Tuesday, October 6, 2009

New high in gold

We had a new high in gold this morning. The precious metal markets were looking jumpy on Sunday night, and we were seeing almost no determined selling. Almost all of the big market orders were buy orders, and you can see this on the charts by steep or parabolic moves up in price followed by largely lateral movement. This indicates large amounts of buying motivated by time, followed by consolidations with a firm bid to take any sellers.

This new high is NOT confirmed by either the dollar, silver, or the gold stock index. As I outlined at the beginning of last month http://outsidetheboxecon.blogspot.com/2009/09/silvergold-cleared-for-take-off.html this is the first of three events necessary to assure a healthy breakout. We are well on our way to the second condition being met. The dollar is close to breaking below support at 76, and getting to 75 would probably follow shortly. The third condition (a new high in the HUI and in silver) is still some ways distant, but that distance could be made up very quickly as these markets are capable of moving 5 or 6% in a day.

I had a funny dream over the weekend. I was with a friend and we were trading gold at an old board, the way things used to be traded back in the day. It was a large board with electronic prices of gold, silver, platinum, various gold and silver stocks, etc., essentially a trading pit dedicated to precious metals. In the dream, I had a large physical position that I had established with my friend, and we were watching the price of gold as it broke out through its old highs. It then went from $1000 to $10,000 in about 6 minutes, literally burning through the numbers! In the dream I remember frantically searching for a firm bid for physical, because I wanted to sell at $9,500. All of the orders getting filled were futures positions, and I was struggling to find a firm bid for the physical. It was a fun dream though.

Cheers to all,


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