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The levels that markets
are traded at are not open to interpretation; they are clearly defined. If
one believed that the market were going to rise over a specific time period,
and instead they fell, then one would be wrong. No matter what kind of
reasoning you employ, the fact of the matter is that when the market says
that you are wrong then you are wrong. If one finds themself in such a
situation, the best thing to do is to admit that you have called the market
wrong and re-evaluate your entire position in the market.
The past few weeks have
shown the end of the bull market in its current cycle. Some of the bulls have
been gracious in defeat, admitting that they were wrong in their predictions.
Of these bulls some still hold their position on other rationale, such as a
lack of faith in fiat currency, which we have no issue with, since their
outlook and time horizon is different from ours.
However, there are those
in the gold market that are refusing to acknowledge that they have made a
mistake in calling the ongoing market direction. Rather than simply say “I
was wrong”, which everyone is from time to time, this author included, they
have resorted to blaming market manipulation and conspiracy theories for
their losing positions. These frustrated cries stink of desperation from the permabulls who are unable to cope with an environment
where gold prices are not constantly making all time
highs, and are in fact falling.
We would like to clarify
that firstly, we have not always been bearish on gold and have made
significant returns on rallying gold prices in the past, and it is only in
the past year that we have held the view that the bull market is over. We
would also like to point out that we are open to manipulation theories;
familiar readers will be aware of our investigation into the enormous profits that one could have made through
holding an intraday short position on gold during London hours, and holding a
long position overnight while London was shut. However, in the current market
situation conspiracy and market manipulation theories do not apply, the bull
market is simply over.
When market manipulation
is considered, the math does not add up. It is possible that one could
influence the price with large flows on an intraday basis, as may have been
the case through most of the bull market, but to say that the fall from over
$1900 to below $1400 is due to manipulation is ludicrous. A fall of nearly
30% in price is not called market manipulation, it’s called a fall in price,
and if one believed that gold would rally instead of fall then they were
wrong.
Claiming that central
banks want gold prices lower, and that they are actively pursuing this by
pushing and holding the price down is also ridiculous. The small relative
size of the entire gold market means that if a central bank wanted gold
lower, then they could push it far lower than it is currently.
One must also ask the
question, where these manipulators were when gold was rallying from $250 to
$1900? The answer is that they were exactly where they are now, in the
imagination of those who had called the market wrong.
All ranting aside, the
number of permabulls still crying manipulation or a
rally to $10,000 an ounce is an important factor to take into account when
one is considering how to trade gold in its current market. These claims mean
that those permabulls are still holding long
positions on the yellow metal. This in turn means that they are yet to stop out, which means that as gold falls
lower more bulls will become trapped longs trying to exit the market. As the
number of trapped longs grows, gold’s ability to mount a
rally falls, as a rally will be subsequently stopped by those longs selling
at the slightly more favourable exit levels. This
will result in increasing downward pressure on gold prices as more and more
bulls gradually through in the towel.
The most recent
employment data from the US indicates that there will not be an additional
quantitative easing from the Fed; therefore there is no reason for the US
dollar to weaken and for gold to rise against it.
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