first majestic silver

Gold Sets The Tone For The Election Unknown

Market Analyst & Author
November 6, 2016

We were graced this past week from a visit by a great friend/charter reader of The Gold Update. I excitedly grabbed the nearest node on the residence's network of devices, and with a swipe, double-tap and turn of the unit in our guest's direction, said: "Look at this ... this is as pretty as it gets!"

"We're in heaven..."--(Bryan Adams, 83). Admittedly a bit of musical exaggeration there given today's precious metals' prices being but half what they "ought be". But regular readers know the above two-panel graphic showing us the last 21 trading days for Gold on the left and Silver on the right beautifully vindicates our "favoured buy signal" described some two missives prior: when those baby blue dots denoting 21-day linear regression trend consistency begin to curl northward from the -80% level on their respective scales, as 'twas written: "the probability [for price] ... to continue in the new direction is high". Bang. "Baby Blues": we love you.

'Course, what's technically at work here is Gold's 1280-1240 support zone having thus far contained the -8% price pounding (from 1317 to 1243) during October's first five trading days, almost having recovered in full this past week with 1309 trading on Wednesday following the as-expected "do nothing" Federal Open Market Committee policy statement. And to be sure, what's fundamentally at work here is the buying with both fists of Gold and Silver given the incessantly-stated "FEAR" over the U.S. election, (which for you non-Statesiders take place this Tuesday, the networks calling for either a Presidential winner, else "to close to call", at 04:00 G.M.T. Wednesday).

"FEAR" indeed: the S&P 500 has closed down through yesterday (Friday) for nine consecutive sessions, albeit the loss therein has been but -3.1%. We maintain daily records of the S&P going back to 1980, that year being the only other one with a nine-day losing streak; but the loss then was more dire: -9.4%; (never in that overall time frame have there been 10 straight down days). We also maintain that "FEAR" over the election ought pale in comparison to "FEAR" over an overdue -50% correction in the S&P, simply to get it in line with earnings: 'tis sitting out there; so is Gold 2000+.

As for the nation's next President, 'tis been well-established that the Oval Office occupier shall be a Gold positive, our take being either the Clinton Quantitative Easing or the Trump Fed Leadership Dump. As for the "FEAR" of the unknown, or otherwise, let's simplify it, ('specially for you WestPalmBeachers down there).

"I knew this was coming, mmb..."

Now just stay with me Squire, as this directly affects even your vast holdings of Gold over in Amsteg. Specific to the Presidency and Gold, what we know is this: should the Lady win, "FEAR" of the known ought drive Gold up; should the Gentleman win, "FEAR" of the unknown ought drive Gold up. 'Tis therefore in a sense too bad, really, that one cannot vote for them both: 'twould be a double-Gold positive, (albeit both may well claim victory ... and a contested result dragged out for weeks might even rate a triple-Gold positive). All in due time shall Gold and those who it hold be rewarded.

So as Gold sets the tone for the election unknown, we've quite the positive picture here, the weekly bars both having survived and climbed back atop the purple-bounded 1280-1240 support zone in closing out this best week of the last four +2% at 1305. (And yes, George, your dental Gold inlays at $20/oz. are up in value by some 6,425%):

Naturally, the savvy trader, regardless of the Presidential result, shall be wary of "selling the news", which would in turn again test that 1280-1240 support zone. Either way the "FEAR" trade has tracked in classically eloquent fashion vis-à-vis the percentage change in Gold versus that for S&P over the past 21 days (one month):

Now, as noted, the FOMC did meet this past week. In reading through their statement, we found that whilst Mesdames George and Mester were still in favour of nicking the Funds target from the present 0.25%-0.50% zone up to the 0.50%-0.75% zone, former favourer of same, Mr. Rosengren, this time 'round switched back to the "no-go" balance of the group. Naturally, nary a word in the statement inferred anything about political uncertainty, but as we herein penned a week ago, "the fallout following the 08 November election may well find a forgotten Fed having folded and frittering about in the far corner." That stated, Reuters this past week ran with "Warmup begins for the Great U.S. Rate Hike of 2016" whilst a Huff-n-Puff blog queried "Is the Economy Growing Too Fast" ... amusing perceptions from those who don't do the math:

Recall as also noted a week ago, our Q3 gross domestic product grew at an annualized 2.9% pace; but we've since heard that 1.1% of that came from the exportation of soybeans, which of course counts, yet without which would put the number sub-2%. Nonetheless, it still bests the enthusiastically received Q3 GDP growth in the EuroZone of +0.3%, not to mention October joblessness in Germany falling to a "record low" whilst factory growth neared a three-year high: clearly Deutschland is getting energized by all of our soybeans they're eating ... Guten Appetit!

However, the main course sating our appetite is the positioning of the precious metals within their 10-day Market Profiles. And as the following two-panel graphic shows, both Gold (left) and Silver (right) closed out their past two weeks of trading smack on the respective heavily-traded levels of 1305 and 18.40, with underlying support prices as noted. The post-election question is: shall there be a further dessert topping ... or a run down the hallway to the nearest loo?

Regardless, we feel it appropriate to bookend the election with a "before and after" look at the Gold Stack. Thus for this week, 'tis the "before":

The Gold Stack
Gold's Value per Dollar Debasement, (from our opening "Scoreboard"): 2655
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) or 1385 basis the December '16 contract
The Weekly Parabolic Price to flip Long: 1367
10-Session directional range: up to 1309 (from 1260) = +49 points or +4%
Trading Resistance: none (per the 10-day Market Profile)
Gold Currently: 1305, (expected daily trading range ["EDTR"]: 14 points)
Neverland: The Whiny 1290s
Trading Support: 1289 / 1274 / 1270 / 1264
10-Session “volume-weighted” average price magnet: 1284
Support Band: down to 1240 (from 1280)
The 300-Day Moving Average: 1219 and rising
Year-to-Date Low: 1061 (04 January)

In closing, we've these final few notes:

■ As far as we know, most coins have two sides. But coming this March, The Royal Mint, on behalf of Her Majesty's Treasury, will be releasing a new £1 coin ... with 12 sides. A cool move to counter counterfeiting, but even more marvy to use in lieu of dice at the craps table, what? (Yes, of course, 'tis the rim):

■ Down in Dubai, you can bid at auction for your vehicle's license plate number. To wit, one Balwinder Sahni just scored a single digit plate for his Rolls with a winning bid of some $9 million. 'Tis $2 million up from the $7 million he paid last year for the single digit plate on his other Rolls. Makes it easy for the police in a chase, one would suppose.

■ From luxury Rolls to nothin' but Polls: and they are, quite literally, driving some folks to mental overdose. Any why not? Remember 'twas impossible for Brexit to pass? It did, (albeit it appears now to have to pass muster with a rather anti-Brexit Parliament). How about last February's Super Bowl? Remember, 'twas not that Carolina wouldn't win, rather by how much? Denver won. And now according to the American Psychological Association, via a poll by Harris, "52 percent of American adults are coping with high levels of stress brought on by the election", therapists nationwide taking patients' appointments over election anxiety, anger and (of course) "FEAR". What a way to spend one's free cash flow, eh?

One thing about the election is known: the trade in the futures markets Tuesday evening ought be fraught with abrupt moves lacking liquidity this way and that, especially come "It's eleven o'clock on the East Coast and ABC/CBS/CNN/FOX/NBC news projects _______ as the next President-Elect of the United States!" Successful trading in the futures markets oft stems from having an affinity to recognize trend and assess the ebb and flow therein: however, election evening trading shall be more akin to a casino's wee ivory ball bouncing about the roulette wheel, wherein one's friend -- the trend -- is nowhere to be seen; 'tis thus a venue best to avoid. As for our present location here on the left coast, but where for the markets one maintains mid-Atlantic hours, we expect to be media-free in full, blissful repose prior to "The Announcement". For as dear old Dad used to say, "We'll get it outta the paper in morning ... Dewey Wins!"

See you on the other side.

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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