Gold - Six Years To Zero

Apropos of this week's title, irrespective of the -- and indeed ever-ignored-- above scoreboard valuation at $2,523/oz., the following chart is the daily price of Gold from its highest closing level ever (1900.4 on 22 August 2011), as linearly regressed through yesterday's close (1098.5 on 24 July 2015) to the resulting closing price of Zero (0.0 on 27 December 2021):

The Gold Update of a week ago emphasized how our metal is being sold on "conventional rationale", but by same, is not being bought when it ought. As we thus concluded, Gold's price now, on balance, only goes down. (Arithmetic is a beautiful thing). Further, should Gold go sub-zero ("oh yes" some might say), folks would then be paying you to take their Gold! Surely at minimum, bared for all to see on sidewalks 'round the globe would be that which was once securely hidden away in those secretive underground bunkers, the contents of their bar boards and coin coffers starkly gleaming in the sunlight, whilst affixed with masking-taped signs reading "FREE!" in crayon.

The reality is, of course, the foregoing shan't happen. Indeed we took heart to a fundamental dose of common sense from a quite visible wealth management colleague of ours, who in a quarterly tele-conference to clients this past week opined that even should Gold in its present rout trade sub-1000, we'll nevertheless see it move up into the (and I quote) "multi-thousands" given the inevitability of quantitative easings and their failings. Something of which to look forward, I have to say. Keep your eyes on the prize.

Still, one or more material catalysts are requisite to right our Golden Hind, lest it continue to get kicked in the behind. Or put another way, given our wont to employ musical analogies, Gold needs to get into the groove with Vicki Sue Robinson's "Turn the Beat Around" ('76), else going further down the road 'twill seem like AC/DC's "Highway To Hell" ('79)

As for The Now, given the opening scoreboard's valuation for Gold of $2,523/oz. by currency debasement alone, price's having fallen sub-$1,100/oz. this past week has gone beyond nonsensical. And as we turn to Gold's weekly bars, price needs to plow all the way back up through the 1100s, and then some, just to flip the parabolic trend from Short to Long:

Yet having depressed our readership's spirits akin to that of price, fear not, for there's actually a silver lining being knitted into Gold's otherwise fraying fabric, (albeit Sister Silver herself traded down to six-year lows this past week). This "good news", if we can so say, is that Gold is finally coming back into play. In a year where we've tensions running the gamut from Greece, to the threat of an interest rate increase, to a stock market overly obese, to daily acts of blatant terrorism destroying our peace, Gold throughout has been huddled away on the back burner of the world's stove-top, its value being quietly boiled off. But as we next look to the yellow metal's "expected daily trading range" (EDTR), Gold on the left has now suddenly been yanked to the front burner, whilst the gyrations of the S&P on the right elucidate the uncertainty of its participants. Again this is not directional movement; rather 'tis our measure of volatility expectations day-by-day:

"But mmb, how can 'in play' be good if gold is getting creamed even more?"

Squire, a market's coming into play accelerates its visibility and interest. To wit: the COMEX contract volume for Gold this past week was the largest recorded since that ending 24 May 2013, better than two years ago. But let's further rewind. Remember then-Chancellor of the Exchequer Gordon Brown's infamously dumping 60% of the United Kingdom's Gold through the turn of the millennium, (aka "The Brown Bottom")? Now let's fast-forward most recently to China's having reported a lower-than-expected Gold supply, in reaction to which came massive Asian selling, (aka "The Shanghai Bye-Bye")? Look not to Zero, rather reach for the Sky.

Speaking of which, in recalling Gold's trading way back on 21 January 1980 up to 873.0, that level was then sky-high given the relatively benign amount of money supply. And yet the intra-day low yesterday (Friday) of 1072.3 was literally less than 200 points from that price of better than 35 years ago! To be sure, the 1980 high was the culmination of a spike that saw price essentially double in a mere month's time. Yet, were such event to recur today from what is -- by debasement comparison -- a very lowly price: 1098.5 x 2 = 2197.0 ... still a bit shy of our scoreboard's 2523 level ... (but we'd take it, eh?)

Indeed, one wonders if yesterday's wham down to 1073 was the final washout for Gold, as price rose right through the final nine hours of the session, recovering as many as 28 points off the day's low. That is reflected below on the left in Gold's 10-day Market Profile, the coloured swath being Friday's full trading range and the closing price (white bar) just a point off the session's high. The panel on the right for the last three months of Gold's daily bars similarly shows the rightmost one with its closing nib just off the bar's top; moreover, Gold's "Baby Blues" (the consistency depiction of 21-day linear regression trend) are not "stuck on the floor":

Comparable to those above for the yellow metal, next below are Silver's graphics, the white metal in fact "one-upping" Gold yesterday by finishing on the high trade of the session at 14.710 as we see. Sweet move Sister Silver!

Thus, can you say the word "capitulation?" 'Tis starting to pop up in the press. Moreover, when 'tis so obvious that a major market is going to cross a material millennial milestone (in this case the notion of Gold moving below 1000), it doesn't always so do, for when low enough is "low enough", the big buyers ensue.

As for the week ahead? Here comes the Fed, the timing of which could have been better instead: the FOMC Policy Statement is to be issued on Wednesday; but the first look at Q2 GDP comes Thursday. Still, the members can have a gander at the Economic Barometer, and like any of us, see that Q2 ought well have bettered Q1...

... but is the devil in the convoluted details of the data? We saw this past week that the level of Initial Jobless Claims came in at a 42-year low; yet the labor market's participation rate (62.6% in June) is at a 38-year low. 'Tis one of those things that makes you go "Hmmmmmm..."

Likewise does the extraordinarily high valuation of the S&P 500 Index, our "honest" calculation of the price/earnings ratio presently at 34.8x. And yet, oh the complacency: a few days ago, a seasoned neighbour, (next to whom I'd just parked), through his window remarked "The market's having a lousy year!" My friend, perhaps you've forgotten what "lousy" is. That certainly made him go "Hmmmmmm..."

Likewise too does our well-documented, extraordinarily low valuation of Gold make pause for cogitation. At these levels, it ought make the whole world go "Hmmmmmm..."

Therefore: maybe, just maybe, Gold's about to start HUMMIN'. 'Twill so do at some point, for it shan't really go to Zero. Instead, how about up to a Two with three Zeros? "Humm Baby!"

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