Gold/Silver: report from the trenches.

To be sure, I AM NOT in the trenches, but I report here on people who are.

Gold bears (bouillion banks and swap dealers plus weaker (private) shorts) have tried to keep gold below 1,580 and have accumulated a large short position. Bulls (hedge funds and small public buyers) have moved in the dips and brought gold back above 1,600. Now that gold is past 1,600, the private shorts will run to cover and the bouillion banks and swap dealers will continue to enlarge their shorts. The private shorts may take gold up to 1,625 (a minor resistance). Gold's interim high should be around 1,650.

The 1,760 figure mentioned on KWN is a capitulation figure for the shorts. Once that figure is breeched, gold will go into a hyperbolic mode so that the 50 DMA will far outpace the 200 DMA.


What is driving gold? For one thing, there is the Greek default. Greece has already defaulted according to the rating agencies, because there has been a 21% reduction in the value of the Greek bonds that is part of the deal reached by the Europeans. Greek bonds are rated default privately and those bonds are not bought by the public, but the European governments and banks. Official recognition of the default is coming. So, it is a matter of time till the 'contagion' becomes known.

Besides Greece, the US is heading into troubled waters. The argument about raising the debt ceiling comes about within the context of another dose of mass layoffs and continued economic softening. If gold closes above 1,760, it will mean that the Market had given up on the US and the Dollar.