Analytical Charts - Jim Wyckoff
Gold Burrows to Year's Lows
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Featuring views and opinions written by market professionals, not staff journalists.
Be it from the Golden sun of the Côte d'Azur to now the southwest corner of the Golden State, all that glitters is everything -- except Gold. Fed-Speak and Tariff-Talk both served to give Gold a Fatal Friday Finale in finishing the week yesterday at 1282, price taking an excursion en route down into The Box (1280-1240) by trading as low as 1278. 'Twas Gold's worst trading day since 23 November 2016, price finishing at its lowest close year-to-date.
And the "seasonality" from this point via the above Gold Scoreboard is a split decision: should price track 2016's direction from here, Gold rises; if instead 2017 rears its head, price falls. But the good news at this juncture from both of the prior years -- should history repeat as we 'spect it shall -- is that in neither case was the year's high yet in place.
So per the Gold Stack at the foot of this missive, we see that the high thus far this year is 1369 (11 April): a return to there almost certainly, indeed finally, means re-taking Base Camp 1377, beyond which as you know is our anticipation of all the "buy stops" getting blown out such as to accelerate Gold's rise to our 2018 forecasted high of 1434.
But for the present, Gold's big test is not to bust below The Box (1280-1240). And from the "Trivia We'd Rather Not Know Dept." as we're all so sick of Gold getting stuck in this area: of the 911 weeks thus far in this millennium, Gold has settled 16 of them in the 1280s, the first time being at 1283 on 12 July 2013. Had you bought a nice shiny Maple Leaf on that day, you ain't gained nuttin' -- and yet since that date the StateSide M2 money supply has increased from $10.71 trillion to $14.10 trillion (+31.7%). Go figure.
"Well, mmb, the Dollar Index since then has gone from 82.600 up to 94.460..."
Nice to see you're manning the machines, Squire, up there in San Francisco, ("...yesterday a paradise, today a wasteland..."). Odd how the Dollar has maintained the bid it has, given its breeding like bunnies. Which reminds us of course that the rest of the world's dough also is faux.
As for Gold's movement, whilst we don't revel in it dropping, at least price finally went somewhere, given the "expected daily trading range" (EDTR) though Thursday had reached its narrowest reading in better than a year. But despite Gold's lurch lower, as we've learned throughout its history, "what goes down comes back up, and then some". 'Course, 'tis the "then some" for which we're all patiently -- or perhaps impatiently -- waiting. Yet honestly, until yesterday's plunge, we were seriously wondering if there really were any lights on at the world's Gold trading desks, or had it all become merely a filament of our illumination? Of late, it has become to feel like there's more trading action in Black Sea Wheat and Live Hogs than in Gold. And don't knock dem hogs: like Gold, they too have been usefully around for 5,000 years but at least they're "live"; Gold on the contrary these many days has been appearing "dead".
As for Sister Silver this past week, she traded up into the 17s for the first time since 23 April, looking Gold straight in the face and said "You comin' along, Bud? No? Well, I'll see ya later." That was nice until she pot-holed out the week by dumping deep back in the 16s to settle yesterday at 16.57. Still, regular readers know of our fervent anticipation for Silver to outperform Gold in their ensuing run-ups -- which will happen -- Silver's being comparatively firmer of late as reflected in the Gold/Silver ratio which had overstayed its time above 80x only to have now rightly fallen to the current 77x level. The following graphic charts the ratio from the last time it met its millennium-to-date average back in November 2013 through today:
To Gold's weekly bars we go and therein we see price's drop this past week back into The Box. The good news here is that structurally looking back to the price clustering 'round Oct-Dec, that "ought" contain further material fallout, Fed-Speak and Tariff-Talk notwithstanding. Nary passes a day wherein we don't remind ourselves that Gold is trading at less than half its currency debasement value, and that the stock market is trading at more than double its earnings value, both with their respective "regression to the mean" runs in the offing. Meanwhile for Gold's parabolic Short trend, the cascade of red dots continues:
Gold coming off the boil, the StateSide economy's runnin' hot! 'Tis a shame, really, that the stock market is as terrifically overvalued as 'tis, given that throughout history, valuation always redounds to earnings. Bob Shiller's "CAPE" for the S&P 500 is presently 33.0x, our median price/earnings ratio is 24.1x, and the yield on the mighty Index is a paltry 1.932%, almost 100 basis points below the 2.924% yield on the U.S. 10-Year Note, (the latter by which you "know" you'll also get the return of your dough). With stocks? Who knows? We're maintaining our call for the S&P to reach down a full 25% (from its 2872 January high) to 2154. That ought well be aided by two more Federal Reserve Bank rate hikes (September and December, barring the wheels not having come off by then) plus concerns of inflation's increasing business costs and wage expenses. Add in the "Trump-induced" trade tiff that put the G7 a bit stiff, and again we ask who knows? Here is the S&P (red line) astride the booming Baro:
As for digging into the Gold trade, here next is our two-panel view for the last three months-to-date of price's daily bars on the left and the 10-day Market Profile on the right. And no, there's no need to adjust your set: Gold's baby blue dots of regression trend consistency went "Kerplooey!" as Friday's price got kicked in the booty. Severely so that in the Profile, that 1302 resistor appears -- for the present -- as impenetrable:
Our alluding to Silver as being firmer of late than Gold shows quite clearly here in the next two-panel view. Her Friday "Kerplooey!" did not break down anywhere near the year's low (16.07 on 1 May), let alone hoover away 21 days of uptrend as did Gold. Sister Silver shows trading support at 16.50, with her trading resistors as labeled on her Profile:
In summing up Gold's overall price stance, here is the stack:
The Gold Stack
Gold's Value per Dollar Debasement, (from our opening "Scoreboard"): 2808
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
2018's High: 1369 (11 April)
The Weekly Parabolic Price to flip Long: 1345
10-Session “volume-weighted” average price magnet: 1300
The 300-Day Moving Average: 1293 and rising
Neverland: The Whiny 1290s
Trading Resistance: 1288 / 1302
Gold Currently: 1282, (expected daily trading range ["EDTR"]: 12 points)
Trading Support: here at 1282
The Box: 1280-1240
10-Session directional range: down to 1278 (from 1313) = -35 points or -2.7%
2018's Low: 1278 (15 June)
We'll wrap it for this week from our being ensconced here in beautiful Rancho Santa Fe with this rather cavalier thought on mitigating consumers from ultimately having to ante up to cover the $50 billion of price increases due to tariffs charged on goods coming in StateSide from China:
Conservatively, the US Federal Government's annual spend is $4 trillion, (the fiscal year budget for 2019 calling for $4.4 trillion). Given the government is steadfastly closed on weekends, that $4 trillion spend is over some 252 annual work days, which in round numbers comes to some $16 billion spent per day. Solution to the tinge of tariffs? Simply shut the government down for three days and redirect the $50 billion it otherwise would have spent to point-of-sale terminals in the form of discounts for each tariff-affected item the consumer purchases. "Ta-Da! Everybody's happy!" 'Course in the long run, we'll all be happy by having our Gold!