The Gold Update

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

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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

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