Now don't get discouraged out there: to be sure, mid-week following FedSpeak, the precious metals took a bit of a hammering, Gold at one point being off 56 points (down to 1251) from the prior week's high (of 1307). But resplendent in its newfound resilience, Gold zoomed back up yesterday (Friday) to settle out the week with a net loss of just 10 points at 1284.
Blame the sudden pullback on that which you prefer: one prominent FinMedia outlet rousingly running with "Gold Drops Most This Year as Investors Sell After Greek Election"; gleefully hand-wringing analysts expounding on StateSide economic strength such that the Federal Reserve Bank can't help but raise interest rates this year, which can only be an automatic Gold negative, (our having proven such is far from always being the case); or that given its brawn and fortitude, the Dollar has indeed become the new Gold.
But rather than succumb to such piffle, here's a thought from the "Nothing Goes Up In A Straight Line Dept.": Gold, and moreover Silver, have been on a terrific run such as to have arrived in an area where one ought expect the trend to become at least a little undone. Technically, Gold's returning into those Whiny 1290s as we described a week ago was sufficiently swift such that price -- not for the first time -- now appears a bit ahead of itself as we'll see below, such that some ebb within the upside flow would, by markets' nature, be due.
But first, with the month of January now in the books, let's begin straight-away with our year-to-date BEGOS Market Standings. And if you're pro-precious metals, 'tis hard not to be satisfied with this year's overture, despite the past week's wee setback:
Quite the impressive results thus far, non? What a difference a year makes, especially given that axiomatic Wall Street harbinger: "As goes January..." And to see Sister Silver not just on the podium with Gold and the Swiss Franc, but at the top of the table after all the mudslinging destitution through which she's be dragged is nothing short of sterling. "Brava Diva!"
Further, being month-end, 'tis the point at which we bring up Gold's year-over-year percentage performance in concert with those of key precious metals equities as measured by the ARCA Gold BUGS, Philadelphia Gold/Silver, Market Vectors Gold Miners (MX:GDX) (exchange-traded fund for miners) and Royal Gold Inc (NASDAQ:RGLD). And just as these equity measures die on the downside, so do they fly on the upside. As noted in the above standings, Gold so far in 2015 is +8%, but the others' respective increases are: HUI +23%, XAU +15%, GDX +21%, and RGLD +16%. Unlike those of us here who cling to the comparatively muted metal/futures, you there who trade the equities are the real "playahs, baby!":
Now as to our measuring of Gold's being a bit ahead of itself, let's next go to our old tried-and-true analytical tool, the smooth pearly valuation line, (not to be confused with the opening scoreboard's valuation of Gold, which based upon ruination of the currency rightly, indeed some say conservatively, calculates Gold presently as ought being at least 2469). But because the great markets that comprise BEGOS (Bond / Euro / Gold / Oil / S&P) are constantly looking at and playing off one another, a comparative valuation of any one component can be derived with respect to the other four, as depicted by the smooth line in the following graphic for Gold, normally presented as either a three months or year-over-year display. But this time, in order to best emphasize the "being a bit ahead of itself" notion, we've blown the chart out all the way back from the beginning of 2012-to-date (774 trading days). Here's the key analytic: the lower panel of the chart is the oscillator of price less the valuation line. Look at the four red boxes across the oscillator, each one denoting Gold as has having reached 100+ points above valuation. This does not infer Gold must drop 100 points from here, for in the main panel as you can see, the smooth line itself is rising up toward price; rather 'tis just a reminder that Gold's recovering to far higher levels shall be met with resistors of all sorts en route, which can include getting too far ahead of this version of valuation:
Next let's turn to Gold's weekly bars, their current performance somewhat similar to this time of a year ago (leftmost part of the chart). Very encouraging is the recovery yesterday of price from within the 1280-1240 support zone (bounded by the purple lines). Near-term however, we may have to withstanding some hem and haw in and out of that support zone, given Gold's aforementioned "ahead of itself" notion, before seeking higher ground in the 1300s:
Hemming and hawing notwithstanding, here is some seasonally good news for Gold: 'tis, on balance, loved by February. Oh, they do have their occasional lover's spat as you can see below in the following chart of Gold's performances in February throughout this millennium's first 14 years, only to then regain infatuative admiration. "Amore, amore!":
But also "observez, observez", for coupled with our earlier observance of Gold's presently being a bit ahead of itself, here next in this two-panel graphic we see on the left Gold's "Baby Blues", (measuring 21-day linear regression trend consistency), having begun to rollover in that three-month view; whilst on the right in Gold's 10-day Market Profile we see the current price of 1284 (white bar) essentially now centered in the trading range of these past two weeks:
Notwithstanding a February that becomes beloved, else belaboured, should the year's trend continue as our friend and Gold remain in inverse correlation to the S&P, the year's best days for the yellow metal clearly lay ahead as the stock market arrives at a far overdue demise. Here is the month's percentage track of gleaming Gold vs. that to be Sold:
Now whilst all this is going on, our Economic Barometer continues to decline, such that we maintain our stance that the Federal Reserve Bank shan't raise its Fed Funds nor Discount Rates as the year proceeds, barring en route some miraculous upturn in the economy. However, we reserve the right to hedge somewhat against that "no rate rise" opinion. Here's why: we've noted throughout life that the minority have a tendency to "will out", to be correct and thereby the most successful. Some examples include: only a fractional amount of the populous actually make any "real" money on Wall Street; in the world of derivatives, 'tis said that just one in six make any dough; amongst managed portfolios, we're told that less 5% maintain exposure to Gold, and yet 'tis said 'twill be the "last man standing"; and as we'll see on Sunday, just one of the National Football League's 32 teams wins the season's Super Bowl. The balance of us in the majority do our best to make a happy slog through life, with success ranging from mediocre to somewhere above average. But here's the point: with the Federal Open Market Committee stewing over the timing of a rate increase, (and I found this well-put by the FinMedia), the Fed is the only developed-nation’s central bank considering raising interest rates this year. Therefore: their being in the minority means they may well so raise! Thus: rid thee of thy variable rate debt, lest those monthly payments increase your sweat as the Fed doth threat (!) All that having been said, 'tis that below with which they must deal, and so far, it ain't gettin' any prettier:
Moreover, 'twas rightly said post-Fed that "Federal Reserve officials will keep the benchmark interest rate at a record low after their meeting in Washington today amid signs the global economic slowdown is catching up with the U.S." No foolin'?
In Greece, you've no doubt seen bond yields soar and bank deposits flee as new Prime Minister Alexis "Tie-less" Tsipras attempts to forge a coalition challenge to the austere policies of the European Union, within which the EuroZone itself is falling deeper into deflation; there's even talk now of having to sacrifice Greece to order to save Spain, (odd given that the latter just recorded its fastest GDP growth in the past seven years). But 'tis what 'tis. 'Course, then there's Russia, (which with a tip of the cap to Oil), just had its credit rating downgraded to junk by S&P. Indeed given all of this global floundering of economics and politics running amok, we duly give a big "Thumbs Up!" to the Netherlands which, for the first time in 16 years, has seen fit to increase its holdings of Gold. "Barman? Another round of Heinekens for our Dutch friends here!" Worth toasting, that!
We'll wrap it with the Stack. Here 'tis:
The Gold Stack
Gold's Value per Dollar Debasement: 2469
Gold’s All-Time High: 1923 (06 September 2011)
The Gateway to 2000: 1900+
The Final Frontier: 1800-1900
The Northern Front: 1750-1800
On Maneuvers: 1579-1750
Structural Resistance (broadly): 1479
The Floor: 1466-1579
Le Sous-sol: Sub-1466
Base Camp: 1377
Year-to-Date High: 1308
Neverland: The Whiny 1290s
Trading Resistance: 1288 / 1292 / 1303
Gold Currently: 1284, (weighted-average trading range per day: 24 points)
10-Session “volume-weighted” average price magnet: right here at 1284
Support Band: 1280-1240
Trading Support: 1278 / 1270 / 1264-1261
The 300-day Moving Average: 1262
10-Session directional range: down to 1252 from 1308 = -56 points or -4%
Structural Support: 1239
The Weekly Parabolic Price to flip Short: 1181
Year-to-Date Low: 1167