by Bill Downey     Price Analysis of Gold and Silver
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Technical Analysis Trading Gold, Trading Silver/ analysis By Bill Downey providing key turning points & charts for investors and speculators in Precious Metals Trading, and Precious Metals Markets

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Gold Options expiration this week and a whole lot more of what is going on

23 Mar 2015 1:57 PM | Bill Downey (Administrator)

Let’s use today’s headlines to drive home the outcomes GoldTrends has been forecasting since the 2011 Gold top.

First we forecasted that deflation/Liquidity Squeeze and not inflation would be the coming problem.

Another "Worst Since Lehman" Moment: 70% Of The "Developed" World Has Inflation Less Than 0.5%
Submitted by Tyler Durden on 03/23/2015

"Proactive central banks figure this out early and fight the inevitable slowdown by implementing QE and weaker currencies. They grab the other guy’s pizza slice. Their asset markets soar. As Figure 5 shows, 70% of the world’s developed markets have inflation below 0.5% – almost as high as the depths of the 2008 financial crisis. So the USD 8.6 trillion in central bank balance sheet expansion (from the Fed, ECB, BOE, BoJ, and PBoC, which amounts to 130% growth over Dec-07 to now) has been unable to get inflation going." - Bank of America

Second, we said that a soaring US dollar and not gold would be in play into 2015 and that the USD would eventually end up taking the US economy down (along with the global economy).


Commodities
Medium Term trend – Bearish
Moving averages – 259 – 274

In order to increase awareness on the massive deflationary collapse that has taken place in commodities we give you the long term chart. As you can see overall commodity prices are trading where we were 23 years ago. That’s right, we are at 1992 prices. (Scroll under chart to continue discussion).

Commodities weekly price chart

Keep in mind we are not saying your cost of living isn’t going up. It is going up and it is exploding higher at a time when wages have been stagnant even longer than commodity prices have been going down, and there’s a direct relation there. Real cost of living is going up because governments have increased taxes, license fees, permits, excise, services, and every other thing possible, while corporations have increased their profit margins without boosting wages. Yes, the bottom line at the grocery store and most other products we purchase as well seem to forever be rising in price. And so while many continue to cry out inflation, in fact, we have the opposite. There is no commodity inflation. Rising government taxation and corporate profit margins are deflationary because wage increases have not kept up with the latter. What this causes in effect is deflation as there is less and less non-discretionary spending. Paying for food, clothing and shelter does not make for economic growth. That only comes with non-discretionary spending.

For now the trend remains down and the trend in commodities is in line with an economic global crisis that is brewing. We can make the argument that prices have doubled in Russia and while that is true, the fact of the matter is commodities are NOT PRICED in Rubles. We have pointed out and will continue to do so the fact that some currencies are going to experience INFLATION while others experience deflation. The sad fact is that crude oil prices and a host of other commodities have CRASHED in price. That’s the bottom line. But if you live in a country like Russia, your currency has collapsed and yes, in your world a monetary devaluation against other currencies has taken place. Rest assured, the PRICE OF CRUDE OIL HAS DEFLATED. IT HAS NOT INFLATED.

The ONLY price bounce we have had since the 2014 high was a three week bounce from the lower green channel line in February 2015 that met resistance at that white downtrend line here in March. Since then price has returned to the lower green channel line and 1992 price levels. In addition, note we have the 2009 crash low line sitting at the 200 area as the next support should this lower green downtrend line fail. We are less than 15 points away. The only other support is the 1999 and 2002 commodity low at 180.

For all intents and purposes the deflationary event has already taken place. Now it’s just a matter of waiting for a total global economic implosion and debt default that begins to take place between Q4 2015 and Q2 2016. The system is definitely going to get a liquidity crisis and that is the message that gold, silver, Oil and just about every other commodity (along with zero interest rates has been telling us). Hell, even the dollar has had a PANIC move up as it has done in all liquidity panics. A life change of Biblical proportions is about to engulf the entire globe. It should be obvious as to why all the US Government agencies have armed themselves to the guild and why all the ammunition is disappearing. It is because the Government already knows what’s coming and it’s what we’ve been telling you is coming at GoldTrends. Odds are very high it begins in Q4 2015 – Q2 2016. In summary, a price rise from this area is not out of the question. For all intents and purposes, we have already crashed in commodity land. So whether we move from this 214 area to 200 or 180 is irrelevant. The commodity crash has already occurred. Now we await the global liquidity crisis to strike in the latter portion of 2015 or in the first portion of 2016. The bubble it will burst is the government bond markets.

And of Course the US Dollar damage to US economy is another GoldTrends forecast…………

US Economic Activity Worst Since 2011 Amid Major Downward Revisions, Chicago Fed Signals

Submitted by Tyler Durden on 03/23/2015

January's "optimistic" +0.13 print for CFNAI was revised drastically lower to -0.10 and now February prints -0.11 against an expectation of +0.10 for the 3rd miss in a row - the worst run since Q3 2011. The Chicago Fed National Activity Indicator (which has gained in prominence in recent months) indicates a 3rd month of "below trend growth," for the first time since June 2011.

GoldTrends forecasted the coming collapse would most likely begin in Europe………..


Buying Euphoria Fizzles Ahead Of Make Or Break Tsipras-Merkel Talks

Submitted by Tyler Durden on 03/23/2015 -

As previously observed (skeptically), a main reason for the surge in the DAX, and thus the S&P, on Friday was premature hope that the Greek talks earlier were a long-overdue precursor to a Greek resolution, and as we further noted yesterday, subsequent bickering and lack of any clarity as we go into today's critical "final ultimatum" meeting between Merkel and Tsipras, is also why the Dax was lower by 1.1% at last check, even if the EURUSD continues to trade like an illiquid, B-grade currency pair whose only HFT purpose is to slam all stops within 100 pips of whatever the current price may be.

The Euro has reached a place where a bounce back to 116 could be developing.  But we don't think that is going to be the end of the damage.  But 9 straight months down does allow for a bounce.  Not that it has too, but one would think odds favor it.  Key is the long term support line is the last one on the charts until the mid 80 area.

Euro Long Term Price Chart



As for the USD GoldTrends forecasted once the High is in place for the USD and all the global short positions have had their clock cleaned, that the end of the USD as a reserve currency would begin
.

Washington Blinks: Will Seek Partnership With China-Led Development Bank

Submitted by Tyler Durden on 03/22/2015

"The Obama administration, facing defiance by allies that have signed up to support a new Chinese-led infrastructure fund, is proposing the bank work in a partnership with Washington-backed development institutions such as the World Bank." And with that, one giant shift towards de-dollarization is now in the books.

The Fed is now trapped ……………………… as all the UNDERFUNDED pension funds are in stocks.


The Fed - Hawk, Dove, Or Chicken?

Submitted by Tyler Durden on 03/23/2015

We often hear various Fed officials described as hawks or doves but Janet Yellen’s Fed brings to mind another avian metaphor. They are afraid to raise rates for fear that doing so would upset the asset market inflation process and derail what is left of their theory. In her press conference last week Yellen said that stock market valuations were on the high side of historical norms, an appellation that only works if one includes the stock bubble of the late 90s. It seems that she and the other members of the FOMC have decided that another epic stock market bubble is better than admitting they were wrong. This FOMC doesn’t have any hawks or doves, only chickens.

In the end, the global collapse, or liquidity squeeze will set off the ultimate bubble that has been building up for a Fibonacci 34 years………… BONDS.

Illiquid Corporate Bond Market Will End In "Very Unpleasant Fashion"

Submitted by Tyler Durden on 03/23/2015 

The hunt for yield is driving investors into riskier debt at just the wrong time. With liquidity in the corporate bond market drying up thanks to new regulations, the rush to the exit is likely to be "very unpleasant," one analyst says.

(Our thanks to www.zerohedge.com for the above articles)

And so what about gold ?

Gold is in its final down phase. The ideal low is in the 850 area, but those are odds and not absolutes. The maximum downside range on a 2008 style panic is 680 but it is hard to fathom that low. On the other hand the 975-1040 area has a lot of support as well.

Could the correction in gold be complete now?

Odds favor its close, but there is not enough evidence to say yes definitely yet.

Let’s go to the short term;

According to GoldTrends subscriber and options trader Evert P.
Coming up this week on 3/26, April options expiration for gold.

Going to be pretty interesting, the FOMC bounce has put a lot of options into play that wasn’t a factor before. The 1200 strike have taken on new meaning all of a sudden.

Puts have OI of 8839 at 1200 strike and calls 4962.

This is causing a interesting dilemma, option writers would now want the market above 1200 to cancel the puts out and below 1200 to cancel the calls out.

This would create the possibility to trade up to 1200 before expiration even.,and trade around that level till after expiration.

Bottom line, the FOMC has created an interesting situation for the option boys this expiry.

Hope it helps.

Evert

(Thanks for that Evert !!!!)  (Odds favor 1200 is going to be tested).

Gold Chart

After reaching last week’s target of 1175-1182, gold is trying to break above the 2015 downtrend line. Odds favor we will do it as OPTIONS expiration this week (3/26) looks to want to bring gold to 1200. Note how we keep holding the 1180 area on the 8 hour bars below. That is suggestive that the boyz want to run it to 1200 and next resistance of 1205-1211. Should there be a pullback before the expiration, then 1162-1172 is this week’s first firm support (at the moment). In summary, a break above the 2015 downtrend line favors 1205-1211 next. With Options expiration here, that 1200 area is the odds favored move. Until we cross the 2015 downtrend line, we can still pullback to 1162-1172 first. It takes a close below 1155 to negate the short term uptrend, and a move above that downtrend line to extend it.

Gold price chart since the 2015 price low

Cycles
Last weeks forecast of a short term turn up at the red cycle in the odds favored 1142-1146 area coming out of the FOMC meeting was right on the money. Subscribers are long gold at 1159. That resistance area at 1205-1211 is this weeks 1st price target and the 1222-1225 area is the 2nd. The first area is the highest odds favored where the downtrend and uptrend channel lines meet and options expiration come into play. The 2nd target is the 50 day moving average at 1222. That might be more for early next week if it is to occur and certainly not favored before Friday (if at all this week).

The next short term cycle is due April 3rd (plus or minus 72 hours).

Gold cycles


Silver

On the very short term silver has resistance at 1194-1704 and then 1725-1750. Support is scattered on the chart but the greatest band is 1580-1620 and then at the 1650 level. Silver should follow gold higher into the next cycle due April 3rd.

Silver price chart since the 2015 price low



Technical Analysis :: Gold & Silver

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