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RIP Goldrush!

Gold and Silver

Fri, Mar 28, 2008 - 1:02pm

In "The Takedowns in Gold and Silver" published by Financial Sense on 7th March I started the article with a bold statement:

"I will tell you the exact price levels in gold and silver where the next "takedown" by the "conspirators" will occur. The periodic takedowns of these markets are predictable to a matter of ticks"

On Monday 17th March the Daniel numbers in Gold and Silver stopped those markets almost to the tick at the "conspirators" price targets as the bears savaged complacent bulls in 4 brutal days. Subscribers to the Danielcode knew those numbers and also knew with a high degree of certainty that the low of the initial drive down was in by the end of Easter week; they knew the numbers for that turn too as the charts below attest. Next week is vital for the bulls if they are to reassert their supremacy. More than ever you will need to know what the cartel is planning for your edification or punishment and what numbers they will use! Remember; the takedown numbers are simply the Daniel numbers. You should know that by now.

tombstone. fotosearch - search clipart, illustration, drawings and vector eps graphics imagesGold aficionados come in two classes. Those who own it and those who trade it. Owners are loved by traders as without that stubborn buy and hold mentality there would be no one for the traders to play with. Traders are loathed and despised by owners as "takedown artists" and devaluers of their precious asset. Both views are wrong and both of these groups are at decision time.

For gold lovers there are intrinsic values in owning physical gold. There is a deep seated belief that Gold and Silver will always retain their value, provide an effective hedge against inflation, be a secure store of wealth free from government's inherent tendencies to devalue fiat currencies by systemic inflation and most importantly it is deemed to be an internationally valued asset beyond the reach of the manipulative paws of government policies and fiscal fiends. As the oldest store of value known to our civilization there is an almost intuitive belief in the value of Gold and Silver bullion.

Whilst those beliefs were true for centuries, modern machinations of paper shuffling, carry trades and global markets have conspired to turn Gold and Silver into mere commodities. As such, owners and traders are at an inflection point where hard decisions will come thick and fast.

Last week I showed you how the weekly Danielcode numbers stopped Gold in its tracks at the weekly price target. Whilst writing that article last Thursday Gold had put in an intraday low at 915.00 only to succumb later in the day to its alternate sequence. In Monday"s charts for members I showed Gold and Silver at Daniel sequence support. The black Daniel target for the first downside rush was 904.40. The low was 904.70.

gold comex

More troubling for Gold owners, the turn in Gold coincided with the turn in US Dollar Index which arrived at its long forecast Daniel number as Gold made its 1034 high on Monday 17 March. What was it that caused such a violent reaction in Gold and Silver to the apparently innocuous daily bar in DX on the 17th? If you followed the Danielcode you would know.

This week Gold has confirmed its commodity status as a tool of the carry trade by mirror imaging DX in its meandering rally. If Gold truly is an independent market with its own drivers this should not happen to this degree although the hedge against USD is part of the trade. The chart below highlights the recent correlation:

comex daily

The dotted lines show that Gold's 4 day plunge took it back to 17th February prices expunging 4 weeks price gains in 4 days. The corresponding DX rally in contrast took back only the prior 5 days price action.

Silver's apparent demise was even more spectacular as the weekly chart shows.

comex silver

Both Gold and Silver fell precisely to recognised Daniel numbers and have spent this week rallying quietly. Gold is close to its rally target and Silver closed Thursday right at its first DC target. The question now is whether the fast move merely corrected chronically overbought markets enabling them to return to their prior trend or is that the end of the Goldrush?

This is a crucial time for long term bullion owners. As I have highlighted in previous articles, markets fluctuate and even the best of bull markets end. There is no way of knowing if recent highs in precious metal markets are temporary or terminal but we do have some clues. This is the weekly chart in Gold:

comex clues

The hope for bulls is that the 1034 high came at a weekly Daniel sequence created by an intermediate or 2nd degree price structure. Our assumption always is that intermediate structures create intermediate turns so there is hope for further highs at a later stage. The immediate challenge for bulls is that last week's correction overbalanced all previous corrections in the rally from 2005 and that is the first signal of a change in trend. On the monthly chart below, an end of month close below 975 will create a key reversal bar on the monthly chart. That is a powerful signal especially as the reversal is at a significant Daniel price level. The last significant monthly reversal in May 2006 brought lower prices for 6 months.

comex 2006 lower prices

US T Bonds

Monday's charts posted for subscribers gave Bond traders a weekly and daily Daniel price level of 120^28 for the turn and 117^23 as the first target:

us t bonds

Big and small bond traders who had these Daniel number sequences took a good bite out of the market as the following chart shows. Monday's high was 120^27 against its DC numbers at 120^28 and Thursday's low was 117^23 as the first DC target was recognized by the market.

t bonds 117 23

Corn

This is the monthly chart for Corn posted on the Danielcode website on 19th February and still posted. Two degrees of Daniel number resistance at 531^40 on the cash chart stopped this market at least for the month.

corn

On the daily Daniel number chart the pullback and subsequent rally have followed their DC numbers within a variance of 3 points:

corn rally

S&P

Danielcode subscribers had 1363.00 on their Monday charts and this market obliged by turning at 1361.00 just 2 points from its DC number and within the 3 points variance we allow for this index. Other DC price levels have been deleted in deference to subscribers.

sp 1363

Crude Oil

Last week I showed you how the Daniel numbers stopped Oil's heady rise just 1 tick from its DC target. Subsequent price action shows the pullback to 98.65 against its DC target of 98.76 and the subsequent rally, surprising to some, but not Danielcode subscribers who had 108.41 as the 2nd target in the rally sequence. Thursday's high was 108.22.

crude oil ny comb

Forex

Forex and CME currency markets continue to track their Daniel number sequences with great precision. As I cover 16 forex pairs and 5 CME currency contracts, space doesn't allow me to show you more but I particularly enjoyed this chart and its comment: "Very clever market. 2 DC targets; 2 hits!"

forex usd-cad

Free Daniel number charts at the Danielcode Online

I invite you to visit the Danielcode Online to learn more about the Daniel number sequence which defines all markets and to read previous articles at my FSO archives.

For those kind enough to register (free) at my website I invite you to claim a current Daniel number sequence chart of your choice. New charts for the week are posted before the US open each Monday and updated on Thursdays. Shorter time frame charts are updated as required so I suggest you claim your free chart on Monday when new charts for next week are available. Last week almost 1000 Financial Sense readers claimed their free chart. They benefited by knowing the crucial Daniel numbers in the market of their choice.

Subscribers get all the Daniel numbers across all the markets set out in my Services page. The coming week's price action will be crucial for many key markets. You need to know these amazing numbers.

Financial Sense ASIA

This is the Hang Seng weekly chart posted last Friday. This market is up 2100 points after turning at its indicated DC number.

hang seng index

The Nikkei and Australia's SPI 200 have similar results with turns made near their weekly DC numbers. I hope you saw them and benefited accordingly.

Copyright © 2008 John Needham

About the Author

Lawyer and Financial Consultant
jneedham [at] thedanielcode [dot] com ()