The Gold Update

The Gold Update: No.702 (29 April 2023) – Gold Our Best Vertex; S&P Train Wrecks

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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)

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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

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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