Another characteristic of a "natual" market.....

I often write about how I believed that the gold market is not a "natural" market, rather it is one that is controlled by very strong influences. You might think I'm nuts as the gold market is at record highs, but from observing the market tick by tick, one can see the characteristics of a controlled market. I still believe the greatest tell is the fact that gold still not has hit it's all time high adjusted for inflation; that high would be $2100. Given the fact that the economic climate is so much better for gold than it was in 1980, that fact is quite startling.

I was thirteen in 1980 and really didn't pay attention to gold back then, but I have learned that the entire market lasted basically five weeks. Gold was trading around $400 and had a parabolic spike that drove it to $$850 over those five weeks. Gold then came crashing back to earth and then eventually topped out at $750 the next time around. Keep in mind, the reason gold didn't go higher was there were real adults running the monetary system. Paul Volcker admitted there was inflation and was going to do whatever it took to break inflation's back. That's why rates went to 18%. Compare that to now, where the Fed believes inflation is under control and economic growth will resume in the second half of the year.

Back to the point of this entry. Platinum and Palladium have been on a tear, mainly on SA's electrical woes. The spikes upward have been parabolic and will not last. Right now, I would bet based on TA, plat and pal are way overbought. Now, there are two ways too work off an overbought condition. The first is to, obviously have the security go down in price. The second is for the security to churn in place where it is now; basically to do nothing, go up a few dollars, go down a few dollars. Guess what plat and pal have been doing? Yes, churning. Neither have been doing much over the last week or so. How long a churn has to take place is a matter of time and function until the overbought condition is worked off and the TA stats become more favorable to buy.

Now compare that situation to gold. As bugs, we are conditioned for gold to have let's say a $50 increase over a period of two weeks, then a decline of $45 in two days. So far on this latest leg higher, gold has held onto gains (knock wood). But my point is, so far plat and pal act like a natural market should. Gold for the most part hasn't.