Gold Stays Sedentary Whilst Silver (A Steal!) Skids Senselessly

Market Analyst & Author
December 12, 2021

Without looking... Think quick! What is the price of Gold right now? (HINT: If you read last week's missive, you already know the answer).

"Uhh gee, mmb... in the 1780s?"

Spot-on there, Squire, for the simplest reason that the price of Gold is always in the 1780s. Don't believe it? Feel free to verify the following, (you cannot make this stuff up):

'Twas in the 1780s ten years ago; 'twas in the 1780s ten months ago; 'twas in the 1780s ten weeks ago; 'twas in the 1780s ten days ago; and 'tis today in the 1780s -- 1783 to be precise -- as portrayed in the above Gold Scoreboard. That is just 44% of Gold's Dollar-debased value of 4015, even as honestly-adjusted for the increase in the supply of Gold itself. No kiddin'.

Indeed should Gold have just died, an epitaph of solely "1780" is perfectly apt. "Charles, is this Gold's gravestone?" ... "That, my dear Dysphasia, is a rhetorical question."

For just as the price of Gold was relatively "fixed" post-Issac Newton in the $18-to-$20 range, then again relatively "fixed" post-Bretton Woods in the $34-to-$35 range -- until 1971 upon Richard Nixon nixing such Gold Standard -- today we might say Gold is relatively "fixed" in the 1780s by "The M Word" crowd. Indeed, the "manipulation" motif is gaining more and more mainstream mention of late, the market depth of bids and offers rotating marvelously around 1780 as a centerpiece price. And it never being wrong, the market is what 'tis today: 1780. But broad buying sway can this allay: for Gold remains extraordinarily under-owned, an understatement at that. 'Course, the day to sell your Gold is the day everybody wants it, even at a five-figure price.

But for now, why own a dense, ductile lump of rather incongruous rock when with a mere tap of the mouse one benefits many times over from an increasing array of shiny objects permeating the markets, be they earningless stocks or cryptocrap or even non-fungible tokens? Certainly they make one and all cocksure and feeling fine! (Until suddenly the objects vanish, but we're not supposed to say that).

And how about Sister Silver of late? Hardly does she feel very great. Whilst Gold has been ad nausea sedentary in forever wallowing 'round the 1780s, and more accurately being -3.0% month-over-month, Silver senselessly has skidded -10.9%! Quite obviously, Silver has not been adorned in her precious metals pinstripes. So it must instead be that she is sporting her industrial metal jacket, right? For Cousin Copper clearly must be going over the cliff. But no, 'tisn't. Rather for the same stint, Copper is off but a mere -0.5%. What To Figure, eh? Last week we wrote of market dislocation: Silver has become so dislocated as to have been left naked! Here are the percentage tracks of our BEGOS Markets' metals triumvirate from one month ago-to-date (21 trading days):

Further, guess what just crossed above 80x for its first occurrence since 29 September? Exactly right: the Gold/Silver ratio, which now is 80.3x. Its millennium-to-date average is 66.4x. Thus were Silver today (22.215) priced at the average, she'd in fact be +24.6% higher at 27.690. (Think means regression). Either way, by our math, Silver right now is a steal (!!!)

So as Silver sinks even as Copper remains buoyant -- which makes no sense -- Gold sedentarily sits. In settling out the week yesterday at the aforementioned 1783, price on a points basis traced its narrowest week (since that ending on Valentine's Day 2020) in the last 22 months, and the narrowest week on a percentage basis since that ending nearly two years ago on 22 December 2019. So narrow was last week's trading range that it barely shows as the rightmost nub on the graphic of Gold's weekly bars from one year ago-to-date:

Economically, the past week of incoming metrics were inflation-persistent. There was an upward revision to Q3's Unit Labor Costs along with a downward revision for the quarter's Productivity: that's Classic Stagflation, right there! Too, November's CPI remained stubbornly high with an +0.8% reading, (which for those of you scoring at home is an annualized pace of +9.6% ... are ya gettin' that with all the dough you've got sitting in the bank? Oh right, you put it all in the stock market). October's Trade Deficit backed off from that for September, whilst Consumer Credit eroded and Wholesale Inventories somewhat bloated. December's University of Michigan Sentiment Survey regained the 70 level, but remains below the COVID-era average of 77. Put it all together and the Economic Barometer lost of bit of tether:

With further respect to rising everything ('cept the metals), Dow Jones Newswires during the week ran with "This Inflation Defies the Old Models. Neither supply or demand by itself is increasing prices; it’s an unusual combination of both." True enough: we've tons of money chasing not enough stuff, the cost of which to produce and supply is ever-increasing. This is what happens when the system is flooded with money. Everybody's loaded, so why the heck seek work? Especially given your shiny object investments see you retiring at 35. (Or as a French friend oft texts to us: "So gréat!")

Meanwhile come 21 December (that's Tuesday a week), some 40% of StateSide obligations shan't be payable given the debt ceiling then being reached. "Hey Shinzo, that you? Joe here. Hey listen: we may have to skip that next interest payment. My Janet who? Hello Shinzo? Hey! Are you still there, buddy?" Or something like that. Which leads us to three critical, succinct questions:

¦ "Got Gold?" ¦ "Got Silver?" ¦ "Has the S&P crashed yet?"

Just askin'. In fact speaking of the latter, our "live" S&P 500 price/earnings ratio is now 48.6x, (another of our honest calculations that the FinWorld elects not to perform). In fact, the "in" thing these days is to value a company -- should they not have earnings -- by revenues. (This is referred to as "Dumbing-down beyond stoopid"). For example, we read this past week that such valuation method is apparently touted for a shiny object called "Snowflake". Last year this object's top line was +$592M and its bottom line -$539M, a truly symmetrical snowflake swing of -$1.1B. Moreover, we read (courtesy of NASDAQ) that negative swings are to be again seen in '22, '23 and '24. And snowflakes do melt. (See 2000-2002). Just sayin'.

'Course to be fair, Gold's price as a function of valuation continues to melt. The U.S. money supply continues to rise, yet Gold's price remains hardly wise, (except in the guise to load up on this prize). To wit, our two-panel graphic featuring on the left Gold's daily bars from three months ago-to-date and on the right price's 10-Market Profile. The good news per the "Baby Blues" having just ceased their fall right at the -80% axis is that price's recent freeze in the 1780s may be the consolidative haunch from which to launch. And obviously, those incessant 1780s clearly dominate the Profile:

Silver's like graphic shows both price and the "Baby Blues" (below left) clearly more skittish than Gold, whilst her Profile (below right) sees her singin' the blues. (But grab some Silver whilst you've nuthin' to lose!)

Grab a glimpse too at The Gold Stack:

The Gold Stack
Gold's Value per Dollar Debasement, (from our opening "Scoreboard"): 4015
Gold’s All-Time Intra-Day High: 2089 (07 August 2020)
Gold’s All-Time Closing High: 2075 (06 August 2020)
2021's High: 1963 (06 January)
The Gateway to 2000: 1900+
The 300-Day Moving Average: 1815 and falling
The Final Frontier: 1800-1900
The Northern Front: 1800-1750
Trading Resistance: 1785 / 1795
10-Session “volume-weighted” average price magnet: 1783
Gold Currently: 1783, (expected daily trading range ["EDTR"]: 22 points)
Trading Support: 1777 / 1773
10-Session directional range: down to 1762 (from 1811) = -49 points or -2.7%
On Maneuvers: 1750-1579
The Weekly Parabolic Price to flip Short: 1728
2021's Low: 1673 (08 March)
The Floor: 1579-1466
Le Sous-sol: Sub-1466
The Support Shelf: 1454-1434
Base Camp: 1377
The 1360s Double-Top: 1369 in Apr '18 preceded by 1362 in Sep '17
Neverland: The Whiny 1290s
The Box: 1280-1240

And then there's next week. 15 metrics are scheduled for the Econ Baro. And the mid-week cherry? A policy statement from the Federal Open Market Committee. "Oh no, not again!" Kinda like those radio hits: good or bad, they just keep on comin'! So c'mon and get yourself some Gold, and don't forget the Silver too!

www.deMeadville.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.


A single ounce of gold (about 28 grams) can be stretched into a gold thread 5 miles (8 kilometers) long.
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