog of misconception around the precious metal, commodity future and actual demand are complicated and indirect with certain delayed or advanced movement. Again the chart above showing the disconnection between precious metal and the U$. Should there is always a inverse relationship only, the chart telling the relationship is not real.

2011.07.01 Gold and silver's correction continues. Gold is much into the U$1,400 level. Silver is hard pressing the down resistance of $33. All these happen when USD is pulling back, may be just slightly from 75 to 74.30. What in contrast is Dow moves up. The old adage says that gold does not give you dividend. This does not necessary true any more with ETF. Is precious metals experience the bad and ugly of 2008. There is such a probability only if there is a bank like Bearstern and Lehmann Brothers. If Fed does not repeat the same trick, the inflation will show up everywhere when the commodities price continue to rise.

2011.06.24 Gold and silver is not tightly pegged by U$ anymore. There is weak influence due to reallocation of money and speculative market making. These are no long term trend. The short term trend can be deceiving. Like the USD, it seems getting second live but the reality is that it is in range bound provide it does not get out of the ceiling in above chart. Gold is facing a top resistance and silver is having some support at the lower bound. Unless silver is broken down, which has 20% possibility, silver may have bottom out when it was U$34 last week. Gold should not violate the U$1,500 support. All in all, patience is the game. If we worry about silver, there is nothing to worry because it remains 8% above the 200MA; a very healthy position for up trend. Gold is 6%. Because silver was parabolic to vertical, the pullback makes the silver bull sustainable.

2011.06.17 It seems the fall is bottomless but on the other hand, it did not go any where. All the focus on the USD which rose to 75 is just within the range bound. Until it breaks above the bound, it is just a normal activity. Silver is the underdog that fell more than 30%. The SLV's OBV is rising. A sign of bottom out. Many silver stocks are riding out or at the bottom already. A strong USD is not the result of strong American economy because it is the sign of a panic economic collapse around the world when American repatriates the money back home. By that the strength is not backed up. Therefore, it creates the strange phenomenon of rising precious metals and USD. We can discount the strength of U$ and watch when it falls. As long as it does not break above 76, it will fall below 74. This is a matter of time.

2011.06.10 Life is not always a bowl of cherry. The current volatility will not necessary a bad thing if we can weed out the speculators which is almost impossible. None the less, gold is forming a plateau and silver is forming a inverted H&S. All hinged on U$ again. As long as there is speculation, the paired trade of precious metals is U$. When U$ get higher, the money has to flow out of somewhere. It is important to see gold in C$ made another all time high at the beginning of the week rather than the end which will make the rally much stronger. Silver will give a lot of misery for those day traders.

2011.06.05 USD is losing the battle of competitive devaluation, or does it? As recent as July 2010, we have USD standing about 89 which was the highest since April 2009 during the recovery of the stock market. On the other hand, we know that the American Fed's agenda is to inflate away all the debt obligation. The inflate away debt may not be the main agenda because inflation is overruling the world which is living on limited supply of resources. Everything are consumed with very little recycled. The recycling part may continue to increase. It is being advertised to death that human being start to recycle only now. This is not true. Thousands of years, human being recycle significantly as practice including the first hundred years of the American. The un-recycling when the American dumping partially used merchandize to the dump site when the national average income sky rocketed. The big enterprises do not build things that last anymore. Every product will be broken down sooner than later. Take cell phone as example, why on earth it has to be replaced, obsolete and no replacement parts for just a few months. Most of the time, any advancement could be achieved with just a software upgrade now. Android phone has the proximity hardware since the first one come out of the market. But why is it no in use but until Gingerbread which possibly becomes mainstream by 2012. Going back to U$'s value and what could happen. The earnest question is not will it continue to fall but what will its role in the future? A currency fall could be attributed to GDP, political stability and diplomatic influence. U$ was strongest during the 70s and 80s period when its military reach dominated the world then followed by the economic military reach hitting the world with all those American export. During the end of 90s, it is weakening by the lacking wars. The American's GDP falls. The Wall Street money lords started the financial war by creating different type of fear, panic, greed and demand to continue the war thesis rather than just the ammunition industry. The false success created the false security of economy that stimulated huge consumer demands. The results feed the greed of Wal-Mart to export the manufacturing to the underdeveloped world in exchange to import deflation that creates a vicious circle of consumer demands. Until the American can wane their consumption to a more balanced level to the rest of the world, it is not possible to rebuild the nation's economy from the grounds up. The GDP could grow but this is the effect of the big enterprise. A country without saving has been proved to be vulnerable to the economic stability. Down the road, if the consumption pattern does not change, the U$ will continue her fiscal imbalance. The foundation of the country will be dismantled. Britain is a good historic example. In a very short term, if the US government links the U$ the gold not using gold as reserve, it will be the best way to slow down the U$ devaluation which is a key to recovery. If U$ devaluate too fast, the export is destroyed. The import flushes out major inflation. There is no time to deal with it when the people are over taxed. From the chart, USD may have a chance to hit 70 at the end of this year or early next year. The stock market may not able to respond to the devaluation with the same speed of value gain. These engineering maneuver does not really create wealth. The positive effect will be temporary. Should the government ties the U$ to gold, the U$ could win back some prestige to be the world's major settlement currency but not the only one. This will throw the gold bug a curve ball.

2011.06.03 Gold in C$ continues to make surprise new high. This is when the USD is falling. The USD is very much willing to climb but the effort seems fruitless and goes back to the long term down trend. Whenever there is any global financial crisis, U$ will rise due to the settlement. This blips will get smaller and smaller.

2011.05.27 It is a very pleasant surprise that gold in C$ is continue to make a few new high this week while the American price is not able to claim top spots. The channel for the gold price in U$ and
the USD are established.

2011.05.20 Strength and the weakness of the USD does not mean anything to the gold and silver but much more to the gold stock. Gold is trying to recover from the bottom while silver is struggling to bottom. I believe gold has succeed this week and so does silver.

2011.05.19 If you predict only one side of market action, up or down, you going to hit the nail on the head. When that happends, you could quote in the future prediction how good you are. Therefore, investment houses are required to disclose the percentage of bullish and bearish rating of companies. But there is no disclosure on how many time bull/bear forecast put down and duration of these period. If there is no self promotion later but analyze what gone wrong then it turns a phony operation to a genuine learning exercise. When copper goes up, people quote Dr. Copper to forecast the bull trend is in tact. However, if it pulls back due to normal market action, they forecast the bear is back. To perform a true analysis, the verdict should decide the change is a pull back or top. There is also another trick entertainyst eploits to help their accuracy by saying watch out "it could be this or that". Every one knows it is either up or down. All these tricks are employed by many. On the other side of coin is that technical analysis is attacked to be voodoo magic because it says the wind changes direction when the value breaks up or down at a certain level. Many time, it happens but turnaround in a few days. So what could be an example. Copper (future and spot) broke below the 200MA. This signal a bearish fall. But in 4 days, it is up and broke up the 200MA for both the future and spot. With all the programmed trading that keyed to the technical event, it is possible to trigger a massive buy or sell by a concentrated buy or sell. Therefore, we need the help of the fundamental to see through the fog of money. The market anticipates a lot of fear when Denis Gartman tells the world that Glencore is cashing out. He goes on to say this is the clearest signal that commodities is top. But looking a the demands from the BRIC, it is not easy to see why. With Dr. Copper recovers, this could be end of the correction. One more indicator, uranium spot is up U$1.25 this week. This is not a weak sign.

2011.05.13 Believe or not, gold did not have a correction according to the chart, it is just range bound. USD did a wild range bound (actually out of bound) and now is coming to the lower bound. The USD does not hold so it is back to the old days. It is very possibly to see a bottom in next week as the shorties cover their book. Silver's sold off returns to the better proximity of the up trend. This should provide strong resistance. With all these factors, anyone wants to push further down will create the buying opportunity for BRIC.

2011.05.06 Gold closes the week down less than $100 or less than 5%. Such volatility is extreme low. On April 20, gold broke up above U$1,500. Within 2 weeks, it fell and approach U$1,500 again. The trip is fast. Silver had a double top and broken down with the scary 35%. The fall halted on today, some what. Silver was heavily dumped on the COMEX during the week. So much that it most probably exceeded a few years of world production. This is the power of paper trade. Does this triggered by the increase on margin? Or the increase on margin is an orchestrated attack on precious metal? Silver stocks actually does not have severe casualty. So does oil stocks which had a 15% drop in oil price this week. The market romour says George Soros sold gold and silver but John Paulson bought. We may never know the fact but the story is amusing. If the market is not manipulated we can see the trend. If the market is manipulated, a few billion dollars could create a lot of fear that can bulldoze a lot of bull walls. Silver shows a lot of strength through the stock. USD has to beat down precious metals to stay about 74 or higher. But we see some hint through the silver stocks. On Friday, most of the silver stocks were traded more than 100% of their 200 day average volume. Central Gold Fund had 6.6 time its 200 day average volume. The pure silver metal play is 3 time. Many silver stocks were down about 10% during the first 4 days of the week and recover half of the lost on Friday. Is this short covering or not?

2011.05.04 As far as the war of competitive devaluation, U$ is winning. The question we should examine is why? Is it because of the direct interference or the consequence of the losing the value. April is a very important month only second to December because of international settlement for trade current account. U$ is demanded to pay the balance. The decline of the USD is continuous and continues to breaking support downward or lacking the evident of any support at all. If this is in conjunction of rising commodities, it could say the reallocation of asset. For last few days, both commodities and U$ fall together just like some days they all rise together. The thesis of asset allocation does not hold. The money has to move from one spot to the other. This is like a two dimensions being observing the disappear of an object on a pane while this object is travelling to another spot of the same pane. It is the hidden and unidentified vector of influence that could not and should not be explained by guessing which will contaminate the thinking process.

2011.05.03 When the window of opportunity is closed, it could open wider. It could be so wide that it falls through. This is a dangerous example; silver lost almost 20% to finish about U$41 today. The usual rule of thumb for correction at 10% level will give you a fit when it falls 20%. Can you say it is bottom today?

2011.04.29 The hero of this week is gold. Silver almost made it but failed on Friday. Silver is just too overbought. Its sideway action will stage a strong attack of U$50 for a new all time high. Gold's surge broke the upper bound of the trading channel in the gold vs USD chart. For the GOLDC-I chart, the channel has been expanded. It remains within the channel. This is forced by the broke down of USD below the critical level of 74. With USD close below 74, the trend follows the much more steeper red line than the pink. If gold breaks above the expanded channel, it will go wild like 1980 $850. You can could on U$1,600 passes fast and shoots for the U$1,700. As gold and silver broke up, there is cashing in. The cashing in and panic buy will keep the swing in big amplitude. The result will attract more day trader which could do more covering buy or sell depending they are longing or shorting. It will not be reasonable to see GLD and SLV detach from the underlying asset. This means people will pay much higher premium to these paper precious metals by the flicking of a finger which exuberate the market volatility. SLV's high volume demonstrates the profit taking. For the meantime, SLV shows very strong selling on the way to the most recent high but the new high was formed. Most recently, silver corrections are very short. So short that it could last one or two days only. With the SLV's OBV points down ahead of the price, the correction may be continued for a short while so that price can catch up with the demand.

2011.04.28 Silver has been ballistic as identified on 2011.04.18. It becomes daily high every day except last two days which was a correction. If trading out two days ago and want to a further down to buy back, the window of opportunity closed in 24 hours. In the coming days, silver could break the U$50 major psychological barrier. Once broken, many retail investors and follower can easily pushes silver to U$60. At U$60, after another 20% gain, there is the really resistance due to profit taking. This will the moment of true to test how much the correction will be. Today the RSI was dropped from 2011.04.18's 93 to 79. Some steam has been blown off. Lets see if the RSI continues to push. If the rally continues, RSI will rise. The question is how fast silver is going to rise.

2011.04.21 Since the U$1,440, the precious metals' rally have entered the point of frenzy all expecting USD will not hold the critical support of 74. While U$ wants to go down, all other currencies do not want that happens because this will make their export to America expensive. The result is to find a store of wealth medium. Gold flirt with the U$1,500 a bit and stays above at the end of the week. In turns of C$, gold does not make a new high of the week by new high of weekly close. We can trust this is a good support for the gold. Silver is just ballistic.

2011.04.18 The precious metals are really strong. Gold and silver made new high not because of U$ weakening; on contrast, it is when it bounded back 78 bps which is enormous when America's outlook is being downgraded by Standard & Poor. All these are completely incoherent. As the result gold and silver made new high in C$ too. On the contrast, the precious metal stocks are not doing as well. Many fall only the lucky one is up. Silver Wheaton may be on a tear so that it has to pull back. But when silver is advancing? This shows investors are chicken out and like to cash out. This is not the sign of a bubble or over price.

2011.04.15 Gold and silver making new highs. Gold to silver ratio drops below 35. The acceleration of gold to silver ratio down fall is increasing with the rate of change between gold and silver sustained at 3. This monstrous.

The gold to USD chart has a new more gentle tend line for the USD that takes into the account of long term movement rather than the movement in last 12 months. USD has been scaling the old trend line's bottom closely. This may be temporary as soon as all other currency start to do competitive devaluate their currency.

2011.04.15 Finally, there may be some good news for Canadian gold bug. This morning the near future gold in C$ hits an all time high of C$1,431.65. If the record maintains until end of the day, this is an important milestone because the previous record was set in December 2010.  Updated at the end of day: The gold in C$ has the all time high close at C$1,434.29. So this is not a double top. This break through is more important than the string of all time high in U$ which is deteriorating.

2011.04.08 Our American gold bug cousin should be very happy this week but not our Canadian friends. While U$ continues to fall against C$, the new high in U$ means nothing to the Canadian when gold movement is so gentle in C$ and violent in U$. When this reflect on the Canadian gold producer, the price movement is gentle until they see the break up above $1,440. So what's now? With gold and silver now seat at the very overbought territory, it will be hard not to ponder. The continue bad news coming from the Europe bailing out will keep the gold in U$ rising. It is a very hard call for gold but a easy call for silver. Silver should have a near term target of U$60 now which will take the gold to silver ratio to around 27 and gold price about U$1,600. This is a tough target for silver and a simple target for gold. The momentum is in favour of silver.

2011.04.05 Today should be the critical moment for the precious metals for gold hit another all time high in U$. It is also breaking the psychological barrier of holding pattern around the U$1,400. Technically, gold is just into the overbought area. If the momentum carries, there could be room to be sideway or up. As for silver, it is extreme overbought because it made two 31 year new high in a row. Gold is just a pop which indicates some sort of squeeze. Silver is just a grinding stone that started a rally at U$14.65 since February 2010. If the U$B silver short is true, the squeeze is on. The gold silver ratio is just above 37. It looks like it could break down below 37. As soon as all these wonderful climax, we should prepare the empire strike back that pushes down the gold and silver. With the USD hovering 76, this means everyone is rushing to the bottom for competitive devaluation. Precious metals will be a better choice of store of wealth so the demand will be high. For the gold bug, it may be the time to sell in May but if the QE 3 shows up, there is not time to go away for vacation. Today, HUI went up 5%. This is huge. CGSI and UGSI both went up 4%. This should be one of the top 95% movement date.

2011.04.01 Who supposed to be down does not down. Who supposed to go up does not go up. This is what happens to the gold price and the USD. Silver is just going sideway to build a jumping platform. Gold should reflect the inflation but it stays sideway while the QE-n is meandering in the financial market. The weakness of U$ is not reflected. Of course, no body wants the U$ goes down to foil their devaluation plan. However, the convergence shown by the chart above is obvious. No matter how slow, it is happening.

2011.03.26 The leader is not separated from the spectators. All the precious metals just standing idly around. Despite the new high of gold, it is just part of the fluctuation and base building around the U$1,400 which could be one of the strongest support in the coming years. Although every gold bug is harping the tune of U$5,000 or even high gold price. We have to recognize the mechanic of the financial and economy could not allow or support this. All these thesis is based on U$ will collapse in comparison to the Weimar Republic. The biggest fallacy is that American dollar is still literally backed by gold because the gold at Fort Knox supposed to be there. If it is not there, the US Government still the rightful owner and physical own those gold even they are loaned out. If US Government reel them in will spark a gold short covering spike which some economists agree that the gold rally could make the U$ strong again. But this is the last thing the US Government wants. The US Government wants inflation and lower U$. Therefore, in a very ridiculous reason, the US Government does not want higher gold price but want inflation. If gold reflects the true inflation rate, it is a very complicated balancing act. So far, with the massive injection of liquidity through QE1 and QE2, gold remains low is a wonderful job. We have to examine the success in several plane. U$ has been inflated away. This is true. Fed did a wonderful job to make this happens. It helps to inflate away the debt which finances the luxury of the rich in the expenses of low income. The deflation introduced is very successful through the global investment by the American based multination companies who migrate their manufacturing base to the cheapest factory around the globe. It is not China steals the job. It is American multination companies steal it from the low income and give it to the sweat shop around the world. In fact, China has allowed the bankruptcy of tens of thousands of low end manufacturing in order to end the lowest end of sweat shop. As long as all these carrying on, we shall not see the gold price moves any faster than what we have seen. Gold rose from $340 level in 1997 to the current $1440 level is only 9% increase in compound which matches the true inflation quite well and very profitable.

2011.03.18 There is still no direction and no leader this week despite gold dropped below $1,400 the so called major support. As we approaching the historic high again, it takes a lot of confidence and momentum to break another new high without taking a breath. With the combination of the Japan incidence, cash is raised for the reconstruction of Japan. Precious metals could be sold to raise cash.

2011.03.11 No direction; no leader.

2011.03.05 The tale of two precious metals; gold and silver. Gold made all time high but the rally is not as spectacular as silver. The following two charts show the demand pattern. The GC-F chart is the NYMEX gold while the SI-F is the NYMEX Silver. The OBV shows how much the accumulation or distribution is. The rise is accumulate and the fall is the distribution. These OBVs are normalized with the high and low of the price in the chart. So it is much accurate on telling the demand and supply. The gold OBV shows continuing the accumulation but there is sign of distribution or profit taking. The silver OBV is a sudden leap forward showing a demand jump. For industrial demand, this is not a normal sign because industry would not buy at peak unless high peak is coming. There is alternative explanation for the steep silver OBV, short covering. If the rumor of million silver short outstanding, there will be long way to cover the silver short or a long way to cover the short. The longer the way, the more panic buy.

2011.03.05 Does the precious metals really turnaround or it is the Libya situation creates a temporary situation. By the complexity theory, it is both. Precious metals have been performing their traditional role. The purpose of precious metal is not to earn interest; it is to store wealth. The Libya situation forces the shorties to cover the short. Silver's 3% jump on Friday shows how serious the silver short is. Gold is going to hit the upper bound of the channel. Its rise will be slower. Silver covering may force the silver continue to new 30 year high.

2011.02.25 Precious metals are climbing back some lost at the end of the week.

2011.02.18 Rally resumes even the USD is up. Detach is obvious.

2011.02.11 By examining the price, it seems correction has finished. OBV shows the small rally is an opportunity to sell. At best, it limits the rally strength if not fizzle. This is not a firm bottom. This is how double bottom confirms the bottom. Sit tight and wait. Another dip could come.

Money Matters 2011.02.09 Silver quietly recover above U$30 and the gold to silver ration slipped under 46 with gold to oil dropped to 15.70.

2011.02.06 When we assess the change of an asset, what is the trigger level for action?  In general there are two dimensions; the percentage and the $ value. This is valid when the price range falls in a certain boundary. Out of the boundary, it does not apply. Consider a penny stock with two cents value and the minimal price increment is half a penny, the minimum percentage change will be 25%. In some case, this is good enough to take a profit or cut the lost. However, this will not necessary the case for this penny stock. We should reference to the volume and fundamental material changes. In another case, when a stock is at $20,000 like the Berkshire Hathaway, you can make a profit or cut the lost if it change just 0.5% for the day trader. By the same token, does the correction of U$120 gold shows the weakness of gold? My view is a definitive yes. We talk about the gold price (not the ETF price) is actually the contract price traded at the COMEX or LME. The margin does not change along with the price. So the major impact factor is the $ value change not the %.

2011.02.04 The slope for the gold price in the chart above has been lowered to reflect the slowing down of the the gold rally. After a magnificent run, gold may need more than a correction to build a base. Silver has been gyrated within a wide range before broke through the U$30 mark and pull back. The gold action does not have much to do with the U$. The driving force is speculation and emotion.

2011.01.31 Financial market has many dimensions; precious metals, base metals, banking, bonds, stocks, real-estate, economic productivities, etc. All of them should be in phase if they have the same cycle length. Because they don't, once the market is in motion, the begin and end of the cycle will not necessary to be aligned. This make some of the dimensions become the lead indicator but some lag indicator while the market is somewhere in the middle. Last week's precious metal remark was that the gold bottom was not firm while it enjoyed a rally of U$20+ on Friday. Such bottom's confident is discounted by the Friday effect which means everyone will try to balance the book with minimal long or short carried through the un-traded two days of weekend. This morning, gold continues the fall but not as severe despite the unrest of Egypt. Egypt's unrest has been regarded as the fuel to the gold recovery using the traditional wisdom. This is a single dimension thinking. The modern world has grows out of single dimension thinking. So there is break down of the analysis. It is not to say the analysis is invalid. It is the premise. Analysis is based on the premise. When the premise is not set right, it is like building a house on an unsounded foundation. Who changes the rule of the game? It is the market. There are more players and wider geographic. So what the market telling us. The unrest at Egypt could have the butterfly effect to impact the rest of the world. One immediate effect is the oil from the Middle East which travels through the Egyptian controlled Suez Canal. The supply may slow. As the result, WTI traded as high as U$90. However, this ignore the fact that those oil are to Europe. Brent has jumped to U$96 range last week because Brent is local oil. The oil market has discounted the effect of Suez and jacked up the Brent price. To North America, all the 'surplus' oil will have a chance to put in good use. There should be no panic. If the WTI rises, we can gauge how much 'surplus' oil is there.

Despite of all these confusion, we can take a look of the spot metal markets; precious and base. The following table, captures the price at 8:00 a.m., shows that precious metal continues to fall which could be a cashing out due for longie as discussed a few days ago. The interesting is the long term economic view hinted by the base metal is a much healthy look. The conclusion could be that in the short term the tug of war between precious metals longie and shortie goes on but the base metal telling us the demands remains healthy. At the end of the day, the picture could be interesting. Updated at the end of the Day: How does the metal market does today? The lower chart is the price at the end of the day. Position changed hand slightly. Base metals remain to be the gainer and the precious metal lower. USD Index does not change. The trend holds. It will take a few days to settle.

2011.01.28 Precious metals have a correction. This correction does not look like natural. Rather, it is a tuck of war between the shortie and the longie. Both sides are strong so the volatility swing wild. It seems the riot at Egypt helps the longie. The short term situation remains cloudy.

2011.01.22 There are two events we have to watch. First gold price falling. Second the premium of gold price in C$ turns discount. After the round top, the gold price has showing some unexplainable weakness for those longed gold. As the thin margin of gold did not change since it went above U$1,000, we can see some margin call soon. If the margin call is not satisfied, we shall see more drop. This could all engineered by the shortie who used the thin trade at the year end to lure gold bull to the bull trap. The another drop of more than U$20 during the week could support that. If gold cannot hold to the U$1,350 level anymore, we shall see more margin call selling when the stock selling could not help. So the weakness of gold is nothing to do with the fundamental but social engineering. However, it offers a good chance to buy. The second events we should watch is now gold price in C$ could be in discounted. Although the international price remains in U$ but those who makes profit in C$ market may not covert back to the U$ which will buy the U$ and sell the C$. The consequence will be higher demand in C$ and lower demand in U$. This will not happen in first quarter. This will occur when C$ persistently  fluctuate the on par. Trader will take advantage of the on and below par to make a few more buck. We should expect more people going to do margin call duty more frequent than expected that translates to high volatility of the precious metal market.

2011.01.14 We Double top forecast came true. So does the gold price hits the bottom of the trading channel. If the gold price could bounce off the bottom of the channel, the correction is done. The GOLDC-I shows we may be done with the correction. Silver remains weak because of the strong action during end of last year. Yet it's correction is less than 10%.

2011.01.07 We should asked whether the precious metal rally is window dressing or tax management? The fundamental has not change. The world currencies problem has not change. U$'s temporary strength is just another cycle of downward spiral. But when you have investor who is very speculative, the volatility will be huge. So huge that USD can move between 72 to 89. We should accept this is the norm for the time being. Even with this wide range of fluctuation, gold and silver remain moving in a upward trading range. However, gold's moving forward could facing more resistance due to the stock market's rally. If U$ is perceived as the devaluation currency, U$ will be moving up when investor picks up U$ stock. The other side of the paired trade will be selling precious metal. Gold's double top could signal a temporary high if we could not see upward motion. The support will be as low as U$1,280 rather than $1,300.

2011.01.05 On the second day of trading, the commodities are "sold off". In general, the fall by 3-5%. The volatilities of the commodities remains to be gauged by amateur with irrelevant method. A asset is sold off when it is being sold at a much lower rate than the normal fluctuation. If an asset moves within a 5% commodity channel, a drop of 3% is not sold off. During the period from 2009 to 2010, the maximum gain in one day is 5.06% and loss is -4.16%. Gold dropped 2.5% yesterday. It cannot be regarded as the small but definitely not panicky. Gold's recent rise is too fast and too high so it deserves a correction. It should not confused with the sudden rise of U$. C$ is on par with U$. But the USD basket of currency is pretty much lower due to their economy is either deteriorating or being drag down by other such as Germany. The following chart shows USD is trading within a horizontal channel and the short term 50MA is on a up trend. We should not be surprise to see more strength of U$. U$ should be weaken to strong currency such as C$ and A$ but USD could very much remain within a trading channel between 75 to 88.