Technical gold trader Gary Savage commented over the weekend on the strange timing of events and price action in the gold market, specifically the incredibly bullish announcements of QE4 & German gold repatriation, contrasted against repeated overnight collapses in the price of gold.

Says Gary:

“I have to say I have pondered over the bizarre action in gold ever since QE4 for weeks now. I don’t buy most of the usual explanations and I’m going to go over why…

Right after QE3 Germany starts making noise about repatriating their gold, which then intensifies after the confirmation that Operation Twist will be converted to QE4.

Germany’s gold has been sitting in the United States for 50 years. Now all of a sudden they don’t trust us with their gold anymore? Let’s face it, if they did they wouldn’t be asking for it back. I have to say I think it’s too much of a coincidence that gold begins acting strangely right after QE4, and not long after that Germany intensifies their efforts to repatriate their gold. I have to think that the two are somehow connected.

One logical explanation is that the US doesn’t have some portion of Germany’s gold readily available. If that’s the case, and it’s a large enough shortage that it can’t be readily purchased on the open market, then one way to shake that kind of supply lose would be to to create an artificial selling panic.

What better way to do that than to drive the price of gold down right at the time the fundamentals shift into high gear? Lots of traders and investors would be caught on the wrong side of an artificial move. Stops would be triggered, and an artificial selling climax created, generating a large supply of physical at low cost. Personally, I think this is the most likely explanation for the unusual behavior of the gold market since December 12.

Since Germany was already making noise about repatriating its gold after QE3 began, I’m sure the Fed knew this was going to escalate the minute QE4 was confirmed. If the Fed knew that QE4 was going to intensify a gold supply problem then I think they were probably ready with a strategy the minute QE4 was announced. Which it certainly looks like was the case as gold reversed that very afternoon, which in itself isn’t entirely unusual as the stock market reversed also.

The overnight crash that drove gold back below $1700 that night however was not in my opinion a natural market move. A couple of days later gold was driven down to and then below the 200 day moving average. Again in my opinion this was not natural market behavior as liquidity had already begun to flow into stocks and most other assets.

This very much looks like a war being fought at the 200 day moving average between one side trying to artificially depress the price of gold (possibly in an attempt to create a selling panic to alleviate a supply shortage) and real demand being generated by QE3 and QE4.”
To learn more about Gary Savage and his regular market commentary, visit

Thoughts are welcomed. 

Tekoa Da Silva
Bull Market Thinking