JWU FEB 11

Feb 11, 2014

 

1.   Great news!  You almost made it through an entire week, without one of the 3 bank econ amigos, (Stoneface Schnider at UBS, Jeff Currie at Goldman, and Tom Kendall at Credit Suisse), screaming in your face that gold is going to tank to $1000.

2.   But you didn’t.

3.   Tom “I hate gold, and I hate you!” Kendall raced to the CNBC stage after Yellen spoke, pumping the idea that much more ETF selling is coming, after this rally dies and rates rise.

4.   My prediction for 2014 has been that gold and your junior gold stocks have a huge rally (underway now), and then both gold and your stocks sell off, but gold makes a new low, while gold stocks do not.

5.   Kendall, Currie, and Schnider are not algo traders.  They are top economists for major bullion banks.  Of the three of them, I view Schnider as the smartest, Kendall 2nd, and Currie in 3rd place.

6.   What happens to the currently beyond-demoralized silver bullion bugs, if gold goes to a new low, and silver tanks to new lows, after failing to rally at all, despite ultra-bullish COT reports and ETF inflows while gold had outflows?

7.   Answer:  Team beyond-demoralized becomes even more demoralized, while you buy.  That’s all that happens.

8.   I don’t know if the 3 amigos are going to be correct or not.  There are times when markets can be predicted with a reasonable degree of accuracy, and there are other times when it’s a total crapshoot.  I would argue that right now it’s a crapshoot, and I’ll go into that in a moment.

9.   Chinese jewellery buying accounts for about 70{7d2759035a2769ee7a6afa7c646e6642b67314b0cd0e17ac0c6ae4f965ff87d9} of Chinese gold purchases.  The 3 amigos predicted that Chinese jewellery buying would taper, like QE, in early 2014. 

10.                They were dead wrong.

11.                Also, I think the econs are underestimating the greed of mobsters around the world.  With profits that are easily as big as the Mexican drug racket profits available to those who can create reliable gold smuggling supply lines of serious tonnage into India, every mobster and his dog obviously wants in on the action.

12.                If Indians begin to buy more “dinner size” tonnage from the mafia, rather than the 15 tons a month of appetizer stuff they are buying now, while Chinese jewellery demand continues to grow steadily, it’s going to be extremely difficult for the banksters to convince the stronger-handed remaining ETF gold holders to unload their holdings.

13.                The bank econs are basically counting on Indians to buy microscopic amounts of gold, the net purchasing power of the average Chinese citizen to stagnate, and they are counting on Western ETF holders to bail in size again.  

14.                They could try bombing the market with some more euro government gold like they did in April.  That might work, but it could backfire on them if Indians who control most of Dubai’s gold market buy as Chinese dealers buy.  Chinese dealers can buy a lot more gold now, than they could in April of 2013 when the Chinese banksters handcuffed the dealers.  The change is due to new rules enforced by the Chinese government.

15.                The 3 gold-bashing amigos also seem to view the election of Narendra Modi as a non-issue. If Modi stiffs the gold community of India after getting elected, rather than getting weighed in silver this time, he’s likely to get weighed in a garbage can, and then get incinerated by millions of enraged citizens.  I have a very hard time seeing Modi cheering on the “mafiazation” of the Indian gold market, but obviously the 3 amigos think he’ll do it.    

16.                 Please click here now: http://www.gracelandjuniors.com/images/stories/14feb/2014feb11gdxjjr1.PNG     That’s the weekly GDXJ chart.  Price is arriving at some sell-side HSR.  Note the downtrend line. 

17.                The trading volume is almost surreal, and anyone even partially sane would agree that GDXJ has a shot at blasting through that downtrend line. 

18.                There is a veritable army of individual juniors that seem destined to march higher even if GDXJ tanked right now.

19.                Please click here now: http://www.gracelandjuniors.com/images/stories/14feb/2014feb11gdxjjr2.png

20.                I suggested booking some profit at $41.60 -$41.92, and that’s where we are now.

21.                Let the first HSR fish go.  On the buy-side, gamblers could buy at $38.22, but more conservative junior investors (if there is such a thing) should wait for 34.80, which not only buy-side HSR, but also where the low of a potential h&s bottom’s right shoulder might form.

22.                On the sell side, $44.62 - $45.12 is your pgen sell zone.

23.                Gridtime!  If you feel a little confused by this rally, my suggestion is to just go with the flow.  Don’t over-exert yourself trying analyse what probably can’t be analysed.  Continue to sell lightly into this strength, but do not touch core positions.

 

Thanks!

           Cheers

           St

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