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Undaunted gold bug Murphy looks to East
By Peter Brimelow
Monday, August 11, 2008
NEW YORK -- Gold gaps down (again). But the gold bugs are grimly determined (again).
Note: They were right last time.
The past three times I have written about gold, the story was basically the same: Gold bugs excited by recent dramatic move, favorable technical developments, interest by reputable generalist non gold-partisan sources -- in other words, a plausible breakout-on-momentum situation.
Every one failed, most spectacularly the last, which looking back objectively the strongest. Peaking two days after the column was written with a $978.70 close, Comex gold has subsequently plunged $113.90 (11.6%) into Friday's close.
It's almost as if gold's technical breakouts trigger massive suppressing selling from some secret source. Isn't it?
So am reverting to the last gold column I wrote that subsequent price action endorsed. It was presciently headlined (no thanks to me): "The buggiest bugs show grit about gold.":
After that gold rose $120.70 (14.1%) to its July peak.
According to those gritty bugs, the situation is the same as then, only more so.
The technical damage to gold has been tremendous. Even Australia's The Privateer's $5x3 point and figure chart looks bad. It has broken its post-2002 uptrend for the first time. In May, it was far from doing that:
As Martin Pring noted laconically on Thursday in his Weekly InfoMove Report: "This week has seen both the gold price and the Amex Gold miners Gold Share ETF, Market Vectors ETF, complete significant tops. Since neither is deeply oversold, the breaks are likely to be valid, so we should expect lower prices in the period ahead."
And that was before GDX fell 6.73% on Friday.
Jeering from gold's enemies has become deafening. The influential Gartman Letter, for instance, has once again resumed pouring contempt on "gold bugs" in the style which has made this publication so popular among them.
About the only pro-gold group which appears cheerful, just as at the last low: the hard-bitten band gathered around the banner of Bill Murphy's LeMetropole Cafe.
This is because the LeMetropole Cafe group actually does believe that the top in any gold move is set by heavy surreptitious central bank selling, motivated by the authorities' desire to manage sentiment.
Consequently, while outraged, the group feels vindicated by gold's mid-July fizzle.
Plus, Murphy's men believe the floor in gold is established by resolute buying of physical gold by individuals in the East, (particularly India, the world's largest buyer) whose interest in Western Hemisphere sentiment is negligible.
For this reason, the site monitors the price of gold in India, and collects stories about bullion buying in the region.
From this unusual perspective, gold looks glorious. For the past few days, LeMetropole Cafe has been reporting high premiums in India, facilitating heavy import demand -- exactly what made them cheerful in early May. And an impressive collection of stories about renewed gold off-take in the region has been posted.
LeMetropoleCafe quotes the UBS AG gold commentator: ""We ... are actively looking for an opportunity to bang the table and buy gold. ... Inevitably this opportunity will probably come next week as I am on holiday."
The site comments: "Gold's friends will likely have occasion to celebrate this gentleman's holiday."
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