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Trader Dan Norcini Turns Bullish, Says “You’re Nuts” If You Don’t Own Gold

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Welcome to this week's Market Wrap Podcast, I'm Mike Gleason.

Coming up we'll welcome our good friend Dan Norcini back to the program and have him break down what's happening in the markets like few can. Dan explains why gold has been moving up so far this year, whether or not metals investors should be concerned that silver is lagging, and what he sees ahead for both metals in the weeks and months ahead. Don't miss a fantastic and incredibly informative interview with Dan Norcini, Trader Dan, coming up after this week's market update.

Well, the rally in the gold market continues to show signs of resilience – and of something bigger in the making. After getting hit in overseas trading on Monday and again on Tuesday, gold rebounded on Wednesday and Thursday, closing Thursday near breakeven for the week. As of this Friday recording, gold prices come in at $1,233 per ounce, a weekly decline of just 0.5%.

Turning to silver, we're still seeing the white metal lag behind gold. Silver prices currently come in at $15.43 an ounce, down 2.2% this week. We'd like to see silver, platinum, and palladium, and essentially the entire commodities complex show more technical strength to confirm gold's recent breakout to the upside, although my podcast guest Dan Norcini will explain his take on whether or not that should be a concern for metals investors. So stay tuned for Dan's analysis on the technicals for gold and silver.

Crude oil prices did experience a big rally of nearly 10% earlier this week to bring the price of a barrel of oil back up near $30, it is giving back much of those gains today however. The oil market is still down a few percent for the year and down over 65% in the past two years, pushing many oil companies to the brink of bankruptcy.

The precious metals mining industry also faces tremendous challenges. After two years of gold and silver spot prices trading near or below miners' all-in production costs, the weakest companies in the industry have been totally wiped out. Even the strongest mining companies are struggling with losses. This week Newmont Mining released quarterly earnings and reported an operating loss for the fourth quarter of 2015, with revenue down more than 10%. Newmont's earnings slump was worse than analysts had expected. Shares of the gold major initially fell on the news in the after hours Wednesday, but by Thursday's close Newmont's stock finished in positive territory.

Resilience to bad news is one of the hallmarks of a bull market. And as bad as the news has been and continues to be for the mining sector, gold stocks have actually been on fire over the past month. Since January 19th, the HUI gold stocks index has shot up more than 50%. Clearly, some investors are betting big that gold prices have finally bottomed and the worst problems in the mining sector are behind us.

Gold could continue to benefit in the months ahead from a diminished economic outlook. On Thursday, the OECD revised its projections for global economic growth in 2016 and 2017 downward. The globalist body acknowledged that loose monetary policies around the world have been largely ineffectual in terms of stimulating actual economic activity.

But that doesn't mean central bankers won't keep trying to roll out new stimulus schemes. Here in the U.S., St. Louis Federal Reserve President James Bullard said that additional rate hikes would be "unwise." This dovish posturing comes on the heels of the latest FOMC meeting minutes which show the clowns at the Fed are now concerned the economy's performance could worsen in the near-term. Cynics might wonder whether Fed officials are just taking their cues from the stock market – which recently slapped their rosy economic outlook in the face.

The Fed has pumped trillions of digital dollars into the financial system since it announced Quantitative Easing. Banks, hedge funds, and high-frequency trading algorithms have flourished. Financial proliferation made possible by the Fed's churning out of unbacked fiat dollars from its electronic printing press. The danger is that it's another massive financial bubble that could be on the verge of bursting.

But leave it to government officials and establishment economists to ignore the massive systemic dangers of the digitized financial sector and instead worry about people who carry $100 bills in their wallets. Former Treasury Secretary Larry Summers penned a column in the Washington Post on Tuesday titled, "It's time to kill the $100 bill."

Yes, the same man who was in the running to replace Ben Bernanke as Federal Reserve chairman and control trillions of digital dollars at his fingertips wants to abolish $100 bills in order to make it harder for you to engage in large cash transactions. It's a step toward a completely cashless economy, something that won't work, by the way, according to my podcast guest Marc Faber last week. But nonetheless, attempts at a total physical cash ban would enable the government to digitally record and track every dollar-based transaction.

It's Big Brother's dream. But his grand plan for an all-electronic economy could backfire if people would move out of the dollar and into underground alternative currencies or barter instruments. Gold and silver coins could reassert themselves as a common currency in transactions. Regardless of what plans policymakers have in store for the dollar, the intrinsic value of a gold or silver coin will always be widely recognized.

Well now for more on the rally we've seen in metals so far this year and how long it's likely to last, let's get right to this week's exclusive interview.

Mike Gleason: It is my privilege now to welcome in Dan Norcini. Dan is a professional off-the-floor commodities trader bringing in more than 20 years of experience in the market. Dan's editorial contributions and supporting technical analysis charts cover a broad range of tradable entities, including the precious metals and foreign exchange markets as well as the broader commodity world.

He is a frequent contributor to both Reuters and Dow Jones as a market analyst, and can be found as a source in the Wall Street Journal's commodities section from time to time, as well as CBS's MarketWatch. And you can follow his fabulously detailed work at TraderDan.com.

Dan, welcome back. It's been quite a while, but it's great to have you on with us again. How are you?

Dan Norcini: I'm well Mike. It's pleasure to be back. It has been a while. It's always good to talk to you. I hope it will be a fun interview. There is a lot going.

Mike Gleason: Yeah, to start out here. I want to get your thoughts on the market action so far this year. We're seeing a good start to 2016 for the precious metals, as you just mentioned. They appear to be diverging from the broader stock market. Assess the year to this point for us, if you would. What's your take on the way the metals have been acting in the face of some real turmoil in other markets?

Dan Norcini:Well I think, Mike, we finally look like we've got some rising fear and uncertainty or confusion, or a lot less conviction that we had about the overall health of the global economy than we had for so much last year. We had, underneath the markets there were sort of this given that the central banks were going to be there. They were going to be providing liquidity.

That liquidity tends to mask a lot of the problems that were, structural problems, that are deep seated in so many of these national economies, whether it's here in the U.S., whether it's overseas in Eurozone, or in Japan or even China for that matter.

As long as that central bank, let's call it the old punch ball, as long as that was there, a lot of these problems they were sort of just glossed over. Traders were looking at this huge amount of money being created through Quantitative Easing, and then of course you had the ECB with their program last year. I guess they started up in March, if I remember right... the Bank of Japan never ended theirs, and you've got all of these stimulus that was being provided.

And it seemed like what sort of got the ball rolling to the downside, at least it started to put some uncertainty in the traders' minds, when this first rate hike, when the Fed had been telegraphing in the U.S. for, I don't know, I guess since the last quarter of last year, I should say 2015, there was going to be an expectation of rate hike.

That started getting people a little bit nervous in the markets, particularly when you had the Chinese yuan devaluation that we all witnessed in August of last year. Of course that knocked the market for a loop. They stabilized and they came back. It seems to me like ever since the Fed did that, one quarter percent rate hike in December, it seems like a lot of the air has been let out of these markets.

Of course we just have lost that liquidity support that was supporting so many of these things up. Once these markets started to totter, then we saw this uncertainly, its fear and confusion starts to arise. Now we're at the point where nobody really knows what's going on with them, no business is increasing. As this nervousness has increased this uncertainty, you start to see that reflected in the moves in these markets.

You see that obviously in these global equity markets, which have been swooning. Of course you see it now in the currency markets, they have no idea what to do in the currency market. I mean they are up one day. One currency is laying in the park, one day, the next day it's down, the third day it's back up. I mean markets are flipping, flopping, flopping, flipping, back and forth. Again no conviction, a lot of uncertainty, a lot of confusion.

And that in my mind, that's one of the reasons we've really started to see a firm bid going at the gold market this year. For the first time in quite a while, three and half, four years, we've really seen some strong signs on that technical price chart, from a technical analysis perspective. That chart has really propped up, and you've got some good signs in there now.

Of course what you're seeing, I believe in the metals, is simply the fact that you've got to the point now where traders are really worried about the longevity of the central banks' stimulus efforts to actually create something in terms of lasting prosperity.

In other words, it's almost like we're reaching a point of diminishing returns, Mike, where traders, investors seem to be losing confidence in the ability of the central bank to actually fix what ails this global economy. And I think that's what you're starting to see now. You're seeing that reflected in the currency markets, and of course that's spilled into gold. You've seen reflected in the interest rate markets. Now we've got negative interest rates, not only in the Eurozone, now we have them in Japan.

There have been a chatter about then coming there to the U.S., although some of the Fed governors have knocked out idea down right away. But the fact that you're even seeing that floated over here, it just goes to show you how much uncertainty is in the markets now, and how weak this global economy is.

Of course in our environment with all that confusion, people just don't really know where to do. They are kind of concerned what to do with capital. They are afraid to put capital in equity markets, because the central bank's support is not there, or at least it's not working as it used to. They don't really want to lock up money long-term in bonds and particularly bonds that are playing next to nothing for long-term bonds.

And so you are seeing that money start to move into gold in a big way. Of course that has been reflected in the rise in holdings in the gold ETF GLD. We've had a really healthy increase in there. To me that's a very good sign for this market, as far as gold goes, to see that kind of interest that's finally materialized over here in the west.

We've talked about this, Mike, I think in the past where that GLD, to me, it's a proxy for western-oriented investment demand in the metal. And when it was falling, when those reported holdings kept declining. Now you can just tell that big money managers here in the west, institutional outfits, this did not have a lot of interest in owning the metal.

And of course as they didn't, the price, money flowed out the gold sector and moved in to other areas, other assets classes. You saw it reflecting declining gold price, but now you've see that interest reviving over here in the west, based on those rising GLD holdings. And of course you've seen that reflected in the improvement and the price charts. We've got some good support in this market right now for gold. Honestly it's been the best performing market on the planet right now, for the first six weeks for this new year.

Mike Gleason: Yeah. Gold seems to finally be acting like a safe haven in the face of all of that turmoil, the safe haven that it was once thought to be. So has the tide finally turned, because I remember you saying all of last year that, until investors to stop favoring U.S. government bonds as they are preferred flight to safety that it's going to be tough for gold to break out for its 4-plus yearlong down-trend. So are you starting to see that trend reverse and has that cycle, maybe, finally been broken?

Dan Norcini: Yeah, it looks like it has for now, Mike. It's been interesting watching the change in sentiment in regards to gold and in the interest rate markets. As you mentioned, I'm just a big, big proponent of watching, particularly the bond market, and not only here in the U.S., but the German bond market and Japanese government bond market as well. And you're right, that's what we're seeing for the longest time. We would see during the so called safe haven rush, when traders or investors were concerned about safety of invested capital and then equity.

For most of last year, well let's put it this way, for the majority of last three years, three and a half years, they didn't seem to be interested in moving into gold. They preferred the safety in their mind, at least to say give government bonds.

Again, until something shifted, with regard to sentiment, you weren't going to be get much of a bid in gold. But it seems to me like you had something happen in these bonds market, and I can't put my finger exactly on what the course was, because in one sense, the underlying fundamentals were always there. We still had the same issue about the lack of overall economic growth. We still had the fears of deflation towards the end of last year.

We had concerns about China. We had concerns about the help in the Eurozone, all the stuff that was going on over there. We had every now and then, we'd get a lousy unemployment report over here in the U.S. We weren't seeing a lot of growth. The same token, we didn't see money going in to gold, we just saw going in the bond markets, whenever there was any sort of sell-off in the global equity markets or people got nervous.

Something happened, something shifted that perception really particularly to start off this year. Like I said, I think it went back to when the Fed hiked that twenty five basis points. I mean if you think about it, I mean quarter of a percent is insignificant from an actual standpoint, when you're talking about it's the first interest rate hike in years. Yet, it did something to the psyche in the markets, for some reason.

Then again that was compounded by the lack of growth, the lack of improvement in the Eurozone, and those continued push of the interest rates in the negative territory. It seemed like at some point investors said, "You know what, there is zero opportunity cost in holding gold right now. I mean there isn't any, so let's get it, because of this instability we're seeing in the currency market. We see instability in the global equity markets, it's not costing us anything to own the metal. Heck, we may even get some capital gains out of this."

Something shifted and that sentiment shifted with it, and man you just see it, you see it improved in the gold chart and you saw the metal move up. Right now, looking at this same, Mike, it doesn't look like there is anything that I can see on the immediate horizon that it's going to shift this.

To me it looks like gold should remain relatively well supported here. Actually the price action in the last few days confirms that. You get a couple of days of rally in the equity markets, these risks trades come back on, stock markets pop higher. All of a sudden everybody goes, this is the all clear signal. Everything is going to be fine, the central bank is going to be fix everything.

And then the rally peters out, and it's dashed by some actual hard economic news, and bingo, you see the risk trades, they reverse. The risk aversion trades come on. You see the yen rally as they yen-carry trades unwind. You see the bond markets move higher up, pushing interest rates even lower. And then up goes gold, just like it did today. That seems to be the pattern that we're watching right now. So until we see something shift again, Mike, again it's hard to see this gold market breaking down right now.

Mike Gleason: Now in terms of the rally and the metals that we've had, is the fact that gold and not silver is leading the way this year a good thing, or is it evidence that maybe the rally hasn't been confirmed yet? As we're talking here, Thursday afternoon, we've got gold up 16% this year, whereas silver is only up 12%. The mining stocks are doing well too, but should the bulls maybe be a little bit nervous that the white metal isn't leading?

Dan Norcini: For me, not really. That's my view, obviously you'll get different views from talking to different folks. But the reason I say that, Mike, is a couple of things that I like to watch, this is a personal view, Mike. I happen to believe that silver is going to outperform gold, when you have an inflationary bias in the marketplace. In other words, if you've got a situation where investors are looking at whether it's a result of currency debasement, whether it's a result of accelerated growth because of ultra-low interest rates in the economy protecting a potentially overheating, wages going up, home prices are rising, et cetera... in that kind of environment, I would always look to see silver doing better than gold.

However, when you flip it around, when you've got an environment like we currently have, where you have slow growth spheres, when you have a sluggish growth environment. For instance if you look at the copper price, if you look at the price of platinum, if you look at the price of palladium, you look at those other industrial metals... now you and I know that platinum is sort of a quasi-industrial precious metal, sort of functions both ways, much like silver does.

Silver sometimes doesn't know what it wants to do, whether it wants to be an industrial metal one day or a precious metal on the other day. Sometimes you'll see it follow the industrial metals lower like copper and platinum, sometimes you'll see it follow gold higher.

The one thing that I have noticed it's been pretty consistent of late is that whenever you see a general weakness in the industrial metals, and you've got gold popping higher on a safe haven bid, silver tends to lag, simply because the rest of the rest of the industrial metals are lagging in that slow growth environment.

If you think about it this way, Mike, the story for the longest time when it can be industrial metals was China. Everybody talks China. China is buying up the world's copper, they are building everything over there. You've got China buying up platinum. China is buying up palladium. Everybody was talking about how China was buying nickel and molybdenum, and everything else you could think of.

Well when that was going on, silver was just really rip-roaring to the upside, because it was kind of ramped in with that and everybody was talking about the Chinese story. When China started to slow down, and we started to see supply concerns rise around these industrial metals, based on the current level of demand, that's when silver seemed to get sluggish as well. As far as I can see, this is how I look at it, as long as you see platinum prices generally weak and copper prices generally weak, I think you'll see silver lagging gold.

But I don't think it's necessarily a harbinger of a move lower in the gold price. Simply because gold is really functioning more, let's call it this slow growth, deflationary, ultra-low interest rates environment, it's doing exactly what it's supposed to do. It's serving as a store value. It's actually holding up very, very well, and obviously we've seen it make some nice gains this year as well.

I think for silver to do that sort of thing, you'd have to see it detach itself from the slow growth environment scenario that surrounds copper and platinum, and have to see it focus almost exclusively, like shifting out of its industrial metal viewpoint, and moving more towards this precious metal viewpoint. Now could that happen? Sure, but I think you'd have to see something that would trigger a shift in this sentiment, and right now I don't see that.

But for me, personally I don't see it as a cautionary note when it comes to gold. What I'm actually watching more so precautionary on gold, assuming that there would be one, which I don't currently see, would be a sharp falloff in the mining stocks, which we're not getting. The mining stocks doing it very, very well. Or a sharp drop in those reported holdings in GLD.

Quite the contrary we're getting that, those holdings have been increasing. Since the start of the year, they are up about 73 tons at one point. Now we saw them drop about five tons the other day, but that's relatively insignificant, and heck, perhaps this afternoon or tomorrow we may see them go back up again for all I know. As long as those other factors that I'm watching, they're mainly the gold stocks and the GLD holdings are firm, I wouldn't be worried about silver is doing as far as it impacting gold.

Mike Gleason: One would think that the possibility of negative interest rates here in the U.S., you touched on it earlier, and then also negative rates globally of course, that would be very bullish for gold. Talk about that for a minute, because obviously the criticism made by many about gold has always been the carrying cost involved. But with a negative interest rates in the environment, you'd have to think that would be incrementally beneficial for demand of the yellow metal and ultimately prices as well. Is that fair said Dan?

Dan Norcini:Yeah, I think it is Mike. I think you said it as good as anybody else could say it. There is no opportunity cost to hold it. You put money in bonds that are paying next to nothing, obviously there are some people who are content to lock up money for ten years at 1.7% in a 10-year treasury. I guess if you compare it to a ten year German bond or a ten year Japanese bond, it looks like you've hit the jackpot, when you buy a U.S. 10-year treasury.

But for most investors they have a sort of longer term horizon, personally I wouldn't want to lock up money in the government bond for ten years, for 1.7%. You see money moving in the gold for that reason. Again there is not much opportunity cost in holding the metal. And you do have a chance for upside appreciation, particularly when you're in an environment as uncertain, as chaotic as it is now, Mike.

It would be one thing if we had just ultra-low interest rate environment, but stocks were moving steadily higher and wages were kind of maybe gradually moving higher. In other words, you had this scenario that we had for the longest time, where interest rates were low, but stocks were making, it seems like almost every other day, you would see the S&P made an all-time lifetime high. Or the Dow is making with a lifetime high, on the Russell 2000 making lifetime high. The Nikkei is moving strong, and the Chinese markets are really doing well.

That's one thing if you've got low interest rates. In an environment like that, people are saying "You know what, there is not much opportunity cost in holding gold, but there is not much upside in capital gain appreciation potential either. So why would I buy the whole, I'll just put money in the stock market."

But now that you've got that other factor removed, now these stock markets are still shaky again, there is no reason really not to own gold in this environment. That's why you're seeing these holdings rise and I think that's why you're seeing the mining stocks go up as well.

Mike Gleason: As we begin to start to wrap up things here, give us the idea what you're looking for on the charts for gold or silver. As a trader, what are you looking for there, support levels, resistance and so forth?

Dan Norcini:Okay. With gold, and I made note of this on my website this week. We're watching that big sell-off, I think it was on Monday night, or Sunday night. I'm trying to remember what night it was. All of a sudden it seemed like you've got the rally in the stock market, the oil price stabilized, of course we had a big sharp selloff in gold. But it ran down, Mike, the interesting thing on the chart, it ran down to a really key technical support level right around $1,190 level. I noted on some of my comments about that, that that was 38.2% Fibonacci's retracement number from the rally off of $1,265, whatever it was.

And that was the key level, it held it and bounced off that and ricocheted off that as a matter of fact, and then it popped up the next day and then of course it moved up again some more today (Thursday).

So the support level that I watch on the downside is $1,190. Now if you think about it, gold basically went from around $1,070 an ounce, all the way up to just shy of $1,270. We're talking about a two hundred dollar an ounce rally in about a month. That's a pretty solid rally, pretty impressive.

If you look at the ascent, the slope of that ascent line, I mean that thing is really, really sharp, Mike. It's very, very steep. Generally speaking, it's a general rule, markets that climb that steeply, they can't sustain that rate of increase. It's just so steep. It's so quick.

Now of course if you have some catastrophic happen, sure they can do that, but generally speaking once a market reacts to the initial fear, the concern and you get that sharp acceleration, you get a lot of shorts that where in that market get squeezed out. The new longs that are coming in are pushing them out as well.

Anytime you get sort of let up, the fear factor, in other words, things calm down just a little bit, it doesn't mean the problem is going away. But the intensity of the emotion that drove it up in the first place subsides somewhat, that rate of increase in price it's just too steep to maintain. So you get a setback and that's what we've seen.

Then as traders and investors, we watch the charts to see where that price will stabilize as far as support. Well right now it looks $1,190 has been really solid support on the downside. I actually think that would be healthy for this market, for it to sort of bounce around here now and just work off some of the over-bought status that it has, and sort of consolidate in this area, maybe between let's call it $1,240 on the top, $1,190 on the bottom. It's about fifty dollar range.

If it would have moved back and forth within there and consolidate, I think that would provide either good base for another leg higher in the event of another domino or shoe were to fall from somewhere around the globe, or some sort of unexpected fall or some negative news, or something else that we got. You would have a pretty powerful base from there to bounce up higher.

Markets that shoot up too quickly tend to burn themselves out, Mike, and then they don't sustain those gains. I think most of the people who want to be friendly towards gold, they want to see this thing shoot up and then like a media and it's flying up and come right back down again. So a pause in an uptrend of that, a steepness is a good thing actually.

Going back to your original question, $1,240 or so is our resistant level, above that it would be $1,265 to $1,270. Looking at the chart, if we're able to close through $1,273 or $1,275, I think you've got a very good chance to this thing making it to $1,300. You have that much momentum in this market.

If you look at the weekly chart, I mean it's broken out considerably, and particularly the fact that it's been able to stay above $1,200 it's constructive. So you've got some good upside momentum in the market, except if you take out a key resistance level overhead around $1,273 to $1,275, then you've got a shot at $1,300.

And my goodness, if this time we ever go through $1,300 for any reason, you're talking $1,375 to $1,400 then it becomes very realistic, because something obviously would have changed in the global investing environment that would bring about that kind of buying... something would have to have happened, it would be rather dramatic. At that point you would start to see some real momentum traits coming in here.

You know what, a lot of what we had in short covering in this market, Mike, we've got a new hedge fund long side interest in it as well, but we don't have an overwhelming majority of those guys really piling in heavily on the long side yet. And we've all seen what can happen in the past, when that group does commit to a market on the long side.

So as I mentioned, if you've got some sort of advantage and who knows, I mean we're in such a chaotic environment right now, such a time of uncertainty. If anything were to happen that would offset this so called equilibrium that we've had the last couple of days or so, it would not take much to push this market higher if those funds are starting to compile on the long side again.

So that remains a possibility, but again the market would have to proof itself tactically, it would have to take out $1,300. But again, as long as the HUI stays supported, it's hard to see gold breaking down. And right now the HUI looks pretty good on there, I mean it's very strong on its chart. As long as the HUI is rising, it's going to discourage aggressive selling in the gold bid, I can tell you that.

Mike Gleason:And wow about silver? We haven't necessarily broken out of the range that has been going back for months now, whereas gold maybe has. What are you looking up for silver on the charts?

Dan Norcini: Silver has improved, Mike. It definitely has, you can certainly say you've got some solid bottom down there above $13.50 let's call it, in that congestion zone, which was really between either side of $14 Mike, you had sort of a congestion zone that was in effect really going back to November, so what is that, three months, three and a half months now and you broke out. You've got a good base on there. Then as I mentioned when we were starting this talk off, if it wasn't for the weakness that you were seeing in the industrial metals, particularly in copper and some of the other markets like platinum or palladium, you'd probably see silver even higher. Again, it's got a little bit of a lead weight tied to it in that regard.

However, I said on the chart, it has broken above that congestion zone. The fact that it was able to create $14.50, and not so off right away, well that was constructive, because that was what happened at this point, you had some shorts to decide they were going to cover. The downside didn't look like it was going to be a readily apparent that they decided to get out and dodge, when they did we had some longs coming into that market as well.

So you do get some momentum guys in there, and they were able to chase it up through $15, which was in my mind was a big accomplishment. Now the key in looking at silver, I'm looking at roughly at that $16 level. You made a run up $16, a little bit over that, $16.25 or so in October of last year, and then the market just probably fell apart. We went from about $16.25 all the way down to about $13.50 in about two months' time. That was a pretty brutal downdraft.

But you're back up they are knocking in that general vicinity, you are not there yet, but if silver was able to push through let's call it $16.25, you've got something going there, because on the chart you've got to break out. Then that gives you some upside momentum, then you've got the potential move at least $17, even $17.25 to $17.75. It wouldn't be much to put another dollar, an ounce on silver once it got to that level up there.

So we'll see how it acts here, Mike, as we move further into February and see what goes on. One thing I might add to this, if the central banks come out and they manage to concoct some sort of concerted effort, where you see some additional bond purchases from the ECB.

Like let's say they increase their current level of Quantitative Easing, let's say that the Bank of Japan gets a little more aggressive in their Quantitative Easing. I personally don't think it's going to have any impact overall on the real economy, but as far as the trading world and the investing world, oh a lot of traders will look at that and say "yippee, let the good times roll" and they'll come back in and they will push some of these commodities higher again, because the risk trades will come on.

You'll see the yen-carry trade revived. You'll see more aggressive buying of stocks, buying of commodities, in particular in the question, is how much does that last? I don't know. But my concern is in the fear I have is what happens on the day, when we get an announcement by the central banks that we're going to get an increase in the Quantitative Easing. The market initially responds positively for one, two, three days, maybe even a week, and then all of sudden selling starts coming in.

I'd tell you what, if we see that sort of thing happen, and I'm not wanting to give an dire prediction. I'm not one of these guys this gloom and doom thing. I tell you what, if you see a big massive effort by the central banks to reflate further by increasing Quantitative Easing or some sort of other stimulus measures, and you see the market initially respond positively to it and then abruptly sell off, we're in trouble Mike, because at that point what do they have left to do?

Mike Gleason: Yeah, there certainly seems to be a diminishing return fact that's happening. It takes more and more stimulus to have the same effect that they used to get here a while ago. It's like the junkie, that fix has to get bigger and bigger in order to sustain it and to give you that effect.

Dan Norcini:Yeah. What I keep pushing is they've kicked the can down the road for so long. This has been my pet peeve, and maybe it's a little off topic for your listeners over here.

When you try the paper over the problems in the economy by basically using monetary stand list, and you don't really work on what I would call the structural reforms, the deep seated structural issues that have given rise to these problems, tax codes that are oppressive or punitive or regulatory regimes or regulatory burdens that are crushing businesses.

A lot of those things, excessive debt levels, all of those sorts of things that defy a quick fix. They are not quick fixes they take time, and a lot of them let's face it are politically not very popular, I mean because they cause a little discomfort at times.

Politicians basically are saying give us an easy fix. Give us something that we're going to call the voters to turn against it. And the central banks will come step back with the monetary measures, but that doesn't get an underlying structural problem that produced the slow down the first place, the excesses, the imbalances, et cetera.

In one sense all you're doing with this monetary stimulus is you just keep kicking this can down the road and sort of put a band aid on it, in the meantime the problem just festers, that's where I get concerned. At some point if these central banks do some sort of stimulus and it doesn't work, man oh man I mean, then we have to say okay, now what? Now we're going to let the system purge itself like it should have been in the first place. I don't know.

We're really are in unchartered territory, Mike, in monetary history. I don't think we've ever had a time in global monetary history that I'm aware of where every major global economy, whether it's here in the U.S., whether it's Latin America, whether it's the Eurozone, whether it's Asia, every single of them will slow down at the same time. We've always had one region around the globe where there were some strength.

This is really one of those situations where we're all going to have a learning experience in this. We're all going to learn something and what we're all trying to do at this point is just to try to protect ourselves, and trying to foresee what's going to happen. And trying to take sort of steps, where we don't get caught up in it if the event does not end well. So that's my general concern.

And people who have listened to me, have listened to my interviews or read my website, I have been a bear on gold for quite a while because the charts told me to be bearish. But I've always owned the physical metal, even when I was bearish, I just didn't trade it from the long side. The reason I owned it was because you always have to have some of that, particularly when there is all this currency on risk.

I tell you what, seeing what's out there right there, I feel very very comfortable owning physical gold. That's your insurance policy. You've got to own some. You're nuts, if you don't right now.

Mike Gleason: Well despite the chaotic nature of all these markets, I always appreciate your insights, and your way of explaining them it's always very informative. I love talking to you. There seems to be a lot happening this year, and look forward catching up with you again as it starts to unfold. Hope you have a great and restful weekend. I know you enjoy those weekends, and hope you have a good one, Dan.

Dan Norcini: You bet, Mike. My pleasure talking to you as well. It's certainly going to be an interesting year, that's for sure. What was it, the Chinese probably you live in interesting times as well. We are there. We are in an interesting times, my friend. Great talking to you, Mike. I look forward to chatting with you some more in a not too distance future as well.

Mike Gleason: Absolutely. Well that will do it for this week. Thanks again to Dan Norcini. If you want to follow the fabulous market commentary and technical information that Dan puts out, just go to TraderDan.com.

And check back next Friday for next Weekly Market Wrap Podcast. Until then, this has been Mike Gleason with Money Metals Exchange. Thanks for listening, and have a great weekend everybody.

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