The fear of these technicians is that the channel and 50 MA gets smashed. If so then you have targets down to the 200 MA, and support levels shown here:
jessel.100megsfree3.com
That's what's happened in oil:
jessel.100megsfree3.com
If Veneroso's theory is that this is caused by intervention (*), then you have another in a series of bogus declines and what I call Ministry of Propaganda (MoP) ramp jobs. The only way to truly break gold for more than a brief corrective phase is through meaningfully higher interest rates, and that doesn't now appear to be in the cards.
Message 20848460
Therefore I'm very inclined to treat a POG price break as an opportunity and false breakdown.
I still see the HUI at 210-220 as eventually signalling a false breakdown, and lean towards believing it will hold (and was buying my favorites early on Wed morning, not selling as Woods suggests , and possibly start rallying almost in tandem with the hard bottom 200 MA in POG. If we suddenly saw a munch by year end in something like a CLG or GBU, or MFN, then you have a whole new dynamic, as whether POG priced at 410 or 430 won't be as relevant.
(*) Veneroso:
But even if the dollar is overdue for a bounce, what would precipitate it?
The European and Japanese policy makers, fearful that dollar weakness will throw their weak economies back into recession, have been pushing the U.S. to engage in coordinated intervention to reverse the speculative positions of the dollar bears. The U.S. has refused. As a consequence anger is rising among these policy makers and it is spreading to encompass the likes of China and other emerging economies. We are hearing strong and angry language on this issue from the U.S.’s trading partners like we have not heard for many many years. Efforts are now being made by these countries toward a very broad coordinated intervention that may exclude the U.S. but may encompass China and many others.
Will such intervention work? The speculators who are short the dollar say no. But the historical record says otherwise. When speculation and the dollar are at extremes intervention works. It turned the dollar down on March 1st, 1985 – the day of the dollar high. It turned the yen down against the dollar on the yen high in 1995. It set in motion the big dollar rally in 1996.
Why does intervention sometimes work? Because speculative bandwagons displace currencies from their short run economically determined equilibria. Speculators are trend followers. If their positions are extreme, intervention, by changing the price trend, can cause speculators to unwind positions en masse.
Speculators in today’s markets are more short term momentum oriented than in the past. Hedge funds are judged by monthly returns. That is why we see so many charts in which prices follow a trend in a very narrow channel. But, once that trend is broken a crash ensues. Look back at those charts of silver, copper, and oil.
If intervention in the currency markets comes and it is successful, even for a while, the odds are that gold, which is itself in such a narrow channel, will break hard. This should not be hard to imagine, as it happened a mere eight months ago. |
