Gold Bushwhacks Bears Again!

June 4, 2012 at 19:52

truthing

It’s happened again: Looming weekends seem to be getting dangerous for gold bears. And, once again, gold bulls sense a major breakout.

Two weeks ago, after making a new low for the year, gold violently reversed.

Last Friday saw an even more violent reversal. Gold for August delivery saw a gain of 3.6%, and there was a gain in the NYSE Arca Gold Bugs Index of 6.74%. In contrast, two weeks ago, gold and shares gained only 2.41% and 4.45%, respectively.

Last time, gold subsequently lost momentum as May wore on. But gold shares did not.

“Trader” Dan Norcini points out on his website: “The last time we had three consecutive weeks during which the mining shares outperformed the broader U.S. equity markets was in late October/early November of 2011. While May this year has been atrocious for the S&P 500, it has been an excellent month for the miners. June is starting out on a good note to say the least. …”

This will be pleasing for the respected institutional service The Gartman Letter, which has been making friendly comments on gold shares for some time.

Whipsawed out of half its gold position Wednesday, TGL bounced back by establishing a long gold/short S&P 500 Index holding on Thursday. After Friday’s slaughter in stocks, this might be an idea that some of Gartman’s numerous institutional followers find worth emulating.

Another service that has been saying interesting things is Gene Arensberg’s Got Gold Report, which follows the microcap gold shares but does extremely sophisticated work on the Commodity Futures Trading Commission’s (CFTC) commitment of traders (COT) report.

After gold’s strong mid-month bounce, GGR published on May 18 a report entitled “Help Is On The Way,” drawing attention to the important move in gold shares that week, after a period of unresponsiveness.

Last weekend, after a discouraging week, GGR published a very long and complicated video discussion of the COT data.

Entitled “COT — Funds High Short Positions Major Rally Fuel for Gold, Silver,” this argued, with plentiful charts, that the futures situation was as extreme as in the bottom in the crisis of mid-2008 — which occurred directly before the global financial crisis.

This week Arensberg’s comment on the HUI chart is bold: “A monumental reversal may, repeat may, be under way. … This is beginning to feel like a real deal post-capitulation rush higher.”

Most letter editors are understandably focused, with horrified fascination, on the consequences of the death throes of the euro.

Perhaps that’s why a normally significant gold item got little attention, except at the LeMetropoleCafe website: Turkey’s gold imports in May rocketed 150% over February to 19.47 tonnes — the highest since summer 2008 and a significant amount in anyone’s book.

Middle East press reports say almost all this metal is going to Iran.

What could the Iranians know?