Gold Manipulated Into Bear Market, Potential for a Silver Bounce-Up

Gold plunged into a Bear Market last Friday, as Comex Gold Futures fell below $1,500 an ounce for the first time in nearly two years. Gold Market traders are describing the fall as largely technical in nature. Sell stops were hit as the market slipped first through last week’s longtime lows, and then support at the lows that had held since September 2011. Only the break of support levels acted as one of the main catalysts in driving Gold Prices lower Friday. Stop loss levels get triggered, kicking out traders from their positions. The ones who hold on to the positions, are forced to liquidate if they cannot provide for the mark-to-market losses and any margins which may get imposed.

There is no dearth of bad news in the markets which is bullish for Silver and Gold. This is just a liquidation event, and is purely technical after being initiated by manipulation. Meanwhile the total U.S. national debt rises in 2013 from $16.8 trillion to $17.8 trillion. Gold Prices are bound to bounce up, and Silver Prices can be expected rise to new lifetime highs soon enough. But for the very short term, the market still remains vulnerable.

The Gold Market Manipulation is forcing people out:
The decline in Gold Prices does not appear to be fueled by any major breaking news. It was more surprising on a day when U.S. economic data has been soft, and equities are on the defensive. There has been a significant reduction in Comex Gold stocks recently, meaning that Gold has been physically delivered on the futures market. Some of the Gold ETF outflows are likely to have been due to physical deliveries rather than solely to shares being sold. There seems to be an investor preference to physical Gold holding than a paper promise. Whereas reports of possible Cypriot central-bank gold sales spooked the gold market last week, the greater risk to Gold would be if outflows from exchange-traded products continue. Central bank buying helped to supplement the slowdown in Gold Jewelry demand last year. The sale of 10 tons itself can be absorbed by the Gold Market, particularly given the strength of China’s demand in recent weeks.

Gold Prices extended losses in today's Asian session, falling to $1427 and its lowest level since April 2011. Silver Prices have also followed trend and crashed miserably to $24.10. Technically, Silver has hit bottom but Gold Prices may not have seen bottom yet. Gold Bullion can now expect all price rallies to be sold off, and shorting Gold Futures will remain a popular sport.

Rumors of Gold Holdings liquidation by Central Banks intensify Sell off:
The news from Cyprus “weighed on the Gold price, on the view that other peripheral central banks - with much larger Gold Holdings - will go the same way. Statements by the European Central Bank President Mario Draghi triggered Friday’s dramatic sell off in Gold and Silver. On Friday afternoon, the eurozone finance ministers officially backed the 10 billion euro loan for Cyprus. However, Cyprus itself will have to come up with 13 billion euros of its own; the bulk of those funds are expected to come from the closure of its Laiki bank and the restructuring of the Bank of Cyprus. Although Portugal was granted an additional seven years to pay back their loans as a reward for sticking to their austerity programs, any default could result in the country selling a part of it’s vast Gold Reserves. Portugal is number 14 on the World Official Gold Holdings with 382.5 tons, and its percentage share held in gold of total foreign reserves is 90.3%. While Cyprus’s Gold sale in itself is small, heavily indebted eurozone nations such as Portugal, Slovenia, Hungary, Spain and Italy could also find themselves under increasing pressure to put their bullion reserves to work.

Gold and Silver Technically Speaking:
Comex Gold below $1423 can slip to $1372.6 also, but strictly on volatility. If a bounce up in Gold Price continues as is seen from the day’s low of $1427 seen till now, then Gold may rise up again to $1463.5 & $1513. Comex Silver has slumped to $24.10, and has a limited downside to $23.50. A Bounce up in Silver Prices can lead to a rise to $25.48, $26.56 and also $27.41 . MCX Gold below Rs. 27,321 can slip to Rs. 26730, and then also to 25,777, but strictly on volatility. If the bounce up in MCX Gold Price continues as is seen from the day’s low of Rs. 27,100 till now, then Gold may rise up again to Rs. 27352. Buying may gain momentum above this level, and trades may rise further to Rs. 28,270, 28,873 & 29,800 as well. MCX Silver has slumped to Rs. 46,079, and has a limited downside to 44,628. A Bounce up in MCX Silver Prices can lead to a rise to Rs. 47,746, 49690, 50860 and 52,804.