Gold bull enters different phase.

The gold bull market entered a new phase. Large swings will be coming and downswings will be fast. We have seen this already. Gold price was down over $200 in three days (to $1700 in fact) before gold recovered and went up $130 in three days. Both, the up and the down phases have been faster. All eyes will be on the gold market Sunday night and Monday morning. Silver has not yet moved much.

The gold miner index corrected only about 5% while gold corrected over 10%. The expectation is that gold miners will outperform gold 3 to 1.

KWN expects gold to test $2000/oz during September and hit $2,100 by the end of the year. With the newer, faster moves of the gold market, these levels seem entirely possible and even within a shorter time span.

Changing patterns.

One of the more interesting face of the PM market is the sequencing of events. Look at the first graph (the PM miners) and you see a downtrend in prices. This is supposedly due to shorting by hedge funds and will result in a shorts squeeze when the miners break out.

The second graph is that of silver. Silver has been heavily shorted and manipulated, but it has been in an ascending (but slow) pattern. Silver has closed above $42 today, which chartists believe will lead to a rapid rise in silver.

The third graph is that of gold prices. Gold has broken out of its normal trading channel and is beginning to rise at an accelerating pace (even more apparent with the MACD). Gold has wiped out a lot of shorts above 1,680, but is believed to be propelled now by the entrance of retail investors.

We can expect a sequence of breakouts: gold first, silver second and miners last.Experts expect silver to blast through fifty to set a new, all time record. Gold is expected to move past $2,000, but it is not clear what will happen then. Some forecasters see a government interference at $2,100, some at $2,300. Considering that we have a lawless President, who refuses to defend and enforce the Defence of Marriage Law or the Immigration Law, one hesitates to guess what this criminal will do to restrain the gold rally.

Disaster in slow mo.

Have you seen the video of the collapse of the stage at the Indiana State Fair? It was slow enough to actually observe it, but too slow for some of the victims to get away. That is what is happening to Europe. During Q2, Europe's exports fell by 4.9%, enough to knock Germany's growth to 0.1%. Europe actually did better at 0.2%. The last meeting of German and French heads of State resulted in the decision to NO INCREASE in the EFSF funds (an equivalent of our TARP bailout funds). So what? u might ax? What this means is that Italy and Spain will get no more bail outs and now that France is coming under scrutiny...well, Germany had it with the bailouts. And the European banks stand exposed to attacks on the interest rates they have to pay on their bonds.

Contagion is spreading to the US. Actually, US banks hold a lot of dollars doled out by the FED. They do not want to loan the money out, because the FED pays them interest. As soon as they start loaning that money out, inflation will accelerate even more than it is doing now. So, the FED has two alternatives: 1. do nothing and watch the economy deteriorate more or 2. do another QE and accelerate inflation. If inflation picks up, it will force up interest rates on Treasuries, which could add as much as $1T/yr to the deficit. The CHANGE is HOPE-less.

Meanwhile, Rush is ridiculing the Obama re-election theme (re-elect me for all the good I would have done if the Republicans did not stand in my way). O'Bungle had a Democrat Congress for two years! Every day, the reckoning draws nearer. Gold is on the march. Today it hit 1,822/oz.

Where are the gold miners going?

The Gold Miner Index is working on the right shoulder of a reverse Head and Shoulder with the head being about 30 units below the neckline. This implies a breakout of XAU to 220+30=250.

The Two-Headed Monster.

There is an interesting interview with Jim Rickards on WTN. Rickards asserts that we are in a Depression brought on by excessive debt, resulting in tremendous Deflation (the loss of value of assets). Bernanke is trying to "cure" the condition by slowly devaluing the Dollar. In other words, creating Inflation. Rickards' solution is to devalue the Dollar all at once, pegging it to gold as 1 oz gold=$7,000. The US then would nationalize the banks and repudiate its debt. It would work like a reset.

There are several problems with Rickards' solution. Repudiation of US debt would wreck pension plans and leave the banks in government hands. Remember the US Post Office? Not exactly a thriving enterprise.

Fortunately, we already know how to cure a Depression. After WWI, the Country nosedived into a Depression. The President died in office and it was the Country's luck that Calvin Coolidge became President by succession. Silent Cal, as he became known, slashed government expenditures by 50% and ignited the "Roaring Twenties." That is the solution. While Medicare and Medicaid need some trimming (and Social Security should be privatized to increase returns), the problem resides in the Federal budget being too high causing Deflation. When the US entered WWII, Roosevelt got rid of "mark to market" which was an instrument to perpetuate the failure of banks.

How about the mining shares?

The DJI can't make up its mind whether it is still in a Bear Market or out of it and gold is consolidating of wiping out the shorts and finally passing above the 1,764 point. Now what? we might ask. And what about the gold and silver miners? So, I brought up a few on BARCHART and I was rather astonished by the similarity of patterns: a building REVERSE HEAD AND SHOULDER.

The first three graphs are Fortuna, GPL and Impact silver (silver miners), followed by NAK and THM (gold miners). The patterns suggest that a breakout is coming in about two weeks.

John Embry on gold miners.