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CLETE
A Response to Mike Swanson's Latest Post about Gold.
posted Dec 29 '11 by clete
Gold stocks roll over! Where will gold (NYSEARCA: GLD) and gold stocks (NYSEARA: GDX) bottom now? - Mike Swanson (12/29/11)I think Mike is WAY TOO BEARISH!!!!
Gold has barely even come down to its major support level and he's already talking about the $1300's!
How about we wait to see if the support level between 1530 & 1550 holds or not before talking about a 30+% correction in the price of gold.

I got stopped out of gold by yesterday's drop but I'm not nearly as bearish as Mike. In fact, I intend to buy some SLV options as early as tomorrow for what will likely be a short term trade (a few weeks maybe).

The most bearish thing on the charts for gold and silver both is the fact that they are trading below their 200 day moving averages. But what you have to remember is that its not that unusual to trade below the 200ma in a bull market when you're going through a correction off of really large moves like what we saw earlier this year. Nevertheless, being below these averages means that they will act as resistance until we get a solid break back above them again and so caution is warranted, which means I'd likely trade out of any gold or silver position once it rallied back up to its 200ma.

Another thing to look at is the volume. Notice how the volume steadily rose through the upswing we had in the first quarter (in silver particularly) and how since the high in April, the volume has been getting progressively lighter as the price has dropped. That says to me that there is not a lot of longer term momentum to the down side, not enough to break these long term support levels. Now, having said that, if some regulatory agency decides to change the margin rules (again) and artificially creates a break of these levels then the momentum picture could change very rapidly, but baring some governmental of other big money manipulation, everything is saying to me that its time to at least begin considering buying into this weakness, especially on silver but on gold as well. As close as we are to these long term support levels, I can't imagine how you could hope for a lower risk entry point than where we are right now.

And none of all that I just said even touches the mega strong fundamentals of the gold and silver markets. One thing I do agree with Mike about is the Euro Zone crisis putting downward pressure on the price of the metals and other commodities. That's simply because the lower the Euro goes, the higher the Dollar goes and since gold and silver and oil and gasoline and natural gas and practically every other commodity you can think of is priced, world wide, in U.S. Dollars the higher the dollar goes, the lower the price of the commodities go. But regardless of that, there just isn't any way to resolve the Euro Zone problem that isn't VERY bullish for both gold and silver. No matter what they do its going to drive the price of gold through the roof. They basically have the choice of debasing their currency further or allowing whole economies to fail and collapse. Either way, gold and silver both go to the moon.

Clete

BEASTOFBODMIN
I want gold to go down in price. Silver too.
posted Dec 30 '11 by beastofbodmin
As someone more experienced than me put it, "Are you using gold to buy dollars, or dollars to buy gold?"
I'd choose gold over the green toilet paper any day.
Same goes for wheat, corn. soybeans and oil and natural gas.
I suppose that is a stockpiling mentality.

CLETE
You May Get Your Wish
posted Dec 30 '11 by clete
I don't really care if it goes up or down, so long as it does one or the other.
The fundamentals have me very bullish on the metals long term and the technicals have me just enough bullish for the short term to take another stab at a short term trade that'll have me taking profits when the price gets back to the 200 day moving average.
However, (and I'm glad you posted your response because it gives me an opportunity to clarify myself a little here) it could well be that gold and silver both go a lot lower from here. The fundamentals are amazingly strong so I really will be surprised if we go much lower than where we are right now but I've been surprised more often than not lately so I'll be having my stops in place just below the current levels. Any close below Thursday's low will stop me out on silver and any close below 1530 or so would stop me out of gold although on gold I'll probably wait a few more days before getting in to see if we do test the 1530 level a little more before moving up.
Clete

CLETE
One of My Favorite Things
posted Dec 30 '11 by clete
One of my favorite things is when someone else, whom I consider to be much smarter than I am, says basically the same thing I've said - AFTER I've said it. I just love that!
The following article on ZeroHedge.com just made my whole day!
GLD: A Great Set-Up!

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