Gold and Silver Retreat From G8

By: Douglas V. Gnazzo | Fri, Jul 21, 2006
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"All that is necessary for evil to succeed
is that good men do nothing"


What a difference a day makes. On Friday all the news media were pounding the war drums and rattling the sabers, roiling the blood and raising the visceral response of all within their sphere of influence.

The unfortunate fighting in the Middle East was cast as both the cause of a flight to gold, and as a bid put under oil, as future supply might become hostage. It was reported that the hostilities between Israel and Hezbollah had intensified and that surrounding countries such as Syria or Iran could end up being drawn into the fray. The media had the heat turned up to high.

Most commentators and pundits were calling for both gold and oil to be significantly higher when New York opened for business Monday morning.

LONDON (17 July) THE spot price of gold climbed to an eight-week high of $676.15 a troy ounce today on the conflict in the Middle East, traders said.

In early trade, gold was quoted at $676.15/oz, up $9.55/oz from the Friday close.

Gold is higher on the Middle East conflict. If it ends then gold will come off, if it doesn't then gold will go higher. The direction of the price of gold depends on what politicians say at this stage," said Johannesburg-based trader for Standard Bank Charles Leishman.

Israel was keeping up a deadly assault on Lebanon on two fronts to recover its captured soldiers and halt rocket attacks on its territory, as Hezbollah rained rockets across the border into Israel, AFP reported today (end quote).


How did gold respond to all this? It closed down over 3% for the day. As this is being written it is presently down another $8 in overseas trading.

The long term trend for gold is up, and gold is the strongest of all bull markets, however, we would like to bring attention to the disparity between its falling price action today, as compared to what most experts said would be the opposite - rising prices, some even calling for new highs within the very near future.

Obviously, most got the call wrong, as prices of gold and oil retreated today, as the charts below show. But why were so many on the wrong side of the trade? Because they were set up to be: welcome to market intervention of the 21st century New World Order.


Is it possible for the powers that be to intervene in the markets causing results as we saw today? Yes indeed it is - as was clearly illustrated today. Recently we have penned three papers on market intervention in the gold market, warning of what was transpiring and might possibly result. See Market Intervention: Laying Off Risk - Derivatives Of Hell.

Within the above cited papers are references to many quotes from both government officials, central bankers, to elite international organizations, to transnational corporate entities - all illustrating their power to sway markets by intervention. We will not repeat them here again.

The news report below was pretty much standard opinion on both gold and oil. Click on the link to read the full story. Here are a couple of quotes from the full article.

Gold Rises to Six-Week High as Middle East Conflict, Oil Rally Spur Demand (Bloomberg)
Gold rose to a six-week high as investors bought the metal as a haven and a hedge against inflation, after escalating violence in the Middle East pushed crude oil to a record.

"Crude oil may rise to a record next week on concern the growing conflict in the Middle East will disrupt shipments from the region, according to 20 of 34 analysts and traders surveyed by Bloomberg News. The Middle East is the source of 30 percent of the world's oil. Below is a chart of West Texas Crude for today."

Here is a chart of West Texas Light Crude for today. As the chart shows WTIC was down $1.80 a barrel today, a loss of over 2% - on a day after a weekend where almost all media outlets reported intensified fighting in the Middle East, and a plethora of reasons as to why the price of oil should rise accordingly.



From the same news headline as the above oil quote we read about gold's upcoming performance this week.

Gold Rises to Six-Week High as Middle East Conflict, Oil Rally Spur Demand (Bloomberg)
Gold rose to a six-week high as investors bought the metal as a haven and a hedge against inflation, after escalating violence in the Middle East pushed crude oil to a record.

"Flight-to-safety buying has been a major catalyst in gold's gains this week and is likely to be a feature next week,' said James Moore, a Kettering, U.K.-based analyst at The Bullion Desk."


Here is a chart of gold for today Monday July 17, 2006:


Gold closed down $16 at $650.32 (-2.40%) for the day. It is still well above its 50 day moving average. As this is being written gold is down another $8.70 overseas.

The last charts are of the HUI Gold Bugs Index that contains the major precious metal stocks.




The HUI was down 12.13 (-3.57%) closing at 328.05, and is sitting right on top of its 50 day moving average of 328. The low last week was 335.10, which the HUI clearly closed below today. The lower low does not auger well for the short term unless the 50 dma manages to hold as support.

Both the XAU and the HUI have been under performing physical gold as of late. Generally this warns of lower prices ahead, which has so far been the case. However, with physical gold now falling as well, the parameters are decreasing. This MAY lead to a rebalancing between the metal and the stocks, from which a more sustainable rally will be able to occur.


The main point, however, is not in trying to predict what prices are going to do in the near term, but that the price action that occurred today was the complete opposite of what almost all commentators and pundits called for; and this during very heightened geo-political world events.

This clearly illustrates that intervention within the markets takes place by the powers that be - that is the important message - caveat emptor.


Perhaps the following news headline provides a clue. The Fed does not want the long end of the yield curve to go up. They want an inverted yield curve where short rates are higher than long rates; otherwise the real estate market will be visiting the Sopranos.

Ten-Year Treasury Yields Remain Near 1-Month Low on Middle East Tensions
July 17 (Bloomberg)

"U.S. 10-year Treasuries were little changed, with yields near a one-month low, as tensions in the Middle East led investors to seek a haven in government debt."

Now ask yourself - does it make sense that there is a flight to quality that includes gold, oil, the dollar, and bonds - so there's pretty much a flight to everything, at least that's what was called for (except stocks).

In this past weekend's market wrap, the following was in the summary:

"We expect what will seem to many to be surprises from the G8 meeting. Look for statements, and or actions - that pull bids from certain asset classes, and place bids under others. Commodities come to mind. The world press comes to mind as well."

The emphasis will be on profits even if they are couched in terms of peace and war, freedom and slavery - as it makes no difference to the elite transnational conglomerate merchants if lucre comes from peace, war, freedom, or slavery - profits are profits and that's the bottom line.

There's a large permanent open market operation tomorrow - which means the Fed adds liquidity to the system, well at least to the primary dealers in the system; and it's permanent - in other words, it doesn't get paid back.

Cui bono? If I had to guess I'd say bonds and the primary dealers. Welcome to market intervention - the 21st Century New World Order style.


Come visit our new website: Honest Money Gold & Silver Report
And read the Open Letter to Congress




Douglas V. Gnazzo

Author: Douglas V. Gnazzo

Douglas V. Gnazzo
Honest Money Gold & Silver Report

Douglas V. Gnazzo is the retired CEO of New England Renovation LLC, a historical restoration contractor that specialized in the restoration of older buildings and vintage historic landmarks. Mr. Gnazzo writes for numerous websites, and his work appears both here and abroad. Just recently, he was honored by being chosen as a Foundation Scholar for the Foundation of Monetary Education (FAME).

Disclaimer: The contents of this article represent the opinions of Douglas V. Gnazzo. Nothing contained herein is intended as investment advice or recommendations for specific investment decisions, and you should not rely on it as such. Douglas V. Gnazzo is not a registered investment advisor. Information and analysis above are derived from sources and using methods believed to be reliable, but Douglas. V. Gnazzo cannot accept responsibility for any trading losses you may incur as a result of your reliance on this analysis and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities. Do your own due diligence regarding personal investment decisions. This article may contain information that is confidential and/or protected by law. The purpose of this article is intended to be used as an educational discussion of the issues involved. Douglas V. Gnazzo is not a lawyer or a legal scholar. Information and analysis derived from the quoted sources are believed to be reliable and are offered in good faith. Only a highly trained and certified and registered legal professional should be regarded as an authority on the issues involved; and all those seeking such an authoritative opinion should do their own due diligence and seek out the advice of a legal professional. Lastly, Douglas V. Gnazzo believes that The United States of America is the greatest country on Earth, but that it can yet become greater. This article is written to help facilitate that greater becoming. God Bless America.

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