Anyone
watching the gold and silver market understands that something is not
right. An objective look at the fundamentals suggests that there seems
to be no substance behind the recent downwards move.
Posted: Friday , 18 May 2012
ORANGE COUNTY, CA (KSIR Capital) -
There has been a constant debate over the years on what drives the price of gold and silver.
Obviously we have the fundamentals that have put the metals in a bull market for the last 10 years. The powers that be have total control over money, as they set the price for capital via manipulating the interest rates. So it is not a stretch that they would be concerned with a rising gold price because gold is a threat to how the current fiat regime functions on a day-to-day basis.
Without Mr. Bernanke able to step in and buy US treasury bills, where would interest rates be? How would we fund our deficits?
These are just some of the reasons why it is important for the elites to pay attention to the price of gold and silver. Knowing this, the powers that be have instructed their banking arms JPMorgan, HSBC, Goldman Sachs and the like, to create paper derivatives to help manage the price.
But what happens when we get to a threshold point where the physical market breaks the back of the paper derivatives? We think that this time is near.
The Accumulation Distribution Line developed by Marc Chaikin is a volume-based indicator designed to measure the cumulative flow of money into and out of a security. Chaikin originally referred to the indicator as the Cumulative Money Flow Line. As with cumulative indicators, the Accumulation Distribution Line is a running total of each period's Money Flow Volume.
First, a multiplier is calculated based on the relationship of the close to the high-low range. Second, the Money Flow Multiplier is multiplied by the period's volume to come up with a Money Flow Volume. A running total of the Money Flow Volume forms the Accumulation Distribution Line. Chartists can use this indicator to affirm a security's underlying trend or anticipate reversals when the indicator diverges from the security price.
We think this, along with other technical indicators, is screaming BS on the paper gold and silver game. If you take a look at the chart below, you can see that the indicator has confirmed this bull cycle as money has continued to move out of paper assets and into the physical. Currently we see an extreme divergence:
The volume and the Moving Average Convergence/Divergence (MACD) are also calling BS on this latest paper assault on the metals prices. It is even more obvious when you look at this chart of silver below:
The recent lower volume in the metals and the related mining shares are not confirming this move lower.
If the gold and silver price were to have kept a correlation with this indicator we would currently see close to $1900 and $50 silver. Our experience tells us that this type of disconnect usually ends in violent corrections to the norm. In this case it could mean that we are witnessing the straw that breaks the paper gold and silver games' back. Finish reading @Source
