first majestic silver

Gold Clout, Dollar Rout, Tax Bill Doubt

Market Analyst & Author
November 19, 2017

Through Thursday of this past week, gold for all the world was yet again reprising its rendition of "Nowhere Man"--(The BeaTles, '65), apparently en route to a fourth consecutive weekly net change of less than 10 points.

But then come Thursday evening was the termination of the "Sell the rumour" (from back in mid-October's gold peak at 1308) and "Buy the news" (as our House of Representatives passed their version of the tax bill). For in now turning to the Senate with their own version and expectations of tax bill dissent, in came the doubt, leading to a Dollar rout, and thus gold garnered some clout in settling out the week yesterday (Friday) at 1294, its best weekly gain (+19 points or +1.5%) in the last five.

Moreover in glancing at the opening graphic of the Gold Scoreboard, price is now 7.2% above where 'twas at this time a year ago (1207): that's the highest percentage difference 'twixt the two tracks since mid-January, and further, this year's price is now bending upward rather than retracing last year's flopping finale.

'Course in 2017, there are still six trading weeks to run: plenty of time for price to again succumb. But 'tis somewhat gratifying to see gold (as we say in Formula One) "get some grunt in its lump", on Friday having spritely run up and out of The Box (1280-1240); we write "somewhat" as price's still being sub-2000 at this point in the currency debasement cycle remains an inane absurdity, indeed an illogicity not found anywhere else in nature. Fortunately, the eventual reversion to debasement's mean, (by our scoreboard 2764), shall put the scales of monetary justice back in balance.

"And then there's the overshoot, right mmb?"

Right, Squire. But Assignment One is to reclaim Base Camp 1377 (2016's high trade) which as we turn to the weekly bars remains quite high in the sky above the descending red dots of parabolic Short trend. But is it out of reach by year's end? Gold's present price of 1294 need rise 6.4% to reach 1377 within this year's final six weeks: for the 16 completed years in this millennium, gold locked in gains of better than that percentage during the final six weeks of 2002, 2005, 2007 and 2008. On average, that's once every four years ... but 'tis not occurred in the last eight. Can you say "overdue"? To be sure 'twould be a nice holiday present:

Overdue, too (ad nausea), is a stock market correction/crash/revaluation. Naturally the notion is that this 12-cylinder economy will spur corporate earnings, (upon which the tax rate is "expected" to be reduced), to catch up with the record-high valuations of stock prices. To date, that is not apparent a wit: Earnings Season for Q3 is now officially in the books, and of the 446 S&P 500 companies therein reporting, only 184 of them (41%) actually had better bottom lines than in Q3 of 2016. 'Course, the only ones that matter are those of Apple, Microsoft, Amazon and Facebook: the common stock of those four companies alone make up more than 10% of the total capitalization of the mighty S&P 500, the Index below depicted by the red line in our graphic of the ever-steeping rise in the Economic Barometer:

Mindful that the Federal Open Market Committee is set to raise their bank's Funds rate in just over three week's time, the rise in the above Econ Baro does incorporate a few negative reports from this past week: both the New York Empire State Index and Philly Fed Index posted notably lower November readings from those of October, whilst our import prices rose (i.e. we're paying more), but those for our exports got hosed (i.e. we're receiving less), the latter turning negative for the first time since May. All to which gold says: "Thank you, dear old declining Dollar."

Now as doubtless many of you are stuck in hopelessly holiday-delayed travel mode at this airport or that bus station (our regards to the girl in the taupe mini-skirt) and are just getting to perusing this piece, we think it helpful to go 'round the horn with the current trend of gold -- indeed for that of all eight BEGOS Markets -- such that upon your arriving exhausted at your Thanksgiving destination, you'll nonetheless be the wiser at the table. Thus for the past 21-trading days (one month) below we've the daily bars for each of these markets (Bond, Euro/Swiss, Gold/Silver/Copper, Oil, S&P), highlighted with their "Baby Blues" which are the dots that detail the consistency of the 21-day grey linear regression trendlines. Note the rightmost up bar (Friday) for both of the precious metals. Indeed for gold, Friday's +1.2% gain was its best daily rise since 28 August (+1.5%). In fact, you might share over cocktails with any gold cynics lurking about the festivities that were price to repeat that daily percentage performance for just the next 33 trading days, 'twould eclipse its All-Time High (1923) this coming 09 January. Put that caperberry in yer martini:

Next in pulling up our 10-day Market Profile (below left) for gold, this time 'round 'tis paired with the "expected daily trading range" (below right) from one year ago-to-date so as to emphasize just how narrow pricing has been in recent weeks. The "12.3" in the box is the expected range between the ensuing session's high and low, and you can see 'tis but half that of a year ago. As for the trading support suggested in the Profile, 1285 and 1278 surround the top of The Box (1280-1240), which as we above showed in the weekly bars is thankfully being very price supportive:

Here is the same display for Silver, 17.05 continuing to be the dominant trading area in the Profile. And similar to Gold, Sister Silver's "EDTR" at 30¢ from high-to-low is also but half what 'twas a year ago. For both the yellow and white metals, their price compression in having only a few Profile apices, along with their narrow daily trading ranges, are portents that gold and Silver are due to break away from current levels, the supporting technicals giving us the directional inference of UP:

'Course, the entirety of the foregoing shall be for naught should Nibiru come through, the cataclysmic passing by (if not Earth's collision with) so-called "Planet X" having been re-pegged from 23 September to (as we write) tomorrow, 19 November. The expectation of the event is gravitational force eliciting massive earthquakes in turn ripping apart our world. And you long time readers know what the resulting headline will be: "World Ends, Dow +2". More likely we'll be seeing "Tax Bill Stalls, Gold +22".

Happy Thanksgiving Everybody!

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.

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