The bears will never learn, because they are bearish for what amounts to irrational reasons, no matter how rational they sound.  Gold is not going to be blown out back to $1400 per ounce because of debt deflation.  If today’s price action did not tell them that it never will and they will continue to shake their heads in a fugue of confirmation bias that will continue all the way to whatever top is carved out.  From the moment the deal in Cyprus was announced — and it’ll teach me to go to bed before 2:30 am  — Gold was relentlessly sold on the mistaken idea that tail risks have been removed from the picture.

Because of this, those short and facing option on futures expiration this afternoon began a beat down in the illiquid pre-market in New York taking the price down below $1600 for the first time since the Cyprus nonsense began last week.  Gold touched the $1590 level and immediately stopped and turned higher.  Moreover, it didn’t stop at $1600, but rather continued rising into the COMEX close and attempted to break beyond $1608 only to be faced with the famous infinite wall of paper
we’ve come to know so well.

Given the events of the past day and options on futures expiration shenanigans, gold closing above $1600 is a very big technical and fundamental achievement given where the market was just two week’s ago.  Moreover, gold put in this performance against the resounding thrashing the Euro took today, now trading at a 3 month low.  This is telling you that there is decoupling of physical demand from the paper arbitrage game that has been dominant.  Buying underneath this market has moved up to the $1590-$1600 level from the $1550-$1560 level.

I’m still looking for a daily close close above $1616 and a weekly close above $1620.  Both of those things could very well happen this week now that the lunacy in Cyprus is well known and the monthly position squaring is nearly over.