Nobody Expects A Gold Reversal

Boy, the mood in precious metals is like a funeral directors' picnic right now. And the bad mood comes in spite of the fact that gold is making a decent attempt at putting in a bottom.

Gold closed down a bit yesterday. But it's up this morning (though off its highs), and silver is up, too. The fuel for the move may be that China's gold imports in October were HUGE.  According to Reuters...

China's net gold imports from Hong Kong climbed to their second-highest on record in October, as the country bought more than 100 tonnes of gold for a sixth straight month to meet unprecedented demand.

Mineweb adds ...

Chinese gold imports through Hong Kong accelerated in October to 131.2 tonnes ...  the seventh month this year that China has imported over 100 tonnes of gold and the sixth in a row.

The sheer tonnage of China's gold imports are amazing. It was expected to break 1,000 metric tonnes this year. Obviously that estimate was too low ...

China net gold imports from Hong Kong 2013 to date

Month	(tonnes)
January	20
February	61
March	136
April	77
May	106
June	102
July	113
August	110
September	111
October	131
Total year to date	967

But I can't emphasize enough, this is only gold imported through Hong Kong. China also imports gold through other routes, including Shanghai. So, its total import figures now look likely to be nearer 2,000 tonnes. Some analysts put them even higher.

Bottom line: Gold continues to move from West to East, seemingly at an accelerating rate. The West only has so much gold to sell, and the Chinese have seemingly bottomless pockets with which to buy.

So the China imports are one angle.  Now let me give you another one. As I wrote in my Gold & Resource Trader issue yesterday ...

"Funds that are long gold have hit a four-year low, while short positions spiked recently.  In other words, sentiment on gold got too extreme."

As an indicator of that sentiment (but also a fundamental on gold), Exchange-Traded Products (ETPs) that hold physical gold continue to sell. Their bullion holdings fell by 17.1 metric tonnes in the most recent week to 1,852.4 tonnes, according to Bloomberg data. That’s the lowest level since April 2010.

Now, let's look at two charts from Citigroup on gold and silver ...

Source

Citi's FX Technicals group is now bullish on gold, targeting $1,335 for gold in the short term.

Nobody is expecting a gold reversal, even a short-term rally. And that may just be why we get one.

Just something to think about. Have a great Thanksgiving, and let's all count our blessings.

All the best,

Sean

The Quest for the REAL City of Gold

Another blast from the past -- my story about "the city of gold," Timbuktu. Happy Friday, and have a good weekend.

Quest for the City of Gold

El Dorado … Cibola … Quivira … these are all fabled “lost cities of gold” that fired up the imaginations of explorers who pursued their dreams to the four corners of the Earth. These cities only existed in the fevered imaginations of storytellers.

But there was a real city of gold … or at least, a city richly associated with gold. Its discovery by European explorers is the story of unlocking mysterious Africa … a tale that rings down through the ages … and holds lessons for investors today.

The real fabled city of gold is Timbuktu. In present day, this incredibly remote city at the southern edge of the Sahara is not much to look at.

Timbuktu today -- not much to look at

But in 1324, Timbuktu made a dazzling impression on the civilized world when its emperor, Mansa Munsa, passed through Cairo on a pilgrimage to Mecca.
The emperor arrived with a caravan of 60,000 men, all dressed in fine Persian silk and brocade. He was preceded by 500 slaves, each carrying a golden staff weighing four pounds. And Munsa was followed by a baggage train of eighty camels, each weighed down by 300 pounds of gold.

The Golden Emperor …

Munsa made his pilgrimage and passed into history. But he spent so much gold that he flooded Cairo’s market with enough yellow metal to last the next dozen years.

By the late 1700s, when the Europeans started carving up Africa, Timbuktu was lost in the mists of time. Arabs along the Mediterranean coast may have heard of Timbuktu and could even visit it, if they could survive the grueling journey across the Sahara. But Europeans who tried to reach it were summarily killed by tribesmen who considered non-Muslims “enemies of the prophet” (and juicy targets for robbery and murder).

There was another approach to Timbuktu — through the fever swamps of Africa’s east coast. But these swamps were known as “White Man’s Doom” for a good reason, because the Europeans had no resistance to the diseases that plagued the area.

You might think these would be good reasons to stay away from Timbuktu. But the British and French explorers of 1800, eager for fame and fortune, cast covetous looks at one of the last uncharted places on Earth.

The Last Blank Space
On the Map …

By 1800, there remained few corners of the Earth upon which some European foot had not trod. But most of Africa’s map remained blank.

Africa spreads out across 11 million square miles — 3 times the size of the United States, including Alaska. Yet a well-regarded map of Africa produced in 1829 left most of the interior spaces empty. That’s because it was easier to map the surface of the moon with a telescope in 1829 than to produce a detailed map of Africa.

And no destination in Africa burned brighter in the fevered imaginations of Europeans than Timbuktu, a “city paved with gold.”

The Geographical Society of Paris offered a price of 10,000 francs for the first European to travel to Timbuktu and return with proof of his journey. And the race was on.

Many of these expeditions are covered in an excellent book, The Race for Timbuktu by Frank Kryza. I highly recommend putting it on your Christmas reading list.

British expeditions were backed by leading figures of the day. But one brave explorer after another would set foot in Africa’s interior only to end up dead in a matter of weeks. The killers were …

Disease. Malaria and other illnesses infested not only the fever swamps but also the oases dotting the desert.

Poor planning. Not only did the explorers have to pack everything they needed for the months-long journey on foul-smelling, spitting camels, but they also had to bring enough money to bribe local warlords. Running out of funds was a common calamity for the British explorers.

Poor navigation. Finding Timbuktu was one problem … finding precious water holes along the way was another. “Whole caravans of a hundred men simply vanished like ships in the ocean because their calculations were off by a hundred yards,” Kryza writes.

Attack. The Arabs, Tuaregs and various tribes of the desert were constantly at war with each other. So traveling in disguise didn’t work that well, because eventually you’d be disguised as someone’s enemy.

Clapperton

Oddballs in the Desert …

Still, lured by tales of Africa’s “city of gold,” the explorers pressed on.

My favorite explorers are a real “odd couple” — Captain Hugh Clapperton, a Scottish-born adventurer, and Lieutenant Dixon Denham, a preening social climber with a mean streak a mile wide.

Clapperton, Denham and their team journeyed across the Sahara and were the first Europeans in recorded history to visit Lake Chad. Along the way, the two men grew to detest each other, and finally resorted to communicating only by writing letters to each other.

Denham

Local political intrigue and illness prevented them from pushing on to Timbuktu, so they returned to Tripoli. That was enough for Denham, who was just using the exploration to boost his career.

The Lady
Or the Crocodile …

But Clapperton became obsessed with finding Timbuktu. And his obsession ignited when he found out that another explorer, Alexander Gordon Laing, was already making a new attempt south from Tripoli. So Clapperton hurried to take his chances through the fever swamps of Africa’s east coast.

Most of Clapperton’s party died of disease in the first 150 miles. Then, exiting the swamps, the survivors entered the country of the Yoruba. There they found a happy, healthy people who were incredibly friendly to the white explorers.

Laing

Perhaps too friendly. Clapperton and his surviving team drew the attention of the Widow Zuma, a rich schemer who wanted to marry one of the white men as a way to further her political ambitions. Clapperton might have gone for it.

But the local male ideal of feminine beauty was “the more bulk, the better.” Zuma was the size and shape of a walking water barrel wrapped in fine threads. And she relentlessly wooed the British explorers from one end of the country to the other.

Clapperton and his crew fled Zuma’s attentions, swimming a crocodile-infested river to make their escape.

Finally, though, Clapperton succumbed to disease and joined the rest of his men in the grave. A lone, faithful servant turned back to report the unhappy news.

Success …
And Disappointment

Meanwhile, Laing, who was racing Clapperton to find Timbuktu, endured one hair-raising adventure after another and finally reached the fabled city. And what a disappointment!

All Laing found was a city of mud!

The city of gold was a city of mud. A thousand years old, it was crumbling. Its population, down from 100,000 at its peak, was reduced to 12,000 and devastated by war. Timbuktu’s golden glory days had long since passed by the time Laing strode through its gates.

Laing was in Timbuktu only a month before he was chased out for being an unbeliever. Then he was murdered and robbed by the men who were supposed to guide him to safety.

Finally, a Frenchman entered Timbuktu and returned to tell the tale.

Rene Caille journeyed from the West Coast of Africa disguised as an Arab, surviving months of illness and hardship. He returned to France to collect his prize from the Geographical Society of Paris and was greeted as a hero. But the fact that Timbuktu was NOT a city of gold was certainly a disappointment to the people following the drama.

Caille won 1st "Amazing Race"

Within a short time, the various European powers carved up Africa’s rich interior under the guise of stamping out slavery. And Timbuktu became just another bump on the dusty trail.

What Investors Can Learn
From the Men Who Sought Timbuktu …

Persistence Pays Off. Reading the tribulations and exploits of the early explorers, I was constantly reminded that those who persevere can triumph. Refusing to be discouraged by early setbacks was what separated the men from the boys. Even those who didn’t find Timbuktu sometimes found enough to make the journey worth their while.

Be Prepared and Be Flexible. Anything can happen, and often did on the trail from Tripoli to Timbuktu. Whether it was an attack by tribesmen armed with poison arrows or the amorous advances of a milktruck-sized widow, the best explorers planned ahead and adapted when plans changed.

Be Open to New Opportunities. Many of the great adventurers had temperaments that drove them to look beyond the next hill. If you never stretch yourself to try new things, you will have missed out on all the thrilling adventures life has to offer. Likewise, while the bear market has burned many investors, those open to new opportunities will likely reap the greatest rewards.

Don’t Let the Sandstorms Throw You Off the Trail. More than once, the explorers lost the trail in the sand-swept Sahara. But they knew the general direction they had to travel, and they pressed on. Today, we need to keep our eyes on the big picture and not let short-term noise throw us off.

Let’s Apply Those
Lessons to Gold …

(Updated chart)

This 7-year chart shows the comparative performance of gold, the CRB index, which tracks a broad basket of commodities, the S&P 500, the 10-year Treasury note and the U.S. dollar. Over a 7-year period, gold has more than doubled. The S&P 500 is FINALLY starting to play catch-up. The CRB is up 10% not even keeping up with inflation. Treasuries did a little better. And the US dollar index has lost value over the long-term.

It’s just another case of gold’s eternal value shining through. Much as it beckoned British explorers over vast distances of space and time to Timbuktu, gold now beckons us today.

The explorers of the 1800s arrived in Timbuktu centuries too late to enjoy the city’s golden age. And that leaves us with today’s last lesson: Timing is everything. Don’t be left in the dust when the next upward leg of gold’s journey begins.

Why I Bought Junior Gold Miners This Morning -- & Banked Nice Gains

This morning, I took nice half-gains in the Guggenheim Solar ETF (TAN). 

Why? TAN is down while the market is up, always a warning sign.  I'm out on the first half of the trade with 28% gains -- not bad for a trade I entered in September. I've moved up my close-only stop a lot, too. 

Meanwhile, my India position seemed to have stalled. So, I exited all of my WisdomTree India Earnings (CPI) at a nickel-a-share loss, and HALF of my WisdomTree Dreyfus Emerging Currency (CEW) at a decent 5.75% gain. I moved up the stop on CEW, too.

Bottom line: Taking gains before the weekend makes me happy, and I have less to worry about. AND I'll have money to put to work next week, if I want to. I traded more than I wanted to this week, but the opportunities were there. We'll see what happens next week.

I also added a new position this morning. After yesterday's action in gold, I'd made up my mind to buy something in precious metals if we got a pullback. I was leaning more toward an ETF than a single stock, for reasons I'll get to.

First, some news and charts. Specifically, let's start with these charts from Mark O'Byrne at Goldcore.com. Mark writes ...

A deeper look into China's gold holdings warrants attention (see charts).
Its last reported gold holdings in April 2009 were 1,054 metric tons. After adjusting for net imports from Hong Kong and domestic output, the figure is closer to 5,086 metric tons. If one were to take away gold uses for jewelry, industrial, and other categories and only add implied bar demand to central bank holdings, the figure is likely closer to 2,710 metric tons according to Bloomberg Industries’ Andrew Cosgrove and Kenneth Hoffman.
In just 10 years, China’s gold holdings could catch up to the U.S., based on adjusted Chinese consumption for jewelry, industrial and other uses and using implied bar demand as the primary driver of incremental central bank additions. 

Some other interesting news ...

• Gold premiums in India, the world's biggest buyer of the metal, stayed at a record high of $120 per ounce. Thailand has now slapped a 15% import tax on gold and jewelry being shipped to India, as India's government cracks down on importation loopholes. I'm sure the gold smugglers applauded.
• Bloomberg reports that gold holdings in exchange-traded products fell 3 metric tons to 1,886.2 tons yesterday. So far this year, gold assets held by ETPs have dropped 28% reaching the lowest since April 2010 on Oct. 21. This reverses the build we saw on Tuesday. Gold holdings in exchange-traded products rose by 6.5 metric tons on Oct. 22, the most since October 2012, according to data compiled by Bloomberg. So, if fund demand for gold is bottoming, it's a bumpy bottom. 
• And The U.S. Mint sold 39,000 ounces of American Eagle coins so far this month, triple September’s total, data on its website show. Don't get too excited -- 39,000 ounces is only 1.21 metric tonnes. But this may be indicative of sentiment. In fact, we may be seeing a bottom in sentiment.

Now, let's look at one of the major drivers of the gold price -- the US dollar.  The US dollar index is heading down to test that support I talked about previously ...

(updated chart)

I put #3 on there because someone sent me a note trying to say that was a trend (and potential support). Good luck with that. Maybe you'll luck out.

Anyway, What happens when the US Dollar Index tests support #2 is anybody's guess, but the trend is your friend, and the trend is lower.

And as we know, the recent trend is lower dollar = higher gold + higher miners.

This brings me to my next pick. I was considering adding the Global X Gold Explorers (GLDX), because it popped hard yesterday.

But it worries me that a stock like Pretium (PVG) was one of the big gainers.

You can read Pretium's sad story HERE. Basically, the big deposit they were developing may not turn out to have nearly the gold they thought it did. In fact, a geologist hired to assay it said the Valley of the Kings deposit at the Brucejack Project has "no valid gold mineral resources."

But on Pretium's website, you can read that Valley of the Kings is "comprised of high-grade visible gold stringers within a lower grade gold quartz stockwork system. The Valley of the Kings hosts Probable mineral reserves of 6.6 million ounces of gold (15.1 million tonnes grading 13.6 grams per tonne gold)." 

To paraphrase the great Inigo Montoya, "I do not think the word 'Probable' means what you think it means."


  The scary thing -- for me -- is that Pretium's Brucejack Project was recognized earlier this year with a discovery award from the Prospectors and Developers Association of Canada.

That indicates to me that the single-stock risk -- in explorers anyway -- is higher than average right now, or at least, higher than I had realized.

So I can't see buying any single explorer at this time. The risk is just too great.

I say that, but did you see what happened yesterday? Pretium rallied hard! Sure, many stocks rallied -- miners, developers, explorers. But who's buying Pretium? ...

(Updated chart)

Maybe it was short-covering, maybe we're seeing the Greater Fool theory at work.

Obviously, if Pretium can get a bid, viable explorers should get bids. And sure enough, yesterday, everything went up. But then I ran this next chart, comparing the gains made by the GLDX in the last (June 26 to August 26) rally. I compared the GLDX's performance against junior miners (GDXJ), silver miners (SIL), big gold miners (GDX), silver (SLV) and gold (GLD) ...

(updated chart)

You can see that the explorers did not significantly outperform junior gold miners or silver miners in the last rally.

So why would I buy a basket of explorers when I can buy a basket of producing junior miners? It seems to me that's where a lot of the value is anyway.

Why not buy a single junior miner?  Well, that's what I already did with Silvercrest, Primero and B2Gold. And if my thesis is correct, and precious metals and miners are on the cusp of a big rally, then we're at one of those rare stages in the market where you don't need to be as picky as you might be other times.

So, I bought the GDXJ at $40.72, right after the open.  It wasn't the low of the day, but it seems like a good price. We'll see if I'm crying in my beer come Monday.

So far, buying the dips has turned out to be worthwhile. I'm not your investment adviser -- do your own due diligence, and do what is best for your own investments.

Good luck, good trades, and have a great weekend.

2 Buys in Gold Today

Here are two stocks and funds I think were worth buying today. We'll use the prices indicated on the charts for tracking purposes ...

(Updated chart)

Bullish gaps in the GDX usually have follow-through, and MACD gives us a bullish cross-over for the first time since July.  You could put a price target at either the September high or the 200-day moving average, which is coming down, but let's say 31.25. The trailing, close-only stop would be at around 22.70.

So, there's 8% downside risk, and the 31.25 target gives us 26% upside. Half position only.

And for those daring enough for single-stock risk ...

(Updated chart)

B2 Gold is one of my favorite miners. It hasn't broken out yet, but its gap higher today to its downtrend raises the possibility of a follow-through.

B2Gold has great management, is a low-cost miner, has three operating mines in Nicuaragua and the Philippines, and plans to have a fourth mine coming online in 2015. Production is expected to grow from around 370,000 ounces of gold per year in 2013 to over 550,000 ounces of gold per year by 2015. The company also has money to burn, or at least enough to carry them through hard times. 

At at 1.5 million shares a day, this stock is very easy to trade in and out of. And also hard (or at least harder) to push around than some other small-caps.

 My initial price target is 3.40. The trailing, close-only stop is at around 2.20. That gives 44% upside, and 6% downside risk. Very acceptable.  Half position only.

If gold continues higher, I'll have more picks tomorrow.  But I really want to make more buys in energy, and I have a couple banks on my shopping list as well. Mañana.

I'm not your investment adviser, and you should be doing your own due diligence. What works for me may not work for you. Don't buy something just because some idiot on the Internet likes it.

That said, good luck and good trades, whatever you buy.

Bottom Alert: 2 Must-See Signals in Gold

Gold is rallying nicely today. This comes after the test of the neckline of the head-and-shoulders pattern that I talked about a few days ago. It sure LOOKED like gold was going to break down. But once again, the market surprises the greatest number of people. Let me show you on a chart of the SPDR Gold Trust (GLD) ...

(Updated chart)

By this time, weary investors are saying, "it's only a dead-cat bounce." And maybe they're right. Maybe.

After all, the irony that gold plummeted during the debt crisis -- when everyone expected it to rally -- and is rallying now that the crisis is over -- can't be lost on us. 

So maybe this IS just a dead-cat bounce.  Maybe the gold bears are right.

Let me show you why I think they're wrong, and why you can start (cautiously) adding positions at this point.

And maybe why there are better metals to buy than gold.

Signal#1: Good News Is Good News

The US dollar is cratering today, plunging near eight-month lows.  This is at least part of what is fueling today's $30+ move in gold.

(Updated chart)

This is how it's supposed to work -- gold and the dollar are usually inversely correlated, because gold is priced in dollars (at least in this country. Gartman prattles on about his "owning gold in terms of yen.")

But it was just last week that gold and the dollar were moving in the same direction. While unusual, this actually went on for weeks. In that case, the fact that the dollar was down did not help gold. That's when "Good News was Bad News."

When any investment goes down on good news, that's a sure sign it wants to go lower. That's a big part of the reason why I've been bearish on gold, lately.

Now, the tables have turned. Gold is going up on good news. That's bullish.

Will the US dollar continue to go down? Well ...

• As the Reformed Broker says, "The incoming Fed Chairperson (Janet Yellin) is the most dovish in the institution's 100 year history. There will be no taper talk whatsoever so long as employment data remains muted. At least not this quarter and probably not until the spring." More economic stimulus weighs on the dollar, because dollars have to be created in the act of stimulus. 
• I believe the main reason the Fed won't taper is that a good chunk of one of our political parties is still taking crazy pills. Do you think we won't have ANOTHER, worse debt ceiling fight when it comes up again in February? I'd say we're headed for a kerfuffle, only this time the Tea Partiers have learned from their mistakes and will come back meaner and more determined. Anyway, short-term, that means more stimulus.
• China's Dagong Global Credit Rating cut America's credit rating by one notch to A-minus from A on Thursday, saying a deal struck by Congress to raise the government's borrowing ceiling failed to solve the cause of its debt problem. China is pretty nervous as it is the largest foreign owner of US Treasury debt. First Fitch, now China downgrades US debt. More downgrades, if they come, could continue to kick the dollar when it is down.

A weaker dollar is bullish for gold (apparently, once again). Gold acting bullish on good news is the first step in a gold recovery.

It could get more bullish if Gold goes up on bad news. Well ...

Signal #2: Gold Rises in the Face of Continued Selling By ETFs

Exchange-traded products (ETPs) have sold 731 tons valued at $30 billion this year, data compiled by Bloomberg show.  We already know that's the major bearish force in gold.

In fact, selling by these ETFs, or ETPs as Bloomberg prefers, continued even yesterday, when gold ended the day higher. ETP assets reached 1,900.8 tons yesterday, the lowest since May 2010.

But not only did gold rise yesterday -- after starting the day in the hole -- it's up again today.

Sure, you can say that data shows selling by ETFs has slowed, so it's easier for gold prices to rise.  But isn't that in itself a bullish development?

By the way, the gold that is being sold out of the COMEX and GLD is going straight to China.

So, we have gold going up on bad news. That's bullish.

So these are two things I'm watching. Now let me show you a third thing that indicates there may be a better way to play this than gold. 

Here is the price action in gold, platinum, palladium, silver and the S&P 500 since gold's recent low in June ...

(Updated chart)

As you can see, since gold made its low in late June, it's up about 7.71%.  That's just about the same performance in the S&P 500, which is up 7.64%.

But platinum is up 9.47%.  Palladium is up 15.61%.  And silver is up 17.68%.

Silver is showing strength here.  Shouldn't you capitalize on that fact?

If I were to add any positions here, they would be half positions. Gold, silver, gold miners and silver miners still have serious overhead resistance. They could still bang their heads and head lower. There are still plenty of challenges that remain.

I believe we're at a gold bottom. But it may not be THE bottom.  

Still, if you're a risk-taker, it sure looks like the odds just shifted in your favor. I am not your investment adviser; do your own due diligence before buying anything.

Gold Price Watch: 10 Fundamental Truths on Gold

Here are some facts we know ...

• Central Banks keep adding to their Smaug-sized hoards of gold. But they're still below levels of a decade ago.

Source: Sharelynx.com

• Net Chinese gold imports through Hong Kong plus the country’s own domestic production, are together likely to reach well over 1,500 tonnes in calendar 2013.

• Despite government attempts to discourage imports, India's gold imports should be close to 1,000 tonnes this year. More if you include all the smuggled gold.
• Together, China and India will account for nearly all the world’s 2013 newly mined gold supply.
• In percentage terms, they are consumers of more than 60% of global gold.
• Selling of physical gold by exchange-traded funds is the biggest bearish force on the market right now. 

• Investors sold 711.8 metric tonnes from bullion-backed exchange-traded products this year, erasing more than $61 billion from the value of the funds, according to Bloomberg.
• But the sheer amount of gold being produced also had an effect, at least through the end of 2012. The world produced 2,848 metric tonnes of gold in 2012.

• How much will production change with gold prices under pressure? Gold produced by US mines has dropped 5% from 2012 to-date totals and is almost 10% lower than 2011 to-date totals.

• The price of gold is well under the average all-in cost of mining gold, which is $1,538, according to Societe Generale.

These are some important things to keep in mind when considering investments in precious metals and miners.

Gold Price Watch: The Market Is Terrified of a Broken Neck!

As I write this, gold is up $10 an ounce, but the big action came on Friday. That's when gold tested the "neckline" of a head-and-shoulders pattern. This really worries gold traders, because if gold breaks this neckline convincingly, we could see another 10% to 15% downside in gold.

The test came on rising volume, which in this case is bearish. Measuring the potential move down in dollar terms, I would look for a drop to $1,110 to $1,125.

In this scenario, you don't want to be holding any miners that can't survive at $1,110 per ounce, because the market will sell them hard.  But all gold miners should come under pressure, so there may not be any good options on the bullish side in the short-term. 

If you've been reading my recent posts, you know I think the smart thing to do now is invest in energy.

As for gold, from a bullish perspective, what a broken neckline of a head-and-shoulders pattern means is that we may be coming up to an EXCELLENT buying opportunity.

Think of it.  All the gold miners you ever wanted being sold for pennies on the dollar.  If you are bullish metals longer-term, the bottom that comes after this move is what you've been waiting for.

The bottom will be a moving target. 

In any case, the test isn't over.  And let's look at some gold fundamentals ...

• The major bullish force in gold right now is Chinese consumer demand. And China's annual consumer inflation rate rose to a seven-month high of 3.1% in September. When people are worried about inflation, they tend to buy more gold. In other China news, that country's imports of energy and base metals rose strongly in September, driven by a seasonal pickup in manufacturing and restocking ahead of the October Golden Week holiday.
• The U.S. Congress and President Obama made little to no progress over the weekend on reopening the government and agreeing on a measure to extend the government debt ceiling. So that's putting a safe-haven bid in gold this morning, along with the expected short-covering. On the other hand, the chances of a deal rise with every passing day, unless you're a real pessimist.
• Gold holdings in exchange-traded products (ETFs) dropped 7.6 metric tons to 1,909.8 tons on Oct. 11, the lowest since May 2010. Selling of metal by funds is the biggest bearish force in the market right now.
• Gold supply remains tight in India at the start of festival season, and premiums on physical gold are rising.

This is all stuff to keep in mind as we see gold zig and zag around that neckline this week. Will it break, or are we at the beginning of the next rally? Stay tuned.

Charts on Gold, Plus Who's Got the Mo-mo Mojo?

I'm going to write about gold today, because judging by my stats, EVERYBODY is interested in gold. But then I'm going to turn to other, more immediate ways to make money. Seriously, you should be checking out the action in other parts of the market. In fact, I'll show you a chart of Apple today that, if it were a chart of gold, would have the gold bugs flopping around in puddles of their own jizz.

Anyway, let's start with the central banks. Man, they have been buying a lot of gold, haven't they? Last week, I covered the latest statistics, which would seem to indicate that central banks are going to continue to add to their Smaug-worthy gold hoards at an avaricious clip -- as they have been doing for years.

This has continued despite the correction in gold. Since gold peaked, central banks have bought 884 metric tonnes of gold. Russia has bought the most, at 171 metric tonnes.

Well, now the central banks are saying they're through, dammit!

Speaking at the London Bullion Market Association in Rome, Juan Ignacio Basco, deputy general manager at the Central Bank of Argentina, said the 2013 volatility in prices had "definitely changed" attitudes among central bankers towards gold investment.

"We don't feel comfortable with gold's volatility," said Basco, "even though it's only a small part of the portfolio."

Another person on the panel with Basco added: "Many central banks are now prioritizing other assets over gold."

Who Are You Going to Believe, Me or Your Lying Eyes?

How unfortunate that Argentina's actions do not match its words.  That country has bought nearly 62 metric tonnes of gold for its central bank reserves over the last decade. It added the last 8 tonnes at record-high prices between July and October 2011. And this gold-buying came after Argentina sold down its 120-tonne gold reserves down to near zero in the late 1990s.

Well, if any central bank would have a reason to sell gold right now, it would be the U.S., right?  The U.S. has 8,133.5 metric tonnes of gold -- worth about $344 billion in today's market. That would cover some checks now that the Congress has de-funded the government.

But Uncle Sam has no intention of selling that gold. We know that because a Treasury official quoted by Marketwatch.com said: "Selling gold would undercut confidence in the U.S. both here and abroad, and would be destabilizing to the world financial system.” 

So, the Treasury considers U.S. gold holdings to be a key element in maintaining confidence in the financial system. Some "barbarous relic," eh?

Also, there's the embarrassing fact that $344 billion is only enough to keep the government going for a month. What then?

And then there's the fact that in January, Germany's Bundesbank confirmed that it plans to take 1,536 metric tonnes of its gold that is stored in the U.S.  That process will take a few years.

I wonder if Uncle Sam even has that gold to spare. I also wonder if Uncle Sam wants to buy that gold on the cheap. But I'll leave those thoughts to the tin-foil hat crowd ... for now. 

In any case, I'd say that the central banks have shown their hand ... and it's a hand that likes to own a LOT of gold.

What If They Gave a Crisis and Nobody Came?

People keep saying and writing that the budget battle/debt ceiling crisis is bullish for gold.  Unfortunately, gold doesn't agree. In fact, gold fell more than 2% last week despite the budget debacle.

Gold fell despite the fact that Treasury secretary Jack Lew told CNN on Sunday, "Congress is playing with fire!" Because "if the United States government, for the first time in its history, chooses not to pay its bills on time, we will be in default."

So why isn't gold up? I think part of the reason is the same one I laid out in September -- that this crisis is artificial and can end anytime House leader John Boehner feels like it.

By the way, let's revisit that chart I posted in my September article, "Your Next Buying Opportunity," in which I made the case that you should buy the pullback.

(Updated chart)

We haven't had much of a pullback at all. No wonder everyone is so freakin' calm. As far as the markets are concerned, there is no crisis.  So is it any wonder that gold is drifting sideways, despite the fact that the US dollar is near an 8-month low?

Investors are not very worried and do not expect any debt ceiling rupture to last long. Heck, just like me, they're all sitting in cash, waiting for that sell-off to buy it.

But listen, my friends. If you're focused on gold, then lift your myopic eyes out of the muck of US politics and focus on other parts of the world.

Bullish Forces for Gold Around the Globe

In India, gold prices are surging as demand picks up. Holiday season is around the corner.

In China, the physical gold deliveries on the Shanghai Exchange are growing ENORMOUSLY. 

Source

Look at that surge in gold sales! If this was happening in the U.S., I think CNBC would be broadcasting from the floor of the COMEX every damned day.

By the way, Sun Zhoaxue, president of China's biggest gold mine, says: "The average Chinese person only holds 4.5 gram of gold, that is far below an average of 24 grams per person globally."

Do you think the Chinese gold rush is over? I'd say it's barely started!  Just to get equal with the rest of the world China would have to import or mine another TWENTY-FIVE THOUSAND metric tonnes of gold and allocate the biggest part of this among the population.

And the Chinese have a cultural affinity for gold. They aren't settling for "average."

Gold has its problems.  And some people are focused on the wrong things -- like the obsession with gold eagle sales.  The markets for gold in India and China dwarf any gold eagle buying in the U.S. to mere molehills.

But if gold is your obsession, then focus on the big picture.  And the big picture is quite bullish for gold.

Chart Fiesta -- GLD, Alacer and More

In the short-term, gold and the GDX keep banging their heads on the 20-day moving average like a 7-foot guy walking through 6-foot doorways.

(Updated chart)

There's not much joy there, amigos. Not in the short-term. A wise man would wait for the trend to change.

That said, do you want to see some bullish gold miner charts? Sure ya do. You just can't help yourself.

(Updated chart)

First we saw Alacer break out of a lower range and move to a higher range. Now it looks like somebody keeps buying Alacer on the dips ... and they're getting impatient. You can credit rising production, project expansion, the sale of non-core assets -- it looks good.

Here's another that might surprise you ...

(Updated chart)

Remember when we'd all written Bear Creek Mining off for dead? Well, now the thinking that the geopolitics in Peru are turning more friendly. And that's breaking life into a stock, and pushing it toward a potential breakout.

I don't own either of these stocks.  You shouldn't either, unless you do your own due diligence and buy it for your own reasons.  Don't buy something just because a fat-head puts up a good looking chart. If you do something that stupid, let me know -- I'll reach right through the intertubes and slap the stupid off your face.

Now, I promised you a sexy chart of Apple, didn't I?  Here you go ...

(Updated chart)

You can see Apple put in a double-bottom. Then it broke through overhead resistance, which it retested as support. Now, it's coiling up. The next move should be a breakout. $600 could be in Apples' reach.

This is why the tech-heavy Nasdaq-100 is kicking the S&P-500's ass ... and running rings around the Dow.

Hell, I could go on about bull markets all day. I haven't even talked about the bull market in select energy stocks (a topic for another post).

The point is, if your investing universe begins and ends with precious metals, you're missing out. I like precious metals longer-term, and I think there are some incredible bargains you can pick up in the metals right now IF YOU HAVE PATIENCE.  I think the global trends point to much, much higher prices longer-term.

But if you want some boom-boom and vroom-vroom in the short-term, you need to look for the mo-mo mojo elsewhere.

When will gold miners finally find their mojo?  Stay tuned.