The Gold Update: Start Your Coin Collection, Now

In corresponding with a dear friend on Thursday, during which time Gold found itself being terribly throttled down into the 1270s, I remarked: “You did buy a Gold coin today, non? Otherwise, you are a bad boy.”

Admittedly, ‘tis I who’ve been the bad boy ever since Gold declined through The Top of the Floor (1579-1466) this past April. Then four weekly missives ago we ran with “Gold’s Low Is In For The Year; As Would The S&P’s High Appear”, except that Gold broke its year-to-date low of 1322 on Thursday, trading a further 53 points lower to 1269 yesterday (Friday). Two missives ago came the celebratory moment, after a record seven repressive months, of Gold’s ~finally~ reversing its parabolic Short trend back to the upside as Long, except that it too fizzled out as well this week as we’ll herein peek.

Then just a week ago came all the encouragement from seeing the overhead trading resistance becoming less burdensome, except that consensus market forces decided -- given the charts being just as ugly as are those of Silver, Copper and the Bond -- that Gold is at best only a commodity, as opposed to its actually being real money in a world awash with worthless wherewithal, and thus down we went.

Not to necessarily digress, please allow me this StateSide aside: as some of you know, Gold is being accepted as legal currency/tender in both Utah and Arizona, whilst 12 other states have approval of such under legislative consideration. In fact, I read this past week that 1/10 ounce coins have become such a hot item that the U.S. Mint had to suspend selling them, its inventory driven well below desired levels after April sales. Then of course there are our Swiss friends with their ever-popular one gram break-off wafer, ($46 at this writing):

Nonetheless, we must face the facts as the great unwashed continue to weigh upon Gold’s price. Indeed when we last left you a week ago, Gold analogized as a Formula One race car had just come into the pits for a wing adjustment so as to better speed up through the aforementioned eroding overhead resistance. However, upon exiting the pits as we closed out the missive, it now turns out that the pit crew had forgotten to securely tighten the front wheel nuts.

So, in accordance with the laws of physics, when the front wheels then separated from the axis, bollucking off on their own accord, there naturally developed a sudden loss of adhesion from Gold to the upside track, which at speed combined with the wing’s then useless aerodynamics, instead flipped Gold upside-down:

Further replication of such flip is seen here, a fresh red dot appearing above price, (to quote Sir Hugo Drax)…


… “with the tedious inevitability of an unloved season.” --(‘Moonraker’, United Artists, 1979). And thus we’ve the commencement of a new parabolic Short trend. Yet to paint the picture somewhat positively, Gold traded at what is now the new flip price of 1423 just 12 sessions ago (on 06 June), and given the propensity, (unlike in other markets), for price to oft rise more swiftly than fall, I shan’t be surprised a wit to see us back up there, dare I say, in shellacking-short order (pun intended).

Again with regard to post-Fed Thursday, every component of the detailed BEGOS markets complex was down through the majority of that session: the Bond, Euro, Swiss Franc, Gold, Silver, Copper, Oil and, believe it not, even the All-American savings account that never goes down, the S&P 500. One had the anxious sense of The Black Swan, Part Deux, unfolding before our very eyes. Gone with the bathwater went the baby, the bassinet, even the bidet. And specific to the S&P, ‘twas what which we penned a week ago? Something about, upon a withdrawal of stimulus, the market shall then finally have to be valued by economic reality?

In recent days, as has been FinMedia-postulated in every possible permutation, “tapering” by the Fed is still stimulus. But you do realize, of course, whether by tapering or outright withdrawal to where such absence of stimulus ought lead…

“More stimulus, mmb?”

Exactly right, Squire. And in turn, to far higher levels for Gold. (Now just stay with me out there). The ever-compounding layers of debt simply require more of same to service it. Yes, the Fed is fastidiously fabricating $85 billion per month; however Washington is spending triple that amount, (by our calculations some $10 billion per day). How must they make up the difference? Via taxation, debt and therefore further debasement. The Fed’s diluting or removing the punch bowl is one thing; not having the air fuel tanker arrive in time as you transfer from powered thrust to unpowered glide at 37,000 ft. is quite another.

As we remindfully note on occasion, barring global cancellation of all debt, (which includes your bank deposits), and starting from scratch with new hard-asset-based currencies, requisite repayment amounts of principal and interest shall continue to grow. We’ve gone beyond the pecuniary pale and the piper will have to be paid, “preferably in Gold if you please”. I have to think that ultimately we can only be facing a global revaluation of assets and the one thing you’d best have in your pocket is this:

There is nothing like the wonderfully-weighty feel of a Gold coin denominated in Swiss Francs, (which of the eight detailed BEGOS markets suffered the least for the week, down just 1.4%, whilst Sister Silver suffered the worst, off 8.8%). In any event, if for some silly reason you’ve not already done so, there’s no time like the present to start your coin and/or wafer collection, especially with Gold absolutely on the El Cheapo at 1298.

Maintaining Perspective (Again)

As Gold’s valuation is a function of global currency debasement, (notwithstanding its being treated through here by the trading community as a commodity), let’s update our year-over-year view of StateSide growth in its M2 money supply versus that of Gold:

Still skeptical? “Too short a time frame”, you say? Fair enough. Let’s try a slightly longer view…

Now isn’t that something: when Gold arrived at its All-Time High of 1923 on 06 September 2011, it had practically caught up to the growth in M2, but not quite. (M2 data courtesy of the St. Louis Fed’s “FRED”). Moreover, as a friendly reminder, such M2 does not even begin to include the monetary debasings of China’s ¥uan -- and how about that PBOC coming through with accommodation at the 11th hour on Thursday to assuage interbank freeze-up -- the €uro, Japan’s ¥en, the UK’s £ Sterling, nor even more surprisingly, Borneo’s Malay Ringgit. Conservatively putting aside that Gold plays no currency favourites, given that it has cumulatively risen to just half that of StateSide M2’s growth alone over the last 30 years, ought the yellow metal not really be trading around 2600 right now? (You’ll recall our “improbable” notion a year ago for Gold to achieve Twenty-Five Hundred by Twenty-Five December, Twenty Twelve.) And yet here we are at li’l ole 1298.

Indeed to Gold’s pricing structure we go, now as measured by its weekly bars, (the dailies were getting too congested), since the All-Time High. You can see we’ve added a new layer below The Floor and given it an appropriate salutation, (you might come up with your own):

I know ‘tis ugly; fortunately, ‘tis Gold, those upper layers of the pricing structure remaining on the chart for a reason.

Next we go to the three-month valuation chart for both Gold (the left panel) and the S&P (the right panel). Again, the smooth pearly line in both charts is a calculation of value for those markets based upon how they are moving relative to the five primary markets that comprise BEGOS (Bond/Euro/Gold/Oil/S&P):

Recall a week ago how anticipatory we were for Gold to penetrate up through its smooth line, notably as the trend in its oscillator view (price less valuation) at the foot of the panel was rising. Clearly, the S&P did its expected part, plunging through its own smooth line. But as for Gold, this is what happens when ‘tis treated as tungsten. Should such sophistry continue, I plan to enlist a platoon from the Gold Troops, head over to the Shorts’ house, and TP it…

Such a deserving, indeed scandalously nefarious bunch, are the Shorts!

“And now for something completely different, we give you Major Backup”

No, ‘tis not yet another Monty Python skit about the adventures of one of Her Majesty’s finest defending the Empire in the wild; rather ‘tis the far more scintillating truth of yields backing up, in this case being that of the 10-year Treasury Note. Remember our not being overly concerned about rising rates until they eclipsed the upper level of the orange resistance box? They just so did, as described by the horizontal line at 2.514% per this next graphic of the 10-year T-Note from January 2011-to-date, (weekly bars):

Moreover, that yield is higher than the S&P 500’s current 2.186%, which along with a “live” price/earnings ratio of 25.5x makes the stock market all the less attractive. Why take the risk of principal loss in a now less-yielding stock market when one can feel secure in the safety of a U.S. Treasury Note? (Why are you laughing?) Good thing we’ve Gold.

And so to its vastly-spread trading profile we go, the current 1298 level being the red bar:

Given that North of where Gold is now, and seeing that there’s been hardly any substantive trading activity all the way down from 1367, we could well return there faster that you can say “El Dorado!”

We’ll close it out here with mention of the FinMedia’s referring to Thursday’s stocks slide as “a meltdown”, that ‘twas “a total bloodbath in the market” and so forth. Yessir, the ole S&P on that day alone was bludgeoned by a loss of -2.5% and for the week in toto by -2.1%.

How will they describe it all when such S&P percentage loss hits the initial daily limit of -5.0%?

Still, consensus estimates for many of the incoming economic data reports in the new week are running below prior period results. Will bad news for the economy continue to translate into good news for the markets, for ‘twould foil the threat of tapering? Grab some Gold and stay tuned…