Gold and Silver Stemming Their Downtrend

Market Analyst & Author
September 11, 2022

Mme. Lagarde & Co. just kicked the Buck in its butt, in turn giving Gold a bit of a  bid, but -- as Mark Twain might have penned -- "'Twarn't really much".  

Gold settled out the week yesterday (Friday) at 1728, a price which has now  traded within six of the past ten weeks.  

And hardly "breaking news": 1728 also traded for eight consecutive weeks  during 2021, and for 11 consecutive weeks during 2020, and too for many-a week during 2011 and 2012, the supply of Dollars then as you ad nauseam know but 46% of what 'tis today.  

But even accounting for the supply of Gold itself having increased by +16%  from a decade ago, the Dollar's debasement alone places the value of Gold  today (per the above Scoreboard) at 3990 even as it essentially continues to sit  at a price of 1728. You can thank the at-large disinterest in owning Gold plus  the "M word" crowd for such sleepy lowly Gold pricing.  

Lack of bullishness notwithstanding, we do offer some good news at least  technically for our precious metals. As this past week unfolded, both Gold and  Silver had their daily parabolic studies flip to Long. Thus for those of you scoring  at home:  

Specific to the yellow metal, the past 12 such flips to Long (going back to 06  July 2021) have averaged upside follow-through of 58 points (which from the  flip price of 1720 = 1778); 

And specific to the white metal, the past 12 such flips to Long (as well going  back to 06 July 2021) have averaged upside follow-through of 1.41 points  (which from the flip price of 17.91 = 19.32).  

'Course, hardly does the past vacuum of "average" predict reality, but it does  give us an idea near-term as to how much meat may remain on the upside  bone. And from their respective present prices (Gold 1728 and Silver 18.79), we  sense there is more meat to seek. To wit, our two-panel graphic of Gold's daily  bars from three months ago-to-date on the left, and those for Silver on the  right. The present key for both cases are the "Baby Blues" of trend consistency making the early appearance of rising from their sleepy ashes, for which you  regular readers and website followers know the rule: "Follow the Blues and not  the news". Or musically put: "Boo-lacka-lacka-lacka, Boo-lacka-lacka-lacka,  Wanna take you higher..." --[Sly Stone '69]:  

Indeed as we turn to Gold by the week from a year ago-to-date, such near-term  bounce is critical to keep price from falling through the weak wall of the barely  sustaining blue-dotted parabolic Long trend, the rightmost bar again going right  to said wall without penetrating it. For should it bust (which in the ensuing week  would be at 1702), the year's low of 1678 could well too be sliced through. As  sleepy as Gold has been of late, at the same time 'tis sleep-walking on a knife  edge: 

'Course this past Thursday upon the European Central Bank raising by +0.75%  all three of its key lending rates, the Dollar Index took the aforementioned boot  to the butt in recording its largest three-day high-to-low loss so far this year  (from 110.785 to 108.985, or -2.2%), the Swiss Franc deservedly getting the  bid (from $1.01405 to $1.04800, or +3.3%). As for "Oh that Euro strength!",  the ECB's improved return buoyed its otherwise flagging currency (from  $0.98825 to $1.01175, or +2.4%).  

And thus the precious metals responded in kind, (Gold low-to-high by as much  as +2.3% and Silver by +6.3%). And should it (as anticipated) all go wrong for  the stock market -- it being September, it being lack of supportive earnings, it being a recession -- we "ought" see the precious metals get some further grip, if  for no other reasons than the noted daily parabolic Long flip and "Baby Blues"  righting their ship.  

As for the "conventional wisdom" that Gold and Dollar are inversely correlated,  we again demonstrate that Gold plays no currency favourites per this next two panel depiction. To the left we've Gold versus the Dollar for the most recent six-

month run: negative correlation there. But to the right, we've their six-month  period out of 2009 into 2010: positive correlation there. Oh to be sure, Gold  today is well down, let alone priced severely below valuation; but this proves yet  again that fiat in any form is irrelevant (i.e. fake). Or as the late great Richard  Russell would remind us: "Gold will always be worth something". We remember  when we were wee that a gallon of gasoline in La Jolla (CA) cost 15¢. Today 'tis  $6.79 (45x as much). Gold since then is +4,837%. Thus lose thee not sight of  the Big Picture even as Gold endures its present, sleepy, "manipulated" malaise:  

"But mmb, rates weren't rising back in 2010 like they are now..." 

Squire again tees up a leading question, knowing full well (as do you regular  readers) that for the three-year stint from 2004 through 2006, the Federal  Reserve's Funds Rate rose from 1.00% to 5.25% ... and Gold for the same  period rose +59% (from 403 to 639). Another "conventional wisdom" notion  slayed.  

As for the recession, did you see the "Quartz" (who?) piece this last week  entitled "Service Economy Keeping US Out Of Recession" (even though 'tis  already well into one and certainly so on a REAL basis)? The denial continues.  But can the currently reported Q3 economic metrics at least turn the Gross  Domestic Product nominally (for you WestPalmBeachers down there that means  inflation counts as growth) into a positive number? We'll know "officially" on 27  October.  

'Course with the Economic Barometer, you may not have to wait those seven  weeks to find out. Note: the puke-green portion of the Econ Baro line is  essentially specific to Q3 data thus far reported. Is the worst behind us? 

We might derive a little more accuracy as to how Q3 is unfolding given 16  metrics shall hit the Baro in the new week: at first blush, they appear to be a  wash, mais on verra...  

As for the S&P 500's scrabbling against all odds to get a September foothold,  the Index has been "textbook oversold" for these past two weeks. But the  MoneyFlow notably for last week is unsupportive of the up move, (which you  website followers know is a leading indicator). Today at S&P 4067, we still sense  the 3600-3200 support zone awaits in this year's wings. Moreover on the  subject of "thin", the amount of money requisite to move the S&P one point  today is just 50% of what it was last February. (A word to the wise is sufficient).  

Meanwhile as to FedSpeak this past week, Lael "The Brain" Brainard opined that  her Bank's raising of rates will slow inflation, whilst Jerome "The Chair" Powell  expects higher rates to bring higher unemployment. Let's thus re-cue Jefferson  Starship from back in '84: "No Way Out..."

However, there is a way up for the precious metals to move as we turn to their  10-day Market Profiles featuring Gold (at left) and Silver (at right). For the  yellow metal, the initial key is to stay above the large apex at 1723. For the  white metal, the 18s appear near-term supportive, with a run toward the upper  apex of 19.35 in the offing should the follow-through of the earlier technicals run  their course: 

Speaking of running, as has been well-publicized, long-time California residents  have been on the run to less-intrusive states and even across the Pond. "There  goes the tax revenue!" However, in a "last ditch" (or otherwise) effort to keep  'em at home, Governor Gavin "The Gruesome" Newsom just signed into law for  "fast-food" establishments a minimum wage increase from the current $15/hr.  to $22/hr. by next year. As demonstrated time immemorial, just as raising  interest rates also raises unemployment, so too does raising minimum wages.  "Hey Honey! The guy who makes our Big Macs just got sacked!" Keep your eyes  on the Econ Baro, and as the precious metals downtrend gets stemmed, get  your hands on some Gold and Silver too! 

Cheers! 

...m...  

www.deMeadville.com

www.TheGoldUpdate.com

*********

Mark Mead Baillie

Mark Mead Baillie has had an extensive business career beginning in banking and financial services for two years with Banque Nationale de Paris to corporate research for three years at Barclays Bank and then for six years as an analyst and corporate lender with Société Générale.
 
For the last 22 years he has expanded his financial expertise by creating his own financial services company, de Meadville International, which comprehensively follows his BEGOS complex of markets (Bond/Euro/Gold/Oil/S&P) and the trading of the futures therein. He is recognized within the financial community of demonstrating creative technical skills that surpass industry standards toward making highly informed market assessments and his work is featured in Merrill Lynch Wealth Management client presentations.  He has adapted such skills into becoming the popular author each week of the prolific “The Gold Update” and is known in the financial website community as “mmb” and “deMeadville”.
 
Mr. Baillie holds a BS in Business from the University of Southern California and an MBA in Finance from Golden Gate University.


One cubic foot of gold weighs more than half a ton (1,306 pounds).
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