GLD/Gold

GLD/gold is a different story then SLV/Silver. It use to be that gold and silver moved inversely to the dollar, then they seemed to lose the correlation. See the chart below and if you study it carefully, you will see breaks in the correlation.

 GLD vs UUP (USD-red)

Silver is a different story then gold because silver has been suppressed for a long time due to JPM's inherited short position from Bear Stearns, which was and may still be huge. I remember not too long ago the struggle between Blythe Masters of JPM and the silver vigilantes led by Max Kieser. For nearly 4 months, $30 was the line in the sand and the level at which, once broken, it was assumed JPM would cover their short. Silver did break that line in the sand mid Feb 2011 and promptly headed up to $48 on what was assumed to be JPM short covering, but whether it was or not, I really don't know. All  know is word came down-I'm guessing the "FERAL Ra Swerve" (you know who-I don't want to be tagged by their ease dropping programs running all over the web) most likely sent word to the COMEX to kill the rally in order to protect JPM from massive losses and the COMEX did it's duty like a good solider and killed the rally with 5 sequential margin hikes at the pace of about 1 every 2 days (and the volatility excuse didn't hold because they kept raising margin even after the rally was dead).

Point being, the historical ratio of what's in the ground between gold and silver and price would mean silver was still undervalued by at least 40%. So while gold is in my opinion, in a bubble (which can last a lot longer), the manipulation of silver never really allowed such a bubble to form, and that's why they look different in my opinion.

 This s the long term 150-day m.a. which historically over the last few years has been a fool proof place to buy. However the decline to the moving average this last time was so sharp (unlike past declines to the average) that I have felt GLD needs to consolidate along the average and prove it can hold it.

 There aren't a lot of important charts here, not a lot any way. The 1 min shows GLD when it moved a little too far away from the average and I expected a return toward it, this negative divergence started that move back toward it.

 What is a bit scary for gold longs is this 30 min chart which doesn't look good.

The 60 min chart also has a slight negative bias at a time when  would thing accumulation would be sending both higher. So it all comes back to what I originally thought, GLD needs to consolidate very lose to the 150 day moving average, that's where accumulation would occur and just as important, it needs to hold the average.

My fear (if I was a long gold trader) would be that this 150-day moving average buy area, is so well documented now that it only makes sense to send GLD below it. What would be difficult is distinguishing between that being a head fake move or the start of the gold bubble popping. Since GLD hasn't behaved like I would have preferred, to me, this scenario is very much up in the air. Taken with the COMEX's ability to hike margins anytime for any reason, I personally don't feel safe trading gold. After all, the central banks are buying it, why wouldn't they want to buy it as cheaply as possible?