Mid-afternoon Gold Buying - 3 times now - what's going on?

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Erik T.'s picture
Erik T.
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Mid-afternoon Gold Buying - 3 times now - what's going on?

I'm trying to figure out what's been going on in the gold market for the last few days, and thought I'd post my thoughts here in case anyone else can offer further insight. Check this chart of COMEX gold futures out:

12-26_gold_chart.png

Notice how on three separate occasions (including about an hour ago), there have been big mid-afternoon price spikes. My first thought was that a big institutional buyer is legging into the market, making large purchases in the afternoon sessions to establish a large position. If that's the case, they're not doing it in the futures markets, however. Look at the volume figures! Oddly enough, there was strong futures volume reaction to each big move up, but the buying is happening somewhere else. Today's very large up-move happened against very small futures market volume.

Can anyone figure out what's going on here? I was holding off on increasing my gold position, thinking we were sitting at the top of a price channel that was established over the last couple of months. But this is starting to look like a genuine breakout.

All thoughts and insights welcome!

Erik

 

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Golden Age
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Re: Mid-afternoon Gold Buying - 3 times now - what's going ...

I can say this about all the price fluctuations of gold.  Someone has tried to hold the price of gold down to benefit the dollar.  Some explanations are that the hedge funds were selling their gold because customers wanted to draw their money out.

I don't believe that but it was speculated as one of the reasons.  

The value of gold has been manipulated by perhaps 2 of the largest on Wall Street, Citigroup and Goldman Sachs, in my opinion.  It is my opinion, and that is all it is, an opinion, that a lot of money has been lost selling gold short and then having to cover.  The reason I believe this is Paulson won't tell us where all the money went that he gave them.  

Supply and demand are two of the most reliable indicators of the value of an asset.  When people in CA thought a house was worth $350,000 and another person was willing to pay that price, you have the "market" determining the value of an asset.  The market now says that same house may only be worth $275,000, if someone is willing to pay that price.  It is still the market working to determine the value of that asset.  

When gold is selling for $850 an ounce and it takes a dealer perhaps 2 months to deliver that ounce of gold, someone is manipulating the price of that asset.  I don't care if someone says gold isn't the asset of last resort, that's an opinion and he is entitled to it.  But the fact is that the demand for that asset at that price is not readily available.  That means the market isn't working as markets are supposed to work. 

When the Mint has to stop taking orders for gold coins because of a lack of metal but the price of gold falls another $50 dollars an ounce, no one is going to convince me otherwise.  Gold is the enemy of Fiat money because there is no liability in holding gold.  Fiat currency is a liability of the government, and sad to say, but the Dollar today isn't worth the paper it's written on, once again in my opinion.  That fact will be obvious when Japan, China and others stop buying Treasuries and funding our government.  

This is my opinion, and it is not a recommendation that anyone purchase gold.  Each of us must DYODD.  (do your own due diligence.)  

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wdstk46
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Re: Mid-afternoon Gold Buying - 3 times now - what's going ...

Hi Erik,

The Comex down volume spike on the 23rd also shows up on the GLD volume.  The up spike on the 24th, however doesn't.  Then, today, the up move in price is accompanied by high volume on the GDX but not in the Comex.  Overall, though, volume on both exchanges has been very light since the 17th.

My guess is that it is the lack of volume that is responsible.  One bank covering a large client position would be enough to move the market price substantially.  I'll be a believer if we get follow through early next week.  I remained flat from early on this week because these kind of moves are not uncommon on thin trading but there is no way to know which way the price is going to move.  I am long-term very bullish but slightly bearish short-term.  

A brief aside to  Golden Age.  You share a very common opinion and are entitled to it but it is based on facts not in evidence.  There was no shortage of gold at $850.  There was a shortage of coins and it wasn't long-term.  Bullion was trading in good amounts at the price in question.  Also, there was no shortage of gold to the mints but a shortage of blanks.  The difference is critical to understanding the apparent dichotomy of a coin shortage in the face of low gold prices.  You can actually see this difference in the markets.  Coins held a wide premium to bullion but the bid/ask spread on bullion remained normal.  I offer this as matters of fact.  My opinion, given these facts, are that the markets are working quite normally.

I fully believe that the evidence presented by Chris and company on this site can do nothing but lead to higher gold prices over the long-haul.  My long-term plans reflect that opinion. 

 Jim Thompson

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pov56
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Re: Mid-afternoon Gold Buying - 3 times now - what's going ...

Could it be that China is making the Yuan an international currency?   This is VERY bad news for the dollar and indicates that they will lend us much less.

http://www.marketskeptics.com/2008/12/china-makes-yuan-international-cur...

 

 

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pinecarr
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Re: Gold Buying...& China making yuan an Internat'l currency?

Very interesting articles on recent developments re the Chinese yuan, pov56!  Thanks for the link!!

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Rob Z
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Re: Mid-afternoon Gold Buying - 3 times now - what's going ...


Gold Surges Amid Geopolitical Tensions Friday:

(RTTNews) - The price of gold surged higher in afternoon dealing after seeing little movement in early dealing Friday, ending the week up nearly 4 percent as the precious metal's hedge appeal was boosted by geopolitical tensions.

Gold for February rose $21.60 to $869.60 an ounce, and is up about 6 percent so far this month.

Gold generally moves opposite the dollar, but with the dollar little changed in quiet dealing Friday, the surge in gold prices was sparked by developments in the Middle East, where Palestinian militants attacked southern Israel with rockets and tensions flared between Pakistan and India.

Full story at (RTTNews).

 

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joemanc
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Re: Mid-afternoon Gold Buying - 3 times now - what's going ...

Erik,

I emailed my friend the chart you posted and your question. He is a financial analyst and has access to plenty of data. Not sure if it helps, but here's his answer:

 

You pretty much called it right with the volume aspect. People
screw around always at the end of the day, and since the traders have
been off recently, people who are still trading are able to screw around more. I would say once the new years starts you will see a more normal patern
of trading. I bet gold takes a dump back down to 700 to 750, but I'd still be a
buyer.

RubberRims's picture
RubberRims
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Re: Mid-afternoon Gold Buying - 3 times now - what's going ...
ErikTownsend wrote:

I'm trying to figure out what's been going on in the gold market for the last few days, and thought I'd post my thoughts here in case anyone else can offer further insight. Check this chart of COMEX gold futures out:

Notice how on three separate occasions (including about an hour ago), there have been big mid-afternoon price spikes. My first thought was that a big institutional buyer is legging into the market, making large purchases in the afternoon sessions to establish a large position. If that's the case, they're not doing it in the futures markets, however. Look at the volume figures! Oddly enough, there was strong futures volume reaction to each big move up, but the buying is happening somewhere else. Today's very large up-move happened against very small futures market volume.

Can anyone figure out what's going on here? I was holding off on increasing my gold position, thinking we were sitting at the top of a price channel that was established over the last couple of months. But this is starting to look like a genuine breakout.

All thoughts and insights welcome!

Erik

After Israeli bommings gold will continue to move higher. This event may be the anser to your question?

Erik T.'s picture
Erik T.
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Posts: 1234
Re: Mid-afternoon Gold Buying - 3 times now - what's going ...

Hmm.... It's hard to gauge the real effect of the Isreal bombings. The first two moves on the chart I posted obviously pre-dated those attacks.

Gold just hit $890 in early asian trading. This is starting to look more and more like a bona fide breakout to me. I should have moved sooner! :-)

Erik

Erik T.'s picture
Erik T.
Status: Diamond Member (Offline)
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Posts: 1234
Re: Mid-afternoon Gold Buying - 3 times now - what's going ...

I'm now (Sunday evening) convinced that a big institutional player is legging into gold. Look at this chart:

12-29_Gold_Chart.png

The staircase pattern coupled to even-number price levels is a dead giveaway. There was a clear resistance level at 850 on Friday, then somebody jumped in (first yellow circle) with an 870 limit on Friday afternoon. The price action held steady at 870 (indicating that they kept on buying, arresting any mean reversion) until today's asian open when they upped the ante to 880 (another even number, 2nd yellow circle).

There was a small price retreat as some profit-taking occurred, but the buyer didn't even wait for that to stabilize. They were anxious for more volume and upped their limit (thrid yellow circle) to 890.

The buyer's impatience says a lot. I predict the staircase to continue until at least 900, where I would expect more profit taking.

This is a very interesting and very unexpected (by me) development. How curious...

Erik

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Woodman
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Re: Mid-afternoon Gold Buying - 3 times now - what's going ...

I'm not expert but am not assuming a breakout yet if it's just one big buyer and light volume.  If gold takes a dip again I'll probaby buy more; if it doesn't I'm happy with what I have. Then again, if one thinks the dollar is reallly going to tank soon then one shouldn't wait to buy gold I suppose.

Fogle's picture
Fogle
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Re: Mid-afternoon Gold Buying - 3 times now - what's going ...

At this moment (monday morning), the gains for gold in dollars is 1.7%. But the gain in euro's is only 0.16%. While the gains of gold last week did not have a dollar weakening.

What does it mean?

Well, today's rise is only a rise for dollar-people. Here in Europe the price remains stable. I am going to buy today (or tomorrow) some 1/2 krugerrands. I feel we could have a break-out. But still, when our fiat currencies hit bottom, it will be academic at what price we have bought. I think any price under 1000/oz is good.

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cejstrup
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Re: Mid-afternoon Gold Buying - 3 times now - what's going ...

EURUSD has gone up during the day. So that's probably why the gain is a bit higher in USD than EUR

Lemonyellowschwin's picture
Lemonyellowschwin
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Posts: 561
Erik T., Any Comments on Today's Gold Action?

I know you've been following it closely lately.

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RSLCOUNSEL
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Posts: 41
Re: Mid-afternoon Gold Buying - 3 times now - what's going ...

 

 

If you enjoyed the US Situation Comedy "Barney Miller" in the 1970's, you may enjoy this brief 6 minute clip from 1978....

http://tedbits.blogspot.com/2009/01/it-didnt-happen-30-years-ago-so-why-now.html

 

All things come to those who wait....

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