Don’t Short This Dog

By Keith Weiner of Monetary Metals

This week, the prices of the metals mostly moved sideways. There was a rise on Thursday but it corrected back to basically unchanged on Friday.

This will again be a brief Report, as yesterday was a holiday in the US.

Below, we will show the only true picture of the gold and silver supply and demand fundamentals. But first, the price and ratio charts.

The Prices of Gold and Silver
gold and silver prices

Next, this is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio. It moved sideways this week.

The Ratio of the Gold Price to the Silver Price
gold-silver ratio

For each metal, we will look at a graph of the basis and cobasis overlaid with the price of the dollar in terms of the respective metal. It will make it easier to provide brief commentary. The dollar will be represented in green, the basis in blue and cobasis in red.

Here is the gold graph.

The Gold Basis and Cobasis and the Dollar Price
gold and the us dollar

The price was unchanged, but the basis is up slightly and cobasis is down (i.e. gold became slightly more abundant). This is not the news dollar shorters (i.e. those betting on the gold price) want to see.

Our calculated fundamental price is all but unchanged around $1,360.

Now let’s look at silver.

The Silver Basis and Cobasis and the Dollar Price
silver and the us dollar

In silver, the basis is basically unchanged but the cobasis went up a bit. The silver market got just a bit tighter, and our calculated fundamental price is up more than 30 cents to about a quarter above the market price. Not exactly “bet the farm with leverage territory”, but definitely not “short this dog” either.

Watch this space. We have some exciting data science to reveal soon.

Stocks and Gold; the Next Opportunity

By NFTRH

Unless you visit the Notes From the Rabbit Hole website regularly, you might think the title of this article implies it is written by a market analyst pretending to know what will happen; like a top in the stock market or a resumed bull cycle in gold.  You might also think it is written by one of the writers who’ve either a) been fighting the stock bull since the bearish market terminated a year ago or b) been a perma gold bug bull.

So once again, we have our disclaimers because in a milieu of quickly forgotten soundbites, integrity is important.  So I point you to a couple of posts (among many others) that indicated, when the time was right for people to get bullish the stock market in favor of gold.

AMAT Chirps, B2B Ramps, Yellen Hawks and Gold’s Fundamentals Erode (May 30, 2016)

Detailed Multi-Market Update (an NFTRH premium update, now public, from July 22, 2016)

From the July 22 NFTRH update, in the event you don’t wish to follow the link to read the whole thing…

Yesterday in a public post a target was established for the S&P 500.  I’d love to see a drop toward 2100 to clear over bullishness but regardless, SPX targets 2410 as long as it’s at or above the noted support zone.

Here is the price panel of the chart from that update…

spx

Indeed, SPX went on to make a hard test of 2100 on election jitters, as you can see by today’s version of the very same chart.  That folks, was the last opportunity for those who had remained bearish after Brexit, to stop being so.

Continue reading Stocks and Gold; the Next Opportunity

Silver Futures Market Assistance

By Keith Weiner of Monetary Metals

This week, the prices of the metals moved up on Monday. Then the gold price went sideways for the rest of the week, but the silver price jumped on Friday. Is this the rocket ship to $50? Will Trump’s stimulus plan push up the price of silver? Or just push silver speculators to push up the price, at their own expense, again?

This will again be a brief Report this week, as we are busy working on something new and big. And Keith is on the road, in New York and Miami.

Below, we will show the only true picture of the gold and silver supply and demand fundamentals. But first, the price and ratio charts.

The Prices of Gold and Silver
gold and silver prices

Next, this is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio. It fell this week.

The Ratio of the Gold Price to the Silver Price
gold-silver ratio

For each metal, we will look at a graph of the basis and cobasis overlaid with the price of the dollar in terms of the respective metal. It will make it easier to provide brief commentary. The dollar will be represented in green, the basis in blue and cobasis in red.

Here is the gold graph.

The Gold Basis and Cobasis and the Dollar Price
gold and us dollar

Again, we see a higher price of gold (shown here in its true form, a lower price of the dollar) along with greater scarcity (i.e. cobasis, the red line).

This pattern continues. What does it mean?

First, it means the price of gold is being pushed up by buyers of physical metal. Not by buyers of futures (which would push up the basis, and reduce scarcity).

Second, if it continues too much more, it means nothing good for the banking system. There is one force that can make all the gold in the world—which mankind has been accumulating for thousands of years—disappear faster than you can say “bank bail in”. The force is fear of counterparties, fear of banks, fear of currencies, fear of central bank balance sheets… fear of government finances.

We want to emphasize that the gold basis is not signaling disaster at the moment. It is merely moving in that direction, for the first time in a long time. It has a ways to go yet.

Our calculated fundamental price is up another $40 (on top of last week’s +$40). It is now about $130 over the market price.

Now let’s look at silver.

The Silver Basis and Cobasis and the Dollar Price
silver and us dollar

Note: we switched to the May contract, as March was becoming unusable in its approach to expiry.

In silver, the story is a bit less compelling. The scarcity of the metal is holding, as the price rises. However, scarcity is not increasing.

Were we to take a guess, we would say there is some good demand for physical, and the price action had futures market assistance.

While the market price moved up 44 cents, our calculated fundamental price moved up … 46 cents.

The Illogical World of GATA

By Steve Saville

In response to the 3rd January blog post in which I pointed out the straightforward fact that evidence of market manipulation is not necessarily evidence of price suppression, a reader sent me a link to a year-old GATA article. The GATA article was presented by the reader as a refutation of what I had written.

It is certainly possible to construe the aforelinked GATA article as having at least partly refuted what I wrote, but only if you take the article’s headline (“State Dept. cable confirms gold futures market was created for price suppression”) and conclusion (“…[the cable confirms] the assertions by GATA and others in the gold-price suppression camp that futures markets function largely as mechanisms of commodity price suppression and support for government currencies”) at face value and give no further thought to what is being presented and asserted.

However, if you take the time to read the excerpt from the 1974 State Dept. cable included in the GATA article you will see that it does NOT say that the gold futures market was created for price suppression; it says that re-legalising private gold ownership in the US (it had been illegal since 1933) would result in the formation of a large and liquid futures market. In effect, it says that the formation of a futures market would be a natural consequence of the gold market becoming freer.

The State Dept. cable does express an opinion that large-volume futures dealing would create a highly volatile market, and that the volatile price movements would diminish the initial demand for physical holding and most likely reduce the long-term hoarding of gold by U.S. citizens. This opinion is certainly debatable, as a good argument can be made that futures markets tend to bring about LESS long-term volatility in the price of a commodity. In any case, it is just an opinion as to the price-related consequences of a naturally-occurring futures market.

It is also worth mentioning that the cable is from an embassy bureaucrat with no say in government policy.

So, in no way does the State Dept. cable do what the author of the GATA article claims it does. Moreover, the assertion that “futures markets function largely as mechanisms of commodity price suppression and support for government currencies” is not only in no way backed-up by the evidence presented, it is so illogical as to be laughable. There have been futures markets for many widely-traded commodities for hundreds of years. These markets were not created by and do not exist for the benefit of governments.

Sometimes, no specialised knowledge is needed to figure out that a conclusion doesn’t follow from the information presented. For example, detailed knowledge of the gold futures market is not needed to see that the State Dept. cable cited in the GATA article does not come remotely close to confirming GATA’s assertions. Sometimes, all that’s needed is a modicum of logic.

Gold and Silver Divergence

By Monetary Metals

This week, the prices of the metals went up, with the gold price rising every day and the silver price stalling out after rising 42 cents on Tuesday. The gold-silver ratio went up a bit this week, an unusual occurrence when the prices are rising. Everyone knows that the price of silver is supposed to outperform—the way Pavlov’s Dogs know that food comes after the bell. Speculators usually make it so.

This will be a brief Report this week, as we are busy working on something new and big.

Below, we will show the only true picture of the gold and silver supply and demand fundamentals. But first, the price and ratio charts.

The Prices of Gold and Silver
gold and silver prices

Next, this is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio. It rose slightly this week.

The Ratio of the Gold Price to the Silver Price
gold-silver ratio

For each metal, we will look at a graph of the basis and cobasis overlaid with the price of the dollar in terms of the respective metal. It will make it easier to provide brief commentary. The dollar will be represented in green, the basis in blue and cobasis in red.

Here is the gold graph.

The Gold Basis and Cobasis and the Dollar Price
gold and the us dollar

Do we have rising price of gold, up $25 (i.e. falling dollar, from 26mg to 25.5mg gold)? Yes. Do we have rising scarcity of gold (i.e. the cobasis, our measure of scarcity)? Why yes, we do.

This resumes the pattern that began the last week of December. The price of gold made a low of $1,127 (i.e. the dollar made a high of 27.6mg). Since then, the price of gold has been rising (i.e. the dollar has been falling) while the scarcity of gold has been rising.

Not a lot. Not Defcon 5, gold is going to spike to $10,000 (i.e. the dollar is going to crash to 3mg gold). Not a big obvious crisis-looking sort of move. Just a gradual move from -100bps to -68bps. What makes it significant is that it occurred with rising price. Gold is becoming scarcer as its price rises.

So far, this move has been driven by buyers of physical metal.

Our calculated fundamental price is up $40 to stay about $100 over the market price.

Now let’s look at silver.

The Silver Basis and Cobasis and the Dollar Price
silver and the us dollar

In silver, there is quite a bit more volatility in the basis. And though the March cobasis is up, farther contracts do not show the same move.

Our calculated fundamental price did move up a bit—15 cents. However, it did not keep up with the market move. So now it’s basically even with the market price. It turns out speculators did think that silver ought to outperform gold, and they tried. They caught up to and passed the buyers of physical metal.

We note that in the futures market, the open interest in gold turned down sharply starting last week. However, silver open interest diverged, and continued to skyrocket.

LMBA 2017 Forecasts (for the US Dollar)

By Bron Suchecki of Monetary Metals

Every year the London Bullion Market Association (LBMA) surveys the top precious metals analysts of bullion banks and consultancy firms for their forecasts for precious metal prices for the year ahead. We look at things a little differently, and would say that the analysts are forecasting the value of the US Dollar, priced in gold (or silver). This year the analysts are generally bearish on the Dollar, with an average forecast of 25 milligrams of gold, down 5% from the value of the dollar at the start of this year.

The aggregated forecasts assembled by the LBMA have a fair history of accuracy, as the chart below demonstrates. It shows the actual average value of the Dollar as a line against the lowest (bottom of the navy bar), highest (top of the dark cream bar) and average (where navy and dark cream bars meet) of the forecasts . Note that these charts are of the analysts’ yearly averages – see the survey for more detail on each analysts’ high and low range.

au_lbma_dollar_2017

Again, this year the range of forecasts is quite tight, indicating more consensus among the analysts about the direction of the US Dollar. The most pessimistic analyst is Joni Teves of UBS (the 2016 forecast winner), who sees the US Dollar averaging 23.04 milligrams during 2017, whereas Bernard Dahdah from Natixis is the most optimistic, thinking it will average 28.02mg of gold. For reference, the dollar is currently 25.84mg gold.

The LBMA analysts are less accurate when looking at the US Dollar in silver terms but this year their range is tight so they must be confident. William Adams of Metal Bulletin Ltd has the lowest average at 1.54 grams of silver while Bernard Dahdah sees the average at a high 2.06g. The dollar is currently 1.78g silver.

ag_lbma_dollar_2017

If you want to look at things back-to-front, you can find the survey here, where they present the forecasts as if it is the value of gold and silver that is changing. Crazy, huh? We plan to release our own predictions soon, in our Outlook 2017.

Silver Speculators Gone Wild

By Keith Weiner of Monetary Metals

This week, the prices of the metals had been up Sunday night but were slowly sliding all week—until Friday at 7:00am Arizona time (14:00 in London). Then the price of silver took off like a silver-speculator-fueled-rocket. It went from $16.68 to $17.25, or 3.4% in two hours.

What does it mean? We don’t know. We would bet an ounce of fine gold against a soggy dollar bill that no one else does either. The old stories of silver shortage or manipulation have no power to explain this move. Why not? Because they are old. The explanation would have to say that earlier in the day there was a reason for silver to trade well under $17 but as of that moment, it was urgent that the metal trader well over $17.

As often occurs, once the move hits certain levels on a price or momentum chart, that’s all it takes. It’s of no use to say that in the long run this will be just another blip of noise. In the heat of the moment, these 60-cent moves are exciting.

Below, we will have an intraday silver chart that shows clearly something that is almost never available to the public. We have a plot of the basis against price. If other theories are right (e.g. manipulation, shortage) this chart should show nothing of interest.

We are at no risk of that. 🙂

But first, the price action and regular basis charts.

The Prices of Gold and Silver
gold and silver prices

Next, this is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio. It fell this week.

Continue reading Silver Speculators Gone Wild

The Trump Weak Dollar Report

By Monetary Metals

The action favored bettors this holiday-shortened week (Monday was Martin Luther King day in the US), with the price of gold up 13 bucks and silver up 26 cents.

We noticed a worrisome remark by newly inaugurated President Trump. The strong dollar of the past 20 years, he said, is not good for American competitiveness. Let’s just tackle this straight on. Actually, we will address three distinct issues.

First, Trump said, “our companies can’t compete with China now because our currency is too strong.” Keith is old enough to remember long before the current scare about China, the scare was about Japan. Japan was going to bury American companies, and buy up America. Or so we were told. It would be interesting to look at the yen during this time, to see if it was falling and giving Japan some of the competitive advantage that Trump theorizes should occur.

As it turns out, it’s exactly backward. From a low of 0.33 cents in 1976, the yen rose to nearly 1.3 cents by the mid 1990’s.

Of course, this makes sense to everyone but benighted economists. How could draining away the savings of the people and businesses give any advantage? That is what currency devaluation really means. A loss of everyone’s savings. Poof.

This brings us to the alleged strong dollar. On January 22, 1997—exactly 20 years ago—the dollar was worth about 89mg gold. Compare to Friday, when it was just under 26mg, a loss of 71%. Orwell would be proud at this new meaning of the word strong!

Of course, no one any more believes in any kind of objective standard. The dollar, they think, should be measured by the euro, pound, and yen. And they, in turn, are measured against the dollar. It’s a neat little trick, a sleight of hand, to distract attention from wholesale theft.

Finally, we have Trump advisor Anthony Scaramucci, who said the rising dollar will “have an impact internally in the US”. He spoke of “reaching out for lower-class families and middle-class families.”

To reaching for… that is a good visual for this. The government will reach for their savings!

Fortunately, under the current structure, the president does not have the power to push the dollar down. Heck, the Fed has been trying to do that for years, and has not been succeeding. However, this is a worrying development that bears close watching. Can anyone—including Trump—say what he might do?

Below, along with the fundamentals, we show a hint of what’s coming soon at Monetary Metals. But first, the price action.

The Prices of Gold and Silver
gold and silver prices

Next, this is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio. It fell a bit this week.

Continue reading The Trump Weak Dollar Report

How to Buy Low and Sell High Like a Pro

By Elliott Wave International

Learn about one group of investors who ACTUALLY know how to time the markets

There’s an old saying on Wall Street that goes “buy low and sell high.”

It’s usually said in jest because it’s a feat that’s much easier said than done. History shows that most investors pile into bull markets just as they are about to end, and they do the opposite in bear markets: sell right near the bottom, when the fear is at its highest.

But there is a group of professional commodity traders who consistently pull it off. They’re called “commercials.”

This is from our May 2016 Elliott Wave Theorist:

The Commodity Futures Trading Commission follows the activity of three different groups of participants in the commodity markets: small traders, large traders and commercials. Small traders are typically on the wrong side of the market at the turns. You might think that large traders, because they have a lot more money, are right a lot, but they are likewise usually wrong at the turns. The commercials are the only participants in commodity markets who generally buy low and sell high. … The reason: Commercials are in the business of manufacturing, not speculating, so they think economically rather than financially. … They perceive [commodities] as economic goods, so they search out bargains just as a consumer does in the store.

This knowledge, in conjunction with the Elliott wave model, helped us to make a key bullish gold forecast right near the end of a big sell-off. This chart and commentary are from our December 2015 Elliott Wave Financial Forecast:

“Sharp rally imminent.” Gold prices are in the late stages of an ending diagonal, which, when complete, will finish a five-wave decline from the September 2011 peak. … Large Speculators hold their smallest net-long position in 12½ years, since April 2003. Back then, gold rallied nearly 30% over the following eight months. The bottom graph on the chart shows that Commercials currently hold their smallest net-short position since the two weeks surrounding the July low, when gold started an 11% rally to October 12. Prior to that it’s been 14 years, since December 2001, that Commercials have held a smaller net-short position. As the arrows on the chart show, each of the prior instances that the Large Specs and Commercials have held similar-sized positions since gold’s September 2011 peak have led to rallies.

That forecast for a gold rally was made on the very day of gold’s Dec. 3, 2015 low of $1,046.20! Gold proceeded to rally 30% from that bottom.

Fast forward seven months: Here are a chart and commentary from our July 2016 Financial Forecast, using market data through June 30.

In December, the Financial Forecast cited a multi-year extreme in the net short position of Large Speculators and a concurrent extreme in the net long position of Commercials, and forecast the start of a rally. Gold has since gained 30%. Large Speculators and Commercials now hold a record number of futures and options contracts in the opposite direction.

That implied the end of gold’s rally. Just seven days later, on July 6, 2016, gold’s price hit a high of $1375, reversed and went on a five-month sell-off that took it to a low of $1124 an ounce in December.

Gold is just one market where we’ve kept subscribers ahead of trend changes.

Now, at the start of 2017, we’re seeing other markets — like bonds and crude oil, to name just a couple –where the activity of the “commercials” is lining up beautifully with the Elliott Wave model, implying big moves ahead.

And you can prepare for these big moves with a new free report. See below for details.

Markets all around the world are at a critical juncture — you must see this free report now.

This is the fifth year EWI has created our annual State of the Global Markets Report. And since many markets around the world are at a critical juncture, this may be the most-timely edition of the State of the Global Markets Report yet!

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This article was syndicated by Elliott Wave International and was originally published under the headline How to “Buy Low and Sell High” Like a Pro. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Currency Chaos

By Tim Knight

This is going to be just a quick [post]. Equities are nicely in the red for a change, with the ES down 9 as I’m typing this.

0117-es

Apparently Trump’s comments that the dollar is too high has sent a bit of chaos into the world, and one dark spot for me is a very strong gold market. I’m not so sure I’m going to hold on to that DUST position anymore, but we’ll see.

0117-gc

The big surprise, just hours ago, is that Theresa May announced that for some reason the will of the British people was going to be subjected to a vote by both houses of Parliament, which might mean the entire BREXIT thing could turn out to be a non-event, thus the pound is soaring.

0117-gpb

Lastly, as mentioned, the dollar is taking it on the chin, with particular weakness vis a vis the Japanese Yen.

0117-usd