Gold Glitters Amidst Geo-Jitters
Mark Mead Baillie | Aug 11, 2014 12:17AM ET
When rooting for a reliably-profitable technical signal to actually fail, and then seeing that it so does, 'tis cause for a modicum of rejoicing -- emphasis on "modicum" as in the future we certainly desire the signal to return to reliability. Nonetheless we're pleased that in this case, the technical signal's failure to achieve a specific downside target underscores the buoyancy of Gold's price, that its weekly parabolic Long trend remains well in force, and thus that the case for the trip to 1400 is firmly intact.
So with an albeit awkward tip of the cap to the geo-jitters eminating from Crimea, Gaza, and now Iraq, let us begin with this welcome failure of Gold's "price oscillator" study on the daily bars time-frame, which had suggested the "near-term dip" we'd been experiencing to extend down to at least 1270, (toward which price did get somewhat close in reaching as low as 1281 on 01 August). In any event, the following chart shows us Gold's daily bars since just over a year ago-to-date. When the bars are green, the daily price oscillator study is positive, else negative if the bars are red as is the current case -- but note the rightmost resilience of recent price even though 'tis red:
Moreover, unless Gold were to quickly plunge, the price oscillator is poised to turn positive, and thus the daily bars to green, early in the new week. In fact, Gold's more conventional MACD (moving average convergence divergence) study on the daily bars has already turned positive, as have the "faster" 12-hr. bars on the price oscillator study such as to set up a Market Rhythm target of 1327, ideally in furtherance to 1400 within the broader-based parabolic Long trend on the weekly bars. Specific to which, here's the latest read, price settling out the week yesterday (Friday) at 1311:
Still, from a Good News/Bad News perspective, we offer this. The bad news is that if there's one motivation with which we've never really been comfortable that drives Gold toward higher levels, 'tis these geo-jitters, for once they're removed from the headlines, (albeit oft unresolved), price regardless has a hankerin' to settle back down to where 'twas pre-geo-jitters. The good news is that despite the on-going winding down by the Federal Reserve Bank of "Quantitative Easing Part Trois" -- given the eventuality of a "QE IV" -- the price of Gold shall return to unavoidably being driven naturally higher by new monetarily creative accounting entries. To be sure, Gold has certainly rebuffed itself in not responding positively to the Fed's "advances" thoughout QE III, but at some point, debasive nature must run its course.
Get The News You Want
"So mmb, you're really in the camp for more QE, huh?"
Squire, you don't think a new accommodation is coming post taper-caper? That the economy is fine and dandy, thank you very much? Here are a couple of Fast Fed Facts: 1) consumer spending comprises 71% of the US economy; 2) 31% of Americans have no retirement savings, a big chunk of households having saved nothing at all. 'Tis hard to save anything when, as an analyst interviewed on Bloomy radio stated this past week, 65% of the glorious non-farm payrolls created are part-time positions. And now the Fed is pondering interest rate increases which would redound to higher payments on the variable debt of typical middle-American consumer spenders like Egbert & Myrtle Stapudnick?
The recipe can only eventually again be: debit Fed, credit Treasury, and presto-chango, instant dough! (And Go Gold Go!). For when it comes to fattening up, indeed the obesity problem in this country goes far beyond too much McDonald's; rather 'tis too many claims on inflated assets that really aren't there -- and can we start with the stock market, let alone derivatives. Depending on its widely-ranging methods of calcuation, given the average size of a retirement account, a solitary one kilo bar of Gold contains more substantive real value than a pile of Ma & Pa's share certificates stacked up to the width of the Manhattan telephone directory, especially should the equities markets rightly halve themselves to get in synch with real earnings. You get the point.
Geo-jitters aside, Gold is nicely navigating what are typically thought to be negative fundamentals. The portent of higher interest rates isn't really putting Gold off, and as we herein charted a week ago, during the three-year stint from 2004-2006 as the Fed Funds Rate rose from 1% to 5%, Gold nonetheless rose merrily alongside from 402 to 638. Then there are those who cannot conceive of Gold's rising in the face of so-called "Dollar strength". We've on occasion pointed to both Gold and the Dollar Index rising by better than 10% during the first six months of 2010; now 'tis happening again despite the next chart's appearance of inverse correlation. Here we've the daily tracks of the Dollar Index and Gold from May-to-date in 2014. As is the norm, Gold is more volatile 'round its dashed linear regression trendline than is the Dollar 'round its measure of same, but the dashed trendlines themselves are almost precisely paired to the upside:
In fact, of our BEGOS Bunch (Bond, Euro/Swiss, Gold/Silver/Copper, Oil, S&P), Gold is presently tied with the Bond for first place in the performance year-to-date standings at +8.8%. Poor old Sister Silver is only +2.5%, indecisive as whether to be adorned in her precious metal pinstripes or in her industrial metal jacket; indeed Cousin Copper is down there in the eighth place cellar at -6.4%. As for the US Dollar Index itself, (which is not a component of BEGOS and only moves ever so ponderously percentage-wise, thus our amusement over the perception of "Dollar strength"), year-to-date 'tis at +1.6%.
Either way, both the Dollar and Gold being higher in 2014 again underscores our notion of the yellow metal's playing no currency favourites. And now with Italy's Matteo "Recessione" Renzi under the spotlight as their GDP gearbox slips into reverse, not to mention Germany's factory orders dropping for the third month in four, 'tis likely just a matter of time before the European Central Bank further loosens its €uro-coffers. Even across the channel, the UK's quickened economic recovery has not convinced the Bank of England to dare put rates up a pip.
What is up, and clearly well beyond that of just a single pip, is the track of Gold's "Baby Blues", the 21-day linear regression trend's measure of consistency. Here we've the Blues with Gold's daily bars for the last three months (63 trading days). Note how the anticipated near-term dip hasn't been sufficient enough to drive the dots below the -80% level, (our arbitrary level, as with +80%, to determine a trend's being consistently in place):
What is down is pattern of the Baby Blues on the S&P 500. What ever happened to the Tapping of Two Thousand? Likewise, recall the incessant cry a year ago by Gold's negative nabobs of "Down, Down, Down"? Where are they now? This certainly looks "Down, Down, Down" to me:
The ruffling of the S&P certainly has the FinMedia in full agitation, (which is the norm, for as goes the stock market, so go the ratings as folks delve into denial and tune out). Still, the authoritative W$J reports that "Stocks End Week With a Wild Ride". Methinx they've forgotten what "wild" is; but they'll be reminded in due course and then cite their catalyst of choice. Yet as a charter reader of The Gold Update enjoys prudently pointing out: "Does it really matter which snowflake causes the avalanche?"
In the meantime, below in Gold's Market Profile we've avalanche mitigation with trading supports at the noted apices, as then further detailed in The Gold Stack which follows:
- Gold’s All-Time High: 1923 (06 September 2011)
- The Gateway to 2000: 1900+
- The Final Frontier: 1800-1900
- The Northern Front: 1750-1800
- On Maneuvers: 1579-1750
- Structural Resistance: 1479 / 1524-1535
- The Floor: 1466-1579
- Le Sous-sol: Sub-1466
- Year-to-Date High: 1392
- Base Camp: 1377
- 10-Session directional range: 1324 up from 1281 = +43 points or +3%
- Trading Resistance: 1319
- Gold Currently: 1311, (weighted-average trading range per day: 15 points)
- Trading Support: 1306 / 1296 / 1288
- The 300-day Moving Average: 1301
- 10-Session “volume-weighted” average price magnet: 1300
- Neverland: The Whiny 1290s
- Structural Support: 1285 / 1266 / 1227 / 1163 / 1145
- Support Band: 1280-1240
- The Weekly Parabolic Price to flip Short: 1260
- Year-to-Date Low: 1203
In closing, remember the PIIGS, (and moreover our sentiment of therein deservedly adding France to thus rearrange the acronym to read as FIGPĪS -- pronounced "fig pies")? Having made mention earlier of Italy, let us now turn to the recently-documented problem in Portugal surrounding its Banco "Have Lost Our Espirito" Santo. France's Crédit Agricole (PARIS:CAGR) having invested in the Portuguese institution resulted in an almost $1 billion Q2 charge for CA such as to nearly expunge the entirety of its quarter's profit. Ah, but thanks yet again to creative accounting, writing off the loss in effect allowed CA to instead record a boosted profit. Query: Isn't that cheating? 'Course, it pales in comparison to our own Bank of America's (NYSE:BAC) having just settled with the Attorney General to pay a penalty of $16 billion with respect to the mis-selling of mortgage-back securities. And we thought banks at large did not engage in risky business. I opt for the ultimate Right Risk: Gold!
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.