The Gold Update: No. 783 – (16 November 2024) – “ ‘Tis No Surprise, Gold’s Current Demise ”

So in again teeing off on Squire’s “How low is low?” query from a week ago, the above graphic depicts the amount of adversity one might expect from the present 2567 level, the “average” -75 points suggesting Gold revisiting the upper 2400s on this run.  Indeed doing the math across Gold’s price-structuring cluster from 03 May’s low of 2285 to 20 May’s high of 2454, the mid-point is 2370.  And as you seasoned techies know, cluster mid-points are oft ripe targets.

“So mmb, you’re saying another 100 points down from here is where Gold is going?'”

As you know, Squire, none of us ever know.  We can only put to use that which typically eventuates so as to have some degree of cash management guidance.

“But folks should still wait to buy, eh mmb?”

Our modus operandi (a little Latin lingo for you WestPalmBeachers down there) for buying into dips is to accept the risk (especially with respect to Gold) of getting aboard with an initial tranche, but budgeting to fully expect another buying opportunity further down.  In other words, by planning to be initially wrong, one doesn’t miss out when it all goes right.  To again reprise the resplendent Richard Russell:  “There’s never a bad time to buy Gold.”  And priced today at 2567 vis-à-vis the opening Scoreboard’s Dollar debasement level of 3740, obtaining Gold at a -31% discount to its long-term value ought be an attractive entry point for those of you scoring at home.

Speaking of scoring, the Dollar Index just completed its seventh consecutive weekly gain, en route reaching to as high as 106.990, a level not traded since 03 October of a year ago.  And as we approach the 15th anniversary of these weekly Saturday missives (since 21 November 2009), we’ve on occasion quipped that provenly “Gold plays no currency favourites”, albeit price typically trends contra-Dollar as has been the recent case.

To be sure, pre-election Gold was being grabbed as a safe-haven bid, in concert too with the Fed to that point having turned somewhat benevolent.  But so-called oxymoronic “Dollar strength” has a tendency to erode all eight elements of the BEGOS Markets (Bond, Euro/Swiss, Gold/Silver/Copper, Oil, S&P 500).  In fact during these recent days wherein a glance at the screen portrays all eight components in the red, we “know” a priori that the Dollar Index is higher.  ‘Tis just the way these markets both interact and react.

Moreover with respect to being in the red, the mighty S&P 500 (aka “Casino 500”) — which though this year’s first 42 weeks (to that ending 19 October) had net gains in two of every three — just recorded its third down week in the last four.  (Recall the Wall Street Journal piece pre-DotComBomb about less-experienced investors actually believing the stock market never went down?)  Yet, just how overvalued remains the S&P, even having lost -2.7% (high-to-low) in just past five trading days?  Technically, the Index through Friday is still “textbook overbought” through 23 of the past 27 trading days.  Fundamentally, the “live” price/earnings ratio is a whopping 44.4x.  But then again, portfolio theory has long-been passé:  either be a lemming, else be left behind.

Which brings us to the Economic Barometer, itself continuing to improve. And per today’s conventional wisdom, as things get better, the S&P gets worse:  because rather than earnings-driven, the contemporary market is Fed-driven.  And as aforenoted, the Fed is now conditioning the market so as not to expect the FedFunds rate to automatically be cut time and again.

Specific to just this past week, of the Econ Baro’s 14 incoming metrics, only four did not improve period-over-period, albeit those laggards included October slowing in both Retail Sales and Capacity Utilization.  But the month’s wholesale inflation (Producer Price Index) popped — which is a Baro positive, “the rising tide of inflation lifting all boats” — whilst rate shrinkage was reduced for both Industrial Production and September’s Business Inventories.  Too, November’s NY State Empire Index whirled ’round from -11.9 to +31.2, its largest month-over-month improvement since COVID-laced June in 2020.  Thus, up with the economy, down with the S&P: