Tag Archives: Gold

Gold vs. Silver…

Guest Post by Steve Saville

Gold vs. Silver During Precious Metals Bull Markets

It is widely believed that silver outperforms gold during bull markets for these metals, but that’s only partially true. It’s true that silver tends to achieve a greater percentage gain than gold from bull-market start to bull-market end. It’s also the case that silver tends to do better during the final year of a cyclical bull market and during the late stages of the intermediate-term rallies that happen within cyclical bull markets. However, the early stages of gold-silver bull markets tend to be characterised by relative strength in gold. This is a point we’ve made in the past, including in TSI commentaries earlier this year, but warrants revisiting due to the recent price action.

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Hulbert HGNSI and Gold

First off, I want to say that the plan explained by Steve Hochberg in the video associated with the previous post (free sign up required) meshes well with how I see gold currently.  The 1000 +/- level is very doable, folks.  Not a given, but quite doable.  That would close out investors’ fear from 2008 by having made a completed cycle on the rebound in greed.

In the short-term, gold was probably ready to bounce even before the war stuff hit the news yesterday.  Sentiment had become just deplorable, with gold bulls puking left and right.  The geopolitical thing is a negative, as it always is but the Hulbert HGNSI is quite a positive, as the gold timer community (ha ha ha…) plummets well into net short territory.

hgnsi

So, geopolitical aside (and I always take that seriously as a negative for gold because it gets the worst of the gold “community” back to pumping) gold can see some decent rally activity off of sentiment and the improved Commitments of Traders structure.  But I think more downside may follow over the next few months.  Then?  Cyclical bull.

Meanwhile, I am using gold as a macro tool; probably the best macro tool I have when comparing it to other assets that are positively correlated to economies.  Gold is just a tool around here after all; a tool for market evaluation and a tool for monetary value.  It’s not an idol.  When the ones who obsess about gold with wildly glaring eyes are back on the pump, take caution.

Separately, also at MarketWatch we see that the word is getting out that these ‘golden’ and ‘death’ crosses that inexperienced TA’s often get hysterical about are indeed opposite to the hype.  The supposedly bullish golden ones are more bearish than the death ones.  Too funny, and sadly all too true.

What I like about market management is that there is no shortage of bullshit out there to decode and debunk, but casual observers tend to take it seriously.

GSR & Uncle Buck

People should try to get their heads out of their ass(et) classes and look at the signals that these assets may be sending.  Look, gold bugs are screwed and being run up the analytical flagpole as outdated anachronisms and stuffy old fogies with outmoded views.  The stock market has proven bullish again and again and policy making has worked swimmingly for a couple years now.

So take out the gold bug, the silver bug, the commodity and inflation bug and the stock market bull and/or bear and just look at the signals.  The Gold-Silver ratio (GSR) is rising strongly and it is happening in unison with the now well bull horned US dollar, which everyone left for dead just a few months ago *.  The question that should be asked now is not ‘how do I defend my stance?’ or ‘what asset should I buy or sell?’ but rather, ‘what does this mean from a macro market view?’

gsr.uup

The correlation by daily view of the GLD/SLV and UUP ETFs is not very good, but over a longer-term is GSR and USD are generally in line.  We have always felt that the USD (a global asset anti-market or counter party) is a bedfellow of the gold-silver ratio (a risk off/illiquidity indicator).

More to come on this in the form an NFTRH excerpt later on.  But we should be beyond hoping that this or that asset class will go up and into a time of evaluating what, if any meanings can be taken from the USD-GSR relationship.  A lot of people are interpreting the rise of the USD as a bullish event, with only gold and commodities to suffer.  They had better do the work to confirm that view rather than just making assumptions.

* Not by me and not by my market management service.  We charted its hold of important support and casually followed its progress every single week.  Now Uncle Buck is all lit up in neon and as usual, a majority is now aboard the story and promoting distortions.

Gold & Silver CoT Reports

Yup, improved a gain.  A lot of good it did precious metals bulls today, but we can bet that the goons covered shorts again today (data are only through Tuesday) and I would assume speculators continued to puke.  Got to play the game folks, in the casino at least.  This has nothing what so ever to do with real physical gold.  Note the open interest on silver; that is in line with the power of today’s thumpage.  A coming low in these metals should be very interesting.  Click the graphics to de-minify them.

gc

SI

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?

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Sentiment Shifting for Gold Bugs

Warning… Condescension ensues… NFTRH 307’s opening segment, dated 9.7.14:

From a post on the HUI at the site last week:

“There are worse things that could happen than filling a gap and scattering the wrong kind of gold bugs back out.  Then it would be up to the longer-term charts to do the heavy lifting if the daily does fulfill this downside potential.”

The gap was filled, the top end of the anticipated support zone was reached and indeed, the wrong [i.e. momentum players] kind of gold bugs are scattering back out.  The hard sell down on Thursday was very likely due in large part to the selling by traders with a fetish about gold as a geopolitical or terror hedge.

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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.

Market Ratio Messages

Using monthly charts I want to update more big picture views of where we stand in the financial markets.  This is just a brief summary [edit; okay it's not so brief.  In fact it had to be ended abruptly or else it would have just kept on rambling] and not meant as in depth analysis with finite conclusions.

I was listening to Martin Armstrong talk about his ‘economic confidence’ model and realized that the way he views gold is similar to the way I do (and very dis-similar to the way inflationists and ‘death of the dollar’ promoters do).  I don’t love the way he writes, and I usually avoid these weird interview sites, but checked it out (linked at 321Gold) anyway and found him enjoyable to listen to.

Anyway, this prompted another big picture look at gold vs. the S&P 500 and as with the shorter-term views, the picture is not pretty.

au.spx

Well, it is pretty if you have patience and no need to promote gold as a casino play.  Gold will be ready when gold is ready and that will not be until confidence in policy making and by extension the stock market, starts to unwind.

Gold vs. SPX has meandered out of a long Falling Wedge (blue dotted) with 2008’s Fear Gap still lower.  On the big picture the risk vs. reward is with gold over the stock market.  But it is a funny thing about big pictures; they move real sloooow.  A fill of that gap may not feel so good to anyone vested in an immediate conclusion to gold’s bear market vs. SPX.

Moving on, let’s look at some ratios of components of the stock market…

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Gold and Silver CoT

As expected, there was improvement this week in the gold and silver CoT data.  Silver did not do much but it had been improving much more steadily than gold, which mysteriously (ha ha ha) took a sizable hit a week ago Thursday.  This data includes that hit.  The goons did some covering on that day.  Click graphics for full view…

au.cot

Au Commitments of Traders

ag.cot

Ag Commitments of Traders