Category Archives: Gold

Goldzilla

godzilla“History shows again and again how nature points out the folly of man”  –Blue Oyster Cult, Godzilla

I would have written off the gold sector long ago in its ongoing bear market had I thought for one moment that gold’s utility as insurance against the acts of monetary madmen/women in high places had been compromised in any way.  On the contrary, the monetary metal is simply having its price marked down in a bear market while its value, especially given its current price and all that has gone on in the financial system over the last 3 years remains just fine.

Indeed gold, an element dug out of the ground for centuries, once as money and now as a marker to sound money systems will one day be shown to be a calm oasis from the fallout to global monetary shenanigans currently ongoing.  At least it would be an oasis to those who have valued it as such.  It is going to feel like a giant dinosaur (minus the kitsch value) ripping through a city built on paper to the multitudes who have taken the bait on the current too big to fail global inflationary operations.  They will fail.  Timing is the only question.

Despite what many are compelled to believe by aggressive (read: maniacal) global policy making that has turned down to up, right to left and symmetrical to asymmetrical, gold is and has been a lump of monetary value just sitting there, waiting out a phase where monetary policy is working seemingly as intended, to impoverish the working and saving classes and further enrich the asset ownership and investment classes.

I have gone hard on the gold “community” for a few years now because I watched in real time as the dark clouds gathered against the honest money relic and those bullish upon it.  The narrative never changed for many of the most high profile gold “community” leaders and spokespeople, and in the modern financial markets that simply will not do.  In the past, even during the previous bull market, I have likened being a gold investor to being at war.  You are at monetary war in support of ideals and a sense of what is right vs. entities that manipulate and control markets toward desired outcomes.

And do you know what?  They have won every damned battle since 2011.

The most brilliant move made by the US Fed in targeting gold (either directly or as part of the fallout) was Operation Twist, which came on the heels of gold’s flirtation with the $2000/ounce level.  Op/Twist very simply was designed to “sanitize” (the Fed’s word, not mine) inflation signals by selling short-term T bonds while buying long-term T bonds.  It was brilliant, evil and awe-inspiring all at once; genius.  Simply manage paper and digital entries in the bond market so that a long relied upon macro signal (the relationship between short and long-term Treasury yields) will at once show a financial system under diminishing stress (yield curve decline) and a lack of inflationary expectations.

So the US Federal Reserve had the balls to literally paint the macro by turning the out of control 10yr-2yr yield curve (an important gold fundamental) down, sanitize inflation (a less important but sometimes very relevant gold fundamental) and best of all, keep on inflating… and inflating… and inflating… with ongoing ZIRP and QE3 as the global macro pull of deflation put Goldilocks on US markets 24/7 and 365.

Gold bugs would have none of this and why should they?  The average gold bug (the real people, not the pitch men and promoters) is driven by this thing we call honesty and a sense of morality.  To anyone with half a brain and not incentivized to look the other way (like probably 90% of the financial services industry), these macro parlor tricks are ephemeral and will not only not succeed, but one day be looked back upon as a scourge upon future generations.

The problem is that gold is so simple (as a monetary anchor) that eggheads feel a need to make it complex (the old ‘baffle ‘em with b/s’) and those with agendas feel a need to pile on, for example, schooling us over and over again in the media about how gold is a poor “inflation hedge”, when that is not its only utility; not by a long shot.

The post-2011 period has been a veritable Wonderland of possibilities for the printers of paper, enterers of keyboard digits and those who follow their breadcrumbs.

Further, the leadership of the gold “community” have been shown to be little more than dogma spewing robots firmly set in their ideology when maybe what was needed was a more even handed approach that could have helped legions of gold devotees avoid some very unpleasant interim situations before Goldzilla finally rises up and wrecks the cities around the globe made of paper and digits.

The gold sector is rallying as we expected it would from the 2008 lows and a capitulation of at least moderate degree but has not proven much, technically.  Similarly, the fundamentals are not yet fully baked for the sector (ref.  yield curves, gold vs. stock markets, gold vs. certain commodities, intact public confidence in policy making, etc.).  These things will change either sooner or later, but for years now imposing our will upon the market has not worked.  Sit back, relax and let Goldzilla do his thing.

I write the above in the style I used to write as a ‘for free’ public writer (as opposed to the more technical stuff I need to see to now with NFTRH) to hopefully add a level of perspective to the conversation going forward.  The macro is going to change.  It always does.

Gold Sector Review

Below is a summary of some of the aspects we follow in NFTRH to gauge a future investment stance on the gold sector.  It is much more complex than simply hearing dogma that seems to make sense and then holding on for dear life…

Inflation

The hype is dying.  10 years of inflation hysterics have gone down the drain even as global policy makers pull out inflationary bazookas and use them at the slightest hint of economic trouble.  The BoJ’s recent action was just the latest and most striking in its timing.  Global markets were bouncing within correction mode and the Yen had just pinged a key resistance level.  The BoJ then blew the Yen up with policy designed to at once reward risk takers and asset holders and mercilessly punish the Japanese people, renowned for the ethic of saving.

But the global inflation is dying despite these periodic bazooka blasts.  The US Fed as much as admits it wants inflation.  More accurately, it will do anything to stave off the next deflationary impulse because when that takes hold it is going to unwind the system, and they know it.  Why on earth do you think noted Hawk James Bullard was trotted out the moment the stock market took a routine correction in October?  Here Jim, get out there and eat that mic and calm them down.

Gold is not about inflation and in this cycle it, as a squarely risk ‘OFF’ asset, is about the opposite, the deflationary unwinding of the inflated excesses which now are no longer clustered in commodities and global markets, but in US stocks and the balance sheets of certain corporations set up to benefit.

In a dis-inflationary environment, which is the preferable one for the gold stock sector, the pain comes first and the rewards for those left standing come second.  We have not exited the pain phase for gold bugs and most people still think ‘no inflation, bad for gold’ when they should be thinking ‘no inflation… that means eventual deflationary impulse… bad for the economy and stock markets and one day, from the ashes good for the gold sector when and only when gold out performs other assets positively correlated to the economy’.

tip.tlt

Goldilocks has been in play in the US as the global dis-inflationary pull has dropped the TIP-TLT ‘inflationary expectations’ gauge lower.  At some point Goldlilocks will morph to something less benign for the economy and for stock bulls.  But it has not yet.

Macro Fundamentals

Continue reading

Gold vs. S&P 500 (big pic)

[edit]  Adding the daily view of GLD-SPY from this morning’s NFTRH ETF update.  I’d say some progress is being made here as GLD-SPY threatens to join several other indicators in a macro phase.  The trend is still down, but this is impulsive stuff.

gld.spy

For all you gold vs stock market sports fans, here is the big picture view of gold measured in S&P 500 units.  Though the stock market is making bearish technical signals and indicators are flashing a counter cyclical warning, the best that the Gold-SPX monthly chart can say at this moment in time is that MACD is getting interesting, RSI has a positive divergence and momentum to the downside by a Rate of Change (ROC) is slowing down.

The macro is changing in a big way, but we continue to note the poetic justice that would be satisfied if gold fills the 2008 ‘fear gap’ before resuming a bull market vs. SPX.  Given the damage that the US market is incurring, this could be satisfied with one final plunge with gold declining faster than the SPX or it could happen by other means.  Or it could not happen at all if MACD furthers its signal.

But it looks like we are grinding around, leaving one macro phase and entering another in the coming months.

au.spx

The Most ********* Chart in the World; Gold vs CCI

I find it kind of lame when someone puts up a chart with a heading like ‘The most bearish/bullish/important/profound, etc. chart in the world’.  Here we cue memories of a funny post at some website with “the most bearish gold chart in the world” back when gold was well down in the triple digits.

Look, chart guys are proud of their charts and proud of their analysis, I get it.  I think highly of my own work.  But I don’t think highly of hype (as if you haven’t gleaned that by now) so I’ll just robotically remind you that this chart, the most ********* chart in the (financial) world, is in a big picture uptrend and never stopped being in one.

au.cci

The number of characters in ********* actually fits at least 2 good descriptors I can think of for the above.

Gold: Short-term Pictures

Gold vs. Oil is rising; a condition that mining operations would like to see continue.

gld.uso

Gold vs. Stock Market is slightly elevated; a condition that gold sector investors would like to see continue.

Continue reading

Gold; a Simpleton’s View

First off, if you have an interest in the price of gold and have not already done so, I highly recommend you check out Steve Hochberg’s 2-part Elliott Wave video presentation on gold (disclosure: free sign up to Club EWI brings a small commission to yours truly ;-) ).  With all his zigs, zags, waves and patterns he ends up at the same place I do with my simple version.  I may use less cluttered methods, but I find this stuff very interesting.

With markets at a key juncture, the US dollar over bought (but bullish), the precious metals, commodities and increasingly, global markets over sold but bearish and US stocks acting as if October 2014 could at least recall memories of October 2008, I want to try to weave all this together around the simplistic monthly chart of gold, which is the asset that would provide liquidity for asset market refugees if the macro really were to get very negative.

It is important to simplify folks.  Gold is not going to go up because of Modi and Indian Wedding season.  It is not going to go up on China demand and it is most assuredly not going to go up because the US stock market is going up, as if it were simply an asset class that got left out of the party.  Commodities actually would have a better chance at that than gold.

Gold is going to go up (at least in relation to most assets) when confidence in policy making starts to wane… period.  I am going to keep this simple monthly chart on radar going forward because it has long-since broken the Triangle and it is a gauge on the macro.

gold.monthly

Shorter-term data points indicate that a bounce is very possible if it has not already begun.  But the Triangle pattern and distance from support to resistance measure to 1000 +/- and what I find more interesting than the raw chart is the idea of closing out the misery of 2008 in a final declaration that policy making has succeeded (in cleaning up the disaster created by previous policy making leading into 2008).

Markets are often poetic and they are even more often ruthless, as this one will probably be toward those caught revering or worse, taking for granted, the job Policy Central has done post-2008.  When gold is ready to bottom, we would then likely start finding out the details of just how damaging the current clean-up of previous damaging policy has been.

What to Look For

If silver begins to lead gold and there is a bounce in the sector along with commodities it would be a counter-trend play.  Read more into it than that at your own peril.  Further, if you hear the usual suspects coming out with Indian Weddings, China demand or worse, the end of the world talk about the US stock market, be very careful (unless gold is above 1400 at such time, which is doubtful any time soon, and US stocks are completely broken down).  If things get bullish near term please keep your tender gold bug heart steeled against the promoters who cannot wait to sound the call once again.

While we are managing what was a fully expected decline in US stocks this October, we should be aware that it feels just a little bit scripted.  Ooohhh, it’s October!  Ha ha ha… the corrective activity in the stock market could ultimately be a healthy thing to reset the over bullishness that made every stock jockey with a couple well-known symbols look smart.

Another possibility is that the stock market bull really is over (there are some beneath the surface indicators we follow that are bearish) and that gold has not finished leading  the way down amidst a deflationary pull.  So we should also manage each market on its own and in consideration of its individual role in the macro.

Going back to gold, its simple big picture chart is bearish until it either gets above the Triangle’s nose at 1300 and/or rises above 1400.  The time seems about right for a counter trend bounce (watch 1247 as initial resistance) to embolden some in the gold “community”.  But a renewed decline to 1000 +/- would likely be a time to get very bullish because not only would a very relevant technical juncture be attained, but the poetic justice of closing out the 2008 economic and market disaster could represent a psychological critical mass where confidence in policy makers – tops out.

Hulbert HGNSI & Gold

Mark Hulbert checks in with some not so great news for gold bulls.  Do you know what that news is?  Gold bulls are alive, well and ready to call a bottom at the drop of a hat.

Gold market sentiment takes a big turn for the worse

According to Hulbert…

“On the contrary, we now know — courtesy of the HGNSI’s jump late last week — that gold timers’ bearishness was only skin-deep, and that they stand ready to become bulls again at the drop of a hat. True bottoms typically are accompanied by bearishness that is much more stubbornly held than that.”

This does not necessarily reflect on the gold market’s ability to take a counter trend rebound, especially since the reading below was taken on Thursday, before the big price drop on Friday and according to Hulbert, even after yesterday’s upside HGNSI was at -34%.  I think that what he did not like seeing is how readily gold timers jumped bullish trying to be ‘the guy’ calling a bottom.

I think a rally can get going off of 1180, but bigger picture there very well could be some unfinished business; namely the business of killing off anyone who would be bullish on gold’s price*.

hgnsi
Hulbert HGNSI, from MarketWatch.com

* An important distinction as always is gold’s assigned ‘price’ vs. it’s long-term ‘value’ in a system of remotely managed inflation operations by authorities world wide.

CNBC on Gold

As Fed Looms, is Gold’s $1200 Support Vulnerable?

What kind of FOMC week would it be without some gold obsession in the headlines of the mainstream media?

Gold may drop to $1,200 an ounce, possibly breaching the key support level, thanks to a resurgent U.S. dollar and higher Treasury yields on expectations that the U.S. Federal Reserve could signal tighter policy this week, CNBC’s latest survey of strategists, analysts and traders shows.

Says who?

“In the shorter term I believe gold tests $1,200, trades as low as $1,190 or so, after which the bargain-hunters will come in and move the price back to the $1,240 to $1,250 level,” said Anthony Grisanti, President of GRZ Energy in a September 15 commentary. “Geopolitical has been quiet and all major economies are easing one way or another. And that makes the Greenback the strongest buck on the block. My bias for gold is lower.”

Oh, says Anthony Grisanti.  Okay.  Well even just mentioning “geopolitical” disqualifies Mr. Grisanti because it has nothing to do with gold.  But for the sake of argument, gold has already lost support per this alternate chart I am using due to stockcharts.com being on the fritz this morning.

gold

See that low at a nice, crisp 1240?  That was a loss of support.  Before that gold dumped out of a Symmetrical Triangle, targeting below 1200.  I am flying naked here without stockcharts.com, but I don’t recall any notable support at 1200.  The strategist wouldn’t be talking about ’round number’ support just to fill some headlines on FOMC week, would he?

Continue reading

Gold vs Commodities

Listen folks, this is an economic indicator.  While legions of gold bugs continually obsess on the metal itself as some sort of Idol, it is actually just a simple counter cyclical asset.  When it is measured against cyclical assets like commodities, it can give macro signals.

gold.cci

The message here is that Au-CCI has broken above some moving averages that have held it down since 2012.  If these moving averages cross, it would mean a condition is in place that indicated the US financial crisis and the acute phase of the Euro crisis.

Gold rooters and gold stock boosters may be chomping at the bit to get bullish, but they are going to need to be patient.  This macro stuff plays out of time and we as humans tend to see things on the day-to-day.

Today’s Employment Report and the anecdotal information I have on machine tools may (repeat may) be initial signs of a better environment for the gold sector (Au-CCI is up today, not shown on the chart above), but… patience please.  We have to get rid of all the bugs that think Ukraine has anything to do with anything and Indian Wedding Season is the big driver.

Welcome Back Boyz!

The last item in NFTRH 306’s ‘Wrap Up’ segment:

“The Boyz come back next week and it is time to be coming off summer maintenance mode and really paying attention.”

Okay Boyz, you’ve got our attention.

gold.kitco

This is really not a serious post in any way imaginable.  In fact, these things usually strike my funny bone.  I mean the myth, the predictability and then seeing the visual above is just funny.  Da Boyz, back from da Hamptins and ready to roll.

Gold, Monthly Perspective

Reference the recent post using monthly views of HUI, Gold and Silver.  It is linked above for review.  Today I have taken the updated gold chart from that post and marked it up with a (blue) line showing gold’s current price.  Note the strategic small Symmetrical Triangle.  If that lower Triangle breaks down, gold is done.  If not, we grind forward.  The original post gives upside and downside targets.

gold.monthly