Commodities »

Gold Tips its Cap to the SNB for Tossing Out its Cap to the €uro

Mark Mead Baillie
Share on StockTwits
Published on
www.deMeadville.com

Long time readers of The Gold Update know that our microphones are everywhere such that we certainly did not miss out on Thursday’s mid-morning kaffee talk outside of the Schweizerische Nationalbank along Bern’s Bundesplatz as we present:

Tom: You know, JP and Fritzie, I’ve been thinking that our three-year cap to the €uro has served its purpose, ja?
JP: Ja.
Fritz: Ja.
Tom: I mean, this €uro thing seems to have lost its spring, unlike would ever happen in our universally-treasured Swiss watches, ja?
JP: Ja.
Fritz: Ja.
Tom: And our citizenry, having just rejected returning to Gold for currency support, would put our Franc in dire straits were the €uro, its being a concept let alone a currency, to fail, ja?
JP: Ja.
Fritz: Ja.
Tom: Besides, the Franc is already quite unattractive given our recent reversion to charging for deposits maintained here, ja?
JP: Ja.
Fritz: Ja.
Tom: Then it is decided, JP and Fritzie: let us toss away the €uro cap and return to our beloved Franc’s strong currency independence, in the spirit of our glorious and gracious Helvetia, ja?
JP: Ja.
Fritz: Ja.
Tom: Is that all you two can say is “ja”?
JP & Fritz (in unison): Can we remove our Shorts first?
Tom: Ja!

And so it came to pass on Thursday from 10:30 CET to 10:55 CET that the Swiss Franc ascended 24% from 98¢ to $1.22 in 25 minutes, the session’s volume more than triple that of normal, causing the collateral trading damage of which you’ve no doubt found widely reported across the FinMedia. To be sure, had you been Short the Swiss Franc with a protective stop, the slippage nevertheless likely damaged your account similarly to that of a failed NASCAR vehicle, described in that vernacular as “It done blowed up!” Worse, were you Short with a stop/limit, you’re most likely not around anymore given having never got filled whatsoever, your limit having been left far behind down the alpine ascent.

But just prior to the SNB’s annoucement had you been lucky (if not one Claire Voyant) and instead bought, (or had Short-covered), even just a single Swiss Franc futures contract — for someone had to take the other side of the trade — given a per contract margin requirement of $2,035, upon price reaching $1.22, you’d have gained $30,000, (one contract being levered at $1,250 per penny), a 1,474% return on that requisite margin, and thus can really toot your horn. Here’s how it all unfolded per one-minute data during Thursday in the wee hours Pacific Time, not that a time zone would matter, horn blowing or otherwise:

Of course, the whole episode was spot-on groovy for Gold, in turn sporting its largest weekly percentage rise since that ending 16 August 2013 by settling yesterday (Friday) at 1280, +4.7% for the week. As shown below in Gold’s weekly bars chart, price raced right up through the 1240-1280 resistance area, that purple lines-bounded zone technically now becoming support, (some natural near-term retrenchment notwithstanding per our Value and Magnet charts which next follow). As for Gold’s distance of 122 points above the parabolic price of 1158, ’tis the largest upside span since the week ending 14 March 2014, and on a percentage basis (+14.1%) the most since week’s end of 06 September 2013:

“But, mmb, dead ahead are those Whiny 1290s again, right?”

You’ve a fine memory there, Squire, as they were quite the annoying area, Gold endlessly traipsing about therein last Summer. But the upsurge this time feels more substantively, indeed long overdue fundamentally, of resolute purpose. ‘Tis a bit like old times, non? Some strength in Gold and an independent Swiss Franc? What’s next? An eventual return to the Escudo, Lira, Guilder and Kroon? The Drachma certainly appears first on the doorstep with Greece’s general elections but a weekend away, the ensuing Parliament to then elect a new President. Regardless, the currency printing tumblers at the European Central Bank will soon be a-spinnin’, indeed in earnest given European court adviser Pedro “Cruz to Victory” Villalon’s having just opined that bond-buying stimulus for EuroZone is legal, such that more ECB Quantitative Easing can sally forth.

With respect to the aforementioned notion of some near-term price retrenchment, we turn to this two-panel graphic of Gold for the last three months (63 trading days)-to-date. Both panels show Gold to be presently strong, and yet “high” via their respective measures. On the left is Gold vis-à-vis its smooth, pearly valuation line derived from price movement relative to same within the five primary components that comprise BEGOS (Bond / Euro / Gold / Oil / S&P). On the right is Gold vis-à-vis its Market Magnet derived from the “contract volume per price point” data which also form the Market Profile at which we’ll later look. The oscillators (price less metric) at the foot of both panels suggest Gold is a bit upside-stretched at the moment, (but we’re not complaining):

As for Gold versus the S&P month-over-month, (21 trading days-to-date), the former is +7% whilst the latter is, well, flat at best, its trend in descent:

Speaking of trend, ’tis time to bring up the “Baby Blues” as we again review the last 21 trading days via linear regression trend consistency, which for the Swiss Franc in the center panel has to be the most violent throwing off of a trend’s rails we’ve ever seen. Gold is in the left-hand panel, the continuity of its rising blue dots nothing short of brilliant, whilst the in the right-hand panel the S&P is no more, we think, the place to be as its Baby Blues tumble into the sea:

This week’s final graphic is of Gold’s 10-day Market Profile, and again to help visualize the move of the Swiss Franc, we’ve added as well its Profile. Gold’s attendant trading supports are as indicated in the panel on the left. Those for the Swiss Franc are more difficult to as yet discern, the 1.1730 price suggesting some resistance; nonetheless, were one indeed on the right side, the breadth of such monstrous move ought keep one in geschnetzeltes for life. “Mehr bier, bitte!”

We’ll wrap it here with:

The Gold Stack
Gold’s Value per Dollar Debasement: 2458
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
Neverland: The Whiny 1290s
Year-to-Date High: 1282
10-Session directional range: up to 1282 from 1178 = +104 points or +9%
Structural Resistance: 1281 / 1288 / 1293
Trading Resistance: (none)
Gold Currently: 1280, (weighted-average trading range per day: 22 points)
Support Band: 1280-1240
Trading Support: 1277 / 1259 / 1239 / 1229 / 1212 / 1196
The 300-day Moving Average: 1262
Structural Support: 1255 / 1239
10-Session “volume-weighted” average price magnet: 1231
Year-to-Date Low: 1167
The Weekly Parabolic Price to flip Short: 1158

We certainly shan’t ever forget you, Sister Silver, for you’ve had quite a remarkable run in the new year, already +13.4%, which is second place now amongst all eight BEGOS Markets only to the Swiss Franc (+15.6%, thanks to Thursday’s SNB awakening), as further supported in third place by Gold (+8.2%). Stay the course, Sister, and you’ll be lookin’ .9999 fine!

Cheers!
…m…

www.TheGoldUpdate.com

Share on StockTwits