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Gold's Flight 1200 on Errant Descent

Long-time readers of The Gold Update know that our microphones are just about everywhere, to wit this air traffic chatter we just picked up yesterday (Friday):

Tower: "Gold 1200, this is Airport 800 Tower; you have entered our airspace. If it is your intention to land, make right and follow the glide-slope on ILS 873.0, landing runway 1980 left; contact the controller on final approach; you have Airport 800."

Gold: "Hello Airport 800. 873.8 was our high back in 1980; are you sure you've the correct aircraft?"

Tower: "Gold 1200, given that you've lost 41% of your altitude since 2011, yes. Please confirm your intention to land."

Gold: "Airport 800, we've no intention of landing on your strip; too far down for our journey."

Tower: "Gold 1200, then please be advised you are 1,394 points below your assigned altitude of 2,526. You must ascend immediately. Traffic alert for Tungsten, bearing 29 from you, less than a mile: report them in sight."

Gold: "Airport 800, have the traffic. This is embarrassing."

Tower: "Ya think?"

The market price is what 'tis: having settled out the week yesterday at 1132-- and in so doing making a five-year low -- what was Gold Flight 1200 is now but a mere 259 points above its 21 January 1980 high of 873. If 'twas you that bought the high back then and have stayed the course, your position presently is up but a wee 30% over better than 35 years. (The United States "M2" money supply alone over the same stretch is up nearly 700%).

Here's the cause and effect of Gold's price retardation. There is so-called "conventional rationale" for Gold's directional movement, which most popularly includes the value of the Dollar, the level of interest rates, the economic stability of nations, and geo-political security. Such "conventional rationale" for Gold to decrease in value is given a strengthening Dollar, increasing interest rates and a world happily resolving any worrisome issues. The inverse of those elements is the "conventional rationale" for Gold to increase in value. The causes for Gold to go down are working. The causes for Gold to go up are not working. The effect therefore is that Gold, on balance, now only goes down. Last week's missive ("Gold And Greece Both Begin With G") highlighted but one quintessential example (amongst a tome's worth) of such "one-way" cause and effect, the repetitive Peloponnesian pattern playing out as follows: there's trouble in Greece, Gold stays flat; there's hope for Greece, Gold goes down; and round and round and round. Such "conventional rationale" is about as palatable as a root canal.

Similarly unpalatable is Gold's track these past 10 years vis-à-vis its 300-day moving average, the latter having changed its role from stalwart supporter to stubborn resistor. Only consistent in growth is the Stateside money supply, (along with its bubble buddies debt and equity, not just here, but right 'round the world):

Now let's zoom in to our usual year-over-year view of Gold's weekly bars, the young parabolic Short trend as depicted by the rightmost red dots now three weeks in duration:

As noted, the week's low of 1129.6 was the lowest Gold has traded since 19 April 2010 (1124.3). But 'twas from that price just over five years ago that Gold began its run in earnest to the All-Time High of 1923.7 (02 September 2011). Indeed per the Airport Tower's instructions at this missive's outset: "You must ascend immediately."

"Yeah gold, crank up those turbo fans and yank back on that yoke baby, right mmb?"

Squire, your aviation enthusiasm is welcome; anything toward getting Gold to soar back up.

Either way, Gold admitted its embarrassment when likened to the level of Tungsten in our opening air traffic chatter. Now in likening Gold to the pas-de-deux in which 'twas engaged with the S&P 500 these last few weeks, the former's price has parted with said partner, morphing the elegant dance into a rather dodgy pas-d'un by having stumbled right off the stage, dropping 6% month-over-month, (last 21 trading days):

That's gonna bruise. Will, too, a hike in the Fed Funds rate? The Federal Open Market Committee meets in just under two weeks' time (28/29 July), sans press conference from Chair Yellen. You'll recall in closing out last week's Update, we super-imposed the Federal Reserve Bank's Head Teller (Old Yeller) below the recent dip on our Economic Barometer, querying "Ready?" Given the Econ Baro leads the S&P 500 -- or at least used to so do prior the dis-allowance of market corrections -- nonetheless, does not the portent of a rate rise appear wrong? It does to us. Here's a special 10-year view of the daily Econ Baro:

Again, should the current cause and effect upon Gold continue as is, a back-up in rates would push Gold down, but instead not to raise rates shan't push Gold up. 'Tis just the current climate. One wonders if Gold can even ascend upon the next round of Quantitative Easing ("QE4").

"When is that, mmb?"

Squire, let's just say that should the FOMC indeed vote to nick rates up, the budget-busting effect from variable-rate debt on the common consumer -- the economy's most important driver -- ought accelerate the arrival of QE4.

Time now to turn to the Market Trends (uggh) and the Market Profiles (double-uggh) for both Gold and Silver. And starting below with the Trends, that for Gold on the left seems even worse than that for Sister Silver on the right. For both Precious Metals, the baby blue dots depicting 21-linear regression trend consistency have dropped below their respective -80% levels, confirming such trends as negative (no kiddin'!):

As next below for the 10-day Profiles, the white bars near the foot of each panel mark the week's settles at 1132 for Gold (left) and 14.80 for Silver (right). Doin' the limbo is one thing, but this is flat out lyin' down, (double entendre intended!):

And so to see how it all stacks up, (or rather down), one need only go to the bottom of the stack as follows:

The Gold Stack
Gold's Value per Dollar Debasement, (per our opening "Scoreboard"): 2526
Gold’s All-Time High: 1923 (06 September 2011)
The Gateway to 2000: 1900+
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
Year-to-Date High: 1307
Neverland: The Whiny 1290s
Resistance Band: 1240-1280
The 300-day Moving Average: 1228
The Weekly Parabolic Price to flip Long: 1223
10-Session “volume-weighted” average price magnet: 1154
Trading Resistance: 1143 / 1154 / 1162 / 1167
Gold Currently: 1132, (weighted-average trading range per day: 13 points)
Trading Support: right here at 1132
10-Session directional range: down to 1130 (from 1174) = -44 points or -4%
Year-to-Date Low: 1130

'Tis said that Gold shan't reach zero ("0") 'til hell freezes over. We find even that exaggerative, for never shall Gold be worth nothing. Nevertheless, we read this past week that "scientists say", (the most redundant phrase in the English lexicon), global freezing is descending upon us such that in just 15 years' time we'll be in a "Mini Ice Age". Assuredly Gold shall have traded up through 2000 by then, (else we'll really have to wrap ourselves up in our woollies whilst composing these Saturday morning missives. Brrr!) The good news remains that Gold is so ridiculously overdue to get hot for hundreds of upside handles, the ambient heat ought send said scientists into the cooler.

Next week brings a fairly light calendar of incoming economic data. However, of particular interest is Thursday's (23 July) lagging report of the Conference Board's Leading Economic Index, the consensus expectation for which is slower growth. So mind the Econ Baro as well as Q2 Earnings Season, the latter for which early on shows just 56% of companies doing better year-over-year. As one notable stock market analyst put it this past week, "How can stocks continue to rise on no earnings?" Good question. Been going on for a fair number of years now, (hint hint, nudge nudge, elbow elbow)...

Steady on now Gold. Let's point this baby skyward (!)


Mark Mead Baillie


Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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