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IMF Gold Sale Sent Shock Waves Through The Gold Bear Camp!

November 4, 2009

Central banks are no longer bearish and negative on gold. Only the Anglo-American Illuminati cabal still wants to depress the price of gold. This is because their control of the fiat currency USD financial system will collapse, should everyone decide to dump their USD holdings in exchange for gold! Many coffins are being prepared for all the bullion banksters/manipulators of gold price. Hear the death knell, gold shorts? The chimes are getting louder! If you are not paranoid, you obviously have not been listening! Trader Dan explains what happened yesterday:

News overnight that India was going to stand for half of the proposed IMF gold sale sent shock waves through the gold bear camp resulting in a near panic among trapped shorts. Their buying sent prices ripping through overhead resistance just above the $1,070 level setting off a cascade of pre-placed buy stops that propelled gold above $1,080, a mere $20 from psychologically significant $1,100.

By the way, let me take a minute here to give a Hat Tip to Jim who has been saying for YEARS (and received a fair amount of trash talk for so doing), that any gold sold under an IMF arrangement would never see the light of day as Central Banks would gobble it all up. That is precisely what India did and I am convinced that China is also looking to do. As a matter of fact, India probably got the jump on China because they knew that they were lurking in the background looking to buy.

How many times over the last few years did we hear talk about IMF gold sales just about the time gold was threatening to put in a technical break out on the price charts. The news would cause a near panic among ignorant analysts and talking heads who would promptly advise their clients to dump their long positions playing right into the hands of those who originally trotted out the story. Let’s hope that after today, gold longs are no longer the least bit troubled by any further chatter concerning IMF gold sales. Do not forget, that the Central Banks of the rising powerhouse economies of the East are looking to diversify their foreign reserves and need large block sales of gold at a preset price in order to facilitate an order of the magnitude that they are placing. Try obtaining 200 tons of gold on the open market! That is why they welcome such large sized gold sales.

What makes the surge higher in gold even more impressive is that it came in the face of a weaker Euro, a stronger Dollar, and most particularly, a dropping equity market. The net result of such occurrences is that gold moves higher in terms of nearly all of the major foreign currencies. Gold priced in terms of Euros is at its best level since March of this year with British Pound priced gold back near the 650 level.

Based on today’s price action, one would have to say that the price of gold has consolidated long enough above $1,000 that the market has now come to terms with a permanently higher gold price of 4 figures. Without wanting to be premature, gold under $1,000 would undoubtedly be viewed now as a bargain. That is why markets that move higher, consolidate, move higher, consolidate, etc, are sustainable bull runs. The run and pause effect gives the industry TIME to become acclimated to the new, higher price level whereas markets that launch into parabolic type blow offs, while spectacular, are generally unsustainable and short lived in the broader scheme of things. They come crashing back to earth as quickly, if not faster, than they went up.
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The Dow Jones/Gold ratio is currently trading exactly at “9” as I write this. You might recall that chart I put up not all that long ago where I noted that the ratio near “9” has been a floor of support. If this level gives way, it will indicate that savvy investors who can read the tea leaves of the US economy have seen the handwriting on the wall and understand that the lake of inflation is relentlessly rising behind the dam of illusionary wealth soon to break forth with a fury. As said so many times on this site by Jim, Monty and myself, you cannot print your way to prosperity. If that were the case, it would have been successfully attempted long, long ago by nations throughout the course of history. Sadly, our current monetary officials and political leaders are oblivious to this truth and refuse to back away from their reckless policies and short-sighted courses of action. The Dollar, while moving higher today, is a catastrophe waiting to occur. The collapsing Dow/Gold ratio says it all.

Bonds are moving lower in tandem with stocks today which is unusual. I have not been able to clearly read the bond market ( then again I know of no one else who can for that matter these days) but perhaps the surge in the gold price caught bond traders’ attention and they are a bit more worried about inflation than they are the lower equities. Bonds are probably going to have to get below the 117 level and stay there to flip the inflation/deflation battle over to the inflationist camp. All I can say is that you could not pay me to hold a US debt obligation. They are nothing but confetti paper in my opinion as the world is literally awash in them.

Back to gold for a brief moment – volume in the gold pit is very strong today and most impressive. This move is coming with a lot of emotion particularly fear among the gold shorts. The weaker ones were blown out – the only selling left is the bullion banks but it should be noted that they have not been able to cap the price below the early morning price peak. Buying is quite persistent and is eating through the overhead selling allowing the market to move higher and put in a new peak as it moves further into the session. That is not the norm that we have grown accustomed to seeing in this market.

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