One wonders if we'll look back upon this December as an inflection point for Gold. To be saved by the Swiss, (who pending their referendum, at this writing, are polled at only 38% pro-Gold), else roiled by Oil on the heels of its worst down day since the Black Swan of 2008? And if 'tis the latter -- per some perceiving the global economy slipping into deflationary depression -- our concern has long been 'twould be a Gold negative. Which in turn, given the stock market's being a helping hedge against inflation may well tip it into a crumbling ledge rife of deflation, et voilà, we'd see the S&P 500 correct some -50% for a third time in the past dozen years, (and not surprisingly so with earnings, by our honest calculation, running about half what they ought be up here in the stock market stratosphere). Of course, Gold's mitigant to the delirium of deflation is as presented above in the Scoreboard. And some view the "difference" therein as conservative.
Either way, what if they gave a party but nobody came? In a best efforts attempt, we so tried to do a week ago in penning "Gold Measures Set to Regain the Mid-1200s". Nice try, but it didn't happen. Yet, perhaps by the time many of you read this, at least we'll know if the stalwart citizens of Switzerland have -- contra to the polls -- come to the aid of the party, else have thrown Gold headfirst down the skeletal ice chute of their reknowned Cresta Run, ingloriously exiting at 130kph onto the St. Moritz parking lot and disintegrating dead-stop into a snowplow's steel blade. ("Tape at 11!"). The thrill of victory, else the agony of defeat.
And yet, we continued to do our modest part this past week in writing to no less than eight Swiss "family" members, encouraging their voting "JA!" in tomorrow's (Sunday's) referendum requiring die Schweizerische Nationalbank to maintain a minimal 20% Gold asset base, forbidding the bank to sell Gold, and repatriating that which it has stored abroad, (assuming such host countries -- in thinking they're doing the Swiss a favour -- have not already discarded the Gold as a "near-useless mineral").
Indeed a week ago, we'd a whole rash of technical measures poised to pop positive for Gold -- and we still do -- however the party, at least momentarily, has been put on hold, short of being thrown out in the cold. Again, blame it in part on the deflating price of Oil? It certainly has come off the boil with the United States ramping up our own production such as to lower StateSide importation of OPEC Oil to levels not seen in 30 years. Yet a glance at the daily Gold/Oil ratio from 2001 through yesterday (Friday) does suggest these two massively influential markets as not being that excessively priced vis-à-vis one another...
...and therefore we're not exactly diving into the deflation dumpster as may be other analysts, especially per Gold's gross "mis-pricing" via our scoreboard at the top. Moreover, despite public perception that Gold's best days are behind it, here's a fast quizzical fact you can pull on your friends: which market has corrected the most from its all-time high, Gold (-41%) or Oil (-54%)?
"But, mmb, Silver has been down as much as 70% from its all-time high..."
Squire, you did have to bring that up, non? But he's right folks: Gold, whilst grossly undervalued by Dollar debasement alone, pales in comparison to Sister Silver's being senselessly slogged through the stenchiest of sewers: the average Gold/Silver ratio from 2010-to-date is 56x; today 'tis 76x.
Indeed, unless you're the Bond, the S&P, or to an extent even Gold, you've had a dourly deflative year. Here are our BEGOS Markets Standings from January-to-date with December in the balance. Note how Oil was ranked in 5th place just at the end of Q3, but has since plummeted to last place at -33%:
In fact, let's next zoom in on the last 21 trading days (one month). Below are the daily bars of Gold, Silver and Oil from a month ago-to-date. If you think Gold had a "bad hair day" yesterday, (something to which Sister Silver has, for herself, become quite accustomed), look at Oil! And if you're a short-term trader, (dare I say with reasonably large attachments), this could well be your December to Remember:
Now we proceed to the latest view of Gold's weekly bars and the ever annoying Short parabolic trend, price still having to yet crack above the declining red dots. As we're wont to say, nothing (save for the only-up stock market) moves in a straight line, and let's face it: Gold had just put in three firm up weeks, all with strong closes into their respective Fridays. So this pullback here appears perfectly normal, whether 'tis being accorded to: 1) hesitancy ahead of a Swiss renaissance that Gold is money, or 2) Oil's pointing to a deflationary depression, or 3) simply just a little good old ebb within the flow of price. Or all three. Problematic of course is that we Gold Bulls are getting quite fed up with red ebb:
So from the current price of 1167 back up through 1204 is all Gold needs to travel toward flipping the parabolic trend back to Long; but to quote Hervé Villechaize: "So close ... and yet, so far", ("The Man With The Golden Gun", Eon Productions, '74).
Yesterday's pullback notwithstanding, another technical measure which had all but turned positive by week's end is Gold's Price Oscillator study. Here in this graphic of daily bars since better than a year ago, green represents when the Price Oscillator is positively disposed and red when negatively disposed. And were it not for Friday's decline, the bars were set to go green at the ensuing week's open, rather than having now been shoved down the garbage disposal:
Still, as earlier-displayed in the BEGOS Markets Standings, Gold year-to-date is off but -3.1%. To be sure, price presently being some -39% below its All-Time High (1923) is a bit of bother given the proliferation of debased currencies and dissemination of dangerous derivatives. But as 'tis month's end and we next turn to the percentage tracks of Gold versus its precious metals brethren, the metal itself clearly has just the least of the negative tilts. 'Course, the brethren -- HUI Gold Bugs Index, XAU Philly Exchange Precious Metals Index, GDX miners exchange-traded fund and RGLD Royal Gold -- do out- accelerate Gold in both directions:
This next graphic is a two-panel display of the 10-day Market Profiles for both Gold (left) and Silver (right), their settling prices being the white bars at 1167.0 and 15.365 respectively. Obviously there is overhead drilling to be done to reclaim that which both these markets had prior to Friday, but given these are precious metals markets, they can rise just as swiftly, if not more so, than they've fallen. So in seeking upside goals, Gold's broadest profile bar is 1198.0, (which is just six points below the parabolic flip price of 1204), and for Silver 'tis 16.250:
Now obviously, indeed logically being pro-Gold, let not our spirits be deflated over deflation, for should it become material, 'twill in turn inflate us to becoming elated over inflation, assuming one holds Gold, or better yet, adds to one's pile. Let's take a quick global glimpse:
1) Germany's Consumer Spending may have just barely swerved Deutschland away from Q3 recessionary concerns, however next door in France, words of warning have been sent down from the European Community Bank that Le Coq and like nations need implement further unpopular economic reforms and austerity programs, which when they all go wrong shall surely keep the €uro tumblers a-printin';
2) Japan's inflation rate just hit a yearly low as did its ¥en follow in tow against the Bucko. Seems that the Bank of Japan toward getting up to its 2% inflation target, with The Land of the Rising Sun sinking into recession, shall surely keep the ¥en tumblers a-printin';
3) Stateside, our economy may be on its best six-month stretch in a decade, but 'tis reported that we consumers who materially drive The Land of the Free are simply not that participative given the slow pace of earnings growth. As one New York-based economist put it this past week: "A lot of the data suggest we're not still in the wake of the Great Recession and financial crisis, but consumers have not forgotten those times ... People are quite terrified of what happened in 2008 and 2009". Who can blame them? A would-be repeat inevitably shall send the Dollar tumblers a-printin'.
Finally, if you think Gold, the EuroCurrencies, Copper, Silver and Crude Oil are having a hard go of it, then pity even more poor Tiffany & Co. having missed forecasts for their Q3 earnings. To where might this lead? From luxury to austerity? Given France's citizenry already having to deal with the latter, will we see them mobbing the front door of the company's store on Paris' Rue de la Paix, begging for bargain-priced baubles? If only we could bring back Audrey Hepburn!