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Gold Gains Anew Over Much Ado

Commentaries & Views

Or as Bill the Bard of Avon might have queried, "Much Ado About Nothing?" Is the StateSide executive branch covertly concealing a felonious act? Or are players in the congressional/media complex destined to go down as the daftest deviants in decades? Either way, Shakespeare himself would be on the edge of his seat over such great theatre. To be sure, the markets certainly have so been, at long last getting their volatility in gear to sport some of their best swings of this year. Indeed for the EuroCurrencies and the S&P 500, this past week was their rangiest year-to-date.

And Gold gained anew in the stirring of the brew, albeit as the above panel shows, price is just about spot on where 'twas at this point a year ago (1253) in settling out the week yesterday (Friday) at 1256. The bulk of the week's 28-point gain came during Wednesday's swift 24-point surge; but before we get too carried away, in turning to Gold's weekly bars, we presently find price all but smack in the center of the purple-bounded 1240-1280 resistance zone, the parabolic Short trend now three declining red dots in duration:

"Uh mmb, why is that trendline down if Gold is where it was a year ago?"

Good to see you doing some scrutineering there, Squire. 'Tis simply because the slope of the selling therein has been steeper that that of the buying. Which brings up this further point: we've noted over the years that, unlike most markets, Gold has a tendency to rise faster than it falls; clearly per Squire's good question, that has not been the case across the above chart. Moreover, given the geo-(and otherwise)-political climate, Gold has the appearance of underperforming a bit at present as seen in this next chart. Here we have for the last 21 trading days (one month) the percentage price tracks of our primary BEGOS Markets. Note specifically that Gold is off 2% from where 'twas a month ago, but that two of the markets with which Gold oft is positively correlated are firmer, the Bond being "unch" and the Euro being up a solid 4%:

So why the "(?)" as to Gold's underperforming? If we go deeper into the data, we instead find 'tis the Euro that's not just been outperforming, but indeed overperforming. Here's technically why. The below two-panel graphic shows us for the past three months the Euro on the left and Gold on the right along with their smooth valuation lines borne of how price changes relative to the other components of BEGOS. The lower portion of the each panel shows the oscillator of price less valuation, by which the Euro is presently a full 5¢ (that's a ton!) "too high", if you will, above its BEGOS valuation, whilst Gold is basically spot on valuation. ('Course that doesn't preclude by debased currency valuation Gold being half what it "ought be" and in due course shall be). Here's the graphic:

Economically, the past week's incoming data made it harder to get a grip on it all out there. Which is of course why we have the Economic Barometer, itself looking somewhat more uncertain, especially noting in the balance the vote fora rate hike from the Federal Open Market Comittee come 14 June. But talk aboutmixed metrics: The New York State Empire Index went negative -- but the PhillyFed Index soared through the roof, sporting its fifth best reading in almost 20years; Housing Starts and Building Permits slowed -- but the lagging reading ofLeading Indicators stayed steady at +0.3%. And amongst it all, the S&P madea marginally higher All-Time High, over which our smile was wry upon hearingBloomy Radio in Tuesday's wee hours reporting markets as "smashingrecords": give it a restalready, will ya? I tell ya folks, be it mainstream, financial or evensports, we've reached the point where the word "media" ought be dropped for"mania". Here's the Baro:

More worldwide, the mighty Ford Motor Company announced 'twill boff 10% ofits global workforce to boost its bottom line and share price, which at thiswriting is 71% below its 1999 high. Bonne chance. Meanwhile, European CentralBank Governing Council member Vitas "Vee Can Vait" Vasiliauskas says they oughtannounce the unwinding of stimulus before actually so doing. Very verifying.Then there's poor ole Alexis "Tieless" Tsipras down there in Greece, theeconomy of which shrank in Q1, austerity notwithstanding. Pass the Ouzo. All ofwhich is to say that the more the world changes, the more it stays the same.

However, too often staying the same in the broad sense is Gold'sprice. As portrayed, Gold has been in and out and all about its 1240-1280resistance zone these past 12 months, reaching as low as 1124 and as high as2016's predicted top at Base Camp 1377. And yet as noted, here at 1256 we areat the same level 'round which we were a year ago. Perhaps traders' delight,but long-term investors' plight. At this rate, one wonders if in ten years thevoice from the radio shall say "The Dow has reached 30,000 for the firsttime ever, Fed accommodation pushing the money supply across the $100 trillionmark; Oil is still clinging to the 200 level, while London Gold is 1279 theounce." One can only hope the latter is not that then. But as for "thenow", let's go to Gold's "Baby Blues" and 10-day Market Profile.

So per usual at leftwe've Gold's daily bars from three months ago-to-date, the cascading and nowspringing blue dots of 21-day linear regression trend consistency nicelyclimbing up and away from their -80% turnaround area; the key of course is tokeep price climbing up and out of the aforeshown 1240-1280 resistance zone.Then at right in theProfile we find Gold, as suggested a week ago, having quickly filled the thatcentral area which still appears somewhat void of trading volume: "Fergitda 40s, Fred; we're either gonna be up da 50s or down in da 30s!" How'bout we just get to the 1300s, eh? Sheesh...

We've the same schema below for Silver. Note how her left panel overallcarries a more negative tilt than that above for Gold. She certainly is runningbehind Gold, our Sister Silver: the average Gold/Silver ratiomillennium-to-date is 62x, but the present reading is 75x. 'Course, CousinCopper's being half what he was six years ago hasn't helped our Sis:

We thus roll into the new week, the economic highlight of which looks to bethe first of two revisions to Q1's Gross Domestic Product growth, its initialreading of a rather docile +0.7% expected to be put up a pip or two toward+0.9%. To the extent such economic data gets lost in the ongoing WashingtonRuckus one can only guess. Either way, it all ought keep Gold in play, and inhaving opened with an appropriate Shakespeare musing, why not close out withone more bruising ... "Double, double toil and trouble; Fire burn, and cauldronbubble..."

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 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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