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Gold Goes Down -- Its Trend Goes Up -- And Imbalances Are Everywhere

Market Analyst & Author
September 16, 2018

To state that Gold closed down for the week -- indeed down for the 12th time in the past 14 weeks -- but that price's trend flipped up from Short to Long -- is justification to ring up the LTS (Looney Tune Squad) for the author to be carted away... "...ah roger that, no he'll come quietly; just the usual stretcher and straight jacket will do, over..."

To be sure, mathematical measuring of markets can materially meander, marring not so much the truth as the numbers don't lie, but belying it. Oxymoronic perhaps, but if doctrinaire use of technical analysis always led to profitability, "we'd all be rich", in reality an impossibility as there'd be no one taking the other side of the trade.

"Where on earth are you going with this, mmb..."

Well, Sir Squire, with respect to Gold's seemingly endless parabolic Short trend by the weekly bars, you'll recall the following sentence as penned a week ago: "Price need just trade up through 1213 in the ensuing week to end this trend toward rounding the next upside bend."

And it happened this past Wednesday, at 10:00 Pacific Time to be precise, the Dollar getting ditched within a frenzy of renewed hopes for resolving trade issues with China and pro-Brexiters giving Prime Minister May a bid. Indeed Gold furthered its modest climb to 1218, a level not pipped since 28 August -- before giving it all up and then some to close out the week yesterday (Friday) sub-1200 at 1198, its second-lowest weekly settle since that ending 27 January 2017. Not very impressive, right?

But But But: the intra-week price pop was enough to end the 19 weeks of parabolic Short trend -- the third lengthiest millennium-to-date -- which "short" of leaving us speechless at least garners an "Oh goodie..." as the first encircled blue dot of the new parabolic Long trend (meanderingly or otherwise) appears:

'Course the burning question from the "History Repeats Itself Dept." is: how did the price of Gold fare following the other two Short trends of even greater duration?

Not very well: following the 20 weeks of Short trend which culminated on 17 August 2012, Gold's price on a closing basis then stretched up from 1618 to 1783 (+10% over seven weeks) prior to unraveling into the millennium's record 31-weeks of Short trend. The latter culminated on 31 May 2013 from which price then barely gained any traction whatsoever, finding its way from 1388 up to just 1396 -- a scant +1% over 14 weeks -- before it all went wrong over the ensuing couple of years, (as you know reaching as low as 1045 on 03 December 2015).

Still of more numerical interest is to again note that through this past August, Gold recorded a fifth consecutive down month, (then settling at 1207). As penned at that time: "...across the 524 months from January 1975-to-date ... Gold has fallen for a sixth consecutive month just three times..." Gold has two weeks yet to run toward closing out this September: to finish sub-1207 would mark a sixth consecutive down month. And notwithstanding the fresh new parabolic weekly Long trend, the Gold Scoreboard at the top of this missive depicts price for the last two years as having seasonally performed poorly from this point until December.

Such negativity noted, the Big Picture must be maintained. To wit, we yesterday every so briefly ran into a collegial precious metals writer who emphasized one key word: "Imbalance", in turn bringing to mind this classic graphic, now freshly updated. And that trailing-twelve months S&P 500 price/earnings ratio is not a typo:

Imbalance indeed. Have you been following the Economic Barometer? A rhetorical question to so many of you who've pointed out the divergence between the Econ Baro and the stock market becoming so stark of late. Yes, some of the data is quite good, growth in Industrial Production having leapt from +0.1% in July to +0.4% in August. Consumer Credit in July increased by $8.1 billion, that month's largest leap in the 20 years we've been running the Baro: we view credit expansion as an economic positive as it increases the velocity of money moving through the system for goods and services ... until the credit wall is hit (which arguably it did a long time ago and with such force as to obliterate it).

Further from the "Oh By The Way Dept." our mainstream media tell us nobody's confident in the StateSide President ... but 'twould appear everybody's confident in his economy, the University of Michigan's Sentiment Survey in September topping the vaunted 100 level for the first time in six months.

'Course a Gold positive is the economic negative of the U.S. Treasury's deficit having literally doubled from July into August: "Uh, this is Steve at Treasury. Can you please call Jerome over at the Fed to have them make one of those magic accounting entries for us? Thanks."

Other negatives? August found deflation in Export Prices, deflation in Import Prices, and deflation at the Wholesale (PPI) level. Only (as usual) did the consumer (CPI) to take an inflationary hit. And: the Federal Open Market Committee is geared up to raise their Bank' Funds rate in just 10-days time. Here's the Baro:

In fact, we're finding imbalances everywhere. Let's go 'round the horn with all eight of our BEGOS Markets. Here are their daily bars for the past 21 trading days (one month) along with the baby blue dots of consistency for the respective grey trendlines. Look first at Gold (its trend going up) over Silver (its trend going down) and is it any wonder their ratio of of 85.1x is nearly at an all-time high? 'Course declining Copper (an economic "negative") hasn't helped Sister Silver, even in the face of rising Oil (an economic "positive"). Then note the descending Bond (indicative of ascending yield) even as the Dollar is weakening per the rising Euro and Swiss Franc. 'Course amongst all this imbalanced confusion is the rising S&P 500 ("Spoo") albeit its own "Baby Blues" -- like its components' earnings -- are struggling to support price (uh-ohhh...):

We find imbalances as well with respect to the present positioning of the precious metals' prices per their 10-day Market Profiles. As shown for both Gold on the left and Silver on the right, price is below each respective trading fulcrum, which for the yellow metal is 1201 and for the white metal is 14.25.

In wrapping it up, clearly you are aware of the Securities and Exchange Commission's "temporary" trading halt (through 20 September) in both Bitcoin Tracker One and Ether Tracker One. 'Tis reported said halt is in place due to "confusion among market participants regarding the instruments", which not for the first time has us querying: do you know who is managing your money ... and how?

Indeed, within the ensuing week we'll have bounced back to Monaco and shall no doubt again pass by (what has appeared as) the somewhat inactive office of the Monoeci project. (For those of you scoring at home, the Monoeci traded as high as $10.32 this past January; it settled this past week at just 7¢). Quite the imbalance there, although we do wish the project's entrepreneurs every success. Just keep your scale in balance with 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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