Happy Memorial Day to those celebrating.
We all know the story. Bearish at 350, 420, 600 and so on. He was also bearish at 1900. But what I find interesting is that Bob Prechter has also consistently recognized and promoted two seemingly opposed ideas:
- Gold was in an over-loved bull mania
- Gold is real money
A cornerstone of my personal philosophy from day one has been to not worry about the price of gold, because it is not about price. It is about securing off the grid value within a system that has so obviously gone berserk. I see no change what so ever to that view currently.
But I also realize that a lot of gold bugs are (in my opinion) unhealthy players with too-limited, or single-minded viewpoints. Do you think it is bravado or reverse psychology when I write that gold can easily drop 100 or more bucks in a day or ultimately go below 1000? It is not. It is the realization that it is the propped up paper and digital world of highly gamed finance that is in motion, not gold. In that context, the value assigned to it can also rise to heights unimagined by today’s frightened players. So what? Gold just sits there. The system is in motion.
All of this said, you can get a free report on Prechter’s 5 arguments that refute the heretofore bullish case on gold’s price. The report is excerpted from the April Elliott Wave Theorist, to which you may recall, I subscribe. Here are the talking points:
1) Central Bank Buying
2) Fed Inflating
3) The “Crisis Hedge” Argument
4) The “Gold is Cheap” Argument
5) The Conviction that Post-Peak Lows were Support
For me, EWT is now much more about the stock market and the macro global economy in general within the context of rising deflationary pressures. But this report might be a bit of an intro for anyone interested. As usual, I’ll note that I am promoting the EWI service with this post. But it is a service to which I subscribe as part of a well-balanced market intelligence platform. I also subscribe to other services like Bespoke and McClellan for their unique perspectives on areas that are not within my core focus analytically.
So click the link above or not. It’s free with no strings, but – cue to jeers and mocking – I do now and always have valued Prechter since first reading 2002′s Conquer the Crash. But I think for myself at all times, no matter what other analytical sources I take in. I recommend Prechter wholeheartedly, especially now given my current view on the stock market.
(e) = external link
Chutzpah Michael Ashton 5.22.13
Half Science, Half Art, Half Luck Brent Cook w/ TGR 5.22.13
Psychology in Gold News Greg Canavan 5.22.13
Desperate, Deceptive Measures Penny Stock Scammers Use… IKN 5.22.13 (e)
Live Blog of Bernanke Testimony MarketWatch 5.22.13 (e)
3 Things Not to Worry About Right Now Mark Hulbert 5.22.13 (e)
Present Shock & the Loss of History & Context Of 2 Minds 5.22.13 (e)
Bernanke KIKs the Can Bruce Krasting 5.22.13 (e)
That something was a big smash in gold and especially silver over night and then a head spinning reversal. Exactly the kind of thing we look for to be buyers.
Silver actually got near my target zone, which is 17-20. But there is a bump of long-term support elsewhere (noted this morning in an NFTRH update) that could hold for a rally or better. When items like gold and silver have been this badly decimated and people have come to hate a concept like honest money this vehemently (while being compelled to worship inflationary policy making), you need to give merit to the idea that the next rally could be the rally.
Silver’s CoT data still shows some open interest by whatever gamers or evil interests there may be in the paper and digital markets, but its structure is very bullish. Yet until this morning, everybody hated silver.
Now, lack of follow-through and another flop would reset and extend the agony that honest money advocates have endured, but there seemed to be enough going on today in gold, silver and the associated stock indexes to stand up and take notice.
May/June is after all, the time frame we have been expecting for some pretty important changes in the macro markets. Did something happen today? We’ll find out very shortly.
If you ask me, the biggest concern for those fretting about the gold price is the preponderance of analysis showing up out there cherry picking the top trend line by a log scale chart. Sort of like this:
Of course the chart also has a lower trend line that intersects a massive support area defined by the pattern that formed in and around the crash of ’08. Why is this one not highlighted as much?
Meanwhile, a more honest linear scale chart (shows a market as it really is, not percentage adjusted) argues that 1200 and even or especially 1000 look doable.
These are the charts. They do not care about cartel manipulation or all the other crap that people desperate to keep bullish opinions intact promote. Gold is just gold. The brainwashing by those that promote it is something else all together. This cyclical bear correction is cleaning out all of that.
It is funny that some people who have said don’t believe the charts seem to be watching the charts plenty now; log scale charts with a trend line that intersects an area that does not show strong lateral support. Take it for what it’s worth.
Did you know that…
“The precious metal is down 4.4% this week so far, dropping below the key $1,400-an-ounce level earlier in the week as continued gains for equities and the U.S. dollar have curbed its attraction for investors. Amid a clutch of data Thursday, news of a deeper-than-forecast drop in consumer prices for April also cut into gold’s traditional appeal as a hedge against inflation.”
…gold is a hedge against inflation, which is measured in consumer prices? I thought it was a hedge against unbridled money creation. That has already taken place, is now being talked down and has not worked to the degree mandated. There is no inflation, so why end QE if we are not at 6% unemployment? Would it have something to do with the Fed realizing it could lose control of peoples’ expectations of Punch Bowl to Infinity?
“Gold is hurt by any talk that the Fed might stop that easing, which tends to weaken the dollar and make gold stronger, though the metal has not been responding in a typical fashion due to bearish sentiment and a downturn that began in mid-April.”
…gold is hurt by talk of QE’s end? As opposed to what, how beneficial QE has been all these months?
“Constant sales of gold-backed exchange traded funds have also undermined gold. Shares in the SPDR Gold Trust GLD -0.40% are down 4% on the week, nearly 14% on the quarter to date. Billionaire investor George Soros cut his gold holdings in the first quarter.”
…sales of paper shares and the Soros hype are bad for gold? Well, how good for gold were the massive in-flows to GLD and the previous ‘Soros is buying!’ hype?
…gold is going to continue getting crushed due to the lack of inflation?
As for more bearish calls, a day prior, Ric Deverell, head of commodities research at Credit Suisse Group AG, predicted that gold will be trading at $1,100 an ounce in a year and below $1,000 in five years.“Gold is going to get crushed,” Deverell told reporters in London on Thursday, according to a report on Bloomberg. “The need to buy gold for wealth preservation fell down and the probability of inflation on a one-to three-year horizon is significantly diminished.”
Maybe it is getting crushed due to an atmosphere created for the mainstream whereby it is compelled by policy to jump head first into the risk pool. All the happy swimmers believe the water is just fine, so why would they need a barbarous, shiny rock anyway? Isn’t Credit Suisse a bank or something?
Look, this guy’s targets are doable. But his time frame is whacky. Gold could hit 1100 in days or weeks because that is how it trades. Or it could turn and burn at any time, leaving this phase of perceptions management so well crafted by certain establishment interests in the rear view mirror.
Take it for what it is worth… a bullish divergence in the HUI Gold Ratio.
Although there is nothing like the ugly daily chart of HUI to illustrate the long and terrible southward journey gold stocks have been on.
At some point this crap will bottom. Is today’s attempted reversal that point? Bullish divergence has not stopped new bear market downside in the past. But rallies have to start somewhere. Bears watching… and no, no pun intended.