During the trip through Western England and Ireland, the only notes I could make were through photographs taken on my phone and after downloading 453 pictures to a 4-gig data stick, I took the time to go through them and, as I did, I was able to reclaim the thoughts I had as they related to gold, the gold miners and global markets. The larger story of the first week was that gold had "BROKEN OUT" above a six-year downtrend line and was now poised for a move of several hundred dollars to the upside. Sadly, as long as I have been writing this missive, I have contended that as valuable as technical analysis is for some markets and certain commodities, it is ineffectual for any and all markets that are "rigged." The markets that are "rigged" are defined as "all markets deemed important to the national security of the United States" and that means debt markets (bonds), equity markets (stock, ETFs), and precious metals (gold, silver).
All three of these markets are targeted by the Working Group on Capital Markets ("Plunge Protection Team") with the first two (debt and equities) manipulated higher while the third (precious metals) is manipulated lower. The purpose of this is to insulate the almighty U.S. dollar from attack because to successfully undermine the U.S. dollar would undermine the fundability of the U.S. military and its propensity to protect nations abroad such as the U.K. and Japan. Now, since the U.S. dollar has been under pressure since the end of December 2016, these Interventionalists are intent upon keeping all markets levitated in order to insulate bank collateral from unexpected markdowns. So, with the world all rejoicing and in full voice, the siren of the majestic "Gold breakout!" was in no fewer than fifty separate commentaries that I have read since last Sunday and I watched as if it was a beer bottle sliding off the edge of a table in suspended slow motion as the Commercial Traders fed over 70,000 contracts out into a $50/ounce rise and capped the rally at exactly the point where the "technicals" turned "long term positive."
Whatever the rationale might have been for a "breakout," the memory-challenged algorithms trading the futures decided after the pattern-recognition software spit out a "BUY" signal, that they should pile into gold futures leading up to last Tuesday's 30,397 gluttonous buying frenzy. The Commercial traders under express instruction and guidance from their bullion bank masters at 33 Liberty (and at the Bank of Japan and the European Central Bank) did it again—they set up the trade like a Titleist 3 on the 18th tee at Augusta National. So here we sit at $1,271.40 after an assault on one of the downtrend lines drawn between $1,800 in late 2013 and the top last year at $1,380, and, once again, I beseech you to ignore any and all technical analysis when trading gold other than to recognize its importance to the bullion bank criminals that rig markets on a regular basis.
I have written about the ineffectiveness of technical analysis since 2001 with missives like "Sell breakouts; buy breakdown" (2013), "Trade and think like criminal" (2015) as well as a few others. When the net short position of the commercial traders undergoes a sharp and rapid change in response to a technical "signal," I will always "Follow the Commercials" (2015). Sell Breakouts; buy breakdowns – always.
Global markets have now moved into (what I believe is) the final, parabolic, public-entrapping vertical ascent that typically punctuate established trends with cataclysmic reversals. The problem I have with making such a bold statement is that the body bags are lined up at the side of the road with those that have fought this move firstly since the 2008 Meltdown and then after the 2016 U.S. elections.
The large banks with their supercomputers and unlimited cheque books have now successfully hijacked the markets and appear to have eliminated the need for protection while smashing volatility (the VIX) to a 9.5-11 range with only three harmless pops to over 15 since the Trump election. Their skillful suppression of all volatility by way of indiscriminate bludgeoning of the VIX has allowed the large portfolio managers to glide over the financial landscape completely unhedged such that current mantra is that to buy volatility insurance is a stupid way to shave points off your performance because the government-supported, bank-driven interventionalists have ensured that any and all dips will be bought.
In fact, that narrative forms the basis for my persistent warnings because it has been eight years since the Armageddon-like March lows in the S&P were made and with the exception of a couple of blow-offs, long-term stock and bond investors have been richly and abundantly rewarded not, however, by brains, but by extremely good fortune and loyalty to the central bank motto that they will do "whatever it takes" and they most certainly have done that.
The issue of "moral hazard" is now moot because politicians everywhere look to the role the central banks have played in rescuing a decayed and corrupt political and financial system and all they need to use as their benchmark is the S&P or the FTSE or the NIKKEI. With every central banker in "PRINT" mode with zero exceptions, my old and now VERY relevant phrase "One can NEVER underestimate the replacement power of equities within an inflationary spiral" has been the ONLY rule in my quiver of investment arrows to which I have adhered.