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The Gold Update by Mark Mead Baillie --- 325th Edition --- San Francisco --- 06 February 2016 (published each Saturday) --- www.deMeadville.com
"Gold's Swift Ascent Already Closing In On 1200"
Let's begin with the below graphic from the 26 December edition of The Gold Update (which was queried "Gold to Ascend into Year's End?"). Having alluded to this picture a week ago, we now deem it worthy of being re-presented and updated through yesterday's (Friday's) close of 1174, because the suggested technical setup for Gold to make the run from 1076 (back on Christmas Eve) up across 1200 is happening, these past six weeks as portrayed by the rightmost animated bars:
Moreover as we also saw a week ago in our year-to-date BEGOS Market Standings, the precious metals were leading the pack, +5%; now they're blowin' the doors off:
Gold +10%, Silver +8%, Bond +6%, Euro +3%, Swiss +1%, Copper -2%, S&P -9%, Oil -20%.
Indeed our usual snapshot of the 21-day (one month) percentage tracks of Gold vs. the S&P 500 encapsulates it nicely. (Funny, too, how the stock market "shock" as viewed in this fashion is simply in a state of treading water; but with the S&P presently at 1880 and our target for it this year being the lower 1400s, the "down" bit has yet to really kick in, as is clear here):
On the positive side, that upswing for Gold is clearly welcome, (obviously well overdue), and gives some foundation to our year's target being the upper 1200s, ideally above 1280 which is the upper band of the 1240-1280 resistance zone. This is next shown in the weekly Gold bars, the rightmost one marking this past week as the strongest percentage five-day up move since that ending 28 October 2011 -- over four years ago -- on which date Gold settled at 1743, (a level that we'll inevitably again see):
'Course, all of this does lead to our notion of "how we'll know when the bottom is in" for Gold. Already, musings are being made that 'tis, and to be sure, it really does feel like it (!). That said, toward maintaining a level head in acknowledging that Gold shan't simply move straight ahead, let's review our criteria for "knowing" when the bottom is in:
■ The weekly parabolic trend ought be Long ('tis)
■ Price ought be above the 300-day moving average ('tis)
■ The 300-day moving average itself ought be rising ('tisn't)
■ Price ought trade at least one full week clear above 1280 (hasn't)
Here's the graphic presentation of these criteria from Gold's All-Time Closing High of 1900 on 22 August 2011 through yesterday's settle at 1174:
Still with many-a-challenge remaining, (per The Gold Stack near the foot of this missive), 'tis nice to see the Precious Metals prices all but at the top of their respective 10-day Market Profiles as displayed here with Gold on the left and Silver on the right:
Next to a near-term "cautionary" note, which actually we might consider on balance as a very telling Gold positive. As you long-time readers know, we place a "value" on Gold in two ways, the first being borne of common sense as portrayed by currency debasement in the Gold Scoreboard that opens each of these weekly writings, (the present reading begin 2541). The second is the reality that Gold, being one of our five primary BEGOS markets, behaves relative to how the other four components (Bond, Euro, Oil, S&P) are flexing. Indeed all five of the markets are constantly reacting to how each of the others are doing, for example the S&P moves subject to the cost of debt, the cost of currency, the cost of hard asset protection and the cost of energy, (all of which redound to companies' bottom lines, and ultimately your managed dough). The point is as we turn to Gold vis-à-vis its smooth pearly valuation line (which basically regresses Gold's movements to those of the other four markets), price right now is at an extreme high, as measured by the oscillator -- price less value -- across the foot of this one-year graphic. The last time Gold was this high (113 points) above the smooth line was on 27 January of 2015, from which price dropped by over 100 points in the ensuing five weeks. But this time 'round, the momentum of Gold already closing in on 1200 is such that we sense a near-term pullback ought be more muted:
Further, 'tis helpful for Gold when Big Players are on the Buy Side. In the last few weeks we've read of Russia and China respectively adding better than 20 tonnes to both of their stacks. And from the "We Want It Where We Can See It Dept.", we learned just a week ago of die Deutsche Bundesbank continuing its repatriation promise, last year transferring to Frankfurt 110 tonnes of Gold from Paris, plus better than 90 tonnes from beneath New York's Federal Reserve building.
Speaking of the Federal Reserve Bank, a tip of the cap to The Cable News Network's Heather Long, who rather than towing the mainstream media party line, didn't mince her words with respect to growing expectations of no rate hikes in 2016, in her piece captioning a photo of the Fed Chair with "Janet Yellen and the Federal Reserve are on another planet." No argument here Heather, (nor would there be from my late media mogul grand-pappy Hugh Baillie), and certainly not from the Economic Barometer:
Indeed in addressing the Council on Foreign Relations this past Monday, Zambian-born Fed Vice Chair Stanley Fischer stated "The world is an uncertain place, and all monetary policymakers can really be sure of is that what will happen is often different from what we currently expect." That's a confidence booster, right there! Then come Tuesday, we learned the Fed is to stress-test the effects of negative rates right here at home, just in case we fall in step with Switzerland, Sweden and Japan. "I Love a Parade"--(Arlen and Koehler, 1931).
Specific to Japan, their central bank's Governor Haruhiko Kuroda says they stand ready to move rates still further sub-zero, whilst over at the European Central Bank, President Mario Draghi says they shan't "surrender" in combating low levels of inflation, the case for more accommodation coming in March. And Bank of England Monetary Policy Committee member Ian McCafferty says he's nixed his notion for an interest rate increase, (which from the "Size Doesn't Matter Dept." flies in the face of a wee hours comment made on Bloomy Radio this past week that presently the economy of the UK is stronger than that of the US).
Oh such economic fuss hither and yon! Forget the fuss, for we've the Gold Stack as thus:
The Gold Stack
Gold's Value per Dollar Debasement, (from our opening "Scoreboard"): 2541
Gold’s All-Time High: 1923 (06 September 2011)
The Gateway to 2000: 1900+
Gold’s All-Time Closing High: 1900 (22 August 2011)
The Final Frontier: 1800-1900
The Northern Front: 1750-1800
On Maneuvers: 1579-1750
The Floor: 1466-1579
Le Sous-sol: Sub-1466
Base Camp: 1377
Neverland: The Whiny 1290s
Resistance Band: 1240-1280
Year-to-Date High: 1175
10-Session directional range: up to 1175 (from 1099) = +76 points or +7%
Trading Resistance: none (per the 10-day Market Profile)
Gold Currently: 1174, (weighted-average trading range per day: 17 points)
The 300-Day Moving Average: 1158
Trading Support: 1155 / 1139 / 1128 / 1117 / 1108
10-Session “volume-weighted” average price magnet: 1130
Year-to-Date Low: 1061
The Weekly Parabolic Price to flip Short: 1056
Finally, these three quick notes:
1) How red is your Gold? Artcurial Motorcars garnered 32.1 M€ for the '57 Ferrari 335 Sport Scaglietti that was driven to victory in the 1958 Cuban Grand Prix by the great Stirling Moss. Today Sir Stirling is 86 years of age. The sale of the car he drove is equivalent to 33,555 ounces of Gold, which for you bullion stackers out there is some 76 400-troy ounce (27 pound) bars -- the favoured central bank size -- (just in case you're scoring at home).
2) The level of Federal StateSide debt has just topped $19,000,000,000,000, (which for you WestPalmBeachers down there is $19 trillion). We carefully calculated the effect on the price of Gold were all that debt to come due at once, but after going through an entire box of pencils, only to then discover that our slide rule does not calculate beyond one bazillion, we gave up.
3) Then there are you having kindly inquired 'bout the whereabouts of Squire. I told him to spare me the details, but he has something to do with tomorrow's half-time extravaganza down the road at the Super Bowl. Have fun with it, young man, for I fear the game itself will be a blowout bore: Carolina 52, Denver 11. "Another glass of that Gold brew please?" Now yer playin' ball!