Gold: "Truth, or Dare?"
Well buggers, it's as simple as this:
The cards have been dealt, there's a big ole pile of chips
sitting in the middle of the table, and gold has
called out Ben Bernanke.
It's "truth, or dare" time once again for Helicopter Ben.
The last time the market called -- Bernanke blinked.
Now today, he came out and talked a little trash.
Why?
Because he had to.
-- Gold is on fire.
-- Commodities are surging.
-- Equity markets stand at/near all time highs.
-- The Turks are threatening to retaliate against Kurdish
rebels in Northern Iraq.
-- Oil is on fire.
-- And Global Central Bankers are seeing their dollar
reserves, and their exporters crushed beneath the weight
of a falling US Dollar.
The challenge here for Bernanke & Paulsen is to control
the descent of the dollar, to contain the surge in
commodities, and to silence gold....so they can continue
with the managed descent and competitive devaluation of
the dollar...and further rate cuts....propping up US credit
and equity markets.
Given today's news of the $100 Billion Dollar SIV Bailout
Fund, the still weakening housing market and slowing U.S.
economy, make no mistake about it... the Fed's work is
not done.
They know it, you know it, currency traders know it, and
the ECB, BOE, BOJ and IMF all know it.
Bernanke is in a box.
Trapped.
Paulsen can "talk" about a strong dollar policy all he
wants, but the IMF already leaked Paulsen's talking points
of a competitively devalued dollar months ago.
The .72 level has been floated around for months.
The key is "managed descent."
The BOJ, BOE, and ECB are now feeling pain...for Ben
and Henry's gain.
We'll have to see if Bernanke's "talk" is enough to calm
markets, cool commodities and silence gold.
But, I don't think it will be.
You can only play the same card so many times...
I think gold traders need to understand where Bernanke and
Paulsen are right now... and respect what weapons they have
at their dispostal to cool commodities, to silence gold, and
to steady the dollar.... so they can resume rate cuts.
Number one... there's still a lot of gold that can be dumped.
Prepare for it.
The Fed & the PPT have shown they are now slouch when it
comes to timing their anti-gold, or market prop-job
interventions.
Shame on them the first time they caught you off-
guard...and shame on you -- the next time they do.
Their weapon of choice on the last 2 major smack downs of
gold has been the BOJ and shaking out Yen-carry traders.
But, as I said earlier... you can only play the same card
so many times.
The subprime credit crisis has now put the BOJ, the BOE
and the ECB in the same box as Bernanke.
And Yen-carry traders know it.
Given that, I'd look for a good ole' fashioned gold dump
to follow Bernanke's attempt to talk down commodities,
gold and oil...and talk up the dollar.
So, how do you trade that?
First, it's a hell of a lot easier to trade out in front
of the market -- if you're already out in front of it.
It's a lot easier to take some chips off the table into
rallies... or, add some puts as insurance...if you didn't
get steamrolled by the Yen-carry shakeout in August.
Fundamentally... there is no compelling risk:reward
opportunity here in gold. Gold isn't cheap, nor are
gold stocks.
There is no compelling discrepancy between price and
risk in gold, or gold stocks.
Which makes trading gold here...
kind of like flying in the fog.
And when you find yourself flying in fog,what do
you have to do?
You have to rely on your instruments.
And in this case, our instruments -- are the technicals.
And here's where we're at:
We got our "little green circle" breakout to new highs per
"The Chart part II"...and equally as important, the former
longterm resistance level of HUI 370 has held as new support.
So, until Bernanke blinks (again), or until we see a
compelling discrepancy between price & risk develop...
we continue to fly by instruments...and let TA guide
us through the fog.
Continue to take a few chips off the table on each rally,
move your trailing stops up tighter and take a small
portion of your profits banked and buy a few puts as
insurance.
Stay in the game...and continue to participate in the
upside, but realize that fundamentally, risk has ramped
while reward potential has diminished.
Be prepared for Bernanke & Paulsen to do a little more
than "just talk." Primarialy, because "talk alone" ain't
going to get it done this time.
Oil is smokin' ... gold is screamin' ...
and "strong dollar policy" talk alone,
just ain't gonna git 'er done.
So be prepared.
We're at the big table now... we're in the finals,
the ante's are bigger, the blinds have doubled,
and the pot's a helluva lot bigger.
You can't win if you're not in the game, so now is
not the time to be standing on the sidelines.
You have to keep playing your game, but at the same time,
you must be patient enough to allow your enemy to keep
making mistakes...and respectfull enough to realize that
he's still got a lot of chips left, and there's still
more hands to play.
Anticipate an attempt to cool commodities here, especially
oil and gold. But, recognize that the reason for this
smackdown/silencing of gold, is to allow the Fed to be
able to continue with their rate cuts.
If you believe like me...that there's just no possible way
that "this" Fed is "one cut and done" ...then prepare for
this smackdown and position yourself to buy it, because...
When it comes to "truth, or dare" - Bernanke will blink (again).
S.O.T.B. |
