For anyone interested, the CoT data improved again, although silver is not yet near the level that put in the June bottom. This could best be termed a sentiment indicator I guess. Other sentiment indicators are contrarian bullish. Yet certain macro fundamentals are not. I would welcome a final event to clear the contradictions, croak the bottom callers and finally set things up for a rally or bull market.
Everybody’s afraid of the dreaded ‘taper’ and that may be just what is needed to get the inflationists out of the gold market (come on FOMC, don’t roll over on us again). They are absolutely obsessed with the money printing aspect of QE and yet not looking at yield relationships and ZIRP.
Since this is among many others, an indicator to the macro funda climate for gold, it is notable that the 30-5 spread is dropping below the 50 day moving averages, putting a would-be bottoming pattern in question for the ratio. Gold tends to be correlated to Treasury yield spreads, rising and falling with them generally.
NFTRH has had to remain bearish (aware of a possible final waterfall that swamps the bottom callers and potentially ends the bear) on the near term price of gold and gold stocks at the risk of being mocked as a contrary indicator. That is not because I am afraid of buying a potential bottom. Long time readers know that I have routinely stepped up to the plate on bottom feeder buying op’s.
But this time, unlike Q4 2008 for example, the funda’s are just not there, no matter how loudly people bullhorn China buying, COMEX shenanigans or Fed/Goldman conspiracies. The yield spread above had been constructive, but now it is joining a chorus of other indicators saying to use caution in the near term and tune out the bottom callers.
The idea remains to be intact first and ready to speculate second.
From former Biiwii.com A-hole of the Year award winner Harry Binswanger, comes this little piece about a pretty mineral that is taken out of the ground and used by humans as a retainer of monetary value to varying degrees as needed over the centuries.
Good old Harry, he of the “99% owe the 1% a debt of gratitude” lunacy.
Here’s old Harry making love to gold, whispering the usual sweet nothings in Forbes:
In Praise of Gold. Not a ‘Barbarous Relic’ but a Spiritual Value
No Harry, you do not praise gold or trot out the cliches you do in this article. Gold is a tool and nothing more. Not religion, not “Gold is the ultimate expression of mind-body integration. It is the symbol of purely, “crassly” material value because it is beautiful–i.e., because it is a spiritual value.” as you put it.
Gold just is. People fall in love with it or get mystified by it and then they end up miserable when it drops a 100 bucks an ounce. Most people can’t seem to handle the simple concept of value vs. price in a casino of blinking red and green lights.
A disclaimer: I am long and/or trading several regular ‘bull stocks’ (as well as short a couple). Don’t interpret the sober message below as a ‘sell your stocks right now!’ style bearish warning. Indeed, after an expected choppy start to December I think more bull market mania, errr… rally, could still be ahead. But it would be just dandy if people would keep their perspective along the way.
From the December 1 edition of Notes From the Rabbit Hole (NFTRH 267):
Closing the 2008 ‘Gap’
In 2008 market and economic participants suffered a hard downside ‘gap’ in the prices of their assets and in the levels of their expectations. The bull market that began in March of 2009 is doing a fine job of closing that gap and fully resetting the herd from the utter fear mode of Q4, 2008 to a 2007 or even 1999 style greed mode today.
So here is the playbook folks. ISM is going to be released today at 10:00 US Eastern. If it is strong, as it has been for the last several releases (Surprised? You shouldn’t have been) then there will likely be some ‘taper’ jawbones out again because long term yields already look bullishly constructive. Relentless manufacturing strength would put more upward pressure on yields.
The Fed should just give up on its chronic manipulation and let the ‘organic’ economy be; let it ride. Let the banks take over and ‘carry’ the yield differentials as they become incentivized through higher profit motive to borrow short and lend long.
Gold and silver CoT data improved for the second week in a row.
It has been 2 years of chop, grind and drop in the gold sector. 2 years since my lousy projection on HUI’s monthly chart failed to do what the Russell 2000 still has a chance to do; measure the ‘Cup’ to an upside target.