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Gold/Mining/Energy : Gold and Silver Juniors, Mid-tiers and Producers

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From: Proud Deplorable	2/9/2006 2:53:45 AM
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"A Note From Dan" "The following are a few thoughts about today’s market action: No doubt a great many of our gang are shell-shocked after today’s orchestrated raid, all which was orchestrated by the plethora of top pickers that seem intent on undoing any rallies taking place in gold. As said repeatedly by both Jim and I, these newsletter writers and advisory services that have a morbid fascination with constantly calling for tops in the metals are no friends to gold, no matter how they represent themselves. For the umpteenth time – how often do you see leading financial TV shows with their talking heads unceasingly predicting tops in the stock market every time it stages a decent rally? Is not the exact opposite the norm? They are all bulled up on the US economy and continue to present their reasons for a continuation of the rally. Rarely if ever is a stock market bear given much time and if he is he is overwhelmed and outnumbered by the bulls. For some perverse reason, this simply NEVER happens when it comes to gold. Instead we get one “expert advisor” after another telling the gold community to head for the hills before the “overbought” market collapses on them. The COT are among the sharpest professional traders in the market today. If the gold community is going to telegraph in advance what it intends to do, it only makes sense for these pros to help make their predictions come true. As a long-time trader I can tell you one of the tricks floor traders use in working a market is to pour over commodity newsletter advisory services for recommendations towards buys and sells in various markets. Few people outside of the professionals make their own trading decisions when it comes to the futures markets. These newsletter writers give a pretty good read on the current psychology of particular futures markets at any given point in time. Ask yourself a simple question: If I were a professional trader and knew that a specific newsletter was recommending sells among all their subscribers and that many other newsletters were doing the same, why would I not front run them and beat the price down as a short to jump in front of what would be an almost sure bet? If you know in advance that the buying support under a market is going to dissipate, you can afford to be quite aggressive with your short sales. In this scenario you can be assured the sell stops are going to do the work for you once the momentum shifts to the sell side and the black boxes then turn negative. Following this you sit back and laugh all the way to the bank. You might even send money to the newsletter writers to keep them self-delusional enough to go right on doing the same thing. Why mess with the gravy train that works? This is exactly the process we witnessed today and throughout the entirety of this gold move since 2001. We will continue to see it repeatedly as long as the gold community continues to pay money to those who are no friends of gold but rather opportunistic profiteers who prey on you like the parasites that they are. There is a fungus among us! Markets correct constantly and undergo periodic setbacks against the main trend. Predicting exactly when these will occur is anyone’s guess especially if the fundamentals are arrayed on the side of the primary trend. The geopolitical factors that have contributed to the current leg up in the gold price have not abated. If anything, they have gotten worse. Keep in mind that one of the factors that touched off the Franco-Prussian war was word that Bismarck had been messing around with a telegram. The power of the press of inflame passions should not be underestimated. The latest event over the Danish newspaper cartoon has unfortunately played right into the hands of the radical element in the mid-East and has been expertly used to further heighten tensions between that section of the world and the West. This coming on the heels of a confrontation with Iran over the nuclear issue is quickly becoming a very dangerous and volatile situation; one in which emotions and non-cool heads could very well decide the next move. All it takes is one ill-conceived action on the part of a political leader and you have a spark that could ignite a conflagration. In this sort of environment do you really want to give credence to those continuing to work at cross purposes to your financial well being by hoping that their predictions of tops in the gold market will come to pass? We may well wake up one morning to the most horrific of news and see gold come in some $30-$40 higher and that will be the end of the naked shorts. The oil situation is still balancing on a pin’s head with only one event between it and $70/bbl or higher once again. The new budget that was presented to Congress has already engendered talk of “draconian cuts”, which is another clue that Washington does not have the stomach to make the necessary spending cuts to ever bring the runaway federal spending under control. We have one of the most influential brokerage houses in Europe coming out with a report that is perhaps the most bullish we have seen in some time. It suggests their clients begin hoarding gold as they look for a $900 spike that might reach as high as $2000. All this and some players want to see how much downside they can press out of gold?! That is just madness in my estimation. It is one thing to be flat or out of the market if you desire to be long but are a bit unsure. It is another thing to get outright short. Watch the trend lines as we wait for the physical market buyers to make their presence known. They have not gone anywhere. There is no doubt in my mind that much of today’s price collapse was the result of forced liquidation due to margin selling once the sell stops took over. There was simply too much delay in the sell offs from where I was sitting. The market would stabilize with buyers coming in or covering only to then melt down and hit another wave of stops. We may see more forced selling tomorrow morning, although with a rout of this magnitude many brokers will force their clients out on an intraday basis who are on a call. The margin on gold had increased at both the CBOT and COMEX. Coupled with this downdraft, it did not help the situation for the longs, especially those who bet the ranch on a moonshot. I am cautiously optimistic that we will get some stability in gold soon. This region near $550 on down to $545 looks like a pretty strong basis for the April contract. Spot gold looks to have some buying coming in between $546 and $542. We will have to wait and see if the funds are finishing getting flushed or whether they have some more selling to do. The physical market buyers will not waste any time in buying if they get the slightest inclination that the funds are finished selling and are looking to re-enter on the buy side. They do not want to have to compete with those guys. Dan"

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