When Gold Goes Well
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
"You are listening to WGGW: When Gold Goes Well" ... To state that Gold is going well when 'tis trading at half the market value it ought be is a bit of a stretch. In fact, as "bulled up" as Gold aficionados appear to be through these first nine trading days of the year, price being +2.5% is actually the second weakest "nine starting days performance" of the past five years. Yet in a positive sense, it really "does feel different" this time. And when Gold goes well, ironically, 'tis oft more difficult to write about because 'tis doing that which is expected: rising.
Still, before we all get overly excited out there, let's update this annual tidbit: in the 43-year span from 1975 through 2017 inclusive, Gold's low for the year has come on the first trading day just four times, but had never so done in two consecutive years until 2016 and 2017. Is 2018 to make it the third such straight year? So far, 'tis the case, Gold's year-to-date low of 1304.6 having traded in the first hour of this year's first day. Now we've Gold per yesterday's (Friday's) settle at 1338.3.
Moreover, from the "Say It Ain't So! Dept." Gold bullishness is uncannily permeating beyond the bounds of the old gummers down in their bullion bunkers. Indeed, one may have read on various Gold pages of late that the yellow metal is anticipated to be an out-performing asset in 2018, that once again we've another "This is IT!" year, so many of which post-2011 have been fizzlers. But when the pro-Gold notion reaches the MFM ("mainstream financial media"), one does sit up and take notice. Long-time readers know that we steer quite clear of all televised MFM: yet courtesy of the bedside radio, we heard on Bloomy in the wee hours this past Tuesday an analyst with expectations for Gold's indeed being a 2018 out-performer. As Bloomy touts ad nausea their global media presence, we trust that millions "hoid it dere foist!"
"First" for us is the first blue dot of Gold's new parabolic Long trend as we below see depicted in the chart of weekly bars from a year ago-to-date. Note as well that Gold has risen for five straight weeks: that is only the third time since July 2014 that Gold has risen by five or more consecutive weeks ... and for the 889 weeks millennium-to-date, Gold has risen by six or more consecutive weeks just 11 times. All that courtesy of the "Nothing Moves In A Straight Line Forever Dept." The good news is that Gold appears structurally protected across the top of the Box (1280-1240), and hem-'n-haw as price may do, Base Camp 1377 looks like the prize for this parabolic Long trend's rise:
'Course, Gold gets a lot of grip when you get what was the financial headline of week, and arguably that of the millennium: "China May Halt Purchases of U.S. Treasuries". That's an "Uh-oh...": China and Japan lead all foreign owners of the StateSide fluff, each holding over $1 trillion apiece, which combined is about one-third of the total $6 trillion in outstanding foreign holdings. Thus should China's one-sixth interest mature away, might that have to be plugged with more taxes to pay? A rebut to the new tax cut? In turn, the Dollar just having come off its worst year in the last 10 sure ain't startin' off 2018 any better. Here 'tis millennium-to-date toward now testing the vaunted "90" level:
Indeed, down with the Dollar and down with the Bond is leading to up for everything else across the BEGOS Markets. Here is each component for the past 21 trading days (since 13 December), showing their respective grey linear regression trendlines and "Baby Blues", the dots that depict the consistency of each market's trend. We on occasion quip that "Gold plays no currency favourites", but 'tis nice to see the present set of circumstances pushing price right through the roof of the chart:
And for those of you keeping a keen eye on incoming EconData, you may well be nurturing the notion that apparent economic slowing might also bode well for Gold should the Federal Open Market Committee in bidding Chair Yellen adieu do nothing. Her farewell overseeing of the 31 January policy statement is looming:
As for the stock market when measured by the S&P 500, Embark Group's Chief Investment Officer Peter Toogood put it in succinct brilliance this past week in stating on Bloomy that "...the S&P has been in a four-year vacuum of no earnings...". So as you regular readers know, given we actually compare earnings numbers, we've no argument with there, which is just too good.
Now let's focus for a moment on Sister Silver. You've likely noticed our repetitively pointing out of late how she -- as the denominator in the Gold/Silver ratio -- is thus keeping it up near the 80x level, which millennium-to-date is about as high the ratio gets, save for a spike up to 88.4x in November 2008 during the chaos of the Black Swan event. The ratio at this writing is still quite the lofty 77.6x, the average since 2001 being 62.9x (at which level would put Silver at 21.290 rather than at Friday's settle of 17.245). Here's the point: Silver is not really being traded with the enthusiasm that Gold has been receiving in the young year-to-date. Here's visual proof of that in the following two-panel graphic of the EDTR ("expected daily trading range") for Gold on the left and Silver on the right. We emphasize the lines are not that of price direction: rather they suggest the width in points for each ensuing trading day's range between its low and high. Clearly the expected reading for Gold (12.5 points) has been expanding off the bottom of its panel. But look at that for poor ole Sister Silver: she appears absolutely dead in the water, her current EDTR about as narrow as she gets down there at just 0.2 points:
The same notion of Silver being left alone at the dance appears in here 10-Day Market Profile. Below we've that for Gold (left) and Silver (right). The difference between the number of price "handles" being traded is stark: Gold's range from the bottom up (1296 to 1340) is a 3.4% distance, but Silver's range (16.85 to 17.30) pales at just a 2.7% distance. And Silver is supposed to be the more volatile of the two? Time to get with the program, Sister!
Finally, nary a day goes by without being broadcast-burdened by bits**t and its crypto-bit brethren. But South Korea's decided not to bask about waiting for bitcoin et alia to bust. They have enough drama with which to deal, the Winter Olympiad just four weeks away. As for the aforementioned China, seems they're really cleaning house of superfluous stuff as well: enough as noted with StateSide Treasuries, and now a move to close bitcoin mines. "Be it bonds or bits, if we can't see it, let alone touch it, we don't want it!" Words to live by, those. We give our thumbs up to Gold!