Precious metals expert Michael Ballanger discusses how investors should interpret the recent shifts in gold and silver “market techtonics.”
As we move rapidly through the spring of 2016 and with summer less than a month away, I thought it would be a good time to revisit the main markets that dwell on my financial radar screen (gold, silver, gold and silver equities, and the S&P 500) because there has been a fairly sizable shift in market tectonics, particularly in gold and perhaps more ominously in silver over the past month.
Call it deterioration in momentum or correction; the NYSE.Arca Gold BUGS Index (HUI) is off 10% from its top at 236.23. I am almost afraid to mention the term Commitment of Traders or the word Commercials because everyone from Dennis Gartman to “kitchen chair financial planners” have now become “COT experts,” pointing fingers and resurrecting archived blog posts from the last 10 years to prove their exclusive ownership of “COT analysis.”
This humble scribe only learned about the COT some 10 years ago but cast it aside as a play toy for “eccentric gold traders” until 2015 when, thanks to my good friends at Gold Anti-Trust Action Committee (GATA), I started reading interpretations by the likes of Bill Murphy. Taking his lead, I delved deeper into the role of the bullion banks and why it was that, unlike every other market in the world, technical support and resistance levels were meaningless. I discovered that the only way one could monitor the activities of those banks that act and execute for the Exchange Stabilization Fund (another topic for another day) was to monitor the very banks that show up in the Participation Rate survey and which are represented as “Commercial Traders” in the COT.
So, if the guys painting the tape to …read more