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One of the more common themes during the parabolic moves in gold and silver was that the US dollar was on its last legs and ready to die and that anyone wanting to survive needed to buy silver and gold to protect themselves from the day the dollar died. (didn’t one of those silver stacker fear preachers make a video about that? moving on …) The financial crisis gripped the world in late 2007 but didn’t really hit everyone in the head until 2008 and 2009. We saw some major movements in all equity markets, commodities and currencies. As I stated, one of the central themes was the the US dollar was dead and as I noted above, the only true currencies that were going to survive were the “hard” currencies such as gold and silver. For the record, whether or not silver is in fact a currency metal or an industrial metal depends on what camp you fall into. The ultra-bull camp will often flip-flop depending on the story they intend to sell that day so I guess it all depends what camp you are in. However, Dr. Copper has been telling us for a while that it thinks the world is headed for another economic slowdown and silver and platinum, both industrial metals in my eyes, have faced the consequences as I posted on March 20th giving you all the heads up on what might occur if silver was to follow their lead. True enough, platinum and copper did lead the eventual resolution in gold and silver prices. In any event, any long term readers of my blog know that in late 2011 I wrote a very lengthy piece in which I asked readers to strongly consider whether or not we had seen the end of the decade long bull market in gold. Remember, nothing goes up forever and this was the theme I was trying to hammer home. In fact, I have been extremely bearish both metals since we nailed the top in gold in 2011 which is why only 2 months later I wrote that piece speculating that we had seen the last of $1900 gold prices for a while to come. I wrote on December 13, 2011 that it might be time to acknowledge the end of the gold bull market. I remember many who took that stance, including myself, were clobbered by the ultra-bulls at the time, but the reality is, that despite a few contra-trend bounces, the clear overall trend of the gold market since that time has been down. The long and short of it is that the ultra-bull camp who predicted that QE would spell the death of the dollar and the endless rise of the metals has pretty much failed with the argument. Except for the massive parabolic move by the metals and especially silver, pretty much all of the impacts of the last two measures of easing has been priced out of the metals, especially silver. I would argue that pretty soon, both metals will have lost their QE punch. As for the dollar, as I predicted here before Christmas, it was going to make a run and it has done exactly that, gaining significantly since that time. The following charts demonstrate why we are on the precipice of gold’s future direction as well as the dollar’s direction. (HERE AND HERE). Laugh if you will but I am of the view that the dollar is the haven and will remain so for the foreseeable future. Dollar doomsday prophets will argue the dollar is on its last legs but I would argue that it has taken a few punches but has survived. First the US Dollar. Note the bull run it had between 1995 and 2001 when it reached its all time high on the index. Ever since that time it has been on a decline with the blue line on the chart marking the upper line of the down channel. Recently, I witnessed the possibility of the dollar putting in a double bottom. Double tops and bottoms are usually seen at the end of longer term moves. Based on the action of the dollar, it has now punctured through the top line of the bear market channel and has the potential to start moving up again which would lead gold and silver to come back down. It is no coincidence that the bull market in gold started with the bear market in the dollar. Now that the dollar has broken out of its down channel that had been in place since 2000, we may see the dollar start to come back to life, especially if we see, as I anticipate, a major stock market correction on the horizon. The dollar, not gold will be the haven for investors as it was in 2008 and 2010.  
How does this relate to gold? There are two charts that really show the same picture. The first chart shows the various stages of the gold market. As you can see, for the first time since the financial crisis, the weekly chart shows that gold has dipped below it’s 50 day moving average and continues to work its way to the 200 day moving average. It is not surprising hat the golden cross was made at the time the bull market started. We have now seen a flattening out of the 50 day moving average and it has started to slope down. Should the 50 day ultimately move below the 200 day moving average on the weekly chart over this time frame then I would solidify my view that the gold bull market is finished. (I am already in that camp but will wait for a break of the longer term support line discussed below) The second chart shows the gold channel during its bull market. note that gold is now flirting with the bottom line of that channel. Yes, it pierced below it during the liquidity crisis of 2007-09 and quickly rebounded but that move could have, in hindsight have triggered the last phase of the bull market. Every since the bull market in gold began we have not seen what now amounts to 17 months of essentially, sideways action. Gold keeps making lower lows and lower highs. This is not a good sign. As indicated on the chart, it would pose a very bearish picture if gold were to fall below the lower channel of that trend line. 
Here’s a different look at the chart …(Note, although my annotation indicates that gold must hold the lower channel line and it did break beneath it, it is not uncommon for any equity in a channel to probe above or below that channel…follow through is always needed but as of today, that lower channel line is breached and this can lead to accelerated selling) 
Let’s go a little closer to try to determine some support/resistance: 
The bottom line is that people were sold a bunch of goods implying that easing and the economic picture was going to kill the dollar and send gold to the moon. Even with the threat of contagion and bank runs in Europe now, especially since the Cyprus situation broke, gold did not capture the panic bid as was predicted. At the end of the day, people want cash in their hands, not metal. You still can’t walk into a store and purchase something with metal. In fact, James Turk, one of the most bullish analysts for silver has been wrong ever since the silver crash of 2011 calling for silver to break out at any time to his target of $75.00. (We’re still waiting). Anyone associated with Sprott, Sinclair, King World News, Zero Hedge, Max Keiser, Rick Rule and the endless fear mongering folks from the National Inflation Association to the newly formed Future Trends (which is just a re-hash of the old doomsayers that permeated You Tube) and any likeminded “stacker”. Not one of these folks ever recommended lightening up on the metals despite what was staring them all in the face. Not even a fabricated “insider” could get the GATA camp to sell their story to a judge as all claims against JP Morgan for price rigging were dismissed. (Sure enough, the Sprott and Rule camp are now touting Platinum ..more on that in a few days). Don’t believe me? Thanks to a great contact for sending me these links. You can decide for yourself what Sprott’s next big “pump” will be. Why the PGM space is like uranium 10 years ago – “For centuries, PGMs have been a means of exchange and a store of value.” Great catch .. I thought gold and silver were. My Platinum Chat With Rick Rule Why Rick Rule Bought $280M of Platinum and Palladium Sprott’s Rick Rule: Is it Time to Sell Gold & Silver and BUY Platinum & Palladium? Infographic – for those who finding reading words hard Platinum & Palladium’s Breakout Year I wonder how Sprott’s hard-core followers are going to react to this? Cash remains king. Everyone pushing the gold and silver ownership meme will argue that fiat currency is doomed and when the end comes, gold and silver are what you should own. The question I have for them, which is never answered in their posts, is how do you make change for a half ounce of silver when doing some grocery shopping or when paying your bills? Where will the money come from when it comes time to sell that gold and silver if the paper money is worthless? Are you essentially changing your gold and silver for worthless fiat currency in order to buy your consumables and necessities? How did holding silver bullion help the people of Cyprus or Greece? If in fact gold and silver ARE the only true currencies then why does James Turk’s GoldMoney only accept fiat? How come all other subscription services named above ONLY TAKE FIAT as a form of payment for their newsletters that claim that gold and silver are the only real money? You see, there will always be a monetary system in place. Whether or not gold and silver ultimately ends up backing up any currency is not the issue here because the fact remains you will need your paper money in order to carry on your day to day activities. If true financial and global financial calamity occurs then people will barter for things they can use. (I will trade you my can of corn for that bottle of water etc) People won’t be trading gold and silver nuggets at a time where people will need necessities of daily living (should the ultimate end-game occur as predicted by many of the fear mongers in the perma-bull camp). The other day, Citi analyst Tom Fitzpatrick maintained that gold and silver would now surge in the wake of the Cyprus “chaos”. Of course, he gave this interview to Eric King of King World News. To use Fitzpatrick’s own words, the events in Cyprus will now be the catalyst that will see the price of gold and silver “surge”. He believes there is fallout yet to come to lead to this pricing event. His call was based on technical levels that I wrote about here as well last week citing $1620 as a breakout area. Remember in 2012 this same analyst indicated that $2400.00 was in the cards for gold after he called the gold correction finished in January of 2012. At that time he was using the crisis in the middle east as the catalyst for the price of gold. Today he’s using Cyprus. (Starting to get the picture here?) The fact of the matter is that there will always be geopolitical and credit market events that will lead to a rotation in capital. However, what I urge readers to do is stop trying to point fingers at the next event that will be used as the marketing ploy for outright calls of higher gold prices. The reality is that the price of gold was in a major bull market and while we may see upside bounces on news, the fact that gold and to a lesser degree silver have been unable to hold any rallies that have ensued following these events is concerning when looking at the overall bigger picture.  That bigger picture leads me to speculate that a reversal of trends is near wherein the dollar will regain the safety bid whereas in the last few years gold benefited from that rotation into safety. The bottom line is, if you want to trade the metals, continue to follow the support/resistance lines as I often point out here and which have been pretty accurate over the last 2 years. The patterns as I pointed out in posts earlier this month haven’t led investors astray. It’s obvious that Cyprus, Egypt, Greece, Syria, seemingly endless easing etc have not helped gold and silver surge to record highs again. It’s all been pretty much baked into the price which is why we aren’t seeing any sustainable rallies in either metal. For the time being at least, there has been no better or safer place to be right now than in cash (if you aren’t in equities). Gold is down over 18% from its October 2011 high. Silver is down over 45% from it’s May 2011 high (Chart above was saved before this week’s breakdown) Note as well that silver still remains in a significant down trend channel. The lower line of the channel is marked in the dashed line. Note the strong support line which is represented by the horizontal blue line. With the top end of the channel now starting to reach the apex with the support line, we are still a ways away from any meaningful recovery rally in silver. Turning specifically to silver for the very short term, it is important to note that as I have been talking about lately, we have seen the end to the long sideways consolidation and as expected, it has resolved to the downside. I provided my levels in my previous posts and I hope you took advantage to make a little money. The chart is not pretty. We have a major break of the support levels and it looks like silver wants to test longer term support of $26.11.  Taking a closer look at silver, if critical support at $26.11 breaks, it will become hard to find a significant area of support. Silver can keep sliding right back to where its major run started in early 2011 when it was trading at $18.00. If you don’t think that it can get there or don’t choose to believe that it will, then you might be in the same camp that never thought silver would see $27.00 again after bouncing to $35.00.  The point of the exercise is that silver is in bear market territory as is gold. We have been in a prolonged state of decline since both metals made their tops and they just keep on falling. Bullish consensus is 13% on silver which means it still has some ways to go before we get into single digits and we can play a relief bounce but as is often stated, stocks and metals can stay overbought and oversold for longer than you and can remain solvent. Bottom line, the dollar hasn’t died, the world hasn’t ended, endless quantitative easing hasn’t led to hyperinflation and there is now talk of the Federal Reserve ending their asset purchases and despite what the silver pumpers were all claiming, cash remains king. As for the metals, if they are to survive another round in this 2 year old boxing match, they must hold the support levels noted above. If they do, they have the potential to live another day.
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