Gold Up, Volatility Down
Mark Mead Baillie | Mar 27, 2022 02:25AM ET
Gold having completed its usual geo-political spike and fade finds its trade now more regularly played.
The expected daily trading range (EDTR) is swiftly dropping from a war-high of nearly 50 points now to sub-40, and shall further shrink into the new week. Here graphically is Gold's EDTR from one year ago-to-date, now 37 and still above average, however sinking like a stone:
Indeed, the yellow metal's actual trading ranges this past week exceeded 30 points on just one day (Wednesday).
And more broadly, with the war sadly having morphed into a daily absorbed event, volatility extremes at large are rapidly waning, the revered, oft-feared Chicago Board Options Exchange's Volatility Index "VIX" actually settling the week below its 200-day moving average for the first time since Feb. 9.
In fact, within the buzz at a large gathering this past week, we overheard it callously questioned: "Is there a war going on?" Irrespective, the markets have to a degree "moved on", the S&P 500 itself having netted seven gains in the last nine sessions. Regardless of war, stagflation, increased interest rates, and an S&P price/earnings ratio today 68% above its lifetime mean, life apparently is good.
'Tis good as well for gold -- it recording its 11th up week of the past 15 -- in settling yesterday (Friday) at 1958. Price again avoided by mere pips tripping its weekly parabolic Long trend to Short per the rising blue dots next shown here. Now 21 weeks in duration, the Long trend ties for sixth most extensive this century. Yet should 1910 trade in the new week, it all flips to Short; and should you be scoring at home, Gold's expected weekly trading range is now 66 points:
Get The News You Want
Meanwhile from the "Back in Harmony Dept." we again present the website's graphic of gold vis-à-vis its smooth valuation line, (borne of price's changes relative to those of the other four primary components which comprise the BEGOS Markets: Bond / Euro / Gold / Oil / S&P 500). Here below, the lower panel oscillator (Price less Valuation) is the key: at its recent closing spike, (Gold 2058 on Mar. 3), price was nearly 200 points above the smooth line; today combined with the duly rising line and price fade, the two returned to harmony this past week at the oscillator level of 0 (zero). But obviously by the opening Scoreboard's debasement value of 4071, Gold remains wildly underpriced, just as 'tis by our forecast high for this year of 2254. For the present, here's the in-harmony graphic:
That mouthful said, given gold in the technical vacuum is quite stretched to the upside, our near-term sense is price trading between, say, 2000 and the underlying support zone (as last week shown) spanning 1854-1779. However: with gold "awareness" being renewed, our 2254 target remains well in view.
"Gold-optimistic as ever, eh mmb?"
Squire mon vieux, were we not, we wouldn't be writing.
As for the "They're Just Figuring This Out Now Dept." (aka the "Federal Reserve"), Chair Powell went on record this past week saying that interest rates need be quickly raised. And as you regular readers know, we've not ruled out a Volckeresque "Saturday Night Massacre" akin to Oct. 6 1979. (Yes, 'tis a bit of a stretch perhaps). But in peering ahead at next week's incoming stream of 15 metrics for the Economic Barometer, Thursday (Mar. 31) brings the Fed's favoured inflation gauge: Core Personal Consumption Expenditures. For four consecutive months, the reading has been at a steady annualized pace of +6.0%. But 'tis "expected" this time 'round to have "cooled" a tad to +4.8%. Nonetheless comparatively: the "riskless" US 30-year Bond yield is only 2.603%; the 10-year Note only 2.492%; and the 3-month Bill only 0.520%. Then there's the "riskfull" S&P 500 yield which settled the week at only 1.406%.
"But people don't buy stocks anymore for yield, mmb, 'cause they only go up and up and up, right?"
To Squire's point, the S&P 500 from 1970-to-date (with its regression channel):
Further in support thereto, Dow Jones Newswires reported this past week that older Americans are "flush with housing and stock portfolio wealth". Living the marked-to-market illusion is a beautiful thing. Living the reality of the falling Econ Baro is another thing:
And notable (or perhaps better stated notorious) amongst last week's brief set of stagflating metrics was shrinkage in February for both Pending Home Sales (-4.1%) and Durable Orders (-2.2%). But thankfully, the straight-up S&P is oblivious to it all... "Whew!"
Not so oblivious to price's recent spike and fade are gold's daily bars below on the left from three months ago-to-date. The baby blue dots of 21-day linear regression consistency are smack on their 0% axis, meaning that measure is now trendless, (which for you WestPalmBeachers down there means 'tis El Flato). Below on the right is Gold's 10-day Market Profile, its 1935-1924 area bellying-out as near-term trading support:
Silver continues her precious (rather than industrial) metal stance as her like two-panel presentation is spot on with that for gold, the neutral "Baby Blues" at left and Profile at right, wherein we see 25.15 as near-term trading support:
So with just under a week to run until March is done here we've the present state of the Stack:
The Gold Stack
Gold's Value per Dollar Debasement, (from our opening "Scoreboard"): 4071
Gold’s All-Time Intra-Day High: 2089 (Aug. 7 2020)
2022's High: 2079 (Mar. 8)
Gold’s All-Time Closing High: 2075 (Aug. 6 2020)
Trading Resistance: 1963 / 1980
Gold Currently: 1958, (expected daily trading range ["EDTR"]: 37 points)
10-Session “volume-weighted” average price magnet: 1937
Trading Support: 1935-1924
The Weekly Parabolic Price to flip Short: 1910
The Gateway to 2000: 1900+
10-Session directional range: down to 1895 (from 1995) = -100 points or -5.0%
The 300-Day Moving Average: 1811 and rising
The Final Frontier: 1800-1900
The Northern Front: 1800-1750
2022's Low: 1779 (Jan. 28)
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
Finally to wrap, we've this:
The iconic Carl Icahn -- who by our reckoning has got to be some 120 years old by now -- remarked this past Tuesday to the FinMedia that there "...very well could be a recession or even worse..." Clearly Carl keeps an eye on the Econ Baro. And eye, too, Gold: range is tightening, but the future worth sighting!
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.