first majestic silver

Gold: From February Fold To Marching Bold?

Market Analyst & Author
March 2, 2015

It just wasn't our February, was it? No. And to think: after all that end-of-January flag-waving to support the tradition of love's favouring Gold in the month of February, only to see their relationship again go off the boil -- indeed to the worst degree this millennium -- price for the month finishing -5.5%. Remember this chart from four weeks back of Gold's intimacy with Februaries past, lost love being the exception rather than the rule?

Gold February Chart

But as indicated by the rightmost bar, this year the rule turned cruel. February forsook any fondness for Gold which, amongst other things, failed to show up with neither flowers nor clean underwear beneath its rumpled suit, in essence as a sad-sack suitor only to stink up the joint. And yet in defense of precious metals, just as do others go off the rails at times, (think of Lee Marvin in the Gold-mining musical "Paint Your Wagon"), whilst not always perfect, Gold's the best thing we've got. Were it not, we'd sell it at spot.

Still, with one-sixth of 2015 already in the books, Gold is sporting a modestly positive position, +2.6%, as we turn to the year-to-date BEGOS Market Standings, wherein we see Sister Silver leading the pack:

BEGOS Markets

Of course, also +2.6% year-to-date is the S&P 500. "How can that be?", query ye? Clearly a mathematical conundrum given Gold and the S&P being in negative correlation to one another. It certainly feels like the S&P is up for the year, for it never goes down. It certainly feels like Gold is down for the year, for it never goes up.

"But mmb, you yourself said that Gold had gotten a bit ahead of itself in January..."

Smart boy, our Squire. Here are the percentage tracks of both Gold and the S&P500 through these first two months of 2015: indeed the two markets are +2.6%. And yet their negative correlation is clearly there, for 'tis just that they're passing as ships in the night:

Gold vs S&P500

At least Gold closed out February by firing on all cylinders in escaping the 1100s into which it had briefly dipped in both of the past two weeks as you can next see here in the year-over-year chart of Gold's weekly bars. True, the parabolic trend is presently Short (red dots), but that can be short-lived:

Weekly Gold Bars And Parabolic Trends

Moreover, given such a vast number of Gold investors and traders engage in their craft through the conduit of equities and exchange-traded funds, the herd's push into those vehicles year-to-date have afforded a better return over Gold itself. And thus it being month-end, we next bring up the usual year-over-year view of Gold versus the equity groupings of the ARCA Gold BUGS, the Philadelphia Gold/Silver Index, the Market Vectors Gold Miners (ARCA:GDX), and this time 'round in place of Royal Gold we're instead showing the year's stellar Gold Star so far, Newmont Mining (NYSE:NEM), which year-over-year is the only one of these entities that is in the black. As for 2015 year-to-date, they're all in the black and we've put the respective percentage changes (YTD^%) of the whole bunch across the top of the graphic; the thin vertical line marks the beginning of the trading year:

Gold vs Equity Groupings

Should Gold go marching bold into the ensuing month, it would be nice to see it commence with some oomph. And this next dual-panel graphic may just be giving us hint of such. Let's start on the left with Gold's daily bars for the past three months-to-date, the blue dots thereon being the daily consistency reading of the 21-day linear regression trend at the end of each trading session; note how these "Baby Blues" have begun curling up from the floor of the panel. Then on the right is Gold's Market Profile covering the past 10 trading days, the white bar being yesterday's (Friday's) closing 1214 level; the most commonly traded Gold price for these past 10 sessions is depicted in the panel by the profile's longest apex at 1209, which we in turn view as near-term trading support:

Gold: 21 Day vs 10 Day

Now to Gold's structure, featuring those broad-based named layers. Despite all the ballyhoo, (including that from us too), Gold continues to be stuck in the goo. The yellow metal has had every catalyst in the book thrown at it to be trading substantially higher than where 'tis, be it StateSide M2 debasement alone putting the price today at $2,493/oz. (per our "Scoreboard" at the open of each of these missives), or geo-political strife being at all but warring height, or the urgency by those wiser countries "in the know" to repatriate their Gold, or even by the Swiss Franc saying "We're done with the Euro". Yet below as the chart shows, we see Gold continuing to meander along through the basement, flirtin' with Purgatory:

Gold Futures Chart

Finally, we've made a lot of late about what may be the greatest positive Gold catalyst of all: the declining Economic Barometer that "no one" (except you valued readers) seems to see leading toward the next QE. A Quantitative Easing Four (QE-IV) would seem more in the cards at this juncture than a raising of rates. For were the latter to be invoked, we can just hear it now: "Variable interest rate shock got you down? Simply ask a for pay increase. Management will implement it before that monthly credit card payment due date, right?" So here now is the updated stance of the Econ Baro. The embedded quote is by Federal Reserve Bank Chair Janet Yellen during her testimony to Congress this past week:

Econ Bara

We provide, you decide.

But wait, there's more: indeed 20 more inputs pending for the Econ Baro next week, including a whole new bilge of part-time payroll creation for February come Friday. How many jobs are you workin'?

What we really desire to have working -- with March upon us -- is Gold's turning bold toward higher levels. That curling upward in the "Baby Blues" we saw earlier oft heralds the beginning of a new up leg. And perhaps today's dawn is pointing the way, this photo just snapped here in San Francisco moments ago at 06:54 PT, the warming Golden sun heading up into a Baby Blue sky:

March awaits us: Beware it’s Ides if 'tis the S&P500 you hold. Rather: be bold and go with Gold!

********

Courtesy of http://www.demeadville.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.


The world’s gold supply increases by 2,600 tons per year versus the U.S. steel production of 11,000 tons per hour.
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