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The Gold Update by Mark Mead Baillie --- 279th Edition --- San Francisco --- 21 March 2015 (published each Saturday) --- www.deMeadville.com
“Gold Springs Into Spring”
And, save for the Dollar, so did "Everything". To wit, at last Sunday's Investors Roundtable, a colleague of ours queried as to whether or not we're in the "Golden Age" of the stock market. The notion is that unsupportable earnings don't matter, as neither do failing economics nor so-called "Dollar Strength", let alone "Dollar Exceptionalism". Today, ours is a correction-less stock market, indeed reminding one of that rather infamous, tongue-in-cheek headline: "World Ends, Dow Up 2".
To be sure, the markets certainly fawned over the "squish" provided by the Federal Open Market Committee on Wednesday, despite "patience" being pulled from their Monetary Policy Statement (giving it a bit more bravado), to then have the Chair emphasize that lacking "patience" doesn't really mean a interest rate increase is imminent, (i.e. come 17 June). Such dovingly gentle stroking caused the Buck to balk and the Bond to balloon, in turn sending the BEGOS Markets (Bond / Euro / Gold / Oil / S&P) moonward en masse. Specific to Gold and the S&P, here's how their countdown and lift-off unfolded, (minute-by-minute during real-time hours):
Indeed came the clarion call "Houston, we're GO!" as in flowed the dough, the only market left in woe being the Dollar, its Index -- which just one week ago having eclipsed and closed above the vaunted 100-mark for the first time since April 2003 -- then settling out the week yesterday (Friday) at only 98.035. Poor little dog, left out in the cold whilst the balance of the great markets heated up to the barest inkling of a world continuing without rates. Moreover, for the last month, both Gold and the S&P have traded away their negative correlation to instead track together quite similarly to those days in which we referred to their loving dance as a "pas de deux". Here is that duet's last 21 trading days, (one month ago-to-date):
As for the Federal Reserve Bank, we see it stuck in a classic "Catch-22", the unsolvable logic puzzle in this case being the FOMC caught between credibility and reality. In order to maintain credibility, the members most certainly have to vote to raise the Fed Funds rate because 99% of the universe is expecting them to so do. But then starkly in the face of reality, per this following graphic, such an imminent rate rise would appear to be a bad idea. Here's why:
"Jeepers, mmb, it just keeps going down and is really starting to look serious, huh?"
It so does, Squire, and what's annoying about it all is that very few folks out there, (save for our esteemed readership and other fine colleagues who take the time to ferret it all out and report), are paying any attention. If the news announcer on the car radio says that jobs growth is spectacular and that all's right with the StateSide economy, then "that's the way it is", (thank you Walter Cronkite).
As an example, there was a FinMedia piece that ran this past week with this bit: "In the U.S., hiring over the past year has been stronger than any time since the go-go 1990s." It really does border on irresponsible blasphemy, given the makeup of the jobs, non? I daresay there are times when one feels like Howard Beale as portrayed by the late Peter Finch, --("Network", 1976). But at some point the word shall get out that all is not as it seems.
Meanwhile, specific to what the Fed said, I responded to a valued reader post-FOMC as follows: "My thinking at this point is that they will do one rate raise simply for credibility’s sake ... and then they’ll later rescind it (!) Further, I think Gold knows it ;)" which of course hints for another round of Quantitative Easing.
And be it Gold's knowing that inevitably there must be more QE, or the excitement over the new six-bank mix to set the electronic Fix, the yellow metal put in its best weekly performance since that ending 16 January (nine weeks ago). And as we next turn to Gold's weekly bars, note that the descending red dots which depict the parabolic trend as Short are now moving down into the purple-banded 1240-1280 resistance zone. This is a technical positive, for Gold now does not have to clear the entirety of the resistance zone to flip the trend back to Long; rather price in the new week would have to eclipse "only" 1269, (admittedly a bit of a stretch from the current 1182 level giving the weighted-average weekly trading range now being 44 points). But the dots themselves are presently declining at a rate of 14 points per bar, meaning that in just a week's time they'll be nearer still to the lower purple band, thus making it ever-easier for price to rise up and meet them, barring another bout of brute selling:
A further technical positive is the resumption of the Precious Metals' "Baby Blues" moving up from the floor. Here we have the daily bars of the past three months-to-date for Gold on the left as well as for Silver on the right. In both cases, their respective blue dots now again whilst still residing below the 0% horizontal axes indicates the 21-day linear regression trends are losing their downside consistency, a favoured early hint of the tide turning back up. And notably taking high to the sky is Sister Silver, wasting no time in getting with the program by sporting yesterday her best day (+82.5¢/oz. or +4.86%) since the aforementioned 16 January (43 trading days ago). Fly, Sister, Fly!
In this next graphic, from the nearer-term perspective, we see both Gold (left) and Silver (right) via their 10-day Market Profiles having made ample headway this past week in moving up and over trading resistance, ideally which now morphs into support, yet another technical positive. The white bars near the top of both panels are yesterday's settles:
Toward wrapping it up for this week, we've a couple of graphics with respect to Oil, which settled the week yesterday at $46.45/bbl, (West Texas Intermediate). To look at the Gold/Oil Ratio millennium-to-date, one might conclude the price of Gold has been soaring...
...when of course 'tis Oil that's been absolutely creamed, down 54% from this date a year ago. Yet from the "You've Gotta Be Kidding Me Dept.", Oil may not as yet quite be in a bear market -- at least based per what I heard on the bedside radio in Wednesday's wee hours from what is ostensibly the world's leading financial radio broadcaster, (and you regular readers know of whom I'm writing, 'tis just that we deem this sufficiently embarrassing such as not cite them directly). In fact, the first time I heard it, I thought I'd mis-heard it, only to then hear it repeated in their news loop an hour later. And I quote: "Oil is down for a seventh day-in-a-row and heading toward a bear market." Perhaps better late than not reported at all? Here are Oil's weekly bars year-over-year:
Finally we've this: in an effort to circumvent counterfeit coinage, you may have heard that the £1 sterling coin is being remodeled, the tails side having been competed for by some 6,000 contestants and the winner being a youngster from the West Midlands. With all due respect to the winning designer, when one thinks of Great Britain, one thinks of, well, its being GREAT: you know, ships and Churchill and that sort of thing. But for this mintage, whilst one trusts the obverse will still be the image of the Queen, the new presentation on the reverse is that of floral fauna. Somewhat softly gutting, when one comes to consider it all. Still, maintaining the shiny brass border does give the coin that dash-of-Gold appearance, which, at the end of the day, is a good-lookin' thing: