NFTRH 226: “Want to bet that each of these pictures improved on last week’s wipeout?”
Well look at those large spec’s shorting gold. Look at the commercials covering. And some pretty big price damage happened subsequent to this data release so we might surmise that the CoT improved even more over the last few days.
Au CoT data courtesy CFTC
Ag CoT data courtesy CFTC
The US Fed is pumping the money supply and trying to manage the unmanageable. There is now ‘QE exit’ hand wringing at each FOMC meeting, which comes out later in the minutes as the markets hang on every fretting statement that these policy clerks utter. Then the jawbones come out and talk nicey nice in the media and the market calms down.
They are not going to be able to manage this to anything other than a very sad outcome. They actually seem to think that policy making is bigger than the market and the economy. But it isn’t.
We are in an economic contraction and even after gold has been blown up, its ratio to the 3 Amigos of positive economic correlation continues to indicate the counter cycle.
Gold ratios to copper, oil & stocks
Gold bugs need to be really careful here. There is still bottom calling going on and it is best not to root root root for the home team in any kind of a speculative casino patron type manner because the precious metals may have entered the realm of macro economic indicator and exited the realm of near term profit play.
The destruction in gold and gold stocks along with the now pronounced weakness in key commodities like copper and oil bring the prospect of deflation front and center, or rather the prospect that the inflation is not taking in economically sensitive materials and resources.
Yesterday the St. Louis Fed updated the Monetary Base data and it is still boinking upward.
Adjusted Monetary Base, updated 2.21.13
But then the dBoys would immediately produce this picture for contrast…
M2 Velocity
We are in an economic contraction and they are still inflating against it. The big question – the one for all the marbles – is ‘is it deflation first and then hyperinflation or the other way around?’
I cannot shake the feeling that what the precious metals and now commodities are indicating is much darker than what the pom pom waving gold bug community may believe. It’s an economic contraction and that is the only environment that the accursed gold mining sector has a chance to thrive.
But in that scenario they go down first. And boy have they been going down. They may have bottomed and they may not. I have refused to bottom call a thing since HUI lost 460′s parameter to normalcy. I’ll just keep it that way, pending what any new data points that any coming bounces may produce.
But a bigger question is what are the PM’s forecasting? People need to get that answered right.
The stock market vs. gold (SPY-GLD ratio) has a measured target significantly higher by this big picture monthly chart.
SPY-GLD Ratio, Monthly
But it is very over bought by the daily view, which also can be interpreted to be at an interim target at the least.
SPY-GLD Ratio, Daily
Yes, I get it that the crusty old gold bugs are an anachronism and life is all about texting, tweeting and buying all the stuff advertised on idiotic super bowl commercials. I get it that the stock market is filling up with all the fools that never saw the financial crisis coming and are now relieved that it is finally in the rear view mirror.
I get it that all those hedge funds that chased gold have realized the error of their ways. The crisis is over, there is no inflation. They were the screw balls that messed up the CoTs and gave us the biggest warnings by the way. Better these low lifes are flushed. I get it.
Simply because I learned the main riff yesterday and cannot get it out of my head today. 
From an NFTRH update earlier this week:
“I will gladly be a contrary indicator with the continued caution against bottom calling. But a breakdown in the gold stocks and continued weakness in gold would not only kill the bottoming case, but start the clock ticking on the stock market’s bull termination, as one of several indicators.
So have they stopped bottom calling yet in gold bug land? I ask because the sector may not bottom until they do.”
Not sure about the bottom calling, but as of an email received last night Mr. Gold has joined forces with the King of all Newsletters in telling gold bugs to hold firm, hold the line and “not be hoodwinked by these demonic sociopath bankster gold banks”.
That kind of emotion and hyperbole does nobody any good. Turning it into an indicator, does this still need to be puked out or is today a capitulation? HUI’s loss of 460 was a long time ago and that was when gold bugs who think for themselves should have been amp’ing up the risk management.
The weekly chart of the Japanese Yen targeted the downside.
Yen Weekly Chart
The daily Yen chart shows divergence to a would-be bottom.
Yen Daily Chart
The caveat is a question: How often do hysterical, globally significant currency or asset market events come right to a target, make divergences and obediently follow through?
[edit] Adding monthly view for more perspective. Projected above is a strong short covering rally. Ultimate downside should eventually reach 98 or below.
Yen Monthly Chart