The Gold Update
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The Gold Update by Mark Mead Baillie --- 402nd Edition --- San Francisco --- 29 July 2017 (published each Saturday) --- www.deMeadville.com
"Gold's Push to 1300 (again...)"
Kudos to our good colleague and bon vivant Squire who a week ago, with respect to our annoyance over Gold's returning up only to get stuck yet again in its 1240-1280 box, quintessentially queried: "...what if price just keeps powering up through here this time?"
The lad's not being 'round this time to take credit himself, we say "Well done, son!" For as the above panel shows, price has spritely picked up the pace these past three weeks, settling yesterday (Friday) at 1269. For us futures folks, add in six more points of premium as volume rolls into the December contract, ("first notice" for August physical delivery being Monday), and you've got price at 1275. Further, 'tis nice to have some "technical push" associated with this up move, which since 07 July is a 4.7% gain, Gold's best three-week stint since mid-January.
Which brings us to the following two-panel chart. On the left is our familiar three-month view of Gold's daily bars with their "Baby Blues" of 21-day linear regression trend consistency: note how the blue dots are powering up with room still to go, barring the "top of the box" 1280 sellers putting the kibosh on it all. On the right for the same period we've again the daily bars, but with the canned textbook study known as the "Price Oscillator"; whilst we caution that no technical study is perpetually reliable, this one has been sufficiently so in recent months such as to regularly make our "Market Rhythms" page: seven of the last 10 crossings of the oscillator from down-to-up and vice-versa have seen price then follow-through in the same direction by 40 or more points, (which for you WestPalmBeachers down there means it has failed to so do 30% of the time). The point is: the oscillator confirmed a positive crossing at the close a week ago at 1255. Were a full 40-point follow-through to again occur: 1255 + 40 + 6 points of December contract premium = 1301. "TA-DA!" 'Course, between here and there also come those horrible Whiny 1290s. Remember them? Just sayin':
Either way, if you're now all pumped up, let's put Gold in prudent perspective. Save for one trading day, we're now at month's end, which means 'tis time to bring up our BEGOS Market Standings year-to-date. And just as they were positioned at the end of June, today we've Gold (+10.2%) still in fourth place and Silver (+4.9%) still in sixth, but now with Copper (+14.8%) for the first time in forever leading the pack:
Note, too, the boffing of conventional wisdom in the above performances. Both Gold and the S&P 500 are up by almost identical amounts: "That's not supposed to happen!" Plus there's the recent strength in the Euro at the natural expense of the Dollar, yet not keeping like pace is the Swiss Franc, its succumbing to hard selling this past week as the Bern bunch at the Schweizerische Nationalbank muddle over LIBOR to be no more come 2021.
Notwithstanding the above standings, Gold's "technical push" is to be put to the test as stands stark in this next graphic of the weekly bars from a year ago-to-date. Having closed the last three weeks in a row within five points of each one's respective high -- a phenomena which has not occurred since January 2014 -- Gold now stares directly upward at the top of the omnipresent purple-bounded 1240-1280 box, just beyond which come the declining red dots of parabolic Short trend. Shall they Gold contain? Or shall Gold further gain? We see Gold as "up" to the challenge:
Continuing on this year-over-year timeframe with July all but in the books, here next we've the percentage tracks of the yellow metal itself (-5%), barely now beaten by Franco-Nevada (FNV, -4%), followed by the earnings-exuberant Newmont Mining (NEM, -13%), the lagging exchange-traded fund of the miners (GDX, -21%) and grip-lacking Goldcorp (GG, -26%), with the as yet to accelerate exchange-traded fund of the Silver miners (SIL, -30%). Why "as yet to accelerate?" The millennium-to-date Gold/Silver average ratio is 62x, but is at present 75x. Mathematically if we freeze Gold here at 1269, getting the ratio back to that average puts the white metal at 20.47 (vs. today's lowly 16.75):
'Course, aiding Gold with some "fundamental push" is the Dollar's recording its fourth down week in five, along with the StateSide economy slowing as the Economic Barometer clearly has been showing, Q2 Gross Domestic Product (+2.6%) not surprisingly missing expectations (+2.8%) albeit 'twas closer than we thought 'twould be, yet still there's the Federal Open Market Committee's 26 July stated exaltations:
Moreover what the FOMC doesn't seem to see is that which the International Monetary Fund does decree in slashing America's growth forecasts for 2017 and 2018 given Washington D.C. fiscal uncertainty. And with 19 metrics set to affect the Baro next week, 'twill day-by-day be worth the peek.
Thus combining the positive technical/fundamental push for Gold, we find it for third consecutive week near the top of its ever-evolving 10-day Market Profile (below left) of contract volume traded per price point, and similarly so for Sister Silver (below right):
As for the broad view from here on the advent of August, we've Gold's structure by the month since 2011's All-Time High, the pattern these last two years likened to a golf ball's bouncing upon a freshly-mown uphill fairway. Let's just hope the approach shot flies nice and high:
Finally from our "Did All Y'All Notice? Dept." we've these two items:
■ How 'bout that micro "flash crash" that hit the stock market during lunch hour this past Thursday? No, it didn't make the news, (not that we give the news much due at all anymore). But if you were glued to the S&P futures as were we just after 09:30 Pacific Time, you couldn't have missed it. The lunch hour is obviously the quietest time during the stock market trading day, the S&P futures typically stuck in a three-point range. But on Thursday, 'twas 10 points, all straight down in a heartbeat, with traders and algorithms running for the exits as the bid and offer sizes halved themselves. So stunning was the plunge and evacuation of traders that we issued a note entitled "Did the 'Crash' Just Commence?" And yet since then, we've found no explanation. That's just how fragile the stock market is right now.
■ Taking their cue from the French (as we've already noted in a recent missive), Great Britain has also now announced their intention to ban sales of new petrol- and diesel-powered cars come 2040. We can't see this going over very well up in Silverstone within the hallowed halls of the ultra-exclusive British Racing Drivers' Club. Neither can our Girl Scouts be too excited about it either: one of their new uniform badges is that of a racing car. What's next? Electric jumbo jets? Good luck with that.
Bottom line: when it all doth fold, be glad you've got Gold!