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The Gold Update

Monday October 01, 2012 09:52

149 Saturdays ago I started “numbering” these weekly missives in concert with their finding their way onto the Internet courtesy of the good folks over at Time & Cycles. (Prior to that, there were non-Internet “e-mail only” editions as far back as 21 February 2009 to an audience -- at the very beginning -- as vast as one; and you know who you are out there!). Today, thanks to Kitco, as well as other Gold websites, links and referrals, the audience has grown substantially, and moreover, responded positively beyond that which I could have ever imagined. So to all of you cherished Readers and Internet linkers of The Gold Update, a hearty “Thank You!” I am humbly grateful.

With respect to this being the “sesquicent“ edition, let us briefly zoom back to the “first” one of 21 November 2009, Gold having settled that week at 1197, and extract this highlight: “…Were Gold to continue to rise at the linear rate established from the low of 705 just over a year ago on 13 November 2008 to date, it would arrive at 1297 one year from today…” Indeed one year hence on 21 November 2010 Gold stood at 1353. Sorry to have low-balled it so.

Today Gold sits at 1774, true to form having rightly risen essentially with the expansion of the foundationless global supply of money, of which we certainly expect there to be scores more galore. I realize the monetary fiat powers-that-be are trying really hard out there, especially with respect to austerity. Spain, for example, is raising taxes and working spending cuts into its budget as to so impress the European Central Bank enough to turn the printing tumblers of Euros for yet another episode of Bond Buy Bailout. “We cut, you print!” What a deal. Which in turn impressed Gold, (after not unexpectedly starting the week lower), on Thursday to leap as much as 44 points above its Wednesday low. Meanwhile, in France … no that’s just too good … we’ll save her for the end. Rather, here is the current stance of Gold’s parabolic Long trend as measured via the weekly bars:

With a keen eye to the above chart, whether it be distance of price below declining red dots, (in the case of a Short trend), or that above rising blue dots, (as is the case in our current Long trend), Gold at the moment appears sufficiently extended above the blue dots such that some re-trenching would not at all be untoward. This arbitrary technical read does not preclude that Gold has reached the maximum level (1790) of this parabolic Long trend. But as do all the great liquid markets of the world, Gold, too, ebbs and flows. We’ve put forth the notion of late that Gold’s route to 1800, as close as it has already been to that level, could realistically pass through the upper 1600s. That is not a prediction, but at the same time ’twould be a path by which not to be overly concerned. As you can see, Gold would have to trade down through 1608 next week to reverse the parabolic Trend back to Short. And that I predict shan’t have occurred when we again meet in a week’s time. Moreover, Gold’s stalwart broad-based supporter -- the 300-day moving average, its lengthy recent breach notwithstanding -- is now up to 1675.

To be sure, fundamentally, ‘tis “Go Gold Go!”; however as technically just noted, we may first dip a bit before reaching 1800. We’ll herein develop that idea more upon reviewing The Battle Map and some weakening linear regression trend consistencies, but first: ‘tis month-end and thus time to update the year-over-year percentage performances of Gold and its trading brethren.

And there is no need to adjust your set. Regular readers know that we recently added the royalty company Royal Gold (how original) to our merry band of Gold and Gold-like trading vehicles. Further, ‘tis oft said that traders like volatility. Here’s a lifetime’s worth:


Now be honest: how many people do you know of that are talking about RGLD? They certainly like to talk about Apple: ‘tis up 26% since 18 May. RGLD over the same period is up 59%. (But then I forget that less than five percent of portfolios coast-to-coast carry any Gold exposure). Cue Bonnie Raitt: ”Let’s give 'em something to talk about…” --(1991). Gold itself is 9% higher than 'twas at this time a year ago, (as is its essentially mirror-image “exchange-traded fund” [ETF] GLD). But whilst lagging year-over-year, notably since July the indices of the precious metals equities and miners are clearly on the up move at a greater rate than Gold itself, (the HUI being the Gold Bugs Index, XAU that of the Philly Exchange Precious Metals, and GDX as the miners’ ETF). Yet again, when it comes to RGLD, as veteran sportscaster Dick Enberg would put it: “Oh myyyyy.....”

The War Room

Apropos of the Gold Troops all but completely having hoovered the Forces of Resistance across The Northern Front, ‘tis time to bring up the Battle Map of Gold’s daily bars, (or so-called “candles”). Note Gold’s All-Time High at the graphic’s upper left from 06 September 2011:


As suggested earlier, ‘twould be perfectly natural for the Gold Troops to take a break through here. Were they to so do and retrench, say, to the base of The Northern Front at 1750, or even tag the upper 1600s, as we’d then look across that rose-coloured strip we’d discern a classic “triple-top” from the apices at November, March and now September. And you know that old market axiom: “Triple tops are meant to be broken”, meaning that should Gold now come off for a few weeks or so, its then ensuing forge back up across The Northern Front would, given any riddled remains of the Forces of Resistance, place it into The Final Frontier (1800-1900). Here is some further support to the notion of a modicum of pullback, followed by a surge to higher levels still for Gold. To wit:

We’ve just completed 2012’s Third Quarter. Typically thereto was the window-dressing of accounts, which may have kept the S&P from falling further than it did this past week, given the Economic Barometer is again keeling over. Also, albeit improvably, we’ve those “trading participants” on behalf of Washington who are out to maintain a buoyancy in the market at least through 06 November. Add to which there is the ongoing, positive correlation between Gold and the S&P. Should the latter back off by, as we like to say, “a little bit but not a lotta bit”, then such correlation ought pull down on the price of Gold as well. Indeed as we drive Stateside toward Election Day, there might well be a lot of uncertain wallowing about in all the markets at large. And therefore, it just could be that the next major episode of Gold Breaking Away to the upside from a declining S&P will commence Election Night whilst most will be watching the returns. I’ll be watching the futures data.

A Chorus of Baby Blues

In last week’s missive we put forth the suggestion of laying on a Silver Short trade. Which if you did, you so benefited, had you the foresight to exit by Wednesday. I did not. C’est la vie. Nevertheless, I’m still getting signals of weakening ~consistency~ in the current linear regression uptrends for Silver, Gold and the S&P, the daily bars of which are shown below over the past 21 trading days:


Note how the “Baby Blues” that measure such trend ~consistency~ are in decline for all three markets, those dots having been above their respective 80% levels. Whilst obviously nothing in regression analysis is “surefire”, typically the decline of the dots from those high levels (80%+) eventuates weakness, if not outright trend reversal. Clearly the S&P has already cracked, its attendant buoying from quarter-end activities (et alia) notwithstanding. And unless that positive correlation to the S&P is already breaking apart, both Silver and Gold are susceptible to similar decline. Besides, ‘tis autumn: we’re supposed to have some market drama.

How Are We Doing?

With the end of the Third Quarter, ‘tis occasion once again to “own up”. As you’ve no doubt been following along with baited breath, at the end of last year we charted, as was stated at the time, our “improbable” course of Gold through 2012. So here we are year-to-date. As you can see, unless Gold goes upside gonzo nuts (technical term) through the remaining Fourth Quarter, we shall have exaggerated its track for the year. But I have to say that the labels, shown just as they were nine months ago, haven’t been that far off as events have unfolded during 2012:


The remaining track from here for the extrapolated line calls for a wee layback through October, and then up into Christmas. Stayed tuned…

Smack on the Apex

So as you’ve seen, Gold has spent most of the last two weeks within The Northern Front (1750-1800) battling the remnants of the Forces of Resistance. The yellow metal’s current level of 1774, as denoted in red per the following trading profile, is also the most commonly traded price over these past 10 days. Should Gold break lower, there is that mild support hump just below The Northern Front at 1747:


Finally to France … Literally

With reference near the outset of this week’s missive to La Belle France, is it finally time to pony up the dough for that villa along the Riviera? True to his word, which is highly irregular to expect from any politician, President Hollande is instituting that which he said he would: severe tax increases on France’s top 10% of earners, including a rate increase to 75% on those incomes exceeding €1m. “Sacrés Chats!!” You think that’s bad? Monsieur Le Président is also removing the wealth tax cap: “Knock-Knock … Excusez-nous Madame Le Claire, we will be here only some 30 minutes to assess your jewellery…” Unbelievable. And they’re stickin’ it to the big CAC 40 companies as well. The economic fall out from this raping of private sector resources ought be nothing short of materially damaging. As a bombastic StateSide radio host has on occasion queried: “You ever get offered a job from a poor person?” Be that as it may, you just might be able to get that Riviera villa on the cheap as the Euro tanks and wealthy disparaissent…


“Salut Bébé!” …m…

By 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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