Gold continues descent on “bear flag” pattern

In the Lead: "Democracy Means Permanent Rule!" - M. Gaddafi

Evidently, NOT.

Thursday morning did not suffer from a lack of market-moving news, that’s for sure. The world became one strongman shorter this morning as “The Colonel” – a man who hated to climb more than 35 steps and surrounded himself by an all-female security detail – “met his maker” over in Libya, following a gunfight.

The US State Department was uber-cautious and it did not initially confirm Mr. G’s capture or demise, despite photos of a blood-covered man that appeared to be him making the rounds on the Internet already. It all started months ago with the slapping of a hapless fruit vendor in Tunisia…

Whether or not Mr. Gaddafi is now indeed at a “higher altitude” surrounded by x number of virgins (or female bodyguards) remains unknown, but his countrymen can finally breathe a sigh of relief with the certainty that they will not hear from him again. We will be spared such gems as “Were it not for electricity, we would have to watch TV in the dark.” Nor, will the rest of us, mercifully. As for the Sgt.

Pepper-like military outfit he liked to parade around in, well, there will always be morbid-flavored auctions on eBay…

Over in Europe, just hours after it was reported that France and Germany were basically in accord over the EFSF and such, newer reports indicated that the two major powers are basically in dis-accord over how to tackle Europe’s problems. The conflicting stories are surfacing just 48 hours prior to a summit of Old World leaders; one intended to…tackle the continent’s debt problems.

The euro bounced around as the push/pull of optimistic/pessimistic news made its presence felt in various trading rooms. The US dollar remained above the 77 mark on the trade-weighted index, while a variety of stock markets fell by various amounts in the midst of the continuing “foggy” news from Europe. Adding to the confusion is the latest news bulletin; it suggests that Germany is “amenable” to postponing the weekend summit of European leaders for reasons as yet unknown...

Well, something less than unclear was contained in the news coming from the Economy Ministry in Germany, however. The institution halved (!) its economic growth forecast for the EU’s most important country. That kind of news was probably received with trepidation over in China, right about now.

Speaking of China, the country’s leading bank regulator tried to reassure everyone that the huge and teetering Chinese ‘shadow banking system and private lending’ must be and will be ‘strictly controlled.’

We recently brought you news about how significant the problem has become in China and what tremendous size of the off-the-book lending frenzy has ballooned to (two-thirds of a trillion bucks!).

Nightmarish scenarios have been offered in the event that the recent 30% drop in real estate sales in China squeezes developers against the credit wall. According to S&P the credit outlook is “increasingly severe.” Can we be a bit more…specific?

Gold prices turned significantly weaker overnight and touched lows near $1,605 as waves of fund-based selling pummeled bids in the yellow metal overseas. From a technical perspective, the precious metal has formed a so-called “bear flag” pattern and it might now be aiming downward on said flag’s “pole” towards the mid-$1,500s in the perhaps not too distant future. From an Elliott Wave angle as well, gold’s ascent from the Sept. 26 low (at $1,532) may have come to a close and the breach of the $1,595 level – if and when it occurs – could usher in declines towards a potential $1,300 target.

Major resistance in gold now is probably some $100 higher than current levels. New York spot dealings opened with a loss of $23 at the $1,620 bid level per ounce. Meanwhile, where are the throngs of panicked retail investors who are reputed to be beating down the doors of their nearest friendly bullion purveyor as the sky falls all around them? Well, they are not making much of an “appearance” on the buying scene, at this time.

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