first majestic silver

Gold Price’s Wild Unchanged Week

Market Analyst & Author
August 14, 2016

A week ago we presented a graphic depiction of Gold falling $19/oz. in four seconds. Yesterday (Friday) Gold gained $7/oz. in one second, the instantaneous move from 1348 to 1355 in turn gutting the glutinous glorification of the stock market, arguably ruining pre-written rubbish of further rejoicing over record levels, (perhaps even wrecking some writers' weekends). But 'tis to be expected when the truth -- Rotten Retail Sales -- will out, a fact with which one must deal, and chill out.

Yet as Gold's yesterday unfolded into week's end, gone went the robust gain, and then some, per the following two-panel chart of Friday's trade. On the left we've Gold by the second through the release of the zero growth in Retail Sales report, coupled with a deflating Producer Price Index. On the right is the entirety of Friday's trading session, as charted in 30-minute "candle" periods. Gravity won the day:

'Course, we can play a child's backseat summertime game with the numbers, such as to ask, had Gold continued to ascend at the rate of $7/oz. per second, how long would it have taken to eclipse the All-Time High of 1923?

"Wow, mmb, just one minute and 23 seconds later!"

Exactly right, young Squire. But there's a far more serious, probing query that must be asked:

If the "jobs market" is as robust as has been reported these last two months -- a combined creation of 547,000 net new payrolls, which as we stated a week ago was the 12th largest gain in the past 18 years of 218 two-month periods -- how is it that Retail Sales growth did not increase, and moreover, Wholesale Inflation (the PPI) went backward?

The convolution of such economic results is nothing short of stunning. And the same modifier can be applied to the stock market: with Q2 Earnings Season all but in the books, just 54% of some 2,400+ companies have reported better year-over-year bottom lines; which as we're wont to point out means that 46% didn't improve. And yet the stock market just put in record highs across its major indices. Where's this headline: "Stocks Moved Up to Record Levels on Lackluster Earnings and a Faltering Economy"? But then we forget: no longer are such traditional metrics factored into stock market valuation. 10% of the companies that make up the S&P 500 -- the broadest index of this nation's best -- have negative earnings. It doesn't matter. The track of the Economic Barometer -- to which a blind eye seems cast by the rate hike-intending Federal Open Market Committee -- has a sputtering track. It doesn't matter. Combine the two and instead we see headlines such as this from the week just past: "Global stocks hover near 12-month highs ... Wall St at record on economic optimism". Does anybody get it? Here's the track of the Econ Baro (blue line) vs. that of the S&P (red line) from one year ago-to-date:

But wait: we've come across someone who actually may get it, FOMC member Jerome Powell, quoted this past week as saying "The U.S. economy is at increasing risk of becoming trapped in a prolonged phase of slow growth that points to the need for lower interest rates than previously expected." Thank you, Guv'nor Jay. Might you help us fish your other mates out of da Nile? And with respect to all those "jobs" having been created out there -- noting Productivity having slipped for the third consecutive quarter -- are any of these hirees actually working? "What are we supposed to be doing at this job?" ... "Nuthin'. Just stand around and look interested."

Specific to Gold's "wild unchanged week", the wild bit was essentially that of yesterday's volatility as earlier shown; the unchanged bit is as below depicted by the level closing nubs on the two rightmost weekly bars. That also marks two bars in-a-row to which technicians might refer as "hammers", wherein the close for a period is just about on its low and as such is viewed as a bearish signal. However, note too that the parabolic Long blue dots are rising at a rate which ought find them above the purple-bounded 1280-1240 support zone in two week's time: that is of technical import by suggesting the next parabolic flip to Short would find the duration of then red dots to be short-lived. Again, we've also marked 1306 as structural support:

You can next see the same technical safety net as we go to Gold's upward-bending 300-day moving average. Betwixt the same purple lines is a red line also marking the same rising parabolic flip price presently at 1263 from the above graphic, giving the 1280-1240 support zone the appearance of "triple support":

As for how the precious metals are trending, below we've three months-to-date of daily bars for Gold on the left and for Silver on the right. Notice Gold's baby blue dots -- our measure of 21-day linear regression trend consistency -- have been climbing for the last dozen days, whereas those for Silver have been flat. Blame Sister Silver's lacking of upside trend on her industrial metal family member Cousin Copper, who's been in decline for three full weeks; (click on the website's "Market Trends" page and have a gander at Copper's plummeting "Baby Blues" ... ugly!):

And residing near the foot of their respective 10-day Market Profiles are both the yellow metal (left) and white metal (right), making the near-term path of lesser resistance lower, dare we say, given all the overhead trading resistance. The white bars mark yesterday's respective settles:

So given the foregoing, below is how it stacks up for Gold. And should price slide a bit through here, I doubt 'twould be anything over which to worry, rather an opportunity to (per that time-honoured expression), "buy mohhhrrr":

The Gold Stack
Gold's Value per Dollar Debasement, (from our opening "Scoreboard"): 2626
Gold’s All-Time High: 1923 (06 September 2011)
The Gateway to 2000: 1900+
Gold’s All-Time Closing High: 1900 (22 August 2011)
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: also 1377 (06 July)
10-Session directional range: up to 1374 (from 1335) = +39 points or +3%
10-Session “volume-weighted” average price magnet: 1355
Trading Resistance: 1345 / 1352 / 1358 / 1370
Gold Currently: 1342, (expected daily trading range ("EDTR"): 18 points)
Trading Support: 1342
Neverland: The Whiny 1290s
The Weekly Parabolic Price to flip Short: 1263
Support Band: down to 1240 (from 1280)
The 300-Day Moving Average: 1186
Year-to-Date Low: 1061 (04 January)

In closing, some near-term price slippage notwithstanding, we've these several notes, all of which ought be rationalized as Gold Positive:

■ According to the FinTimes, new dough put into exchange-traded funds with global stock market exposure fell 85% in the year's first half, such that the passive investment industry is "in a world of pain"; so don't be passive: go buy some Gold;

■ The Bank of England's bond buying broke down a bit during the week, sending gilts' yields negative and other EuroZone debt returns lower still, along with slowing Q2 growth 'cross much of the continent. But maybe Germany can keep it all upright ... right: go buy some Gold;

■ China's Ex/Im activity for July dropped by more than 'twas expected, however "they" say their economy is stable; don't tell that to Cousin Copper: go buy some Gold;

■ Jerry Haworth's so-called "black swan fund" across the pond there at 36 South is sufficiently armed with long-term options set to pay off upon everything going kaplooie, (technical term). Just as long as the options don't die pre-kaplooie: go buy some Gold;

■ Shall London's $5 trillion bullion market become more exchange-transparent in moving toward a new Gold futures platform? Goldman Sachs gives it a thumbs up, yet JP Morgan a thumbs down. Either way, 'tis said "This gold rally has legs." No argument here: go buy some Gold;

■ Barring your living off the planet, you've all heard, perhaps even endured, that which befell Delta Air Lines computer system last weekend, stemming from a power failure in its hub area of Atlanta. (I like Delta as 'tis the only airline running non-stop flights between New York City and Nice, having acquired that time-saving route from the once iconic Pan Am). So the power goes out where Delta is plugged in, creating international traffic havoc. What if the power goes out where the Internet is plugged in? Further, we may not even know where the Internet is plugged in: go buy some Gold;

■ Lastly we've this from the also "once iconic" Wall Street Journal: "Stocks Hit New Highs, and That Could Be Just the Start ... A troika of stock indexes hit records in tandem for the first time since 1999 ... The question is whether the party is just getting started." Blessed with lineage from the better days of journalistic integrity, such hype has my grandpa rolling about in his grave. "Hear hear" for the First Amendment, but at the WSJ level, given the bazillion danger signs surrounding the stock market, ought they not know better? It'd be nice to read a little responsible writing out there: go buy some Gold.

The new week brings us a good dose of incoming data for the Econ Baro, including metrics on geographic manufacturing conditions, housing, retail inflation, and the lagging measure of leading indicators. Looking back above at the Econ Baro, do you think those indicators will have risen the "expected" +0.4% for July? No. And the week's centerpiece comes Wednesday with the minutes’ release of what the "Fed said" beyond the FOMC's policy statement of 27 July: recall there was no post-policy press conference. Go buy some Gold!

www.deMeadville.com
www.TheGoldUpdate.com

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.


In 1934 President Franklin Delano Roosevelt devalued the dollar by raising the price of gold to $35 per ounce.
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