2013 Metals Pre-game

This year, I decided to sit for my portrait before I started drinking to greet the New Year, as I usually end up quite shit-faced, and wouldn't want to portray myself as some degenerate rake to our global audience:

So 2012 ended with a whimper, but both gold and silver did finish the year up close to 10%. Not bad.

I expect a big 2013 for the metals, but I think they'll continue to sell off in the near term. Note the 144-day MA has been effective resistance, and will probably require a few attempts to clear. In fact, I returned to trading by buying some GLD puts today.

I'll buy more puts if the 78-week MA is broken. Recall that the 78-week MA = exactly 1.5 years, and as I pointed out in a previous post, it's right around 1.5 years when the moving averages of gold appear monotonic over the course of the whole decade-plus bull market. The 78- week MA has also been strong support:

This chart from a month ago has proven quite useful. I won't go long gold until gold breaks above the downward channel (yellow-green) (perhaps short trades if it bounces off support lines as drawn). Fortunately, the downward channel is quite steep, so the longer gold meanders within this channel, the easier it will be to break through to the upside. 

This ^HUI chart from a month ago surprised me: the white dotted line I drew has been pretty resilient despite a few very bad weeks for gold.

Similarly, gold's "Safe Haven Quotient Chart" has not yet broken the important trend line (purple). Note the two sets of Fibonacci retracements I've drawn (yellow and purple dotted): the pattern looks to repeat, where the purple trend line (and not the Fib line) becomes support on the second trip down. So it looks like gold should outperform the other commodities going forward, even if both do fall (and note ^CCI fell below its 200 day MA in the past few days... That's pretty big).

 What about silver?

I'm happy to say, my networking with Jesse of Jesse's Cafe Americain has paid off. In return for an organic yule log that I made for him (while reading the paper, actually) ...

... he gave me the emails of some higher-ups and encouraged me to contact them. One of them (Jesus Christ, if you insist I drop names) shocked and staggered me more than Eric King after an interview with Michael Pento. Apparently, even God doesn't know what price silver will be on January 1, 2014. He only knows the probability distribution from which the price will be sampled on that date (and leading up to it, of course). Turns out it's a normal distribution, as I impressed him by guessing, with the 1/1/14 expected value equal to $38.75, and a standard deviation of ~$4.50, such that any price over $47.50 or under $30 would constitute a >2 sigma event (i.e. quite unlikely). 

According to Jesus Christ (a.k.a. "the Nazarene Trader") the lower light-blue trend line and the upper yellow parabola are the lower and upper bounds for the silver price on 1/1/2014. Clearly much more upside (70%) than downside (-17%) from current levels...
In hindsight, that makes sense, looking at the weekly chart below:

Alright, off to the main event! Thank you, Screwtape readers for making 2012 a great year, and best wishes for 2013!

Yours in health,
GM Jenkins


Anonymous said...

I've a suspicion it all makes perfect sense GM but being a person who is worried about missing the boat I'm buying Gold now!
Here's wishing everyone here a prosperous 2013.

Louis Cypher said...

Nice GM. I look forward to getting dumping some silver in favor of Gold shortly.

Funky Tape said...

Just pulled some P&F charts for the metals. All daily time periods with "breakout" PO's.

Remember P&F data is price action only as it ignores time. Particularly useful for getting rid of a lot of market noise and just getting down to price movement potential.

Gold: bearish - 1560
Silver: bearish - 25
Platinum: bearish - 1390

And copper. Make sure you're sitting down..
bullish - 8.25

Since 2001 when both gold and copper bottomed, gold at $255 and copper at ~$.6, gold is up 6.5x and copper is up 6.1x.

Who's going to lead who and which way will they go? Weekly and Monthly 20-period BB's are wound pretty tight. Time to pick a direction after nearly a 2 year sideways grind due East gone basically nowhere. I like to think Dr Copper usually knows.

S Roche said...

I will be very interested to see if the next US Debt Ceiling debate, brinkmanship, last-minute agreement and subsequent ratings agency downgrade produce the same spike in gold as last time...or whether, as I contend, it was Venezuala repatriating 120 tonnes of gold that caused the spike.

Enquiring minds will know soon enough.

GM Jenkins said...

Thanks duggo and Louis.

Funky Tape - I've been really short of time so I've been sitting on a bunch of post on charts where the horizontal axis reflects price action more than linear time (which seems not to be the best way to look at these manipulated markets). Would you like to guest post your P&F findings? Interesting conclusion at any rate.

Great insight, SRoche. Worth keeping an eye on. Something did appear to be going on behind the scenes last August, with the debt ceiling excuse transparently weak (it's been raised, what, twice since then, by a few trillion, as gold has fallen 15%?)

GM Jenkins said...

Looking at today's gold action, it strikes me as a sucker's rally, rope in some fresh longs, squeeze some weak shorts. Weekly close this week will be telling.

S Roche said...


NFP Friday...

Funky Tape said...

GM - Point and Figure to your heart's content at stock charts.com. Price objectives can flip quickly, so my data was as of 1/1/13. Case in point: AAPL was showing a bearish PO of 425 and then flipped to a bullish of 600 based on today's price action.

Funky Tape said...

Check that, AAPL's bullish is 660 on the daily, not 600. Oppsies. Still showing bearish 315 on the weekly, though.

costata said...

Jim Sinclair has Alf Fields latest TA on gold here:


Happy New Year to all of the Screwtape contributors and commenters.