July 2013 metals preview

Thus far, I've been refusing media requests to call a bottom. However, I did tell my subscribers yesterday (and lucky members of the general public, today) that I believe we've reached a bottom in gold on a monthly closing basis, based on Fibonacci levels.

 However, I do expect the lows of this week to be re-tested in both metals at some point, if not this month (a bounce seems likely), then next. And frankly, at this point, I cannot in good conscience write this post, which will be read by millions of wide-eyed investors working hard to put food on their families, without acknowledging the prospect that the bull market in gold may be over. It seems mind- boggling that this proposition could be true, in the face of such pervasive corruption and arrogant parasitism, such hubristic folly and dysgenic idiocratization, but a continued move down to the $800's (and a year of $1000 as resistance) after a little dead cat bounce, in conjunction with new stock market highs and unemployment numbers down below 7%, wouldn't really surprise me.

There's been massive very-long-term chart damage on so many charts we've been looking at, e.g. stocks vs. gold, and this one:



Somewhat ironically, it's the charts which are tempering my gold-bullishness--not arguments based on economics. I generally try to read as many anti-gold pieces as pro-gold, but I find them unconvincing. Here was a pretty good one (picked up from Kid Dynamite's stock twits), with the major premise that people are starting to "understand how monetary policy works" and thus no longer fear inflation. But always with these guys, ample straw-man kicking going on. Can someone contra gold please stop pretending that to buy gold = to fear incipient hyperinflation ? Gold is not so much a hedge against inflation as it is a hedge against monetary disorder and corruption, and (for the small players who have power in aggregate) a vote against the thieves masquerading as public servants. The anti-gold commentators often have cognitive biases that seem as obvious to me as those of the perma-bulls they mock: they take official announcements and releases at face value while refusing to question the legitimacy of the enormous zero-sum transfer of wealth (and power) to the financial class (i.e. the gambling elite) in recent years. They are blind to this perhaps because they benefit from it, perhaps because they have been swimming in its axioms like fish that don't realize they're wet.

Here's one of many academic articles offering a big-picture perspective to what's going on:

Financialization of the global economy

The instability of the world financial system, starkly revealed in the recent debacle, is not the only problem it poses. Its secularly increasing dominance over the real economy is in itself a phenomenon that needs examining. The article traces the source of this increasing dominance not just to the increasingly leveraged and increasingly incomprehensible forms of intermediation between savers and those in the real economy who need credit and insurance, but also to the increasingly universal doctrine that maximizing “shareholder value” is the sole raison d’ĂȘtre of the firm and the promotion by governments of an “equity culture.” Some of the social consequences of financialization are exacerbating inequalities, greater insecurity, misdirection of talent, and the erosion of trust [emphasis added]


These factors are not gold bearish (though they explain why the financial class hates gold), and so I don't think gold will enter a bear market.  The Fibonacci support line above shows a healthy 15 year correction to 38%, which I believe will reverse.

I went long bonds, long silver last week, but got spooked out of my position when silver went down more than the 7.5% I warned against last week. Of course, as things go, it immediately recovered on Friday, as did the ratio chart which was the basis of my trade. I don't kick myself over it though; you gotta draw the line somewhere, and I chose 7.5% for silver (assuming yields didn't fall substantially, which they didn't). (On the other hand, I chose 7.5% on the weekly chart, so I probably should've waited to see what happened on Friday.) 






I won't call an official end to the correction until the three line break charts below undergo reversals, as the regular reader knows (the first for gold, the second for silver). Even though GDXJ was up ~10% Friday, you can see these charts are still right at or near highs. 






 Here's the monthly 10-yr-yields-measured-in-oil chart, going back all the way to 1989. New bar again to close this month. I'm keeping my eye out for a reversal here too, which should be bullish for gold.

 Here's the monthly 10-yr-yields-in-gold chart. Entered the channel. Unless it pops out of the other end, still healthy correction territory, with trend in tact.










Here's a regular weekly version of the chart. If you recall, I put a lot of significance back in December regarding the parabolic channel on the log chart, which suggested to me that the end was nigh. Instead, the ratio broke out of that channel, bounced off it, and has taken off. I've drawn some possible reversal points, and I recommend they be watched.


Finally, in lieu of another silver chart, I have a CCI chart: the two should bounce together, if and when they do. I see the ~485 level being a very important point, not only on this three line break chart, but on a regular long term chart as well. 

Actually, let me add this weekly three line break chart of silver. Importantly, this week closed with a three line break, meaning silver needs to exceed $32 to have a legitimate reversal. That's almost +100%, and tells me we'll finish at least a week or two lower than this level before any reversal. But I don't think much lower. 


10 comments:

milamber said...

Great work GM. Very interesting Charts.

Many thanks,

Milamber

milamber said...

GM (and any other chartists, technicians, etc):

I was rereading your piece this AM while listening to Jim Puplava interview a gentleman by the name of Tom McClellan

http://www.financialsense.com/financial-sense-newshour/2013/06/29/tom-mcclellan/bears-in-charge-until-september

Anyways he gave his opinions and I was suprised at how he arrived at his forecasts.

Just curious if you listend to it & if you did, your thoughts if you are so inclinded to provide them publically.

I know nothing about the man or track record (other than this interview), but he had some very interesting things to say about Euro dollar FX interest rates and comparison betwen the S&P and gold bull/bear markets.

Milamber

GM Jenkins said...

I appreciate all comments here, including the FOFOA discussion, but let's just try to keep in mind that we're all anonymous dudes on the internet here (anonymous to each other, anyway, not to the apparatchiks at the Utah data center) and so there's really no rational cause for "personal" scuffling.

@milamber - I will give that a listen, thanks.

Edwardo said...

Speaking of Mr. Fibonacci, you may be aware that June was 21 months from The September 2011 high. I've been in the process of trying to find some other (potentially) meaningful time and price connections for "gold" and one of the more interesting ones I've found is that in September of this year a Fibonacci 4181 weeks will have passed since April 5, 1933 when FDR signed Executive Order 6102.

Here's another strange relationship. As you probably know, subsequent to confiscation of the citizenry's gold, it was then revalued to $35 dollars an ounce, which squared comes to $1225, very close to gold's closing low on 6/17.
I am having some fun pondering the possible implications of important support occurring at that level.

The "official" frozen in amber price of the U.S. gold hoard is $42, which squared comes to 1764 dollars. That's not too far, percentage wise, from the all time closing high for gold in the high 1800s.

Warren James said...

Some content here has been relocated to the 'freegold discussion' page. Cheers, Warren

http://screwtapefiles.blogspot.com/p/freegold-debate-common-venue.html

Jeanne d'Arc said...

Ahhhh.... that's better. This is a nice place to be again :-)

GM: the general (traders') view seems to be that there will be at least one re-test of gold and silver's lows. I'd tend to agree - although the timescale for this could be days or months, of course. To what extent would a re-test play havoc with your three-line break charts? Or none at all? (Sorry - I'm still trying to get my head around their predictive potential, if I'm honest...)

For those who retain some fascination for my bottom, I'd be surprised if we don't see a lower low in both silver and gold before this is over. But it won't necessarily be soon (see above para). Until then, my little lemur purse stays firmly closed.

S Roche said...

Thanks Warren,

Good that you refer to Kid Dynamite's sterling work assisting the deluded and misinformed. I think his site should be compulsory reading for precious metals followers.

In regard to the market now having a greater understanding of how QE works I think The Kid, and others, will come to regard that statement, (if they made it), as a hostage to fortune. Granted, banks don't lend reserves (that interest is being paid on, at least and to anyone other than buyers of equities on margin), ... but, why is it that the vast preponderance of those reserves find their way to the Primary Dealers of European parentage? Is that how QE works?

I hope to live long enough that this is all revealed.

In the meantime, whether a bottom is in for precious metals prices or not, this is just a fascinating market to be invested in and trading.

milamber said...

I think this is where this comment goes:

JdA, I am very interested in your bottom (call). So, please, don't be shy about taking those thoughts out of your cranium (if you are so inclined) and converting them into digital 11111 and 000000.

Thanks,

Milamber

Jeanne d'Arc said...

@Milamber,

Thanks for the interest. GM's done a pretty good post on this today, already, but I'll see if I can pull something together over the next week or so. Travelling back to Africa tomorrow, so hopefully I'll have more time soon.

All that said, 'bottoms' are nothing more than a stunt of two-bit bloggers, never to be held accountable. It's worth remembering that anyone who claims to be able to tell you which way the market will go, and to do so with self-proclaimed certainty, is an idiot.

I prefer to follow trends, and it was obvious to me that the trend has been down since September 2011. I'll 'call a bottom' when that trend changes. Which could be a long time away. For now, I can make real money (as opposed to gold ;-) ) in other places.

JdA

milamber said...

@JdA,

Agreed 100% on the calling of bottoms.

However, I have found it very profitable (as far as understanding what's around the bend) to listen to as many savvy traders as possible about what is going to happen next.

I view good Traders as the early warning system of what is coming next.

Thus the interest in how you guys view what is happening.

Milamber