The Gold Update

The Gold Update: No. 739 – (13 January 2024) – “Gold Biding Time; Bitcoin Prime Time”

by

The Gold Update by Mark Mead Baillie — 739th Edition — Monte-Carlo — 13 January 2024 (published each Saturday) — www.deMeadville.com

“Gold Biding Time; Bitcoin Prime Time“

We directly start with this as culled from the second paragraph penned herein a week ago:

“…But in seeing the Dollar take flight to start this year … along with the Bond’s fresh demise as yields rise, might renewed inflation be taking first prize?  In other words:  what if the Fed instead tightens … surprise!…”

And in that vein, true to form, this past Thursday’s release of the StateSide Consumer Price Index for December posted a +0.3% rise in retail inflation over that recorded for November, in turn increasing the 12-month summation from +3.1% to +3.3%; and should you neither eat nor drive, that for the “Core” rate is now +3.9%.  As we’ve previously mused with respect to the Federal Reserve’s Open Market Committee, perhaps +4% is the new +2%.

Yet fortunately come Friday, the Bureau of Labor Statistics’ ringside timekeeper rang the bell to save the academically forward-looking Producer Price Index.  That registered wholesale inflation as -0.1% December deflation, a number far more in line with November’s “Fed-favoured” Personal Consumption Expenditures Indices; (December’s are due 26 January).

But wait, there’s more:  should we be deflating, evidenced by prices actually falling…

“C’mon, mmb, that never happens…”

…Squire you weren’t around in the early 30s.  But to your point, at the retail level we cannot recall prices in general receding, save for there being a “SALE!”  Why, even the cost here of our preferred Bordeaux is +23% from just a year ago.  No deflation there.

And yet if deflation indeed rears its depressive head, ought the Fed cut rates right now?  Why wait whatsoever for the FOMC’s 31 January Policy Statement?  The Great Greenspan didn’t wait back in January 2001; he exceptionally slashed the FedFunds rate -0.5% astride an earnings-less DotComBomb in freefall.  Might we today similarly see Prescient Powell do same should the earnings-lacking Casino 500 slip into an icy, glacial crevasse?  Our “live” price/earnings ratio for that S&P 500 is now 46.5x, and you ad nauseum know, there ain’t the dough to cover that show, (S&P Market Cap now $41.8T vs. “M2” Money Supply $20.9T).

Further, from the “Oh by the Way Dept.” the 12-month CPI summation for the year 2000 was +3.3% as ’twas just recorded for 2023.  Then following into 2001, the S&P was down as much as -28.4%.  Might we thus see 2001 all over again?  What with so-so earnings, plus a safer and better yield by far in the debt market, ’tis just one of those “stars-are-aligned” things that make us go “hmmm…”

 

However, “hmmm…” also expresses this past week for Gold.  Upon all the inflationary/deflationary dust settling, Gold itself settled the week yesterday (Friday) at 2054, a sleepy net point gain for the five days of +1.  Biding its time, here are Gold’s weekly bars from a year ago-to-date:

Therein, the good news is Gold’s resilience off the week’s low (2017) from the CPI blow, again saved by the bell per the PPI sub-zero.  Still by a whole host of daily mainstream technicals, Gold can be couched at present as rather namby-pamby.  To be sure per the above chart, both the blue-dotted parabolic trend and overall dashed linear regression trend remain positive.  But let’s leap to the less robust daily depiction per our proprietary technicals, notably the last three months-to-date for Gold below left and for Silver below right.  For both precious metals, their respective baby blue dots of regression trend consistency continue to drop, (the old adage of course being “Follow the blues instead of the news, else lose your shoes”).  Here’s the graphic by the daily bars:

That stated, the 10-day precious metals’ Market Profiles are at present supportive of price.  Below for Gold on the left, the 2051-2034 zone looks fairly firm (despite the aforementioned 2017 weekly low), whilst on the right for Sister Silver, that same 23.20 remains her volume-dominant price support.

On to the Economic Barometer, which from its 06 December low has been ratcheting up in recovery.  Specific to this past week’s array of just nine incoming metrics — December’s zany inflation/deflation notwithstanding — we categorize just one as “worse” period-over-period (and yes ’tis boring):  November’s Wholesale Inventories reduced at a slower pace than those for October.  Otherwise, everything’s “Great!” (recall the Baro herein a week ago).  Why, the Monthly Treasure Deficit for December was better than halved from November … so exciting, non?  (Well, maybe not, depending on one’s contextual data source).  Here’s the whole year-over-year picture:

“And now for something completely different” –[Monty Python, ’71].  Rarely do we bring up bits**t…

“Now, now, mmb…”

…yes, Squire, ok, “Bitcoin”.  But it did  take prime time billing this past week in anticipated –and in turn — approval of 11 exchange-traded funds now tradable (including from some high-level names such as Franklin Templeton, Blackrock, and Fidelity).  And whereas with both Gold and the Casino 500 we’ve mathematical extremes vis-à-vis price and valuation (the former priced way too low and the latter way too high), with Bitcoin price is valuation given ’tis something based on nothing beyond a fixed supply.  Reprise:  “The market is never wrong”; ’tis where the traders have placed Bitcoin:  thus ’tis priced right at valuation, pure and simple.  Through transactional growth should Bitcoin gain further acceptance toward supplementing worthless fiat currencies, the price ought materially rise “as time goes by…” –[Herman Hupfeld ’31].

Either way, we decided to take a peek at “The Now” for Bitcoin.  Since the SEC’s cautionary “Gensler Granting” of the ETFs this past Thursday, Wall Street treated Bitcoin as essentially it does “all things” anticipated:  the rumour having been bought, the news then was sold.  ‘Tis depicted here (at left) across the past three months-to-date, the rightmost two days evident of the peak (futs 49,435) and subsequent sell (futs now 43,425).  The “Baby Blues” nicely captured the consistency of the recent run up before pipping down on Friday.  For the present, the strength of the broader trend across the panel is encouraging, however there’s that unfilled gap from 04 December (39,640 to 40,325); still, because Bitcoin spot trades ’round the clock, such unfilled gap may be mere talk.  But not so much mere talk are the S&P futures (at right), the “Baby Blues” therein extending their descent.  “Got stock?”  Sorry to hear that:

Thus there we are for this week as Gold bided its time whilst Bitcoin saw prime time … at least for a bit.  Directionally near-term for Bitcoin, we’re clueless.  Broadly for Gold we’ve no concerns. But for the Casino 500, we’re worried the whole roulette wheel could fly right off the spindle (given we do the earnings — or lack thereof — math).  Regardless with respect to the latter, the children’s writing pool over at the once-mighty Barron’s ran this past week with “Why S&P 500 Pain Could Turn to Gains”.  What pain?  There’s been no S&P pain since the January-October “owie” back in 2022.  Which in turn (save for the brief COVID crash and dash) pales in comparison to the last real pain from the 2007-2009 FinCrisis.  But through generational turnover in today’s “stocks never go down” bubblesphere, this is to where we’ve arrived.  And when the fear sets in that upon selling one’s stock, one might not actually receive the proceeds, the stock market rather than crashing might instead simply shutdown … just a passing thought.

GOT GOLD???

Cheers!

 …m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on “X”:  @deMeadvillePro

The Gold Update: No. 738 – (06 January 2024) – “Gold Stumbles into New Year as the Dollar Gets into Gear”

by

The Gold Update by Mark Mead Baillie — 738th Edition — Monte-Carlo — 06 January 2024 (published each Saturday) — www.deMeadville.com

“Gold Stumbles into New Year as the Dollar Gets into Gear“

The biggest eye-opener for us through the first four trading days of 2024 — a year in which we’ve called for Gold 2375 — is the Dollar’s sudden resilience.  Oh to be sure:  the FinMedia buzz is focused on whether or not the Federal Open Market Committee shall vote to cut its Bank’s Funds Rate come their 20 March Policy Statement, (somewhat shunning that first scheduled for 31 January).

But in seeing the Dollar take flight to start this year — indeed recovering a 10-day losing streak in just the first two days of 2024 — along with the Bond’s fresh demise as yields rise, might renewed inflation be taking first prize?  In other words:  what if the Fed instead tightens … surprise!

Graphically below, ’tis not that noticeable, let alone overwhelming.  But right of the vertical line in commencing 2024, clearly the concerted move is out of the Bond (i.e. yields on the increase) and into the Dollar in what may be deemed as a pro-inflation play, with Gold entangled by conventional wisdom as a “sell”:

Hardly is renewed inflation a firm forecast.  Yet curiously, the Buck and the Bond appear early on as inflation anticipative; and as is our wont to say:  “…the market is never wrong…”

“But as you also always say, mmb, it can be really misvalued…”

True enough, Squire, the two most glaring examples (per our honestly performed math) being the S&P 500 priced +76% above earnings valuation and Gold priced -45% below debasement valuation.  As for “How long has this been going on…” –[Ace, ’74], the S&P’s valuation above mean and Gold’s valuation below same extend back a good dozen years.  “…tick tick tick goes the means reversion clock…”

But as to inflation anticipation:  between now and the Fed’s end-of-January confab, StateSide there’re four key incoming data sets on inflation:  the Consumer Price Index, Producer Price Index, Export/Import Prices, and the “Fed-favoured” Personal Consumption Expenditures Index.  And on this side of the Pond as the year begins, we’re weathering an +8% increase in the cost of our morning café crème/croissant … ouch!

Why?  Because “the club” (oh yes) says ’tis responding to price increases in what it now pays per kilo of coffee.  So we decided to check:  and ICE Coffee futures for March delivery have increased in the last few months by as much as +41% (10 October low to 19 December high).  However, the good news for you caffeine heads out there is Dow Jones Newswires having run yesterday (Friday) with “Eurozone Inflation Rose Less Than Expected, Keeping Rate-Cut Talk on Track” in turn easing our inflative coffee cost concerns … whew!

But as this is not “The Coffee Update”, let’s get on to Gold, which indeed has stumbled thus far into New Year, price having sported its first down week since that ending 08 December in settling yesterday at 2053, albeit a still comfy +84 points above the parabolic trend’s flip-to-Short level at 1969.  And at the foot of this weekly bars graphic we’ve the Gold/Silver ratio now 87.8x, its highest end-of-week level since that ending last 10 March, (the century-to-date average but 67.9x):

As for Gold “awareness”:  if measured by trading range, ’tis not really there, even as price has been fairly firm on balance these past 14 months, (with notable thanks to the BRICS banks).  Still, despite the Gold hype, a public unaware remains the stereotype.  Drawing from the website, the next two-panel graphic displays Gold’s “expected daily trading range” (EDTR) from one year ago-to-date on the left, and the same for the Swiss Franc on the right.  For Gold, expected range from day-to-day is as ’twas a year ago, yet waning.  However for the Swissie, after a year’s worth of range doldrums, clearly of late ’tis back in play, regardless of way.  So beyond banks increasing their Gold shares, it remains that no one else cares:

Meanwhile, looking to find its own way is the Economic Barometer, exemplified by five of the year’s first ten incoming metrics having improved period-over-period … meaning that five did not improve.  Still net-net, December’s job creation and a firm upswing in November’s pace of Factory Orders were enough to bring a New Year boost to the Baro’s first week.  Culling from Friday’s White House statement:  “…2023 was a great year for American workers. The economy created 2.7 million new jobs … more jobs than during any year of the prior Administration…”  ‘Course, not mentioned was that 2023 posted the current administration’s weakest year vis-à-vis job creation, (given 5.1 million in 2021 followed by 4.6 million in 2022).  But far be it from us to rain on the President’s parade; rather, here’s the wayward Baro from one year ago-to-date along with the stratospheric S&P 500 (in red):

‘Course with respect to the S&P, we recall the old adage “As goes January…”, which at least early on is not boding well.  Should you be following the website and/or our “X” feed (@deMeadvillePro), you already know the leading characteristics of the S&P Futures’ “Baby Blues” are suggesting still lower stock prices, certainly underscored by the negative MoneyFlow differential of late.  What this next graphic illustrates is that regardless of time frame (one week, one month, or one quarter), money as regressed into S&P points is flowing out at a pace faster than the decline in the Index itself, and has provably led the decline into New Year:

“So how low would be low, mmb?“

‘Course, none of us know, Squire, and a multitude of measures can be applied.  Here’s one:  a full Golden Ratio retracement between the S&P’s October low of 4104 and the recent not-quite-all-time-high of 4793 would bring us to 4368, a further -7% correction from the current 4697 level.  Or should Q1 Earnings Season net-net show no growth, a reversion to the original “live” price/earnings ratio of 25.4x (at its establishment in January 2013) from such current P/E of 44.7x would elicit an S&P “correction” from here of -43% down to 2669, which would put price back into its growth regression channel had COVID never occurred.  Thus to tie the bow with reference to the aforementioned comment on earnings valuation (just in case you’re scoring at home), 4697 today is +76% above 2669.

Regardless of measure, the straits for the S&P 500 as a single Index remain extremely treacherous:  but until the FinMedia and bullish-beyond-belief analysts own up to the overvaluation, it can remain “Game On!” for the stock market.  For in today’s equities environment, earnings mean nothing … until they again do; (ref:  DotComBomb 2000-2002:  “We don’t need no stinkin’ earnings!”  Oh really?).

Fortunately Gold, given ’tis money, does have meaning as we next turn to the two-panel graphic of the yellow metal’s daily bars from three months ago-to-date at left and 10-day Market Profile at right.  Gold’s “Baby Blues” of trend consistency have of a sudden stalled, suggesting near-term lack of puff for further price rise.  And by the Profile’s labels, this 2051-2074 zone at present determines whether price can instead break higher, else first succumb to a retest of the lower 2000s:

The near-term playbook looks much the same for Silver.  Presently 23.39, were the white metal to slip some more, the broader 23.88 to 21.93 price structure spanning from late October into mid-November appears supportive (below left); more immediately per the Profile (below right), 23.20 appears key to hold:

We opened in musing on inflation:  reporting thereto ranks significant in the first full trading week of 2024 with December’s CPI due Thursday (11 January) followed by the PPI on Friday (12 January).  Shall such metrics renew the inflation scare?  Or instead remain benign over which we’ve nothing to care?  As a great friend and financial colleague remarked over this morning’s inflated coffee:  “This is not going to be an easy year.”  Indeed with valuations so out of whack, it may not be an easy several years.  “Well, ya gotta buy the dip”, they say.  Ok, you go first, Conway.  We’ll hedge with Gold for the Long way!

Cheers!

 …m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter(“X”):  @deMeadvillePro

The Gold Update: No. 737 – (30 December 2023) – “Gold – We Conservatively Forecast 2375 for 2024’s High”

by

The Gold Update by Mark Mead Baillie — 737th Edition — Monte-Carlo — 30 December 2023 (published each Saturday) — www.deMeadville.com

“Gold – We Conservatively Forecast 2375 for 2024’s High“

‘Twas a year ago at this time we opted out of forecasting a high price for Gold in 2023, other than to opine ‘twould make a new All-Time High (above that of 2089 from 07 August 2020), which indeed eventuated at 2152 this past 04 December.  Since then, Gold proceeded to settle the year yesterday (Friday) at 2072.

Opting to not forecast a high for 2023 was simply a function of “Who knows how high ‘twould go…” once the then existing 2089 All-Time High was eclipsed.  To wit, you may recall our tongue-in-cheekedly leaving such prognostication to the “Fibonacci Extension Crowd”.

“So how is it any different this time for 2024, mmb?

Well, dear Squire, we’ve drawn upon our response to that which you herein queried a week ago.  For this time ’round we’ve at least some historical guidance upon which to draw.  To cut to the quick: we demonstrated last week that century-to-date whenever Gold has had a five-day run into Christmas of better than +1.0%, its average maximum price increase (as measured from the settle of the last trading day before Christmas) through the ensuing year is +23.9%.  That average comes from seven qualifying occurrences during 2001 through 2022:  and now for 2023 we’ve an eighth occurrence.  Thus applying that +23.9% average maximum increase to Gold’s 2065 settle this past 22 December would bring 2557 during 2024.

However: because a) we fully comprehend that “average” is not “reality” and more importantly that b) cash management drives at least some degree of capital preservation (which for you WestPalmBeachers down there otherwise means “greed kills”), we’ve decided to lop off one standard deviation of that average, which then conservatively forecasts +15.0% above 2065 — thus 2375 — for 2024’s high.  Anything beyond that is gravy.  Thus from the “Sneak Preview Dept.” the above Gold Scoreboard now highlights next year’s high forecast, which upon being achieved shall be a beautiful thing.

Beautiful too is Gold’s having completed 2023 +13.2% to stand on the BEGOS Markets’ podium, second only to the S&P 500 +24.2%.  (We’re considering from time-to-time re-christening the latter as the “Casino 500”, for clearly as this Investing Age of Stoopid continues to unfold, any consideration of earnings for price valuation has been summarily dismissed; more on that catastrophic catalyst later).  But for the present, here are the Final BEGOS Markets Standings for 2023:

Save for the S&P, the most glaring out-of-sorts pairing therein is Gold’s firm performance versus Silver’s no performance (-0.6%).  At year-end 2022, the Gold/Silver ratio was 75.7x; here at year-end 2023 ’tis 86.2x.  The century-to-date average is now 67.9x, at which ratio (given Gold’s present 2072 level) means Silver instead of being 24.03 today would find it +21% higher at 30.50.  So again for those of you scoring at home:  do not forget the Silver!  As for cellar dweller Oil (-11.4% in settling the year at 71.33):  the percentage price of one barrel of “Black Gold” per one ounce of Gold is a wee 3.4%, the average this century being 6.8%.  “Green” may be popularly great, but do not Oil underestimate.

Specific to our Gold, here are its weekly bars across the entirety of 2023, the present parabolic Long trend now 11 blue dots in duration.  And in pointing toward more in 2024, we anticipate Golden fireworks galore:

Next we broaden the Gold perspective by bringing up the yellow metal’s year-over-year cumulative percentage track along with those of key precious metals’ equity brethren.  Thus as measured from 28 December 2022 through 29 December 2023, we again have Gold itself leading the pack +14%, and then in descending turn:  the VanEck Vectors Gold Miners exchange-traded fund (GDX) +8%, Agnico Eagle Mines (AEM) +5%, the Global X Silver Miners exchange-traded fund (SIL) -1%, Pan American Silver (PAAS) -2%, Newmont (NEM) -13%, and finally Franco-Nevada (FNV) -19%.  So the bottom line here remains the ever-lagging nature of the equities:

As to how ’tis all really going comes the StateSide Economic Barometer.  What we’ve gleaned from the FinMedia is, should you be seated on the left side of the aisle, the economy is doing fantastic; if instead on the right side, ’tis at best spastic.  But because we do the math, the Econ Baro’s net negative bent appears rather drastic.  Indeed, here’s a stat with which you shan’t be provided anywhere else:  of the 590 incoming metrics for the Baro during 2023, 47% improved from period-to-period, 47% worsened, and 6% were static.  (Per the performance by the prognosticators:  17% of the metrics met consensus estimates, 43% were better, and 40% were worse).

“So why then the ‘net negative bent’ as you put it, mmb?

Because, Squire, 30% of all period-to-period readings were then revised lower, whereas only 25% were revised higher, (leaving 45% unrevised).  All-in-all, hardly fantastic, rather more spastic, and bent toward drastic:

‘Course, the red line accompanying the Baro is the afore-dubbed “Casino 500” (has a rather realistic ring, non?)  The Big Roulette wheel through year-end is now 37 consecutive trading days “textbook overbought”, placing it in the 97th percentile of all such overbought conditions across the past 44 years.  As for the aforementioned dismissal of earnings, our “live” price/earnings ratio finished the year at 46.3x:  that is +82% above our first such reading of 25.4x in January 2013.  Similarly from that same month, Bob Shiller’s CAPE has leapt +46% from 22.1x to now 32.3x, and the otherwise “broker-parroted” S&P/DJI version has expanded +53% from 17.3x to now 26.4x.  The annualized all-risk “Casino 500” yield settled the year at 1.466% … the annualized no-risk U.S. three-month dough is at 5.180%. Or in quoting Roger Moore to Gloria Hendry:  “Make your choice.” –[Live and Let Die, ’73]

Still, if living by the website’s Market Trends page, ’tis been hard to be wrong of late given the dying Dollar, the Buck having dumped -6.2% of its Index value high-to-low in the year’s final two months.  Why, the Swiss Franc alone now costs more than $1.20 for the first time (save for its €uro-decoupling one-day spike on 15 January 2015) since 06 September 2011, (that date ringing a bell as ’twas Gold’s 1923 All-Time High which never again was breached until the noted 07 August 2020 date).  But to the point:  with the exception of Silver (sadly), the BEGOS Markets’ grey regression trendlines across the past 21 trading days are all in positive slant, the baby blue dots indicative of the consistency of those trends:

Then zooming in on the precious metals’ 10-day Market Profiles, Gold’s supremacy over Sister Silver is quite clear, the yellow metal settling the year above the Profile’s mid-point, whilst the white metal is below same.  But you already know (courtesy of the “Dept. of Redundancy Dept.”) not to forget the Silver!

So to wrap with Gold this past month having recorded a new All-Time High at 2152 and it now being both month-end as well as year-end, here we’ve the defined Gold Structure chart through the past dozen years, now featuring 2024’s goal of 2375, (conservative, or otherwise):

In transiting through New Year, one wonders how much longer the S&P 500 can withstand trading at nearly double its earnings valuation and Gold at nearly half of its currency debasement valuation.  Ours indeed is to reason why — to seek reversion — for at some point it shall be nigh.  And historically, ’tis always arrived.

But now for the present, ’tis time to imbibe!  Thus from the entire deMeadville crew,  a most Golden New Year to All of You!

Santé !

 …m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter(“X”):  @deMeadvillePro

The Gold Update: No. 736 – (23 December 2023) – “A Great Gift for Gold as It Climbs into Christmas”

by

The Gold Update by Mark Mead Baillie — 736th Edition — Monte-Carlo — 23 December 2023 (published each Saturday) — www.deMeadville.com

“A Great Gift for Gold as It Climbs into Christmas“

You likely shan’t glean this from anywhere else, so here we go.  In this 23rd year of the 21st century, for these past five trading days leading up to Christmas, Gold recorded a net weekly gain of +1.5%, settling yesterday (Friday) at 2065.  For the same five-day stint in past years, percentage gains of better than +1.0% have occurred seven times, which begs the question, courtesy of our good man Squire:

“So then, how well does Gold do the next year, mmb?

The answer is in the following gift box for Gold:

 

Therefore — at least historically so far this century — for the five-day run up to Christmas when price has netted a gain in excess of +1.0%, Gold’s “Average Maximum Gain” at some point through the end of the ensuing year is +23.9%, which from the present 2065 level suggests 2557 during 2024.  ‘Twould be a welcome, healthy step toward the current Gold Scoreboard’s valuation level of 3703.

“But, mmb, that valuation has been over 4000 in past, no?

Yes it absolutely has, Squire.  And ’tis based on Dollar debasement as mildly mitigated by the increase in the supply of Gold itself.  But as many-an-astute reader here knows, the U.S. liquid money supply (“M2”) from 15 April 2022 through today has shrunk from $22.05T to now $20.71T (-6.1%) whilst total Gold tonnage has simultaneously increased from 206,942 to 211,537 (+2.2%).  Such combined effect has thus been serving to reduce the Scoreboard’s valuation of Gold.  ‘Course given — again historically — that Gold’s actual price has eventually reached up to prior high valuation levels, one has much to look forward to by holding/increasing one’s pile.

Piling up too is Gold’s price per the weekly bars from one year ago-to-date, the blue-dotted parabolic Long trend now 10 weeks in length.  The Shorts (should there be any left following their having been all but obliterated two weeks ago) may see the rightmost few bars as “too high” above the positive dashed trendline, such as to warrant a ShortSide shot.  But given our foregoing on price’s firm follow-though upon gains into Christmas, we instead are broadly focused on Gold looking well up into next year … and beyond!

Then from the “(Almost) Everything is Up Because the Dollar is Down Dept.” — which as you know from our purview is due to the FinMedia (the boss) already having instructed the Federal Reserve (the stooge) to cut rates — here we’ve the five primary BEGOS Markets’ respective percentage tracks from one month ago (21 trading days)-to-date.  The Bond having been left for dead in October is clearly the winner whilst in the basement obviously is Oil as in mere years it shan’t be used any more.  “These food containers made out of wind are really cool!”  But we digress…  Here’s the graphic:

Blown down on balance certainly since October, albeit having lately garnered a bounce, is the Economic Barometer.  But did you catch on Thursday the Conference Board’s lagging indicator called “Leading Indicators” for November?  -0.5%, (no surprise as the Econ Baro is always leading such report).  Slipping too were the month’s New Home Sales, December’s Philly Fed Index (which has scored only two positive readings across the last 19 months), and Q3’s Gross Dometic Product getting finalized down a few pips.

Still, Personal Income and Spending both increased their paces during November, and the month’s so-called “Fed-Favoured” Core Personal Consumption Expenditures Index came in again at just a +0.1% pace.  The latter’s 12-month summation is +3.2%, the lowest since that as of April 2021.  Indeed for the Baro’s significant collection of 17 metrics this past week, 10 improved period-over-period.  Thus we’ve this:

And therein note ole St. Nick pointing down at the top of the S&P.  We’ve documented beyond ad nauseam the bazillion reasons for a major S&P correction, (e.g. “Stocks Suicide Mission” from just a week ago).  Further, we witnessed on Wednesday (as tweeted @deMeadvillePro)  a microcosm of how swiftly it can go.  From Friday (15 December) into Wednesday (20 December) the S&P 500 garnered three successive days of “higher highs” … then late-session Wednesday, those three days of gains were gone in just three hours.  Deeper into the numbers:  the pace at which stocks hit downside bids was nine times the pace they’d previously been hitting upside offers.   That is a fear-filled, comparatively monstrous downside pace.  True, it didn’t last long, and the S&P then rather messily tried to recover to close its week.  But it shows us just how thin is the ice on which the S&P is now skating.  Or to cue the popular Yes album from back in ’71: “Fragile” Oh yes, indeed:

We shan’t futher belabour the point of the unconscionably high S&P other than to (yet again) say:  the current “live” P/E is 45.6 (nearly double that of a decade ago); the market cap is $41.6T … the money supply is $20.7T; the yield is 1.479% (all-risk)  … for the U.S. T-Bill ’tis 5.208% (no-risk); and just in case you’re scoring at home, the Index is now 33 consecutive trading days “textbook overbought”.

(Oh, and this too on the off notion that for some silly reason you don’t have protective stops in place:  first S&P futures “limit down” is -7%, then -13%, then -20% … all on the same day).

Funny how through these recent years, broadly speaking the S&P (given unsupportive earnings) trades at double its value whereas Gold (given currency debasement) trades at half its value.  ‘Course, we’ll see who laughs last upon “means reversion”.

As to the “now”, here next is our two-panel display of Gold’s daily bars from three months ago-to-date on the left along with the 10-day Market Profile on the right.  ‘Twould appear Gold’s baby blue dots of trend consistency are nearly halting their fall; and in the Profile, present price appears protected by the 2048 level:

As for the same drill with Silver, her “Baby Blues” (at left) need to apply a bit more brake pressure, with her Profile (at right) indicative of trading support at 24.40 just below her 24.47 weekly settle.  “Hold that line”, Sister Silver!

Thus there we are with but four trading days remaining in 2023.  And as entitled, Gold’s pre-Chirstmas five-day gain at least by historical comparison is a great gift for the yellow metal going into next year.  ‘Course, next week we’ll be here with our wrap for the year and as to how 2024 may well appear.

So with a tip of the cap to our IT crew for voluntarily creating this lovely card from us…

…as they say ’round these parts: “Joyeux Noël !”  And give the gift of Gold!

Cheers!

 …m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter(“X”):  @deMeadvillePro

The Gold Update: No. 735 – (16 December 2023) – “Gold’s Upside Fruition; Stocks’ Suicide Mission”

by

The Gold Update by Mark Mead Baillie — 735th Edition — Monte-Carlo — 16 December 2023 (published each Saturday) — www.deMeadville.com

“Gold’s Upside Fruition; Stocks’ Suicide Mission“

Yes, ’tis The Gold Update, but we’re compelled (as occasionally is our wont) to start with stocks’ suicide mission, given Gold in upside fruition (albeit still vastly undervalued) is doing just fine, thank you very much.

What is with this stock market, eh?  As a great friend (with a long stint at basically the very top of a household-name investment bank … but we’ll maintain anonymity in this case) here recently remarked:  “The stupidest people on Wall Street are the pension fund managers.”

Ya think? Pros and rubes alike are throwing money like Pavlov’s drooling dogs on steroids into an S&P 500 index that is so beyond overvalued, further adjectives escape us.  ‘Course as we’ve tweeted (@deMeadvillePro):  mind the website’s S&P 500 MoneyFlow page to assess if the buying actually has substance.

Still, we hear that apps with names like “Robinhood” allow for incredibly easy stock market access such that everyone’s gonna keep on buying and thus stocks shall only go even higher.  To us that sounds more like being “robbed in the hood” as when the selling starts, the compounding of such shall overwhelm anything Wall Street and the World have ever seen.  Because as you regular readers know:  “The money isn’t there.”

By the numbers:

  • A dozen years ago in 2011, the market capitalization of the S&P 500 exceeded the U.S. liquid “M2” Money Supply by +29%; as of yesterday, that excess is +100%, the market cap now $41.3T versus an M2 of but $20.7T.  (Wanna cause The Crash?  Fax that last sentence over to CNBS for all the rubes watching their boob tubes).

     

  • Per yesterday’s (Friday’s) S&P settle at 4719, ’tis precisely -100 points (or just -2.1%) below the all-time intraday high of 4819 set on 04 Janaury 2022; the current “expected daily trading range” for the S&P is now 34 points, meaning a new all-time high can be reached within 3 trading days, just in time for Christmas.

     

  • The number of consecutive trading days the S&P has been “textbook overbought” (a 44-year concoction of John Bollinger’s Bands, along with Relative Strength and Stochastics) is now 28 which is in the 93rd percentile of all such overbought conditions since the year 1980.
  • Present all-risk S&P 500 annualized dividend yield:  1.475%.  Present no-risk U.S. 3-Month annualized T-Bill yield:  5.225%.  (Why is this so hard to grasp?)  “Because, mmb, T-Bills aren’t gonna double in price…” Just like stock’s can’t get halved, eh Squire?  (‘Preciate the tee-up).
  • The “live” price/earnings ratio of the S&P settled the week at 44.9x; that is essentially double the 66-year average P/E of 22.8x (Shiller “CAPE” into deMeadville post-2012) and +77% up from when our “live” deMeadville version was instituted those 11 years ago at 25.4x:

              

  • Next, too, we’ve the S&P’s 50-year regression channel as plotted from 1973 up to COVID (the red vertical line) from which the channel’s trend is extended-to-date, suggesting the S&P “ought” today be at best sub-3000 rather than the current 4719:

             

By the numbers indeed, the most daunting being lack of price-supportive earnings — and far worse — the lack of money when it all goes wrong.

The good news is:  irrespective of the S&P’s ominous (understatement) overvaluation, the market is never wrong.  The bad news is: the market always reverts to its broadest measures of mean.  And should your use your trusty Pickett slide rule to do such reversion math, an S&P “correction” of -50% wouldn’t be untoward a wit.  We merely await the FinMedia coming up with the catalyst, of which there are a multitude from which to choose, (see our 09 July missive that cited “Stocks’ 10 Crash Catalysts”), or to quote Bill Cowper from away back in 1785:  “Variety is the spice of life”.  And our sense remains “Look Ma!  No Money!” shall be the ultimate crash driver.  The Federal Reserve can then double the money supply to cover what the investment banks cannot credit to you after having sold your stock, the price of Gold at least doubles beyond where it already “ought” be (see the opening Gold Scoreboard), and on we go.

And thus to Gold let’s Go!  In settling this past week at 2034, Gold is -118 points below its 04 December All-Time High of 2152.  Regardless, price just completed its fourth up week of the last five, such fruition from the foresight to be “in” rather than face being fried upon stocks’ suicide.  Here we’ve Gold’s weekly bars from one year ago-to-date, the current parabolic Long trend now nine weeks in duration.  But don’t worry, should you deem that as too long:  the longest such Long trend this century lasted 26 weeks back in 2005, which was preceded by a like 25-week stint in 2004 and later by a 24-week run in 2019.  In fact from the year 2001-to-date, Gold has recorded eight parabolic Long trends of 20 or more weeks.  Which is why we say: “When Gold goes, it Goes!”  To the graphic with Sly we go:

But wait, there’s more:  for can the Economic Barometer also go higher?  Hat-tip Media Research Center in canvassing ABC News to discover that we’re wrong, for President Biden’s economy “is really wonderful” … even as the StateSide Treasury Deficit for November alone rocketed +26% “on higher interest costs”.  Do we again cue BTO’s “You Ain’t Seen Nothing Yet” –[’73]?  How about the month’s core retail inflation increasing from a +0.2% clip in October to now +0.3%?  Fortunately favouring the Fed’s rate cut musings, the New York State Empire Index faceplanted from November’s +9.1 reading to -14.5 for December:  “Smunch!”  Here’s the Econ Baro representing the whole bunch:

All-in-all as to when to cut its Funds rate, the Fed now awaits the go-ahead from the FinMedia, (given the recent paradigm in which they oversee the Fed).  And yet, credit still is due November’s Retail Sales with a month-over-month whirl-round from -0.1% to +0.3% whilst Industrial Production similarly got going from October’s -0.6% sag to bag +0.2% for November.

Meanwhile countering Gold’s post-All-Time-High price drag, both precious metals have resumed showing some swag.  Below we’ve the two-panel graphic of daily bars across the past three-months-to- date for Gold on the left and for Silver on the right.  To be sure, the baby blue dots of the yellow metal’s trend consistency are still slipping, but with less acceleration, whilst those for the white metal have at least paused their fall.  And of course, the broader three-month trend across both panels is obviously up:

Then too we’ve the 10-day Market Profiles for Gold (below left) and for Silver (below right).  Despite Gold’s 164-point trading range these last two weeks, clearly the home of trading volume price consensus is right there at 2047.  And in Silver’s case, same is her 24.15-24.45 zone: 

Time we go to wrap with:

The Gold Stack
Gold’s Value per Dollar Debasement, (from our opening “Scoreboard”):  3704
Gold’s All-Time Intra-Day High:  2152 (04 December 2023)
2023’s High:  2152 (04 December)
Gold’s All-Time Closing High:  2092 (01 December 2023)
The 2000’s Triple-Top:  2089 (07 Aug ’20); 2079 (08 Mar ’22); 2085 (04 May ’23)
Trading Resistance:  2047 / 2087 / 2016
10-Session “volume-weighted” average price magnet:  2042
Gold Currently:  2034, (expected daily trading range [“EDTR”]: 33 points)
Trading Support:  2021 / 2012 / 1997
10-Session directional range:  down to 1988 (from 2152) = -164 points or -7.6%
The Weekly Parabolic Price to flip Short:  1917
The 300-Day Moving Average:  1909 and rising
The Gateway to 2000:  1900+
2023’s Low:  1811 (28 February)
The Final Frontier:  1800-1900
The Northern Front:  1800-1750
On Maneuvers:  1750-1579
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 please do not fall afoul of the following … ’tis coming:

Go with your Gold!

Cheers!

 …m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter(“X”):  @deMeadvillePro

The Gold Update: No. 734 – (09 December 2023) – “Gold-Record’s Calamity; Stocks’ Stark Misfortune-to-Be”

by

The Gold Update by Mark Mead Baillie — 734th Edition — Monte-Carlo — 09 December 2023 (published each Saturday) — www.deMeadville.com

“Gold-Record’s Calamity; Stocks’ Stark Misfortune-to-Be“

British Prime Minister (1874-1880) Benjamin Disraeli is infamously quoted in reference to the leader of Parliament’s Opposition:  “If Gladstone fell into the Thames, that would be a misfortune; and if anybody pulled him out, that, I suppose, would be a calamity.”

And whilst misfortune for the stock market is well overdue to ensue, with respect to Gold, calamity is descriptively apropos following the second consecutive daily record high of 2152 achieved this past Monday (04 December) … following which it all went a bit wobbly, price settling out the week yesterday (Friday) at 2021.

To be sure, a week ago we acknowledged Gold’s “Finally!” having recorded a fresh All-Time High of 2096 on 01 December, a milestone comprehensively missed by the FinMedia.  A watchful reader even wrote to us:  “Nothing in Barron’s or WSJ…”  But then herein penned last week “…new highs in major financial markets tend to draw in the “mo-mo” crowd…” and in turn, Gold on Monday left no doubt in shredding the Shorts all the way up to 2152.  ‘Twas a beautiful thing, albeit then came calamity as highlighted here:

However:  let’s couch calamity in context.  Oh yes, this past Monday’s reversal of -114 points from 2152-to-2038 across just 16 hours ranked as Gold’s fifth-worst same-day high-to-low points plunge century-to-date; but by percentage, such -5.3% intra-day drop ranked only 34th-worst.  Which for you WestPalmBeachers down there means the prior 33 even worse same-day percentage drops all eventually led to All-Time Highs for Gold, (i.e. the trend is your friend given Gold eventually goes all the way back up — and then some — as we just saw.)

Further, Gold’s dominant trends all remain up:  that includes the key 21-day linear regression trend, and as we below see both the year-over-year dashed regression trend along with the rightmost weekly blue-dotted parabolic Long trend, now a healthy eight weeks in duration and accelerating upward:

“But Silver took quite a hit, eh mmb?” 

‘Twas the case, Squire.  Gold’s net fall for the week of -3.4% pales in comparison to Silver’s net -9.9% weekly shellacking, her worst since that ending 14 October 2022.  This in turn blasted the Gold/Silver ratio from 80.8x just a week ago up to now 86.8x.  Fortunately, Sister Silver still has plenty of weekly parabolic Long trend cushion beneath her, present price being 23.29 vs. the flip-to-Short level now 21.07.

Speaking of taking a hit, you regular readers and website followers have witnessed that taken of late by the Economic Barometer.  So much so that the now-defunct Funkin’ Waggnalls might have defined “straight down” as “The Econ Baro”.

But the Baro did get a bit of a boost on Friday from better payrolls data for November:  net job creation beat both “expectations” as well as the October increase; the pace of Hourly Earnings doubled from +0.2% to +0.4%; the Average Workweek grew; and the Unemployment Rate fell by -0.2% from 3.9% to 3.7%.  

Now a month-over-month drop of -0.2% in Unemployment may not seem like much, but ’twas the second-best monthly improvement since the April 2022 reading.  ‘Course the ADP Employment data actually worsened for November, (but Labor’s data survey is better, depending upon “who’s in office”, right?).  Then how about that University of Michigan “Go Blue!” Sentiment Survey:  from November’s 61.3 to 69.4 for December!  And The Wolverines are ranked Number One in StateSide collegiate football!  How great a picture is this?  (Well, maybe not…).  We’ll see what the Federal Reserve’s Open Market Committee has to say next Wednesday (13 December):

Thus we’ve covered calamity following Gold’s record high — and to an ongoing extent — same for the above Econ Baro.  But what about (as entitled) misfortune-to-be for the stock market?  After all the FinMedia appears all-in for an S&P 500 record high (above 4819 vs. the current 4608 level).  To wit, Dow Jones Newswires just reported “The VIX says stocks are ‘reliably in a bull market’ heading into 2024…”  So clearly no one has done the math as to the stock market’s usual demise when the VIX is this low (12.35 at Friday’s settle).  And yet by the website’s S&P 500 menu, we’ve still yet to see any true “fear” in the MoneyFlow, even as we tweeted so (@deMeadvillePro) this past Tuesday.

Further, we’ve herein on occasion enumerated a number of factors continuing to be present for it all to go wrong for stocks, notably the ongoing lack of earnings support.  Yet as a long-time reader wrote in this past week:  “It hasn’t been about EPS for a long time. It’s all about stock price.”   And we comprehensively agree.  That is because “It’s different this time” … just as ’tis always been different prior to every one of the stock market’s true crashes; (e.g. in our lifetime:  27 August 1987, 24 March 2000, 11 October 2007, and 19 February 2020, not to mention the myriad of other double-digit “corrections” therein).  Imagine the 38 roulette slots (or 37 here in Europe) having their numbers replaced with S&P 500 constituent symbols.  “Half on NVDA and half on AMZN!”  … “Le jeux sont FAIT, Monsieur, rien ne va PLUS!”  That’s where we are today.

Not to belabour the point, but we have a question.  What are companies such as Advanced Micro Devices (AMD, p/e 1,003.3x), Ceridian HCM (CDAY, p/e 2,593.4x), Ventas (VTR, p/e 3,593.8x) et alia even doing in the S&P 500?  How about the Index’s 34 constituents not even making money?  Reprise the late, great Vince Lombardi:  “What the hell’s goin’ on out there?!?!?” (Friendly reminder:  US liquid Money Supply [“M2”] now $20.7T; S&P 500 market capitalization now $40.2T; have a nice day).

Stark misfortune-to-be, indeed.  By any historical yardstick, the is S&P is so significantly overstretched ’tis stunning that it hasn’t yet steeply succumbed.  But until it does — and ’twill — as is our wont to say, the Investing Age of Stoopid merrily rolls on its way.

Meanwhile not so merrily rolling downward this past week were the precious metals.  First to Gold’s two-panel graphic of the daily bars from three months ago-to-date on the left and 10-day Market Profile on the right.  Earlier we mentioned Gold’s key 21-day linear regression trend as being up, which ’tis; however, its baby blue dots of trend “consistency” are just now kinking over to the downside, suggestive of still lower prices near term.  Yet by pricing structure, we don’t see too much further damage beyond the present 2021 level down to 1975.  But by the Profile for now, the mid-2040s clearly show as trading volume resistance:

Similar is Silver’s two-panel slate.  Her “Baby Blues” (at left) already have departed below their key +80% axis; price presently as noted at 23.29, her safety support structure ranges from 23.88 down to 21.93.  ‘Course by her Profile (at right), Sister Silver hardly is the happiest camper:

We’ll close it here with another FinMedia bemusement.  The once-mighty now ratings-floundering CNN ran on Gold’s record-high Monday with:  “Gold has never been this expensive.”  With all due respect to the network’s writers and editorial staff, Gold remains extraordinarily cheap.  “Expensive” was back in 2011 when Gold’s price growth was outpacing U.S. Dollar debasement, (recall our then writing about “Gold having gotten ahead of itself”).  But for the chump news-droolers out there, the price of Gold last Monday reached its highest level ever at 2152 … yet valued today at 3705, Gold is cheap!  What’s inanely “expensive” (understatement) is the stock market.  And thus we wrap with this favourite graphic:

Stay with your Gold!

Cheers!

 …m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter(“X”):  @deMeadvillePro

The Gold Update: No. 733 – (02 December 2023) – “Gold: Finally!”

by

The Gold Update by Mark Mead Baillie — 733rd Edition — Monte-Carlo — 02 December 2023 (published each Saturday) — www.deMeadville.com

“Gold:  Finally!“

If you caught last Tuesday’s tweet (@deMeadvillePro, Gold then 2042) you saw where this was going:  “Santa clearly is contemplating a new all-time Gold high by Christmas. ‘Twould be 2075 spot a/o 2089 FebFuts. (On verra…)” 

And so for Gold, as the expression goes, “Santa came early this year.”  In settling the week yesterday (Friday) at 2092, February Gold (the current “front month”) en route traded to as high as 2096, +7 points above the prior “front month” 2089 All-Time High that had been in place since 07 August 2020.  Spot Gold, too, exceeded its prior All-Time High of 2074 in trading as high as 2076.  Finally!  ‘Tis a beautiful thing.

‘Course, you astute readers of The Gold Update fully realize that this year we did not forecast a specific high price, (which for you WestPalmBeachers down there is why the above Gold Scoreboard has stated “No Forecast” throughout 2023).  Nonetheless, early in the year we expressed our anticipation of Gold by year-end at least achieving a new All-Time High: “Whoomp! (There It Is)” –[Tag Team, ’93]

To wit, as herein penned back on New Year’s Day:  “…how do we forecast a high for 2023? Linearly we don’t … as for uncharted territory above Gold’s All-Time High (2089 of 07 August 2020) that’s for the Fibonacci-obsessed.”  

True, we from time-to-time dabble in “fib retracement” for establishing trading targets.  However, we avoid the Sybilistic art of future “fib extension”:  for us ’tis too Timothy Leary, to whom President Nixon in ’70 purportedly referred as “the most dangerous man in America”, (only to then to nix the Gold standard a year later).  That from the “Now Look Who’s Talkin’ Dept.” … but we digress.

Given Gold’s fresh All-Time High is finally in hand, let’s take a realistic crack at “How high from here?” for the yellow metal.  After all, new highs in major financial markets tend to draw in the “mo-mo” crowd, albeit for Gold, its notorious triple top across the past three years ain’t drawn squat.  And let’s be honest:  Gold’s new high at present is marginal at best.

“But it’s only been one day, mmb…” 

‘Twouldn’t be a landmark missive without our beloved Squire.  Still, such marginal high can cue the Gold Shorts, which from the “Party Pooper Dept.” may swiftly remind us that following the aforementioned 2089 high came the 2079 high on 08 March 2022 and then the 2085 high this past 04 May.  Thus in the Shorts’ words, “There’s nothing to see here” in their anticipation of it again all going wrong for Gold.

Yet as we’ve oft quipped of late, “triple tops are meant to be broken”.  And marginally or otherwise, that just happened.  Moreover as herein penned one week ago regarding December’s monthly net changes:  “…the last six [have been]:  +2.6%, +4.5%, +3.4%, +6.4%, +2.9% and +3.8% from 2017 through 2022 respectively…”  That is an average net December change of +3.9%, which from November’s 2056 futures settle would bring 2136 by New Year.

But wait, there’s optimistically more.  Century-to-date Gold has recorded 5,767 trading days, 252 of which have elicited All-Time Highs.  Now obviously it doesn’t “feel” like Gold averages a new high every 23 trading days:  indeed therein the standard deviation is 155 days, the longest stint between All-Time Highs being 2,237 days from 06 September 2011 to 27 July 2020 (whew!) even as the U.S. Money Supply (“M2”) simultaneously increased +90.2% (whoa!)

Nevertheless to our point:  for those 252 All-Time High days, the average maximum increase in the price of Gold within the enusing three months is +8.9%; or if you prefer, the median maximum price increase is +7.9%.  Either way, “in that vacuum” from the present 2092 level would put Gold in the 2257-2278 range by February’s end, (just in case you’re scoring at home).  ‘Course, hardly is “average” reality, but it at least gives us some measure of reasonable upside guidance for Gold through these next three months.

Of greater import however is that Gold’s new high remains peanuts vis-à-vis its currency debasement valuation, depicted in the opening Scoreboard as now 3707, i.e. +77% above here, even accounting for the increase in the supply of Gold itself.  Which got us to question:  how long does it typically take for the price of Gold to double?  Here’s the answer from one price’s “century mark” to the next:

Thus discounting that most recent long 12.4-year stint, Gold from the year 2002 has doubled in value on average every 3.7 years, (inclusive of the above table’s overlapping periods).  So to achieve that 3707 valuation level in four years’ time is not unrealistic a wit.  Which of course begs another question:  will there even be a U.S. Dollar in four years’ time?  Our coy answer:  ’tis oft said “Gold has been money for 5,000 years”; the disintegrating Federal Reserve Note just 109 years.  Poof!

But there’s no poofing nor pooh-poohing Gold’s fresh All-Time High.  To all those fellow “analysts” just some months ago calling for Gold Shorts down toward 1500-1100, here we are instead at 2092 per the following chart of Gold’s weekly bars and parabolic trends.  So do not be that guy:

Neither let us forget Silver.  Severely lagging Gold of late, Silver’s weekly parabolic trend only just confirmed flipping from Short to Long per yesterday’s 25.90 settle, (Gold’s Long trend having been in place now through seven weeks).  And unlike Gold being at its All-Time High, Silver is -47.9% below her All-Time High of 49.82 established away back on 25 April 2011.  Again:  do not forget Sister Silver!

Looking ever more forgettable however is the StateSide Economic Barometer.  It’s one-month (21 trading days) plunge from 02 November through yesterday is the most since 27 May 2022, following which the S&P 500 fell -11.8% from 4158 to 3667 in just 13 trading days.  That being an exception, as we’ve otherwise acknowledged since COVID, the good news is the S&P no longer follows the Econ Baro, so again “There’s nothing to see here.”  See for yourself:

Indeed, of the 49 metrics that have come into the Baro across the past 21 trading days, just 16 improved period-over-period.  It thus appears the Fed is well enroute to successfully attaining its slow-growth goal … but given FedChair Powell’s commentary yesterday, they apparently don’t know it (yet).

As for the “we never go down” S&P 500, it has displaced Gold in leading the BEGOS Markets’ percentage changes year-to-date as we go to the standings with 11 months plus one trading day in the books; both the yellow and white metals round out the present podium: 

And specific to the S&P 500, we wrote this past week to a fine friend and colleague as follows:  “…S&P is ridiculously overbought and horribly overvalued … The set up [for a crash] clearly is there … but of course, ‘tis different this time (right?)…”

‘Tis ad nauseum for you regular readers, but we’ll keep pounding the table on this:

  • The “live” P/E of the S&P per Friday’s close is 42.6x (don’t argue; do the math);
  • The average “live” P/E of the top 50 cap-weighted S&P constituents is 52.6x;
  • The S&P is now “textbook overbought” through 18 consecutive trading days;
  • The S&P’s all-to-risk yield is 1.528%; that of the risk-free US three-month T-Bill is 5.215%;
  • The Q3 S&P Earnings Season ranks only 12th of the past 26 for bottom-line improvement;
  • The S&P “sans COVID” by 50-year regression would today be about 2900, not 4595.

Got stocks?  Scary, really, really scary!

The exception of course is if you’ve precious metals’ stocks, the following graphic suggesting their being well undervalued vis-à-vis Gold itself, even as it too remains debasedly undervalued.  Again it being month-end plus a day, here are the year-over-year percentage tracks of those key metals equities from worst-to-first:   Franco-Nevada (FNV) -23%, Newmont (NEM) -13%, both Pan American Silver (PAAS) and the Global X Silver Miners exchange-traded fund (SIL) -1%, Agnico Eagle Mines (AEM) +8%, the VanEck Vectors Gold Miners exchange-traded fund (GDX) +10%, and Gold itself +17%.  And in the perfect Equities/Gold leveraged world, Gold “ought be” the lowest rather than highest line on this graphic:

Got metals stocks?  Merry, really, really merry!

Further, if you’ve been long any of the BEGOS Components across at least the past month — again save for Oil — the rising tide of inflation has been lifting all boats.  Here we’ve their respective bars and diagonal trendlines for the past 21 trading days, the consistency of those trends as depicted by the baby blue dots.  Note for the Euro the “Baby Blues” suggesting lower levels ahead:

Next we’ve the 10-day Market Profiles for record-high Gold on the left and Silver on the right.  The denoted bars are those with the greatest volume-traded support from 17 November through yesterday:

Naturally it being month-end plus a December day, here is Gold’s Structure by the monthly bars for the past 12 years.  And yes, Virginia, just as there is a Santa Claus, so too as noted are triple tops meant to be broken.  Et voilà.  Thus in turn Gold is at an“All Time High” –[Rita Coolidge, ’83]:

To wrap this rather epic edition of The Gold Update, “We have breaking news…”

“Bring it on, mmb…” 

Thank you, Squire.  Direct from the “We’re Completely Gobsmacked Dept.” here ’tis:

Last evening we were all eyes on Gold when at precisely 18:28 GMT price recorded the new All-Time High of 2089.3, surpassing 2089.2 which as you well-know had been in place as the prior high since 07 August 2020. Some three-and-one-half hours later at 22:00 GMT price settled also at an All-Time Closing High of 2091.7.

Curious as to how our FinMedia friends would portray this great event, we went to Bloomy’s home page, obviously expecting it to be the lead story.  But it wasn’t there.  Worse, it was no where to be found their home page!  So we instead zoomed over to Dow Jones Newswires’ Marketwatch home page.  It must be at the top, right?  Wrong!  Rather, the lead stories were on “The Dow”, “Bitcoin” and “GameStop”.  Where is the Gold story?  We enabled a MW home page search for “Gold”:  first find was Goldman; second find was again Goldman; third find was “Gold” … buried deep down the page amongst the “click-bait” ads for chumps, with the barest of mention of the new high.

But we really and truly learned something from this:  Gold now is of no material media importance whatsoever.  Who cares, right?  The sad part is:  when they finally figure it out (upon everyone morphing from marked-to-market millionaires to marked-to-reality impoverisheds) ’twill be too late.

Still, perhaps the late Leary would have gotten it:

“But his was of the Acapulco type, mmb…” 

Likely the case there, Squire.  As for the real thing, ’tis at an All-Time High and yet it remains unspeakably undervalued.  That’s really all you need to know.

Got Gold?  Got Silver?  Got a wealth-preserved Future!

Cheers!

 …m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter(“X”):  @deMeadvillePro

The Gold Update: No. 732 – (25 November 2023) – “Basking Under Gold”

by

The Gold Update by Mark Mead Baillie — 732nd Edition — Cortona — 25 November 2023 (published each Saturday) — www.deMeadville.com

“Basking Under Gold“

Greetings from under the Tuscan sun.  Here in Cortona, recorded history dates all the way back to the Etruscans in the 8th century BC, (which for you WestPalmBeachers down there is some 2,900 years ago).  And in those days, Gold was employed in wire form toward implanting teeth as “dentures” from animals into those locals having lost same.  ‘Course, ‘twould not be until 1252 AD that Gold as an internationally-recognized currency would appear, namely as the fiorino (or Golden Florin), following which (dare we say) “the rest is history”.

As for the rest of this week’s edition of The Gold Update, as noted in the prior wrap ’twill be brief given our being in motion:  “… just straight to the point with a salient graphic or two along with our view…”  And what we’re viewing for Gold looks quite positive as we go to its weekly bars from one year ago-to-date:

Through Gold’s 47 trading weeks so far in 2023, yesterday’s (Friday’s) closing price of 2004 ranks as the year’s sixth-highest weekly settle.  However, the sticky area across the five better settles is the tight price range of 2016-2025.  Thus the Gold Short may smugly say:  “We’ve been here before, so there ain’t no more.”

Regardless, given Gold’s weekly trading range now being 53 points, ‘twouldn’t be untoward to find Gold reach 2057 within one week’s time.  Again, any weekly close above 2025 would be ample territory to then test the year’s 2085 high (04 May ’23), and further the All-Time 2089 High (07 August ’20):  the latter is just +4.2% above today’s 2004 level.

Moreover in looking toward next month, 26 of the past 48 Decembers have been net positive for Gold, including each of the last six:  +2.6%, +4.5%, +3.4%, +6.4%, +2.9% and +3.8% from 2017 through 2022 respectively.  Whilst Smart Alec might thus say “Down then”; our preference rather is “December’s trend is our friend.”

And toward closing, the Economic Barometer’s fallout suggests upside Gold will out should the Fed stew and pout:

So there we are ever so briefly — yet hopefully saliently — for this week.  Mind too your favourite Gold information at the website:  simple select “Gold” under the BEGOS Markets menu and all the price-leading information is there:  Gold’s Market Value, Trend, Profile, Magnet, Range, and the currently-highlighted Market Rhythm featuring the 12-hour parabolic study.  We’ll therefore see you in a week’s time with the usual graphics-rich end-of-month edition.  Until then:

Bask under your Gold!

Cheers!

 …m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter(“X”):  @deMeadvillePro

The Gold Update: No. 731 – (18 November 2023) – “Gold Pops as Inflation Stops and the Economy Flops”

by

The Gold Update by Mark Mead Baillie — 731st Edition — Monte-Carlo — 18 November 2023 (published each Saturday) — www.deMeadville.com

“Gold Pops as Inflation Stops and the Economy Flops“

Some 40 years ago per advertising billboards for the evening blatt known as the San Francisco Examiner:  “A lot can happen between 9 and 5”.  And relative to just this past week, ’tis perfectly analogous to the state of Gold, Inflation and the Economy:  “A lot can happen between Monday and Friday”.  To wit for the week:

  • Gold above support spritely popped;
  • Inflation (FinMedia’s take) abruptly stopped;
  • The StateSide economy frightfully flopped.

Just like that.  “Who knew?”

Perhaps our neighbour knew in walking past us mid-week with just a single word uttered our way:  “3000”.

Great to hear some Gold awareness there, even as price settled the week yesterday (Friday) at 1984.  Yet per the above Gold Scoreboard, the yellow metal’s Dollar debasement value is 3704.  At least somebody’s paying attention.

Or (oui, c’est ‘Gold’ en français):  was the utterance of “3000” instead a reference to valuing the S&P 500, itself now 4514?  The inevitable reversion of the Index’s honestly calculated price/earnings ratio (43.8x “live”) to our historical 66-year mean (22.7x incorporating Bob Shiller’s CAPE pre-2013) brings the S&P well sub-3000.  Further, we’ve on occasion herein graphically depicted that were it not for the massive monetary infusion to counter COVID, the S&P by our 50-year regression channel would today be in the high 2000s, a level otherwise gratefully accepted by the investing community had there been no pandemic monetary response.  Just a few things to make one go “hmmm…”

Regardless, let’s break down Gold’s pop, inflation’s stop, and the economy’s flop.

Gold’s pop:  per the opening bullet point, this past week saw Gold pop back and settle above the green 1980-1922 support zone, price as noted now 1984, the week’s high en route being 1996 (i.e. just 93 points below the 07 August 2020 All-Time High of 2089).  To Gold’s weekly bars from one year ago-to-date we go, the blue-dotted parabolic Long trend firmly in place with a lot of underlying safe space:

Moreover, we see by Gold’s monthly bars a Moneyflow “Buy” signal:  whilst not a formal recommendation, ’tis worth consideration.  The following chart shows a wee chap at lower right extolling said signal.  This is because the green Moneyflow track has crossed above the double-center line.  Across the past 28 calendar years, this up-cross has occurred 11 times.  The average maximum points follow-through is +264, but with this warning:  three of the past four such Long signals have garnered at most +50 points of additional gain … just in case you’re scoring at home.  For at the end of the day as we always say:  “Cash management is everything.”  But worth an awareness view here:

Inflation’s stop:  In concert with October’s retail inflation having come to a halt (the Consumer Price Index registering “unch”) whilst recording wholesale deflation (the Producer Price Index registering -0.5%), our FinMedia friends swiftly declared the Federal Reserve’s interest rate hikes as having come a conclusion, with cuts commencing next year.  And as you regular readers recall, our missive’s wrap two weeks back described the FinMedia’s essentially running the Fed.  So there we go.  Or do we?  

As ’tis our penchant to actually do the math, we came up with the following three-panel graphic of monthly “headline” inflation reports from a year ago-to-date; (note at right the Personal Consumption Expenditures report lags the PPI and CPI by one reporting month).  Our focus for each panel is the directional slope of the respective dashed regression trendlines.  Again:  “hmmm…”  For both the PPI and CPI, their slopes are rising; and their October figures are quite the deviations from the trendlines. This can imply a snap-back to the upside come the November numbers.  Too, the “core” measures (not displayed) for October are:  PPI “unch”, CPI +0.2%, and for September’s so-called “Fed-favoured” PCE +0.3%.  Let’s see with all three panels identically scaled:

Economy’s flop:  The following bit is not for the weak-of-stomach crowd; thus gird one’s loins as necessary.  Our StateSide Economic Barometer this past week got summarily skewered, as tweeted (@deMeadvillePro) Thursday evening.  Now here’s the picture from one year ago-to-date, the S&P (red line) ignoring overvaluation as the “bad news is good news” illogicity continues:

And specific to “good news”, as we’ve noted since COVID, the Econ Baro doesn’t lead the stock market as it did during the prior 22 years from 1998 into 2020.  ‘Course, the monetary injection post-Covid essentially equaled the increase in the market capitalization of the S&P 500, and we’ve thus been awash in liquidity ever since, (hat-tip “The Market Never Goes Down Dept.”)  Why, not even Moody’s — a week ago citing that U.S. credit risk “…may no longer be fully offset by the sovereign’s unique credit strengths…” — can stop the stampeding S&P. 

“But still, mmb, that’s a really big drop in the Baro…” 

‘Tis a most material drop indeed, Squire.  Since the Econ Baro’s inception back in ’98, there have been just nine other drops of this magnitude across a 12-trading day span.  All have led to fairly imminent — however not always overwhelming — price declines in the S&P.  That stated, the most recent such Baro decline occurred just over a year ago as of 22 May 2022;  then come 17 June (just 14 trading days hence), the S&P had fallen -521 points (-12.5%).  Whether that repeats — with FinMedia missives now suggesting a record S&P high is nigh (i.e. above the 4819 level achieved on 04 January 2022) — depends upon the investing whims of news followers vs. math doers.  Neither overlook that the U.S. “riskless” Three-Month T-Bill still yields an annualized 5.233% per Friday’s settle.  On verra…

Either way, at this writing the S&P 500 is “extremely textbook overbought” (based on our concoction of John Bollinger’s Bands, along with standardized Relative Strength and Stochastics) and the S&P 500 futures settled yesterday +229 points above their smooth valuation line (per the website’s Market Values page).  Too is the S&P’s aforementioned “live” P/E of 43.8x.  Recall the P/E as the S&P topped pre-DotComBomb back in March 2000?  43.2x.  Today ’tis one perpetually scary/expensive stock market.  And with Q3 Earnings Season having just ended, in collecting bottom lines for 1,860 companies, only 51% improved year-over-year.  Specific therein to 446 S&P constituents, 64% improved … but given “It’s the S&P”, should not 100% have improved?  What shall the next spin of the wheel reveal?  “Les jeux sont faits; rien ne va plus…”

Meanwhile, the next special graphic of the precious metals is our two-panel view featuring Gold’s daily bars from the last three months ago-to-date on the left and likewise for Silver on the right.  Of note are Gold’s “Baby Blues” of trend consistency having actually gone negative whilst price has risen.  This is because the 21-day red trendline has rotated to negative; we oft quip “follow the blues”, however in this case given the positive pricing track for Gold, we’re not really looking for much downside.  Indeed for Silver, her red trendline has rotated from negative to flat, hence her rightmost baby blue dot sitting on the 0% axis.  Also as penned in the Prescient Commentary this past Thursday:  “…Silver’s daily Parabolics flipped to Long effective today’s open (23.510): the average maximum follow-though of the past 10 such studies (either Long or Short) is 1.695 points…”  Therefore with respect to Gold and Silver, leave any silly Shorting ideas to Smart Alec:

As to the 10-day Market Profiles which denote prices at the most robust levels of volume, both panels below look healthy for Gold at left and Silver at right.  In fact for the white metal, her +6.6% gain for this past week (vs. +2.1% for the yellow metal) served to reduce the Gold/Silver ratio from 87.1x to 83.4x.  Still, the century-to-date ratio is 67.9x, leaving Sister Silver plenty of room to outperform Gold on the upside:

In sum, Gold again has a chance to go for an All-Time High.  The S&P by any and all rights is due for a dive (understatement).  And certainly both “ought be” similarly priced right ’round “3000” … at least if you do the math.  (What a rare concept, eh?) 

We’ll close it here with this logistical note:

Next week’s 732nd consecutive Saturday edition of The Gold Update is planned to be quite brief as we shall be “in motion”:  just straight to the point with a salient graphic or two along with our view.  In any event, don’t be a turkey, given what can ensue…

…rather, keep your eyes (and wealth) on the Golden prize clearly due!

Cheers!

 …m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter(“X”):  @deMeadvillePro

The Gold Update: No. 730 – (11 November 2023) – “Gold’s Bang-On-Time Dive”

by

The Gold Update by Mark Mead Baillie — 730th Edition — Monte-Carlo — 11 November 2023 (published each Saturday) — www.deMeadville.com

“Gold’s Bang-On-Time Dive“

Let’s open with this from the “We Hate It When We’re Right Dept.” reinforced by the age-old axiomatic quip:  “Be careful of that for which you wish as you just might get it.”  And you regular readers definitely get it.  For bang-on-time this past week came Gold’s dive.

Far more broadly in positively waving the Gold flag across the past 14 years — from the first edition of the Gold Update on 14 November 2009 with Gold then 1120 to now our 730th consecutive Saturday edition and price at 1943 — in anticipation of interim price declines we’ve on occasion had to deviate from Gold’s otherwise net ascent of 73%, (during which stint the U.S. Dollar’s M2 supply has increased a net 143%).  And last week’s anticipative missive (“Gold’s Post-Geopolitical Pullback“) is a case in point, price in turn recording its second-worst weekly loss year-to-date on both a percentage (-2.9%) and points (-57) basis.  Which for those of you scoring at home begs the question:  “Which has been the worst?”, the answer being the weekly loss ending 29 September of -4.1% or -80 points.  ‘Course after that, Gold low-to-high gained +10.7% or +196 points through the heart of October.

Oh to be sure, over the years we’ve pounded the table that “shorting Gold is a bad idea” even in anticipation of price falling.  But this time ’round the dastardly Shorts got their fill (if you will) were they Short per last week’s drill.  We thus humbly utter the one word by the chap whose car cassette player was sufficiently loud such as to send the Tacoma Narrows Bridge into its destructive suspension swing:  “Sorry…” –[Pioneer, ’94].

To add context to present price, graphically for Gold we’ve placed on our year ago-to-date weekly bars the 1980-1922 green-bounded support structure cited in the prior missive.  And quite thoroughly hoovered it was this past week per the rightmost bar, although the parabolic trend remains Long:

Further should that support structure bust, it can be expanded to 1990-1914 or even 2001-1901 before Gold’s overall price positioning becomes materially affected … be it lower … or higher than ever before.

‘Course if you’ve been highly hyped up by the FinMedia these days, you may be seeking a dose of meclizine given the descriptive extremes of markets’ motions.  “Oh yields are plummeting!” they say.  “Oh the Dollar is tanking!” they say.  “Oh the stock market’s soaring!” they say.  “Oh Gold’s become so passé!” they say.  And from the “What Are They Smoking? Dept.” comes this gem: “Oh the Fed’s done raising!” they say.  To which we say clearly any effort to do math has gone away.  More on that along the way.

But for all the dizzying cries over markets’ careening this way and that, let’s look at the comparative tracks of the five primary BEGOS Markets from one month ago-to-date per the following two-panel display.  First on the left — save for Oil — the Bond, Euro, Gold and S&P 500 are all pretty much where they were on this date a month ago.  Yes, really:

Second on the right we’ve merely isolated the same tracks solely for Gold and the S&P such as to emphasize their once again dancing un pas de deux as we’ve on occasion depicted these many years.  And whilst broadly it shan’t last, at least at this writing the best paired correlation amongst those five primary BEGOS Markets is negative between Gold and the S&P, (which for you WestPalmBeachers down there means when one is going up, the other is going down); thus the mirror-like tracking in the above graphic.

“But what about Oil, mmb?” 

Ours is not to wonder why, Squire, other than to speculate when you’ve a lot of something for which demand is intermittently waning, the requisite price to move supply falls, (hat-tip Macroeconomics 101).  Moreover:  whist many folks are openly befuddled by Oil’s down direction given Mid-East tension, we humbly suggest that one merely mind the website’s Oil and/or Market Trends page such as to follow the “Baby Blues” of trend consistency. Five such Oil signals have therein been produced from one year ago-to-date, the average maximum $/cac follow-through within 21 trading days being $6,386, (ranging from $1,660 to $13,490).  That sure beats your trying to outguess the market; or as we oft quip:  “Follow the Blues instead of the news, else lose yer shoes.”

Also becoming a bit shoeless of late is our Economic Barometer.  Already having been on skids during November, this past week’s muted set of just five incoming metrics was nonetheless net negative for the Baro, notable month-over-month weakenings including September’s Trade Deficit and the backing up of Wholesale Inventories, plus a lurch down in November’s University of Michigan’s “Go Blue!” Sentiment Survey.  Too, as household liquidity lessons, the credit card is coming to the rescue.

But:  at least we’re told the Federal Reverse shan’t further raise rates, right?  Wrong.  Here’s the Baro from one year ago-to-date, featuring the earnings-unsupported S&P 500 in red and a table of the Fed’s 2% inflation target vs. the reported data.  Stagflation?  Stay tuned…

“But mmb, those PPI annualized percents are in line with the Fed’s target…” 

Duly noted, Squire.  If that Producer Price Index is truly leading, then we ought see the other inflation percents stall, if not fall, although the Fed does have a lean toward those Core Personal Consumption Expenditures.  As well, Minneapolis FedPrez Neel “Cash n’ Carry” Kashkari per Dow Jones Newswires “…is not convinced rate hikes are over…”  Or to reprise the great Bonnie Raitt from back in ’88: “It’s just too soon to tell…”

In the midst of all this, we read the Fed’s interest-rate increases of the past two years being deemed as “historic”.  Again, the Fed’s Effective Funds Rate is presently 5.33% (i.e. the targeted 5.25% + 5.50% ÷ 2).  Hardly is that “historic”.  Anyone remember the Prime Rate at 22% back in 1980?  We do. (What would be today’s FinMedia adjective for that?  “Steroidic”?)

Specific to the precious metals this past week, a more apt adjective would be “atrophic” as next we’ve the two-panel display of Gold’s daily bars for the past three months-to-date at left and same for Silver at right.  As aforementioned for Oil, here we’ve the “Baby Blues” signaling “Sell” in both metals’ current cases upon the dots having slipped below their respective +80% axes.  Again we commend “The trend is your friend” even if it must descend:

Indeed with respect to Gold, we tweeted (@deMeadvillePro) this graphic last Monday, reflective of the “Baby Blues” heading south:

And so in turn we go to the 10-day Market Profiles for Gold (below left) and Silver (below right).  Simply stated from high-to-low, the word “hoovered” is apropos, with all labeled lines now overhead trading resistance.  As for their two-week percentage changes, Gold’s from top-to-bottom is -4.0% whilst that for Silver is -6.3%.  Is it any wonder the Gold/Silver ratio — now 87.1% — is at its second-highest level since last March?  No ’tisn’t.  Reprise:  Do not forget Sister Silver!

Toward the wrap, here’s the stack.

The Gold Stack
Gold’s Value per Dollar Debasement, (from our opening “Scoreboard”): 3706
Gold’s All-Time Intra-Day High: 2089 (07 August 2020)
The 2000’s Triple-Top: 2089 (07 Aug ’20); 2079 (08 Mar ’22); 2085 (04 May ’23)
2023’s High: 2085 (04 May)
Gold’s All-Time Closing High: 2075 (06 August 2020)
10-Session “volume-weighted” average price magnet: 1985
Trading Resistance: 1951 / 1964 / 1970 / 1994 / 2007
Gold Currently: 1943, (expected daily trading range [“EDTR”]: 24 points)
Trading Support: none by the Profile
10-Session directional range: down to 1922 (from 1980) = -81 points or -4.0%
The Gateway to 2000: 1900+
The 300-Day Moving Average: 1883 and rising
The Weekly Parabolic Price to flip Short: 1846
2023’s Low: 1811 (28 February)
The Final Frontier: 1800-1900
The Northern Front: 1800-1750
On Maneuvers: 1750-1579
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

In sum, Gold is definitely getting the anticipated post-geopolitical pullback.  Does it continue?  Per the website’s Gold and/or Market Values page, recall that price a mere week ago was +120 points above its smooth valuation line; that deviation has since been reduced to now +39 points.  Yet even as Gold’s “Baby Blues” are accelerating lower, again note the cited structural support bases:  1922, 1914 and 1901, the notion thus being that Gold is “safe” above the 1800s.

‘Course, given Gold’s valuation by Dollar debasement is now 3706, ’tis clearly requisite toward maintaining one’s bridge to wealth security.

Thus:  don’t be that guy…

…rather consider that Gold today is THE bang-on attractive Buy!

Cheers!

 …m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter(“X”):  @deMeadvillePro

The Gold Update: No. 729 – (04 November 2023) – “Gold’s Post-Geopolitical Pullback”

by

The Gold Update by Mark Mead Baillie — 729th Edition — Monte-Carlo — 04 November 2023 (published each Saturday) — www.deMeadville.com

“Gold’s Post-Geopolitical Pullback“

From our purview, Gold appears on the perch of a downside lurch:  a classic post-geopolitical pullback.

“Unless like you’ve said that maybe ‘it is different this time’, right mmb?” 

Indeed, Squire, ‘twould be wonderful if Gold of late has been on the march as the world awakens to its real wealth trait versus that of worthless currencies.  But obviously Gold’s +10.7% climb from 06 October (low 1824) to 27 October (high 2020) was overwhelmingly induced by the Mid-East mayhem.

‘Tis terrible such tragedy has brought focus to Gold.  Yet within that conversation we hope arises a wider awareness of just how inexpensive Gold remains vis-à-vis currency debasement.  We need only glance at the above Gold Scoreboard reflecting price having settled the week yesterday (Friday) at 2000 … however by Dollar debasement (even in accounting for Gold’s own supply increase) the yellow metal’s value today is +85% higher at 3707.

That said, as we’ve previously articulated in detail, Gold has a penchant to reverse course downward following geopolitical price spikes, the most recently notable before the Mid-East mayhem being the early stages of the RUS/UKR war in 2022:  from that year’s 23 February settle price of 1911, Gold spiked +9% to as high as 2079 on 08 March only to then reverse course by -9% to 1895 come 16 March, i.e. below where ’twas at war’s outbreak; hence the heartless Gold Short then cynically saying “Nothing to see here…” 

And whilst now we’re starting to sense some Mid-East geopolitical price reversal is nigh, Gold being so close to its 2089 All-Time High, perhaps renewed wealth awareness then drives the yellow metal more properly into the sky.  For as Squire reminds us, maybe ’tis different his time.

By no means does this suggest making light of the Mid-East mayhem.  But acceptance of it as an ongoing event has begun affecting its stance in the news cycle.  Whilst still unquestionably a dire situation, we penned as follows in this past Wednesday’s Prescient Commentary:  “…As Mid-East headlines fall a bit from above the fold, so too falling are the precious metals’ prices…”  Moreover come Thursday in perusing Le Figaro, mention of the Mid-East didn’t appear until the seventh story in their “front page” news stack.

To be sure, fundamentally Gold is far too low; geopolitically ’tis somewhat stretched; and technically at least by BEGOS valuation ’tis presently too high.  (That courtesy of the “Nothing Moves in a Straight Line Dept.”)  To wit, let’s go to our year-over-year graphic of Gold vis-à-vis its smooth valuation line borne of Gold’s movement relative to those of the primary BEGOS Markets (Bond / Euro / Gold / Oil / S&P).

The lower panel’s oscillator (Gold less valuation) tells the “too high” story, price at present better than +100 points above the smooth line.  Historically (century-to-date):  upon price initially exceeding +100 points above valuation, Gold’s average decline within the ensuing 21 trading days (one month) is -5.5%.  Gold most recently exceeded valuation by +100 points in settling at 1993 on 20 October:  solely within that “vacuum” of a -5.5% decline would bring 1890 by 20 November.  Shall it so do?  We think not as Gold shows structural support from 1980 down to 1922; (for you mid-support structure watchers out there, that level is 1951).  Moreover as we’ll later see by Gold’s 10-day Market Profile, trading support at present ranges from 1995-1988.  But here’s the one-year BEGOS valuation chart featuring Mr. Too High extolling the present extreme:

 

Still, by Gold’s weekly bars and parabolic trends from a year ago-to-date, Gold appears quite safe as there is plenty of room below present price to the rightmost blue dots protecting the fresh Long trend, even given a post-geopolitical downward reversal of course:

Even broadly by Gold’s daily closing price across the past dozen years, this next view exemplifies the push to break up through the otherwise still existing triple-top spanning the past four years.  We thus think any near-term post-geopolitical price decline becomes a springboard to the next All-Time High:

“And don’t overlook that the weakening economic data helped Gold yesterday, mmb…” 

True enough there, Squire. The recently burgeoning Economic Barometer took a bit of a whack this past week, markedly so in the October data provided by the StateSide Bureau of Labor Statistics.  And generally, any hint that the Federal Reserve (its Open Market Committee as anticipated unanimously standing pat on Wednesday) may be done raising rates feeds positively into Gold.

Indeed, October’s Payroll creation was -49% slower than in September, and the Unemployment Rate ticked up whilst both the Average Work Week and Hourly Earnings ticked lower.  “Oh no, say it ain’t slow…”  Still, to be fair, ADP’s Employment pace was +27% over September’s:  so again, ’tis who’s counting whom.  Regardless, other slowings from September into October included the Conference Board’s gauge of Consumer Confidence, the Chicago Purchasing Managers Index, and the Institute for Supply Managment’s Indices for both Manufactuing and Services.  Too, the pace of Construction Spending slowed from August into September.  Yes, all that negativity came to be, even as on Wednesday the Wall $treet Journal headlined with “The Economy Is Great…” (albeit Europe and China seemingly are on the skids).  Either way, StateSide put all its math into the Econ Baro, et voilà:

Now beyond the world of reality, the S&P 500 is going giddy!  Or at least those following it are.  On Monday:  “The S&P gained +1.2%!”  Then Tuesday:  “The S&P added another +0.6%!”  Wednesday:  “The S&P is soaring, +1.1%!”  Thursday “The S&P is straight up +1.9%!”  Friday:  “The S&P is all bullish, up yet again +0.9%!”

And thus for the week the S&P garnered growth of +5.9%.  Cue the late, great Howard Cosell:  “Looook at it GO!”

Here’s to where we saw it go:  merely back to now 4358 as ’twas three weeks ago.  Thus predictably, you know the next sentence.  “Change is an illusion whereas price is the truth.”  In other words, (’tis our turn to say):  “Nothing to see here.”

In the midst of it all, ‘natch, is Q3 Earnings Season.  And for the S&P 500, of the 381 constituents having so far reported, 65% have made more dough than in Q3 a year ago.

But shouldn’t they all be making more?  After all, this is the S&P 500, the top-tier, best-of-the-best.  And when it does not all go right, valuation is the plight.  Thus our honestly-calculated “live” price/earnings ratio for the S&P went from 34.0x on Monday to 40.5x come Friday’s settle.  For you WestPalmBeachers down there, that means if you buy the S&P right now, you’re willing to pay $40.50 for something than earns $1.  Further, the cap-weighted dividend yield for the S&P is but 1.625%.  Do not reprise “Bargain”–[The Who, ’71].  Worth reprising:  the U.S. three-month T-Bill annualized yield is now 5.253%.

Then there’s Gold, which as aforementioned can rise +85% just to reach its current Dollar debasement value.  (Remember:  given historically such eventually happens, this is not a difficult decision).  And although price may languish near-term in post-geopolitical recoil, we don’t expect it to come well off the boil, (on which is has been for nearly a month).

So to Gold’s two-panel graphic we go with the daily bars from three months ago-to-date on the left and 10-day Market Profile on the right.  Especially note the baby blue dots of trend consistency.  Barring price imminently/rapidly rising, those “Baby Blues” shall cross beneath the key +80% axis:  such has occurred twice within the past year resulting in subsequent point drops (within 21 days) of -67 and -20 respectively; and that reasonably aligns with the underlying 1980-1922 support structure noted earlier.  Specific to trading support, by the Profile the 1995-1988 zone may be the first to go toward further below:

Turning to Silver, that which seems inevitable for the yellow metal has already happened for the white metal, her “Baby Blues” (at left) having penetrated below the +80% level, as graphically tweeted (@deMeadvillePro) Wednesday evening, (albeit price has yet to let go in being saved by yesterday’s slowing economic inputs).  Still, as stated in Thursday’s Prescient Commentary, we can see Silver sliding down toward the 22.18 level.  But first by her by her Market Profile (at right), Sister Silver’s last trading bastion of support is 22.95:

So with our expectations for Gold getting a post-geopolitical pullback — but still more broadly maintain an uptrend — we’ll wrap it up here with this from the “Is the FinMedia Really Running the Fed? Dept.”  To wit:

As you all know, the FOMC per this past Wednesday’s Policy Statement unanimously voted to maintain the Bank’s FedFunds target range as 5.25%-5.50%.  But did they really need to have their traditional two-day meeting?  After all, we were informed the previous Friday (27 October) by Dow Jones Newswires that:

“Inflation Trends Keep Fed Rate Hikes on Pause–Underlying inflation picked up in September, government data showed, keeping the Federal Reserve on track to hold short-term interest rates steady at its next meeting.”

Therefore:  why meet at all?  Even as the recent inflation data we herein recounted a week ago clearly justified the Fed raising rates, the FinMedia already had decided “No no, Jerome” and that was that.  (One wonders if they have to sign non-disclosure agreements.  Just a passing thought…)

Regardless of who’s running the Fed show, pullback or not, don’t pass on Gold!

Cheers!

 

…m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter(“X”):  @deMeadvillePro

The Gold Update: No. 728 – (28 October 2023) – “S&P Squirms; Gold Firms”

by

The Gold Update by Mark Mead Baillie — 728th Edition — Monte-Carlo — 28 October 2023 (published each Saturday) — www.deMeadville.com

“S&P Squirms; Gold Firms“

Welcome to this week’s missive featuring your favourite end-of-month graphics as we put the wraps on October, (albeit with two trading days in the balance followed by Wednesday’s EuroSide holiday).  And sadly as the Mid-East mayhem continues, the safe-haven bid has further fed into the price of Gold toward settling yesterday (Friday) at 2016, the highest weekly close since 05 May.

However, per this piece’s title, as is our occasional wont we start with stocks, specifically as regards the S&P 500’s state of squirm.  To wit from the “‘Tis Not About Us Dept.” you may recall that herein penned back on 22 July:

►“As we tweeted (@deMeadvillePro) last Thursday [20 July]:  S&P only -0.7% today (Thu) but the MoneyFlow drain was the most for any one day since 13 Sep ’22.  Suggests near-term top is in place.”

‘Course you regular website readers know the MoneyFlow is a directionally-leading characteristic of the S&P 500 which had settled this past 20 July at 4535.  From whence, ’tis all gone rather wrong as depicted by the following daily graphic of the S&P’s closings year-to-date:

Indeed since that tweet, the S&P 500 has declined -9.2% (from 4535 to now 4117).  However for the moment, the S&P has become “textbook oversold” such that it perhaps gets a bounce before the next trounce. That’s technically.

But fundamentally our “live” price/earnings ratio of the S&P 500 remains high in the sky at 34.6x.  And to be sure, Q3 earnings season isn’t helping the situation, regardless of the FinMedia’s fawning.  For example:  last evening, once-revered Barron’s ran with “Why a Solid Earnings Season Isn’t Good Enough for the Stock Market”.  But because we actually do the math, of 596 companies (including 226 S&P constituents) having thus far reported for Q3, just 51% have bettered Q3 of a year ago.  That’s considered “Solid”?

“But 67% beat estimates, mmb…” 

You know Squire had that comment ready to go.  But were we ever to risk dipping a toe into the equities market, we’d desire our shareholdings to be in companies that grow the bottom line rather than shrink it.  Yet such has been the illogical lean to the latter that exists in today’s Investing Age of Stoopid.  Nuff said.  To Gold we go.

And what better segue than to bring up the BEGOS Markets standings year-to-date, Gold having moved from fourth position just at September’s end to now first, +10.2% to this point in 2023.  (Note therein the Dollar Index being +3.0% which by conventional wisdom doesn’t happen when Gold rises … except for the fact that “Gold plays no currency favourites” as you regular readers well know).  ‘Course the Bond has been creamed, price -12.1% in 2023 whilst yield has risen from 3.975% at year-end 2022 to now 5.023%.  As for Sister Silver lacking pace, she’s not getting the geo-political gain garnered by Gold, especially with Cousin Copper on the skids.  Here’s the whole gang:

As for Gold’s weekly bars from a year ago-to-date, we’ve locked in the rightmost second blue dot of the new parabolic Long trend, the prior Long trend having failed miserably only to have then been saved by an equally poor trend (the three red dots) for the Shorts.  Although we’re rah-rahing away there, should there hopefully be some resolution to the Mid-East mayhem, Gold typically would then drop like a stone.  For as we opined a week ago, Gold shan’t become moon-bound until the current All-Time High (2089) is eclipsed; thus it remains for now range-bound, all as herein detailed a week ago.  Either way, from Gold’s recent low just on 06 October at 1824, price has since risen to as high (yesterday) as 2020, or +10.7% in 16 trading days.  Here are the weeklies:

Now let’s stay in the year ago-to-date mode in turning to Gold and its percentage track along with those of top-tier precious metals companies, wherein not all have positively fared.  From the bottom up we’ve Newmont (NEM) -11%, Pan American Silver (PAAS) -9%, the Global X Silver Miners exchange-traded fund (SIL) -4%, Agnico Eagle Mines (AEM) +9%, Franco-Nevada (FNV) +10%, the VanEck Vectors Gold Miners exchange-traded fund (GDX) +16%, and Gold itself +21% from this day a year ago.  What stands stark in this construct is all these equities lagging Gold!  Simply look mid-chart ’round May when Gold was as high as ’tis now, but every equity itself was materially higher than now!  The expression may go:  “Dere’s Gold in dem dere hills!”, but dere’s real value in dem dere equities!  Wow!

Meanwhile, is the StateSide economy Golden?  Ehhhh, not really.

“But the Econ Baro had a good week, ehhhh mmb?” 

Indeed it did Squire.  In fact, of the ten incoming metrics for our Economic Barometer, eight of them improved period-over-period.  However, let’s focus on two of those “improvers”.  First is the first peek at Q3 Gross Domestic Product:  an annualized +4.7% real growth.  Impressive.  However, again as we do the math:  42% of the otherwise unreported nominal +8.4% growth pace was due strictly to inflation.  Unimpressive.  And the so-called “Fed-favoured” Core Personal Consumption Expenditures Price Index — after increasing just +0.1% in August — leapt by +0.3% for September:  annualized that’s +3.6% and the 12-month summation is +3.5%.  Yes, the latter is a two-year low … but is it near the Federal Reserve’s target of +2.0%?  No.  Still, our best guess for Wednesday’s Open Market Committee Policy Statement is that they’ll unanimously again lie low.  Heaven forbid the Fed actually be ahead of the curve.  Here’s the Baro:

Let’s next go ’round the horn for all eight components that comprise the BEGOS Markets.  Here we’ve their daily bars across the past 21 trading days (one month).  Each market has its grey linear regression trendline, four at present rising (Euro, Swiss Franc, Gold and Silver) and four thus falling (Bond, Copper, Oil and S&P 500).  ‘Course, the consistency of each trend is denoted by the “Baby Blues” which specifically for the Swiss Franc have just dipped below their +80% axis, suggestive of a cheaper Franc near-term.  Is that merely coincident that the FOMC may just raise rates, in turn increasing Dollar strength?  ‘Tis one of those things that makes us go “Hmmmm…”:

We’ve already alluded to the white metal not getting the geo-political bid that’s been boosting the yellow metal, the Gold/Silver ratio now 86.8x vs. its millenium-to-date average of 67.8x.  Priced to that average, Silver today at 23.24 would instead be +22% higher at 29.73, (just in case yer scorin’ at home).  Reflective below of Sister Silver not keeping pace is price being mid-10-Day Profile on the right whereas Gold essentially tops its stack on the left:

So with but two trading days remaining in October, here now is our stratified Gold Structure by the month across these past dozen years.  As oft previously shown, now courtesy of the “Here We Go Again Dept.” we’ve Gold’s triple top which “is meant to be broken” as highlighted by the three Golden arrows.  Moreover, we’ve anticipated on occasion throughout this year’s missives that Gold shall record a fresh All-Time High in 2023:  obviously the momentum is there, barring a post-geo-political price retrenchment (as is the rule rather than the exception).  Nonetheless, let’s cue Elvis from back in ’60 with “It’s now or never…”:

Through these 10 months we’ve emphasized the importance of doing the math to get to the truth of such critical metrics as economic inputs, p/e calculations, and so forth.  And whilst nothing light can be made of the horrific Mid-East mayhem, as this past week unfolded a mathematical “challenge” shall we say “came to light” over at the United States Department of State.  Hat-tip ExecutiveGov which reported:  “The Department of State has issued an advisory cautioning United States citizens against travel to more than 200 countries amid rising geopolitical tensions and conflict.”   ‘Course, you can see where this is going, given (hat-tip Quora) stating:  “Today, there are 197 countries in the world…“  The bottom line here being:  if you’re in the States, you’re sorta stuck from going anywhere, nor beyond!  Best therefore not to squirm; rather stay firm and stuck in Gold!

Cheers!

 

…m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter(“X”):  @deMeadvillePro

The Gold Update: No. 727 – (21 October 2023) – “Gold: Range-Bound? Or Moon-Bound?”

by

The Gold Update by Mark Mead Baillie — 727th Edition — Monte-Carlo — 21 October 2023 (published each Saturday) — www.deMeadville.com

“Gold:  Range-Bound?  Or Moon-Bound?“

Across the past 23 trading days (from 20 September) Gold traded per that date’s high of 1969 down -145 points (-7.4%) to 1824 (on 06 October) from which price then ascended +185 points (+10.1%) through yesterday (Friday) to as high as 2009 in settling out the week at 1993.

Further from the aptly-named “Short Memories Dept.” ’twas funny how the FinMedia and friends just two weeks ago were pronouncing the end of Gold as a viable source of wealth:  now ‘twould seem they can’t get enough of it.

Moreover as suggested in last week’s missive, for Gold’s weekly parabolic Short trend ’twas “Three strikes and yer out!”, as provisionally penned in Thursday’s Prescient Commentary.  And with the week having ended, that trend is now confirmed as Long per the fresh encircled blue dot:

So:  is Gold remaining range-bound?  Or is it finally moon-bound?  Let’s start with the former.

For the bazillionth time we postulate that “change is an illusion whereas price is the truth”.  Whilst the low-information, short-attention span, instant gratification crowd have recently been yanked to and fro through Gold’s plunge before its “Going to a Go-Go”–[Miracles, ’65], let’s focus on price, the truth to know. To wit: 

Today’s 1993 price also traded during 34 of the prior 168 weeks going all the way back to that ending 31 July 2020.  And as anyone who is paying attention knows, Gold’s infamous triple top (2089/2079/2085) has yet to be broken, (which they are meant to so do).  Thus until the next All-Time High is achieved, price remains range-bound, for 1993 today ain’t anything over which to bray “Olé!”  Here is price (i.e. “truth”) via the monthly candles from 2020-to-date, denoting the triple-top:

But what has not yet happened — and may not happen — is the usual Gold post-geo-political price spike decline.  As herein penned a week ago:  “…(to risk a terribly overused phrase) perhaps ‘it’s different this time’…”  With reference to the above-labeled “Mid-East Mayhem”, two brutal weeks have passed since the Hamas/Israël incursion, Gold having initially spiked as anticipated.  But given the typical historical time pattern of prior geo-political price spikes, now two full weeks hence, Gold has been void of retrenchment.  The most recent prior example was early on in the RUS/UKR war, Gold twice spiking in 2022 on both 24 February and 08 March … only to trade beneath the initial spike as swiftly as 16 March, even as the war worsened.  Not this time however as quite a number of bad actors fight for center stage in the “Who’s backing whom?” phase.

Recall too our citing Gold vis-à-vis its smooth valuation line per both the website’s Market Values and Gold pages.  Just prior to the Mid-East mayhem, price already was better than -115 points below valuation:  now ’tis +107 points above same per our next graphic.  (Note:  the valuation line compares Gold’s movement relative to those of the other primary Markets that comprise BEGOS, i.e. the Bond / Euro / Gold / Oil / S&P).  Yet should Gold not materially retract — and instead its All-Time High of 2089 be eclipsed — then ’twill be fair to say Gold is moon-bound:

 

“So how high then is the moon, mmb?“

Squire rhetorically knows the answer to his softball question, (thanks mate!).  Clearly moon-bound for Gold is to match its true Dollar debasement level, presently per the opening Gold Scoreboard at 3724.  To be sure, such journeys can seemingly take forever:  on 09 March 2012 that debasement level reached 2089; but such All-Time High for Gold was not achieved until better than eight years later on 07 August 2020.  As valued charter reader THR oft quips “Gold will make you old”, but ‘twould be folly not to anticipate 3724 … and beyond!  Or in the words of the Great Gleason:  “To the moon, Alice!”

As to the destination of the economy, net-net ’twasn’t a nice week of incoming metrics for the Econ Baro.  Some were improved, notably September’s Housing Starts and Industrial Production/Capacity Utilization.  Conversely, October’s National Association of Home Builders Index weakened as did the NY State Empire Index; the pace of September’s Retail Sales slowed as did that for both Building Permits and Existing Home Sales; the Conference Board’s (lagging) set of Leading Indicators turned even more negative; and Business Inventories for August backed up.  Nothing is easy.  Here’s the Baro:

Neither is it easy for the S&P, given both the geo-political climate and the Index’s ongoing overvaluation, our “live” price/earnings ratio settling the week at 36.2x.  And speaking of earnings, (or lack thereof), have you been following their Q3 season?  Specific to the S&P 500, 68 constituents have thus far reported:  just 34 (50%) of those bettered their bottom lines from a year ago.  More broadly?  ‘Tis worse:  with 134 companies’ (of some 1800 to eventually report) results in hand, just 44% have bettered.  Too as tweeted (@deMeadvillePro) this past Thursday, “Flow leads dough…” per our S&P MoneyFlow page depicting a more negative stance.

And again from the “They’re Just Figuring This Out Now? Dept.”, iconic ol’ Morgan Stanley finds U.S. Treasuries attractive at 5%.  (‘Course you readers of The Gold Update have known for months that the T-Bill’s been yielding at least 5% since 18 April.)  Oooh and this quick update:  the market capitalization of the S&P 500 per Friday’s settle is now down to $36.9T; but the liquid money supply (“M2”) of the U.S. is only $20.8T.  It doesn’t add up very well, does it?  No it doesn’t.

But ’tis adding up quite nicely for Gold as we next go to its two-panel display of daily bars from three months ago-to-date on the left and 10-day Market Profile on the right.  The baby blue dots of trend consistency have only just crossed above their 0% axis, suggesting the uptrend has more “Room to Move”–[Mayall, ’69] in spite of near-term technicals being somewhat stretched.  Thus given some natural price retraction, we can see the key underlying support levels as labeled in the Profile:

With the like drill for Silver, her “Baby Blues” (below left) are just on the threshold of turning positive whilst she exhibits a belly of Profile support (below right) in the upper 22s.  (More broadly, Silver’s weekly parabolic trend still is Short, whereas aforeshown Gold’s is now Long).  Nonetheless, Sister Silver is gaining that precious metal bid:

To sum up, ’twas a great week for Gold and a poor one both for equities and the StateSide Economic Barometer, the latter in the new week looking to the first peek of Q3 Gross Domestic Product and that “Fed-favoured” Core Personal Consumption Expenditures metric for September.

And with geo-politics continuing to dominate the airwaves whilst the lousy Q3 Earnings Season unfolds, one ought expect more of the same at least near-term, albeit liquid markets don’t move in a straight line.  But the “Baby Blues” at the website’s Market Trends page tend to keep one on the correct side of it all.

Indeed all-in-all — at least until Gold posts a new All-Time High above 2089 — we still see price as more range-bound than moon-bound.  But again, as Jackie points out to Alice:

 

Or as we time-to-time say:  “Tick tick tick goes the clock clock clock…”  Got your precious metals?

Cheers!

…m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter(“X”):  @deMeadvillePro

The Gold Update: No. 726 – (14 October 2023) – “Awakening to Gold”

by

The Gold Update by Mark Mead Baillie — 726th Edition — Monte-Carlo — 14 October 2023 (published each Saturday) — www.deMeadville.com

“Awakening to Gold“

Now before we all get too excited out there about Gold having yesterday (Friday) posted its largest one-day net gain since 17 March by both percentage +3.4% and points +64, let us acknowledge that price is right where ’twas a mere 14 trading days ago on 26 September.  So in settling out the week at 1946, for you “three-week” price charters, Gold for said stint is essentially “unch”.  Or as we oft quip:  change is an illusion whereas price is the truth.  And at 1946:  truth = cheap.

Still, yesterday’s robust move was gratefully appreciated.  Save also for 17 March, Gold hadn’t had such a single session up move since a smattering of days when the 2020 COVID scare got underway (from 23 March – 09 April that year), prior to which was a +4.7% day’s net gain on 24 June 2016.  Too, in measuring the Gold futures by MoneyFlow (change x volume), yesterday’s inflow ranked third-best year-to-date.  (And further for those of you curiously scoring at home, yesterday’s +3.4% net Gold gain ranks 27th-best century-to-date, the most being +9.0% away back on 17 September 2008 upon ol’ Black Swanee’s song about everything else going wrong).

Impressively however, as we’ve pointed out over these many years, Gold — unlike other major markets –has a tendency to rise faster than it falls.  To wit:  most recently from high-to-low, price dropped -112 points in nine trading days (26 September – 06 October).  Yet from just Friday a week ago – i.e. six trading days — +123 points was price’s gain:  don’t miss the Gold Train!

‘Course by the benefits of debasement, foresight, and a new geo-political catalyst, Gold this past week “got off the schneid” in fast fashion.  To quickly encapsulate these three Gold positives:

► By debasement Gold remains ridiculously undervalued vis-à-vis the above Scoreboard; priced now at “the market is never wrong” level of 1946, ’tis nonetheless -48% below the Dollar debasement value of 3725, which given historical price-to-value reversion shall eventually be reached.

► By foresight as herein starkly charted a week ago, Gold vis-à-vis its smooth valuation line (per the website’s Market Values page) was “nearly -100 points ‘low’, historically an extreme that begs for reversion up to the mean”.  Moreover for four consecutive sessions (02-05 October) Gold settled at least -100 points below said line.  Now ’tis +39 points above it … reversion swiftly wins again.

► By geo-politics came the incursion into Israël whilst we were putting pen to paper at this time a week ago.  Obviously then followed — as anticipated by a material amount — Gold gapping higher at Sunday night’s open whilst the S&P futures gapped lower.

“But in the past, mmb, you’ve gone on about how geo-political price spikes then come all the way back down…“

We’ve detailed in prior missives examples of that typically being Gold’s case, Squire.  But (to risk a terribly overused phrase) perhaps “it’s different this time”, especially per the just cited realities of debasement and foresight, the wake-up catalyst now being geo-political.

The point is:  Gold has been priced way too low for way too long, pure and simple.  And as the Investing Age of Stoopid seemingly unravels, those paying attention may finally be awakening to Gold.

“And you read what Grantham said, eh mmb?“

Our good man Squire really is on a roll today.  Yes, we swerved past a Bloomy piece which teased “Jeremy Grantham Says No One Should Invest in the US“ (as culled from a FinMedia television interview).  And admittedly, we chuckled over the interviewee’s referring to the small-cap Russell 2000 as being replete with horribly high-debt “zombie” stocks.

But neither let us rule out the ongoing overvaluation of the large-cap S&P 500.  That “mightiest of the mighty” index still maintains many sky-high silly valuations, the “live” cap-weighted price/earnings ratio settling the week at 38.2x; (recall 10 years ago it being -33% lower at a still expensive 25.4x … scary).  

And do you remember how overvalued shares fared notably in ’87, ’02, and ’09?  To quote Jonathan Winters in the role of Lennie Pike:  “I hope you turn away … that you just look the other way” –[It’s a Mad, Mad, Mad, Mad World; United Artists, ’63].  For per yesterday’s settles, 101 of the 503 S&P constituents now have P/Es of 40.0x or more.  Repeat:  scary.  As for “fear”?  Yesterday the S&P netted a loss of -0.5% … but the MoneyFlow regressed into S&P points dropped -1.0%.  And as you website followers know, Flow leads dough.  Repeat:  “fear”.

‘Course as is Gold’s wont, it can benefit from the “fear” trade.  Oh to be sure, Gold’s weekly parabolic trend remains Short (as does that for Silver).  But in turning to Gold’s weekly bars from one year ago-to-date, such Short trend had a big chomp taken out of it per the rightmost bar.  As for the flip-to-Long level for the enusing week being 1968, ’tis well within Gold’s current “expected weekly trading range”, now 48 points.  Three strikes and out for the red-dotted Short trend?  Here’s the graphic:

Too, especially for those of you who’ve been with us across better than a decade, there’s the ol’ 300-day moving average for Gold.  Historically it typically marked significant support or resistance for Gold, although much of that “reliance” has since waned.  Still, if only by coincidence, in this next graphic of Gold’s daily closes for some dozen years, that average (in blue) shows as support per the rightmost price bounce.  And as usual, the “triple top” remains there for the taking should the investing world ever awaken to reality:

As to the reality of the StateSide economy, its “yo-yo-ing” has built in a somewhat positive slant from about mid-point (this past April)-to-date in our year-over-year view of the Economic Barometer:

Tell-tale signs of ongoing “Dollar strength” influenced the Baro’s incoming metrics as the week unfolded.  September’s Import Prices shrank whilst those for Export increased.  And inflation at both the wholesale and retail levels came in bit hotter than consensus expectation.  As for the consumer, The University of Michigan “Go Blue!” Sentiment Survey took quite a hit in declining from September’s 68.1 reading to only 63.0 for October, the third-largest monthly decline in the past 16 months.  Indeed, oh that “Dollar strength”, the “Dixie” recording its 11th up week of the past 13.  Yet if you query:  “How then can Gold have also gone up?”  Re-read last week’s piece.

Reading below into Gold’s two-panel graphic we see the daily bars from three months ago-to-date on the left and 10-day Market Profile on the right.  Note that Gold’s “Baby Blues” of trend consistency are on the up move:  because they still are below the 0% axis, the trend mathematically remains down, however ’tis rotating toward turning positive.  And because Gold settled on its high price for the past two weeks, the present “white bar” is barely discernable at the top of the stack.  (Are those the Gold Shorts we hear yelling “Hobson close!  Hobson close!”?  Always a pleasure to have them take the other side of the trade):  

Next we’ve the like display for Silver, her daily bars at left and Profile at right.  Clearly her recent rally whilst robust visually appears a bit dwarfed vis-à-vis that for Gold.  Mais au contraire as Gold’s recent low-to-high gain is +6.7% whereas that for Silver is +10.3%.  Thus be thee not discouraged, Sister Silver!

We now close on a memorializing note for James E. Sinclair.

We were honoured to meet “Mr. Gold” in San Francisco some nine years ago on 15 November 2014.  Long-time readers of The Gold Update know ’tis infrequent that we read the fine writings of other Gold analysts (so as not to bias our own thinking and interpretation of data).  Jim was an exception with whom we occasionally corresponded, and he’d always reply.  And his thorough understanding of The Gold Story was rarely paralleled.  Thanks for the awakening, Jim.

In his memory, let’s indeed add a word to this moving ’73 Pink Floyd piece, his now resting at “The Great GOLD Gig in the Sky”:

 

Cheers to Jim!

…m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter(“X”):  @deMeadvillePro

The Gold Update: No. 725 – (07 October 2023) – “Gold Further Tanks; to the Dollar No Thanks”

by

The Gold Update by Mark Mead Baillie — 725th Edition — Monte-Carlo — 07 October 2023 (published each Saturday) — www.deMeadville.com

“Gold Further Tanks; to the Dollar No Thanks“

“Well ya know, Gold is down because of Dollar strength…”

Oh good grief are we sick of hearing that.  Honest to Pete, knee-jerk “conventional wisdom” is hardly our investing indicator of choice, especially when it comes to owning Gold, which at this writing — in having settled out the week yesterday (Friday) at 1847 — is as cheap as can be.  More on that as we move forward.

But let’s begin by (again) debunking the notion of “Dollar strength”.  ‘Tis axiomatic that which is worth zero (“0”) — regardless of it being acceptably transacted in exchange for other currencies, goods and services — is at any price still worth “0”.  Further to our point — given we oft quip Gold plays no currency favourites — let’s point (►) to past periods (sampled from three-to-four months in duration) of positive correlative strength for both the Dollar and … oh say it ain’t so … Gold!  To wit:

► Just after the turn of the century (which for those of you who can do math began with 2001), the Dollar Index (“Dixie”) from 19 Feb ’01 to 21 May ’01 recorded a net gain of +6%:  Gold’s net gain for the identical stint was also +6%.

► How about in 2005:  from 29 Aug through 28 Nov, Dixie’s net was +7% and Gold’s was +12%.

► Then there were the FinCrisis throes of 2008:  from 08 Sep through 08 Dec both Dixie and Gold netted gains of +7%.  Are we having fun yet?

► Check out 2010:  from 01 Feb through 14 June whilst Dixie gained +7%, Gold nearly tripled same with +20%.  They say:  “No Way!” …  Way.

► Ah, then came infamous 2011:  from 27 Jun through 26 Sep Dixie’s net change was +6% … Gold’s was +9%.

► Three years hence from 27 Oct ’14 through 02 Feb ’15 Dixie netted +9% and Gold a still respectable +5%. 

► And similarly just last year in 2022 from 10 Jan through 25 Apr, Dixie gain a net +8% and Gold again a net +5%.

Thus to paraphrase the Johnny Paycheck tune from back in ’77, you can “Take this Dollar strength and shove it.”

Regardless, as we’ve emphasized, of late ’tis hardly just Gold being pinned down by the Dollar.  The primary BEGOS Markets (Bond / Euro / Gold / Oil / Spoo) have all — save somewhat for Oil until just these last few days — been on the skids.  The following picture depicts their percentage tracks from some three-months ago-to-date along with the green-dashed Dixie:

And amongst the selling, Gold was shoved lower for the third straight week, the 1824 low being revisited for the first time since 09 March.  So per the price tracks in the opening Gold Scoreboard, Gold today (1847) is lower than ’twas on this day three years ago (1936), even as the U.S money supply (“M2” basis) is +33% higher now than then ($15.6T –> $20.8T).  But the market never being wrong, Gold completed its second week of the fresh parabolic Short trend, here per our view of the weekly bars from one year ago-to-date:

Also as anticipated, Silver’s weekly parabolic trend is now Short.

“But are you resolved to ‘how low is low’ for Gold, mmb?“

A side-stepped question that duly warrants a studied answer, Squire.  That red line in the above graphic is precisely at the 1800 level, (one ought think another “planned” loading up point for the sovereigns).  As for an analysis in the vacuum of averaging:  Gold’s average points drop for the past 10 weekly parabolic Short trends from each confirmation is -101 points.  Therefore from the “confirmation price” of 1865 two weeks ago, a -101 downside would bring 1764.  Indeed the mid-to-upper 1700s were extremely price congestive throughout much of 2021.  Yet just this past March (left end of the red line) found Gold buyers coming to the fore.  Should that repeat — especially upon recognition that “Dollar strength” can be beat — this new Short trend can well end as short-lived.

“But even if the Fed raises again, mmb?“

Squire, ’tis starting to look like another Federal Open Market Committee vote to boost the cost of FedFunds come 01 November.  But again in expunging “conventional wisdom”, you along with many of our long-time valued readers already know Gold can get on the go even in times of rising interest rates, (see 2004-2006).  And as we regularly say, with the Gold Scoreboard valuation of 3725 today, price at 1847 is ever so cheap.

More to the point per the website’s Gold page, here next is the graphic of Gold’s daily closes from one year ago-to-date astride the smooth valuation line (born of price changes relative to those of the primary BEGOS Markets:  Bond / Euro / Gold / Oil / Spoo).  The lower panel is the difference between price and valuation, which per yesterday’s settle is nearly -100 points “low”, historically an extreme that begs for reversion up to the mean.  And now we learn of an incursion in Israël which can have geo-political price ramifications for Gold.  Either way, have we mentioned that Gold is cheap?  Indeed:

Not appearing so cheap of late is the thrust of the StateSide Economic Barometer.  In spite of the hand-wringing over a returning recession, the Econ Baro has been marching right up the road, albeit such apparent “growth” includes “inflated” data.  Recall on 28 September the final read of Q2 Gross Domestic Product incorporated a chain deflator implying 44.7% of growth was inflated vs. real.  Still, some fairly bold metrics boosted the Baro this past week, notably Labor’s Payrolls numbers for September (+48% over August), although ADP’s Employment data was 180° out-of-phase (-51%).  Too, August’s Factory Orders whirled ’round from shrinkage to expansion.  But on a scary note:  Consumer Credit — a key economic driver — actually shrank in August for the first time since the summer of 2020 when all were cowering under COVID.  (Prior to that, Consumer Credit hadn’t shrunk on a monthly basis since its July reading in 2012).  Are FedChair Powell and his trusty FOMC able to sleep?  Raise ’em and weep?  Here’s the Baro:

Specific to the markets, let’s now go ’round the horn for all eight BEGOS components.  Typically we reserve this view solely for our month-end editions of The Gold Update.  But with “Oh that Dollar strength!” ruling the roost, here we’ve the exceptional picture of each market’s grey diagonal trendline heading down across the past 21 trading days (one month) along with their respective baby blue dots of day-to-day trend consistency.  Indeed as we tweeted (@deMeadvillePro) this past Thursday with respect to Oil having already issued a Sell signal in the prior week, “Follow the blues, (you know the drill…)”:

And to specifically drill down into the precious metals, follows are their respective 10-day Market Profiles for Gold on the left and for Silver on the right.  Despite the recent selling, both metals at present exhibit trading support below current price (white bar), notably for Gold as labeled at 1834 and for Sister Silver in her 21.70-21.25 zone:

With Q3 Earnings Season underway and 10 metrics due for the Econ Baro in the new week, let’s wrap here with two notes from deMeadville’s vast array of departments.

First from the “Core No More? Dept.” we perused an interesting essay (hat-tip FI’s Todd Bliman) emphasing that the Federal Reserve evaluates inflation and the economy well beyond the oft-mentioned Core Personal Consumption Expenditures Price Index.  We (indeed one would assume all of us) agree, albeit the Core PCE month-in and month-out seems very closely aligned with the Fed’s 2% inflation goal.  Nevertheless, as hard-wired ad nauseum throughout the FOMC’s Policy Statements, they “…will continue to monitor the implications of incoming information for the economic outlook…” and oh baby as payrolls grow but consumers lie low, which way shall the Fed go?  The next Core PCE reading is three trading days prior to the next FOMC vote.

Second from the “They’re Just Figuring This Out Now? Dept.” (the popularity of which is growing by leaps and bounds), Dow Jones Newswires discovered this past week that “Rising Interest Rates Mean Deficits Finally Matter“.  Otherwise, who knew, right?  Moreover, does this (finally) threaten the ongoing Investing Age of Stoopid?  Stay tuned…

As to ongoing so-called “Dollar strength” ultimately getting shoved, we reprise Daryl Cagle’s oldie-but-goodie graphic given that ultimately 0 = 0:  So do stay with Gold and Silver!

 

Cheers!

…m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter(“X”):  @deMeadvillePro

The Gold Update: No. 724 – (30 September 2023) – “Gold Guillotiné !”

by

The Gold Update by Mark Mead Baillie — 724th Edition — Monte-Carlo — 30 September 2023 (published each Saturday) — www.deMeadville.com

“Gold Guillotiné !“

We start by paraphrasing this oft-misquoted line from American TV icon Desi Arnaz:  “mmb, you’ve got some ‘splaining to do!”, even as our two previous missives entitled Gold as being “Technically Torturous” and “The Torture Continues”.  Following which — at precisely 13:40 GMT this past Wednesday — Gold succumbed to the guillotine in penetrating the week’s parabolic protection at 1905.2, provisionally flipping such trend from Long to Short, in turn confirming so with price settling yesterday (Friday) at 1865.  In fact, you may recall that such guillotining was presciently previewed in our prior missive’s graphic of Gold’s weekly bars.  And so it came to pass that 28 weeks of net gain for Gold are now gone, (albeit such trend for Silver is still barely Long, but likely shan’t be come Monday’s open).  Here’s the updated dual panel graphic:

“That’s a gruesome graphic there, mmb…”

Sadly so, Squire, wherein we see at left Gold’s red-encircled parabolic dot confirming such trend having swung from Long to Short, whilst at right Silver’s Long trend is but 8¢ from the end, the guillotine in top gear as the Dollar Revolution continues.

In reaching this past week to as high as 106.540, ’twas the best level for the Dollar Index since 30 November of a year ago, (Gold settling that day at 1783 … but let’s not go there).  Today at 105.870, the plucky buck is but -18% below its historical high of 129.050 upon its futures’ inception away back on 20 November 1985.  And were that gap to close, U.S. interest rates shall be far higher still, the FedFunds rate back then being 8.05% versus today’s 5.50%.

Yet that noted, just yesterday the Bureau of Economic Analysis reported the Federal Reserve’s favourite inflation gauge for August, the pace of the Core PCE Price Index coming in at a rather benign +0.1%, which annualized is well below the Fed’s +2.0% target.  Shall the Fed’s Open Market Committee therefore vote to again “pause” come their 01 November Policy Statement?

Regardless, as depicted above, Gold’s weekly parabolic Long trend never got off the pause button, was executed, and is now Short.  And recall when said Long trend began a month ago, we were looking toward a fresh All-Time High show.  Instead from Gold, out went the dough.  Here’s our updated table of Gold’s ten prior weekly parabolic Long trends, plus the latest’s zero result across the bottom.  As Sheriff J.W. Pepper said to the elephant in “The Man with the Golden Gun” –[Eon/UA, ’74]:  “Boy, you is ugly”:

Understandably, you now may well ask “So how low is low?”  There we shan’t go, save for some structural support from this 1865 level down to 1813 built in early March.  And whilst conventional wisdom points to “Dollar strength” as the yellow metal’s culprit, we again hearken back to a Gold truism:  that it plays no currency favourites.  Simply recall the 2010 six-month stint wherein from January through June the Dollar Index gained +10% and Gold +13%.  Boom!  It does happen.

Still since mid-year, Gold and its equities brethren have been pressured.  It being month-end, here’s our year-over-year view of those elements’ percentage tracks depicting the VanEck Vectors Gold Miners exchange-traded fund (GDX) +14%, Franco-Nevada (FNV) +13%, Gold itself along with Agnico Eagle Mines (AEM) +12%, the Global X Silver Miners exchange-traded fund (SIL) +3%, Pan American Silver (PAAS) -7%, and Newmont -12% (as we know encompassing acquisition costs).  But again from mid-way, this hardly is the happiest chart in the house:

Month-end also means bringing up our year-to-date standings of the BEGOS Markets.  And atop the stack for the first time in deplacing the S&P 500 to second spot is Oil.  Rounding out the podium is the Doggy Dollar, (although because ’tisn’t a BEGOS component, we can still say Gold is in third position).  Properly the cellar dweller is the Bond as the Year of the Yield continues:

Specific to the second-place S&P 500, clearly it struggled through the oft seasonally-challenged month of September.  But more importantly, are both Wall Street and the FinMedia finally waking up to valuation reality?  More on that in our closing paragraph(!)  As for economic reality, here’s the StateSide Econ Baro from one year ago-to-date, replete with its mega yo-yo swerves and curves:

“Yo, Joe!  Which way does it go?”  For this past week’s set of 12 incoming metrics, eight were worse period-over-period and one was “unch”, thus leaving just three that improved, including August growth in both Personal Income and Durable Orders.  But the month’s real stinker was Home Sales, both New and those listed as Pending.  And pity the poor Chicago Purchasing Managers Index:  its September reading of a paltry 44.1 marks the 13th consecutive month of regional economic contraction.  “Go Bears…”

Speaking of “Go” — save for Oil — going down through September was the continued direction for the balance of the BEGOS Markets, (as ’twas the case back on 12 August when we penned “Ain’t Just Gold Been Headin’ Down…”).  Nearly everything gets sapped during “Dollar strength”, but again its yield is decent, the three-month U.S. T-Bill paying an annualized 5.300% per yesterday’s settle.  And that’s risk-free dough, (even if DC is closed).  Either way, let’s go ’round the horn for all eight BEGOS components by their daily bars from one month ago-to-date, Oil being the sole market sporting a rising trendline, albeit its baby blue dots of trend consistency are weakening as we tweeted (@deMeadvillePro) earlier in the week:

As for the precious metals’ 10-day Market Profiles, obviously we find their respective present prices (the white bars for Gold below left and for Silver below right) down in le panier de la guillotine, the yellow metal alone having lopped off some -100 points in just eight days.  Within the overall Profiles, Gold’s high-to-low is -5.4% whilst that for Sister Silver is -7.3%.  

Again as ’tis month– indeed quarter –end, here we’ve the stratified view of Gold’s Structure per the past dozen years-to-date, its triple-top axiomatically waiting to break:

To close, per our aforementioned tease, here we go courtesy of the “Where Have You Been These Last Four Years? Dept.”

Regular readers know — and notably so since 2019 — we’ve been constantly concerned as to the overvalued state of equites, especially the S&P 500 Index as a whole.  Oft we’ve quipped that we’re in “The Investing Age of Stoopid” purely by doing the honest math to compute the S&P’s price/earnings ratio, presently 37.7x as opposed to the parroted, dumbed-down 24.5x believed by your broker, (who frankly today appears incapable of doing the math).  But that’s where we are now.  And as we herein have written ad nauseum through these recent years:  “…earnings are not supportive of price…”

Well here it comes… READY?

This past Wednesday the lightbulb finally illuminated in the children’s writing pool over at Barron’s, headlining their webpage “above the fold in bold” with:

“The Stock Market Has a Big Problem.  It’s Called Earnings.”

They’re just figuring this out now???

And yet when we view our MoneyFlow page for the S&P 500 — even during its current decline — true “fear” has yet to appear.
But what appears most appealing to us is Gold being priced today (1865) at just half its Dollar debasement value (3726) per our opening Gold Scoreboard.
Thus — precious metal guillotines and Dollar Revolution aside — in strolling along life’s path, what ought you have glowing in your vault?  Gold!

 

Cheers!

…m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter(“X”):  @deMeadvillePro

The Gold Update: No. 723 – (23 September 2023) – “Gold – The Torture Continues”

by

The Gold Update by Mark Mead Baillie — 723rd Edition — Monte-Carlo — 23 September 2023 (published each Saturday) — www.deMeadville.com

“Gold – The Torture Continues“

On the heels of last week’s piece “Gold – Fundamentally Fabulous, Technically Torturous“, we’ve given consideration to some infamous tortures foisted upon mankind across the centuries.  And how well-documented they are!  The exasperating drips of the Chinese Water Torture… the exhausting torture of Sleep Deprivation… and (“Don’t say it!”) yet we must –> the excruciating endlessness of the Tickle Torture, (just to name a few).

But wait, there’s more!  Today ’tis the ever-exponential agony of the GPTT:  Gold Price Tease Torture!  “Oh please mother make it stop!” –[Linda Blair, ‘The Exorcist’, Warner Bros., ’73]

“Well, mmb, there’s also your ‘live’ p/e of the S&P still unsupportably high in the sky as everybody waits — in your own words — ‘for it to all go wrong’; that’s kinda torture too…”

So ’tis, Squire.  That price/earnings ratio now at 37.7x keeps clear-cut the case for a comprehensive S&P “correction”.  However, there’s a significant difference between the S&P 500 and Gold:  whereas the former is fully-engaged, the latter lingers unengaged.  Folks follow stocks; few follow Gold.  Going by Gallup as of this year, 61% of adult Americans own equities; going by “Gold IRA Guide” as of 2020, just 11% of adult Americans owned Gold.  And globally, Gold’s ownership has been cited as less than 1%.

Still for those of us is the Gold know, our so-called GPTT continues blow-by-blow.  For nary over a week ago, we were waving Gold’s flag to and fro. And as this past week did unfold, it appeared that Gold finally was on the go.  Gold having then settled at 1946, we wrote our song and dance — including in last Tuesday’s Prescient Commentary the anticipation of price reaching the mid-1970s — and come Tuesday the yellow metal had streaked up to 1969 … only to then give it all back and then some by reaching down to as low as 1933 come Thursday.

“Blame it on the Fed!“, they say.  “The Dollar’s soaring up!”, they say.  “Rates’ll never go down!”, they say.  Either way, Gold settled the week yesterday (Friday) at 1945 in netting a -1 point loss for the week after tracing therein a high-to-low range of -36 points.  “It’s torrr-orrr-turrre…”  –[The Cure, ’87].  And yet for both the yellow and white metals, the respective weekly parabolic trends remain Long per their rightmost four blue dots, with Silver actually bettering Gold for the week:

‘Course specific to the Federal Reserve — its Open Market Committee unanimously having voted to maintain the Bank’s Funds Rate in the 5.25%-5.50% target range — one’s take on it in large part is dependent upon one’s FinMedia source.  Post-Policy Statement and Powell Presser this past Wednesday, if sourcing from Dow Jones Newswires, one read that “Fed predicts ‘soft landing’ for the economy — low inflation and no recession.”  If instead sourcing from Bloomy, one read that “Stocks Fall as Yields Rise on Fed’s ‘Hawkish Skip’.”  So which is it?  Any wonder the precious metals are directionally confused?  Fortunately for them, the math will out.  To wit:

Per the opening Gold Scoreboard, albeit with price at a lowly 1945, valuation today is 3704, (i.e. +90% higher).  Moreover, if you love Sister Silver, here’s the fun part:  whilst settling the week at 23.82, given the century-to-date average Gold/Silver ratio being 67.7x, when applied to Gold’s valuation of 3704, that values Silver at 54.71!  130% higher!  “What’s in your vault?”  Nothing confusing there.

As to the StateSide economy, our Economic Barometer turned in a confusing week.  Just eight metrics arrived, the best being August’s increase in Building Permits, and the worst ironically being August’s Housing Starts.  Go figure, the Baro basically drawing a blank for the week:

As for the S&P (4320) -6.2% from its year-to-date high (4607 on 27 July) — or if you prefer -10.4% from its all-time high (4819 on 04 January 2022) — everyone wants to know “Why?“ The obviously answer (as we simply practice the otherwise archaic science of math) is that price vis-à-vis earnings is historically excessive.  The average p/e of the Top Ten cap-weighted S&P 500 constituents (AAPL, MSFT, AMZN, NVDA, TSLA, GOOGL, GOOG, META, LLY and UNH) right now is 51.5x.  Remember (ad nauseum) ol’ Jerome B. Cohen?  “…in bull markets the average level would be about 15 to 18 times earnings.”

Other answers as to “Why?“ may include it seasonally being September, considered the year’s notoriously worse stint.

Or that the S&P’s all-risk yield of 1.582% is absurd to abide given the risk-less U.S. three-month annualized T-Bill yield of 5.305%.

Or that ’tis better to get one’s money out of stocks given the market capitalization of the S&P 500 is now $37.7T versus a U.S. liquid “M2” money supply of just $20.7T.  Remember ol’ Egbert?  “Hey Mabel!  I sold some stock but the broker says they don’t actually have the money to pay us!”  That shan’t be good.

Or there’s the market overall pricing excess thanks to COVID and the Fed:  recall the S&P’s regression growth channel had said “pandemic” not occurred?  And further how the increase in the market capitalization of the S&P 500 equaled the monetary creation by the Fed to counter COVID?  Here’s that updated graphic:

‘Course, just as the S&P rocket-shot was fostered by the Fed’s monetary injection, the market has since been somewhat succumbing via the Fed’s monetary withdrawal (which commenced in the week ending 2 April a year ago).  Or in the words of Inspecteur Clouseau:  “Out with zee bad air [equities] and in with zee geuuud [yield]…”  And that’s quite a drop from today to the channel were the Fed to so drain…

However through it all, the precious metals remain torturously tepid.  Indeed were Charles Dickens around today to pen a book on Gold and Silver, ‘twould well be titled “Great Expectations, Part Deux”.  Or more realistically given our two-panel graphic with Gold’s daily bars from three months ago-to-date on the left and 10-day Market Profile on the right, “What Expectations?”:

Silver as aforementioned is performing a tad better than Gold per the white metal’s like bars (below left) and Profile (below right).  At least she is adorned in her precious metal pinstripes rather than in her industrial metal jacket.  From her intraday low of 22.56 on 14 September she is now +5.6% higher, whereas Cousin Copper from his high a day later of 3.85 on 15 September is now -4.2% lower at 3.69.  Stay your pinstripes pursuit, Sister Silver!

Torturous as may be this read, this let’s close with a notable FinMedia musing from late in the week:  ’tis the notion that the Fed’s so-called “neutral rate” (i.e. inflation-adjusted lending rate) may have to naturally rise going forward.  We wonder if this is to cover for the Fed having creamed the Dollar — increasing its “M2” supply by +42% or some +$6.6T from March 2020 into April 2022.

And yet specific to the Dollar Index, it has nonetheless risen from March 2020 (then 98.05) to 105.29 today.  Either “the more there are, the more they’re worth” — else the offsetting currencies, substantively the €uro and ¥en — have been strained and puréed:  which of course is the case.  The €uro (that surprisingly has lasted more than four years) has gone from costing $1.104 in March 2020 to as low as $0.959 a year ago; (’tis today $1.068 as it now pays an interest rate).  But pity the poor ¥en!  From 107/$ in March 2020 to a vacation-worthy 146/$ today!

Cue Deep Purple from back in ’73 with  “My Woman from Tokyo” 

 

 Regardless of where your sun rises, when it comes to currency chaos, torturous as ’tis, where else would you rather be?  Gold and Silver obviously!

 

Cheers!

…m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter(“X”):  @deMeadvillePro

The Gold Update: No. 722 – (16 September 2023) – “Gold – Fundamentally Fabulous, Technically Torturous”

by

The Gold Update by Mark Mead Baillie — 722nd Edition — Monte-Carlo — 16 September 2023 (published each Saturday) — www.deMeadville.com

“Gold – Fundamentally Fabulous, Technically Torturous“

Firstly:  Gold is fundamentally fabulous given its ultimate valuation is a function of currency debasement.  Hardly is that news to our veteran readership, nor to anyone who fully comprehends The Gold Story.  So let’s just briefly break down the ultimate effect of valuation on Gold with three bullets:

  • Gold settled this past week yesterday (Friday) at 1946; per the opening Gold Scoreboard, valuation is 3706; Gold is thus presently priced at but 53% of its valuation;
  • Gold’s highest level of valuation-to-date is 4031 (per the week ending 15 April ’22), with price concurrently at 1977; obviously since then, the Federal Reserve has been “rebasing” the money supply (“M2” from $22.1T to now $20.7T, or -6.3%);
  • Gold’s price — whilst typically lagging valuation — eventually ascends to past high valuation levels; Price’s All-Time High of 2089 (on 07 August 2020) matched the valuation high of 2089 achieved eight years earlier (as of 24 July 2012).

Thus ’tis fundamentally fabulous to know there is so much higher for Gold — dare we say “automatically” — to go.  Precisely put, Gold’s price today so relatively inexpensive, ’tis akin to Roger Moore opting for “player’s privilege” in rolling Louis Jourdan’s lucky backgammon dice:  “It’s all in the wrist … double sixes … fancy that.”  –[Octopussy, Eon-MGM/UA, ’83]

“Yet if I can play devil’s advocate, mmb, Gold is just not popular anymore…“

Your “Yet“ is the operative word there, Squire:  merely move it to the end of your sentence in replacing the word “anymore“.  Moreover as recently penned, Gold’s popularity amongst the so-call “sovereigns” remains substantive.  When including Gold as a currency (albeit this data is six years in arrears per the World Gold Council), it reportedly makes up better than 50% of foreign reserves belonging to Austria, France, Germany, Greece, Italy, The Netherlands, Portugal, The United States, and (again per six years ago) Venezuela.

But as the Investing Age of Stoopid rolls along, “The Herd” don’t want yield-less Gold.  Rather, their preference is to be all-in with equities, even if earnings-less.  “No, we gotta own Nvidia ya know [p/e 105x]… “No, we gotta own Amazon ya know [p/e 110x]… “No, we gotta own Salesforce ya know [p/e 133x]…”  That’s just a few of the 25 S&P 500 constituents with price/earnings ratios currently in excess of 100x.  As for the total market capitalization of the S&P now priced at 4450?  $38.9T.  The aforementioned liquid money supply (“M2”) of the US?  $20.7T.  Sleeping well?  Got Gold?  Admittedly that said…

Secondly:  Gold is Technically Torturous given its performance since the weekly parabolic trend flipped from Short to Long two weeks ago.  “Long” means “Up”, not “Down”.  But the latter has been Gold’s state from settling at 1966 since starting September, from which price has been as low as 1922 (-2.2%).  Worse for Silver after settling 01 September at 24.55, she has since succumbed to as low as 22.56 (-8.1%).  Torturous indeed!  That stated, both precious metals are still clinging (precariously) to their respective weekly parabolic Long trends as we see here from one year ago-to-date:

At least by each rightmost respective bar, Gold and Silver got bids into week’s end to close well off those noted lows.  And to stick with this technical treatise — torturous as ’tis — we’ve a near-term Gold study that bodes well for higher prices.  In reviewing the week’s ending data runs, from the website’s Market Rhythms page up popped a pending positive crossover for Gold’s 12-hour MACD (“moving average convergence divergence” … which for you WestPalmBeachers down there is a very popular market-following study).  Here’s the graphic of Gold from mid-year-to-date in 12-hour units with the MACD’s blue line poised to cross above its red line, visibly-viewed by the trading community as indicative of higher price levels in the offing:

‘Course, has this signal been performing well?  In order to qualify for our Market Rhythms page, various criteria must be met.  And specific to Gold’s 12-hour MACD:  across the past ten signals (since 03 May — Gold then 2082 — in perpetually swinging from Long-to-Short-to-Long-etc.) has been complied a pure-swing bi-directional gain of 159 points with an “average maximum” gain per swing of 48 points.  Just in case you’re scoring at home.  The point is:  should this next up swing confirm, we’d expect it to help Gold get back on its broader parabolic up track.

Speaking of “up track”, have you been following that of the StateSide Economic Barometer?  Nothing recessionary there:

Highlighting the past week’s streak of 15 incoming Econ Baro metrics was August’s Capacity Utilization, the 79.7% reading ranking as second highest across the past 10 months, whilst Retail Sales increased their growth to +0.6% from July’s +0.5% pace.  Too, September’s New York State Empire Index — which was largely negative throughout 2022 into 2023 — posted its fourth positive reading of the past six months.

Therein, the bogeyman of the bunch was ramped-up inflation which falsely feeds into economic “growth”.  At both the retail and wholesale levels, August headline inflation (which acknowledges that you eat and drive) more than doubled their July paces.  But is Mr. Bogey frightening Wall Street’s children?  Going by our Moneyflow page, we’ve yet to see “fear” in the S&P 500, (note again that adverb’s emphasis).  But with our “live” p/e of the S&P at an honestly-calculated 39.6x, “tick, tick, tick goes the clock, clock, clock…”

And to be sure, the rising price of Oil is nurturing numbers higher as it inflates its way through the economic system.  Here we’ve the percentage tracks of the five primary BEGOS Markets (Bond / Euro / Gold / Oil / S&P) across the past 21 trading days (one month).  “Somebody stop that Oil!”:

As for the precious metals from three months ago-to-date, here next we’ve their daily bars along with those “Baby Blues” that depict the consistency of the evolving 21-day linear regression trend.  For both Gold on the left and Silver on the right, the baby blue dots are falling, which does not lend well to price’s firming and turning higher.  Still, the rightmost bar in each case is indicative of buying interest, which beneath the umbrella of the weekly parabolic Long trend — plus the aforeshown pending MACD positive cross — can combine to  “Turn the beat around…”  –[Vicki Sue Robinson, ’76]:

To the 10-day Market Profiles we go for Gold (below left) and for Silver (below right).  Their both having departed basement residency from the past two weeks enhances the (hopefully) supportive aspects for the yellow metal’s 1932-1952 zone and the white metal’s denoted 23.40 level:

Time to wrap with the stack:

The Gold Stack
Gold’s Value per Dollar Debasement, (from our opening “Scoreboard”): 3706
Gold’s All-Time Intra-Day High: 2089 (07 August 2020)
2023’s High: 2085 (04 May)
Gold’s All-Time Closing High: 2075 (06 August 2020)
Trading Resistance: 1952 / 1964
Gold Currently: 1946, (expected daily trading range [“EDTR”]: 16 points)
10-Session “volume-weighted” average price magnet: here at 1946
Trading Support: here at 1946, then 1942 / 1932
10-Session directional range: down to 1922 (from 1980) = -58 points or -2.9%
The Weekly Parabolic Price to flip Short: 1904
The Gateway to 2000: 1900+
The 300-Day Moving Average: 1859 and rising
2023’s Low: 1811 (28 February)
The Final Frontier: 1800-1900
The Northern Front: 1800-1750
On Maneuvers: 1750-1579
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

If all this weren’t exciting enough, wait:  there’s more!  Wednesday (20 September) brings the next Policy Statement from the Federal Open Market Committee.  Sense across the spectrum has been the Fed shall “pause” as it recently did two Statements ago (14 June) before again raising last time ’round (26 July), as just did the European Central Bank.  So with August inflation having notably picked up the pace, this time appears more of a “Crapshoot” –[Moriarty, ’16], albeit we think the Fed shall make the raise.  Alors, on verra mes chers amis!  In the meantime, survive the torture toward achieving the fabulous:  stay with Gold and Silver if you please!


Cheers!

…m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter(“X”):  @deMeadvillePro

The Gold Update: No. 721 – (09 September 2023) – “Gold’s All-Time High Drive Departs With a Dive”

by

The Gold Update by Mark Mead Baillie — 721st Edition — Monte-Carlo — 09 September 2023 (published each Saturday) — www.deMeadville.com

“Gold’s All-Time High Drive Departs With a Dive“

Quite the inauspicious start for Gold’s fresh parabolic Long trend as otherwise herein detailed a week ago.  Indeed then we were all megaphones and pom-poms about Gold now being en route to a new All-Time High … and we’re still in that camp even though the drive to such high has commenced with a dive.

For having settled a week ago at 1966 in confirming the new up trend — and historically backed by the strength to surpass the present All-Time High (2089 on 07 August 2020) as we ascend — Gold instead this week fell to as low as 1940 toward settling yesterday (Friday) at 1943.  Fortunately, ’tis not the end.  

Further, this Gold uptrend remains intact, as does same for Silver.  So let’s straightaway go to the two-panel chart of the precious metals’ weekly bars from one year ago-to-date with their respective parabolic trends in stride:

The optimistic news is that both the yellow and silver metals exhibit their rightmost two blue dots of fresh Long trend.  The pessimistic news is that the margin for error — i.e. trend reversal — admittedly appears tight.  Gold’s present distance from here (1943) to the flip-to-Short price (1902) is -41 points, which given Gold’s expected weekly trading range of 44 points is within a vulnerable distance.  Similar is the case for Silver (currently 23.20) with her flip price just -1.00 point lower at 22.20; her EWTR?  1.32 points.  Hang in there Sister Silver!

“But obviously you’re still bullish for higher Gold from here, eh, mmb?“

Would we otherwise be writing, dear Squire?  Or to quote one JP from our Investors Roundtable:  “The trend is your friend until it reaches the bend.”  Moreover as cited a week ago in asking “How high is high?”, recall that Gold’s “maximum average” price follow-through per the prior 10 weekly parabolic Long trends is +11.1%.   Thus again strictly in that vacuum, we’d see Gold 2184 on this run, eclipsing the still standing 2089 All-Time High by nearly +100 points.  Here’s such historical table of positive percentage MaxGain follow-throughs:

“But if I may interject again, mmb, four of those last six ‘MaxGains’ have been less than +5%…“

Duly noted, Squire.  Yet if we instead employ the weighted-average method, the “perfect world” MaxGain comes to +9.1%, which from that starting 1966 level still sets Gold for a new All-Time High at 2145.  Either way, next week is important for the precious metals’ ascent to resume.  Else these fresh uptrends face parabolic busts.

Too, we’ve another oft-overlooked analytical note:  have you been following our Markets Ranges page?  As we tweeted (@deMeadvillePro) this past Thursday night:  “…Market Ranges becoming unusually narrow (save for that of the Spoo); may portend Big Moves ahead for the BEGOS Markets; have a look…”  

Indeed for the month of September — wherein by conventional wisdom “it all goes wrong” — scant little has yet to happen, especially with respect to the precious metals in terms of day-to-day ranginess.  Below on the left we’ve Gold’s “expected daily trading range” from one year ago-to-date; (for you WestPalmBeachers down there, this is not the price of Gold; rather ’tis how many points we expect Gold shall trade between its next day high and low).  And the number “16” in the Gold box is as narrow an expected points range as we’ve seen in better than a year.  Similarly on the right is the case for Sister Silver now with her 0.50 points expectation.  ‘Tis said “Traders love volatility”, a condition rather absent of late.  This is why understanding potential price movement from day-to-day is critical to cash management.  Here’s the graphic:

‘Course, cash management has become a crap-shoot if investing via the StateSide trendless economy.  “It’s up … no wait … it’s down … no wait … it’s ad nauseum…”  Or as crooned by The Moody Blues: “School taught one and one is two.  But by now, that answer just ain’t true…“ –[‘Ride My See-Saw’, ’68].  

Too, there’s the standard verbage in the Policy Statements from the Federal Open Market Committee that it “will continue to monitor the implications of incoming information for the economic outlook”.  Is it any wonder ongoing FedSpeak is so vague?  Can you make heads or tails of it all?  “In Search of the Lost Chord” indeed as we turn to the Economic Barometer:

And therein, we cite a notable number from this past week:  Consumer Credit as calculated by the Fed for July was just $10.4B, the third-lowest reading since the core of COVID 30 months prior.  Hitting the wall of the credit card limit?  That rising variable interest rate is a credit killer.

Regardless, President Biden’s economy is said to be just fine, thank you.  To wit these two headline doozies from Dow Jones Newswires as the past week unfolded:  “Resilient U.S. Economy Defies Expectations” and “Why Higher Unemployment Is Good News Now“  (Clearly the FinMedia summer interns are closing out their stints at high writing levels as they return to University).  Yet on this side of the pond, the EU’s leading economy — Germany — continues to falter.  Further ’round the globe, China’s exports continue to plummet … does that mean Walmart (WMT) shan’t have anything to sell?  Good grief…

Returning to Gold, ’twas a week of grief as told, made graphically bold in the graphic below:  to the left we’ve Gold’s daily bars from three months ago-to-date, this past week not looking so great.  Still, the baby blue dots of trend consistency continue to climb.  And to the right, despite Gold’s plight, the most dominantly-traded price of the past two weeks — indeed the 1943 settle — has essentially held as support per the Market Profile’s fortnight:

As for poor ol’ Sister Silver, the like graphic is weaker, her “Baby Blues” at left having just turned tail, whilst her Market Profile at right finds price having taken quite the “THUD!”  Hopefully it shan’t leave a bruise…

Notwithstanding the precious metals needing a boost into the new week, we wrap this missive with “Breaking News”:

The long-sought reversion of our “live” price-earnings ratio to its mean has finally occurred.  And both elements of the fraction thereto contributed.  The “P” of the S&P 500 at 4457 is -7% below its all-time high (4819 on 04 January 2022).  And the Index’s “E” — which for Q2 grew year-over-year by +6% — was recently enhanced by post-earnings season power profits, notably from the large market capitalization likes of Nvidia (NVDA) and Berkshire Hathaway (BRK.B).  Indeed, those two companies by cap-weighting comprise 4.1% of the S&P 500’s total of 503 constituents.  Here’s our enhanced graphic, the green line having once again reverted to the red line:

So is that as low as the S&P shall go?  Per what we know:  no.  With our “live” P/E today at 39.9x, ’tis still a very strained distance above Bob Shiller’s CAPE, which in turn has yet to re-meet with the oft-parroted S&P/DJI version of “twenty-something”.  And should the economy recess and earnings not grow, a return to the “live” P/E’s low (25.4x in January 2013) means an S&P “correction” from here of -36%; (that’d be to 2852, just in case you’re scoring at home … and recall our musing earlier this year of an S&P sub-3000).  As well, the imputed S&P yield per the P/E ( 1 ÷ 39.9 ) is 2.507%; but the actual cap-weighted yield is only 1.537% … and yet the three-month annualized T-Bill yield is more than triple that at 5.293%, and ’tis risk-free!  Thus you can see where your money ought be.

But for security above and beyond risk-free we’ve the world’s best currency:  Gold!  Today’s 1943 level prices it at just 52% of its Dollar debasement valuation, which per the opening Gold Scoreboard’s calculation of 3709 even accounts for the increase in the supply of Gold itself.  And save for smart sovereigns, just because “nobody” owns Gold yet, do not be without!  Got Yours?


Never in a million years, Sweet Sister Silver!

Cheers!

…m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter(“X”):  @deMeadvillePro

The Gold Update: No. 720 – (02 September 2023) – “Gold and Silver Finally Flip!  How High Might Be This Next Up Trip?”

by

The Gold Update by Mark Mead Baillie — 720th Edition — Monte-Carlo — 02 September 2023 (published each Saturday) — www.deMeadville.com

“Gold and Silver Finally Flip!  How High Might Be This Next Up Trip?“

Thank goodness, THAT’S over.

“ ‘THAT’ being what, mmb? “

THAT, Squire, being the Short parabolic trend for both Gold and Silver having finally reached the end!  For as last week herein penned:

“As to the ‘when’ for these two precious metals’ Short trends to end … it is plausible one if not both precious metals’ weekly trends can be Long in a week’s time.  ‘Stay tuned to this channel for further developments…’“

Which as foretold by the Sibyl — here in the guise of the lovely Lady Fortuna — is exactly what came to pass as the week unfolded, Gold settling yesterday (Friday) at 1966 and Silver at 24.55.  ‘Tis a beautiful thing, their new weekly parabolic Long trends each heralded by its rightmost encircled fresh dot in blue:

‘Course the key question from here is:  “How high is high?”  Notwithstanding last Spring’s structural resistance (for Gold in the 2000-2100 range and for Silver in her 25-27 range), let’s recall “average maximum” price follow-throughs.  For Gold’s last 10 parabolic Long trends (dating back to September 2018), the average max upside upon Long trend confirmation is +11.1%:  thus in that vacuum from today’s 1966 level, to reach such “perfect world” average would bring an All-Time Record High of 2184.  Likewise for Sister Silver’s last 10 parabolic Long trends, (in her case dating back to  December 2018), the average max upside (as anticipatively noted a week ago) is +19.6%.  Such increase from today’s 24.55 price, would bring 29.36, a level not traded for Silver since 01 February 2021.

And for Silver, that’s still a far cry from her All-Time Record High of 49.82 on 25 April 2011, the Gold/Silver ratio on that day a mere 32.1x versus today’s 80.1x.  The century-to-date average of that ratio is now 67.7x.  Pricing Silver to that puts her at 29.04 … which is not far from the just-cited 29.39 potential upside follow-through per the new parabolic Long trend.  ‘Tis one of those things that happily makes you go “Hmmm…”

“Hmmm…” (not necessarily happily) also applies to the state of the Economic Barometer.  Hardly is it humming along, but neither is it sputtering to a stop.  From this past week’s load of 16 incoming metrics, 8 showed period-over-period improvement, 7 were worse, and arguably the most important of all the data points — Core Personal Consumption Expenditures — again came in at +0.2% (an annualized rate of +2.4%) for the month of July.  Such rate of this Federal Reserve-favoured inflation gauge means the Open Market Committee  — some say — shan’t further raise their Banks’ Funds Rate for the balance of the year.  On verra…

To look at the Econ Baro year-over-year, its net neutral state may argue that the Fed simply go to bed, i.e. “Everything’s great!”  Dow Jones Newswires just went on record with August’s StateSide jobs report as “near perfect”.  And as for equities, Bloomy concluded the week with “Stock Traders Get Back to Believing Everything is Just Perfect”.  Perfection abounds.  And why not?  Oh to be sure, risk-free three-month U.S. “no debt ceiling dough” settled the week at an annualized rate of 5.268%, whereas the “all-to-risk” S&P 500’s yield is a paltry 1.507%.  BUT:  it doesn’t matter for neither do earnings, our “live” price/earnings ratio for the S&P finishing the week at 40.6x, not quite double the S&P’s 66-year lifetime median ’round 23x.  (Best not to wreck everyone’s fun).

Regardless, here’s the Baro with the S&P 500 today at 4516, only -5.9% below its all-time closing high of 4797 from back on 03 January 2022:

So just as “The Sky’s the Limit!” for the S&P — clearly as ’twas in November 1980, August 1987, March 2000, October 2007, February 2020 and January 2022 (from which “corrections” then ranged from -25% to -58%) — ’tis no surprise that the mighty Index again tops our year-to-date standings of the BEGOS Markets with both Gold and Oil rounding out the podium, (albeit a distant second and third).  Note Silver’s seriously lagging percentage performance; hence the aforementioned G/S ratio still historically high at 80.1x:

Too, it being month-end plus a day, ’tis time to go ’round the horn for all eight BEGOS Market components across these past 21 trading days (one month) incorporating their diagonal grey regression trendlines and the baby blue dot depictions of such trends’ day-to-day consistency.  Notably therein is a most material move by Oil.  Indeed as we twice tweeted (@deMeadvillePro) during the week, Oil initially en route to the 75-72 zone then defied its “Baby Blues” with a great gusher into the highest weekly close (86.05) since that ending last 07 November (then 88.96).  As for Copper’s up gap, we can thank the price premium in rolling from the September to December cac:

As to Gold and several of the key precious metals’ equity offerings, let’s next look year-over-year at their respective percentage performance tracks.  From the bottom up, note that only Newmont (NEM) by this time frame is in the red, -5% as its weathers costs associated with acquiring Oz-based Newcrest Mining.  Then to the good we’ve Pan American Silver (PAAS) +9%, the Global X Silver Miners exchange-traded fund (SIL) +12%, Gold itself +14%, Agnico Eagle Mines (AEM) +17%, Franco-Nevada (FNV) +19%, and the VanEck Vectors Gold Miners exchange-traded fund (GDX) topping the stack at +22%, (although well off its May highs, as is the entirety of the bunch).  But all ought benefit in anticipating higher metals’ prices near-to-medium term as the new weekly parabolic Long trends kick into gear:

Meanwhile per the past fortnight, Gold’s Market Profile below left depicts trading support in the 1945-1942 zone, whilst Sister Silver below right has slipped a pip below her most dominantly-traded price of 24.60.  These of course shall wither away as higher levels come into play:

Toward closing, here’s our chart of the sedimentary Gold Structure by the month from a dozen years ago-to-date.  Gold’s present All-Time High of 2089 was established on 07 August 2020 as the response to COVID shut down the world.  Yet now that Gold has flipped to a brand-new weekly parabolic Long trend, as noted the typical average follow-through can well break the Triple Top into uncharted territory toward 2184.  And when viewed by the rightmost monthly bars, it makes the nattering nabobs of Gold negativism appear nonsensical:

Heaven forbid your being a precious metals naybob…

…for that’s where you ought put your bob:  into Gold and Silver!

Cheers!

…m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter:  @deMeadvillePro

The Gold Update: No. 719 – (26 August 2023) – “Gold Grips a Bit, but Silver Rips!”

by

The Gold Update by Mark Mead Baillie — 719th Edition — Monte-Carlo — 26 August 2023 (published each Saturday) — www.deMeadville.com

“Gold Grips a Bit, but Silver Rips!“

This past week wherein Gold finally garnered a wee bit of grip, ’twas Sweet Sister Silver who showed how to rip!  Whereas Gold settled yesterday (Friday) at 1943 for a +1.3% weekly gain, Silver settled at  24.285 for a reigning +6.8% weekly gain.  Let us thus duly start with the white metal in revisiting a few phrases from recent of these missives as below dated:

  • 15 July –> “How many times have we herein written ‘Don’t forget the Silver!‘”

     

  • 12 August –> “…from the ‘Means Reversion Dept.’ to price Silver via the century-to-date mean [Gold/Silver] ratio of 67.7x puts it at 28.76, (i.e. +21% above today’s 22.75).  Again:  ‘Got Silver?’”

     

  • 19 August –> “Silver’s ‘Baby Blues’ … are just starting to curl upward, whilst price sits just above major trading support (22.75) in the Profile … Can Sweet Sister Silver actually lead Gold?  Absolutely!“

And so justifiably it came to pass this past week that Silver indeed did rip, and moreover, she did so before Gold itself at least sought some grip.  In fact:  all-in from Silver’s low of 22.265 on 15 August, it took but six trading days for price to touch 24.430, a low-to-high gain of +9.7%.  Had you been impossibly lucky enough to have bought that low and sold that high for a gain of +2.165 points, your single contract gain (at $5k/pt) equated to $10,825 … or as a deep-pocketer had you instead bought 100 contracts, your six-day gain equated to $1,082,500 … (just in case you’re scoring at home).  Visually, here are the respective cumulative percentage tracks (per net daily closes) for Silver and Gold from two weeks ago-to-date, wherein the latter still looking rather flat is saying “Gimmie more lift, baby!”

Significantly intrigued by Silver’s finally coming ’round, we warrant her being paired with Gold in displaying the weekly bars and parabolic trends for both precious metals from one year ago-to-date.  In each case, such trend remains Short (per the declining red dots), but with prices knocking on their respective doors to flip Long:

Indeed with Silver less than one point away from flipping her trend from Short to Long, the question is begged:  “How much farther does Silver then climb?”  Answer:  across Silver’s past 10 weekly parabolic Long trends (extending back into December 2018), the “median maximum” price gain from each Long confirmation at week’s-end until again flipping back to a Short trend is +13.2%, and such average max gain is +19.6%.  Strictly in that vacuum, were Silver’s trend to flip Long in the ensuing week at 24.870, a match to that median max gain would bring 27.480 — and further to the average max gain — 29.040.  As for duration, the average Long trend across those 10 prior cases has lasted for 11 weeks.  A lot of statistics there, but the prudent trader/investor looks to both time as well as range in cash management.

“Which means that 90% are not very prudent, right mmb?“

So say various studies, Squire.  Or as a dear futures mentor of ours from many years ago might say:  “They all knew better than the market which is why they’re not around anymore.”  In other words, investing as Smart Alec on a wing and a prayer won’t get you anywhere, (e.g. how’s that “live” 41.5x price/earnings ratio of the S&P 500 gonna work out for ya?).  Scary remains the story there.

As to the “when” for these two precious metals’ Short trends to end:  Gold is 32 points away from flipping to Long with the “Expected Weekly Trading Range” now 47 points; and Silver is 0.585 points away from same with an “EWTR” of 1.315 points.  Thus it is plausible one if not both precious metals’ weekly trends can be Long in a week’s time.  “Stay tuned to this channel for further developments…”

Meanwhile in briefly reviewing our “non-events” take from a week ago, ‘twould seem that (after all the FedMedia hype as was anticipated) both the Fed’s Holiday Camp and the BRICS’ Revamp had almost no sway on our primary BEGOS Markets:  week-over-week, the Bond was +0.6%, the Euro -0.7%, Gold (as noted) +1.3%, Oil -1.7%, and the S&P 500 +0.8%.  Add to that the quiet Economic Barometer producing just a mild thud, and the week on balance (save for that of Silver) was a dud.  Here’s the Baro as Federal Reserve Chairman Powell keeps a tight grip on the money whilst BRICS’ arguably succumbed to its namesake in adding six bricks to its mix:

But let not too much summertime complacency enter your veins as next week’s incoming Econ Baro metrics shall bring both losses and gains.  Wherein this past week was weathered just five economic data points for the Baro, the ensuing week brings 16 metrics, the key highlight being Thursday’s (31 August) release of July’s Fed-favoured Core Personal Consumption Expenditures Index, the consensus for which is an annualized pace of +2.4%, (i.e. +0.2% for the month).  Yet, if you really want to get into the weeds, recall the recently reported/leading July Core Producer Price Index having registered +0.3%; moreover the Core PCE’s 12-month regression level also “suggests” +0.3%.  Too much information perhaps, but should +0.3% be the number, we shan’t be too surprised whilst all around are “expecting” +0.2%.

Either way, one must deem Silver as the anticipated “surprise” of the past week.  Per our tweet (@deMeadvillePro) on Thursday, Silver’s “Baby Blues” of trend consistency were well on the northerly move after pointing to their commencing a fresh up-curl in last week’s missive.  Such is recalled below in the following two-panel graphic of the precious metals’ daily bars from three months ago-to-date with Gold at left and Silver at right.  And specific to the latter, we’ve coloured in red Silver’s bar and dot from Friday a week ago, from which point she truly did go.  Way to rip, Sister Silver!

In so “ripping”, the Gold/Silver ratio in a mere week fell from 84.1x to now 80.0x:  such like week-over-week drop has happened but one other time this year, indeed just recently so from the first-to-second week of July.  Thus our interpretation?   Sister Silver is getting a long overdue bid!

Long overdue, too, to rise from their respective Market Profile basements were both Gold next on the left and Silver on the right.  The volume-dominant supporters and resistors are as labeled:

So with Sister Silver having put in a semaine superbe, let’s wrap it here with something hardly superb.  As you regular readers of The Gold Update know, we’ve become more and more skeptical these recent years of the FinMedia’s foundational grounding and market understanding, (i.e. in referring on more than one occasion to the once-mighty and revered Barron’s as having become a children’s writing pool).  And to wit, we balked again at a headline yesterday from ever-lovin’ Bloomy.  Ready?  “Stock Rally Has a Ways to Go Before Americans Feel Rich Again”.  Instantly, we had a John Patrick McEnroe moment: “You canNOT be SERious!”  What rally is being cited?  ‘Course having virtually vanished from essentially the entirety of bullish market musings is the “E” word (Earnings) — which themselves haven’t actually vanished — but are, on balance, unsupportive of the S&P 500’s present level (4406 and its ghastly-high aforementioned P/E of 41.5x).

In fact, let’s go all the way back to The Gold Update penned on 28 January with respect to the S&P:  “The S&P is today priced at [then] 4071. Morgan Stanley already is well on the record of it reaching down this year to 3000. We anticipate sub-3000. The P/E reverting to its historical mean (22.4x) suggests — were there no growth in earnings — 2313.”  Yet to be fair for Q2 Earnings Season, as you know S&P cap-weighted profits grew at a +6% pace; but the overall level (as just stated) remains Index unsupportive.

Regardless, from here with just over four months remaining in 2023, ‘twould be a terrific tumble:  from today’s S&P 4406 level to 3000 = -32% with 87 trading days to go.  Has the S&P ever fallen by -32% within 87 trading days?  Of course it has:  during 1987, 2002, 2008, and most recently in 2020.  Shall it so do in the remainder of 2023?  Until we see fear at the website’s MoneyFlow page, the answer is “No” and our sub-3000 notion we’d have to forego.

Still, let us also reprise that:  “Marked-to-market, everybody’s a millionaire; market-to-reality, nobody’s worth squat.”  Or translated for you WestPalmBeachers down there: shall you be out of stocks before it all goes wrong?

And better yet: be in Gold and Silver!

Cheers!

…m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter:  @deMeadvillePro

The Gold Update: No. 718 – (19 August 2023) – “Gold’s Bottom-Seeking Descent; BRICS Seeming a Non-Event”

by

The Gold Update by Mark Mead Baillie — 718th Edition — Monte-Carlo — 19 August 2023 (published each Saturday) — www.deMeadville.com

“Gold’s Bottom-Seeking Descent; BRICS Seeming a Non-Event“

Gold just completed its 10th down week of the last 15, “spot” settling yesterday (Friday) at 1890 and the far more actively-traded December contract at 1918.  Regardless, where is the bottom?

Such bottom-seeking descent hasn’t actually been that dire:  basis December from its 01 May settle of 2081 to today’s 1918 is a price decline -7.8% across those 76 trading days.  Within that period, the yield on three-month money has increased from 5.000% to now 5.278% whilst the liquid StateSide money supply (“M2”) has shrunk from reaching $20.89T (per 02 June) to now $20.70T.  Thus in turn, the Dollar Index has increased from 101.885 on 01 May to now 103.350, as “less is more”.

‘Course you long-time readers of The Gold Update well know that such conventional wisdom “resistors” are futile. For when Gold goes, it goes.  Recall the six-month run from January 2010 through June 2010 wherein even as the Dollar Index rose some +10%, Gold in stride rose nearly +7%?  Or with respect to interest rates when from 2004 through 2006 the Federal Reserve’s Funds Rate rose from 1.00% to 5.00%, Gold therein rising +59% (from 402 to 639)?  So again now, with respect to Gold today:  where is the bottom?

Let’s assess Gold’s weekly bars and parabolic trends from one year ago-to-date:

 

Our best sense is that Gold is near — if not at — its bottom for this red-dotted parabolic Short trend, (now 13 weeks in duration).  Note the two green support lines for the 1901-1893 zone:   1901 is the trend’s overall low from the week ending 30 June; and 1893 is the oft-reliable mid-point of the 1975-1811 support structure established during those weeks ending 03 February through 03 March.  Were that zone to go — to which we say “No!” — 1811 would then become ripe for consideration.

To be sure, the market — today 1918 — is never wrong; yet neither is Gold’s value — today 3719 — mathematically to Dollar debasement.  And since Gold is overwhelmingly priced in Dollars over any other currency, let’s briefly consider some FinMedia bantered-upon tricks by the BRICS.

Thus with a tip-of-the-cap to our “Who Knows What to Believe Dept.” as Brazil, Russia, India, China and South Africa gather in the latter for the ensuing week’s meeting, speculation is significantly rife over a variety of outcomes.  “Yet another new currency regime”, they say, (indeed a curious combining of the “5Rs”:  Real, Rouble, Rupee, Renminbi, Rand).  “The world’s new reserve currency”, they say. “And it’ll be pegged to Gold”, they say.  “But it won’t be convertible to Gold”, they say.  And the “they says” continue ad nauseum.  For what ’tis all worth, (which perhaps is nothing), we deem the outcome of it all as a non-event, and further that ’tis (whatever ’tis is) already priced into the primary BEGOS Markets (Bond, Euro, Gold, Oil, S&P 500)

Still, we’re a bit bemused again by the speculation of pegging a new currency to Gold yet without convertibility thereto.  Given Gold primarily is transacted in Dollars, then is the new currency not in that sense pegged to the Dollar?  And given the Dollar itself is (as are all the fiats) based on nothing, a BRICS currency is but another money mix.  It thus might well be based on cereal box of Trix.  You can see where the logic in pricing falls apart.

Moreover, what would you pony up to buy a “5R”?  If the BRICSters desire creating a new currency, great:  go for it.  We’ve had ’em all though history, some notables being various Dinars, Kwanza , Pengo, various Pesos, notorious Reichsmarks, et alia.  Remember too 97’s Asian Contagion and 98’s Russian Debt Crisis?  So what’s another pile of bad actors’ BRICS anyway, eh?  “Got Gold?”  To reprise the late, great Richard Russell:  “Gold’ll be the last man standing.”

In fact, let’s see how Gold has been standing across the past dozen years.  As vastly undervalued as the yellow metal remains, the bent of price’s daily settles from what was then (on 22 August 2011) Gold’s All-Time Closing High of 1900 to today has at least regained resiliency even as StateSide “M2” has since more than doubled!

“But mmb, you did write back in 2011 that Gold was too high…“

Absolutely correct, Squire.  But run the regression vis-à-vis Dollar debasement across the last four decades and — even accounting for Gold’s own supply increase — valuation today is the aforementioned 3719.  Just in case you’re scoring at home.  “Tick, tick, tick goes the clock, clock, clock…”  Do not miss out:

Turning to the Economic Barometer, its week produced quite an up-streak.  Of the 14 incoming metrics, 10 improved period-over-period, albeit the National Association of Home Builders portends August’s Housing Starts and Building Permits shall show slowing (when next reported on 19 September).  But quite curious amongst the data was the NY State Empire Index tanking from July’s +1.1 reading to -19.0 for August, whilst the Philly Fed Index was rising from -13.5 to +12.0(!)  Is that indicative of a mass exodus from New York City to so-called “Little New York”?  Stay tuned…

Meanwhile as to this current Econ Baro spike, to borrow from an old Memorex advert of 40-50 years ago:  “Is it real? Or is it inflated?”  This past 27 July we had the first peek at Q2 Gross Domestic Product annualized growth, which at +4.6% — less the 2.2% “chain deflator” — netted a real GDP pace of +2.4%.  In other words for you WestPalmBeachers down there, essentially half of the economic growth seems solely due to inflated numbers:  “Yeah, well we sold less product this year but we made more money ’cause we raised prices!”  Let’s see how long that lasts.  Here’s the Baro:

Therein the red line is of course the S&P 500, this year’s high (4607 on 27 July) we’re ruminating as it for all of 2023.  Yes, our “live” price/earnings ratio for the S&P remains unrealistically high at 44.3x (basically double the Index’s lifetime P/E mean).

That is even more significant given the overall poor quality of Q2 Earnings Season having just ended.  Doubtless you shan’t find the following on your favoured FinTv station:  because we actually do the math, for the 1,867 companies collected, only 49% bettered their bottom lines from Q2 a year ago.  Ex-COVID quarters, that is the worst year-over-year comparative performance since Q3 of 2015.  (‘Course 65% of earnings “beat estimates”, the brokering tool to suck in the ignorant).  And whilst 60% had revenue increases, this bottom-line decline means ‘tis getting more costly to run businesses.  “Uh-oh, say it ain’t so!”  See?  ‘Twasn’t on your FinTV.  From the website, here’s Q2 visually:

Visually for Gold we next go to our two-panel display of price from three months ago-to-date on the left and 10-day Market Profile on the right.  And as much as we hate being right when assessing Gold’s descending baby blue dots of trend consistency, again we say “Follow the blues instead of the news, else lose your shoes.”  (To wit, too, last week’s leading tweets [@deMeadvillePro] on Oil).  As for Gold, price again lies near the base of the Profile:

Then we’ve Silver — whose ratio from Gold is a value-grabbing 84.1x (this century’s mean being 67.7x) — and for whom the like display is looking a bit better.  Silver’s “Baby Blues” (below left) are just starting to curl upward, whilst price sits just above major trading support (22.75) in the Profile (below right).  Can Sweet Sister Silver actually lead Gold?  Absolutely!  (Your homework assignment is to review October-November 2022).  Whoo-hooo!  Here’s the current graphic:

Let’s wrap with a look at the stack:

The Gold Stack
Gold’s Value per Dollar Debasement, (from our opening “Scoreboard”): 3719
Gold’s All-Time Intra-Day High: 2089 (07 August 2020)
2023’s High: 2085 (04 May)
Gold’s All-Time Closing High: 2075 (06 August 2020)
The Weekly Parabolic Price to flip Long: 1982
10-Session “volume-weighted” average price magnet: 1945
Trading Resistance: 1923 / 1935 / 1950 / 1960 / 1969
Gold Currently: 1918, (expected daily trading range [“EDTR”]: 18 points)
10-Session directional range: down to 1914 (from 1982) = -68 points or -3.4%
Trading Support: (none by the Profile)
The Gateway to 2000: 1900+
The 300-Day Moving Average: 1851 and rising
2023’s Low: 1811 (28 February)
The Final Frontier: 1800-1900
The Northern Front: 1800-1750
On Maneuvers: 1750-1579
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

To sum, the two big (arguably non-) events in this week next spent are of course the FinMedia BRICS-speculative narratives plus the Kansas City Fed’s annually-sponsored summer camp at magnificent Jackson Hole, to a degree on par with The Who’s (indeed Krazy Keith Moon’s) “Tommy’s Holiday Camp” –[1969].  

So who’s camping your monetary value? Hopefully YOU with Gold and Silver too!

Cheers!

…m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter:  @deMeadvillePro

The Gold Update: No. 717 – (12 August 2023) – “Ain’t Just Gold Been Headin’ Down…”

by

The Gold Update by Mark Mead Baillie — 717th Edition — Monte-Carlo — 12 August 2023 (published each Saturday) — www.deMeadville.com

“Ain’t Just Gold Been Headin’ Down…“

Before we graphically elaborate on this week’s double-entrendre Texas-speak title, let’s be up front as regards a mis-guided inference from a week ago.  Therein we wrote with respect to Fitch’s downgrading StateSide credit from AAA to AA+ that:  “…it remains to be seen if raters Moody’s and S&P follow Fitch…” to which a charter reader of The Gold Update pointed out S&P already having dropped their rating to “AA+” 12 years ago.  Given we command accuracy in all that leaves these fingertips, this correction is obligatorily warranted.

Now in transiting from Kings’s English to this missive’s title drawl of “Ain’t Just Gold Been Headin’ Down…“, we begin with the following graphic normally reserved for our month-end missives.  ‘Tis our ’round-the-horn view of all eight BEGOS Markets across the past 21 trading days, (i.e. from one month ago-to-date).  The day-to-day consistency of the grey diagonal trendlines is denoted by the baby blue dots:

And quite clearly — save for Oil remaining bold even as the Dollar maintains a currency toehold — hardly is it just Gold that’s been getting sold; rather ’tis the balance of bunch, (again ‘cept for Black Gold).

Further, the firming Dollar suggests the Federal Reserve’s foot is “expected” to stay on the interest rate pedal, (or again as a long-time StateSide colleague would quip, the Buck continues to “lead the ugly dog contest”).

Indeed wholesale inflation — which for you WestPalmBeachers down there leads retail inflation — just recorded for July finds the Core Producer Price Index having made its largest monthly pace leap (+0.4% from June’s -0.1% to now +0.3%) since that for March 2022.  Such suggests the Fed’s money noose looks to remain tight rather than return to loose.  Recall too the Fed-favoured Core Price Consumption Expenditures Index through June still ran a bit in excess of the Fed’s 2% annualized inflation rate; the July PCE reading is scheduled for 31 August with the Open Market Committee’s next Policy Statement not due until 20 September.  And a lot can happen (understatement) between now and then.

Within the debiting deluge we turn to Gold’s weekly bars and parabolic trends from a year ago-to-date.  And even initially inclusive from two weeks ago of +40 points of December futures premium over spot, Gold has been unable to break above the red-dotted Short trend, price settling out the week yesterday (Friday) at 1946, (still +33 points over spot’s 1913 level).  To break said trend in the ensuing week requires a rise of at least +43 points (from 1946 up through 1989), which technically is “in range” given Gold’s “expected weekly trading range” is now 50 points.  Specific to statistics, century-to-date Gold is now in its 48th weekly Short trend, the average duration from 2001-to-date being 11 weeks, this current stint now 12 weeks.  Thus if stretching for positives, one might opine that the current trend is getting a bit “short in the tooth, partner”…

Meanwhile, still “short” on establishing any kind of trend these days is the Economic Barometer, this past week’s 10 incoming metrics finding six having improved — and thus four having not — period-over-period.  “But it’s an uptrend!”, they say.  “No it’s a downtrend!”, they say.  To be sure, the yo-yoing chop-chop continues it way:

‘Course, within the overall FinMedia rah-rah of inflation nearing the Fed’s 2% target such that another “pause” is in the offing, we’re nonetheless told that borrowing money to purchase real estate is nearing a cost of 7%.  Why so high if inflation is so low?  Seems quite the large income spread for the bank that pays some 3% to collect some 7%. Yet as Q2 Earnings Season drifts towards its close, in glancing at banks’ earnings, about 40% of those reporting had lower bottom lines than in Q2 a year ago.  The good news is:  at least that sudden spate of bank illiquidity during this past March quickly stopped, right?  “Whew! That was close!” 

As for the S&P 500, at least it finally is correcting, albeit thus far to a rather wee extent.  From the year’s high of (4607) to yesterday’s low (4444) spans just -3.5%.  And given our initial S&P Futures target from that top is 4455, having since reached down to as low as 4459, we’re nearly there, albeit as herein previously penned:   “Other in-house measures suggest the 4300s.” As well, our “live” price/earnings ratio for the S&P 500 — which recently was nearly 60x — has come off, such reading now still an otherwise ridiculously-high 44.8x given annualized risk-free dough pays 5.265% at the three-month T-Bill window; (the yield on the “all-to-risk” S&P is now 1.526%).  Still, we believe reversion to the mean will out:  it always does.  (Anyone remember the March 2009 month-end P/E of the S&P?  13.3x).  Too as we tweeted (@deMeadvillePro) this past week, mind the website’s MoneyFlow page, its leading measures of late now weaker than the decline in the S&P itself.

“Also don’t forget that we’re getting close to September, mmb…“

A little seasonal spice there from our Squire.  Indeed, September into October have on occasion been torrid times for stocks.  Certainly the stars are well-aligned for fallout this time.  But then again, they’ve been well-aligned as such since the days of COVID came to be with nary a material pullback to see.

In the interim (short or long as it may be) what we can below see are the 10-day Market Profiles for Gold on the left and for Silver on the right.  Therein we’ve present prices (Gold 1946 and Silver 22.75) buried at their respective bases.  Moreover as noted in Gold’s aforeshown weekly bars, the Gold/Silver ratio is now 85.5x, the highest week-ending level since that on 23 June (86.0x).  Again from the “Means Reversion Dept.” to price Silver via the century-to-date mean ratio of 67.7x puts it at 28.76, (i.e. +21% above today’s 22.75).  Again:  “Got Silver?”

So as these “Lazy-Hazy-Crazy Days of Summer” –[Nat King Cole, ’63] now work through the so-called “Dog Days of August” let us not be too remiss to “check out”.  For the data drums continue with the ensuing week’s slew of 14 incoming metrics for the Econ Baro, including the Conference Board’s lagging “Leading Indicators” for July.  Uptrend?  Downtrend?  The consensus leans to the latter.

Thus what’s on your platter?  Hopefully Gold!

Oh nice touch there, Squire, on the Sam Pepys’ Silver plate!

Cheers!

…m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter:  @deMeadvillePro

The Gold Update: No. 716 – (05 August 2023) – “Gold is Always AAA; the USA? uhhhhh….”

by

The Gold Update by Mark Mead Baillie — 716th Edition — Monte-Carlo — 05 August 2023 (published each Saturday) — www.deMeadville.com

“Gold is Always AAA; the USA? uhhhhh….“

We’ll get underway with our title’s “uhhhh….” 

To which you wily readers weren’t surprised a wit this past Tuesday upon “Forever First Fitch” downgrading the credit rating of the dear ol’ USA from AAA to AA+.  For as herein penned 10 weeks ago (on 27 May):  “Rating agency Fitch (which always figures to be first) is said to be ‘considering’ a downgrade of its StateSide credit rating.”

‘Course in classic Rodney Dangerfield empathy, Fitch initially “got no respect”, the S&P 500 back then blowing off any threat of a StateSide downgrade by instead rising +9.6% right through this past Tuesday.  But late that day suddenly appeared the actual downgrade and the S&P Futures immediately lopped off -26 points (basically a whole day’s range of S&P Index trading) in just two minutes.  Further on Wednesday, Fitch too cut Fannie and Freddie.  “Oh no, say it ain’t so!”  

Either way, Fitch justified the credit rating cut given an “erosion of governance”, toward which the Secretary of the Treasury took umbrage, Old Yeller disparaging the downgrade as both ‘‘puzzling” and moreover “unwarranted”.  Still at long last, “It all going wrong” may be more materially underway.  Duly noted however (for the present) it remains to be seen if raters Moody’s and S&P follow Fitch (as on occasion is their wont).  We’ll wax a bit further on the state of the stock market, but next let’s go to our title’s “AAA” for Gold!

Now as we cautioned a week ago, Gold’s COMEX contract volume has since rolled from August into December as is the norm at this time of year. Yet ever so noticeable this time ’round was the +40 points of (already eroding) premium of December over August (for the storage cost rationale we’ve previously detailed), the older contract going out as usual essentially at “spot”.

Thus in charting Gold’s “continuous contract”, price has the appearance of having gained +19 points (+1.0%) by the weekly bars, whereas in reality price instead dropped -22 points (-1.1%) settling yesterday (Friday) at 1943 vs. December’s 1978.  Regardless, one might deem that 35-point difference as “noise” given Gold’s “expected weekly trading range” is now 52 points.

Still, Smart Alec may be tempted to Short the futures at 1978 on the vapid assumption that Gold shan’t go anywhere these next several months such as to collect 35 points of ShortSide profit (which at $100/pt/cac on 100 contracts would net Alec a profit of $350k).  Our view, ‘natch, is that Gold shall go the other way (i.e. up) and ’twill be Alec that shan’t have gone anywhere but down, (let alone be around anymore).  But the weekly bars certainly shall be.  Here they are from one year ago-to-date, with the “spot” change as also noted:

And even as you WestPalmBeachers down there can figure, with Gold now (1978) just 18 points below the ensuing week’s flip-to-long level (1996), that 52-point weekly range expectation can easily get us there.  Yet, ’tis critical that we be fair:  through the past trading month (21 days), both Gold and the S&P 500 have been in positive directional correlation (i.e. moving both up and down together) as too have been both the Bond and the Euro; indeed Oil is the only primary BEGOS Market (Bond / Euro / Gold / Oil / S&P) that has wandered up-and-away from that bunch.  Still, such notion puts us in mind of 2008’s “Black Swan” when all five primary BEGOS components simultaneously suffered (the least so the Bond and Gold).  The point is:  if the S&P has put in its high for this year (4607), as it continues to tumble, shall Gold so ride astride, or ideally move up against the tide?  We think broadly the latter will out, but for the present, here are the percentage tracks of Gold and the S&P 500 from one month ago-to-date:

As to the StateSide economy, this past week’s set of 13 incoming metrics for the Economic Barometer was nearly a replay of the week prior.  Six metrics improved, six worsened, and one was “unch”.  Thus the Baro looks stuck in a crunch:

And no, Pinocchio, the Baro does not lie, albeit we oft wonder about the jobs data.  Wednesday’s ADP Employment report for the rate of job growth in July declined by -29% (from June’s 455k to 324k) whereas come Friday, Labor’s Payrolls rate increased by +1% (from June’s 185k to 187k).  Again as we oft quip, it depends upon who’s crunching what.  Too for June, the Factory Orders rate did well (from +0.4% to +2.3%) … but the rate of Construction Spending fell (from +1.0% to +0.5%).

And now just beginning to fall is the stock market.  As we tweeted (@deMeadvillePro) this past  Wednesday:  “Following a streak of 41 consecutive trading sessions as “textbook overbought”, the S&P finally is coming off a bit.  (The record across the past 44 years is 59 days).  Seeking initially Spoo 4455 on this downleg.” (The “Spoo” is the long-beloved nickname for the S&P 500 futures contract).  And ’tis well on its way toward the noted level from the past week’s high (4635), having settled yesterday at 4498.  Other in-house measures suggest the 4300s.  And then more broadly there’s this:

“Ahh, the P/E’s ‘inevitable’ (as you would say) reversion to the mean, eh mmb?“

Spot-on steady you are, Squire.  Since instituting the honestly-calculated “live” price/earnings ratio of the S&P 500 a decade ago, you clearly can see the P/E (green) always reverts to its evolving average (red).  Let’s too be honest about the “E”:  thus far in Q2 Earnings Season, some 80% of S&P 500 constituents have reported, their combined capitalization-weighted EPS increase from a year ago being +6%, a respectable gain fairly in line with the rate of inflation (of which the stock market is a hedge).  The problem remains that stock prices collectively indexed per the S&P 500 — vis-à-vis earnings — are terrifically expensive, especially given the positive interest rate environment, (such extreme risk variance upon which herein we’ve gone on ad nauseam).

Nevertheless with respect to the above P/E graphic, let’s do the foreboding math (a rarity in financial management these days).  The “live” P/E today is 54.9x, varying vastly from your stockbroker parroting that “it’s twenty-something”.  The evolving average is 40.3x.  Thus to bring the “P” in line with the “E”:  the reversion calls for an S&P 500 price “correction” from today’s 4478 down to 3290, (i.e. -27%). As well — rightly or wrongly — we’d written earlier in the year for the S&P perchance to reach sub-3000; or as our initial reader (one J.G.S.) from the inception of The Gold Update quipped away back in 2009:  “There’s always the overshoot”.  And by the above graphic, indeed there regularly is negative overshoot down through the red line.

Further we again remind:  had COVID never occurred such that the money supply had never ballooned, the top of the S&P 500’s 50-year regression channel today would be 2800.  Isn’t math wonderful?

As for the usually “rah-rah for ratings” FinMedia, we credit Bloomy with having come ’round to reality a bit, their headlining this past Tuesday that “Stocks pull back from July rally on weak earnings”, albeit we did ask ourselves for the bazillionth time “They’re just figuring this out now?”  ‘Tis why we maintain the Earnings Season page at the website, which deep into Q2 results shows 50% of some 1,400 reporting companies having beaten their bottom lines from a year ago … which means 50% have not so done, (just in case you’re scoring at home).

Let’s next move on to assess Gold’s scoring via the following two-panel graphic of the daily bars from three months ago-to-date on the left and 10-day Market Profile on the right.  (Note:  both panels are fully in December contract pricing; to view the effect of the aforementioned 40-point premium gap, please see the website’s page for either “Gold” or for “Market Trends”).  Either way, yesterday Gold was well in play as you can see by its rightmost daily bar, even as the baby blue dots of regression trend consistency continue to descend.  As for the Profile, the most dominantly-traded price in December terms for the past fortnight is that 1972 supporter, the overhead resistors as also labeled.  And yes, Virginia, by the December contract, Gold in the past two weeks has traded to as high as 2022, just 67 points below the 2089 All-Time High from basically three years ago to the day (07 August 2020):

The like setup is much the same for Silver, her declining “Baby Blues” (at left) nearly identical to those for Gold; and as for her Profile support (at right), Sweet Sister Silver is sitting right on it at 23.70:

Peering into next week, the more generic (i.e. less Fed-favoured) July inflation data takes center stage.  And by consensus at the retail CPI level, the headline number is again expected to be +0.2% with the core rising to +0.3%; and at the wholesale PPI level, both the headline and core numbers are expected to increase from June’s +0.1% to +0.2%. In other words: “expectations” are that inflation shall not have slowed but instead picked up during July.  And stocks still are way too high.  And the Econ Baro is hinting goodbye.  And the StateSide credit rating has gone awry.  To quote the late, likeable sports broadcaster Dick Enberg:  “Oh my!”

And thus the bottom line for today:

Don’t become “fitched to be tied” like the USA; go with AAA Gold all the way!

Cheers!

…m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter:  @deMeadvillePro

The Gold Update: No. 715 – (29 July 2023) – “Gold Behaving; Stocks Still Raving!”

by

The Gold Update by Mark Mead Baillie — 715th Edition — Monte-Carlo — 29 July 2023 (published each Saturday) — www.deMeadville.com

“Gold Behaving; Stocks Still Raving!“

Let’s start with this, courtesy of the “It’s Not About Us Dept.”

A week ago we herein thoroughly vetted the state of these Big Three eventualities:  Gold’s stop, Fed’s pop, S&P’s flop.

Thus in the spirit of the late, great Meatloaf:  ““Two Out of Three Ain’t Bad“–[1977] here’s a swift three-bullet update:

  • As penned for Gold: “…we can thus see the 1940s-to-1930s near-term…” price in turn this past week reaching down to 1942;
  • As penned for the Fed: “…preparing for another +0.25% FedFundsRate pop…” which unsurprisingly came on Wednesday;
  • As penned for the S&P: “…concluded its 34th day as “textbook overbought … akin to nearly falling off the edge of the Bell Curve…” now instead having extended through 39 days!

But wait, there’s more per this seasonal note:  as July comes to a close each year, Gold is seeing its COMEX contract volume roll from that for August into that for December.  Annually, this the largest volume transfer leap by months for any of the BEGOS Markets (Bond, Euro/Swiss, Gold/Silver/Copper, Oil, S&P 500).  And given the increasingly higher cost of money, Gold’s contango this time ’round is a whopping +40 points, the largest we’ve ever witnessed for the August-into-December contract rollover.  In round numbers, August Gold settled this past week yesterday (Friday) fairly “spot on” (if you will) at 1959; whereas December Gold settled at 1998.

“Such phenomenon arising from what, mmb?

We love Squire’s occasionally leading question toward making the author look good, (especially in this case as our good man ostensibly worked on vault design in Amsteg). 

But ’tis quite simple:  as interest rates rise, so in turn does the cost to storers of physical Gold; they thus pass such cost on to those obliged to purchase that Gold in the future.  The point is:  when we again meet in a week’s time, the change in Gold’s price for this ensuing week shall “benefit” from a +40 point bump … just in case you’re scoring at home.  Moreover, such bump could lend enough “umph” to flip Gold’s key weekly parabolic trend from Short to Long.  For the present, here’s the picture, the rightmost red dots of declining trend having completed their stint’s 10th week:

Either way, it being month-end (save for a day), scoring the most so far this year as we turn to the BEGOS Market Standings is again the ridiculously overvalued S&P 500, the podium positions still respectively rounded out by Gold and the Swiss Franc.  And pity the poor ol’ Dollar:  back at February’s end, the Buck placed third in this stack, from whence ’tis sunk like a leaden sack.  Thus for you StateSiders contemplating that late-summer spree to The Continent:  how’s that travel budget workin’ out for ya?  Hat-tip ZurichSpots:  the average cost of your two-sip espresso therein is CHF4.50 (i.e. USD5.20).  Your five bucks “Gone in 60 seconds!” –[1974, Halicki Junkyard & Mercantile Co.]  Here’s the table:

‘Course as we all know, the more Dollars there are, the less is their worth.  And even as the Federal Reserve has shrunk the StateSide money supply (basis “M2”) by -6% from $22.05T (18 April ’22) to $20.76T (today), ’tis still nonetheless +34% net since the $15.45T level at the commencement of 2020.  

However, the rate of inflation by the Fed’s favoured gauge (Core Personal Consumption Expenditure Prices) is trending toward the 2% goal per the following graphic.  Indeed, annualizing Core PCE for June (0.2% x 12) we’re nearly there at just 2.4%; but by the 12-month summation, ’tis still nearly double (3.9%) that desired by Jay Powell and his Merry Open Market Committee.  How might this appear and be judged through July’s Core PCE (due 31 August) with the FOMC’s next Policy Statement (on 20 September)?

Too, there’s the old adage that “the rising tide of inflation lifts all boats” which (save for the price of the descending Bond, its yield thus rising) we next see via these grey diagonal trendlines across the last 21 trading days in going ’round the horn for all eight BEGOS components.  ‘Course, the cautionary note now is the “Baby Blues” of trend consistency beginning to run out of puff…

Further, “a lot can happen in seven weeks”, including the Fed having to acknowledge a massive stock market “correction” … at least we continue to anticipate such.  As we penned away back on 28 January with respect to the S&P 500 for this year: “We anticipate sub-3000”, a mere -35% from here (4582 –> 3000).  Simply for our “live” S&P price/earnings ratio now 58.0x to revert — as always happens — to its own lifetime mean of 40.1x (from the year 2013-to-date) necessitates an El Plungo of better than -30%. Too, as we tweeted (@deMeadvillePro) on Thursday, the S&P’s MoneyFlow relative to the Index itself clearly is becoming less supportive.  And ’tis the Flow that leads your invested dough, (to the extent it can be retrieved upon it all going wrong, you know).

Yet fortunately for stock market bulls, earnings generation (or lack thereof) no longer matters.  And you may have caught on to that at which we hinted in last week’s missive.  But this time ’round let’s do the math:

One year ago today the S&P 500 stood at 3819, its “live” P/E that day 30.0x:  the imputed earnings (i.e. price ÷ ratio) thus 127.  Now let’s impute that for today … Oh Dear!  Only 79!  Have S&P year-over-year cap-weighted earnings actually plummeted by -38%?  How come this isn’t on Foxy, nor Bloomy, nor CNBS? (Rhetorical question).  As is our wont to say, the Investing Age of Stoopid continues.

Meanwhile continuing to yo-yo like there’s no tomorrow is the Econ Baro, its 22-year record of directionally leading the S&P 500 having come to a halt during 2020, concurrent with the commencement of COVID.  The following view from one year ago-to-date is not indicative of the StateSide economy being poor; rather ’tis merely reprising the 1995 Chris Isaak piece:  ““Goin’ Nowhere“:

And yo-yoing indeed:  of the past week’s 12 incoming Economic Barometer metrics, period-over-period six were better and six were worse.  Belying the most recent months of the Baro was the first peek at Q2 Gross Domestic Product having picked up by an annualized rate of +2.4%; however, some 48% of total nominal growth was purely inflationary (per the Chain Deflator).  Still, the best of the week’s reports were for July’s Consumer Confidence along with June’s Durable Orders and Personal Spending, all three of those beating consensus and their prior periods, all also revised upwards.  However: the week’s biggest stinker was June’s New Home Sales, which missed consensus and slowed from the prior period, itself revised lower. 

But at least the S&P 500 yesterday recorded a nearly 16-month closing high … whew!  To again quote former Buffalo Bills Head Coach Marv Levy:  “Where else would ya rather be?”  Ummm… Gold?

Speaking of which, again it being all but month-end, let’s next assess Gold year-over-year along with the cream of its equities crop.  From worst-to-first we find Pan American Silver (PAAS) -18%, Newmont (NEM) -7%, the Global X Silver Miners exchange-traded fund (SIL) +8%, Gold itself +13%, Franco-Nevada (FNV) +14%, the VanEck Vectors Gold Miners exchange-traded fund (GDX) +20% and Agnico Eagle Mines (AEM) +30%.  Yet have we said in the past not to pass on PAAS?  Its average ratio to the price of Silver century-to-date is 1.23x … but per yesterday’s settle ’tis just 0.64x.  “A word to the wise is sufficient” –[Plautus and Terentius, 200 BC].  Here’s the graphic:

From latin playwrights to living profiles we go, specifically with Gold’s 10-day Market Profile on the left and same for Silver on the right.  Note that the yellow metal’s pricing is calibrated for the now volume-dominant December contract, whilst the white metal is still attuned to September, both metals well off their respective fortnight highs:

Toward this week’s wrap we bring up Gold’s Structure by the monthly bars from 2011-to-date.  Ripe for the taking remains that “triple top”:

Peeking ahead to the ensuing week’s barrage of incoming Econ Baro metrics, we find four “by consensus” expected to improve, but seven expected to slow, including StateSide job creation.  Which with rising interest rates portends stagflation?

Best to avoid that which is raving and go — as is this wise youngster — with what’s behaving … Gold!

Cheers!

…m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter:  @deMeadvillePro

The Gold Update: No. 714 – (22 July 2023) – “Gold’s Push Hits Stop; Fed Preps Rate Pop; S&P Set to Flop”

by

The Gold Update by Mark Mead Baillie — 714th Edition — Monte-Carlo — 22 July 2023 (published each Saturday) — www.deMeadville.com

“Gold’s Push Hits Stop; Fed Preps Rate Pop; S&P Set to Flop“

Quite the trifecta in our title:  Gold, the S&P and the Fed all well in play for the week ahead.

And straightaway we start with Gold — which considering ’tis still within its Short trend — had nonetheless been firming well of late, price having proceeded from 1901 to 1990 across just 15 trading days.  Indeed just a week ago we mused that given Gold’s expected ranginess, price could flip such Short trend to Long basically by month’s end.  Quantitatively that’s still in play as we turn to Gold’s weekly bars from a year ago-to-date, the rightmost re-dotted parabolic Short trend having completed its ninth week in duration.  Given the yellow metal’s having settled the week yesterday (Friday) at 1964, the upside distance to the trend’s “flip price” at 2014 is precisely 50 points — which whilst a stretch with but six trading days left in July — is “reachable” as Gold’s expected weekly trading range is now 54 points:

However:  in that vein, this past week saw Gold’s prodigious push hit a sudden stop on Thursday, well-exemplified by the following two-panel graphic.  On the left we’ve Gold’s past week as charted by 8-hour candles, wherein we see the “push” suddenly morph into the “stop”.  On the right we’ve Gold’s month-to-date view as charted by 12-hour candles, the key there being the lower panel’s MACD (“moving average convergence divergence”) provisionally making a negative cross as encircled:

And specific to that negative MACD crossing, such study at present lists as our best “Market Rhythm” for Gold, as direct from the website’s “Gold” page comes the next chart.  ‘Tis the price of Gold again by 12-hour bars, but this time from as far back as 28 February-to-date:  when the bars are green, the MACD is in positive mode; when they are red, the MACD in negative mode; and the next bar to paint shall be in red upon Monday’s commencement of trading.  ‘Course, hardly are MACD designations perfect, for as is the case with conventional technical studies, they are behind the curve, albeit directionally helpful should price continue to actually “go somewhere” as you can see:

 “But is this negative 12-hour MACD really that damaging to the price of Gold, mmb?“

Actually ’tisn’t, Squire.  But it does give us an idea of how low Gold may go before price resumes northward.  The past eight negative MACD crossings saw price fall by an “at most median” of -20 points or by an “at most average” of -30 points.  Soley in that vacuum, with price today at 1964, such suggestion is we can thus see the 1940s-to-1930s near-term … which for the long (indeed eternal)-term Gold-holder is mere “noise”.  The point is:  be thee not discouraged by perhaps a week of price retrenchment as the Federal Reserve rears its rate hike head come Wednesday (26 July).

Yes the Federal Reserve’s Open Market Committee is preparing for another +0.25% FedFundsRate pop.  As we’ve previously opined, we doubt such desire to raise shall be thwarted by the recent perception  that inflation is slowing:  recall that June’s CPI rate rose to +0.2% from +0.1% in May, whilst that for the PPI rose to +0.1% from -0.4% (i.e. deflation).  Fairly acknowledged however, both measures via 12-month summations are declining.  But:  this is the Fed and ’tis in their head to go with Core Personal Consumption Expenditure Prices, which when last reported for May were running at nearly double the Fed’s desired annualized +2% rate … and which for June shan’t be reported until two days (28 July) following these next Fed Follies (26 July), lest we not also overlook the first peek a Q2 GDP on Thursday (27 July).  Thus following those two post-Fed vital reports, we’ll have “nuthin’ but Fed” through the FinMedia thread right into the FOMC’s 20 September Policy Statement:  you know, “Can the Fed reverse this market crash?” and so forth.  (Keep reading).

And “conventionally”, both Gold and the Dollar are sensitive to Fed interest rate moves.  Moreover, we’re already seeing it.  As comprehensively detailed above, Gold appears poised to retrench just a bit.  For respect to the Dollar, it tends to get a bid given an increased rate of interest.  Which is why from the website’s “€uro” page, we see that currency (similar to Gold’s healthy run of late) having just now penetrated down through our “Market Magnet”, a leading event that perceives lower levels near-term, (i.e. the Dollar gaining back ground against the €uro). To wit the graphic of the €uro (thin line) across the past three months-to-date displaying the rightmost downside penetration of its Magnet (thick line).  See how the Fed can making trading fun? (If you “know” in advance what’s to come): 

As to what’s to come for the S&P, hardly do we see it as pretty.  Rather ’tis primed to flop.  Yes, of course there’s its massive overvaluation, the S&P 500 today at 4536, its “live” price/earnings ratio having settled the week at 57.5x.  And ’tis not getting much help from Q2 Earnings Season:  thus far with 71 constituents having reported, just 56% have improved their bottom lines from a year ago (when the mighty Index was 3962 and the “live” p/e then “only” 31.6x).  What does that say about Earnings relative to Price?  Uh-oh…

But wait, there’s more.  As we tweeted (@deMeadvillePro) last Thursday:  “S&P only -0.7% today (Thu) but the MoneyFlow drain was the most for any one day since 13 Sep ’22.  Suggests near-term top is in place.”  The S&P was buffered Thursday by a spritely Dow, (i.e. that Index at which our parents used to look).  But the S&P’s negative MoneyFlow — a favoured leading indicator — was massive as dough poured from these 10 constituents:  Telsa (TSLA), Nvidia (NVDA), Microsoft (MSFT), Amazon (AMZN), Apple (AAPL), “Faceplant” (META), Netflix (NFLX), Advanced Micros Devices (AMD), and both tranches of Alphabet (GOOGL and GOOG).

Moreover, do you remember what happened from last year’s noted autumnal day of like massive MoneyFlow negativity? From the following day’s high, the S&P careened -393 points (-10%) in a mere 20 days.  And now here we are again.  Such fact hasn’t made it through the FinMedia — their focus being on “how the S&P makes a new high” — but as usual, ’twill become apparent well after the selling has kicked into gear.  Or if all of this is too complex for you WestPalmBeachers down there, as of yesterday’s close, the S&P concluded its 34th day as “textbook overbought”.  That is akin to nearly falling off the edge of the Bell Curve.  Reprise with emphasis:  Uh-oh…

Then there’s the tried-and-true Economic Barometer, which as you long-time readers know from its inception back in 1998 led stock market direction for some 22 years until the Fed’s distortions of the StateSide money supply in the name of COVID essentially made the S&P unilaterally rise despite meager growth in both the economy and earnings.  That cited, the divergence now between the Baro and the S&P 500 is becoming somewhat startling:

The good news of course is that “everybody knows” the stock market never goes down in summertime, (the exceptions being the S&P 500’s double-digit percentage “corrections” during the summers of ’74, ’75, ’81, ’90, ’01, ’02, ’07, ’08, ’11, ’15 and ’22).  Might we press you to another cucumber sandwich and lemonade?

Pressing a bit is this next two-panel view of Gold, its daily bars from three months ago-to-date on the left and 10-day Market Profile on the right.  The rising baby blue dots of trend consistency are as firm as ever, but to remain so, price has to stay on its upside go, else see them kink lower as you know.  And present price in the Profile says it all, that 1965-1963 apex now the support/resistance wall:

Similar yet again is the picture for Silver, her “Baby Blues” (at left) having just eclipsed the key +80% level but with a bit less puff, whilst 25.05 in the Profile (at right) appears more resistive in our sight, with present price 24.78 having slipped a mite:

So quite a lot there to digest from this week’s missive, with material we trust you find useful if unavailable anywhere else.  And speaking of anywhere, a lot is on table for all of our BEGOS Markets (Bond, Euro/Swiss, Gold/Silver/Copper, Oil, S&P 500) as these next days unfold, the FOMC’s Wednesday’s rate hike certainly to play into the mold.  But you know what monetarily to love and hold:  Gold!

Cheers!

…m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter:  @deMeadvillePro

The Gold Update: No. 713 – (15 July 2023) – “Gold Garners Glow; Stocks Go Whacko”

by

The Gold Update by Mark Mead Baillie — 713th Edition — Monte-Carlo — 15 July 2023 (published each Saturday) — www.deMeadville.com

“Gold Garners Glow; Stocks Go Whacko“

On the off chance you somehow missed this past Monday’s early morning tweet (@deMeadvillePro) with Gold then wallowing about in the 1920s, here ’tis:

“Gold’s ‘Baby Blues’ have confirmed moving above their -80% axis, indicative of higher price levels near-term; a run to the overhead 1980-2020 support structure would not be untoward; still, the broader weekly parabolic trend remains Short”

Thus for the nonillionth time, we repeat:  “Follow the Blues…”  Here’s the animated picture by the day from one week ago through yesterday (Friday) as Gold went on the ascent:

Indeed for this past week, Gold’s low-to-high gain of +50.5 points was on a percentage basis its best (+2.633%) in over three months (since the week ending 06 April) toward settling yesterday (Friday) at 1959, the high en route being 1969.

Enthused by it all, as email-queried a most-valued charter reader of The Gold Update:  “When is Blast-off Time?” We responded in part as follows:

“’Blast-Off Time’ is a function of getting the herd awake and engaged … albeit the weekly parabolic trend remains Short until ‘tisn’t…” 

We below see such remains the case through now eight weeks of descending parabolic red dots, the prescient wee green support line nonetheless still marking the precise recent low, (should it not later let go): 

And what the professor therein is going on about per Gold’s EWTR (“expected weekly trading range”) being 55 points — the distance from present price (1959) to the parabolic “flip trend” price (2024) being but +64 points — is that Gold appears well within range of reaching up there in a couple of weeks, (save for the cruelly conniving COMEX crushers coming first to the fore to beat price down more, as is their ardour).

Either way, ’tis good to see Gold getting a bid as “’tis said” inflation is shutting its lid, the Dollar Index in turn having just traded to as low as 99.260, a level not seen since 05 April 2022.

‘Course, you know, and we know, and everyone from Bangor Maine to Honolulu and right ’round the world knows:  the StateSide June inflation reports this past week for both the retail and wholesale levels are not those at which the Federal Open Market Committee preferably view; rather ’tis Core Personal Consumption Expenditures pricing, which for June shan’t be reported until 28 July, two days after the FOMC’s next Policy Statement of 26 July.  And you’ll recall, the annualized May Core PCE reading was nearly double that ultimately sought (+2%) by the Fed, which of course on 14 June “paused” … but prematurely?

Or as put forth this past week in a headlining opinion piece by one Peter Morici to Dow Jones Newswires:  “Fed fumble on inflation has left the U.S. economy vulnerable to stagflation.”  No argument here.  Further as SanFran FedPrez Mary Daly just said:  “It’s really too early to declare victory on inflation”.  In tow, perhaps long-time Fedder (34 years!) James “Bullish” Bullard is stepping down in St. Louis at just the right time to become the Dean of the Boilermakers’ Business School.

Then from the “Fun With Numbers Dept.” came another DJNw piece offering “Measure It Differently, and Inflation Is Behind Us … Gauge U.S. price changes the way Europe does, and inflation was already just below 3% in May.” Right.  That plus a subway token won’t get you anywhere.

But wait, there’s more.  ‘Twas also reported this past week that the larger StateSide banks face growing loan losses, for which Fed ViceChair of Supervision Mike Barr says more capital shall be required.  From where does that come, hmmm?

Or how’s this for an inflation gauge:  when we took up skiing back in ’64 at the eternally-charming Sugar Bowl, a child’s all-day lift ticket cost $2.  As of last season, ’tis $96 for your kid, a 58-year increase of +4,700%.  Inflation indeed.

Meanwhile, incoming metrics to the Economic Barometer have lost all sense of direction, the blue line now tracking as a yo-yo whilst yo-yo’s flock to stocks.  Did you see where the “live” price/earnings ratio for the S&P 500 settled yesterday?  58.2x.  And the Index itself recorded its 29th consecutive day of being “textbook overbought”.  The good news however for the S&P is that math illiterates still parrot the P/E as being “twenty-something”.   Remember that hit by Chicago from back in ’77  “Baby, what a big surprise”?  Oops…   Here’s the Baro:

To be sure, what the stock market does have going for it is the modern-day irrelevancy of earnings.  And the unaware herd feed on it.  Per this past week’s settles, paying 235x earnings for a share of Nvidia is peanuts; to shell out 321x earnings to own Amazon is a steal.  In fact whilst we’re at it, 33 of the S&P 500’s 503 constituents presently have P/Es exceeding 100x.  Again reprising Jerome B. Cohen:  “…in bull markets the average [P/E] level would be about 15 to 18 times earnings.”

Regardless, whilst it appears that money continues to be wantonly thrown at the stock market, this glance from website’s MoneyFlow page suggests Flow relative to Price may finally be just starting to run out of puff, albeit the rightmost panel (one quarter) differential remains on balance bodaciously bullish:

And how about the “VIX”?  Such infamous measure of equities’ “complacency” is down to 13.34:  sub-13 can be regarded as “overly-complacent”.  Got stocks?  (We don’t).  More on that in this missive’s wrap.

Returning to the precious metals (yeah we got those), here is our two-panel graphic featuring the daily bars for Gold (expanded from the aforeshown animated view) on the left and for Silver on the right.  And therein Silver is the real story:  in just the past 16 trading days, the Gold/Silver ratio has dropped from 86.4x to now 77.9x, (yet still well above the century-to-date average of 67.6x).  But ’tis basically a three-week Silver gain of +12.9% versus just +1.8% for Gold.  How many times have we herein written “Don’t forget the Silver!”  Here’s the graphic … Boom!  

So as we next turn to the 10-day Market Profiles for Gold (below left) and for Silver (below right), ’tis no surprise to see Sister Silver essentially at the top of her stack, whereas Gold did back off a bit into week’s end:

And now for the teased wrap.  Since dear old Dad taught us how to read the newspaper stock tables (back during that same year in which we learned to ski), never to this day have we seen our FinMedia colleagues so “All-In!” on the stock market.  The left-hand panel in the following graphic (with a tip of the cap to Getty Images’ iStock Photos) was displayed this past Thursday by DJNw.  Certainly over the many generations of financial reporting, seasoned investors — from Joe Kennedy and his shoeshine boy to today’s few alert folks who are misvaluation-aware — regard such wreckless abandon as “The Top … That’s it.”  

Whether ’tis or ’tisn’t, our view clearly is that of the right-hand panel, if for no other reason than history repeats itself:

And thus: we repeat ourselves as Gold gets some glow but stocks go whacko:  “Got Gold?”

Cheers!

…m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter:  @deMeadvillePro

The Gold Update: No. 712 – (08 July 2023) – Gold’s Downtrend Duly Dissed?  Stocks’ 10 Crash Catalysts!

by

The Gold Update by Mark Mead Baillie — 712th Edition — Monte-Carlo — 08 July 2023 (published each Saturday) — www.deMeadville.com

“Gold’s Downtrend Duly Dissed?  Stocks’ 10 Crash Catalysts!“

As worried as we are over the wildly overvalued stock market — our 10 crash catalysts itemized herein — let’s start with Gold as ’tis our mold. And from this week’s title we behold Gold’s downtrend for the present has instead gone on hold.  Thus to the yellow metal’s weekly bars and parabolic trends we straightway go:

And per that rightmost run of declining red parabolic Short dots, we see the trend is now seven weeks in duration.  Both the average and median durations of the prior 10 such Short trends are 13 weeks, which in such technical vacuum implies this current trend is now through its halfway mark in terms of time.  ‘Course, for the trend to officially end by the dots turning blue and thus ascend, price already need be well on the move upward.  And given Gold a week ago having precisely hit our selected low (futures 1901 per the wee green line, or spot 1893), this past week’s bounce to as high as 1943 suggests the Short trend is starting to lack sellers’ respect — indeed by current street vernacular — ’tis becoming “dissed”, perhaps a buying opportunity not to be missed, (lest we forget proper cash management should lower lows persist).

Too, in this current “Nuthin’ but Fed” trading environment (hat-tip “Depends Who’s Counting What Dept.”) this past week brought significantly disparate Payrolls’ reports for the month of June.  First on Thursday came ADP’s count of fabulous jobs data — the best in 17 months and more than double the consensus expectation — immediately sending all five primary BEGOS Markets (Bond / Euro / Gold / Oil / S&P) into swift plummet for fear that the Federal Open Market Committee shall vote to raise their Bank’s Funds Rate come the 25/26 July Policy Statement.  Second a mere 24 hours later came Labor’s survey indicative of the slowest monthly jobs creation since March, in turn sparking the BEGOS bunch to back up in belief of Fed benevolence.  So upon the dust settling yesterday (Friday), Gold closed at 1931 as we below see per price by the hour through this past week, furthering the notion that this downtrend is now being dissed:

Opposing job summations aside, for the Economic Barometer at large, the past week’s mix of 11 incoming metrics were of net benefit, notably from June’s lengthened Average Workweek and dip in the Unemployment Rate, along with the Institute for Supply Management’s increase to its Services Index, plus a reduction in the StateSide Trade Deficit for May.  But from the Fed’s view, good news is deemed as bad news especially given May’s stubbornly inflationary Core Personal Consumption Expenditures Prices.  And guess what arrives the day after the next Fed Rate Raise on 26 July?  The Chain Deflator for Q2’s Gross Domestic Product.  Economic growth by substance is a good thing; ’tisn’t if by inflation.  Here’s the Baro:

Next as promised from the “Worry Warts (and rightly warranted) Dept.” comes our assessment of the state of stocks as measured by our preferred gauge:  the S&P 500.  As egregiously overvalued as ’tis — our honestly calculated “live” price/earnings ratio having settled the week yesterday at 55.7x — the market is never wrong:  the herd has put price precisely where ’tis (S&P 4399); it cannot be “willed” to somewhere else.  Such is the present case, even as by universally used “textbook technical measures” the S&P just completed its 24th consecutive trading session as “overbought”.  Still by the website’s MoneyFlow page, the differential of inflow over price change remains firmly positive, supportive of substantive money being thrown at the market.   “When will they ever learn…” –[Pete Seeger, ’55].  

And yet, you can feel the market’s fragility.  Prior to the ADP reactive price plunge on Thursday, we’d earlier in the week graphically tweeted (@deMeadvillePro) the large price gap in the S&P Futures’ 10-day Market Profile, price then taking a -42-point hoovering (ironically its “expected daily trading range”) in just under three hours.  Yes, Virginia, it can go quickly.

Be that as it may, the broader fundamental picture certainly is scarier.  Just as we have our Investors’ Roundtable back in whatever’s left of SanFran, here in MC we’ve expanded by respectfully meeting with some very well-established, hardened investors:  and the bearishness is rife.  A long-time StateSide mate just passed through here bemoaning “I’ve lost so much money shorting the market”; another is “triple-short the S&P”; further are those multi-decade experienced analysts who’ve been anticipating it all going wrong for the S&P on scales from -25% to -50% … and yet it hasn’t happened.  All of this led to a discussion here last week of “What will be the catalyst that crashes the S&P?”  To that end… “Nice double-entendre there, mmb…” …oh merci, Squire, mon cher ami, we’ve put together a list of 10 S&P 500 crash catalysts as follows, in no particular order as all are viable, and have been cited in past missives:

  • This is the one nobody wants: a geo-political global disaster such as a nuclear incident in Ukraine, China seizing Taiwan, et alia;
  • The August implementation of a Gold-based BRICS currency, but does it take? And does the Dollar break?
  • Acknowledged lack of real earnings growth; ’tis obviously already in the aforementioned P/E of the S&P, and Q2 Earnings Season has just started;
  • As has happened in the past, XYZ Investment Bank announces a 20% reduction in clients’ exposure to equities;
  • The yield on the “everything to risk” S&P is 1.538%; for the riskless Three-Month U.S. T-Bill ’tis an annualized 5.213%;
  • “Hey Martha!  We need more money for the mortgage, the car, and Muffie’s skyrocketing tuition!”
  • Remember the recent banking crisis?  It came and went in a heartbeat.  So ’tis over, right?
  • The money doesn’t actually exist:  as of yesterday, S&P Market Cap = $38.4T, liquid M2 Money Supply = $20.7T … Oops …
  • Goofball headlines (last Monday):  “Amazon is the cheapest of the ‘Magnificent Seven’ Stocks” … it’s p/e per yesterday’s close is 309.6x;
  • The herd finally “hears” and in turn commences good old-fashioned fear.

Feel free to select any or all of the above as the Investing Age of Stoopid rolls right along.

Indeed speaking of rolling, we next turn to Gold’s two-panel graphic of its daily bars from three months ago-to-date on the left and 10-day Market Profile on the right.  Note the baby blue dots of linear regression trend consistency are trying to roll higher from just beneath their -80% axis:  and the rule “to follow the blues” upon clearing that hurdle is to anticipate high prices near-term.  Also per the Profile, price has nicely been rolling up the ladder:

Similar is Silver’s stance, her “Baby Blues” (below left) not having suffered as much downside consistency damage as have those for Gold, whilst in her Profile (below right) she again has taken better flight:

Thus with Gold poised to rise whilst the S&P faces demise, what better way to wrap than with this long-running graphic of The Gold Update, reflecting stocks’ truly inane earnings-less strain:

The ensuing week brings June inflation data at both the retail and wholesale levels, the respective headline numbers “expected by consensus” to be higher than those for May.  Yep, that means more Fed impetus to keep on raisin’ dem rates, (arguably a Gold negative, albeit we’ve herein proven otherwise).  But this is what you get when you flood the market with more Dollars to the tune of +31% in just three years: inflation!  Which is why too ’tis time to get Gold!

Cheers!

…m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter:  @deMeadvillePro

The Gold Update: No. 711 – (01 July 2023) – Happy Mid-Year Finds Gold Up a Gear

by

The Gold Update by Mark Mead Baillie — 711th Edition — Monte-Carlo — 01 July 2023 (published each Saturday) — www.deMeadville.com

“Happy Mid-Year Finds Gold Up a Gear“

“Happy Mid-Year!”  indeed with Gold up a gear — specifically +5.3% year-to-date — in having settled out this past week yesterday (Friday) at 1928.

That stated, you regular readers well know we purposefully this year did not (as we’ve otherwise done in years past) forecast a high Gold price for 2023.  Rather, our only assumption continues to be that Gold shall record an All-Time High before this year is out, which it nearly did back on 04 May at 2085, falling just shy of the still existing record high of 2089 established on 07 August 2020.  (For those of you scoring at home, the U.S. Money Supply by “M2” back then was $18.2T versus today’s $20.8T, i.e. ’tis now +14% higher, even as Gold by the same stint is -8% lower).

Still, to predict how high beyond the 2089 landmark Gold shall rise this year, we’ve opted to leave that to the FEF (“Fibonacci Extension Fanatics”).  Oh to be sure per the above opening Scoreboard, we clearly value Gold today at 3737.  And whilst Gold historically reaches up and through prior high value levels (our adjusted highest value level being 4031 as of 14 April 2022, from whence the Federal Reverse has been shrinking the Money Supply), we generally don’t expect such magnitude of leap to occur within a single year.  For if it so did, we fear there’d be some seriously scary stuff afoot, (which already of course there is across the monetary/financial/geopolitical/leadership spectrum). 

But: barring the NVDA (+189% ytd, p/e 218x) / AMD (+76% ytd, p/e 467x) / CRM (+59% ytd, p/e 553x) / AMZN (+55% ytd, p/e 311x) / et alia herd suddenly shifting into Gold, 3737 is otherwise out of reach by year-end.  Indeed, Gold’s “expect yearly trading range” for 2023 is 346 points, such range here thus far at mid-year is 274 points.  Solely within that vacuum, assuming the year’s 1811 low is in place, the record high in waiting is 2157. On verra, but hardly is that remotely near the 3737 value level.  (Again, unless the NVDA/AMD/CRM/AMZN herd become boffed if not offed, by which time they may not have any dough left for a Gold trough).

Regardless, the stock market as measured by the S&P 500 remains up in goo-goo land, its “live” price/earnings ratio settling the week at 55.9x.  Thus inverted, the “implied” yield is 1.789% which is quite near the actual yield of 1.537%, with everything to lose.  Comparably, U.S. Secretary of the Treasury Janet Yellen’s riskless three-month Treasury Bill annually yields 5.153%. 

“But Gold has no yield, mmb…”

Gold needs no yield, Squire.  Present price (1928) to value (3737) is +94%:  ’tis 18x sweller than that from Old Yeller.  (…tick tick tick goes the clock clock clock…)

Now it being month-end, indeed both quarter and half-year end as well, ’tis time to bring the whole BEGOS Bunch into focus beginning with their year-to-date standings featuring Gold up a gear so far this year and still tucked in second place, sandwiched between the S&P 500 and Swiss Franc in rounding out the present podium:

Of precious metals’ note therein, whilst Gold is +5.3% ytd, poor ol’ Sister Silver is in near mirror opposition -5.9%.  Which stands to reason for today’s Gold/Silver ratio being at 84.7x versus having closed out 2022 at 75.7x.  The millennium-to-date mean?  67.6x, reversion to which puts Silver (today 22.76) +20% higher (at 28.52).  The last date upon which the ratio matched its mean?  18 May 2021 (at 66.3x).  Thus for you WestPalmBeachers down there, what does it all mean?  “Get Silver!”

Moreover for the leveraged-minded of you out there, one might consider Pan American Silver (PAAS).  From 2001-to-date, its average price relative to Silver is 123%:  today ’tis merely 64%.  So if Silver itself is 20% low relative to Gold, and PAAS is but half its typical price level relative to Silver, run those numbers on your HP-12c.  Rather riveting stuff, what? Either way, from one year ago-to-date, here are the percentage price tracks of Gold along with key of its equities’ brethren.  And save for Newmont (NEM), PAAS nearly is last:

As for the whole gang, from top to bottom we’ve got Gold itself and the VanEck Vectors Gold Miners exchange-traded fund (GDX) both +6%, Agnico Eagle Mines (AEM) +5%, Franco-Nevada (FNV) +4%, the Global X Silver Miners exchange-traded fund (SIL) -3%, PAAS -29% and NEM -31%.  Golden gifts, one and all!

Specific to Gold, whilst as cited +5.3% year-to-date, ’tis -7.6% high-to-date.  Nonetheless we were (albeit perhaps premature) encouraged to see Gold’s lows this past week.  For the current “front month” August contract, Gold reached as low as 1901 whilst “spot” tapped 1893.  To wit, that which we herein penned on 27 May:  “…our lean is that …1893 … is the extent of adversity on this down run…” or even that from just a week ago “…(still with 10 points of price premium) we’d see 1903, or by spot, 1893…” Bingo.

‘Course, that doesn’t preclude Gold further slipping, as we turn to its weekly bars from one year ago-to-date.  Therein we see a sixth red dot of parabolic Short trend along with the green lines defining the oft-cited structural support running from 1975 to 1811, the mid-point being that 1893. So far, so good as it precisely has held.  But ’tis cash management risky to misapprehend trend:

Speaking of misapprehending, how’s that Economic Barometer workin’ out these days?  Talk about trendless across a year’s spectrum!  Moreover, what’s up (literally) with the +0.7% revision to Q1 Gross Domestic Product from +1.3% to 2.0%?  ‘Tis the second largest revision to “Final” quarterly GDP this century!  And yet per the below Econ Baro:  that broad purple line essentially defines the Q1 reporting period; looks fairly “unch” to us.  (One wonders what they’re “taking in” over there at the Bureau of Economic Statistics):

Meanwhile, FedChair Powell inferred (depending on one’s source) this past week that at least (maybe) two more FedFunds rate hikes are in the cards for this year, and further that inflation may take years to tame.   “Ain’t that a shame…” –[Fats Domino, ’55].  And the Fed-favoured inflation gauge of Core Personal Consumption Expenditures for May says ’tis so:  it came it at +0.3%, which annualized is +3.6% — the 12-month summation now +4.3% — still more than twice the Fed’s target of +2.0%.  As to the “elasticity” effect of FedHikes on the inflation rate, we’ll leave such to you brighter bulbs out there.  But clearly there’s more pain to gain.

As to BEGOS Markets’ pain, let’s next go ’round the horn for all eight components across the past 21 trading days (one month) by their daily bars and baby blue dots of trend consistency.  And as you can see, four of the grey trendlines are rising and four are falling; but in all eight cases, the “Baby Blues” are now in decline, certainly so those for Copper for which at the start of last week we so tweeted (@deMeadvillePro) in anticipating lower price levels.  All of this of course is a harbinger of higher interest rates and thus the Dollar leading The Ugly Dog Contest:

On to the precious metals’ 10-day Market Profiles, they appear a bit firmer than in recent weeks.  Below for Gold on the left we see a good amount of trading support built in from the labeled 1938 to 1916 zone, whilst similarly so for Silver on the right from the 23.00 level to 22.65:

Again it being month-end, we present the Gold Structure by price’s monthly bars across the last dozen years, their labeled strata therein along with our ever-subtle reminder that “triple-tops are meant to be broken”:

To close, the more this stuff comes up, the more bemused we find ourselves.  This time’ round over at an event hosted by the ever-regal Brookings Institution spoke one Graham Steele (Assistant Secretary of the Treasury for Financial Institutions), who stated “…Work on climate-related financial risk and the insurance sector is a top priority for the Biden-Harris Administration, the Treasury Department, and FIO…”  (Indeed throughout the Secretary’s address the word “climate” was mentioned 38 times, thus the thrust of it all).

But the phrase “climate-related financial risk” really hit home with us with respect to the extreme undervaluation of Gold versus the extreme overvaluation of the S&P 500.  This was discussed earlier today with a distinguished friend and colleague, who likened it to Publius Ovidius Naso’s character Icarus (8 A.D.) being the S&P as his bees-waxed featherings melted away upon approaching the sun, i.e. Gold:

So don’t find yourself head-over-heels when suddenly the S&P is “limit down”; rather, get some Gold!

Cheers!

…m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter:  @deMeadvillePro

The Gold Update: No. 710 – (24 June 2023) – Gold Sinks in Sync with its Parabolic Short Trend

by

The Gold Update by Mark Mead Baillie — 710th Edition — Monte-Carlo — 24 June 2023 (published each Saturday) — www.deMeadville.com

“Gold Sinks in Sync with its Parabolic Short Trend“

Five weeks have passed since Gold flipped its weekly parabolic trend from Long to Short, (effective the week ending 26 May).  And yet through these recent weeks, Gold really hasn’t seen much sink … until that just past as price is now finally falling from the brink.

That noted, in assessing the above Gold Scoreboard, seasonally this time of the year has typically brought sinking prices for Gold, the only line of exception therein being 2020’s grey one as Gold was getting the COVID bid ultimately toward the All-Time High of 2089 come 07 August of that year.

But today, given Gold’s present parabolic Short trend, price itself is now in downside sync, indeed having reached its lowest level (1920, last seen on 16 March) toward settling yesterday (Friday) at 1930.

Straightaway, here are the weekly bars and parabolic trends from one year ago-to-date.  Therein we’ve again placed the green bounds that form the Feb-Mar structural support zone.  The center green line is the midpoint, again suggesting that just sub-1900 can curtail further downside on this run.  ‘Tis thus dubbed “Support-ish” as by the current front month August Contract (still with 10 points of price premium) we’d see 1903, or by spot, 1893:

Still, as we next glance at the percentage performance of the five primary BEGOS Markets from one month ago-to-date (i.e. the last 21 trading days), Gold has more or less been an “also-ran” along with the Bond and Euro, whereas Oil has been the weakest and the S&P 500 the firmest (more later on that latter calamity-in-waiting).

Regardless, with all the up-and-down-and-up-and-down exhibited by our Economic Barometer, plus the Federal Open Market Committee pausing FedFunds rate rises before resuming them, and now vicissitudes verbalized by FedChair Powell this past week at his Humphrey Hawkins (indeed hawkish) Congressional testimony, there’s yet to be really much substantive markets’ reaction as we see here, the Bond market surprisingly being the least changed of the BEGOS bunch:

And hawkishly lending to the FedChair’s stance was some rebound this past week in the aforementioned Econ Baro as housing metrics ruled the roost:  of note, the National Association of Home Builders Housing Index for June recorded its highest level (55) since June a year ago; and more impressively, Housing Starts for May made their largest monthly leap (by 291k) in better than 17 years (since January 2006).  ‘Course, the bummer for the Baro was the negative measure of Leading Indicators (to which we refer as “lagging” because the Econ Baro actually leads them) that the Conference Board has not reported as positive since their March reading back in 2022.

‘Course as you regular readers and website users know, the red line in the above graphic is the track of the S&P 500 astride the Econ Baro from one year ago-to-date.  And even as the S&P has come off from its recent high (4448 on 16 June), the mighty Index nonetheless through yesterday’s close (now 4348, exactly -100 points off that high) remains to what we refer as “textbook overbought” using a series of near-term, widely-observed technical indicators.

Further, as we tweeted (@deMeadvillePro) on Thursday with respect to the S&P Futures:  “Spoo (4410) daily parabolic flipping Short: last 10 Shorts “averaged” -100 points; so test of Market Profile 4319 apex is reasonable.”  Also this past Thursday, the VIX quietly reached its lowest level of complacency (12.73) since pre-COVID January 2020.  (That courtesy of the “What, Me Worry? Dept.”)

And yet just a week ago, from one FinMedia source to the next we read ’twas nothing but “The next bull market is just underway!” they say.   “Ya gotta be in it to win it!” they say.  “S&P targeting 5000!” they say.

But now just four trading days hence (give the StateSide holiday), a 180° turn took sway. Dow Jones Newswires just ran with this headline as tipped by J.P. Morgan:  “U.S. stocks head for punishing selloff as ‘unknown unknowns’ could drag market lower…”  Oh no, say it ain’t so!  Make up yer mind already!

Moveover, now comes this from the childrens’ writing pool over at the once-brilliant Barron’s:  “Here’s how to know when to start worrying about the market.”  Heck, we’ve been addressing that ad infinitum, as ’tis the easiest query with respect to equities (hat-tip to one Mike Holland from many years ago that “…at the end of the day, stocks are valued by earnings…”).  Ready?  Per yesterday’s S&P 500 close:

‘Tis not actually that bold of a statement; just the do the math.  Still, the parrots cling to “twenty-something”.  And given means-reversion, in due course we shall actually — indeed mathematically — revisit a true “twenty-something”.  Or to coin a phrase from Madison Avenue:  “Watch this space.” 

Watch as well from the website our daily updating of these Gold panels.  On the left we’ve price’s daily bars from three months ago-to-date.  The most recent days highlight the downtrend picking up steam, the blue dots of trend consistency as well curling southward, for which you know the quip:  “Follow the blues instead of the news, else lose yer shoes.”  On the right is Gold’s 10-day Market Profile with its dominant overhead trading resisitors as labeled:

Ever so similar is the same drill for Sister Silver.  And you’ll recall she’d be firming up better than Gold of late only to now negatively rotate.  Just two weeks back, the Gold/Silver ratio was 81.0x; today ’tis 86.0x.  And be it by her daily bars and Baby Blues (below left) and/or her Market Profile (below right), poor ol’ Sister Silver is hardly her true self:

Looking ahead, as if we’ve not had enough of the Fed planted in our head, comes their favoured inflation gauge:  Core Personal Consumption Expenditures, due Friday, 30 June.  “Happy Mid-Year!”

Recall for April the annualized Core PCE pace came in at +4.8% (the 12-month summantion being +4.3%).  Now for May, “expections” are for a month-over-month dip from +0.4% to +0.3%.  Should that be the case, the annualized pace becomes +3.6% and the 12-month summary still +4.3%.  Either way, both are still well above the Fed’s inflation target of +2.0%, their “pause” notwithstanding.

Still, in fervent anticipation, our FinMedia friends are out to keep us educated:  “What is inflation?  And why for so long? And why so high?”

“Well, hardly is it ‘high’, mmb…”

Exactly right Squire.  But a lot of these folks weren’t around in the Carter years.  We recall seeing a rate sheet barely pre-Reagan away back in our banking days in early ’81 declaring the best customers could borrow “at prime” for 22.5%.  That’s nearly triple today’s 8% rate.  And it hasn’t been for very long at all.

‘Course for you WestPalmBeachers down there as to what really is inflation, ’tis simple:  the more there is of something (i.e. Dollars) the less they’re worth and thus the more of ’em it takes to buy the same thing.  Or per the famous Santitas example, the less you receive for the same number of Dollars:

And remember:  regardless of trend, shorting Gold is a bad idea; so hang on to your Gold!

Cheers!

…m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter:  @deMeadvillePro

The Gold Update: No.709 (17 June 2023) – Fed Doing Cruise Control; Gold Doing Donuts; S&P Doing Wheelies!

by

The Gold Update by Mark Mead Baillie — 709th Edition — Monte-Carlo — 17 June 2023 (published each Saturday) — www.deMeadville.com

“Fed Doing Cruise Control; Gold Doing Donuts; S&P Doing Wheelies!“

The title to this week’s missive pretty much puts it all in perspective.  And to the extent this week’s closing bit spooks you from stocks is your own cash management decision.  Nonetheless, let’s start with this triple-shot:

The Fed:  As tweeted on Wednesday (@deMeadvillePro) we were wrong in anticipating the Federal Open Market Commmitee would raise their Bank’s Funds Rate this past Wednesday by +0.25% in accordance with their favoured inflation gauge (“Core PCE Index”) having registered on 26 May an annualized pace of +4%.  Instead, the FOMC unanimously voted to “pause” in cruise control at the 5.00%-5.25% FedFunds target range previously established back in their 03 May Policy Statement.  And again, “unanimously”?  To us, that was an even bigger surprise than the “pause”, as FOMC interviewees in the weeks leading up to this most recent meeting clearly indicated dissent amongst their ranks.  Yet at the end of the day toward emphasizing unity, these birds of disproportionate feather flocked together.  Or as one very wise chap would remind us:  “Don’t listen to what they say; look at what they do.”  And thus 4% inflation has become the new targeted 2%.

“Except they’re gonna keep raising anyway, mmb…”

Indeed as so inferred, Squire.  Let’s see what actually happens given the Economic Barometer has suddenly resumed freefall as we’ll herein install.

Gold:  Obviously the yellow metal is doing donuts. ‘Round and ’round goes Gold without going anywhere.  For a fourth consecutive week, the 1986-1955 range (by the current August contract) was therein traded.  Price then settled its week yesterday (Friday) per the above Gold Scoreboard at 1971, such level first achieved nearly three years ago (28 July 2020) as COVID unfolded.  Since then, the U.S. Money Supply (“M2”) has increased by as much as 22% … but not so Gold.  And as we’ll below see, the weekly parabolic trend remains Short.

S&P 500:  Be it fundamentally and/or technically, this mighty “best of the best” stock market index is so vastly overvalued we could compose an entire multi-chapter tome through which to comb.  Yet in this new paradigm of “earnings” no longer being relevant — and as further boosted by the market-friendly FinMedia proclaiming the new bull market has just begun — ’tis stock wheelies all the way, day after day.  (Or rather, might it be doomsday per that presented toward this missive’s finale…)

Thus with your attention aroused, ’tis on to the vetting, beginning with the current state of the Econ Baro and its frustrations being foisted on the Fed:

As herein penned a week ago “…it appears the Baro may further take a bit of a dip…”  And now with the benefit of hindsight the word “whack” would have been more appropriate.  The Baro was hit this past week with a whopping 16 metrics.  Period-over-period, 10 were worse, including those for June’s Philly Fed Index — which has now been negative for 10 consecutive months — May’s Retail Sales, Capacity Utilization, and Industrial Production — the latter actually having shrunk — and a bloating of April’s Business Inventories.  The only two notable positives were June’s New York State Empire Index going from a strong negative reading to one mildly positive, and The University of Michigan’s “Go Blue!” Sentiment Survey — the latter sporting its second-best year-to-date reading — and thus indicative that everything’s misinformedly great again.  (P.S. How’s that “live” S&P 500 price/earnings ratio now 54.8x gonna work out for ya?  Do keep reading…)

Meanwhile specific to Gold, its still refusing to be bold finds it in fairly stuck mode.  Here are the weekly bars from one year ago-to-date.  Given that the red-dotted parabolic Short trend is now four weeks in duration, the good news is that price has not (yet?) succumbed.  Again, we’re warily eyeing the low 1900s on this run, (indeed by spot ’round 1893), but we’ll gladly accept avoiding such downside spree.  (Jeepers, Squire, did you have to go with the red glaze?)

More broadly, we next go back to view Gold’s daily closing price through this tried-and-true graphic extending back a dozen years astride the 300-day moving average.  And again at right from 2020-to-date is that infamous triple-top temptingly awaiting transcendency:

Next let’s go more to The Now with Gold’s two-panel graphic featuring the daily bars from three months ago-to-date on the left and 10-day Market Profile on the right.  And with respect to Gold’s “Baby Blues” of regression trend consistency, they’ve recovered up to their 0% axis meaning that price across the past 21 trading days (i.e. one month) has essentially been trendless.  That fits well in thus describing Gold as doing donuts, indeed to reprise one of our favourite musical analogies  “Goin’ Nowhere” –[Chris Isaac, ’95].  As to the Profile, price at present is up against more trading resistance than underlying buoyancy:

Too for Silver — and similar to that which we saw a week ago — she’s been modestly outpacing Gold to the upside, her “Baby Blues” (below left) indicative of a mild uptrend, whilst her Profile (below right) is a bit more supportive in appearance than for Gold’s like panel.  Indeed with the Gold/Silver ratio today at 81.2x, were it instead at its century-to-date average of 67.6x (with Gold at the present 1971 level), Silver would now be +17% higher than her current 24.27 level at 29.17.  Do not forget Sister Silver:

Now in saving the best — or arguably the worst if not the most frightening — for last, we again turn to the S&P 500.  To say it is “overbought” is formidably understated.  ‘Tis terrifyingly so.  To wit:

First fundamentally:  in this Investing Age of Stoopid where earnings as aforementioned are comprehensively disregarded, money is nevertheless being thrown at the stock market, (see the website’s MoneyFlow page).  ‘Tis the Pavlovian Response of this go-go era, where “‘Tis always up and nothing but!”  After all, as duly noted, we’re told the new bull market is just underway.  So why does the S&P feel to us as if we’re back on 25 August 1987 or 20 July 1998 or 24 March 2000 or 11 October 2007 or 19 February 2020?  (Warning:  if you lack firm intestinal fortitude, do not go back and look at the S&P from those dates).  We’ve already mentioned the accurately and honestly calculated “live” p/e of the S&P is now 54.8x.  Yet since today’s parrots are apparently inept at performing mathematics, they just say “‘Tis 20-something”.  (And many of them may be managing your money).  A couple of critical examples:  the fourth-largest stock in the S&P 500 is Nvidia; its p/e is 220.4x. What that means for you WestPalmBeachers down there is that today for this “must have AI stock” you’ll effectively pay $220 for something that earns $1.  How about for the S&P’s third-largest stock:  ’tis called Amazon.  Its p/e is 299.5x, meaning today you’ll effectively pay $300 for something that earns $1.  “Yeah, ya gotta own ’em.”  We’d rather cover the dozens and columns at the roulette wheel:  ’tis just safer, as is the risk-free (for now) U.S. T-Bill’s annualized yield of 5.065%.

Second technically:  the following graphic is scary, so if ya can’t suck it up, ’tis best move on from this page.  As you valued website perusers know, we’ve a page at the website called Market Values born of that referred to as BEGOS (Bond, Euro, Gold, Oil, S&P 500) and their critically important price-leading valuations.  Ready?  At this writing, the S&P 500 Futures contract (4459) settled yesterday an unconscionable +329 points by the green line above its smooth valuation line as shown here:

The last time we had such an extreme deviation?  ‘Tis right there in August of a year ago.  And quick as  a wit, the S&P plummeted in mere weeks from 4300 to 3600 (-16%) by September’s end.

But wait, there’s more:  upon our “live” p/e of the S&P reverting to its mean (as historically has always happened) given there being hardly any growth in real earnings (“What are those?”), that mathematically calls for S&P 3300 (or -25% from here).  But that’s just to the “live” mean, (which has evolved by the day since 2013).  For then comes the overshoot, et voilà, we see S&P sub-3000 (or at least -32% from here) as we’ve already on occasion mentioned this year.  ‘Course — again historically — the market always comes all the way back.  It merely depends on how many years or in some cases decades you’re willing to wait.

Still, we can end on a high note:  “BUY GOLD!“  Especially given its being priced today (1971) at just 54% of its true debasement valuation (3658)!

Cheers!

…m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter:  @deMeadvillePro

The Gold Update: No.708 (10 June 2023) – Gold Sees Short Squeeze? S&P’s Weak Knees?

by

The Gold Update by Mark Mead Baillie — 708th Edition — Monte-Carlo — 10 June 2023 (published each Saturday) — www.deMeadville.com

“Gold Sees Short Squeeze?  S&P’s Weak Knees?“

As you regular readers know, Gold’s weekly parabolic trend confirmed flipping from Long to Short at the close of trading back on 26 May per the August (now front month) contract price of 1963.  Since then, price has barely been lower than 1950 and instead briefly climbed back to 2001.  Now we’ve Gold having settled out the week yesterday (Friday) at 1976.

Thus to this point, ’tis been a wee squeeze of the Shorts, Gold having closed higher these last two consecutive weeks.  Indeed let’s straightaway start with Gold’s weekly bars and parabolic trends from one year ago-to-date.  The green support line just above the 1900 level we still view as a reasonable  guide should Gold resume its slide:

Moreover — to lend to their strain — one of our long-standing tenants is lending to the Shorts’ pain as below we show the “Baby Blues” across the last 21 trading days for Gold on the left and for Silver at center; rounding out the metals triumvirate is Copper on the right.  Those blue dots represent the day-to-day consistency of these metals’ respective grey diagonal trend lines. And the near-term significance of the dots rising across the board here means the present downtrends for both Gold and Sister Silver are losing said consistency, whilst the trend for Cousin Copper (oft considered the metals’ leader) has already rotated to positive.  To reprise the tenant:  “Follow the Blues instead of the news, else lose your shoes.”

Broader views of the “Baby Blues” are of course on the website’s Market Trends page for all eight BEGOS Markets (Bond, Euro/Swiss, Gold/Silver/Copper, Oil, S&P500). And specific to Gold:  whilst the weekly parabolic Short trend as aforeshown is only newly on the go, as herein written a week ago “…wouldn’t it be lovely to have the present Short trend short-lived?…“  When first confirmed two weeks ago, we cited (per historically downside follow-through) that the 1850s would not be untoward on this run, even as the noted low 1900s make support sense.  Still, across Gold’s past 10 prior parabolic Short trends extending back into May 2018, the average duration is some 14 weeks, albeit three of which were single digits.  ‘Course with the Fed to add another +0.25% to its FundsRate on Wednesday (14 June), conventional wisdom selling ought then put Gold back on the skids.

And yes, we think such rate raise — and more — are baked into the cake per this graphic herein presented two weeks ago showing the Fed’s favoured inflation indicator:  the Core Personal Consumption Expenditures Price Index.  To refresh your memory, the red line is the Fed’s 2% inflation target to be achieved by effectively strangling the economy via interest rate increases.  Are we there yet?  No:

And per our Barometer of the Economy, is it being strangled yet?  No:

“Well, it is coming down now mmb…”

Squire, to be sure the Econ Baro has weakened a tad since its most recent peak from just nine trading days ago (on 30 May); this past week alone was quite sparse for incoming reports with just six having arrived, notably low-lighted by April’s slowing Factory Orders and a burst in Jobless Claims.  However, next week we’ve 16 metrics due for the Baro, including inflation measures at both the retail and wholesale levels.  And by “consensus” versus prior period, it appears the Baro may further take a bit of a dip, but not by enough to make the Fed quit.

Either way, per the red line (S&P 500) in the above Econ Baro graphic, the stock market clearly doesn’t care a wit. Yet regardless of what conventional wisdom sees, we continue to couch the S&P as standing on weak knees, due overwhelmingly to weak earnings growth, if you please.  The S&P settled the week yesterday at 4299, its highest closing level since last 16 August.  The S&P’s “live” price/earnings ratio back on that day?  38.8x.  Today?  53.3x.  On an implied basis for that stint, (given the “P” of the P/E is the same), S&P earnings on a cap-weighted basis have thus declined -27%; (that shan’t be reported on CNBS, Bloomy, Foxy…).  So we justifiably await the oft-metioned “Look Ma! No Earnings!” crash.

Or if you prefer: as of yesterday’s close, the market capitalization of the S&P is $37.5T … but the U.S. liquid Money Supply (M2 basis) is “just” $20.4T.  Hence there’s perhaps the “Look Ma! No Money!” crash.  To reprise that stated by the sole recipient (J.G.S.) of the first Gold Update nearly 14 years ago:  “Sumpthin’s gonna happen…”   Or as we’ve put more recently:  “Marked-to-market, everybody’s a millionaire; marked-to-reality, everybody’s broke.”

Notwithstanding lack of earnings or money, there’s always the feared “crash” announcement triggered by a prominent investment bank, for example:  “Churnem & Morefees this morning declared a 20% reduction in clients’ exposure to equities.  S&P futures are locked limit-down.” 

Here’s a mitigating thought:  “Got Gold?” 

And yet by the website’s MoneyFlow page for the S&P 500, ’tis into which investors continue to throw dough.  Here’s a visual snippet showing the cumulative MoneyFlow differential (as regressed into S&P points) for the past week, month and quarter.  We don’t have to comb back through our 18 years of daily MoneyFlow data to know the rightmost differential extreme has never before been seen:

But wait, there’s more:  have you been keeping a wary eye on the VIX, (which for you WestPalmBeachers down there is known as “The Fear Index”)?  Its present level of 13.83 indicates “No Fear” for stocks.  As we tweeted earlier in the week (@deMeadvillePro), the VIX has not been at this complacent a level since one month prior to 2020’s COVID crash.  Further:  across the some 34 years of VIX history, its average level-to-date is 20, and one standard deviation below that is 12.  And if you look back across all those years, when the VIX rarely gets down into the 12s, the S&P has a tendency to become rather, shall we say, “unstable” into the ensuing year or two, including with some past “corrections” ranging from -11.4% to -48.5% … just in case you’re scoring at home.

Meanwhile, scoring a bit better than Gold of late is Silver.  From her recent 26 May low of 22.79 (July contract), she’s increased as much as +8.1% to yesterday’s high of 24.62, whereas Gold from its recent 30 May low of 1950 (August contract) managed just a +2.6% increase to the aforementioned 2001 level.  Nonetheless, the Gold/Silver ratio is still historically high at 81.0x vis-à-vis its century-to-date average of 67.5x.  “Got Silver?” We have her 10-day Market Profile here (below right), the relative present level therein better than that for Gold (below left):

So toward this week’s wrap, let’s assess…

The Gold Stack
Gold’s Value per Dollar Debasement, (from our opening “Scoreboard”): 3668
Gold’s All-Time Intra-Day High: 2089 (07 August 2020)
2023’s High: 2085 (04 May)
Gold’s All-Time Closing High: 2075 (06 August 2020)
The Weekly Parabolic Price to flip Long: 2073
10-Session directional range: up to 2001 (from 1950) = +51 points or +2.6%
Trading Resistance: 1977 / 1980 / 1991 / 1996
Gold Currently: 1976, (expected daily trading range [“EDTR”]: 26 points)
10-Session “volume-weighted” average price magnet: right here at 1976
Trading Support: 1961
The Gateway to 2000: 1900+
The 300-Day Moving Average: 1841 and rising
2023’s Low: 1811 (28 February)
The Final Frontier: 1800-1900
The Northern Front: 1800-1750
On Maneuvers: 1750-1579
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 indeed to wrap, we couldn’t help but notice this claptrap, courtesy of the UPI, (such as to have former President and Chairman Hugh Baillie likely rolling in his grave):  Ready?  “Heat-trapping carbon dioxide hit record levels in May … not seen in 4 million years” Really?  Moreover, how can it be a record if it already was the case 4 million years ago… Right?  We’d really like some clairification on this if any of you valued readers might ring up one of your australopithecus relatives … you know … to find out at what laboratory in what state or country such measurement was made back then, and so forth.  Just curious.

‘Course, 4 million years ago is peanuts when we consider that Gold (so ’tis said) extends back some 4 billion years when The World was then being pelted by asteroids.  Now that’s real climate change!  In fact:  “Miss Gibbs?  Would you kindly contact Hollywood Studio Rentals and see if we can get H.G. Wells’ time machine for a week or so?”  (She’s a winner).  Oh to linearly regress the value of Gold from then through now and into the future, WOW!  

Cheers!

…m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter:  @deMeadvillePro

The Gold Update: No.707 (03 June 2023) – Gold Gets the Grip n’ Trip Treatment

by

The Gold Update by Mark Mead Baillie — 707th Edition — Monte-Carlo — 03 June 2023 (published each Saturday) — www.deMeadville.com

“Gold Gets the Grip n’ Trip Treatment“

Point:  One of the long-standing trading tenants of “The Smart Alec Dept.” is to “buy the rumour” and then “sell the news”.  We thus present the quintessential example of such grip n’ trip treatment:  Gold.

Gold entered this past week garnering +19 points of fresh premium as COMEX contract volume moved from June into August.  But wait, there’s more.  For as the week unfolded came the fevoured anticipation for Congressional passage of the StateSide DDD (“Debt Default Deal”):  a raising of the debt ceiling by $4T!  But where’s the dough to make it so?  “Hello Jay?  Janet.  Joey just signed it.  Let’s do it!”  Thus it can’t get any better for Gold, right?  And indeed through the “rumour” stint, Gold gripped for +51 points.  But upon the Congressional approval “news”, Gold then tripped -36 points. 

In sum, by “front month” measuring, Gold’s settling the week yesterday (Friday) at 1964 marked a weekly gain of +18 points, whereas spot itself gained but +1 point. Either way, ’twas a “nothing week” for Gold, which given the approval of the DDD ought rightly have sent the yellow metal to the moon.

Counterpoint:  As we tweeted earlier in the week, ’tis instead the Economic Barometer that’s been moon-bound, doubtless meaning the Federal Reserve (as herein penned a week ago) “…shall keep [its] foot on the rate raise throttle…”  Why, even the brilliant Bloomy brains figured this out following May’s robust Payrolls report on Friday by printing “Yields rise as traders bet on one Fed hike by July.”  Talk about foresight:  the Federal Open Market Committee is only scheduled to issue one Policy Statement prior to July (in adding +0.25% to the FedFundsRate on 14 June).  Impressive FinMedia insight there.  Regardless, make no mistake by the Baro’s take, for even as FinParrots say the economy’s slowing, instead by math ’tis visually growing:

And as “grows” the economy — certainly aided and abetted by inflation — so grows the FedFundsRate, and in turn the Almighty Dollar, its Index of which from low-to-high across the past five weeks is +4.1% toward returning to nearly a three month high (today 104.000; March’s high 105.870).  Whilst most broadly Gold plays no currency favourites, the short (sighted)- term conventional wisdom crowd dumps the yellow metal (or shorts it, as really very few actually own it) in championing the Dollar and its attendant yield.  Indeed the ridiculously-overvalued S&P 500 yields but a wee 1.613% versus the U.S. 3-month T-Bill’s 5.215% — and “Old Yeller” can now rest assured that she can pay the requisite interest,(until…)  Note too:  “always first” Fitch is nonetheless maintaining their “negative credit watch” on the U.S.A., but keeping the “AAA” rating (until…)

Of note as well from the “Afraid to Know the Truth Dept.” you’ll see in the above Econ Baro graphic the wee one with the sign displaying the honestly calculated “live” price/earnings ratio of the S&P 500 as 53.0x; (the current miscalculated parroted version is 24.8x).  We point this out with respect to yield.  The long-standing back-of-the-napkin calculation of yield is to invert the P/E.  Using the parroted 24.8x, the implied yield for the S&P is thus 4.032% — whereas in reality ’tis but the aforementioned 1.613% — which is far closer to the inverted 53.0x yield of 1.887%.  Just in case you’re scoring at home, as “tick-tick-tick goes the clock-clock-clock…”

Meanwhile, ticking lower are the red dots of Gold’s fresh weekly parabolic Short trend, now two weeks in length:

However, therein we see the prior Short trend lasted but four weeks (17 Feb to 17 Mar).  And whilst historically such Short trends suggest Gold revisiting the 1800s during this stint (as graphically herein detailed a week ago), wouldn’t it be lovely to have the present Short trend short-lived?  “Got Gold?”

The still rare breed of investor that does “have” Gold goes for its leverage afforded via precious metals equities.  This being our “month-end” edition of the Gold Update (plus two days of June for which to attune), below we’ve the following year-over-year percentage tracks with Gold +6% itself leading the pack, pursued by Franco-Nevada (FNV) +4%, both the VanEck Vectors Gold Miners exchange-traded fund (GDX) and Agnico Eagle Mines (AEM) -2%, the Global X Silver Miners exchange-traded fund (SIL) -10%, Pan American Silver (PAAS) -30%, and S&P 500 constituent Newmont (NEM) -37%.  Using this date from a year ago as a starting point — given Gold’s positive track — the balance of this bunch ought all be far higher still!

“Yet it depends from where you start, right mmb?”

Indeed so, Squire.  For example:  if measuring from the precious metals’ price depths of year-end 2015, Gold today is +85%, but GDX (as a surrogate for many miners both Gold and Silver) is +129% … and arguably some say it ought be far more.  More toward “The Now”, here’s the graphic:

It essentially being month-end, let’s open up the BEGOS Markets’ gates as we go ’round the horn for all eight components by their daily bars from one month ago-to-date.  As shown, save for the senseless S&P (Spoo), the balance of the diagonal trendlines are down given the firming Dollar “phenomenon do-do-do-doooo…”.  And as you regular website viewers know, the baby blue dots represent the day-to-day consistency of each component’s grey trendline.  So notably mind the “Baby Blues” for both Gold and Silver as they’re just starting to curl upward:

Specific to the 10-day Market Profiles for the precious metals, here next we’ve that for Gold on the left and for Silver on the right.  Obviously Gold has much more overhead trading resistance with which to deal, whereas Silver exhibits more of a 23s safety net.  ‘Course, per the aforeshown Gold/Silver ratio of 82.9x versus the millennium-to-date average of 67.5x, Sister Silver remains cheap!

Then broadly in looking at Gold’s Structure by its monthly bars across the last dozen or so years — all those stratified layers notwithstanding — that rightmost triple top remains ripe for the taking:

Toward closing, ‘twouldn’t be month-end without listing the BEGOS Markets’ Standings from year-end 2022 through this 03 June.  Note that Gold has been displaced at the top of the stack by none other than the S&P 500, aka “The Magic Earnings-less Index”.  As stated in the past:  “‘Tis diabolical”:

Which in turn leads us to this wrap.

We’ve oft referred to the current monetary climate as The Investing Age of Stoopid.  So bizarre has it become that we are seeing headlines which a generation ago would have been regarded as completely irrational, (and obviously never would have made the front, if any, newspaper page).  Nonetheless, the once quite useful WSJ just ran above Friday’s fold with “Robust Labor Market Poses Threat to Stocks’ Rally” –> What?  Shouldn’t a robust labor market encourage a stocks’ rally?  But then we forget.  In this New Age of piling into earnings-less stocks, valuation has no bearing to price.  Rather the Fed has become EVERYTHING, even as FinMedia guidance to the Fed’s “next move” is useless as it changes from week-to-week:  “They’re gonna pivot; no wait, they’re gonna pause; no wait, they’re gonna raise, but only once and then they’re gonna pause…”  Good grief:  for the bazillionth time, this is why we do the math.  (To which point, see last week’s missive as regards the Fed-favoured Core PCE inflation gauge).  And by doing the math, we know that to expect.

And most broadly, yes, Gold shall eventually go to the moon!  So either get in, or get off the gantry!

Cheers!

…m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter:  @deMeadvillePro

The Gold Update: No.706 (27 May 2023) – Gold: Our Near-Term Downside Target Zone

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The Gold Update by Mark Mead Baillie — 706th Edition — Monte-Carlo — 27 May 2023 (published each Saturday) — www.deMeadville.com

“Gold:  Our Near-Term Downside Target Zone“

As herein penned just a week ago for Gold: “…the present … Long trend can swiftly end in tears. Either Gold right now resumes adroitly up, or … just a wee drop in actual price, and ’tis over. A new Short trend would then ensue, and … even the 1800s may return anew….”

And so ’twas the latter case that came to pass this past Thursday (at precisely 12:42 GMT) upon Gold penetrating the 1942 level. And lo (double entendre), a fresh red encircled dot was printed, heralding the start of a new Short trend for Gold’s weekly bars:

And thus the age old question again is asked:  “How low doth Gold go?” Within the above graphic, the white area represents the most recently carved support structure for Gold, spanning from the 02 February high of 1975 down to the 28 February low of 1810.  Therein, the green zone encompasses Golden Ratio support spanning from 1912 to 1874.  That in turn is bisected by the purple midpoint support line at 1893 — a reasonable downside target — which is -53 points below Gold’s having settled out the week yesterday (Friday) at 1946.

More specific to the last 10 parabolic Short trends that extend back a full five years, be it by average, trimmed-mean, or median adversity, such vacuum suggests Gold reaching the 1852-1835 area.  Whilst that still is inside the overall white support structure, our lean is that the 1893 purple line is the extent of adversity on this down run. On verra…

‘Course, that’s all technical.  But as long as Gold continues to be kicked around as a commodity rather than as a currency, the technicals typically will out.  Ultimately there remains the main fundamental:  currency debasement.  And by our opening Gold Scoreboard, we value Gold today at 3686, even accounting for the wee increase in the supply of Gold itself plus some shrinkage of late in the StateSide “M2” Money Supply.

 “But mmb, Gold always rises to prior maximum debasement values, right?”

Exactly right there, Squire.  Historically ’tis the case, however the lag time can be significant: the last such occurrence was per Gold’s still-standing All-Time High of 2089 on 07 August 2020, the debasement value for which was attained some eight years earlier during March 2012.  Indeed as a charter reader of The Gold Update has quipped these many years:  “Gold will make you old.”  But ’twill also make you financially substantive.

Speaking of substantive, such is the state of the Federal Reserve’s favoured inflation rate.  As the Fed assumes that neither do you drive nor eat, it looks to push down Core Personal Consumption Expenditures to an annualized inflation pace of +2%.  And the full-throat FinMedia buzz is that following another +0.25% FedFunds rate increase come the 14 June Open Market Committee’s Policy Statement, they shall then “pause”.  Shall that produce enough “economic slowdown” to garner just +2% annualized Core PCE inflation?  We don’t think so, per the following graphic:

We constructed this inflation measure two ways from January 2020-to-date.  First, the yellow line takes each month’s Core PCE rate and annualizes it (which for you West Palm Beachers down there is x 12).  Second, the blue line is the moving 12 months’ summation of the Core PCE, which is the more commonly accepted version.  The Fed’s horizontal red line goal is at 2%.  Does the blue line look like it’s about to drop to the red line anytime soon? No it doesn’t.  And there are five more FOMC meetings still in this year’s balance alone.

As for “economic slowdown”, by our tried-and-true Economic Barometer (now in its 26th calendar year), “slowdown” of late appears more as “boomtown”:

And as has been the rule rather than the exception through these last four weeks (basically a whole month’s worth of data) period-over-period metrics are improving.  Of the 10 that hit the Baro this past week, 8 were better, including April’s Personal Income, Personal Spending, both New and Pending Home Sales, plus an upward revision to Q1’s Gross Domestic Product from +1.1% (annualized) to +1.3%.  ‘Course, the cautionary note therein is inflation’s effect vs. REAL growth.  And that shall keep the Fed’s foot on the rate raise throttle, even as the Minutes from the FOMC’s 02-03 May meeting noted some members’ thoughts to potentially “pause”.  But the Econ Baro since then has been a rocket ship …  albeit somewhat fueled “as things get worse more slowly.”

Then, too, is the issue of U.S. Treasury default under Secretary Janet Yellen.  ‘Twould be a week from Monday (05 June) per “Old Yeller”, barring some BandAid and tape resolution.  Rating agency Fitch (which always figures to be first) is said to be “considering” a downgrade of its StateSide credit rating.  But not to worry:  President Biden’s Administration has their “contingency plan” waiting in the wings.  (Just mind the “direct deposit” of that Social Security cheque…)

Moreover, the stock market isn’t worried at wit.  Money is pouring into the S&P 500 at a pace we’ve not witnessed since we began collecting stock-by-stock MoneyFlow data on a daily basis back in 2005.  ‘Course, you can count on one hand the five or so stocks that essentially are the whole S&P 500.  But money is money such that by the website’s three measures (weekly, monthly, quarterly) this leading indicator of Flow is unabashedly pointing to much high levels for the Index to go.  All that remains to justify it are earnings.  (Note:  the “live” price/earnings ratio of the S&P 500 settled the week at 55.1x.  The good news is that the “parroted” version is but a mere 24.3x).  Further, the 3-month U.S. Treasury Bill may yield 5.115% as opposed to the S&P’s 1.607%.  But stocks don’t default, right?  Even if the money doesn’t exist to cover them, right? (As of yesterday:  S&P 500 Market Capitalization = $36.6T; “M2” Money Supply = $20.5T … just in case you’re scoring at home).  Have a nice day.

But hardly are the precious metals having nice days.  Let’s start with our two-panel graphic for Gold.  On the left, the “Baby Blues” of trend consistency cracked below the +80% axis back on 05 April, price then 2037; as of yesterday, ’twas better than -100 points lower at 1936.  (Again ad nauseam, “Follow the blues…” given their leading quality).  On the right, all those labeled overhead resistors are Gold’s plight in its downward Market Profile flight:

Faring none the better is poor ol’ Sister Silver, her “Baby Blues” (below left) in pure consistent plunge, although in her Market Profile (below right) she’s found some trading support above 23.25.  Similar to Gold’s aforeshown support structure, for Silver such support extends down to 19.95, (but please let’s not go there, dear Sister…):

‘To sum it all up, Gold’s being conventionally considered a commodity — versus True Cash — finds it in techncially-negative mode, with the high 1800s in its near-term balance.  Doubtless, if there is any resolution for a StateSide default, it shan’t be until “lawmakers worked late with the Administration into Sunday night” (i.e. 04 June), even as ’tis now reported that a tentative agreement has been reached.  But that’s just the way Washington operates and it makes for ad-revenue-generating late-night boob tube “breaking news”.  Prior to which, we see nothing of substance to break Gold’s downward bent, barring poor employment reports later in the ensuing week.  Gold shall naturally run this parabolic Short course as it always does, only to then resume its broader upward climb.  And that we trust shall be sublime to a High of All-Time!

Cheers!

…m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter:  @deMeadvillePro

The Gold Update: No.705 (20 May 2023) – Gold’s Nigh High Goes Awry (aka When We’re Wrong, We’re WRONG!)

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The Gold Update by Mark Mead Baillie — 705th Edition — Monte-Carlo — 20 May 2023 (published each Saturday) — www.deMeadville.com

“Gold’s Nigh High Goes Awry (aka When We’re Wrong, We’re WRONG!)“

From “Nigh” to “Awry” indeed, as straightaway we run with this rare reprise:  “Boy, Did I Get a Wrong Number!” –[Hope, Sommer, Diller; UA, ’66].

Since mid-March, our oft-stated target for Gold has at minimum been its still-standing All-Time High of 2089 … and beyond!  … such that throughout we’ve not chosen a forecast high for this year.  But come 04 May, the jive to 2085 was the most Gold could thrive, only to since see the yellow metal then dive -131 points to 1954 in settling out this past week yesterday (Friday) at 1980.  Way not to go, mmb…
 … albeit hardly are we throwing out the baby (let alone this old man) with the bathwater.

But worse, having been caught up in our own fundamental fervour that this finally was “IT“ — e.g. that Gold at long last was going to imminently break up through 2089 en route to the mid-2100s come July — we instead committed a cardinal error.  (Ready?)

We ignored the very leading essence of our own website’s analytics which from two weeks ago had already begun pointing to near-term lower levels for the precious metals.  “Whoomp! (There It Is)” 

 
“Now don’t beat up on yourself too much there, mmb.”

Regardless, dear Squire, we rather recklessly ditched our reliably leading indicators on the exceptional notion that this time ’round Gold was well and truly en route to new uncharted upside territory.  Even as weakness in our Market Trends‘ “Baby Blues” (notably so for Silver) began to set in; even as on 04 May by Market Values Gold was still trading +44 points above its smooth valuation line after having more so been +153 points above same just back on 13 April; even as on 11 May Gold crossed below its Market Magnet.  All tried and true leading signals across better than two decades … and all of which we ignored.  Instead, we stayed on go for Gold to glow whilst our own stuff warned of a blow.  Thus now, here’s what Gold’s weekly bars show:

 
No, ’tis not the prettiest of pictures.  Given:  price today at 1980, the ensuing week’s parabolic “flip to Short” level just -37 points lower at 1943, and Gold’s “expected weekly trading range” now 65 points, the present parabolic Long trend can swiftly end in tears.  Either Gold right now resumes adroitly up, or the combination of the blue parabolic dots rising at a weekly pace of +16 points and just a wee drop in actual price, and ’tis over.  A new Short trend would then ensue, and by Gold’s price structure, even the 1800s may return anew.

Oh to be sure, we cannot imagine any more Gold positives than are already in play.  Yes, the Dollar’s been “firming” a bit, but you know, and we know, and everyone who’s being paying attention from Bangor Maine to Honolulu and right ’round the world knows that Gold plays no currency favorites, as herein graphically exhibited ad nauseam over the years. 

Moreover, ’tis not just the precious metals that are somewhat stifled of late.  For across the past 21 trading days (one month) — with the exception of the S&P 500 — the seven other components which make up BEGOS (Bond, Euro/Swiss, Gold/Silver/Copper, Oil, S&P) are sporting negative linear regression trends.  In fact, here are the percentage tracks for the five primary components since a month ago, essentially exhibiting a general markets’ malaise (Oil having traced an even more negative phase):

 
And yet that said, nothing markets-wise seems natural anymore, save for the fact that price is never wrong: we cannot will Gold to eclipse 2089 just as we cannot will the S&P 500 (today 4199) to return to a rational earnings valuation in the mid-2000s.  But we steadfastly believe in due course that both will.  And yet as my fine friend and business partner here quips along with me:  “Everything we learned in Portfolio Theory has become useless.”  At least until means reversion again comes to the fore as is its historical encore.

And speaking of earnings, let’s take a moment to assess those of the S&P 500.  One year ago on 19 May 2022, the S&P stood at 3901:  ’tis today at 4199, an increase of 6.9%.  Similarly on that exact day a year ago, our “live” price/earnings ratio for the S&P was 29.8x:   ’tis today at 52.9x, an increase of 43.7%, (which differs considerably from the “parroted” P/E of 24.3x courtesy of the “nobody actually does the math” crowd).  Why so high?  Simple:  Q1 Earnings Season just ended.  Therein, 450 S&P 500 constituents reported.  Excluding the three terrible COVID quarters (Q1, Q2 and Q3 of 2020), this year’s Q1 Earnings Season ranks second-worst since Q3 of 2017 as only 56% bettered their year-over-year results … which means 44% did not so do.  (What ever happened to the coveted “high quality” standards necessary to be in the S&P, hmmm?)

Either way, not to worry per this recent (hilarious) statement from the great multinational Royal Bank of Canada:  “…On the surface, Q1 earnings season looks pretty good … S&P 500 earnings per share (EPS) is on pace to decline 4.2 percent year over year, better than the consensus forecast of a 6.7 percent decline at the end of the quarter…”  The Investing Age of Stoopid rolls on…

Then again, are things actually getting better?  A StateSide Debt Default aside — an economic catastrophe that U.S. Secretary of the Treasury Janet “Old Yeller” Yellen rightly deems would be “severe” — our Economic Barometer has been doing quite nicely of late:

 

Of the past week’s 13 metrics which came into the Econ Baro, 10 were period-over-period improvements across quite a spectrum of indicators, including May’s Philly Fed Index and NAHB Housing Index, April’s Retail Sales, Housing Starts, Industrial Production, Capacity Utilization, and the Conference Board’s Leading (i.e. “lagging” given the Baro always being in the lead) Indicators, plus a working off of March’s Business Inventories. Nonetheless, we’re a bit hesitant to cue up Elvin Bishop’s ’75 hit “Sure feels good feelin’ good again “

Meanwhile from the “‘Tis Not a Beauty Contest Dept.” we go to our 10-day Market Profiles for Gold on the left and for Silver on the right.  From their highs of just over two weeks ago, Gold has fallen as much as -6.3% whilst Silver has repelled nearly double that at -11.2%.  No happy faces there;

Such repelling notwithstanding, let’s wrap with this from the “Cooler Heads Prevail Dept.“

We’re on occasion asked, “What’s it gonna take for Gold to really go up?” Answer:  the same thing it takes for any market to go up –> more offers being hit than bids.  Whilst Gold is very actively traded, (year-to-date COMEX volume alone running at an average of 2.53 contracts traded per second, each contract controlling 100 ounces of Gold, which by today’s price is an average traded claim on Gold of $501,000 per second), the universe of trading entities is not materially expanding given maximum “open interest” is not growing beyond some 400,000 contracts.  And we understand Gold remains significantly “under-owned” vis-à-vis managed portfolio allocation.

‘Course, that can all change in a heartbeat:  “Hey Mabel?  Our Treasury check never showed up this time!”  Followed by:  “Hey Mabel!  I sold some stock but the broker says they don’t actually have the money to pay us!”  Hey Egbert:  finally now you’ll try to get some Gold, eh?  The moral of the story thus being –> do NOT be that guy:

Cheers!

…m…

www.TheGoldUpdate.com
www.deMeadville.com
and now on Twitter:  @deMeadvillePro

The Gold Update: No.704 (13 May 2023) – Gold Comes a Bit Undone, but Silver’s Selling is Overdone!

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The Gold Update by Mark Mead Baillie — 704th Edition — Monte-Carlo — 13 May 2023 (published each Saturday) — www.deMeadville.com

“Gold Comes a Bit Undone, but Silver’s Selling is Overdone!“

 

A mere four weeks ago we penned our 700th missive entitled “Gold: The Next All-Time High is Nigh”.  And as you nauseatingly know from just prior to this past week, Gold came within four wee points of so doing in reaching 2085 on 04 May, (the All-Time High of course still 2089 from 07 August 2020).

Since however, our “Nigh” has gone somewhat awry, Gold having just recorded a wimpy week of net -9 points in settling  yesterday (Friday ) at 2016.  Regardless, from the 04 May high of 2085 to this past week’s low of 2006 was Gold’s coming a bit undone to the tune of -3.8% in less than seven trading days. 

But the more morose lowlight was the comprehensive shellacking of Silver, her selling overdone indeed!  And it all happened in just these last two trading days, Silver settling at 24.13 to close out her week.  ‘Twas quite untoward to take in:  for at Wednesday’s settle (25.63) the Gold/Silver ratio was 79.5x; 48 hours later ’twas 83.5x!  Such two-day increase of 4.0x hasn’t occurred in better than two years (since 03 February 2021)!  Moreover, from Thursday’s high to Friday’s low, Gold dropped -2.0% … but Silver was chopped liver at one point to the tune of -7.0%!  “Hold the onions!”  Behold the two-day percentage tracks for our metals’ triumvirate of Gold, Silver and Copper from this past Thursday through Friday (15-minute data):

 

Oh to be sure, Cousin Copper is somewhat the culprit here.  Just as Gold is money, we consider Silver as same.  But we’ve seen at times over the years our Sister Silver discard her precious metal pinstripes for her industrial metal jacket when on occasion Cousin Copper comes calling.  Yet clearly per the above graphic, let’s just say the white metal’s dalliance with the red metal this time ’round was rather excessive (understatement), whether measured by Copper’s percentage decline, Gold’s modest decline, and/or the Gold/Silver ratio itself.  So say it loud, say it proud:  “Got Silver?“  Further as is our wont to point out — given the century-to-date average Gold/Silver ratio of 67.5x — were Silver priced today by that metric, she’d be +19% higher than her current 24.13 at 29.86.  Reprise:  “Got Silver?“

As for the yellow metal, it recorded an “inside week”, (i.e. a “lower high” and “higher low”).  Not to get too deep into the statistical weeds as we turn to Gold’s weekly bars from one year ago-to-date, but you may find this tidbit of interest.  In reviewing the prior ten parabolic Long trends (from as far back as January 2018), upon Gold therein printing an “inside week”, price’s “median maximum” gain in the ten ensuing weeks was 64 points (which from here at 2016 would be 2080), and price’s “average maximum” gain in those same stints was 108 points (which from here at 2016 would be 2124).  Thus specific to that construct playing out, ’tis fair to still say that a new Gold All-Time High remains nigh.

And to that end, the current trend remains Gold’s friend.  As of course does currencies’ debasement.  Yes, ’tis true that from 1980-to-date the supply of Gold itself has increased +123% … but the supply of U.S. Dollars alone (“M2″ basis”) across those same 43 years has increased +1,198%.  That is 10x the supply increase of Gold.  “Got Gold?”  And conservatively taking the average price of Gold for the year 1979 (such as to avoid 1980’s Gold price spike) of 310: 10x that is 3100.  Reprise: “Got Gold?”  We do right here:

 

“When it all goes wrong” indeed.  How’s that avoidance of StateSide “debt default” working out?  So far ’tisn’t.  “There goes the credit rating…”

“But mmb, it says here: ‘The validity of the public debt of the United States … shall not be questioned.'”

Excellent, Squire, to see you’re keeping up with the 14th Amendment [Section 4].  Anything there about the validity of folks’ bank deposits?  How about the validity of stock prices given stratospheric price/earnings ratios?  Again bearing in mind Jerome Cohen’s writing “In a bear market many stocks will sell at 5 to 7 times earnings, while in bull markets the average level would be about 15 to 18 times earnings” we’ve this rip from the website’s Valuation and Rankings page for the S&P 500:

 

Then too we’ve the Economic Barometer which for the third consecutive week regained some ground.  In fact the only real stinker was Friday’s marked decline in the University of Michigan’s “Go Blue!” Sentiment Survey, its initial June reading falling fourth most since the April 2020 onset of COVID.  To be sure, when concern arises as to whether that ever-reliable U.S. Treasury Interest cheque shall arrive in the mail — or not — sentiment clearly sags.  ‘Course with our “live” P/E for the S&P itself at now 52.6x, alternatively one can cash out before it all goes wrong there as well:

 

Next let’s drill down (quite literally for Sister Silver) into the daily bars across the past three months-to-date with Gold on the left and with Silver on the right.  Fairly stark difference there, the rightmost couple of days for Silver versus Gold.  Did we mention Silver’s selling as being overdone?  Absolument!

 

Then too we’ve the 10-day Market Profiles for the yellow metal (below left) and the white metal (below right).  Whilst Gold rests just below trading resistance in the denoted 2020-2032 range, a swift Silver climb to her 25.85 line would be ever so sublime, for we anticipate ’tis just a matter of time before the precious metals further their shine:

In closing it out this time ’round, what with all the talk of StateSide “debt default”, this past week (as we’ve done over the years) we perused the Budget of the U.S. Government for Fiscal Year 2024.  If you’ve never so done, we encourage you to so do, especially if you pay federal tax.  Amongst the double-columned 185 pages and the many “Seriously?” items therein comes this allocation for the Office of Refugee Resettlement (ORR).  ‘Tis allocated $7.3B to help resettle up to 125,000 refugees in 2024 … which of course works out to $58,400/refugee.  That’s darn good dough if you can get it!  Better still:  get some Gold, and Silver too!

 

Cheers!

…m…

www.TheGoldUpdate.com
www.deMeadville.com

The Gold Update: No.703 (06 May 2023) – Gold Nears Record Threshold … Then Gets Royally Rolled —

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The Gold Update by Mark Mead Baillie — 703rd Edition — Monte-Carlo — 06 May 2023 (published each Saturday) — www.deMeadville.com

“Gold Nears Record Threshold … Then Gets Royally Rolled“

And if you blinked — literally — you missed it.  In one of the most bizarre GLOBEX/COMEX session openings we’ve ever witnessed — that for this past Thursday, 04 May — Gold in mere seconds leapt 37 points from 2049 to 2085, just 4 points shy of the record threshold 2089 All-Time High … only to then get royally rolled into week’s end, settling yesterday (Friday) at 2025.

Thursday’s opening alone put us in mind of that 2000 Nicky Cage drive-in B-movie “Gone in 60 Seconds” as follows, emphasizing volume of 899 contracts upon some “entity” instantaneously hoovering away 13 full points of overhead offers in just one second!  Here ’tis:

‘Course, upon Gold not reaching its record high threshold, price then got rolled — and quite royally so — come Friday’s Bureau of Labor Statistics Payrolls data for April coming in 41% (+253k) more plentiful than “expected” (+180k); [note: our own inhouse estimate was for +250k… but the “Pros” are far more informed than are we, right?]

Oh to be sure, the yellow metal did record an up week.  BUT:  from its high-to-settle ’twas Gold’s second-worst intra-week drop year-to-date (-60 points or -2.9%).

And whilst that “one-second wonder trade” may warily reek of an MSC (“Manipulative Short Clearout”), if not even an honest attempt to go for Gold’s All-Time High it being so nigh, hardly was the effort sustainable.  The firm Labor report (plus as we’ll herein see the Economic Barometer’s recent recovery) almost certainly suggests the Federal Reserve is not set to “pause” come their Open Market Committee’s next Policy Statement (due 14 June).

And why pause at all?  After all, as we a week ago saw, the Q1 Chain Deflator component (+4.0%) of Q1 Gross Domestic Product (+1.1%) basically means 80% of quarterly GDP “growth” was solely inflationary rather than real.  Hence this opening sentence from Wednesday’s FOMC Statement:  “Economic activity expanded at a modest pace in the first quarter.”  Given that +1.1%, we can concur.  But then came the opening sentence of paragraph two:  “The U.S. banking system is sound and resilient.”  Cue one John Patrick McEnroe:  “You canNOT be SERious!”

Regardless, Gold “expectedly” got creamed upon Labor’s strong jobs release as the rightmost weekly bar next shows.  Yet the blue-dotted parabolic Long trend remains well intact, now 8 weeks in duration.  And as you sharp-eyed regular readers already know, the average duration of the past ten such trends is 14 weeks, typically carrying enough average points follow-through to imply (within that vacuum) Gold reaching the mid-2100s on this run.  You tell ’em, Charles, as here’s the graphic: 

We mentioned the Econ Baro:  here we go.  Of the Baro’s 14 incoming metrics this past week, 11 of them were period-over-period improvements, including April’s Payrolls creation both per Labor and ADP, the Unemployment Rate, Hourly Earnings, and the Institute for Supply Management’s Indices for both Manufacturing and Services.  Too for March came growth in Construction Spending, Factory Orders, Consumer Credit and a reduction in the Trade Deficit.  Yes, the groaner therein was our first peek at Q1’s Productivity which shrank whilst Unit Labor Costs rose.  But on balance, a bodacious week for the Baro, indeed its best five-day stint since that ending 08 February.  “Slow that thing down!”

And how about that S&P 500 on Friday scoring its third-best points gain (+75 or +1.8%) year-to-date?  Further:  did you know that 60.3% of that gain (via capitalization-weighted moneyflow) was from Apple (AAPL) alone, the Q1 earnings for which were flat at that from Q1 a year ago (again $1.52/share) whilst revenue dropped -2.5%?  (This is why we don’t “do” stocks:  far too nonsensical).  Oh and lest we forget, our “live” price/earnings ratio for the S&P settled the week at 54.2x.  Too, (should you still be scoring at home), the market capitalization of S&P is now 73% greater (at $36.0T) than the U.S. liquid money supply (at $20.7T “M2” basis).  But wait there’s more:  as we avoid watching them, are the FinTv channels running a StateSide Default Countdown Clock?  Indeed in so many ways “…tick tick tick goes the clock clock clock…”

Regardless, ticking down into week’s end were our precious metals. From high-to-low for Friday alone, Gold fell -2.6% and Silver -3.9%, both paying the freight when suddenly everything else is deemed just great as our two ol’ stock market buddies elate:

Thus to drill down into the precious metals we’ve first our two-panel display featuring Gold’s daily bars from three months ago-to-date on the left, and 10-day Market Profile on the right.  ‘Tis rare that the “Baby Blues” go that askew, but price’s sudden up-and-down has affected consistency in this view.  More importantly, whether by the aforeshown weekly view or this one, the dominant Gold trend remains up.  Meanwhile per the Profile, we look to the denoted trading support in the high 1900s as sufficient:

Silver’s similar view actually appears more stable.  She too got somewhat sucked into Gold’s “spike n’ roll”.  However week-over-week, Silver’s net gain was +2.3% versus Gold’s +1.3%.  Indeed, the Gold/Silver ratio is now 78.1x, its lowest reading since this past 06 January, (albeit priced at the century-to-date average of 67.5x would find Silver today at 30.01 versus her Friday settle at 25.93).  Still, her Profile’s low 25s suggest trading support:

“By the way, mmb, do you know what you’ve not yet posted this year?”

What might that be, Squire?

“The Gold Stack.”

Super scrutineering there, Squire!  Haven’t so done since last 26 November, Gold then at 1755.  Thus without further ado, here ’tis:

Remerciements, cher Inspecteur.  Now peering into the ensuing week we’ve the monthly round of both retail and wholesale inflation data.  The Consumer Price Index is “expected” to have increased from March’s +0.1% pace to +0.4% for April; and for the Producer Price Index from -0.5% to +0.3%.  How’s that erosion of purchasing power workin’ out for ya?  ‘Tis a good time to grab some more Gold!

Cheers!

…m…

www.TheGoldUpdate.com
www.deMeadville.com

The Gold Update: No.702 (29 April 2023) – Gold Our Best Vertex; S&P Train Wrecks

by

The Gold Update by Mark Mead Baillie — 702st Edition — Monte-Carlo — 29 April 2023 (published each Saturday) — www.deMeadville.com

“Gold Our Best Vertex; S&P Train Wrecks“

We’ve completed the year’s first trading quadrimestre (a little French lingo there).  And just as we saw at March’s month-end, so too through April is Gold again sporting the highest year-to-date percentage BEGOS Markets vertex as the “The Leader of the Pack” –[The Shangri-Las, ’64]:

And contrary to conventional wisdom that Gold and the stock market are inversely correlated, barely off the pace is the S&P 500 in second place, with the reportedly “left for dead” U.S. 30-year Treasury Bond rounding out the podium.

Still, specific to the yellow metal through these last three missives inclusive, we continue to anticipate a new Gold All-Time High as nigh — albeit having fully expected en route some near-term retrenchment into the 1900s — which has been exactly the case thus far.  (Note that per reader requests, recent editions of The Gold Update are now being archived on the website, such that you can look back to see what we’ve said).

To be sure, in yesterday’s (Friday’s) settling of the week, (and month and quadrimestre) at “1999” –[Prince, ’82], ’tis but a 90-point sprint to the present All-Time High (of 2089 back on 07 August 2020), which as herein detailed a week ago can happen in a heartbeat.

But in looking ahead toward Gold’s inevitably passing up through 2089, again we’re anticipating the mid-2100s come this July, given typical price gains during parabolic Long trends.  The current one is represented by the rightmost ascending blue dots across Gold’s weekly bars from one year ago to date, (with the flip for the ensuing week still well out of range down there at 1890): 

Now as we turn to “The Gold Leverage Dept.” as well from one year ago to date, Gold itself has the best performance track of the whole bunch.  Thus is Gold too far ahead of the pack?  Hardly, given today’s 1999 being but 53% of the opening Scoreboard’s debasement valuation of 3746.  Rather, we see Gold’s equities brethren having a lot of catching up to do.  At present, their year-over-year percentage tracks with Gold +6% are Agnico Eagle Mines (AEM) +3%, Franco-Nevada (FNV) +1%, the VanEck Vectors Gold Miners exchange-traded fund (GDX) -3%, the Global X Silver Miners exchange-traded fund (SIL) -9%, Pan American Silver (PAAS) -27%, and S&P 500 constituent Newmont (NEM) -34%.  Livin’ for leverage?  Lovin’ these laggards!

But it depends from where you measure, right mmb?

An absolutely valid point there, Squire.  For example, if measuring from the Opening Bell that began the year 2016 when Gold & Co. were deep in the dumper, almost all of these cited equities have outpaced Gold.  Since then:  FNV is +227%, PAAS is +167%, NEM is +157%, GDX is +138%, AEM is +110%, Gold itself is +88%, and the lone underperformer is SIL +58%.  Regardless, ’tis time for the equites to again get on the go, the ideal catalyst being upon Gold eclipsing 2089 for a new All-Time High.  Then watch ’em really go!

And speaking of stocks in general, to again reprise the late great football coaching legend Vince Lombardi:  “What the hell’s goin’ on out there?!?!?”  After all, our missive’s title for this week includes “S&P Train Wrecks” of which we’ve selected several to inspect.  In fact, let’s present them as follows in a form most picturesque:

Talk about taking the wrong track … yet the stock market per our preferred measure of the S&P 500 (currently 4169) refuses to revert to rational valuation (sub-3000, at least).  Indeed as Q1 Earnings Season continues to unfold, of the 249 constituents having reported, a full 40% have posted worse bottom lines than for Q1 of a year ago.  Is it any wonder our “live” price/earnings ratio for the S&P remains in rarefied air at 47.8x up there?  Recall Jerome Cohen’s writing that “…in bull markets the average level would be about 15 to 18 times earnings…”  Still in today’s S&P there are 28 constituents with P/Es of 100x or greater … and hardly is this even a “bull market”.  Let’s cue Dire Straits from back in ’85 with “Why Worry?”  After all, have a gander at the Economic Barometer:

Indeed the Baro’s “low-light” for the week was Q1’s shrinkage in annualized real Gross Domestic Product growth to just +1.0%.  Too, The Conference Board’s April reading on Consumer Confidence stumbled as did both March’s Personal Spending and Pending Home Sales.  But there were a few bright spots to give the Baro a bit of a lift, notably from the Chicago Purchasing Managers’ Index leap for April along with March’s Durable Orders and New Home Sales; also, Initial Jobless Claims subsided.  But on balance across the breadth of the Baro, the economy at best is shaky and faltering.

Faltering too of late are the BEGOS Markets as next we go ’round the horn for all eight components across their daily bars for the past 21-trading days (one month).  Note that in every case, the baby blue dots of regression trend consistency are in decline; moreover, just seven trading days ago, each market’s grey trendline was positive, four having since rotated to negative.  And specific to the S&P 500 (lower left panel) we sense that rightmost spike is a one-time wondershot:  in our book, just because a slowing economy suggests a Federal reserve “pivot”, ’tis poor judgement to knee-jerk purchase equities without regard to extreme overvaluation; and at the end of the day, earnings beating “estimates” doesn’t cover the reality of earnings in decline, (again as is the case this Earnings Season for 40% of the S&P’s constituents).   Here’s the graphic:

Next we turn to the 10-day Market Profiles for the precious metals.  And for both Gold on the left and for Silver on the right, present price (the respective white line in each panel) is poised mid-profile, both near if not at their most heavily traded prices as labeled for the past two weeks.  Perhaps a re-gripping to go for Gold’s high:

Thus toward wrapping it up with one-third of 2023 in the books, here we’ve Gold’s stratified structure by price’s monthly bars from the year 2011-to-date.  Dare we say:  “Here’s Johnny…” reminding us that a new All-Time Gold High is nigh:

So into this year’s second quadrimestre we go.  With the StateSide debt ceiling rising (but dead on arriving?), banks not surviving, Wednesday’s Fed hike reviving and the ensuing week’s 14 incoming Econ Baro metrics (to resume diving?), in whose car do YOU prefer to be driving?  That of GOLD!  The Leader of the Pack!

Cheers!

…m…

www.TheGoldUpdate.com
www.deMeadville.com

The Gold Update: No.701 (22 April 2023) – A Time to Add to One’s Gold Stack; (for the S&P, Prepare Hard Hat)

by

The Gold Update by Mark Mead Baillie — 701st Edition — Monte-Carlo — 22 April 2023 (published each Saturday) — www.deMeadville.com

“A Time to Add to One’s Gold Stack; (for the S&P, Prepare Hard Hat)“

Yes, per last week’s 700th missive, an All-Time High for Gold remains nigh, (i.e. above 2089).  Yet en route to said notion of nigh, we also penned our expectation for Gold to first recede into the 1900s, price indeed having traded this past week to as low as 1981 before settling yesterday (Friday) at 1994.

Nonetheless with respect to a new Gold high being nigh, might price still a bit further slide?  After all, per The Oxford English Dictionary (circa 1879 as The New English Dictionary) “nigh” is simply defined as “near”.  And contextually, “near” is not that far from here.  Or numerically, 2089 is not that far from 1994, i.e. +95 points.

‘Course ’tis always about “The When”.  In round numbers, let’s say Gold basically from here has to pop up +100 points to eclipse its existing All-Time High.  Can that happen quickly?  Historically since 2001, there have been 25 mutually-exclusive (for you WestPalmBeachers down there that means “non-overlapping”) occurrences wherein Gold has gained better than +100 points within just five trading days, the most recent case being in just three sessions from 1815 on 09 March to 1920 on 13 March.   “You can bank on that.”  (Ouch).

But in terms of Gold’s present ranginess, our EWTR (“expected weekly trading range”) is now 63 points; thus solely by that metric, a new All-Time High above 2089 in a week’s time is a bit of a stretch.  Moreover, we’ve the following near-term technical concern.

Recall a week ago our “continuing coverage” of Gold having significantly deviated above its smooth BEGOS valuation line.  Here they are paired in the upper panel from one year ago-to-date:

The lower panel is the oscillator (price less valuation), at one recent point showing price as better than 150 points too high.  Thus as anticipated, price this past week came back to this near-term method of valuation.  However, upon price penetrating to close below valuation as just occurred yesterday, the “rule of thumb” is to expect still lower levels.  Such negative penetrations have happened six times since a year ago to an average downside deviation of -77 points … which from here at 1994 “suggests” 1917, (just in case you’re scoring at home).  But:  our sense is — in staying with the theme that a new Gold All-Time High is nigh — we’re not anticipating much material downside.  Rather, some of the levels we noted a week ago (such as 1953 and 1975) seem more reasonable, especially given our perception of Gold awareness being on the increase amongst the non-Gold crowd.

Moreover, as we turn to Gold’s weekly bars from one year ago-to-date, the blue-dotted parabolic Long trend continues to ascend such that we continue to seek the new All-Time High along this bend, leading further toward the mid-2100s before reaching an end:

‘Course, there’d be no market for Gold were it not for “The Other Side of the Trade Dept.” represented just yesterday in Barron’s by one “AA” (and you know who you are out there) who penned “Gold is Hitting a Wall” such that the 2050-2075 zone somehow is “formidable resistance”.   From our purview, such “resistance” is really the two tops formed first ’round COVID in 2020 and second ’round RUS/UKR in 2022 … and now thrice ’round Common Sense/Fundamental Undervaluation (per our opening Scoreboard level of Gold 3793).  Thus we still see a wee dip … but then up with it.  ‘Tis a time to add to one’s Gold stack.  For as we’ve quipped of late quite a bit:  “Triple tops are meant to be broken.”

Indeed speaking of “broken”, surely you’ve been following the daily track of the Economic Barometer.  ‘Twasn’t the busiest of weeks for the Baro, but it did take in eight material metrics, six of which worsened period-over-period, those being April’s Philly Fed Index, March’s Housing Starts, Building Permits, Existing Home Sales and Leading (or “lagging” as they’re already incorporated into the Baro) Indicators, plus the second highest level of weekly Initial Jobless Claims since last August.  The only two improvements were a one pip increase in April’s National Association of Home Builders Index, plus the month’s New York State Empire Index having turned positive for the first time since last November, (although just its fifth positive reading of the past 16 months).  Toward tying it all up (or better stated down) with a bow, the Econ Baro nearly touched a one-year low:

Such “El Plungo” by the Baro obviously elicits the “R” word.  Recall the back-to-back StateSide negative Gross Domestic Product readings for Q1 and Q2 of 2022 as having “defined” a recession … which was met with a rising Q3 and Q4, (i.e. per the lowly convention wisdom level, “the recession ended as soon as it started”).  And now come this Thursday (27 April) we’ve the first peek at Q1 GDP, consensus calling for +2.0% annualized growth, albeit weaker than the prior two quarterly readings respectively of +3.2% (Q3) and then +2.6% (Q4).  “Slip Slidin’ Away” –[Paul Simon, ’77]

“But don’t you ever get skepitcal of the reported numbers, mmb?”

At times, ’tis hard not to, Squire, albeit, the Econ Baro over its 25 calendar years has been on balance a magnificent precursor to such reports as the GDP, Leading Indicators, at alia.  But skepticism is a natural reaction at times, a most glaring example being the Baro’s significant decline through much of last year’s Q4 metrics … but then +2.6% GDP growth was “reported”.  One’s eyebrow thus is on occasion raised, but the bottom line is our maintaining the consistency in calculating the Baro all these many years.  Still if the “reported” metrics via our sources are fudged, ’tis a bold disservice to us all.

Indeed speaking of “disservice”, the broadest one upon which we perennially harp is the disingenuous math used at large to dumb-down the price/earnings ratio of the S&P 500.  Research it via the internet, and the number (22.1x) is less than half that of our “live” 47.9x.  (We’ve herein posted the formula a bazillion times — but that which was dutifully taught in B-school is irrelevant today — for at any cost do not let The Truth scare investors away).

And with respect to Earnings, the Q1 Season is well underway.  How are we doing? Fairly poorly, one has to say.  Thus far, some 72 S&P 500 constituents have reported, of which just 56% (40) bettered their bottom lines from a year ago.  Going back 24 quarters (six years), that 56% (thus far) ranks fifth-worst … and if we eliminate the four COVID quarters of 2020, today’s Q1 ranks second-worst.  And yet the S&P (now 4133) remains stratospherically up there in goo-goo land.  ‘Tis nothing short of extraordinary. (Oooh… “short”…)

Time was when lousy earnings were fundamentally weak for the S&P.  And now technically? (Prepare hard hat):  by the website’s Market Trends page, the S&P Futures’ “Baby Blues” measure just confirmed dropping below the +80% axis (a highly reliable precedent to lower prices); by the MoneyFlow page ’tis running out of puff; the daily Parabolics on the Futures just flipped to Short; the MACD likely crosses to negative come Monday’s settle; and the “textbook technicals” just completed their 16th trading day as “overbought”.  Thus for the S&P’s ensuing week or longer, can you say “Down”?  ‘Tis our sense.

And again, our immediate sense too for the precious metals is a wee bit lower.  Yet by our title we imply a chance to buy given the All-Time High being nigh.  First to Gold and our two-panel graphic of price’s daily bars from three months ago-to-date on the left and 10-day Market Profile on the right.  For the bars we’ve put in an arbitrary green box encompassing a reasonable support area for Gold, even as the declining “Baby Blues” of trend consistency become less so.  As for the Profile, what had been notable overhead resistance at 2039 has since shifted lower to the now-dominant 2017 level:

Second with the same graphical drill for Silver, her Baby Blues (below left) are poised to cross below that key +80% axis, suggestive of a price run down into the lower 24s. And in her Profile (below right), those denoted lower 25s now show as trading resistance:

‘Course all that said, we’ve this from the “Who’s Next? Dept.” Upon whichever bank next suddenly zooms to the above-the-fold newspaper position shall swiftly send the precious metals back on the upside track, in turn putting the S&P flat on its back.  Not that Gold nor Silver need that to happen:  the yellow metal (1994) again by the Scoreboard valuation (3793) is presently priced at but 53% that, whilst the S&P 500 by earnings-to-historical value is arguably more than double that.

We’ll thus wrap it for this week with one of our (again updated) all-time favourite Gold Update graphics toward the next All-Time Gold High being nigh!

Cheers!

…m…

www.TheGoldUpdate.com
www.deMeadville.com

The Gold Update: No.700 (15 April 2023) – Gold: The Next All-Time High is Nigh

by

The Gold Update by Mark Mead Baillie — 700th Edition — Monte-Carlo — 15 April 2023 (published each Saturday) — www.deMeadville.com

“Gold:  The Next All-Time High is Nigh“

When we penned the first edition of the Gold Update 699 Saturdays ago on 21 November 2009 — for whom the sole recipient was one JGS (thank you, mate) — the price of Gold was 1151.  Since then, Gold rose to as high as 2089 (+81%) on 07 August 2020, nearly reclaiming that level at 2079 on 08 March 2022 as the RUS/UKR war intensified, and nearly again just this past Thursday at 2063.

But as is Gold’s wont to weaken following geo-political boosts, (the latest being upon Finland’s joining NATO as we detailed a week ago), plus some degree of waning inflation as reported this past week at March’s wholesale, retail and import price paces, the yellow metal, too, sank into week’s end, settling yesterday (Friday) at 2018.

Stirring Gold’s price negativity as well was FedGov Christopher “Up The” Waller’s commenting on Friday from the Lone Star State that inflation “…is still much too high … so monetary policy needs to be tightened further…” Or to reprise Al Gore’s infamous comment from back on the campaign trail in ’92:  “…Everything that ought to be down is up.  Everything that should be up is down…”

And priced today at 53% of the opening Scoreboard’s debasement value of 3797, Gold ought be up, whilst conversely with the “live” price/earnings ratio at 208% (46.9x) of its lifetime mean of 22.5x times, the S&P 500 ought be down.  (Pssst:  Can you say “means regression”?)  Or perhaps it all “means recession”?  More on that eventuality when we get to the Economic Barometer.

But first as entitled, for Gold the next All-Time High is nigh.  And as we turn to Gold’s weekly bars from one year ago-to-date, the rightmost blue-dotted parabolic Long trend is now five weeks in duration and accelerating upward.  Whilst price closed mildly lower (-0.3%) for the week just past, its high of 2063 was the best since that ending 11 March 2022, indeed just 26 points below the 2089 All-Time High.  As noted a week ago, we mused were Gold to achieve a new All-Time High coincident with this 700th missive would be brilliant.  Nonetheless, we anticipate price’s breaking above 2089 remains on the table during the course of this parabolic Long trend.  From here at 2018 to 2089 is a span of 71 points:  Gold’s “expected weekly trading range” is 64 points; thus in that vacuum, eclipsing 2089 in the new week is a bit out of range.  As well, Gold’s most recent week scored a “higher high”, but a “lower close”:  since Gold’s establishing the 2089 All-Time High 140 weeks ago, 24 of those have been down weeks incorporating a “higher high”.  The average fallout in those cases within the ensuing four weeks is some -65 points, which from today’s 2018 “suggests” 1953, a level not distant from the 02 February dominant high of 1975. Thus we ought not be surprised should Gold retrench a bit into the 1900s, which themselves are structurally supportive and of course well above the current parabolic flip price of 1858:

And by our valuing Gold vis-à-vis its smooth BEGOS line, price is some +59 points “high” per the oscillator in the lower panel of the following graphic; indeed the mid-point between “price” and “value” is at present 1988.  So again, a bit more pullback would not be untoward in Gold’s broader drive to a new All-Time High:

And speaking of broader, let’s next review our chart of Gold’s daily closes along with price’s 300-day moving average since the 1900 level was first achieved on 22 August 2011  ‘Twas back then when we specifically wrote of Gold having “gotten ahead of itself”.  ‘Course the ensuing fallout was far more than we’d anticipated, price fortunately having since recovered in full.  And forward from 2020, there’s that “triple top” which within trader hypotheses is “meant to be broken”, albeit more immediately Gold’s price appears some stretched above the blue average:

“But Gold is garnering more interest these days, right mmb?  And congrats on No. 700 by the way…”

Squire, we couldn’t have done it without you:  our thanks is beyond words.  And you are spot on.  For as pointed out in recent missives, today we hear more Gold buzz from non-Gold owners than since we began The Gold Update.  “Where is Gold?  How can I buy it?  Is it too late?”  Recall the late, great Richard Russell:  “There’s never a bad time to buy Gold.”  To which we add our 2¢:  the time to consider selling some is when everybody wants it (and ’tis trading up in the five-digits).

Speaking of trading up, one wonders when the S&P 500 shall revert to reasonable valuation, (which given the aforementioned P/E and assuming no growth in the “E” calls for a “correction” in the “P” of -52% … that shan’t be on CNBS, Bloomy nor Foxy).  As we oft quip:  “Others parrot; we do the math.”  And that includes doing the math for the Econ Baro, which in its present state relative to the stock market asserts that bad news is good:

The Baro this past week accounted for 14 incoming metrics of which 10 were worse period-over-period.  The only positives of note came in sentiment courtesy of the University of Michigan’s “Go Blue!” survey, plus improvements for Industrial Production and Capacity Utilization.  But with March’s Retail Sales again shrinking and (assuming you neither eat nor drive) core retail inflation down a pip but still running at nearly a 5% annualized rate, along with backups in both Wholesale and Business Inventories for February, the Baro on balance further eroded. Again, “means recession”?

Hardly eroding having been the price tracks of the precious metals.  For even if some normal retrenchment is in the near-term offing, ’tis hard to argue with the following two-panel display featuring the daily bars across the past three months-to-date for Gold on the left and for Silver on the right.  However, Gold’s baby blue dots of regression trend consistency have slipped below their +80% axis, another sign of pending corrective activity.  And should it be so, surely Sister Silver shall shiver:

And thus to the 10-day Market Profiles for Gold (below left) and for Silver (below right).  For both metals, price clearly has come off the respective highs recorded in the latter part of this past week.  Again as noted a week ago for Gold, there’s that 2039 apex — which indeed was well penetrated to the upside — only to return to now being resistive.  As for Sister Silver, ’tis all about holding above 25, albeit the 24s would now seem in store:

To sum it up for No. 700, our precious metals have had a significant run of late.  From Gold’s year-to-date low of 1811 on 28 February, today at 2018 ’tis +11%.  Similarly for Silver, her year-to-date low was just back on 10 March at 19.95 and today at 25.47 she’s +28% higher:  that’s in just 25 trading days! Brava Sister Silver!  To be sure some lower prices may ensue, but hardly do we believe these rallies are through.

Finally:  our heartfelt BRAVO to all of YOU who across these many years have seen us through.  From our direct readership to our re-publishers and those that further disseminate our missives, many, many thanks.  On to No. 701 … and may Gold stay Bold as the next All-Time High is nigh!

Cheers!

…m…

www.TheGoldUpdate.com

www.deMeadville.com