first majestic silver

Gold's Panning Purports Paranoia

Market Analyst & Author
August 9, 2015

No, not the panning of physical Gold from the cool, fresh downriver waters of a spring or glacially-fed idyllic stream with trout leaping about; rather the published panning of the Precious Metals in general, their no longer being worthy of once-revered valuation, significance and store of real monetary wealth. A mere glance these days down the stacks of stories at even the most respected of Gold websites, let alone those of the FinMedia at large, proclaims to the unenlightened that this is it: the end-game for Gold. 'Tis over.

Not that we ourselves haven't contributed in our own satirical way, this missive of two weeks ago regressing Gold's price from its All-Time closing high (1900 on 22 August 2011) down to zero ("0") by December 2020, whilst extolling throughout the virtues of tungsten. Then a week ago we wrote of Gold's being quoted as "just a metal", only to then further see yesterday (Friday) morning a piece declaring that "Gold isn't a safe haven any more". Really? The age of instant gratification has drawn the blinders over the eyes of our once civil society, its cranial capacity having been shrunk to the size of a smartphone icon.

This four-year abnormal wrinkle, (given Gold's 5000 years of venerable value), being deemed as the yellow metal's finish is nothing short of extraordinary. To be sure, Gold today at 1093 is 43% below its best level ever (1923 on 06 September 2011), achieved during a time when even we cautioned about "price having gotten ahead of itself"; but now to throw the Golden bundle of joy out with the bilge of economic waste water in which so many seem to happily splash about in contentment these days is the quintessential definition of ignorance.

That said -- and you regular readers know of our penchant to apply linear regression to just about anything -- we decided to take a crack at regressing today's punishing pieces on Gold into what we ought see in the ensuing weeks for furtherance of the Gold paranoia. Thus feeding punch-cards into our IBM System/360, it spit out the following few foretelling…soon to appear in Gold stories stacks near you:

■ "Gold's new-found toxicity accelerating global warming"
■ "Banning of 'Goldfinger' forces online streamers to drop it"
■ "Gold wealth tax added to future President Rodham's campaign platform"
■ "Boy in need of exorcism after being shown grandfather's gold coin collection"

Wouldn't surprise us a wit.

And yet, we've this query: has anyone noticed throughout all the reviling rubbish of late in what have been Gold's darkest ever days of journalistic disparagement that the price actually hasn't been going down? Let's stay with the theme of linear regression and bring up the daily bars of the last three months for both Gold on the left and Silver on the right. Why looky there: despite the daily reaming by the FinMedia, the Precious Metals have not only stabilized these last few weeks, but better yet, their "Baby Blues" of linear regression trend consistency are on the rise. Who knew?

As well, amongst all the Golden Gloom out there, we give a refreshing tip of the cap to the "outspoken" Al Edwards over at my old employ "SocGen" for putting out a Gold price target of $9,900/oz. Heck, we'll be happy with just $2,000/oz., moreover ecstatic were price merely to get back in sync with "M2" Money Supply levels (which per our opening scoreboard puts Gold presently at $2,531/oz.). 'Course, then add in the overshoot typical of markets momentously soaring and we ought see price north of $3,000/oz.

"But that is then and this is now, right mmb?"

'Tis so the case, Squire. And as we turn to Gold's weekly bars from one year ago-to-date, were price by year's end simply to reclaim the 1240-1280 resistance zone as bounded by the purple lines, indeed print a weekly bar clear of the upper line (1280) 'twould be quite the cause for celebration. But as you can clearly below see, Gold has to rise almost 100 points from here at 1093 to 1189 just to flip the parabolic Short trend back to Long. (Yet, for those of you lucky enough to be scoring at home, Gold has had five 100+ point weeks since 2008's Black Swan):

And from the "Hope and Patience Dept." in charting Gold logarithmically day-by-day from the turn of the millennium-to-date, the 48% pullback since 2011 appears as but the downside of a gentle swell as price navigates the financial seas toward a more northerly port:

Still, maintaining the Golden Course has hardly been a smooth journey since 2011, weathering the price gutting and the philosophical press pummeling."But you know the darkest hour is always, always just before the dawn" --(David Crosby, '69). But wait, there's more: in spite of quantitative easing having been switched off last autumn, did you know that M2 year-to-date has increased some $440 billion, the weekly linear regression of which is pointing to an all-in 2015 M2 increase of $660 billion? Not everything is reported, nor does everyone do the math.

Which is a fitting segué to once again pairing up the interest rate intentions of the Federal Open Market Committee with the state of our Economic Barometer. You no doubt read this past week of Federal Reserve Bank of Atlanta President Dennis Lockhart stating that "...there is a high bar right now to not acting...", this on the heels of St. Louis Fed President James Bullard having commented that “...we are in good shape...”. Here's the shape of the Econ Baro:

As for the stock market, 'twas merely one month ago that Gold was dancing a perfectly entwined pas de deux with the S&P 500. They since having parted ways has changed the act into a pas de gone. And oh the concern of the stock market's having put in a series of days that were down! Methinx "they've" lost all conception of what "down" is. Watch in the offing for a pas de croix:

We'll wrap it up here with the Precious Metals' 10-day Market Profiles, plus a few quick hits on the way out. Below we've Gold (left) enveloped in a fairly narrow thicket of trading support and resistance spanning between 1085 and 1095, whereas for Sister Silver (right), at 14.80 she is a nice bevy of pips above her 14.65 resistor. Still, "narrow" indeed as we glide toward August's Dog Days ahead of the September Storm:

'Course, much of the globe is already quite financially stormy. The Chinese stock exchanges resemble pogo sticks on steroids. And compared to Gold's aforementioned 43% give-back in recent years, the Athens Stock Exchange gave back 23% in an instant at its reopening last Monday. Not to worry, however, as Greece's Olga "All Good" Gerovasili expects that their bailout deal with international lenders will be completed by mid-month. (She did not go on to say if ensuing bailouts would be quarterly, monthly, weekly, et alialy...)

Meanwhile up in jolly old England, former Bank of England Governor Sir Charles Bean has put forth that the UK’s official statistics methodologies are dated, their having been complied from Great Depression-based modeling. Lord forbid in updating to modern-day Internet modeling that they recount all the beans and find some have gone missing, (let alone their Gold bars)...

Finally, from the "It Comes Around Again Quickly Dept." the National Football League's pre-season kicks off tomorrow (Sunday) with the Pittsburgh Steelers vs. the Minnesota Vikings. And talk about putting the cart before the horse: we're already hearing that 30-second television spots during next February's 50th Super Bowl are going for $50 million a pop. One wonders were the advertisers to invest $50 million in Gold equities today if they'd have those spots paid for come the Big Game, perhaps even being able to buy a whole minute of time given that "The Golds" tend to outpace the metal itself to the upside multi-fold.

Next week is back-loaded with some 11 economic reports alone over Thursday and Friday to weave into the Econ Baro, which as we saw above of its own accord is weaving this way and that. We'll no doubt work it all into next week's 300th consecutive Saturday edition of The Gold Update. So avoid becoming paranoid, stay the Golden Course, (keep an eye on those "Baby Blues"), and see you then!

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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