first majestic silver

Gold Finally Getting Noticed...Really!

Market Analyst & Author
September 27, 2015

Text to The Chair: "Dear Madame Chair: Health before wealth, be it that for thyself, or for the world itself. Do take care. Best to you ...m..."

It cannot be an easy job these days were one a member of the Federal Open Market Committee, let alone chairing the Board of Governors of our Federal Reserve System. What we, as do diligent analysts see, doesn't always tally with what we hear from the FOMC. Yet for all that we do, (an example in our case being the Economic Barometer), I remarked last week to a great friend and trading colleague that, with respect to the FOMC, "They just know more than we do", to which the non-hesitant retort rightly was, "No, they're academicians."

Indeed one wonders if the Chair's momentary physical faltering on Thursday was exacerbated by a burden beyond both the lengthy duration of her address and lack of hydration under the bright lights at UMass. For the stress upon the FOMC at large by not weighing in on economic reality must be Massive. Their desired inflation rate of 2% per August's measures is running flat-to-negative, and at the wholesale level is net-negative year-to-date. The S&P 500 Index is trading at double its earnings support. And jobs being created are scant of living wage necessity, the Fed nonetheless regularly pointing to a low unemployment rate, yet never to the dwindling labor force participation rate, nor to the inadequate levels of retirement funds. Man may not live by bread alone, but running out of dough to buy same shall be the endgame, unless "We need to print more" FOMC members then exclaim.

But wait: there's good news. We just learned yesterday (Friday), that growth in StateSide Gross Domestic Product for Q2 was upwardly revised yet again, ('twas initially +2.3%, then +3.7% and now +3.9%). Fairly fantastic that, given the -0.2% recorded for Q1. Here below is how 'tis reflected in the aforementioned Econ Baro. Dazzling stuff, what?

As for Gold, to say that it had a "dazzling" week is a bit of a stretch, for to colloquially put it, "We ain't seen dazzlin' yet". That said, we couldn't help but smile over this bit run by CNN: "Fear is back! Gold glitters as stocks tank - Investors are afraid. Very afraid. How can you tell? Just look at gold..." Credit them for at least sitting up and finally taking notice. What we notice here in the following chart is that Gold's weekly parabolic trend has flipped to Long, a valued reader writing in just last evening to note that the last two Short trend stints both printed 12 red dots. Which begs the question: when was the last time Gold had a Long trend that spanned at least 12 blue dots?

"Unless that's a trick question 'cause it's never happened, it'd be before the all-time high, huh mmb?"

An understandable skepticism there, Squire, as it does seem like forever ago, but you are correct: 'twas in the 12-week run during 2011 from 25 February through 13 May, the All-Time High (1923) then arriving on 06 September of that year. Moreover, millennium-to-date, there've been a dozen such upside runs, several of which have exceeded 20 weeks. And if this is the beginning of a run on such order of magnitude, 'twill bode well for then asserting that "the bottom is in", toward supporting our rationale that we'd also find Gold having cleared both its 300-day moving average (presently 1200, and then in time, ideally tracking upward), as well as the 1240-1280 resistance zone (the purple lines in the above graphic). You'll recall from recent missives that the first step was to reverse the Short parabolic trend to Long. Step One Done.

And specific to Gold vis-à-vis that 300-day moving average, here 'tis, our recent "new look" version spanning from the All-Time Closing High (1900 on 22 August 2011)-to-date:

Notwithstanding such "feel good" optimism, October has not been a robust month for Gold these last three years: that in 2012 saw price fall a net 53 points (-3.0%), 2013's dropped 6 points (-0.4%) and 2014's was off 36 points (-3.0%). Spooked by Halloween's October hobgoblins is Gold. But stranger things have happened, (such as a +6.0% net gain in October 2007, nudge nudge, hint hint, elbow elbow).

What's not strange is the ascension of the "Baby Blues" for the Precious Metals in the upper quadrants of the following four-panel graphic. The baby blue dots depict the day-to-day consistency of the markets' 21-day linear regression trends, (the diagonal lines). In the lower quadrants, note the "Uh-Oh..." for the stock market (Spoo = S&P Futures) aside the "Oh-No!" for Copper, (a once-heralded bastion portending economic direction). "All y'all ready for that Fed rate rise?" Not:

For the immediacy of it all, here next are the 10-day Market Profiles featuring Gold on the left and Silver on the right. The numbered apices are those prices with the larger volume of contracts traded; the red bars are the latest settles. As noted a week ago, the weekly parabolic trend now having flipped to Long, Gold's next upside target is 1170, a level just above August's high, which ought in turn open the door to the 1200s. Therefore, the initial target is to get a close above that 1154 resistor we herein see:

And thus in parting for this week -- with the squeaky Fed door still ajar, so sayeth the Fed Czar, and the 28 October Statement not too afar -- we find anew these few potential rate hike mitigants:

■ China's factories' output slumping to better than a six-year low is escalating concerns of an even wider-spread financial recession, albeit President Xi, on behalf of some Chinese companies, took the time whilst just up there in Everett, WA to bop by Boeing and buy 300 airplanes, (mostly 737s nearing $100 million a pop, before volume discounts off the sticker; sale ends at midnight).

■ Norges Bank reduced its key policy interest rate to a record low 0.75%, given all the punishing price plunges in Oil, which is the Nordic nation's largest export. However, fish oil being part of the global vitamin craze, perhaps Norway ought ramp up that side of the Oil biz, for after all: one barrel (42 gallons) of North Sea Brent Blend is presently $48.17; 42 gallons of fish oil (at $1.36/oz) would bring in $7,311/barrel. "Got any of those King Oscar sardines over there?"

■ From the A Poltergeist of his Former Self Dept., "They're baaaaak...": Alexis "Tie-less" Tsipras & the Syrizains (there's yer next Grammy winnin' band) are again topping the Greek electoral plurality charts despite have lost 64.5% of the vote in last week's election. New term, same turmoil, stay tuned.

■ Not Gold, but Goldman: they're talking S&P 2100 again by year-end as the Fed cowers. We alluded to the Index's price/earnings ratio earlier: 'tis 32.9x by our "live" reading as of yesterday's close (1931.34). Linearly at 2100, the p/e would be 35.8x. High-end "B-school" acceptability? 15.0x. (But that was before the risk-capital stock market became the risk-free savings account 'tis today deemed to be).

■ Then there are the rumours over Lehman Brothers à la Holstein, aka Deutsche Bank. We'll leave you to the derivatively delightful discovery on that one whilst tooling about in your VW. Unglaublich!

Speaking of which, there's quite the emission of incoming Econ Data in the new week. Econ Baro bounce? Or bonk? Best to brave it out with Gold as 'tis finally getting noticed ... Really!


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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