first majestic silver

The "Gold's Stumbles To Complete Q1; The Econ Baro Comes Undone"

Market Analyst & Author
March 31, 2019

■ Gold settled year-end 2018 at 1285;
■ Gold to make the above Scoreboard forecast for 1434 need be +10.6%;
■ Gold on 20 February at 1349 was +5.0%, nearly half the requisite distance;
■ Gold has now settled Q1 of 2019 at 1297;
■ Gold at present is thus +1.0% year-to-date.

"What—Me Worry?" Indeed 'twas just one week ago that we penned "Gold's Short-Lived Short Trend". But then Gold whilst steadying to a bruising right royal Brexit-and-all-else-be-damned kick in the butt went on to settle yesterday (Friday) at the noted 1297 level, a 1.2% loss for the week. But wait, 'tis worse: for as contract volume rolled from April into June, Gold garnered six fat points of premium. Thus Gold's loss for the week was honestly 1.7%, the fifth worst weekly wallop year-over-year.

"It's that dollar strength, mmb..."

Au contraire, Squire frère: the Dollar ain't done squat. It, too, year-to-date is up but 1.3%. Nope. The story thus far for 2019 is to be Long the economically-driven products and avoid the safe haven stuff. And nowhere is that more apparent than in our BEGOS Market standings year-to-date with Black Gold massively leading the pack:

But specifically from the metals perspective, given that Copper is +10.9% and Gold is +1.0%, why in the hell is Silver -3.0%? To be sure, the market is never wrong, but talk about a gross misguidance of valuation perception out there! Dare we employ the most over-used adjective in sports broadcasting, "It's unbelievable!" Well 'tis. Look at the Gold/Silver ratio in our next graphic of the weekly bars: 85.9x! A year or so ago we were tongue-in-cheek considering the far-flung 80s as becoming the norm: now we're beginning to believe it, (were it not so unbelievable). And for those of you lucky enough to be scoring at home, that ratio's average 2001-to-date is 64.1x. Meanwhile as we below see, the now five-week stint of parabolic Short trend is to this point actually appearing comparatively benign, albeit the right-most bar engulfs the entirety of the prior two weeks' trading range. That's life in The Whiny 1290s:

It being month's end 'tis also when we bring up the year-over-year percentage tracks of Gold and several of the most recognized precious metals equities. You'll recall for our end-of-February missive putting Pan American Silver (PAAS) into the mix replacing Goldcorp (GG), the latter imminently expected to be merged into Newmont Mining (NEM). That gives this chart a bit more Silver visibility which shall certainly be so when the precious metals really start getting the strong bid, in turn leveraging the Silver equities right through the top of the graphic. In the interim as the thumb-twiddling continues, here's how they sit today vis-à-vis this date a year ago: Franco-Nevada (FNV) is +9.7%; the VanEck Vectors Gold Miners exchange-traded fund (GDX) is +2.0%; Gold itself is -2.1%; NEM is -8.4%; the Global X Silver Miners exchange-traded fund (SIL) is -14.1%; and PAAS (again last) is -18.0%:

Next from the "Oh By The Way Dept." comes the Economic Barometer, now carving through its 22nd calendar year. And as a warning to those of you with weaker stomachs, this view brings on it a rather cutting note. One of our "Just sayin'" analyses, if you will, but 'tis true. The Baro had a few good inputs during the week, notably a surprising pickup in February's New Home Sales as the month's Personal Income scampered higher as well. And Jan's Trade Deficit was not nearly as poor as feared. But then, too, came some not-so-good inputs, the clear lowlight being the final revision of 2018's Q4 Gross Domestic Product down to a +2.2% pace from the initially revised +2.6% pace. Is that a big deal? For our 83 quarters of GDP data, that change of -0.4% ties for seventh-worst amongst "final" revisions. And yet through it all, what is our "live" reading of the S&P 500's price/earnings ratio? Try 30.9x. And ... we're still watching this ... the amount of money it takes to move the S&P 500 one point we today calculate as $542k; just four months ago 'twas over $900k; the Index today is 2834; the first time it took that same $542k to move the S&P one point was way back at the 1447 level on 21 August 2007. That means the S&P 500 -- today twice as high as 'twas then -- is somehow surviving on the same amount of dough to push it to and fro. Hello! Too rich for our blood. Here's the Baro, note and all:

'Course the youngsters over at Barron's are apparently oblivious to all this. For Tuesday they told us that "The Dow Added 141 Points Because Recession Fears Are Fading." Then come Thursday they said "The Dow Added 92 Points Because We’re Probably Not Ripe for a Recession." And to close out the week they said "The Dow Rose 211 Points Because the Yield Curve Is No Longer Inverted." Just like that.

Let's reprise:  "What—Me Worry?"

Fortunately amongst the knuckleheads there are some nuggets. Outspoken as he can at times be, the sage Dennis Gartman said in Wednesday's wee hours on Bloomy radio that right now "The best place to be is in the bond market; the worst place to be is in the stock market." No argument here, but let's not forget Gold ... and Silver(!)

For which we next turn to their respective charts of daily bars from three months ago-to-date, Gold being on the left with Silver on the right. The tracks of their rising "Baby Blues" which denote the day-by-day consistency of 21-day linear regression trend would normally be suggestive of higher levels still ahead. That said, the dots are fragile should price not straightaway get up off the mat in both cases:

And so to their respective 10-day Market Profiles we go. Gold (at left) has that one trading supporter at 1296. Scramblin' Sister Silver (at right) twice dipped sub-15 on Thursday and Friday and is now trying to at least get a foothold north of 15.05. But get above those overhead resistance clumps -- and in concert with the rising Baby Blues -- the precious metals we have to think ought then be off to new highs for the year. But 'tis like pullin' teeth, and far too often:

'Tis to wrap: and thus it being month's end here again is the Gold Structure by monthly bars since the All-Time High of 1923 on 06 September 2011:

To close, we again bring up the subject of surviving in StateSide retirement on nothing beyond Social Security, for which the average monthly amount is about $1,400, or some $17,000 per year. That would be (according to Gallup) 46% of what the average American spends per year. Indeed you may have read this past week that the Employee Benefit Research Institute estimates 41% of U.S. households headed by someone age 35 to 64 are likely to run out of money in retirement. Thus to avoid the balance of the nation living in tents as do so many here on the streets of San Francisco, there'll be the ever-pressing need to come up with more dough. So spin the Treasury's printing tumblers and watch the price of Gold go!


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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