first majestic silver

Gold Lies Low And Silver Extremely So

Market Analyst & Author
November 15, 2015

gold and silverLacking enough sleep, we write this morning with quite the want for more winks, a very dear broadcast friend of ours having been in the Stade de France last night and penning to us "...Viens juste de rentrer à la radio ... No word for describe the feeling..." We along with the rest of civilized world extend our heartfelt thoughts France's way. As for the moment, let's get to Gold straightaway.

The local Federal Reserve Bank President here in San Francisco, John Williams, put forth this past Tuesday that there's a "very strong case" for the Fed to hike its Funds rate next month (come 16 December). Naturally, he hedged his comments with "if" inferences should: a) the economy continue to improve ("?"), and b) his fellow Open Market Committee members be confident that inflation will pick up ("?") Those two question marks allude to our not seeing either case.

Add to which come early yesterday (Friday), Bloomy broadcast that European stocks and StateSide futures were falling due to growth woes, the Bond in turn getting the safe haven bid, and Copper hitting a six-year low (2.1510/lb.), as almost did Oil (40.73 settle). Indeed, how low might it all go as our Econ Baro does the limbo, with the Fed rolling the dice in the balance? To us, it still looks like a rate "no-go":

With respect to our two "?" on Mr. Williams' economic perspective, note above in the Baro the October decline in Retail Sales growth and the deflationary reading of the Producer Price Index. Given such shrinkage, will the FOMC "roll the bones" and raise the FedFunds rate at their December date? As noted, we still remain in what is now the minority of "no". (That said, did you happen to catch last week's highly technical NY Times piece on why 'tis so difficult to determine if our economy is "overheating"? Really?)

Fortunately from the "Cooler FedHeads Dept." we've Chicago Fed President Charles Evans, who in pointing to Europe's having raised rates [in 2011] on perceived [inflationary] strengthening vis-à-vis the rest of the world, said during the week: "...There’s often a trail of tears that follows that hope that their own area is stronger..." And as we saw earlier in the week, for European Central Bank President Mario Draghi, 'tis full speed ahead with their current -- and perhaps expanded -- stimulus through September 2016 at the earliest. Further, the Organization for Economic Co-operation and Development (OECD) reported on trade as now nearly down to global recession levels, China's own data then adding to an even more disappointing economic outlook.

Disappointing too was Gold's week, just the second in a new parabolic Short trend series, the low (1073.0 on Thursday) coming within just 70¢ of that for the year (1072.3 back on 24 July), before price's scooting back up to settle out the week yesterday at 1083.4. The only positive take-away here, regardless of the year-to-date low having held at least for the moment, is that the week's points range (29.1) was the second-narrowest in better than a year, (as opposed to price going into full plummet):

gold price chart

In fact, for a technical "silver lining", let's turn to Sister Silver. In this case we offer a contrarian read of which we've been addressing lately in the daily website commentary. Below are Silver's "12-hour" bars for the past five months-to-date. At the foot of the graphic is a core technical study from our "Market Rhythms" work called Moneyflow, (a smoothed measure that incorporates volume with price change). What we see in the lower rightmost area of the Moneyflow is its now "crawling across the floor", a very rare occurrence suggesting an extremely oversold condition from which price then generally has a robust rebound. You may ask if we are therefore actively assessing Silver's Moneyflow every 12 hours? Day and night. For a bounce would almost certainly take Gold along for the ride:

Thus, should Silver imminently pop here, as we next turn to this two-panel display of daily bars (left) over the last three months (with the baby blue trend consistency dots), our focus is on the Market Profile (right) and its first resistor level of 14.75 at minimum as a rebound target:

Now here's the same chart combo for Gold. Of note, Gold is not suffering the same negative Moneyflow extreme as we viewed for Silver, but to see price span back up across that Market Profile gap to reclaim the 1107 resistor, as with a rebound for Sister Silver, would be a welcome near-term breather:

"What about for the S&P, mmb?"

Well, Squire, the "Baby Blues" panel at left in this next S&P 500 futures ("SPOO") version ought stir your wannabe surfer-dude instincts, a terrific wave having just crested there. With the Spoo presently at 2013, at right are its overhead resistors. In fact, a noted maverick financial host in answering his own question this past week as to "Why is the stock market going down?", then simply quipped: "Because it's too high", upon which we faced the bedside radio and exclaimed aloud: "Ya think?":

Next week brings us the conclusion of Q3 Earnings Season; a peek at that page via the website shows -- with 2,540 results thus far recorded -- less than 50% as having bettered their Q3 of a year ago. (Is it any wonder our "live" price/earnings ratio for the S&P, even given its "poor" week, is presently 44.6x? Mathematically in the "straight-line" world, a market "correction" of 66% would bring the P/E down to the "acceptable" level of 15x). We've also incoming data on retail inflation, housing starts, New York and Philadelphia economic readings, as well as on "lagging", indeed low, leading indicators. And as Gold lies low, 'tis quite indicative when viewed within...

The Gold Stack
Gold's Value per Dollar Debasement, (from our opening "Scoreboard"): 2570
Gold’s All-Time High: 1923 (06 September 2011)
The Gateway to 2000: 1900+
The Final Frontier: 1800-1900
The Northern Front: 1750-1800
On Maneuvers: 1579-1750
The Floor: 1466-1579
Le Sous-sol: Sub-1466
Base Camp: 1377
Year-to-Date High: 1307
Neverland: The Whiny 1290s
Resistance Band: 1240-1280
The Weekly Parabolic Price to flip Long: 1187
The 300-day Moving Average: 1181
10-Session “volume-weighted” average price magnet: 1100
Trading Resistance: 1087 / 1092 / 1107 / 1118 / 1135
Gold Currently: 1083, (weighted-average trading range per day: 14 points)
Trading Support: 1082
10-Session directional range: down to 1073 (from 1143) = -70 points or -6%
Year-to-Date Low: 1072

Having opened this missive on France, we close it on same with respect to Gold. Its price historically, indeed sadly, has a safe-haven tendency to rise on the heels of despicably barbarous acts; we need only recall the Charlie Hebdo massacre last January, arguably attributable in part to Gold's then rising up somewhat swiftly through the 1200s to 1300. Yesterday's atrocious acts of terrorism notwithstanding, nor counter measures to be taken thereto, we've herein noted Silver's stance as already being overdue for an upside rebound, and along with that for Gold, we'd hope to be in the spirit of mitigating of currency debasement. For at the end of the day as we oft say, Gold too is money. And by our "scoreboard" calculation, at any price sub-2000, given currency proliferation, let alone that of derivatives, Gold continues to be priced at an extraordinarily attractive value.

Bon courage à tous,

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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