The Gold Update by Mark Mead Baillie --- 171st Edition --- 23 February 2013 (published each Saturday) --- www.deMeadville.com
Or as the expression goes: “Been there, done that”. Gold, for the fourth time since coming off of its All-Time High of 1923 on 06 September 2011, has yet again returned to ”Dancing On The Floor…” --(Third World, ’81), which in our now-infamous structure chart below is the yellow 1579-1466 range. And admittedly, yours truly for the present also has been floored: for had last year’s notion of “Twenty-Five Hundred by Twenty-Five December Twenty Twelve” played out, Gold would be some 1000 points higher than currently ‘tis at here at 1580:
Not to worry. Upon completing your read of this week’s missive, you may well be beating down your Gold dealer’s or broker’s door to buy more. Let’s go.
On the way up, Gold for its very first time reached the 1580 level following the week that ended 29 April 2011. Stateside alone, our M2 money supply on that date, (per data provided by the Federal Reserve Bank of St. Louis), stood at $8.990 trillion. Today, with Gold back down at 1580, (i.e. 0% higher than ‘twas those 21 months ago), our M2 now (as of 04 February) is $10.421 trillion. Which by my trusty HP-12C calculator is an increase of 16%. And here’s the punch line: that does not include the proliferation of faux dough by China, Japan, England, nor the EuroZone. Indeed, Stateside M2 is only about 20% of Global M2, (measured in toto as being just over a quaint $50 trillion as of a year ago). Yet even excluding those other sovereign debasers, were Gold 16% higher in line with that recent growth in StateSide M2 -- given that as goes M2 so naturally goes the price of Gold -- ‘twould right now be at 1829. But instead, here’s the picture from late April 2011-to-date:
“But mmb, you said yourself that Gold had gotten ahead of itself…”
True enough, Squire. ‘Twas back when Gold made its charge to the aforementioned All-Time High. But that was a year-and-a-half ago. Since that time, the valiant Gold Troops have -- as is clearly visible in those first two charts above -- made three trips across The Northern Front (1750-1800) hoovering therein The Forces of Resistance, only to each time repair back here to the safety of The Floor. Yet look above at that M2 go...
Matter of fact: this is the 30th anniversary of our M2 having reached the $2 trillion level for the first time in closing the week ending 25 February 1983 at $2.006 trillion. Gold finished that same week at 449. Now again given the latest M2 reading of $10.421 trillion, that is a money supply increase of 419%. Applying that percentage increase to Gold from such same date in 1983 -- ‘twould right now be at 1881 -- again without including the fiat folly facilitations from those other monetary zones. (And oh by the way, recall that at least 95% of the world’s investors do not have Gold in one form or another in their portfolios). Think about it.
“But mmb, now they’re afraid of the ‘Death Cross’…”
Screw the “Death Cross” (Three Views…)
Yes, Ladies and Gentlemen, on a closing price basis, Gold’s 50-day simple moving average (1661.9) has just slipped below that of the 200-day (1662.3).
View One: Indeed “Mommie, Mommie” ‘tis the Death Cross! With a tip of the cap to MarketWatch for yet another hypy headline as embedded on our chart below, here’s what all the fuss is about. The price of Gold itself (1580) is purposefully not on the chart, such that one can revel solely in the full drama of the cross:
View Two: Turn down the lights to get the best effects of the animation in this next neon gem. Since the stock market crash back in October of 1987, this is the daily track of Gold. ‘Tis simply to provide perspective that the terrible technical event of its 50-day average being less than its 200-day average has actually occurred at other times in the past, and amazingly enough, Gold has survived throughout. The days on the chart wherein blood red dots appear are those when such Death Cross condition has existed:
View Three: this is probably the most telling chart of the bunch. For the past ten years, here we’ve simply subtracted Gold’s 200-day average from its 50-day average. The red bits that are sub-zero mark the Death Cross being in vogue, typically for fairly brief periods:
“But mmb, what if it’s longer or deeper this time?”
I’ll put it this way, Squire: we’ve already earlier stated two cases that Gold “ought” right now be well up into the 1800s simply in concert with the ongoing growth of funny money. Yes, the FOMC at its last meeting apparently showed some hesitancy in having the Fed stay the $85 billion per month printing course upon which it embarked this year. But keep your eye on the Economic Barometer for clues as to how the Fed’s stance shall play out; I think they’ll be forced to continue to pay out. The ever-erudite Mohamed El-Erian stated it quite succinctly this past week: “Once again, central banks will feel compelled to do more, and again they will have no choice but to use imperfect policy tools.” Certainly they’re stilling buying Gold -- indeed 534 tons during 2012 -- the most since 1964. The degree to which our own Fed is stocking up may not necessarily be known, however the ever-irreverent William Banzai-Seven did capture this recent photo of Big Ben:
Meanwhile across-the-pond, France looks poised to miss its growth and deficit targets for this year, part of its continuing best effort to have the letter “F” included amongst the PIIGS, thereby re-arranging the acronym, (as we’ve thus demonstrated in the past), to FIGPĪS, (pron. “fig pies”). Un peu de la crème, s’il vous plait… Further ‘round the globe, we’ve also the insistence by Japan’s new government for its central bank to print more ¥en. Then from there and across the Yellow Sea we see the PBC with Renminbi aplenty. These are all Gold Positives (!)
Still, there’s the parabolic Short trend stance for Gold’s Weekly Bars. Now 17 weeks in duration, the current Short trend rivals the record-setting (since at least 2001) 20-week Short run from just last Spring/Summer:
To be sure, Gold now at 1580 closed well off the week’s low of 1555; but moreover, the beauty of price having traded lower to that excessive extent has served to pull the parabolic price to flip the trend to Long down to the 1677 level. Bit of a stretch to eclipse that price in just a week’s time. But in two? Pas de problem should it be disposed to so do and these most recent weekly trading ranges hold up: the last two weeks have covered 73 points and 64 points respectively.
Finally, here’s our interactive chart of Gold versus the S&P over the last month. Not only does the negative correlation remain nicely in place, but I’ve actually begun to wonder if we’ve seen the S&P’s having put in its high for this year (1530). If so, and this negative correlation runs its course, Gold will be moon-bound:
And as a highly-valued friend, active Gold investor and esteemed reader of The Gold Update cheerfully said to me this past Wednesday: “I’d rather be a month early than a minute late!” Spot on, THR!
To the Gold Stack we go:
Gold’s All-Time High: 1923 (06 September 2011)
The Gateway to 2000: 1900+
The Final Frontier: 1800-1900
The Northern Front: 1750-1800
The Weekly Parabolic: 1704
The 300-day Moving Average: 1665
Structural Resistance: 1628 / 1638 / 1653 / 1678 / 1686
Trading Resistance: 1592 / 1606 / 1615 / 1627 / 1636 / 1649 / 1668
Gold Currently: 1580
The Floor: 1579-1466
Trading Support: 1572
Structural Support: 1432
Oh no, what’s this? Moody’s has just downgraded the credit rating of the United Kingdom to Aa1. In thinking back, only surpassing this is an incident from a 1966 episode of The Avengers entitled “The Danger Makers” wherein John Steed in perusing the stock listings in The Times -- whilst bound in a chair and facing up the wrong end of an adversary’s rifle -- nonchalantly mutters: “Good Lord... British Tin down another point.” (Steed, of course, then trumps his adversary and proceeds to the obligatory glass of champagne with Mrs. Peel.) Like Gold, Brilliant!