Tag Archives: Gold

Ritholtz on Gold

By Biiwii

I linked Barry Ritholtz’s gold bug swipe along with other items in an Around the Web post.  Anything linked (or republished from guests for that matter) on this site is to be taken as 100% their view, not mine.  You, the reader are tasked with using your own brain to consider, discount or ignore any of it as you see fit.

What do I think of Ritholtz’s view on gold, personally?  I think ole’ Barry is picking some easy, low hanging fruit to use up virtual ink over at Bloomberg, per his contract (real or implied).  I mean really, gold did not react to Greece and he takes that as a negative for the metal?

The fact that gold did not do what legions of promoters and fear mongering pitch men insist it is supposed to do is a positive, not a negative.  It brings us closer to the resolution of the bear market as opposed to delaying it with fear mongering promotions (ref. last summer’s Russia-Ukraine-Ebola triple play of unsound ‘fundamentals’).

Gold Shrugs Off Armageddon

“I thought gold was an investor’s best friend during Armageddon.”

Really Barry, I think that you have gotten caught up in a personal ‘back and forth’ with the more unsavory of the gold bug “community”, as Daddy Gold Bug Jim Sinclair calls it.  You are using the same cartoons in reverse that the worst of the “community” uses when it tries to stir fear and greed in naive cult members followers.

As those of us who actually care about reality (as opposed to media-driven hype) have tried to point out repeatedly over the years, gold is not about Armageddon (Bird Flu, Ebola, Cyprus, Greece, war, death, destruction or any of that crap).  Gold is simply a marker, a barometer showing the state of confidence in the financial system and its managers (Central Banks) at any given time.

“Further reducing enthusiasm for gold is the gradual improvement of the U.S. economy. Despite forecasts of imminent collapse, the major economic data — including employment, wages, spending, housing, autos and consumer sentiment — have all trended higher over the last five years. Tales of an impending depression were greatly exaggerated.”

I could not agree with you more, Barry.  Back in 2012 we began gauging big breakdowns in the technical case for precious metals and by January of 2013 we (well, NFTRH) cross referenced the ratio of Palladium (cyclical) to Gold (counter cyclical) with a ‘channel check’ of the Semiconductor Equipment industry to put forward a view that an economic bounce – beginning in manufacturing and later to spread out to the services sectors – was likely to come.

I am a gold bug.  I saw the “improvement of the U.S. economy” when it was appropriate to see it, ahead of time.  When you obsess on the other kind of gold bug, the media star with the Armageddon-like predictions and inflammatory ‘analysis’, or Kool-Aid drinking hate mailers, you do a disservice to your readership because you only present the other side of something that is not real to begin with.  You in essence stand up a Straw Man and periodically set fire to him, really to no one’s benefit.

“Regardless, gold seems to [be… jeez msm, edit much?] going nowhere fast. Feel free to send me an e-mail explaining how wrong and stupid I am. I have an archive of all the messages warning me that gold would teach me a lesson in humility. “You’ll see” these e-mails smugly assure me, “your comeuppance will be here any day now.” My plan was to respond to each on its fifth-year anniversary with a chart showing the performance of gold versus all other asset classes and the details of how much money has been lost.”

Gold is going to be relevant again when confidence wanes and the current boom cycle starts to show its age and reveal its unsound origins.  Until then, gold is a dumb rock that people can hold as insurance and nothing more.  That is all it ever was, anyway.  But that does not sell in the mainstream media to mainstream people.  Cartoon-like depictions of half insane Luddites clinging to that dumb rock do.  Media stars lampooning those Luddites do too.

Hype in the “Community” is Always Punished

By Biiwii

IKN has been pointing out the stupidity of some Apple Watch gold consumption hype and most recently, the non-flight to quality amidst Greece blah blah blah… He is at least as sensitive as I am to this stuff.  More so, maybe.

While I have personally tried to tone down the criticism of the cartoons in the gold “community”, I find it difficult with one writer in particular leading the naive into the GDX (with its “drop dead gorgeous bull wedge”), into the Indian Wedding and China demand stories and as a topping on the cartoonish cake, the ‘US jobs will drive inflation so make like the smart money and BUY GOLD before the big institutions do!’ garbage.

I get irritated by this stuff.  Some people call me sanctimonious (while cherry picking and misinterpreting a chart I put up) and I call myself judgmental, for sure.  That is not really a great trait to have, but at least I know who and how I am.  Speaking for the defense, this is mostly applied when I think that people are being misled to their potential harm by stuff that they are reading and assuming is authoritative.

News flash:  Nobody writing on the internet in general and the financial media in particular, is authoritative.  Present company included.

Last year at this time Ukraine, Russia and eventually Ebola were stoking up.  NFTRH kept a constant warning in force that the rally in the precious metals complex was happening for the wrong reasons (i.e. trade it, but don’t bite on the b/s).  Right out front beating the bull drum were some of these entities about which I am highly critical today.  The result for last summer’s unsuspecting true believers?  New freaking lows in gold, silver and the miners.

It was interesting because last summer NFTRH experienced a temporary net decline in subscribership.  I thought it was just a typical summer drop off, but I also could just feel certain gold aficionados in the base getting fed up with me.  You can always sense when gold bugs start dropping off.  It tends to happen when I don’t tell them enough of what they want to hear.

This summer (so far, anyway) there has been no drop off and indeed there has been a slight increase in net subscribership.  The only way I can explain it is that we have been fully prepared every step of the way for the bearish things happening to gold, silver and the average* miner.  That along with the fact that we have been bullishly managing markets that have deserved to be managed, unlike the precious metals to this point.

In other words this summer I am not being punished for being negative because precious metals prices are not running upward, making charlatans with nicer things to say look like gurus.  People are valuing what is, as opposed to what they ideally might want to be.  Oh and also I think that the last several years have been a process of winnowing the real hard ass gold bugs out of the base and leaving a group of well rounded market participants.  I like that.

This is not a ‘trash the precious metals’ post.  Changes are coming, but first you need to be intact, have several macro fundmental and technical indicators cross referenced and in line and be prepared to be brave when the sheep (funny how the most dogmatic “community” on earth calls regular people “sheeple”, isn’t it?) are being sheared.

* I am fully aware that there are standout exceptions, which is why I currently hold 3 junior gold stocks (alongside a short against NUGT).

Around the Web

By Biiwii

Market Analysis & News From Around the Pipes…

 

Silver-Gold Ratio & USD

By Biiwii

Okay, one last precious metals short-term micro management exercise before moving back to a more generalized market view.

Actually, this one is pertinent to many other items as it is our gauge for the probabilities of an anti-USD ‘inflation trade’ bounce.  Silver-Gold ratio is still alive despite silver’s hard down this morning, and Uncle Buck is still below his MA 50 despite today’s strong bounce.

sgr.uup

GDX-GLD Ratio

By Biiwii

Well here is what GDX-GLD (equiv. to HUI-Gold ratio) did out of the gate this morning, which is interesting, considering HUI-Gold has been making historic long-term lows lately.

gdx.gld

“Drop Dead Gorgeous”?

By Biiwii

As currently ‘risk OFF’ gold and silver prepare to get thrown out of the bull party (celebrating a bankrupt country’s pending agreement to play ball) once again…

au.ag

…we conjure some stuff that some in the gold “community” were considering last week.

For reasons of decorum I won’t name the source, but the following was written on a chart presented in the weekly free ‘analysis’ of a writer who has somehow managed to do two things all through the gold bear market; 1) remain bullish and 2) always sound authoritative and flat out right.  That is some trick.  Never have I seen a mistake admitted.

“GDX is sporting a drop-dead gorgeous bull wedge pattern.”

NFTRH 348 summed up wedge patterns thusly…

“This is a convenient opportunity for us to be reminded again that Wedges, either bullish
falling or bearish rising, are among the most hyped things in TA. And when they do
work out, they only have relevance for 1-3 days, assuming the chart is a daily like this
one.”

Here is the state of the “drop-dead gorgeous bull wedge pattern” at yesterday’s close.

gdx

NFTRH 348 continued:

Here are some facts…

• HUI lost the key support parameter of 160.

• HUI is below the 50 and 200 day moving averages.

• MACD and RSI are bearish.

• HUI broke out of the “drop dead gorgeous bull wedge pattern” and then soiled
itself the very next day.

• Key support levels now are the November and December lows, just as we noted
last week.

• HUI is bearish until proven bullish, technically. Not the other way around.

I am not trying to be like ‘hey look at me, a genius’.  I am trying to be like ‘hey, this was obvious and I have got to wonder who on earth is still taking the bait in the gold “community”‘.

When there is no more bait and when the fish stop biting, the precious metals will be ready.  I am not bearish gold or silver on a risk vs. reward basis given other factors coming into play, but as we have been noting all along certain indicators and macro fundamentals have just not registered yet.

The way the markets are going, that could change in a flash (today, next week, next month?), but you don’t sit out there spouting dogma with your capital on the line, waiting for the change.  You gather indicators, funda and technical data points and build your case.  The gold “community” may have to wait until the stock mania is fully expressed, again, whether that is today, next week, next month or…

We just don’t have answers, so it pays to just admit as much and do the work in an ongoing way without the need to provide easy answers every step of the way.

[edit]  Durable goods fall 1.8% in May, and gold gets hammered further.  But this is actually a positive to the real, long-term bullish scenario for gold.  The one that ignores cartoons about Indian Weddings, China Demand, strong US economy pushing up prices and sending institutions running for gold’s inflation hedge, etc. etc. etc.  We are of course talking about a counter-cyclical environment.

Gold Ratios Today; Ag-Au & Au-Pd

By Biiwii

A couple of our most recently watched gold ratios..

Silver-Gold ratio bounced today, keeping the hopes of the ‘inflation trade’ alive.

sgr

Gold was down hard today, but the problem for the Palladium-Gold ratio is that the cyclical metal, Pd was down harder.

pall.gold

Here’s the weekly view, showing what looks like a shoe-in that a negative macro signal is going to come about.

pall.gold.wk

<Insert here > the usual caveats about tolerances on timing and individual indicators not being taken in a vacuum; but if this indicator is going to work as it has before, it’s message is not a pleasant one.  And no, I don’t have a clue about how this squares with the bullish things I am seeing in the Semi Equipment sector, another ‘canary’ that chirped the post-2012 up cycle.

It’s why you’ve got to love this market I guess.  It’s wonderfully dysfunctional IMO mostly thanks to the historically vigorous levels of policy input post-2008.

Gold and Silver, and…

By Biiwii

[edit] Whoa!

au.ag

This is odd, but not illogical, given the dynamics in play for the gold and silver CoT data and a possible counter-trend setup we have been watching for in the ‘inflation trade’.

au.ag

Here is the CoT chart for silver that was used in NFTRH 348.  Not so bad is it?  The extreme was set at the first set of arrows, but Silver CoT has improved greatly over the last couple of weeks.

cot.ag
Courtesy of COTbase

Silver would likely lead gold if a bounce in commodities and certain global markets were to take place.  Meanwhile, the actual bullish stuff is elsewhere as the US stock market has re-found its momentum leaders and Europe declines to the upper end of its buy range.

Palladium-Gold Ratio

By Biiwii

With reference to this morning’s bigger picture post, here’s Palladium-Gold ratio in-day today.  That is not what you’d want to see dear happy optimists.

pall.gld

Gold’s Ratio Signals

By NFTRH.com

A brief snapshot of counter-cyclical gold’s macro signals vs. other metals (and broad commodities) that are more positively correlated to economies, using weekly charts…

Each week NFTRH updates many charts of nominal US and global stock markets, commodities, precious metals and currencies over multiple time frames.  But we also cover economic data and indicators, with the first macro chart below (Palladium vs. Gold) still barely holding its economic ‘UP’ signal from January, 2013.  At that time a coming economic up phase did not seem likely, but PALL-Gold and fundamental information gleaned from a personal source in the Semiconductor Equipment sector gave us a good risk vs. reward on that stance.

While it can be argued that using an indicator like Palladium (positive economic correlation) to Gold (counter cyclical) is subject to the discrete supply/demand fundamentals of the two assets, it has worked to signal up and down economic phases, with the most recent shown in Q1 2013 (green arrow).  This indicator has been whipsawing since topping out a year ago and the moving averages are near a trigger point.

pall.gold

A related indicator is Gold vs. Commodities.  Gold-CRB made an impulsive rise in late 2014 as the global deflationary phase topped out.  As policy makers (ECB, BoJ, China Central Planning and US with ongoing ZIRP) continue to promote inflation 24/7, 365 Gold-CRB has dropped as it should when inflation is starting to ‘work’ and inflation expectations start to take hold.  But a problem for hopeful inflationists is that so far at least, counter-cyclical Gold-CRB appears to be in a bullish consolidation.

gold.crb

If cyclical PALL-Gold were to break down and counter-cyclical Gold-CRB to hold support and resume its uptrend the indication for the global economy would be negative.

Another chart worth considering is Gold vs. Copper, the traditionally cyclical red industrial metal.  A series of higher highs and higher lows began in late 2013 and is still in play.

gold.copper

To put perspective on this, behold how bearish nominal Copper is and has been by viewing this monthly chart similar to those we have reviewed in NFTRH for years now to maintain a big picture bearish outlook on this metal.  We have allowed for the current bounce/rally/bear flag, but until $3/lb. is exceeded and held, this is a very bearish picture.

copper

Finally, let’s review Gold vs. its primary running mate, Silver.  Actually, flipping Gold vs. Silver over to the Silver-Gold ratio works best visually at this time.

We are allowing for a bounce in Silver vs. Gold.  This could come about if the Fed rolls over again today and plays nice with its language.  Or it could just come about simply because it is due.  This would go hand in hand with a resumption of the mini inflation bounce implied in TIPs vs. regular Treasury bonds and in nominal Treasury bond yields.  The message of Silver-Gold however, is similar to the charts above on the bigger picture because it is locked below very strong resistance.

sgr.wk

Bottom Line

I consider Gold vs. Palladium and Gold vs. Copper to be indicators on the global economy whereas Silver vs. Gold is more an early indicator on inflationary pressure.

The conclusion is that the economy is in danger of decelerating (Pd-Au, Au-CRB, Au-Cu) amidst a dis-inflationary environment (Ag-Au).  The timing could be by this fall.  First, a resumed bounce in the ‘inflation trade’ has a chance to get reanimated.  But that is not the dominant longer-term trend.

Ag-Au & Pd-Au Today

By Biiwii

With respect to the two metallic market indicators in the previous post, I find it interesting that they are diverging today.  The markets are down, people are concerned about a stock market correction (gotten a look at market sentiment lately?), Greece, the Fed and whatever else they can find to upset themselves with.

But today Silver has been trying to bounce vs. Gold while Palladium is more in line with the bearish festivities going on today.  Silver is trying to sniff out an inflation play, while Palladium is still on the message that an economic signal may be coming in the next few months.  It’s only one day (not to be taken in a vacuum), but both ratios have been dropping for somewhat similar reasons, as they both tend to be cyclical.

Of course, it’s FOMC week so we might expect some whacky things.

slv.gld.pall