Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Precious Metals Update: Gold Seeks Support As Trend Flips Short

By Mark Mead BaillieCommoditiesApr 03, 2022 02:32AM ET
www.investing.com/analysis/precious-metals-update-gold-seeks-support-as-trend-flips-short-200621402
Precious Metals Update: Gold Seeks Support As Trend Flips Short
By Mark Mead Baillie   |  Apr 03, 2022 02:32AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Gold Scoreboard
Gold Scoreboard

We penned in our prior missive that: "...Gold in the technical vacuum is quite stretched to the upside..."

Indeed no sooner was that written then did Gold's weekly parabolic Long trend finally come to its end. Below, per the rightmost red dot, such trend is now Short:

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

"But do you really think Gold actually can go down with all that's going on, mmb?"

Squire: the fact that—given debasement and war and inflation—Gold hasn't yet gone to the moon, is stunning to many an analyst. Merely as you can see per the debasement measure alone in our opening Scoreboard, price today "ought be" 4076. Yet, it settled out the week Friday at 1929. And en route to so doing, the week's low (1888) was more than ample to flip the Long trend—after 21 weeks in duration—to Short upon passing down through 1910.

So how much downside price adversity might we expect for Gold during this parabolic Short trend? Since the beginning of 2021, there've been two such Short trends. The first ran for 11 weeks with maximum downside adversity of -110 points (-6.2% from 1783 to 1673); the second lasted 18 weeks with identical downside adversity of -110 points (-6.1% from 1788 to 1678).

So mix that in from Gold's present price of 1929, and -110 points of adversity calls for 1819; or instead by -6.2% we'd similarly arrive at 1809. Not that history perfectly repeats, but both of those constructs would put price smack into the center of the 1854-1779 underlying support zone we've mentioned in recent weeks. Moreover should that actually recur, putting the Gold Whiners in—well—full whine, you can cite that such pullback is perfect normal. However of greater import, we're still locked into Gold getting up to 2254 this year. Gold thus has had some up; it may now weather some down; and then again resume up further into an All-Time High (2090), and beyond... Just like a real market. ("Hey Mabel! Ain't that sumpthin'?")

Here, too is "sumpthin'": the year-over-year percentage tracks of Gold along with some of the most respected precious metals equities. Look below at their most recent, rightmost performances: are the equities leading the metal? Ahhh, hope springs eternal for those bars 'n coins in your bunker. But again, do these metals equities historically lead Gold itself? Research says: "Absolutely sometimes!" So no help there, albeit our bent remains that as goes Gold, so go the equities.

Nonetheless, from a year ago-to-date we've kick-ass Newmont (NYSE:NEM) +32%, Franco-Nevada (NYSE:FNV) +25%, the VanEck Vectors Gold Miners exchange-traded fund (NYSE:GDX) +17%, Gold itself +12%, Agnico Eagle Mines (NYSE:AEM) +5%, the Global X Silver Miners exchange-traded fund (NYSE:SIL) -9%, and Pan American Silver (NASDAQ:PAAS) -10%. Yes, "The Silvers" obviously are lagging. The present Gold/Silver ratio is 77.9x vis-à-vis the average from 2001-to-date of 66.6x. So priced by the average, Silver today would be at 28.95 rather than the present 24.76. Either way, here's the graphic:

GOLD:GDX:NEM:AEM:FNV:SIL:PAAS Chart
GOLD:GDX:NEM:AEM:FNV:SIL:PAAS Chart

Speaking of equities in general, here's yet another "sumpthin'": you sharp-eyed website followers likely noted the "live" price/earnings ratio of the S&P 500 re-achieved 40x during this past Wednesday, even as interest rates are on the rise. For how much longer can S&P investees keep kidding themselves? Recall this from Jerome B. Cohen's collegiate textbook "Personal Finance: Principles and Case Problems, (pg 771):

"In a bear market many stocks will sell at 5 to 7 times earnings, while in bull markets the average level would be about 15 to 18 times earnings."

'Course, that was published back when interest rates were positive. Today, folks instead chase equity prices. Regardless, the S&P's lifetime average P/E at this writing is 23x ... and yet we just revisited 40x? Think about it. And sadly, it could be more than just the first domino being tipped:

Dominoes Guerre
Dominoes Guerre

Thus with that grasp of reality under your belt, plus it being month-end and indeed quarter-end (plus two days), let the graphics parade begin, starting with the year-to-date standings of our BEGOS Markets, Gold just shy of a podium position:

BEGOS Standings
BEGOS Standings

And therein, much to conventional wisdom chagrin, we again see that Gold plays no currency favorites. For even as the Dollar Index year-to-date is +3.0%, nonetheless is the yellow metal +5.4%. "Got Gold?" 'Course, Black Gold is leading second-place Silver fivefold, whilst rising yields find the last-place Bond having traded down to its lowest level in nearly three years.

Not surprisingly in the midst of it all, we find the Economic Barometer remaining in decided descent. Oh to be sure, there were some improved inputs this past week: for March, improvements came to the Chicago Purchasing Managers Index, the Unemployment Rate, Hourly Earnings, Consumer Confidence and February's Personal Income, even as the Core reading of the Fed-favored Personal Consumption Expenditures Index dropped a pip. But these were mitigated and then some by slowing or reductions in March's ADP Employment data, Labor's Nonfarm Payrolls and Average Workweek Hours, plus in the Institute for Supply Management's Manufacturing Index, as well as for February's Personal Spending. Too came a reduction in the final reading for Q4 Gross Domestic Product of a 6.9% annualized pace, from which subtracting the Chain Deflator reading of 7.1%, leaves a Q4 StateSide real GDP decay pace of -0.2%. Here's the "upbeat" (what are they smoking?) stagflative view:

Economic Barometer
Economic Barometer

And from the "A Lot Can Happen Between Now And Then Dept." (for those of you pro-actively scoring at home), the Econ Baro going forward has 45 incoming metrics up to the 04 May Policy Statement by the Federal Open Market Committee. As you know, the current FedFunds targeted range is now 0.25%-0.50%. However: the FedFunds Futures contract for this next go 'round has already priced in a targeted range of 0.75%-1.00%, (which for you WestPalmBeachers down there means a Fed rate hike of 0.50% is "expected". Still nursing those variable-rate credit cards?)

Mind as well the 21-day linear regression trends of the BEGOS Markets: as shown, they are negative for Gold, Silver the Bond and Oil. Copper is barely hanging on to being positive, whilst the Currencies are up as is the "it never goes down" S&P 500. The baby blue dots denote the day-to-day consistency of the diagonal grey trendlines, which for the precious metals are reinforcing to the downside:

BEGOS Dots
BEGOS Dots

As to the 10-day Market Profiles, here we've Gold below left with its present 1929 level the most heavily-traded price across the past fortnight. Silver below right is comparatively lower with 24.75 as a last bastion of near-term trading support:

Gold & Silver Profiles
Gold & Silver Profiles

So with three months and a day in the books for Gold's 2022, here is our Structure graphic by its monthly bars from a dozen years ago-to-date. Can Gold reach the 2254 forecast blue line high with nine months in the year's balance? Surely so, even a near-term dip notwithstanding:

Gold Structure
Gold Structure

To close, we note that the best correlation amongst the five primary BEGOS Markets (Bond/Euro/Gold/Oil/S&P) is between Gold and the S&P. Such correlation remains negative as we see here by their respective percentage tracks from a month ago-to-date (21 trading days):

Gold vs S&P
Gold vs S&P

With that in mind, the selling this past week in the S&P essentially contained "No Fear" as evidenced on the website's S&P MoneyFlow page. In turn, fearless selling generally begets renewed buying, such that if the negative correlation with Gold holds, its near-term price dip we shall behold. And 'tis smart to buy Gold when 'tis being sold: there's a good lad!

Cheers!

Precious Metals Update: Gold Seeks Support As Trend Flips Short
 

Related Articles

Precious Metals Update: Gold Seeks Support As Trend Flips Short

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 (3)
jason xx
jason xx Apr 03, 2022 7:10AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
You and the others thinking inside the box fail to understand popular demand, and I will leave it at that
jason xx
jason xx Apr 03, 2022 7:08AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Delusional saying the SPX "never goes down" when it's been going down all year but I guess that was not good enough for you? Maybe a 25% decline would have made you happy and got your blessing to rise? You think in a box and fail to understand popular demand. There is no law saying equity prices and thier earnings have to match that has been over for a long time as a direct result of more money going into less stocks and was never sustainable without putting a limit on who can invest in the market. Surely you would be on the list but none of us
Prep Pre
Prep Pre Apr 03, 2022 3:06AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thoroughly enjoyed the data and delivery 👌
 
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
Continue with Google
or
Sign up with Email