Gold and silver start … uh, no …
But since gold should never really stray far from the 1780s, let alone silver be allowed to do anything essential except decline, both precious metals fought for intangible weekly gains. Gold hovered yesterday (Friday) at 1799, + 0.9% net for the week and silver at 22.36, + 0.7% net.
Actually a one week net snoozer:
- Even if the Swiss franc continued to turn its linear regression trend (21-day basis) into positive territory …
- Even as the bond price rose to a two-week high …
- Even if S & P’s MoneyFlow for the week rates the index 120 points lower than ’tis …
- Even (in a broader sense) since the US money supply has increased an average of $ 1 trillion every 93 trading days since March 2020 …
- Even when the Federal Reserve again warned the world that it was preparing for a rate hike; (They can’t be outdone by the Bank of England, which just did, even if the European Central Bank continues to struggle with the hand-wringing): We actually think the Fed is ending the throttling and in its policy statement of 26th âI do sorry folks, but we had to do it, otherwise your piece of butter will cost ten dollars. “BOOM!
And regarding the latter, as you regular readers know, the Fed Funds rate rise was very precious metals positive from 2004 to 2006 and, on balance, gold positive from 2015 to 2018.
Yes, even if we have all these historically very gold-positive events in play, it is small that the precious metals are still down.
“Well, mmb, the dollar refuses to die …”
Right there, Squire. As we said earlier, market distortions are âon the flyâ these days. The fundamentals were washed down the toilet, but at least we have to assert ourselves through quantitative and technical analysis. Because once again we joke – even if the market correlations have become stupid – the prices are never wrong, their ebb and flow is still in play, which hopefully leads the way for the trader: “Don’t dare to think, otherwise you will” sink! â(Courtesy ofâ The Trend is Your Friend Dept. â, of course).
In any case, these are extraordinarily challenging trading days! Did you know that the EDTR (“Expected Daily Trading Range”) of the S&P 500 is currently 67 points? The S&P average annual trading range from 1993-1995 was 47 points per year with an average annual percentage tracking of 11%: this year the S&P is tracking a range that averages better than 5% per month! Again analogous to a snake in agony.
And yet the precious metals remain a disappointment (except for âThe m Word âamount). Remember “Gold Forecast High Goes Bye-Bye”, which was written on October 2nd, undoing our price forecast high of 2401 for that year: “… 1849 …” We had hoped we were wrong , but with just two weeks in 2021, that’s exactly what happened.
In fact, here in the weekly gold bars for the past year and up to now you can see that it is “happening” (or rather “not happening”). A snoozer indeed, be it last week or last year, the current parabolic long trend (blue dots) is completely without price increase:
And as an additional holiday treat (hardly) here is our (rarely posted) Like graphic for Silver, which cannot maintain its short-lived parabolic long trend, is actually now short (red dots). Rather a really battered pleasure, you have to say, it doesn’t look too festive:
But as Neil Young sang in ’70, “Don’t get dragged down …” as we have a glimmer of hope for gold by the end of the year; (‘Of course, the basic hope in gold springs forever). This next chart shows gold on a daily basis from the middle of the year to today. In the lower part of the graphic is a popular technical study by the trading community, the MACD (âMoving Average Convergence Divergenceâ). It is interesting that the MACD has just confirmed a positive transition. And while hindsight is not perfect for the future, it is a useful predictor for making a reasonable short-term target for gold, as follows.
This is the 13th positive MACD crossover of gold since March 26, 2020. The âaverage maximumâ price sequence of the previous 12 positive crossovers is +87 points within an average signal duration of 27 trading days (essentially within five weeks).
Based on the confirmation price of 1799, an average increase from 87 gold points to 1886 would be set; (More conservatively, the median maximum price follow-through over these 12 previous events is +57 points, which if hit this run would find gold at 1856). In the absence of impressive structural overhead resistance recently – plus Gold’s penchant for having positive December numbers in four of the past five years – a run to test the designated high of 16th priority is:
The biggest “positive” (if you will) of the week, of course, was that the aforementioned Old Lady of Threadneedle Street raised its benchmark rate by 150% from 0.10% to 0.25%. (Dare the 1st Earl of Halifax – a Charles Montagu who invented William Paterson’s 1691 proposal to create the BOE in 1694 – flipped his wig). Meanwhile, across the channel, the ECB is trying to curtail its âemergencyâ asset purchases, but is still looking into other stimulus measures. There is no price increase. Certainly not in China either, as economic consumption and the real estate market continue to weaken. “Do you have any dollars?”
As you already know, the StateSide FedFolks want to raise their bank’s fund rate to the target range of 0.75% to 1.00% by the end of next year. And as we mentioned before, we think they’ll be moving on January 26th for the time being, aside from an excessive bout of âOh my! Omicron! “
Oh, and from the “Oh By The Way Dept”. President “Jumpin ‘Joe” Biden has just signed the $ 2.5 trillion cancellation notice to allow TreaSec Janet “Old Yeller” Yellen to pay the country’s debts and bills for most of the next year.
From some perspective, US money supply grew by $ 2.5 trillion (a rate of $ 1 trillion per 802 trading days) from January 2, 1998 to September 9, 2005, while the price of gold rose 55%. Today (as mentioned earlier) the money supply is increasing at an average rate of $ 1 trillion for just 93 days of trading, but basically the extremely understaffed gold is “not done” (technical term). Just in case you score at home.
Speaking of scoring: The strength of the economic barometer up to November ran out so far in December, as we can see here:
Notable Baro improvements over last week’s 15 inbound metrics include capacity utilization and November building permits; but industrial production growth for the month slowed significantly, as did retail sales. And while the December New York State Empire Index gained slightly ground, the Philly Fed Index more than halved November’s results.
And oh yes, there was also wholesale inflation in November, the producer price index recorded an annualized rate of + 9.6%: That makes the old puzzle âHow many zeros can there be on a Zimbabwean banknote? not as funny as it used to be. But don’t worry, the FOMC has just stated that “… advances in vaccination and easing of supply restrictions are likely to support sustained growth in activity and employment, as well as a decline in inflation …”
To see how many rising Baby Blue points make a steady trend, let’s turn to our graph with two panels for the daily bars for gold from three months ago to today on the left and those for silver on the right. The respective upward curves to the far right of the -80% axes are generally harbingers of higher prices (namely the MACD study for gold shown earlier). But the negative price campaign on Friday is initially cause for concern: âThe m Word “crowd? The Quadruple Witch? Both? We show you test:
Next we have the 10-day market profiles for gold (bottom left) and silver (bottom right). From that point of view, Gold’s infinite 1780s seem supportive, while poor old sister Silver’s array is an overcrowded representation:
Let’s close with three mentions of inflation:
- Dow Jones Newswires “reported” last week that one factor in determining inflation duration is our opinion, which in turn will guide Fed rate decisions; (People get paid well to write this stuff). We feel like this: be it a surge in costs or a surge in demand, or both, if the money supply increases by 33% in less than two years, it is game over;
- The same creative heap also came up with the idea that by not voting in favor of a rate hike (yet) the FOMC would stimulate the economy, as rising inflation effectively leads to negative real rates. Yes, we understand that, but such a justification could be the greatest bewitching hot-air enthusiasm of all time;
- Speaking of the inflation-related bang, we’ve read that the fairly wealthy US House of Representatives spokeswoman doesn’t support a proposed ban on individual stock ownership for members of Congress. She says: “We are a free market”. Economy â: how is that for a 180 Â° turn? (Maggie Thatcher, you don’t know what you’re missing out on).
But don’t miss out on getting cheap gold and silver before they inevitably jump. True, they’ve had a pretty poor start attempt over the past week. But once they’re really in the air, that’s going to be exactly our kind of inflation!