first majestic silver

Gold Buyer Beware, Or Buy Do We Dare?

Market Analyst & Author
May 14, 2017

1231, 1211, 1190. Those are the three gold levels we offered a week ago as to how low price may go in its present down-flow. We'd already just eclipsed the 1231 level in settling last week at 1228. Then as the above panel shows in settling this week yesterday (Friday) again at 1228, gold en route reached nearly down to the 1211 level, the week's low being 1214. That leaves the 1190 level still waiting in the wings to complete the classic 62% Golden Ratio retracement as measured between this year's high (1297) and last December's StateSide post-election low (1124). Or is the latter of those three levels so obviously going to trade -- that it shan't -- leaving the wanting and waiting buyer mumbling through his "wudda shudda cudda" mantra upon gold's next rocket shot?

To be sure, gold these last four weeks has been shot down better than -6% therein ... and silver nearly -14% within! Make no mistake about it: the 21-day linear regression trends for the precious metals are decidedly down as depicted by the red lines in the following two-panel graphic which spans the last three months for gold (left) and Silver (right):

And yet, as the most recent days above appear, price in both markets has bounced back by its best throughout the red-lined downtrends. So is that it for the selling? Buyer beware or buy do we dare? Were we to have just arrived by spaceship from Saturn and shown the above two panels without labels, (i.e. they could be the share prices of Penn Central and Pan Am), we'd opine that the selling has been steady, yet certainly not capitulative, this bounce in turn being the opportunity to sell again, should the trend be our friend.

Thus specific to gold, rule thee not out a tour to test the aforementioned 1190. But wait: again look above at Sister Silver's "Baby Blues", our clues to trend consistency. Her rightmost dot (for Friday) actually kinked up. Which is why in yesterday's run of our end-of-day stuff this too popped up:

"Which is also why we've disclaimers, right mmb?"

True enough, Sir Squire. Still, a turn in "the blues" is oft an early hint of trend nearing its end, whether now in this case for silver and/or 'round gold 1190.

Warily we therefore go to gold's weekly bars. We say "warily" for the weekly parabolic Short trend depicted by the new red dots has but barely begun. 'Course as with most things technical, study lags price, and if you look at the leftmost part of the chart you'll find that a year ago gold recorded a brief Short stint which lasted just four red dots. We'd welcome such re-performance here, the overhead 1240-1280 purple-bounded resistance zone notwithstanding:

Gold in fact initially rose on the French presidential victory by the man Emmanuel Jean-Michel Frédéric "The Kid" Macron {breathe}, the youngster clearly on course toward maintaining France's economically cloudy outlook, mandatory minimum five weeks of vacation (plus 12 public holidays) and 35-hour maximum work week. Indeed in the wake of the defeat for the woman Marion Anne Perrine "Marine" Le Pen {breathe}, the EuroCurrencies then slacked with gold in tow back to the French pre-election level of 1228 a week ago, as we know.

Still, give the oxymoron of "losing populism" in France, the EU's European Commission is now looking for slightly stronger economic growth than 'twas pre-election. Moreover in crossing the Rhine to Germany, 'tis said that their economy is barreling ahead on rising industry orders, company investing, consumer spending and exports increasing. Stateside too, giving support to the Federal Open Market Committee nicking up their bank's Funds rate come 14 June, have just come reports of increases in April's inflation at both the wholesale and retail levels, as well as in retail sales, all of which have served to give a renewed pop to the Economic Barometer:

Specific to the Baro's reference of the S&P appearing "toppy", it has gone quite narrow of late as we can also see in the following two panel display. On the left is our familiar percentage tracking of old vs. the flat-lining S&P from a month ago-to-date, their inverse correlation quite stark, albeit making the sell of the yellow metal appear as overdone. On the right, given said inverse correlation, we've the daily bars of the S&P from April-to-date: note that the "moving average convergence divergence" (MACD) at the foot of the panel looks close to crossing negatively, the inference therefore being "what's bad for the S&P is good for gold". Indeed should you peek at our Market Trends page, you'll see the S&P's own "Baby Blues" have started to drop:

Next we go to the precious metals' 10-Day Market Profiles. Should gold (below left) be able to hold this 1228/1229 dominant trading area, there's room to run up to that 1256 level given the trading volume within has been sparse. As for Sister Silver (below right), 'tis all about "Stayin' alive"above 16.25:

So again, is it buyer beware, or buy do we dare? Given proper cash management, one might opt to do both. Again let us hearken back to the wise words of the late great Richard Russell who said "There is never a bad time to buy gold". ('Course don't run that one by the bidder who hit the 1923 offer back on 11 September 2011). But remember: despite gold having firmed somewhat these past few days, the aforeshown 21-day trend is, dare we say, downright down, surely to excite the smart-Alec Shorts to again sell into this mild bounce. The aggressive Long might go ahead and buy right here (1228) with a "stop" below the 1214 low. The more conservative parser might go half here and fully expect to go half again at that 1190 golden Ratio level, even should it not trade. Either way or in any way, at the end of the day, it really doesn't matter a wit as long as one is on board upon Gold having soared!

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.

The King James Bible mentions gold 417 times. Not once does it mention a paper currency.
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