Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Breaking News

Square Falls Premarket; Moderna, Caterpillar, Levi Strauss Rise

Precious Metals Update: Gold Drops Exceedingly; Fed Ducks Reality

By Mark Mead BaillieCommoditiesJun 21, 2021 01:03AM ET
www.investing.com/analysis/precious-metals-update-gold-drops-exceedingly-fed-ducks-reality-200587124
Precious Metals Update: Gold Drops Exceedingly; Fed Ducks Reality
By Mark Mead Baillie   |  Jun 21, 2021 01:03AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Gold Scoreboard
Gold Scoreboard

Quite the week, that. Best we begin with some "Facts, Hercule, facts!"

Gold: Having settled last week exceedingly down 6.2% at 1764, Gold is now priced by the market at but 46% of its currency debasement value (as measured by the StateSide "M2" money supply) of 3870, even as adjusted for the increase in the supply of Gold (which today is 201,480 tonnes). Neither is Gold a discarded relic, nor shall it ever be supplanted by cryptocrap. Gold remains humankind's sole de facto true currency as so shall it be even after we're not around anymore.

Dollar: Its Index (by descending weight = the €uro, ¥en, Sterling, CanDollar, SweKrona and SwissFranc) gained 2.0% for the week, which of the 1,068 weeks millennium-to-date ranks 44th best (in the 96th percentile). Contextually, 'twas the Dollar's firmest up-stint since a series of weeks during the March 2020 depths of COVID, prior to which was the +2.3% week ending 14 November 2016. But as a valued member of our Investors Roundtable would say: "For the moment, the Dollar is leading the Ugly Dog Contest." Shan't last; it never does.

Gold and Dollar: Long-time readers of The Gold Update know that Gold provenly plays no currency favourites. As herein referred to a week ago, in 2014 on 04 September, Gold year-to-date was +4.7% and the Dollar +4.4% ... "How can that be?" ... Just because Gold tends to be priced in Dollars doesn't mean squat as to how the Doggie Dollar itself is priced. Cue Fleetwood Mac from back in '77: "You can go your own way..."And clearly for Gold, 'tis a long way up to go, the Dollar be damned.

The S&P: The mighty S&P 500 just lost 2.1% of its value in four days. Millennium-to-date that at best ranks as "noise"; 'tis not even in the bottom 10th percentile of four-day price changes. The "live" price/earnings ratio is at this writing an outrageously ghastly 53.5x, the yield a puny 1.359%, and the risk of ownership 100%. As we penned to our Investors Roundtable on Thursday: "My stock market fear has morphed into sheer terror. I used to take The Rud’s “50% correction” with a grain of salt. That now actually may be modest. ‘Tis merely about “The When”." The stock market remains a losing game, (which is why most people on Wall $treet never make any real money).

The Fed: Here's a simple equation: Late Fed + Dopey Media = Comprehensive Misconception. A time-honoured truth specific to the Federal Reverse is that 'tis "always behind the curve". However, we wonder if this time the Fed in negotiating the curve has instead gone beyond the edge of adhesion and off the cliff. This past Wednesday, the Federal Open Market Committee unanimously voted to neither taper asset purchases, let alone raise its Bank's rate, toward maintaining the ongoing 0.00%-0.25% FedFunds target range. But more incredulously (this from the "Defying Common Sense Dept.") the FOMC "penciled in" to raise interest rates by late 2023, (ahead of that initially considered). Accordingly, the fawning FinMedia—specifically the FinTimes—printed: "The Fed nailed it." Nailed what? That they see two FedFunds rate increases the by end of 2023? How about by the end of this year? The Fed hasn't nailed anything: rather, in ducking reality, 'tis The Fed that stands to get nailed. Are their two portended rate increases going to thus be 10% apiece? Just to catch up to inflation (er, uh, stagflation), you understand; (see 1976-1980). Honest to Pete and back again: if one still is in stocks and not in Gold, there's not much more we can do. Facts indeed.

As for you valued readers who understand and take the Gold Story seriously, the following view of the weekly bars from a year ago-to-date at present doesn't look that great. Or does it actually a buying opportunity make? Recall the late great Richard Russell: "There's never a bad time to buy Gold":

Gold Weekly Bars And Parabolic Trends
Gold Weekly Bars And Parabolic Trends

That noted, the parabolic Long trend certainly appears poised to flip Short in the ensuing week, price having completely hoovered our 1846-1808 structural support zone. And yes, our forecast high for this year of 2401 may be in jeopardy. Or (the French word for Gold): may the forecast in hindsight by year-end appear to have been modest? Recall 1977, 1978, 1979, 1980, 1982, 1983, 2006 and 2008. On verra, mes amis...

As for the near-term, Gold today at 1764 is within a structural support area of 1799-1755; should that bust, the next such area (with some wee overlap) is 1760-1677 (let's not even go there...)

Rather, let's go have a look at the Economic Barometer. It does have the beginning of that good-for-Gold "Game Over" look:

Economic Barometer
Economic Barometer

We read this past week that non-financial aggregate StateSide debt is now nearly one-half the size of the U.S. economy. (Again, let's not even go there...) And as to our ongoing notion that the post-COVID economic boom "has already happened" as folks abandon COVID-time activities and replace them with those more apropos of "normal" times, spending data now indicates that large item purchases are "out" ... and that eating out is now "in".

To be sure, whilst May's Housing Starts, Industrial Production and Capital Utilization all improved, Building Permits slowed as did Retail Sales. And for June, the New York Empire State Index, Philly Fed Index, and National Association of Homebuilders Index all fell short of their May readings. Up with inflation, down with the Economic Barometer/S&P 500, and hello stagflation. ("Tick...tick...tick...")

Meanwhile on this side of the pond, 'tis said that so much COVID-debt was taken on by companies, that "life-support lending" is in vogue toward combating insolvencies. This has of course (and notably post-Fed) knocked the €uro from the podium in the ongoing Ugly Dog Contest, the Zone's currency taking its biggest three-week tumble since COVID really kicked in during April a year ago. (And for those of you scoring at home with that European vacation in mind, the €uro's present 1.189 level looks to erode by our purview to 1.173, even to 1.161). "C'mon Mabel, we're goin' to Rome!"

Now two weeks back when we could "see" some Gold setback—even just seasonally let alone technically—we perhaps ought have entitled that piece (instead of "Gold's June Swoon") rather as "Gold's June Doom". Indeed since Gold's recent 1913 high on 26 May, price today is -7.8%, about its net change year-to-date (-7.2%). And per the following graphic on the left, upon Gold's "Baby Blues" cracking the +80% ice back on 07 June, 'twas surely the real commencement of this swoon. Note that on the right in Gold's Profile for the last fortnight there's been scant trading volume through much of the mid-to-lower 1800s, which for the "All gaps get filled" fans is encouraging for Gold to rebound, (and which common sense of course says 'twill):

Gold Profile Dots
Gold Profile Dots

Silver's like +80% ice broke even sooner, back on 25 May as we seen below left. Should she not hold price here, her next structural support area is a full Dollar's range from 25.68 to 24.68. Sister Silver's Profile below right matches sufficiently well with that for Gold, the Gold/Silver ratio now 68.2x running just a tad above the millennium-to-date average of 66.3x:

Silver Profile Dots
Silver Profile Dots

Whew! After a week like that (our outlook/review thereto), we can only finish up with something even more cuckoo. In her testimony this past week before the Senate Finance Committee, former Fed Chair Janet "Old Yeller" Yellen in sellin' the Biden Administration's $6 trillion budget presented it as a step to resolving "climate change" and "inequality". We can't wait: all of us equally poor under clear skies. "Got Gold???"

Precious Metals Update: Gold Drops Exceedingly; Fed Ducks Reality
 

Related Articles

Tim Knight
What’s Up? Not Oil By Tim Knight - Aug 02, 2021 3

The entire weekend, all the headlines were lockdown-this, delta-that, and yet, as required by federal statute, all the equity futures shot higher and are bright green. It’s...

Precious Metals Update: Gold Drops Exceedingly; Fed Ducks Reality

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Eufrosina Quibin
Eufrosina Quibin Jun 21, 2021 2:19AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Love your articles always.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email