Gold gripping, economy tipping
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
Parsing our title, Gold is gripping in completing a fourth consecutive up week. Moreover per the above Gold Scoreboard, recent weekly closes [green rectangle] continue to track those of a year ago, indeed so precisely so that were such pattern to be maintained, we'd find Gold at its All-Time High (2089) in just three weeks' time. Not so much a prediction as an observation in our maintaining our 2401 forecast high for this year. For should 2089 trade, 2401 could come (to put it articulately) "real fast". After all, Gold by the Scoreboard ought today already be up at 3864.
As well says our title, the economy is tipping in playing right into what we've been stating for months: that the recovery out of COVID "has already happened".
"But hang on, mmb, because President Biden is just now heralding the economic recovery..."
Yes, so we read, Squire. And one cannot fault the Administration for providing free money, rainbows, unicorns and solar-powered flying toasters. "Breakfast in bed, luv?" Let's straightaway go to the Economic Barometer which appears poised to tip into trouble. To the technician, at right is about as ugly a "drooping shoulder" as you'll find, with a light data set due in the new week:
Oh to be sure, not all of last week's incoming metrics were poor: June's Retail Sales actually grew (barely) after having shrunk in May. As well, July's New York State Empire Index nearly tripled over that of June to a record high 43.0: "LET'S go YANKees"BUT: the July readings for both the Philly Fed Index and University of Michigan Sentiment Survey slipped; growth in June's Industrial Production was nearly halved; and May's Business Inventories bloated by +0.5%, their three-year average monthly change being +0.1%, (i.e. stuff wasn't movin' in May ...).
More concerning, June's annualized wholesale inflation came in at a 12.0% pace, that for retail inflation at 10.8%, along with increases (ex-Oil) for StateSide imports at 8.4%, and exports 13.2%. SO to today's already familiar equation:
¦ Up with the pricing + down with the economy = Stagflation
Indeed, you regular readers are already well tuned-in to that, even as (per Dow Jones Newswires): "...Higher Inflation Is Here to Stay for Years ... according to economists who expect the robust post-pandemic economic recovery to fuel brisk price increases..." Our only edits thereto would be replacing "Inflation" with "Stagflation" and "robust" with "feeble".
Meanwhile, Q2 Earnings Season is underway. For the S&P 500, just 23 companies have reported, almost all expectedly "beating estimates"; but not all are beating the like period of COVID-entrenched Q2 from a year ago, (five of the 23 coming in worse). Still, no worries, 'cause 'tis early, right? You betcha...
Further, the Index's price/earnings ratio thus far isn't materially improving, our "live" reading at this writing 55.3x. Indeed as an analogy in paraphrasing from one of our pet films "Boeing Boeing" [Paramount, '65]: "This is what has happened since the market mania came: value has been annihilated." Again we query: "Has the S&P crashed yet?"
As for the FedSpeak from this past week, FedChair Powell and Richmond FedPrez Barkin seem similarly aligned toward not immediately tapering asset purchases, whereas St. Louis FedPrez Bullard says now's the time for such paper taper. Clearly 'tis evident throughout our recent missives that the Federal Reserve's family is displaying directive disarray. Then there are the more private sector investment specialists, to wit one Jeff Gundlach, who without mincing words last Thursday broadly sees the Dollar as "doomed". No kidding? Again we query: "Got Gold?"
Gold positives-a-plenty, price's weekly parabolic trend nonetheless remains Short, albeit we remain resolved that it be short-lived. To wit: fundamentally, seasonally, debasededly or given any and all of the 3Ds (Debasement / Debt / Derivatives), for Gold we continue to like what we see. No, we don't expect Gold to increase every week as it has done for the past four; but year-over-year, Gold has posted one-week gains of better than 3% -- that's more than 50 points given current levels -- five times. (Recall, too, in the fall of 2007, Gold gained ground for 12 consecutive weeks: that from the "When it Goes, It GOES! Dept."). All noted -- with respect to our quip "change is an illusion whereas price is the truth" -- Gold settled the week yesterday (Friday) at 1813, from which we trust 'twill show more grip and go:
Now to our two-panel graphic of the precious metals' daily price bars from three months ago-to-date with Gold on the left and Silver on the right. The baby blue dots are representative of trend consistency, which for Silver are looking to run out of puff unless she can quickly get off her duff:
Yes, as much as both Gold and Silver are money, ole Sister Silver at times gets caught up in wearing her industrial metal jacket, complimented here by Copper (below left) looking very similar, and economically worse the price of Oil (below right) finally breaking its incessant rise since April, the linear regression trend now in rotation from positive to negative as the "Baby Blues" careen down toward crossing below their 0% axis; (presently 'round 71, we're looking for Oil's 67-62 structural support area to hold):
Specific to the precious metals' pricing, here we've their 10-day Market Profiles for Gold (left) and for Silver (right). Gold looks to support at 1806 and Silver to resistance in the lower 26s:
So in stacking it up for the yellow metal, here is...
The Gold Stack
Gold's Value per Dollar Debasement, (from our opening "Scoreboard"): 3864
Gold’s All-Time Intra-Day High: 2089 (07 August 2020)
Gold’s All-Time Closing High: 2075 (06 August 2020)
2021's High: 1963 (06 January)
The Weekly Parabolic Price to flip Long: 1913
The Gateway to 2000: 1900+
The 300-Day Moving Average: 1836 and rising
10-Session directional range: up to 1835 (from 1774) = +61 points or +3.4%
Trading Resistance: 1826
Gold Currently: 1813, (expected daily trading range ["EDTR"]: 21 points)
10-Session "volume-weighted" average price magnet: 1808
Trading Support: 1806 / 1798 / 1792 / 1784
The Final Frontier: 1800-1900
The Northern Front: 1800-1750
On Maneuvers: 1750-1579
2021's Low: 1673 (08 March)
The Floor: 1579-1466
Le Sous-sol: Sub-1466
The Support Shelf: 1454-1434
Base Camp: 1377
The 1360s Double-Top: 1369 in Apr '18 preceded by 1362 in Sep '17
Neverland: The Whiny 1290s
The Box: 1280-1240
In closing last week's missive we cited Wells Fargo ("Since 1852!") withdrawing from its personal line of credit business. Now a week on, we nevertheless read (courtesy of Bloomy) that "Wall Street Banks Take On More Debt as Balance Sheets Swell." Well, Mel, ain't that just swell? We mentioned earlier the FedFolks being in disarray; so 'twould also appear are the banks. Here's the bottom line: Does it all seem reminiscent of 2008/2009? Yes. How about the aforementioned lack of earnings for the S&P 500: kinda like 2001/2002? Yes. (Did we already query "Has the S&P crashed yet?" Yes.) Ought we thus be converting worthless cash to Gold as 'tis gripping with the economy tipping? YES!!!