Gold Garroted…Silver Slaughtered

Market Analyst & Author
September 27, 2020

In each of our prior five weekly missives we've pointed to 1830 as a key structural price foothold should Gold be so sold. And this past week under a heavy selling load, Gold reached to as low as 1851, a level not seen in better than two months when price was then progressing up toward its All-Time High of 2089 achieved on 07 August.

Since then, Gold has pulled backed looking to regroup, indeed giving an appearance of consolidating in the mid-1900s. But come this past week, the precious metals were really kicked in the teeth, Gold getting garroted -4.7% and Silver being slaughtered -14.7% to settle it all out yesterday (Friday) at respectively 1864 and 22.99. Such percentage disparity drove the Gold/Silver ratio up from 72.6x to 81.1x across just those five days.

'Twas penned back on 22 August in anticipation of Gold's weekly parabolic trend flipping from Long to Short (as it so did the following week): "...Structural supports for Gold? 1830, 1789, 1776. Good footholds to know, should they show..." Now 1830 is just 34 points south of Friday's 1864 settle and well within the ensuing weekly expected trading range of 84 points (the daily expected trading range alone being 34 points itself).

'Course you know how markets are: when 'tis so obvious a specified price is going to be hit ... 'tisn't.

And straight back up from here would be lovely. But should the present downtrends remain our "friends" (with whom "Who needs enemies?"), lower levels appear in order with Gold 1830 as a support test in the nearby offing.

To be sure, we already have the aforementioned weekly parabolic trend as Short for five weeks running. Moreover, as was graphically presented in our prior piece, the weekly "moving average convergence divergence" (MACD) indeed confirmed its negative crossing per yesterday's close. And further as was foreseen last week, the 21-day linear regression trend (then mildly positive) has again rotated to negative. Lot's of technical stew upon which we humans can analytically chew, but the algorithms see it right through such that their selling doth ensue. Indeed, let's Frankie cue: "That's life, that's what all the people say, You're ridin' high in August, shot down September-way..."(a little poetic license there).

Here graphically are those two weekly cases, beginning with Gold's bars and the run now of five red parabolic Short trend dots. The rightmost bar is quite the momentous plunge, the -4.7% drop Gold's weekly worst since that ending 13 March (-8.7% upon it all going wrong come COVID, prior to which Gold's worst week was a -6.0% doozie way back for that ending 11 November 2016). The 1830 foothold is as denoted:

As for the weekly MACD negative crossover, here is that "quintessentially elegant" graphic as updated from a week ago, again with the weekly bars, but with the blue line having now glided below the red line:

Negative as well is Gold's 21-day linear regression trend having so rotated. Here 'tis from one month ago-to-date by the grey diagonal line in the leftmost panel of these four selected BEGOS Markets, along with their declining baby blue dots indicative of the downtrends becoming more consistent. And when this batch of the BEGOS bunch is goin' down, it can mean but one thing: "Dollar strength, baby!"

In fact, have you noticed the positive correlation between the Dollar and COVID cases? As the number of COVID tests geometrically increase, so does the number of cases increase. Funny how that works (the more ya test, the more ya find). Yet in fear, folks flock to the Dollar, the world ends and "The Dow" finishes +2. Who knew? But is what we're being told actually true? Don't miss "The Mask Unmasqued" coming this fall to a theatre near you!

Always unmasqued, 'natch, is the Economic Barometer, for (in the words of the late great Howard Cosell): "That's telling it like it IS!" And what 'twas this past week was quite light for the Baro, with just four metrics which wandered in, the most notable surprise being August's New Home Sales topping the one million mark for the first time since December 2006; (to maintain perspective, such monthly sales regularly were above that level from 2002 through 2006, prior to credit then all going wrong). As for next week, we've 21 incoming metrics scheduled for the Baro, it presently pausing ahead of such rash of reports. Indeed strap in firmly for one heckova bumpy markets ride as we transit from September (aka "The Worst Month") into October (aka "The Crash Month"):

Meanwhile this past week during his Congressional testimony, Federal Reserve Chair Powell kept his pedal to the metal, crediting the government's quick fiscal response to COVID as having prevented worse economic conditions, but saying that Washington and the Fed need now "stay with it". Banks are also said to be doing their part in buying up U.S. Treasury debt.

Indeed in the midst of it all, the FinTimes/Peter G. Peterson Foundation US Economic Monitor poll found 89% of StateSide "voters" favouring more relief aid, given COVID. (Who doesn't like the illusion of "More free money!", eh?). This in spite of the Fed having just said that American household wealth reached a record high by Q2's numbers. "We got winners, we got losers..." --[Toby Keith's "I Love This Bar", '03]

But specific to volume bars, falling toward the base of them are the precious metals' prices as we here see respectively within the 10-day Market Profiles for Gold on the left and Silver on the right, their most heavily-traded levels as labeled:

How does it all thus stack up for Gold? Here we are:

The Gold Stack

Gold's Value per Dollar Debasement, (from our opening "Scoreboard"): 3583
Gold’s All-Time Intra-Day High: 2089 (07 August 2020)
2020's High: 2089 (07 August 2020)
Gold’s All-Time Closing High: 2075 (06 August 2020)
The Weekly Parabolic Price to flip Long: 2069
10-Session “volume-weighted” average price magnet: 1920
The Gateway to 2000: 1900+
Trading Resistance: 1868 / 1892 / 1907 / 1951 / 1960 / 1966 / 1975
Gold Currently: 1864, (expected daily trading range ["EDTR"]: 34 points)
Trading Support: 1862
10-Session directional range: down to 1851 (from 1984) = -133 points or -6.7%
The Final Frontier: 1800-1900
The Northern Front: 1800-1750
On Maneuvers: 1750-1579
The 300-Day Moving Average: 1647 and rising
The Floor: 1579-1466
Le Sous-sol: Sub-1466
The Support Shelf : 1454-1434
2020's Low: 1451 (16 March)
Base Camp: 1377
The 1360s Double-Top: 1369 in Apr '18 preceded by 1362 in Sep '17
Neverland: The Whiny 1290s
The Box: 1280-1240

In closing and with respect to Gold's being fueled by the 3Ds (Debasement, Debt and Derivatives), Phillip Swagel (whom we all know is the Director of the Congressional Budget Office) stated this past week that the federal debt as a percentage of StateSide GDP is projected to double from 'round 95% today to 195% come 2050. That's 30 years hence. The actual level of federal debt hardly grows at any rate of consistency; since 1929, 'tis doubled on average every nine years, but the "standard deviation" therein is seven years; so its growth amounts are all over the place. But the point is, GDP in no way is projected to keep pace. We thus close with this favoured quip: "GOT GOLD???"


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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