Best of the Week
Most Popular
1. Ray Dalio: This Debt Cycle Will End Soon - John_Mauldin
2.Stock Market Dow Plunge Following Fake US - China Trade War Truce - Nadeem_Walayat
3.UK House Prices 2019 No Deal BrExit 30% Crash Warning! - Nadeem_Walayat
4.What the Oil Short-sellers and OPEC Don’t Know about Peak Shale - Andrew_Butter
5.Stock Market Crashed While the Yield Curve Inverted - Troy_Bombardia
6.More Late-cycle Signs for the Stock Market and What’s Next - Troy_Bombardia
7.US Economy Will Deteriorate Over Next Half Year. What this Means for Stocks - Troy_Bombardia
8.TICK TOCK, Counting Down to the Next Recession - James_Quinn
9.How Theresa May Put Britain on the Path Towards BrExit Civil War - Nadeem_Walayat
10.This Is the End of Trump’s Economic Sugar High - Patrick_Watson
Last 7 days
UK House Prices Momentum Forecast 2019 - 18th Dec 18
Will US Government Shutdown Cause The Stock Market To Crash? - 18th Dec 18
The Coming Financial Storm - 18th Dec 18
Jeff Gundlach thinks that a Stocks Bear Market has started. Is he Right? - 18th Dec 18
Gold’s Not An Investment – You Won’t Get Rich - 17th Dec 18
Stock Market At Medium-Term Lows, Which Direction is Next? - 17th Dec 18
This Stock Will Drive America’s 5G Buildout - 17th Dec 18
Stock Market Turn In The Tide - Have a Happy Bear Market! - 17th Dec 18
How A NASA Scientist Could Trigger The Next Cannabis Boom - 17th Dec 18
iShares Russell 2000 IWM Leading Stock Market Decline - 17th Dec 18
Where is the Dow Stock Market Santa Rally? - 17th Dec 18
With Weaker Climate Consensus, Expect Elevated Climate Change - 16th Dec 18
SMIGGLE Advent Calendar 2018 UK Contents - What You Get Look Inside Review - 16th Dec 18
Is there a Lump of Coal in Santa's Stock Market Bag? - 16th Dec 18
This Market Will Drive Gold in 2019… - 16th Dec 18
Gerald Celente:Central Banks Can’t Stop a 2019 Debt Disaster - 16th Dec 18
Gold Stocks Triple Breakout - 15th Dec 18
The stock market fails to rally each day. What’s next for stocks - 14th Dec 18
How Low Could the S&P 500 Go? - 14th Dec 18
An Industrial to Stock Trade: Is Boeing a BUY Here? - 14th Dec 18
Will the Arrest of Huawei Executive Derail Trade War Truce? - 14th Dec 18
Trump vs the Fed: Who Wins? - 13th Dec 18
Expect Gold & Silver to Pullback Before the Next Move Higher - 13th Dec 18
Dollar Index Trends, USDJPY Setting Up - 13th Dec 18
While The Stocks Bulls Fiddle With The 'Fundamentals,' Rome Burns - 13th Dec 18
The Historic Role of Silver - 13th Dec 18
Natural Gas Price Setup for a Big Move Lower - 13th Dec 18
How to Get 20% Off Morrisons Weekly Supermarket Shopping - 13th Dec 18
Gold Price Analysis: Closer To A Significant Monetary Event - 13th Dec 18
Where is the Stock Market Santa Claus Rally? - 12th Dec 18
Politics and Economics in Times of Crisis - 12th Dec 18
Owning Precious Metals in an IRA - 12th Dec 18
Ways to Improve the Value of Your Home - 12th Dec 18
Theresa May No Confidence Vote, Next Tory Leader Betting Market Analysis and Forecasts - 12th Dec 18
Gold & Global Financial Crisis Redux - 12th Dec 18
Wow Your Neighbours With the Best Christmas Projector Lights for Holidays 2018! - 12th Dec 18
Stock Market Topping Formation as Risks Rise Around the World - 11th Dec 18
The Amazing Story of Gold to Gold Stocks Ratios - 11th Dec 18
Stock Market Medium term Bullish, But Long Term Risk:Reward is Bearish - 11th Dec 18
Is a Deleveraging Event about to Unfold in the Stock Market? - 11th Dec 18
Making Money through Property Investment - 11th Dec 18
Brexit: What Will it Mean for Exchange Rates? - 11th Dec 18
United States Facing Climate Change Severe Water Stress - 10th Dec 18
Waiting for Gold Price to Erupt - 10th Dec 18
Stock Market Key Support Being Re-Tested - 10th Dec 18
May BrExit Deal Tory MP Votes Forecast, Betting Market Analysis - 10th Dec 18
Listen to What Gold is Telling You - 10th Dec 18
The Stock Market’s Long Term Outlook is Changing - 10th Dec 18
Palladium Shortages Expose Broken Futures Markets for Precious Metals - 9th Dec 18
Is an Inverted Yield Curve Bullish for Gold? - 9th Dec 18

Market Oracle FREE Newsletter

How You Could Make £2,850 Per Month

Gold-Backed Currency? Not Any Time Soon, But Be Prepared

Commodities / Gold and Silver 2014 Dec 06, 2014 - 03:34 PM GMT

By: Michael_Noonan

Commodities

Last year, many in 2013 were calling for the price of gold and silver to double, and more! Then came 2014 and those dashed hopes were pushed back to the second half of 2014. Earlier, in the first half of the year, we said that the second half could likely be more of the same, as in 2013, [See 2014 Could Be A Yawner]. With just a few weeks away from the end of the year, prospects for 2015 can equally be brought into question re PM price appreciation.

Is the petrodollar on the way out? More frequently, the signs say yes. Is a gold-backed currency standard waiting to replace it? Beliefs, at least in the PM community, remain high, but facts to substantiate the beliefs are hard to find. Sure, China and Russia have been and continue to be the largest buyers of physical gold, but is either the Renminbe or the Ruble ready for Prime Time? The short answer is no, and more emphatically for the Ruble. While the Renminbe is becoming more widely viewed as a potential replacement for the "dollar," China has nowhere near the capability of a world reserve currency system and all that it entails.


How, then, can there be a gold-backed currency? Last week, we discussed the likelihood of Special Drawing Rights, [SDRs] and how both China and Russia favor their use! SDRs are a creation of the existing elite banking system, and any such change to them would be a lateral move that will ensure New World Order domination as a fait accompli, and any illusion of change would be a delusion in fact.

Can there be some ray of hope on the horizon for past and current buyers of physical gold and silver? It seems the best chance [cannot say best "opportunity"] lies in chaos, as in more war skirmishes prompted by the United States. Despite ample US alienation of its largest European ally and de facto 51st state, Germany, if Germany refuses to exercise her own sovereign backbone and defend her economy's financial interests, instead of undermining them, [a proven fact] with support of the failed sanctions against Russia, there is no strong support for an alternative to the petrodollar, despite all the bluster against it. The irony cannot be lost that one of Germany's most important trading partners, especially for energy, is Russia. Merkel comes from the same school as Obama when it comes to protecting one's economy.

Along comes Turkey. In what may be yet another advanced chess move by Putin against the checkers player Obama, Putin just dropped the important South Stream project and made a deal to build a gas pipeline through Turkey to Greece. Turkey is Gazprom's second largest customer, after Germany. This then eliminates a gas line transit through Ukraine along with all the attendant problems the US has tried to impose as measures to weaken and destroy, if possible, Russia. Obama does not know Russian history.

What punctuates the importance of this move by Putin is that Turkey is a NATO member. Additionally, located within Turkey is Incirlik Air Base, one of the largest US air bases outside of the continental United States. It even has its own web site. Incirlik is critically important as the US wages its numerous wars in the Middle East, and there is the equally important SIGINT, [Signals Intelligence] station used against, who else: Russia. What has all of this to do with PMs and/or a gold-backed currency? Everything. While all eyes are focused on some kind of gold-backed currency emerging to replace the failing petrodollar and skyrocket gold and silver prices, all should be aware of the current world reserve currency and how all of these war-induced skirmishes are to maintain and protect it. Plus, the moves by China [rapidly expanding Yuan-Swap facilities around the world] and Russia making all kinds of economic growth deals around the world while it appears "burdened" by US-led [read forced] EU sanctions against it, continue to grow.

With the Saudis smashing the price of crude lower, an important source of revenue for Russia, Putin has decided to sell its oil in exchange for gold, at current suppressed prices. He will also accept "dollars" at the dollar's current inflated high price. He then takes the high-priced "dollars" and sells them to buy low-priced gold. Could Obama do any more to help Russia in the US effort to cripple it? For an in-depth explanation, read this superb article by Dmitry Kalinichencko, Grandmaster Putin's Golden Trap.

For as long as events such as these are being played out [so poorly by the US, begging the question, does anyone in the Obama administration have a clue about anything?], the fate of gold and silver remains in the hands of the manipulators, and their sole intent is to keep PMs down to not be considered as competition to the elite's fiat Ponzi scheme.

There are so many different events like this unfolding. It is impossible to make a cohesive presentation of them, but they are all pieces within the same puzzle. All relate back to the preservation of the inflationary-inducing petrodollar, and by extension, how gold and silver are currently [mis]priced as an intended consequence.

There has never been a greater divergence between the demand for physical gold and silver and the elite-controlled supply of the excessively large derivatives paper market for them. At some point, reality will prevail to reflect the demand but not before the demise of the US stranglehold on the rest of the not-so-free world. Sadly, if the US has its way, it will end badly in a potential major war. It is the way the US knows for "solving the problems it creates."

The biggest unknown that the PM community wants to know is WHEN? [Certainly not IF]. It will remain an unknown but virtually guaranteed event in the ultimate repricing of gold and silver. The ONLY thing the PMs community can do is to continue to do what the financial giants are doing, buying as much gold and silver as is available. Follow in their footsteps, following a proven path. No one can know/control the when, but each can exert control over their preparation for when the When occurs.

Most trend bottoms have a certain look about them, and weekly silver does not fit any pattern with which we are familiar. It could be the result of central bank artificial manipulation as opposed to the natural forces of supply and demand. If it turns out to be the bottom, fine, but for now, there is no confirmation either way. What we know for certain is that every bottom undergoes a process of retesting, with none yet apparent.

Silver Weekly Chart

It is possible that what appears as a weak retest of last Monday's high may be attempts of buyers to overcome sellers, and if so, the process is not complete. Again, we take the largest rally in silver as mostly short-covering, and it stopped at the end of October's broken resistance for a reason.

So far, what little activity there has been since the spike low has held near the high of that bar. In a strong up trending market, that would be a positive sign. Silver is not in a strong up trending market, and that makes the likelihood of further retesting under 16 a greater possibility. It may not happen, but odds favor retesting lower from here.

Once there has been some confirming indication of a low, it would still take time for the bottoming process to develop before considering the long side from a futures perspective. Being first in in an unconfirmed bottom can be expensive, and one need only look to the left of the chart to see where anyone who had previously thought a bottom had formed had formed a premature "opinion." Better to trade on established facts than fleeting opinions.

The gold:silver ratio remains around the 73 area, and we are still of the belief that silver will outperform gold once the next rally phase gets underway. There is no substitute for buying physical silver and gold, and the reason for doing so are even more compelling at current price levels.

Silver Daily Chart

While trying to assess last week's surprising sell-off and equally surprising recovery within several trading hours, after a few years of price decline for context, the "look" of how gold has developed since the July swing high stood out in the 4-step process as outlined on the chart.

It is but one way to view this market because it shows an inability of buyers to make a stronger show of strength. How the market develops next week and beyond may alter that view, but until it does, the risk of saying gold has put in a bottom could prove costly.

Gold Weekly Chart

The daily activity echoes the weekly assessment when noting how price is struggling as it has rallied from the November low. The bars have been overlapping since the strong rally bar in mid-November, and last Friday's close is just about $6 higher after 14 more TDs [Trading Days]. So much for the "argument" that gold was at its seasonal low starting in the Fall and a rally should ensue.

This analysis is light on making a more positive assessment because there is not much that argues for a stronger stance. More developing market activity is needed before drawing a more definitive conclusion. Otherwise, the risk of buying futures has to be a stop under the low of 1130. Anything else would be a "money stop," as in how much are you willing to risk between now and under 1130? Money stops are an admission of too large of a viable stop-out price location. Until that changes, it continues to be caveat emptor, which does not apply to buyers of the physical metals.

Gold Daily Chart

By Michael Noonan

http://edgetraderplus.com

Michael Noonan, mn@edgetraderplus.com, is a Chicago-based trader with over 30 years in the business. His sole approach to analysis is derived from developing market pattern behavior, found in the form of Price, Volume, and Time, and it is generated from the best source possible, the market itself.

© 2014 Copyright Michael Noonan - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Michael Noonan Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules