first majestic silver

Gold Leading The Pack through January

Market Analyst & Author
January 31, 2016

An employee poses for photographs with a one kilogram gold bar at the Korea Gold Exchange in Seoul, South Korea, July 31, 2015. REUTERS/Kim Hong-Ji/FilesFour trading weeks of the new year are now officially in the books, and as much as Gold may feel lackluster to many of you, 'tis had but one losing week of the four. Indeed from the year's low (1061) to its high (1128) is a 6% pop in price, and as we'll below see in the BEGOS Market Standings, now that we're through January 2016, Gold is leading the pack +5.4% for the year.

Still, if it doesn't really feel all that great to you, then you've come a long way Baby, for this is why we oft say that change is an illusion whereas price is the truth. And per yesterday's (Friday's) settling out the month of January at 1118, let's face it: Gold's price stinks, especially as our mathematics of tonnage supply versus StateSide currency debasement equate to a price right now of 2529. The upside row remains an ever so long one through which to hoe, but with all that we know, 'tis the only logical direction in which Gold ought go. That said, here are the standings a month in:

Now if you think back to our final missive of last year (26 Dec), we'd graphically portrayed Gold as in the process of making a basing pattern -- albeit within its multi-year downtrend -- very similar to four such prior basing patterns since 2013, all of which led to rallies well-exceeding 100 points, such that this current one could well place Gold back up into the 1200s. That would bode well for our 2016 target of Gold reaching the upper 1200s, as we've 11 months still in the year's balance. Not to ignore that markets are hardly unidirectional, but as we turn to Gold's weekly bars and parabolic trends, this rightmost up move from December appears quite purposeful, with price this past week reaching its highest level (1128) since last 03 November, practically a three-month high:

Turning the tables in putting in not just a three-month low, but seemingly en route to a three-year low is our tried-and-true Econ Baro: its present level is the lowest reading since 14 June 2013, (on which day the S&P 500 settled at 1627; today 'tis 1940 despite decelerating growth in earnings ... hint hint, nudge nudge, elbow elbow). And with all eyes on the Federal Open Market Committee this past week, pre-meeting we enjoyed this headline from the venerable news institution Time: "Does the Fed Have the Guts to Raise Rates?" 'Course, I think all of us knew they'd be stuck this time 'round, the expected "do nothing" Policy Statement of 27 January paraphrasingly rife with "well yes, but no, still maybe". In fact, the real eye-opener of the week was the Conference Board's reading on January Consumer Confidence: in month where the S&P 500 was off at one point by better than 11%, the confidence reading (98.1) was a four-month high. Really? "By golly Ethel, our savin's 'er gettin' creamed, but I gots me confidence" ... "That's nice Stan..." Then come yesterday was our first look at Q4 Gross Domestic Product: +0.7%. 'Twas the third-weakest reading in the past two years. As Reuters put it ahead of the data release: "U.S. economic growth likely braked sharply in the fourth quarter..." Braked indeed, for as the Economic Barometer has displayed throughout, 'tis breaking:

Specific to the stock market itself, the current Dead Cat Bounce got some additional life, and notably so yesterday with the S&P +2.5% (its best up day since 08 September), as money poured into U.S. assets upon the Bank of Japan moving a current deposits account interest rate to -0.1%. From Switzerland to Sweden and now to Japan: contagious, isn't it? Indeed, 'twas the Dollar Index's best day in almost six weeks. Money into stocks, money into Treasuries ... and money into Gold as well. That's not supposed to happen, right? Quite a week there for the Land of the Rising Sun. Why even their economy minister Akira "Alarmi" Amari resigned, (allegedly for under-handed doings), his leaving a bit of a calamity (understatement) for Prime Minister Shinzo "Don't Go!" Abe.

Meanwhile back on the Continent, the European Union is working with the Italian banking community towards selling off non-performing loan portfolios. (Does anyone recall the "Black Swan"?) Whilst across the Channel, the UK's Chancellor of the Exchequer George (née Gideon Oliver) Osborne notes the potential for economically "bumpy times ahead" given the stumbling global business environment. Are we surprised? No.

Again turning to Gold, along with several of the precious metals equities, 'tis ever so bumpy for the latter group as we see here via these year-over-year daily percentage tracks, HUI being the Gold Bugs Index, NEM being Newmont Mining, GG being Goldcorp, FNV being Franco-Nevada, and SIL being the Global X Silver Miners exchanged-traded fund. Albeit FNV's being a bit less robust most recently as earnings guesstimates are cast about, note the rightmost upthrust of the equities in general:

Below for the metals themselves, here first we've Gold, the daily bars of the last three months on the left with the baby blue dots of 21-day linear regression trend consistency lurching along to the upside, whilst in the 10-day Market Profile on the right we see price (1118) nicely tucked in above the broadest support beam (1117) in the stack:

And second for Sister Silver, her Baby Blues (left) have leapt upward with price finally breaking above many a hum-drum week spent either side of 14; thus she's finally made it above center in the Profile (right) with 14.50 as overhead trading resistance:

This of course being a month-end edition of The Gold Update, we tell it like it is via the following Gold Structure with our defined pricing zones. This graphic has moved from being displayed as Gold-by-the-Week to Gold-by-the-Month, but the "Song Remains The Same"--(Led Zeppelin, '73), Gold still stuck in this broad picture "Down Below", again with our year's goal just to get up into the upper 1200s "au sous-sol":

Thus we've January 2016 already filed away. Extrapolating Gold's rise year-to-date using daily linear regression would put the price at 1627 on 31 December 2016; or repeating January's BEGOS-leading percentage performance of +5.4% for 11 more months would bring us to 1998. How annoying 'tis that Gold shan't rise in a straight line! Neither can the StateSide payrolls data due next Friday (05 February); 'twill be the Grand Finale of a week replete with incoming Econ Data, into which the Econ Baro shall unfold, whilst one stays the course with one's 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.

The Incas thought gold represented the glory of their sun god and referred to the precious metal as “Tears of the Sun.”
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