Gold & The Bond: Facing Reality

  • Print
  1. There you sit. In Happy Land. You lean back in your armchair, with yourgolden friends.  You sip a glass of wineand puff on a high quality cigar, toasting the good times for gold.  You raise a glass for a number of recent newhighs for many junior gold stocks.  Adirector of one the hottest juniors companies is there too, and he forecasts aglowing 2011 for his company, for gold, and for you.  You agree, and immediately instruct yourbroker, who is there too, to pick you up another $200,000 of your favouritejuniors stock at market open. The backslapping continues.
  2. Between toastings of your golden excellence, one chart has somehowslipped under your radar screen and fallen onto the floor. Click here now to view that chart, theinstitutional money managers’ DeathOf Gold Chart.  You are looking atthe monthly chart of the US Govt Treasury Bond. That is the 30 year bond bull market that Bill Gross has declared… over.  The bond has already declined against thedollar deep into major support.  Thehangman’s noose sits at the 113 level.  
  3. We are only 6 to 7 points away from that price now.  Elmer Fudd Public Investor is all-in onbonds.  I believe a break of the 113marker would start a worldwide panic in bonds. The Chinese taxpayers stand at the head of the “to be roasted”table.  The decibel level of thebanksters’ laughter is growing.  So muchfor the “those smart Chinese” group rant chant. They price-chased bonds for their taxpayers in monster size after a 30year bull market.  Now the grim bankster reaperhas arrived, to give them their just reward for their totally insane tactics.  Panic liquidation at huge losses is thereward coming to billions of bond market “investors”.  These “investors” are more properly definedas maniacal price chasers, lifetime loss bookers, and they are doomed.
  4.  Most mainstream analysts think a bond bearmarket is gold-negative.  In contrast, mostin the gold community think a bond bear is gold-positive.  In thebig picture, the gold community is 100% correct.  
  5. Unfortunately, liquidity flows rule markets, not the goldcommunity’s theories.  Who has the mostliquidity?  Not the gold community.  Other than the banksters, it is the funds whohave all the cash.
  6. When a bond bear market begins, the mainstream institutional moneymanagers believe that rising rates will cut off inflation, so they believe goldis a sell.  They don’t believe in anymajor bond bear market, just a modest down move in price and a modest up movein rates.  They think rates are risingbecause times are improving.   
  7. It doesn’t matter if they are wrong or correct.  Institutional money managers control almost$10 trillion in cash, and they are flowing it now. Their money flows are what matters, not thecorrectness of their theories.  Theybelieve Ben Bernanke is on the verge of announcing an end to quantitativeeasing.  So do I.  The difference is I believe he’s doing sobecause QE has failed, while institutional land believes QE has succeeded. 
  8. Either way, ahit on gold of enormous size is very possible as this theme races acrossinstitutional money managers’ trading desks here and now, like a wildfire fuelled by bankster napalm.
  9. Rising rates are seen by the mainstream managers who control that$10 trillion, as mildly general equity-negative but substantiallygold market-negative.  What is thebottom line?
  10. The bottom lineis: Hi ho, hi ho, it’s into the fear zone you and I go.  It’s been a while since you and I tasted realfear in the gold market.  It’s real andyou need to face all that is real.  Don’tpaste a giant Goldilocks poster on your mirror. Don’t underestimate the power of your current opponent.  Your gold-market friend, a major bond bear market,is currently your enemy, and that is the norm at the beginning of amajor bond bear.  My “do not wishfor something too hard or you just might get it” mantra can be applied directlyto the wish of the gold community for a major bond bear market.  You got your wish come true.  Now the question is:
  11. How does it feel?
  12. Theinstitutional money managers think they are in the driver’s seat.  They are not. Their cheers of rising rates as gold-negative will turn to horror as thebond does not stop falling and they beg the banksters to “just make the painstop!”.  Their “ideal growth” scenariowill go down in flames, but that takes time. All things in the market take time. More time than we all know is possible.
  13. The banksterswill ask the institutional money managers to sell their paper money soul tomake the bond wipeout stop.  “Are you prepared to accept a major hit onthe dollar to stop the bond price decline?” –banksters, in conversationwith burning bond market money managers, June 2011?      
  14. I was a buyerof gold at 1343, 1335 and now again at 1327 this morning.  I have more buys at 1320, 1313, 1306, and soon, so on down the side of the cliff.  Thatdoesn’t mean we’ve seen the bottom in gold’s decline, or should I say the topin paper money’s rally.  Martin Armstrongis throwing around numbers like $1100, and I’ve told you repeatedly thatwhen a major head and shoulders pattern has price hit the initial mathematicaltarget, a substantial reaction can occur. 
  15. Often thatreaction goes all the way back towards the neckline, which in this case sits at$1000-1033.  Here’s a look at thatpattern playing out in textbook fashion.  GoldHead & Shoulders Playbook Chart.
  16. Some havecalled the current COT reports ultra bullish. What I see in the current COT reports is simply professional market actionby the banksters, and unprofessional action by the funds.  The banksters are covering gold shorts andbuying gold longs into dollar strength against gold, yes.  Regardless, the massive 500,000 contractshort position held by the banksters has never been resolved, and the currentattempts by gold analysts to call the bottom in the decline to me is verypremature.  Be a buyer of gold, yes.  Be a bottom caller?  Absolutely not.  This morning, you see why I operate in themarket as I do.  I don’t callbottoms.  I’m booking profit on dollarsand buying gold, but I am not about tostand in front of a 10 trillion dollar liquidity flows freight train fuelled byan imploding bond market and pretend that is a non-factor in the gold market.  The biggest factor in the gold market rightnow is the one least understood by almost every single gold analyst.  The bond market factor. 
  17. Think back tomy statement in Oct 2010 as the emails poured in to “chase price” at Gold$1387, the day I termed, “The Gold Community’s Loss Of Sanity” day.  Looking back now, it’s possible that a real loss of sanity occurred.
  18. Here’s a lookat the latest COTReport.  Most analysts look at theNET position of the banksters.  Idon’t.  I look at the shorts and longs inisolation.  The most bullish situation iswhen the banksters (commercials) are not just covering shorts, but piling onlongs, and I mean piling them on. 
  19. What do you seehere?  There is no piling on oflongs.  There is buying of longs, whichis what I’m doing myself, but no “piling it on”.  There is substantial short covering, yes, butthere are a lot more shorts that can be covered.  A gold short is a dollar long against gold.  The banksters are in profit booking mode ondollars, more than gold accumulation mode. In summary, what I see in the COT liquidity flows report is simplyprofessional action by the banksters, and unprofessional action by thefundsters.  I don’t see anything thatindicates a “turn”.  A turn could occurat any time, and it will come, but those who are trying desperately to call it,are already the ones destroyed before it happens.
  20. Measured fromthe highs at $1430, gold has fallen about 8% and silver about 15% from itshighs.
  21. Regardless ofwhat the gold community thinks, the reality is that institutional moneymanagers will sell gold on rallies from here. Only a surprise from Ben “Dr. Pinocchio” Bernanke that he won’t end QE, or a huge bond mkt rally, will be sufficient action to change the minds of institutional money managers on selling and shorting gold for the intermediate term.  You need to understand that these people are not flippers.  They get a view, and unless something major changes that view, and those managers around them, they are not going to be jumping back on the gold wagon.
  22. This is all phenomenal news for me.  I’ve built massive cash reserves that I am cashing out and buying gold currency with alongside the banksters.  Make no mistake, almost all the gold and gold stock being sold now is going directly into the hands of the gold community’s mortal enemies, the banksters.  I’ve tried to tell you repeatedly that the fundsters and Elmer Fudd Public Investor are your market “enemy”, not the banksters.  The banksters understand that he who has the gold, makes the rules.  They are taking more gold from their pathetic opponents that bust out like water balloons hitting the pavement from an airplane drop.
  23. Those of you who operate still-successful businesses (many if not most of you), have solid inflows of cash.  Paper money.  Are you a winner?  I think so.  If you are a winner then you want to book profit on that cash as it rallies.  Paper money is rallying against gold.  Paper money is an asset.  You’ve got profits on that asset.  Book those profits, to a degree.   The great error of most business owners is they think paper credits are money, when they are currency.  Currency is an asset, not money.  When it rises in value against another asset, you want to book profit while buying that other asset at great value.  Once you fall into the typical loss-booking mentality, which is created by viewing paper currency as money rather than an asset, it is very difficult to escape that world, and the financial damage that follows can grow exponentially in a relatively short period of time.
  24. Most in the gold community are heavily invested in gold stocks.  Here’s the picture the banks are painting for you.  GDX Head and Shoulders Monster Top.  How does it feel?  The banksters want you to think price will rally to $58 completing a right shoulder of a huge top pattern where the head itself is a big h&s pattern.  I term that “head and shouldering”.  They want you to look down to the $42 area and feel great fear that price is going there.  They want you to believe that if it happens, it is a disaster for you.  They might be successful in creating that fear.  We all need to face the reality of what the banksters are capable of doing in the markets with their unlimited liquidity.  We need to face the reality and respond to it.  Following their actions, not their mouth.  Remember that the banksters are creating fear in their opponents so they can take their gold stock.  They don’t want gold lower because they hate gold.  They love gold.  They want gold lower so they can book profits on their paper currency asset and take gold from all those obsessed with paper currency as money.   Still think my call to think in ounces is unimportant? 

CLICK HERE to subscribe to the free weekly Best of Financial Sense Newsletter .

About Stewart Thomson

Quantcast