The metal is fundamentally a monetary lifeline in these times where everyone is finally facing the reality that many of us troubled ourselves over for years; that the wizards running the show are at best charlatans, and at worst political animals driven by a dull cynicism if not suppressed hatred of the public for which they supposedly work.Keynesianism is dead, only the corpse keeps on twitching.
You are starting to hear some predictable stuff now. Bernanke says Fed will withdraw liquidity as the economy recovers, even as Geithner pledges more purchases of toxic 'assets'. The United States goes deeper into its denial even as the public becomes increasingly outraged. Ah, nothing like a stock rally to help shut them up. Alcoa has pooped stocks and commodities this morning although this could well be a necessary continuation of a decline to purge traders before continued upside by a pig that would try to get as many believers on board the happy hope train as possible.
Anyway, the charts are the charts and gold's daily chart is bearish and it remains bearish unless that neck line can be surmounted. I don't believe the sentiment backdrop is in place for a rise to new highs, but I can certainly be whipsawed out of the 2X gold short trade by this parameter, no emotion, no what if's. On the plus side for gold the SMA 200 is usually a good, solid support for a healthy bull. If it fails there, along with the weekly EMA's 50 & 75 (see weekly chart from previous post), look for significantly lower levels.
The weekly big picture is bullish, however. Gold could find support at the mid 800's or it could decline all the way to the 600's. It would still be bullish. As I have written before, that would come amid renewed hope that the worst is over with policy makers trumpeting success and pretending to be prudent. Most people who have not yet protected themselves will again fail to do so down there, if given a chance.
Meanwhile, I think it is telling that some of the people most bearish on gold's current price are the ones looking to do some buying or adding. They know this is just a counter move. Smart stock traders know that the market's predictable rally is of the counter variety as well.
Yes, I know I say I don't micromanage the price of gold. But when I am double short the soundest form of money in a monetary world gone berserk, I micromanage.
Edit (9:55) Added ZSL (2X short silver) as well given that silver tracks the HUI better than gold. I am not a true believer against these metals so I am by definition a weak handed short, and will manage risk accordingly. Edit (10:08) Put in a tight stop on DZZ to keep it simple. Neck line breaks and a small amount of slush gives way? Out. Simple.
