Friday, May 11, 2012

Earthquake Before The Price Eruption In Gold

Mount St. Helens experienced a magnitude 4.2 earthquake on March 20th 1980. By March 27, steam started venting on March 27th. Yet, how many residents of Skamania County, Washington, U.S. anticipated the following:

On May 18, with little warning, a second earthquake, of magnitude 5.1, triggered a massive collapse of the north face of the mountain. It was the largest known debris avalanche in recorded history. The magma inside of St. Helens burst forth into a large-scale pyroclastic flow that flattened vegetation and buildings over 230 square miles (600 km2).

Today the line of despair for gold, silver, and the mining shares stretches as far as the eye can see. Negative headlines reinforced by seemingly endless decline have motivated many within to sell their long-term holdings while muttering NEVER AGAIN! Unfortunately for them, the precious metals markets, similar to Mt. St. Helens in early 1980s, are beginning to record significant seismic activity in the futures and options market. This activity suggests a major, upside price eruption in the months ahead.

Statistical significant tremors have preceded every major turn in the secular gold bull (see chart). The latest earthquake recorded on May 8th 2012 represents the 9th tremor since 2001. Yet, investors distracted and confounded by statements such as caves might be a better investment than gold are more likely to be spelunking and filling up Jim's email box than the interpreting the market's bullish message this weekend.

Chart: Gold London P.M Fixed and Long/Short Concentration Index (CI): 1 = Bullish Setup, -1 = Bearish Setup

The invisible hand was working hard last week. Insight and mindset readers will be truly amazed by the money flow setups unfolding this week. More to come when time permits.

Posted by Eric De Groot at 6:29 PM