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Precious Metals Update: Gold Reamed, Silver Creamed, Now Lower Still, 'Twould Seem

By Mark Mead BaillieCommoditiesJan 10, 2022 01:44AM ET
www.investing.com/analysis/precious-metals-update-gold-reamed-silver-creamed-now-lower-still-twould-seem-200614079
Precious Metals Update: Gold Reamed, Silver Creamed, Now Lower Still, 'Twould Seem
By Mark Mead Baillie   |  Jan 10, 2022 01:44AM ET
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Gold Scoreboard
Gold Scoreboard

How was that for a precious metals' Happy New Year? For 2022's opening five-day stint, Gold traded down as much as an annoying -2.7% and Silver an indecent -6.0%. And yet in commencing this 22nd year of the 21st century, we've had far worse five-day starts per the following table, 2022 being Gold's seventh-worst and Silver's third-worst, as measured from 2021's close through last week's low:

Gold & Silver Dips
Gold & Silver Dips

The Good News is with respect to Gold's side of the table, in just one of those years (last year) did the yellow metal go on to finish its year in the red. The Bad News is with respect to Silver's side of the table, it finished its year in the black but two times.

To mitigate such silvery concern, prospective must be maintained via our oft-quipped vein that "change is an illusion whereas price is the truth". Thus to reiterate and update: Gold by our opening Scoreboard rightly is valued at 4079; the Gold/Silver ratio's century-to-date average is 66.5x; therefore that puts Silver at 61.34 (should you be so fortunate to be scoring at home). Either way, worth writing down.

Regardless, we duly acknowledge that "the market is never wrong", by which Gold on Friday settled out its first week of the year at 1797, the "Annual Finale Rally" of the prior week (having reached as high as 1831) now comprehensively extinguished. Bereft of all common sense, Gold continues to lie (pun intended) low, its price at present just 44% of valuation. Which for you WestPalmBeachers down there means a run from price of 1797 to valuation of 4079 is a gain of 127%; enhance that with some precious metals equities leverage and the potential gain becomes 200%-to-400%. And that's by ownership of a tangible something vs. a cryptocrap nothing. 'Tis coming.

Negatively for now, what is coming per the following graphic of Gold's weekly bars are the rising blue dots of parabolic Long trend ... without price itself on the rise. That puts Gold in a technically precarious position: currently 1797, should price penetrate 1761 in the ensuing week, the parabolic trend flips to Short. And given Gold's "expected weekly trading range" is now 47 points, just a 36-point dip completes the trip:

Gold Weekly Bars & Parabolic Trends
Gold Weekly Bars & Parabolic Trends

Further aiding and abetting Gold's starting askew in 2022 is the daily MACD ("moving average convergence divergence") having confirmed a negative cross at yesterday's close. Such study presently ranks as "best" amongst the website's Market Rhythms for Gold. Here 'tis:

Gold MACD
Gold MACD

Thus for Gold's fallout seemingly to follow, the prior 12 negative MACD crossings averaged 68 points of downside typically within a month's time, which from today's 1797 suggests 1729; (the median downside drop is 62 points, suggestive of 1735). 'Course, "average" hardly is "absolute", and to us 'tis fundamentally nonsensical for Gold's price to drop whatsoever a wit: please inform a sovereign bank and/or large institution near you to get on with their preservation of wealth program.

Toward preservation of economic health, our StateSide Barometer caught a wee cold in commencing the year. Improvements arrived for December in ADP's +60% Employment pace, the Dept. of Labor Statistic's lower Unemployment Rate and Hourly Earnings growth, along with November's Factory Orders and Consumer Credit. But there was deterioration in Labor's -20% Payrolls pace for December and in the Institute for Supply Management's readings for both Manufacturing and Services, as well as for November's Trade Deficit which reached over $80 billion for just the second time in the Econ Baro's 23-year history. So yes, there's again a dichotomy in the job numbers, but who's counting, right?

Well, we are:

Economic Barometer
Economic Barometer

With respect to the Federal Reserve, the response to their Open Market Committee's December Meeting Minutes by the FinMedia gave the impression that they'd not actually read the formal Statement issued back on 15 December: yes, the door is fully open to raise the Bank's Funds Rate. (Why is this so surprising to grasp?) Purportedly, the taper caper terminates in March; the Rate rises in June; and we stand by that which we've put forth in many a recent missive that the FOMC just do both come the 26th of this month. To be sure, the Fed's great fear is an unraveling of the S&P so significantly dear that today's marked-to-market millionaires suddenly face the reality of being just thousandaires, in turn retreating from the high life to that which is low ... and again down the economy shall go. (That courtesy of the "Rock and Hard Place Dept.") Nevertheless, to the Fed's rescue came St. Louis FedPrez James "Bullish" Bullard who on Thursday at the city's Chartered Financial Analyst Society said the Fed "is in good position" as regards monetary policy. (We're lovin' it).

But not so is Gold in a good position, (at least not yet: recall Gold's 53% rise during the Fed's 2004-2006 Rates rise). Still for "The Now," in addition to Gold's aforeshown MACD negative cross, we next turn to our two-panel graphic of the daily bars from three months ago-to-date on the left and 10-day Market Profile on the right. "Shur ain't purty there, Mabel..." as the baby blue dots of regression trend consistency turn tail and price descends into the Profile's basement, (overhead trading resistance levels as labeled):

Gold Dots Profile
Gold Dots Profile

The picture is essentially identical for Sister Silver. Despite her being priced today (22.39) at but one third of her aforementioned valuation (61.34 upon Gold getting off its own butt to 4079 and the G/S ratio coming back into line), her "Baby Blues" (at left) are dropping as is price through her Profile (at right):

Silver Dots Profile
Silver Dots Profile

"Seems like a lot of wishful thinking there, mmb..."

Of course it does, Squire. 'Tis always that way until it happens, after which we'll then hear "What was I thinking?" by Stoopid and the Shiny Objects Society.

We'll wrap it here with a fun fact: prior to the wee dip in the S&P 500 this past week, much ado was made over the market capitalization of Apple (NASDAQ:AAPL) having surpassed the $3 trillion level. 'Tis since trickled down a tad to $2.8 trillion; but nonetheless, that still is equivalent to 13% of the entire U.S. liquid money supply ("M2"); (recall the entire S&P 500 market capitalization is about double said liquid supply). But that's still an impressive single stock pricing consensus. Cooler still, a one kilogram bar of Gold is basically the same dimensions as the iPhone SE. That's right: breast-pocket size. 'Course the bar weighs nearly nine times the phone—and by price—is 159x more expensive ($63,387 vs. $399). But they do make a lovely couple. "Got Gold?"

Cheers!

Precious Metals Update: Gold Reamed, Silver Creamed, Now Lower Still, 'Twould Seem
 

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Precious Metals Update: Gold Reamed, Silver Creamed, Now Lower Still, 'Twould Seem

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