Was last week the beginning of the end of gold’s bear market? Gold finished up 1.3% for the week and last Thursday gold gave us the largest one-day gain ($34) in more than two years. It continued to rise on Friday and Monday. Backwoods Jack dropped me an Email and said, “It’s just a dead cat bounce.” To me, it looks like this is anything but a dead cat bounce.
There are real fundamental reasons for gold’s move. And silver’s too. What is surprising to me is not that gold has started to move up; it’s that it took so long to do it.
You know my feelings on this. The only thing that matters, the only thing that determines how gold and silver do is buying and selling of futures contracts on the Comex. THE PAPER MARKET CONTROLS THE PRICE, PERIOD! It’s not about the dollar or interest rates or the stock market. They are just excuses that the “commercials” use to justify their massive sell orders that get the technical and momentum funds to join in and sell their positions too. It is all done for profit, at the expense of what Ted Butler calls “the brain-dead managed money technical funds.”
It appears that the reason for gold’s strong performance is because
it penetrated its all-important 50-day moving average ($1,204),
something I’ve written about several times in the last week. It’s been six months since this last occurred. That ignites technical fund buying and you saw the result. Silver also breached its 50-day MA which stands at $14.60.
A fact worth remembering: Butler estimates that, over the past seven and a half years,
JPMorgan has acquired at least 775 million ounces of silver and another 20 million ounces of physical gold.
They own far more silver than Warren Buffett or the Hunt Brothers ever accumulated in years gone by.
JPMorgan books a profit of tens of billions of dollars a year. They can afford to invest 10% - 15% of it per year in physical gold and silver which translates into give or take, 100 million ounces of silver and two and a half million ounces of gold per year. Do you think they would do this unless they knew it was the right thing to do? And the beauty of their strategy is that by shorting the paper gold and silver market they have been able to accumulate all these ounces at the lowest possible prices. Go short paper and long physical is a strategy they have mastered. They added billions of dollars of gold and silver to their portfolio for the last eight years, WITHOUT forcing the prices to rise. I thought only the Chinese were this smart!
This goes beyond the adage, “Buy when there is blood in the streets.” They are the ones who spilled the blood on the streets in the first place.
After being short for the last eight years, JPMorgan is now LONG 25,900 contracts and I can’t recall that ever happening before, certainly not since I have been following the market. The set up for an explosion in gold hasn’t looked this good in years. The last time there were as few long contracts (82,000+) gold proceeded to move up $300.
Yup, Backwoods, “Dead cat bounce” my ass. Of course, I could be wrong, and he could be right, but all I have to do is look at the numbers and the story is clear.
Check out the following article by SRSrocco. They offer up lots of reasons why gold’s move up is not a dead cat bounce. There are reasons for it, lots of them.