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Dare To Be Gold Aware

Mark Mead Baillie
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All those who witnessed Gold ascend 26 points in 91 minutes yesterday (Friday from the price of 1146 at 05:35 PT to 1172 at 07:06 PT) say “Aye!”. I did. I also did the math: had that rate of ascent continued, which it essentially again did in trading up through 1192 before settling at 1188, by the time some of you latecomers are reading this (say Monday/Tuesday) the price would already have surpassed 2000 — just in case you’re scoring at home. Yet you, of course, did not miss this move, non? Or perhaps as a prescient proposal, you will be on such moves of like degree, oui? We’ll then stand as one during the great Gold Run.

‘Course, whilst nothing moves in a straight line, let alone at such an unsustainable rate as we saw yesterday, Gold’s eventuality of eclipsing its All-Time High of 1923 (06 September 2011) and moving on into the 2000s ought not come as a surprise, at least to those who will have all along understood the Gold Story. Hence, as herein unveiled a week ago, the new opening feature above of the scoreboard already placing price well above 2000 today, simply due to Dollar debasement, even when diluting the price of Gold for its own supply increase over these last 34 years.

The point of the scoreboard is, naturally, to garner (and I hate this word) “awareness” as to Gold’s financial if not outright societal rejection in reflection of its current price. Other “awareness” events wherein people have bake sales, go marching about, or volunteer to be dunked by a barrel of iced athletic drink, all serve to make the participants feel good about themselves, but materially go for naught in benfitting the cause at hand. We know this from personal experience as when, during the Clinton Administration, a few of us mates, whilst imbibing at a local pub, each had pinned to our lapels a dollar-bill folded in that classic looped-crossed shape, having to then explain that these were our Deficit Awareness Ribbons, (which did not go over well with the balance of the bar’s socio-communist-marxist denizens, this of course being San Francisco). But specific to the awareness case for Gold, curing the inequity of its mis-valuation is quite simple: Go Buy Some. (The security of real wealth will really make you feel good).

Still, reviving the price of the yellow metal shall be countered by those who think Gold is finished. During the week, a colleague of ours sent us one of those “warning to the gold bugs” pieces that oft appear with annoying frequency. It pointed to opinions of Gold being a “near-useless mineral”; if that is true, I suggest they tear down Ft. Knox and turn the property into a minor-league baseball stadium.

Moreover, they could convert the vaults beneath Manhattan’s Federal Reserve Bank of New York into a more direct subway route to connect the Wall St. and Fulton St. stations. That’d really screw up the repatriation plans of Germany, Switzerland and Finland: “Uh, well, we threw your Gold out — think of it as a favour.” The piece also cited opinions that: 1) Inflation is dormant, (my food bill sure isn’t); 2) the U.S. Dollar is on the rise, (relative of late only; ‘tis down almost 50% from its 1985 highs); 3) the federal government is solvent, (oh C’MON MAN!); and that 4) modern civilization abides, (Russia invading Ukraine, ISIS and keeping one’s head, Ebola and your sweaty fellow airplane passenger, Market Street here run rampant with maniacs, et alia). There’s no doubt about it: anti-Gold excuses have gone from thin to silly.

As for the “real deal”, I don’t know what ’tis about the last two Fridays, but they’ve certainly been robust for Gold as you can see here per its weekly bars, the rightmost pair closing practically on their weekly highs. And now with price at 1188, the distance to the parabolic’s “flip-to-Long” level at 1218 is a mere 30 points…

…emphasis afforded the word mere as Gold’s expected weekly trading range is now 40 points, within which — as Gold’s volatility has increased — the expected daily trading range is presently 24 points, nearing such level of a year ago:

‘Course a more lofty achievement to obtain by year’s end would be to take back Gold’s 300-day moving average, which in this next year-to-date chart you can see is currently 1278 and furthering its decline. Still, regression of price back up to the dashed trend line now at 1237 would incorporate the aforementioned weekly parabolic trend having flipped to Long, (again that level for the ensuing week being 1218):

Next let’s update Gold’s three-month view in this two-panel graphic. On the left we’ve Gold’s daily closes since August vis-à-vis the smooth pearly valuation line which suggests a price level for Gold per its movement relative to those for the primary markets that comprise BEGOS (Bond / Euro / Gold / Oil / S&P). Recall two missives ago when we cited Gold’s being WAY oversold? Look at the smooth pearly line, (hint hint, nudge nudge, elbow elbow). On the right for the same period we’ve Gold vis-à-vis its Market Magnet. Gold’s flourishing Friday found price fly right through the magnet; yet should the latter have just made a base for itself there at 1159, ’tis supportive of still higher levels ahead:

Now to the last 21 trading days and linear regression trends thereto. With the exception of the S&P (“SPOO”), every BEGOS Market (including the secondary components of the Swiss Franc, Silver and Copper) is in a 21-day down trend. Here we simply pair Gold (left) with the S&P (right). We’ve written in the past that Gold, unlike most markets, seemingly has a hankering to rise faster than it declines: nothing like hoovering up two weeks of losses in a single bound! Further, Gold’s “Baby Blues” are just beginning to curl up, suggesting the down trend is losing its consistency. As for the S&P, a picture tells a thousand words, albeit let’s give the Index some due: improved Q3 earnings have brought our “live” price-earnings ratio down from the mid-30s to 28.5x as of yesterday’s close, (Bob Shiller’s inflation-adjusted version is 26.7x). Now if we can halve that, we’ll have a “properly-priced” stock market rather than this “bubbly-spiced” one:

To be sure, this most recent week for the S&P has shown signs of its running out of puff, that ’tis getting incrementally harder and harder to stay on what has been an incessant ascent. Thus as we go to this next chart of these percentage tracks from a month-ago-to-date, with Gold’s heating up — should its negative correlation to the S&P be maintained — ‘twould be another swan (black?) dive for stocks :

Finally, from the “What A Difference A Week Makes” Dept., we’ve these wonderfully supportive Market Profiles for Gold as well as for Sister Silver, (who has since retrieved her precious metals pinstripes from the local pawnbroker, taking luncheon yesterday at the Ritz). On the left for Gold is a terrific thicket of support from 1167 down to 1144, (1188 in red being the current price). On the right for Silver, (currently 16.30), she’s built in supports for herself at 16.00, 15.65 and 15.35:

As we’ve a pressing Gold engagement later this morning, we leave you with these three quick notes:

1) You may have caught Wolfgang Münchau’s piece in the FinTimes this past week that “The euro is in greater peril than ever”, this being a function of more state-independence-minded electees potentially coming on board within a prolonged period of secular economic stagnation for EuroZone as a whole. I recall stating when the €uro replaced the Franc etc. in folks’ wallets at the start of 2002, the single currency would sustain itself for about four years before the inequities of the different economies would be sufficiently stressful to send everybody back to their Lire and Drachma. The stresses obviously have proved to be overwhelming, yet the €uro remains in the wallets. Now 12 years later, ’tis curious to consider for how much longer — and you know what a currency failure would do for the price of Gold!

2) The bad guys may solely be onto one thing that’s good: As purportedly ordered by their fearless leader Abu Bakr “Skyhook” al-Baghdadi, the Islamic State apparently is to mint Dinars in Copper, Silver and Gold, (if they have, or can get, any of the metals to so do). At least they get that Gold is Money!

3) As noted, we now must press on with all due dispatch in order to drive to a meeting hosted by one James Sinclair. Not a bad chap with whom to spend a Saturday, what? Dare to be Gold Aware indeed!


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