The Gold Update: The Gold Gauntlet Thrown

12/20/2022

5 minutes read

2022.12.20 11:28

Six weeks have passed since weekly parabolic trend flipped from Short to Long (at 1745 on Nov. 10). And based on the prior ten Long trend follow-through by points, we’ve been remindful throughout that 1900 is possible on this run, whilst duly admitting that the 1800s are structurally resistant.

Gold Scoreboard

With gold having settled this past week yesterday (Friday) at 1803 (price having traded during this trend as high as 1837 on Tuesday), the gauntlet has been thrown by the value-savvy fundamentalists at the skeptically-scheming technicians (and, if you like, the price suppressing scalawags: scandalous!)

As you regular readers ad nauseam know, Gold first touched 1800 a-way back on 18 (appropriate) August 2011 when the U.S. Money Supply (“M2”) was $9.5 trillion; today, it is +124% higher at $21.3 trillion. Thus per our opening Gold Scoreboard, the price today “ought to be” 3689 even as adjusted for the increase in the supply of the yellow metal itself (then 177k tonnes, today 208k tonnes). So as we turn to Gold’s weekly bars, let’s cue the immortal Vince Lombardi again: “What the hell’s goin’ on out there?!?!?”

Weekly Gold Bars & Parabolic Trends

Nonetheless, we’ve three notable takeaways from the above graphic:

The dominant dashed trendline across the chart’s entirety is not only negative, but the price’s current excursion above it is excessive unless the tide truly is turning up;
Looking leftward from the rightmost bar (per your Technical Analysis 101 class) toward the purple-encircled resistance box clearly is indicative of it being challenged right now, success up through which would bring that 1900;
The current blue-dotted parabolic Long trend continues to afford plenty of wiggle room given the noted “flip” level is -128 points below the current price, such that Gold can accommodate some near-term pullback without breaking that uptrend.

“By why think about any pullback at all, mmb?”

A rhetorical question there from Squire, who himself developed our “Nothing Moves in a Straight Line Dept.” But this is why we created a website with unique analytics. To wit via our year ago-to-date Market Value graphic for Gold:

Gold Futures Chart

The upper panel displays the daily closing price of Gold. The smooth grey line running through price is our proprietary valuation for Gold per its daily price movement relative to those that make up the other four primary markets to which we regularly refer as BEGOS: Bond / Euro / Gold / Oil / S&P.

The oscillator in the lower panel is the difference of priceless valuation, which (strictly by this analysis) suggests Gold is at present 66 points “too high” as price and valuation inevitably shall revert toward one another. Thus in this “vacuum”: current price 1803 – valuation gap 66 = 1737. Hardly are we rooting for that, but should it occur near-term, ‘it would not be enough to nix the present weekly parabolic Long trend. Cool, eh?

Let’s look too at the website’s Market Magnets for both Gold left and Silver right from three months ago to date. By this construct, both the yellow and white metals are at present perfectly priced given they’re both essentially on their respective Magnets (the thicker line), the deviation of price from Magnet as shown in the lower panel oscillators:

Gold and Silver Magnet Levels Chart

So: by the weekly parabolic trend, Gold goes higher notwithstanding the resistance of the 1800s; by its BEGOS Market Value, Gold goes lower a bit near-term, and by its Market Magnet, Gold goes nowhere. Where else shall you find such finely-tuned analysis?

Reiteration: regardless of which way the gauntlet is thrown, Gold by currency debasement “ought to be” +124% higher than the present 1803 price right now. For we know historically that the price of Gold always catches up to prior levels of Gold valuation by debasement: and ’tis way overdue to recur, not having happened since 22 June 2012. That is why you own Gold right now!

But let’s stop puffing the chest and go to the rest, beginning with the StateSide Economic Barometer’s suddenly losing its zest. For during this past week, 13 metrics hit the Econ Baro, of which:

Just two were mildly encouraging as (the weekly report that makes economic headlines when there’s nothing else about which to write) declined, as did Import Prices (ex-Oil);
The balance was poor. Notably, December’s New York State Empire Index flipped from positive to negative whilst the Philly Fed Index remained sub-zero. Moreover (or perhaps better stated “More under”) the following metrics all were worse month-over-month: November’s both headline and , the both headline and (slowing inflation a function of the economy also slowing, e.g. “We can’t sell our stuff at these higher prices”), Industrial Production/Capitalization Utilization, Export Prices (ex-Agriculture), the Treasury’s Budget Deficit (e.g., can Janet “Old Yeller” Yellen come up the interest dough), plus a backup in October’s Business Inventories (which for you WestPalmBeachers down there means product ain’t movin’ as fast). Here’s the result of it all (deep breath…):

Economic Barometer

And now everyone is together on three: One… Two… Three… “But the Fed’s gonna keep on raisin’!”

As depicted in the chart: the data to the right of the vertical lavender line is basically for Q4 thus far, which is starting to mitigate the “end of the recession” recovery we had in Q3. Further, for next week’s 14 incoming metrics, only 3 by “consensus” are expected to improve. –> “Got Gold?”

And yet, (courtesy of Dow Jones Newswires), we read that “Investors Grow More Confident of a Soft Landing” and that “Mutual funds and hedge funds are putting money in stocks that would benefit from slowing inflation and falling rates.” We’re not privy to what those “stocks” may be; however, given the “live” price/earnings ratio of the settled Friday at 36.4x with a yield of just 1.682% (vs. 4.163% annualized for the 3-month U.S Treasury return), we’ve no desire to be near any equities, save for “The Golds”. Yet even as the Fed downshifts a gear from +75bp to +50bp, their upside target is higher still? What was that phrase with regard to Powell’s Presser on Wednesday? “Emphasize the pain”? –> “Got Gold?”

Elsewhere as we cue The Ramsey Lewis Trio’s “The In Crowd” from back in ’65, joining the Federal Reserve in the +50bp Club Conga Line are The Bank of England, The European Central Bank, und der Schweizerischen Nationalbank. (Or collectively is that instead — quite literally — “The Hustle”–[Van McCoy and the Soul City Symphony, ’75]?) –> “Got Gold?”

Here we’ve got Gold regaining some linear regression uptrend consistency as shown next on the left in the panel of daily bars from three months ago to date, the blue dots therein getting a bit of a foothold by the day this past week. Similar is the case for Silver on the right. And for both precious metals, notice their respective rightmost bar (Friday) having completed the session near the high trade of the day:

Gold and Silver Daily Bars

As to their 10-day Market Profiles for both Gold (below left) and Silver (below right), prices settled the week of amidships. The good news here, per the denoted key apices, there appears more underlying support than overhead resistance:

Gold and Silver Market Profile