Gold breaches 200-day moving average

In the Lead: “...And Whispered in The Sounds of Silence...”

The price washout in precious metals intensified in the wake of the Fed’s failure to please the markets with more stimulative action. The disappointment was palpable and when combined with the on-going angst surrounding the European debt debacle, the sentiment resulted in fresh two-month lows for gold and significant breaches of long-standing moving averages. The domino theory in action here, and now. Curiously, the one domino that was supposed to be ‘toast’ by now – the USD – is not only standing, but it is taking out the 80.50 (!) level on the index. Hmmm.

The yellow metal fell to fresh lows right at, and then well under the 200-day moving average price of $1,619 per ounce in increasingly scary dealings this morning. Such an occurrence normally ushers in what Mr. Gartman referred to as a ‘bear market’ just yesterday. Do take note of one thing, if you take note of anything this morning: Gold has not broken its 200 DMA since 2009. Until now, that is. Roughly $100+ has been stripped from gold’s price tag in but a small handful of trading sessions. Now, the $1,600 psychological price marker is clearly in play, followed by…(insert your favorite ‘must-not-break’ number here).

At the same time, the 144-day MA was pierced overnight amid heavy liquidations and a hint of panic. Spot silver broke well below the $30 mark and dropped to lows near $29.65 the ounce while the euro also penetrated a notable psychological pivot point at $1.30 against the greenback. That pivot point was last touched eleven (!) months ago, for perspective. Analysts have now allowed for the common currency to possibly touch $1.20 amid skepticism that the fix that Europe needs can be achieved any time soon, or properly. Italian bond yields set a fresh record today at 6.47%. What a $1.20 euro might mean for bullion values, well, that remains to be seen…

Meanwhile, yesterday’s “bull alarm” that was rung by economist Dennis Gartman (see our coverage in yesterday’s article) prompted swift ‘damage control’ type of critical statements (mainly from worried bullion dealers) about the man’s ‘track record.’ A classic case of ‘shoot the messenger first, then ask questions later.’ The propaganda in the gold space has shown to be louder and more powerful than the “force” in Star Wars, all year long.

To wit: You have been repeatedly told that India is consuming gold faster than a shark eats fingerlings at a feeding frenzy, price be damned. Reality check time: "Imports by India, the world’s largest gold consumer, may decline as much as 16 percent from a record as the rupee’s plunge to an all-time low boosts local prices, according to the Bombay Bullion Association. Purchases may fall as low as 800 tons this year from 958 tons in 2010, Prithviraj Kothari, the group’s president, said yesterday." Reconcile that bit of news with the promises made by newsletter vendors and the World Gold Council. We cannot.

Hindsight is always value-laden, of that there is little doubt. The fact that certain top-callers and sell-signal-issuers were roundly criticized (or worse, dismissed as amateurs) speaks volumes about the euphoria that a decade-long bull market can induce in the trend-following crowds out there. Market observer Nigam Arora, writing on Marketwatch this morning, remarks that “reading the sell signal [in gold] at $1,757 could not have been easier.” The morning of December 8 as it now turns out, was a fateful time indeed. However, right about the same time, we were all inundated with countless pronouncements of the “rocket about to take off” and promises of $2,050 (precisely!) gold in virtually no time at all.

New York spot metals dealings opened with assorted losses as the technical damage intensified and the psychological damage aggravated some more. Gold market players saw bullion opening near $1,625 and struggling to avoid a repeat of the previous two sessions’ 2%+ cave-ins. Silver traded nearly two bucks lower and was seen as trying to desperately hang on to values at anything near $30 (more like $29) as more longs started to throw in their respective towels. Platinum and palladium did not escape the damage resulting from the widespread selling and fell $45 and $38 respectively, to touch $1,427 and $604 per ounce in turn. Copper lost 3.2% while crude oil slid 2.8% amid the massive rout developing in the commodities’ space.

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