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Precious Metals Update: Price Put Athwart, Gold Roars Back From Support

By Mark Mead BaillieCommoditiesAug 16, 2021 12:21AM ET
Precious Metals Update: Price Put Athwart, Gold Roars Back From Support
By Mark Mead Baillie   |  Aug 16, 2021 12:21AM ET
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Gold Scoreboard
Gold Scoreboard

Gold just posted its best net weekly gain of the last five, price settling Friday at 1782. 'Course, hardly was the week's gain impressive solely by the mere up blip in the above Gold Scoreboard's evolving price track for this year. Indeed toward our seeking an "august August" for Gold, a weekly gain of 18 points (+1.0%) is more in line with the so-called sleepy dog days of August.

"Hold it, hold it, mmb! Gold got creamed on Monday by nearly 100 points! Right?"

An absolutely valid point there, Squire. If we measure from the prior Friday's (06 August) high of 1807, the move down to last Monday's (09 August) low of 1678 was a 129-point drop, (-7.1%). 'Twas almost perfectly in line with the following sentence from last week's missive: "...Were that zone [1796-1750] to fail (don't say it) 1674 comes onto the board..." And essentially it did.

To be sure, there was no inkling of such "sell" from the prior Friday. Rather, Monday's "sell" had all the look of "the lads" having consorted—via their weekend barbeques and mobile devices—to "sell" at Monday's 00:00 Central Euro Time opening whilst the balance of world was in one form or another of somewhat inebriated summer Sunday slumber. And 'twas within just that first trading hour that Gold fell from 1765 to the week's low of 1678. Then ensued the "buying with both fists" as we'd offered in closing out last week's piece.

Far be it from us to fully ferret out the rationale behind the "sell" other than (with reference to Basel III in our early July 2021 edition entitled "Stocks Cavort; Gold Goes Short") Monday's price demise having been an effort to drive down Gold's paper level such as to pick up the requisite physical at more bargain levels. Indeed, a tip of the cap to Matt "Go Bears!" Piepenburg whose thoughtfully comprehensive explanation of last Monday's metals malaise skated across the transom here. And considering Gold by the Scoreboard is valued at 3903, this present level remains a bountiful bargain.

Moreover: Gold's roaring back from the stated support is a clear warning not to be Short. Recall that Gold settled the month of July at 1817: that is just about 35 points above here with 13 trading day's left in the month's balance. Shall this be Gold's ninth up August of the last 12? We still believe so: augustly so. Further, for those of you fortunate enough to be scoring at home, Gold's "expected weekly trading range" is now set at 56 points, the notion of an again higher August well within just a week's reach.

But farther out the curve by Gold's weekly bars, the parabolic trend certainly remains Short, the hurdle of 1894 still better than 100 points to the upside. Nonetheless: price clearly has roared back from the rose-coloured line of support: you tell 'em there, Leo:

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

Meanwhile, the StateSide Economic Barometer—on which 15 June is the view's highest peak—did not endure a very good week after Joe's Jobs Jump. Among this past week's 11 incoming metrics, the Econ Baro benefited from July's combined increase in Export Prices with the decrease in Import Prices, and as well from the increase in Q2's Unit Labor Costs, (itself typically a sign of improving economic activity). But negatively, July's pace of retail inflation was half June's (although that plays positively into the Federal Reserve's "transitory" inflation assessment), the month's Treasury Budget ballooned beyond belief, Q2's Productivity was nearly halved from that for Q1, and The University of Michigan's "Go Blue!" Sentiment Survey for August took its worst month-over-month wallop since the COVID depths of April a year ago. Here's the Baro:

Economic Barometer
Economic Barometer

And from this week's Fed episode of "Yes Taper, No Taper" of note was SanFran FedPrez Mary "Quite Contrary" Daly going against the grain of fellow Chicago FedPrez Charles "Easy Money" Evans, her suggesting that asset purchase reduction can be put in force this year. (Oh dear...)

As for the straight-up "Look Ma, No Earnings!" S&P 500, through this year's 155 trading days, 58 have registered all-time-highs, i.e. once every three days. 'Course as we approach the cusp of traditional "crash season" (September/October), we 'spect such pace to diminish, if not outright stop ... perhaps for years. (Write it down).

More specifically: 'tis "said" that these days 70%-80% of stock trading volume is algorithmic, (which for you WestPalmBeachers down there means computers rather than humans are placing trades, with buying begetting buying). The problem obviously is that when the selling starts—and then repetitiously begets itself—humans shall have little chance of stopping it: any of you who were trading the S&P 500 futures during the fall (both seasonally and directionally) of 2008 experienced such terrifically swift damage. This next time 'round, given the S&P today being at heretofore unheard of valuation via earnings—and algorithmic trading being even more prominent than 'twas 13 years ago—the compounding of relentless selling shall be unfathomable. Beyond stock exchange circuit breakers (which merely are temporary), the only human intervention to control the carnage shall be to rip out the power cords to the computers ... which shan't be easy assuming they are housed in high-security complexes (...crick-crick ...crick-crick ...crick-crick...)

Either way, here are the percentage tracks of the five primary BEGOS Markets across the past 21 trading days (one month), led of course by the cricket-wooing S&P, and by Oil for volatility:

BEGOS Markets - Last 21 Days
BEGOS Markets - Last 21 Days

In turning to our two-panel graphic of the precious metals' daily bars from three months ago-to-date, to be sure, 'twasn't the sound of crickets being heard following the "sell" this past Monday. Rather, 'twas the cacophony of two-fisted buying which ensued. (We like that algorithm). But notable therein was Gold on the left recovering in full whereas Silver on the right has lagged. Indeed the Gold/Silver ratio increased from 72.5x a week ago to 75.0x today, (the millennium-to-date average being 66.3x):

Gold Silver Dots
Gold Silver Dots

Now the highlight of the next two-panel graphic is the dearth of trading volume during last Monday's first hour "sell". That's what selling 23,537 Gold contracts (left) and 8,655 Silver contracts (right) into a nearly bid-less market looks like:

Gold Silver Profiles
Gold Silver Profiles

Fun, eh? Let's go to...

The Gold Stack
Gold's Value per Dollar Debasement, (from our opening "Scoreboard"): 3903
Gold’s All-Time Intra-Day High: 2089 (07 August 2020)
Gold’s All-Time Closing High: 2075 (06 August 2020)
2021's High: 1963 (06 January)
The Gateway to 2000: 1900+
The Weekly Parabolic Price to flip Long: 1894
The 300-Day Moving Average: 1841 and rising
Trading Resistance: 1803 / 1813 / 1835
The Final Frontier: 1800-1900
The Northern Front: 1800-1750
Gold Currently: 1782, (expected daily trading range ["EDTR"]: 28 points)
10-Session “volume-weighted” average price magnet: 1774
Trading Support: 1774 / 1765 / 1749 / 1731
On Maneuvers: 1750-1579
10-Session directional range: down to 1678 (from 1836) = -158 points or -8.6%
2021's Low: 1673 (08 March)
The Floor: 1579-1466
Le Sous-sol: Sub-1466
The Support Shelf: 1454-1434
Base Camp: 1377
The 1360s Double-Top: 1369 in Apr '18 preceded by 1362 in Sep '17
Neverland: The Whiny 1290s
The Box: 1280-1240

We'll part for this week with these observations:

■ Yep, they just did it again: Banxico hiked its overnight lending rate; 'tis now 4.47%. Are you folks up there in the Eccles Building paying attention?

■ The annual right of modern-day August is the proliferation of global warming warnings. Our favourite this time 'round is from the Intergovernmental Panel on Climate Change, citing 'tis "Code red for humanity". Betcha the S&P's demise beats 'em to it.

■ We all know that polls are commissioned to produce a desired pre-determined result, but we nevertheless got a chuckle out of this one from Foxy: "Nearly 80 Percent of Americans Blame Biden for Inflation Surge". And yet he received a record-obliterating 81 million votes? (Yes, the latter came first).

■ If you've given some thought to moving StateSide, here's some encouragement to so do. The latest "free everything" infrastructure plan is to include: universal nursery school, a couple years of community college, and Medicare coverage for ears, teeth and eyes. Therefore: keep your eyes on the prize: GOLD!

Precious Metals Update: Price Put Athwart, Gold Roars Back From Support

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Precious Metals Update: Price Put Athwart, Gold Roars Back From Support

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Todd Holaday
Todd Holaday Aug 18, 2021 9:33AM ET
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Always enjoy these. They stretch my brain while also reaffirming my common sense.
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