GM Jenkins' 2014 Predictions

Happy New Year, friends! 

First, a retrospective. Screwtape was forged out of the fullest heat and fire of the gold and silver mania of 2010-2011. I call it a mania now, though I didn't at the time. And that, to me, was the most important lesson of 2013. See, back in the day, it seemed more reasonable (to me, anyway) to interpret the then-ballooning prices of all hard assets as fundamentals-based.  2013 disproved that interpretation. Don't get me wrong: in all likelihood, the unrelenting, world-historical forces of Sociopathy and Folly that drove the world economy to the brink in 2008 simply took a breather in 2013, licking their chops and gathering strength for another foray at the global hippopotamus this year (or this decade, or next decade). Still, the fact that such a pause and major reversal could occur tells us that the price action of 2010-2011 was primarily speculative mania.

With that important lesson in mind, I believe price charts have become more important than any fundamentals-based arguments (e.g. of the "1001 reasons the dollar is doomed" variety you see on Zero Hedge once a week). My goal being to make money in 2014, my resolution is to avoid letting the bone-crushing stupidity of the American population, the knee-weakening asininity of the mind-bogglingly corrupt politicians, and the eye-watering chutzpah the Wall Street scumbags influence my investment decisions (especially short- and intermediate- term decisions).

A final point about 2013. For those wondering if or when the gold market will resume its long term bull trajectory, I say that the action of Q4 has been as ominous as the bloodbath that began Q1. I say this, because regarding the April crash, a violent washout and capitulation was certainly due after 12 years of price increases, and probably even healthy. So we saw the historical drop in April, and then the other shoe fell in June, giving the charts at least the potential to form a text book reversal (I've been arguing against that interpretation, but it was certainly a possibility). See the inset in the chart below to get an idea of what that might've looked like: I simply reversed the price action of the past 3 months. However, the actual grind downwards has no appearance of forming a bottom. None of the long "hammer" candlesticks, for example, that signify a capitulation. Not even a lot of volatility. And of course, a new daily (and weekly, and monthly) closing low.

And so in short, 

though gold may have a relief rally, I believe it will break below its hugely important, never-been-broken, weekly-closing-price trend lines on the linear and log weekly charts [green and blue, respectively, on charts below], and that's a bad sign.



Linear, weekly closing prices
Log, weekly prices




Given that even the most optimistic interpreters of the past few years' price action must concede that gold is undergoing a major correction, it makes much more sense to me that the 50% Fib line of the entire post-2000 bull market will be hit before a capitulation occurs. Looking at the log weekly chart above, and the monthly chart below (as well as the daily chart, not shown), that level appears to be the $1050 level, so I expect a bottom in the monthly, weekly, and daily closing prices somewhere between $1000 and $1075, for another 10-20% drop.




As regular readers know, I like using ratios of various commodities with equities and the long bond to identify trends and buttress predictions made on charts of single assets alone. The flexibility of ratio charts (i.e. the fact that a target can be hit whatever the numerator or denominator does) makes them useful clues in the prediction puzzle.

But let's start with the 10-year yield itself. Clearly, an important trend line has been broken in the past week (see grey and green for two variations), making the red line a natural target, though probably not this year. Looking at the RSI below, we also see a pattern that suggests a 10% rise from here, probably to 3.25 in the next few months, before a correction. 




Regular readers will also recognize the "10 year yields measured in silver" chart from my post with the very Turdish title "Figured it out"(which was probably my post of the year). The chart suggests that a ~10% price drop in silver is coming fairly soon, at which point the green "flanging" wedge will be hit, and gold (blue, in background) will reach its low point. (Of course, the wedge can be overshot, too.) Note that this relationship between the ratio and gold is highly regular (see some of the vertical dotted lines I drew in; I didn't include all of them to avoid clutter, but note that almost every "landmark" day in gold occurred when the yield-silver ratio bounced off the wedge). Also note: it doesn't have to be this way. Sure, highs/lows in silver often coincide with those of gold, but the ratio has another variable--the 10-year yield--which must cooperate. In that vein, if you look beyond the start of the current gold bull market, there had been no such discernible relationship previously. Also cool is that the starting point of the wedge converges right at the very start of the gold bull market (green dotted line).
Here's my target on another chart; pay attention to the RSI:




Looking at the actual silver chart, then, I see the green line being hit, though perhaps not on a weekly close.

Let's look at the 10 year yield measured in gold. The horizontal lines are targets I set many months ago, after the break out of the parabolic channel (on the log chart, which otherwise would've meant a "singularity" was approaching).
As a general rule, I see a lot of these yield-commodity ratios not hitting major resistance until they approach some 2009 critical points (which I depict only as minimal targets, where serious resistance should be encountered). So for example, the "10-year yields measured in real shit" ratio will probably break the important resistance where now it sits (using as evidence that lots of individual commodities have broken through that analogous resistance line), sending the $CCI to it's next Fib target of ~$470 for a ~10% decline from current levels (see small chart below). 













This guess is supported by my target for the $GOLD:$CCI ratio (i.e. the "how much real shit can you exchange an ounce of gold for" chart), assuming gold tests $1000. The ratio looks to be headed for the 50% Fib line, or ~2.2. Note that the post-2008 correction on this chart hit the 50% ratio before resuming (red lines).





 The "10-year yields measured in oil" chart is also worth looking at, as it appears to have broken important resistance. I see oil prices falling sharply this year, which will help equities but also somewhat belie their continued rise (but we know fundamentals don't matter anymore).



What about the gold ratio with equities? My old target is looking quite prescient, and I see no reason to change it:




So there are my 2014 predictions, folks. I see lows in the commodities coming within the next 6 months. If there will be a major turnaround in these markets, I don't see it happening until the fall. Perhaps then the shit will really hit the fan, and I'll have to communicate next year's New Years post to you via ham radio.

Best wishes for a healthy and prosperous 2014!

-GM











55 comments:

Eric Original said...

Having gone back to my trend following roots, with "Don't Fight The Tape" as my mantra, it is now against my religion to make predictions. My job is to see what the market is giving me and react accordingly.

However, in the spirit of the season and with no more than a pitcher of beer on the line, I'll throw my hat in the ring.

I'll say that both gold and the S&P end up within 5% of where they start. Rallies and corrections, sure. But this time next year we'll be looking back on a big ho hum of a year.

I say this only because it seems like everybody is looking for violence in the markets, up or down, in one or the other or both, depending on which camp they are in. The one thing that will disappoint everybody is one big yawn.

costata said...

Best wishes to all for a happy and prosperous New Year.

Elmer Habavilo said...

Predictions for end of 2014:

Gold 1600
S&p. 1700

End of 2015:

Gold 2500
S&p 2000

2016:

Gold 3000
S&p 2400

2017:

Gold 6000
S&p 3000

2018:

Gold 4000
S&p 2000

2019:

Gold 7000
S&p 2500

2020:

Gold 6500
S&p 3000
Can of coke $4


I don't like to make predictions though

costata said...

Heads Up!! Please read this short article from the Council for Foreign Relations: http://blogs.cfr.org/geographics/2013/12/04/greeksurpluses/

Beware of Greeks Bearing Primary Budget Surpluses

Sovereign Default and Primary Budget Balances

A primary budget surplus is a surplus of revenue over expenditure which ignores interest payments due on outstanding debt. Its relevance is that the government can fund the country’s ongoing expenditure without needing to borrow more money; the need for borrowing arises only from the need to pay interest to holders of existing debt....

....As today’s Geo-Graphic shows, countries that have been in similar positions have done precisely this – defaulted just as their primary balance turned positive.


The EMU countries cannot debase the Euro to default on their debts through inflation. "Austerity" measures hardly ever work because government revenues tend to shrink with the economy. There's only two ways out for the countries with debt that cannot be repaid. A targeted devaluation of the Euro against gold or default on the debts.

Elmer Habavilo said...

Also, for those wondering how real dollar bills will enter into the real economy to bid up the static or decreasing supply of consumer goods: one example would be when the fed buys bonds from the treasury via QE and those printed dollars are then spent by the federal government to pay salaries of military personnel stationed in bases around the United States. These soldiers then have money that didnt exist before to spend on big macs and diapers that did exist before.

Elmer Habavilo said...

I.e. the fed prints up the money for the purposes of buying new bonds as they are auctioned by the UST. New paper money is thereafter put into the economy when the soldier buys shit after getting his salary out of the New Years defense budget.

AdvocatusDiaboli said...

best wishes for a nice new years eve and a good start next year.
Greets AD

P.S.
As some nice anecdote: I bet with my wife a 1kg gold bar that the price will double over the next two years. Well, if it doesnt I dont give a damm for that worthless stuff anyway, and if it doubles I know my wife will be pretty mad handing me over some of her shinny :D

Elmer Habavilo said...

GM -

For what its worth, this afternoon at around 2PM GMT, the 10*10yr/SLV ratio was at 30/18.18 = 1.650, the highest its been in over 3 years.

EH

Gary said...

Will we get a photo of AD's wife handing over her shinny?

;(

and yet

:)

Happy New Year AD.

ssgtrader said...

I am not good at making long or medium term prediction, however Gold has reach an important support that I think is worth a trt

Elmer Habavilo said...

Yeah I think gold at $1200 in 2014 is better than gold at $750 in 2008, 5.5 years earlier.... This situation just can't go on much longer

ssgtrader said...

looks like my try is working well at least for today

GM Jenkins said...

Eric - I nodded my head when I read yours - that's probably how things will play out lol.

Thanks, costata, AD, and Gary!

Elmer, your predictions sound reasonable to me, e.g. that S&P will continue to rise for the next few years with gold (I believe probably outpacing it, at least for the next year or two) ... though I don't see gold, if it returns to the $1600 level--and especially if it breaks its 2011 high--to go up as gradually as you predict. If $1900 were to be emphatically broken, then the narrative that 2011 = 1980 would be shot. "This time" would appear really to be different, and gold would probably go from $2000 to $3000 faster than our billionaires, in the modern spirit of noblesse oblige, could board their sea castles

Nice call ssgtrader! Is this just a relief rally? I believe so and am looking to short it, but not quite yet. Still, the bounce off the trend line on the weekly chart is a bullish development. The bulls appear to have come through for now.

Elmer Habavilo said...

GMJ-

is there such a narrative out there that is taken seriously.. that this is 1980 all over again? Gold hit $850 in Jan 1980, but the fed funds rate was already at 16 % in oct 1979 i believe, and then was taken to between 18 and 20% for a pretty sustained period in 1980 - 1981... and this seems to have caused gold to return to 500s and 400s thereafter, and to have tamed inflation... of course now we are in a situation where the 10 year going to 5 and 6 percent would really be pretty intolerable for the economy.... so its obviously very different now... i know you are just saying that its just the narrative being referred to-- that hey this is 1980 all over again, but im not sure how much of a role that false narrative could be playing really.... it just seems to me that my timetable for return of gold bull mkt is a fair one... like i think it might take a year to get some steam back in the market, but after that, we might really see some action... idk... this current correction will really clean out the weak hands... youre calling my rise gradual but i did project gold to be $6000 by end of 2017 -- that would be a 5 bagger in 4 years from the level we were at a week ago... generally speaking though, short of fairly extreme financial situations (of which we might have a couple in the next 5 years), i think there are ways of containing gold so that it doesnt rise more than 50% in a year... what do i know though, im just a hobo in a boxcar with a jug of wine

costata said...

GMJ,

One of the things that worries me about TA is that I can read analysts who are claiming diametrically opposing views based on their TA about the direction of just about any market you can name at the same time.

I also wonder if, say, FDR's devaluation of the US dollar in the 1930s was anticipated by technical analysis. Policy and the willingness to intervene in markets may trump other factors. So JdA could be right and it could be business as usual this year.

But what if these tools and techniques being used by the Fed, central banks and governments can only forestall an inevitable adjustment of the accumulated imbalances. So I'm also posting a link that Bullion Baron tweeted. This article by Ambrose Evans-Pritchard discusses an IMF paper that asserts default among western developed nations is unavoidable.

http://www.telegraph.co.uk/finance/financialcrisis/10548104/IMF-paper-warns-of-savings-tax-and-mass-write-offs-as-Wests-debt-hits-200-year-high.html

Here's a link to that Reinhart & Rogoff paper produced for the IMF:
http://www.imf.org/external/pubs/ft/wp/2013/wp13266.pdf

I'm still going through it. The abstract doesn't pull any punches:

Even after one of the most severe multi-year crises on record in the advanced economies, the received wisdom in policy circles clings to the notion that high-income countries are completely different from their emerging market counterparts.

The current phase of the official policy approach is predicated on the assumption that debt sustainability can be achieved through a mix of austerity, forbearance and growth. The claim is that advanced countries do not need to resort to the standard toolkit of emerging markets, including debt restructurings and conversions, higher inflation, capital controls and other forms of financial repression.

As we document, this claim is at odds with the historical track record of most advanced economies, where debt restructuring or conversions, financial repression, and a tolerance for higher inflation, or a combination of these were an integral part of the resolution of significant past debt overhangs.

Elmer Habavilo said...

GM - come to think of it, 50 is a really big level in silver and there's a 30+ year old cup and handle chart in silver... So when that breaks, which I would say would be around gold at $2000, then I would expect silver to take off to 80 and 90 and maybe bounce off $100 at some point... I foresee a break out in food prices going along with a return of silver to the 20s and 30s this year.. I think the breaking of $50 silver will be a key moment for the USD... I think that enormous cup and handle chart is pretty meaningful... Breaking $50 might have to wait for 2015 though, after some backing and filling and after inflation is given some time to wear out the dollar... ..in that sense tho, u may very well be right, that gold going from 2000 to 3000 would be very fast (it would also probably correspond to silver going from 50 to 85 or so.. Could happen over the course of a summer or fall even).. When silver breaks 50 (the cup and handle line), the dollar is in a different zone and I think the USA goes into a little more of a Hellenic period at that point... For all u followers of the ancients out there

Elmer Habavilo said...

Also, is it just me or did the miners put in a pretty good day today? I mean I see some stocks up 5% and more... On a day the s&p was down .9%, and gold seemed to be up about 1.5 %... GMJ, one of those mining indices like the HUI or GDX might make for an interesting chart vs the S&p... That ratio chart feels like it might have just bottomed (or topped) out....

Elmer Habavilo said...

Sorry to scattershot posting here STFU'ers, but I see that the CAD has been in a pennant formation over the past few weeks... CAD strength seems to correspond to gold strength... The CAD has been in a pennant between .93 on the bottom and around .942 on the top in the past few weeks.. That will be interesting to watch for more cues on gold... Without the CAD above 1.0 vs the USD, I don't think we can talk about "getting excited" (for those of us who say they "get excited" about such things)... I believe we are at the lowest level on the CAD in over 3.5 years incidentally

Elmer Habavilo said...

Also GMJ, one thing to bear in mind about the s&p is that its coming from a level of 666 on march 6, 2009. So to my mind that sort of limits how far it can go on the upside... I mean a 3-bagger in 5 years is a lot to ask for a market that doesn't have too many fundamentals on its side.. Mind you in my predictions I still had the s&p increasing, but I think the gravy is mostly out now... I have the s&p at 3000 in 2020, which would be up something like 65 percent over that time... Which is a nice return, until u consider that I also have the price of a can of coke over the same period quadrupling... So I'm thinking inflation-adjusted it'll be a mixed bag in stocks, with some issues doing well... But I can't be very positive overall, given the almost tripling since 2009, and the currency and interest rate headwinds...

Elmer Habavilo said...

That is, the currency and interest rate headwinds that are likely to arise in the next several years

costata said...

According to Dan Norcini the upticks in gold and silver are merely due to index funds re-weighting.

Every year, those who manage the major commodity indices such as the Goldman Sachs Commodity Index ( GSCI) and the Dow Jones/AIG Commodity Index, REWEIGHT the composition of the various commodities that comprise their respective index. Some category of commodities see DECREASES in the weighting for that particular index; other commodities see INCREASES in the weighting.

This is common practice and happens every single year. It impacts the various markets for about a week or so as those INDEX FUNDS (These are sometimes referred to in industry slang as LONG ONLY funds) that benchmark against these indices must then BUY or SELL those commodities in order to bring their portfolio into line with the NEW WEIGHTINGS for that year.

In the case of gold and silver, both GSCI and DOW/AIG RAISED the weighting for these precious metals for 2014. That means index funds will be buying this first week of the year to align their portfolios.

That is what we are seeing occur in gold and silver today. I would expect this to provide some support to both markets until the bulk of this new money allocation process is completed.


http://traderdannorcini.blogspot.com.au/2014/01/index-funds-buy-precious-metals.html?spref=tw

ssgtrader said...

GMJ, actually I don't know whether this is just a technical rebound or it is going to develop into a trend. My strategy is to buy at strong support, place stop below $1186 than monitor it one day at a time. If by chance gold crossed 1260 (50 DMA) than maybe I move my stop to 1230 until I get stop out. Forecasting medium and long term is too difficult for me. But if my luckily star is shining on my maybe gold can re-test $1360 or higher at that point I will decide whether to take profit. Everything is one day at a time.

Elmer Habavilo said...

Oh noes... Fed's Charles plosser warns it may have to make aggressive rate move...

http://www.marketwatch.com/story/philly-feds-plosser-warns-of-rapid-rate-rise-2014-01-03


cchyah, OK... well do u feel lucky Chucky?

GM Jenkins said...

Good stuff Elmer. Re: equities vs miners, I do follow a lot of variations on this regularly, my favorite being the weekly 3-line break chart btwn the Dow and GDXJ (first introduced here), which seems to offer the most consistent predictive power on when there's gonna be at least a moderate reversal in gold (and by extension, the bearish cycle in miners that began on April 11 2011: see this post of mine, where I noted something was up pretty early in the game). With the S&P vs GDX, I wouldn't even start getting excited about a possible bottom unless it breaks below 75. Currently, it's at 83.

Here's an article that you may find interesting
http://blogs.wsj.com/moneybeat/2014/01/03/the-bearish-call-to-end-all-bearish-calls/

GM Jenkins said...

costata- for me, the philosophy behind TA seems to me "Prove to me, ye gods (or at any rate, ye Masters of Finance who micromanage all markets) that the past won't repeat itself!" I.e., I look for patterns supported by multiple data points (e.g. the more bounces off a certain moving average the better) and especially, multiple independent-ish data points (e.g. a convergence of ratio charts that all suggest a similar possibility). It works more often than not, but now and then your Promethean challenge to the trading gods will of course cost you your liver.
Obvious stuff, I know, but my point is that there is of course no reason to believe that the past patterns must repeat, and eventually none will, and such a break from a pattern often is triggered by an exogenous event, even events much more trivial than the ones to which you allude. So yeah, all these predictions could be dead wrong. Just how I'm betting currently.

As a philosophical fan of gold, I was encouraged to see the strong bounce off the weekly trend line I've been following in my last few posts. Maybe it won't look back. I like Bill Fleckenstein (one of the few interviews I listen to on KWN when I get a chance) and he seemed pretty confident that a double bottom was made. I don't think so, but that's what makes gambling fun.

GM Jenkins said...

Re: Trader Dan, I like him and try to visit his site regularly. But he does need to make his mind up about whether the US Govt cares about the price of gold or not. He never answers my questions on his site (I think because JdA pissed him off once lol) but to my knowledge his view is that the government does control the price of gold from rising when it's in a bullish phase, but is totally hands off during a bear phase (as the one we're currently in), and, e.g., its agents, i.e. JPM, GS etc. (in his view too, I believe) have no hand in any waterfall drops, etc. Seems highly unlikely to me. Either the government (more correctly, the real wizards behind the curtain, who manage the Exchange Stabilization Fund etc.) has some gold policy which is always being pursued to some degree, or Kid Dynamite is correct, and the government basically doesn't give a rat's ass about gold, really does consider it a barbarous relic and "tradition," and thus must be laughing at the Chinese, Indians, Arabs, Turks, Russians etc. for their insatiable appetite, the way we might laugh at the ungenteel fatty at a cocktail party munching the decorative garnishes off the canapĂ© trays.

costata said...

GMJ,

" I look for patterns supported by multiple data points (e.g. the more bounces off a certain moving average the better) and especially, multiple independent-ish data points (e.g. a convergence of ratio charts that all suggest a similar possibility)."

I have had the opportunity to observe some very successful traders at work. It seems to me that the successful ones have an intuitive feel for markets that prompts them to look where others aren't looking and to act when others are hesitant. Perhaps TA helps to take the emotion out of the decision making process.

Perhaps it's a chicken and egg situation.

Cheers

costata said...

GMJ,

I saw your comment on Trader Dan after I posted the response to your comments about TA. I think he's honest and he makes a sincere effort to point out the flaws in the arguments of some of the extremists.

FWIW I think government Treasury and central bank officials do recognize the importance of gold in the financial system. Managing the gold market as far as they are able to would be a logical policy IMHO in order to maintain the status quo.

I posted a link to an interview with Paul Keating by Tony Jones in the ABC's Lateline program from 2009. It's offline now but I still have the transcript I made. In the interview Keating makes it absolutely clear that the price of gold is the canary in the coalmine for a US government default on its debts through currency debasement.

Elmer Habavilo said...

if/when gold goes over 2k and silver over 50, the public will start to see gold and silver as being more desirable. Gold bracelets will start to come back in fashion for wealthy men , like it was in the 1970s. A movie star guy, for example, can look cooler now by wearing a cloth or string bracelet (that he bought for $100 or $5) or even rubber band around his wrist (the surfer or slacker look) than he can by wearing a 5k gold bracelet. When gold goes over 2k, we will probably see a trend towards gold bracelets being cooler for men (they have always been good for women). If/when gold goes over 2k, new companies will probably be more likely to use the name "Gold" in the name of their company, to give the appearance of being top notch or quality companies (even when the companies' businesses have nothing to do with metals). The words gold, silver, platinum etc will be more commonly used to convey quality or excellence (though the practice is already common enough, especially in smaller businesses, it will become more so).

So it was interesting to me that Obamacare is using the words "gold" "silver" "platinum" to denote different levels of quality for various health care plans you can get. Granted this is a fairly common practice, but why the metals names for this landmark, and so far failing, government legislation? If gold falls to $500 per ounce, the value of millions of women's jewelry will decline drastically. If it falls to $100 /oz, there would be a huge paper loss on tons of jewelry around the world, and gold would become much less popular. All the companies that have this convention of naming their different plans or services they perform after the metals ("gold", "silver", etc) would probably begin to change them. "Platinum" credit cards would probably be given different names over time. If you wanted your health plan to be accepted and liked, it might not hurt to name it after an asset they will appreciate by 4x in the next few years... but nah, no consideration was given to what the different grades of health plans would be called. They were just following the olympics...

Elmer Habavilo said...

If you wanted your health plan to be accepted and liked, it might not hurt to name it after an asset THAT* will appreciate by 4x in the next few years...

Elmer Habavilo said...

In the last couple of days, the CAD has broken down out of its wedge pattern and is now at .923. This is not favorable for gold. If gold is going to start making a decided upside move, I would expect CAD to start moving back up also.

Desperado said...

In this ZH piece: proof-golds-latest-slam-was-not-fat-goldfinger one of the Tylers really exposes how gold was slammed down $30/oz by thousands of algo trades made in a fraction of a second.

That the gold price is not being manipulated, and that who ever is doing this is protected from prosecution or exposure is now no longer open to question.

So to you TA lovers I ask, how can you be sure what comes first, the manipulation or the trend? Could it be that they perform these dumps precisely to meet milestones such as making your charts sing? And if whoever is doing this is simply "trading" then why don't the manipulations also occur on the upside instead of constantly grinding down to match TA expectations?

Elmer Habavilo said...

Desperado - right... TA vs. manipulation... this is a basic tension obviously... if there is manipulation, how can TA be that reliable/ reliable? If charts can be "painted" -- or as you put it, if charts can be made to "sing" -- whats the use of TA?

One thing I would say is that TA operates on the notion that certain patterns will produce bullish or bearish results a certain percentage of the time... and once the manipulator has his hand in the market (since manipulation can of course only ever been temporary or SOMEWHAT limited), even if one chart is "painted" to look bullish over a certain time period, another bullish chart might eventually pop up... some levels just cant be maintained, just as after a certain point, you cant make people change what they want any more... at some point supply and demand cant be stopped. I would say, yes, the usefulness of TA is a bit questionable generally... and yes, when there is manipulation in the market, TA becomes an even less reliable tool... But these things cant be held down or up forever.... gold couldnt be held under $1000... it couldnt be held under $300... people just want it too much... Of course there is the possibility that that demand might one day change (e.g. when we start mining other planets with solar power 300 years from now and we find gold to be a lot more plentiful)... the 10yr yield could similarly not be kept under 2%...

So even if one chart is painted, on another chart you might still have another bullish TA pattern after a while, when an asset is in demand... A chart that is painted in one time period, can still be telling in another time period... also if you paint a gold chart to look like a certain pattern, you can still be just creating an aberration on the 10yr-yield/gold chart, through which the underlying pattern for gold can still be seen... Of course this argument has a bit of reductio ad absurdum to it (i.e. well even if a chart is painted, there is always some chart somewhere that is bullish or bearish, etc.)… but based on long experience, I still find TA to be a somewhat useful exercise

Manipulation is just a much bigger market force than all others, but its still a market force and its not like the manipulators are king midas, and just creating real gold at will... at some point, market participants can decide on real gold... at some point, you can saw your gold bars in half and in quarter and see if theres tungsten inside... so anyway, either the trend or the manipulation can come first, it doesnt really matter in the end, since manipulation is limited…

As an example for students of TA to consider, the current silver 40-year chart is very instructive… I think the supply-demand figures bear out the notion that when this "cup and handle" formation over the last 40 years is broken to the upside (i.e. above 50), the cup and handle bullish pattern will play out… TA is just loose science… TA uses inductive reasoning just like science does in the end… just as you use both induction and newton's laws of mechanics to say "ok when I drop this apple off the table, its going to fall", you don’t really know for sure its going to fall… that’s just what has happened in the 20 billion times you’ve seen that or something similar… but there could be space-time continuum where an apple doesn’t follow newton's laws or einstein's… TA is a science like any other in that sense… a person sees certain patterns play out a certain way, and they develop a probability of that happening in their head…. From what I'VE seen, it CAN be somewhat useful, as long as you are aware of the limitations.. Like everything else in life, from "believing" in physics, to "believing" in evolution, to "believing" in voodoo, to "believing" in TA, it comes down to a judgment call as to how much use it has and how much it is rubbish

Elmer Habavilo said...

Canadian Dollar at its lowest level in 3.5 years (at .9161 vs. USD)... id like to see a sustained rally for the CAD back up in the direction of .93, .95, before getting too bullish on gold

AdvocatusDiaboli said...

Hi Desperado,
let's assume for a second that all this is "manipulation". Now what? Who cares? I mean why do YOU care? Would it make your life better if the price of gold would be 10x higher? Seriously I wanna know, what's the point at the end of the day? You think you would not be bullied at the airport any longer? Or on the Obama kill-list? Or being robbed by taxation? Or the debt debate would be any different? What is the point?
I would understand in case you are a miner, but personally I really give a shit about the miners at all anyway. This is also one of the few points I dont understand in the book of Ferdinand Lipps - Goldwars: Moaning about the price of gold and meanwhile pushing for mining more of that stuff.
Miner=liar sitting on a hole in the ground. Remember?
Please dont take that personally, I just wanna understand: You wanna buy an asset that is potentially underpriced or overpriced?
Take a look at this:
http://pricedingold.com/crude-oil/
Is gold too cheap/expensive or oil too cheap/expensive? You tell me.
Peace bro,
Greets, AD

costata said...

AD,

In reply to your question to Bron over at his GoldChat blog the refiners represent a very large potential supply of kilo bars. Only the mints can produce coins and small bars but the refiners have the capacity to cast around 10,000 m/t of bars per year including kilo and 100 oz Comex bars.

So the Mints can still be a major bottleneck in the retail supply chain but if you are prepared to accept kilo bars like the Asians then there's substantial excess supply capacity compared to the annual flow of mined gold and scrap.

In a separate comment I also want to pick up on a couple of graphs from the priced-in-gold site that you linked. There's some very interesting material there.

Cheers

costata said...

AD et al,

I'd like to give GM Jenkins a heads-up on the charts I'm linking here. They're from the site (http://pricedingold.com/) that AD linked above. They may suggest actionable trading strategies. I don't have the skills or knowledge to evaluate them from a trading perspective so the rest of this comment is merely intended to explore the theme of US dollar devaluation that the charts describe.

AD, that oil-priced-in-gold chart wasn't news to me but this chart showing the "half-life" of the US dollar was a perspective I hadn't seen before: http://pricedingold.com/half-life-of-the-us-dollar/ (There's a follow up post responding to a reader's comment on that post here: http://pricedingold.com/2013/10/11/927/ titled "Is the Dollar's Fall Over?")

If you look at these graphs a couple of things are striking to me. It looks like there has been a controlled and targeted devaluation of the US dollar over the past 13 years in both gold and oil. Oil has remained comfortably within it's long term ratio and tracked quite closely in the middle of the range around 15:1. (Ironically oil seems to more closely reflect the silver bugs claim about the correct historical GSR than silver does.)

Jim Rickards has remarked that it is possible to target a devaluation in a currency quite closely in order to select the winners and losers. That's one of the reasons why he is (or was) highly receptive to the argument that the US government could use hyper-inflation to stiff its creditors.

I think there are sound reasons for thinking that monetary inflation only shows up in asset prices under the present monetary and financial system of the western developed nations. Long story short, the apparent absence of inflation in the US economy may be a case of looking at the wrong data. Consequently the historical precedents for HI may not shed much light on how hyper-inflation could unfold in the USA.

Desperado said...

@Elmer,

You write: "manipulation can of course only ever been temporary or SOMEWHAT limited"

We know that gold price relative to other assets has been manipulated since at least Waterloo, when Nate Rotschwein famously made his gold dump based on inside information. We also have the recently exposed meeting minutes from about '75 where it is explained to Kissinger by the Fed that gold should be completely demonetized. Then we have this ZH piece I linked to showing how the gold price is being manipulated over milliseconds. It is a massive price manipulation fractal extending over all time periods for the price of money extending over centuries.

To quote Karl Rove: "“We’re an empire now, and when we act, we create our own reality. And while you’re studying that reality — judiciously, as you will — we’ll act again, creating other new realities, which you can study too, and that’s how things will sort out. We’re history’s actors . . . and you, all of you, will be left to just study what we do.” "

All the western CB's are connected to the Fed and the empire by the political umbilical cord. No western country dares defy the CB/BIS empire except perhaps Iceland, for now. Those outside the west that dare either get invaded (Iraq, Afghanistan, Libya) or ostracized and starved (Cuba, Iran, Venezuela) like Germany in WWI. Isn't interesting how these western CB's are exchanging bankers (Carney to BofE and now this Israeli joining the Fed)?

So my point is that IMO this manipulation is going to continue as long as the empire does. The banking cartel will manipulate PM prices to their and the empires benefit until the empire losses control of the reserve currency and collapses.

Elmer Habavilo said...

Desperado - "rotschwein", I like that... Yeah, I agree that the manip will continue as long as the empire does... I was just pointing out that in spite of the direct manipulation in many markets, one can't hold reality back forever... So TA is somewhat useful, I think... Sure , gold can be manipulated as long as the empire exists.. That makes sense... But they can't hold gold under $300... Or under $1000... Can it be held under $10000? Idk... It's interesting to do TA on things like the 10 yr and other commodities too.. Like how long can the 10 year be held under 3pct, etc...

That priced in gold link is cool.. Wonder why they use turk's. gold grams unit... I carry those priced in gold charts in my head a fair amount... Arguably anyone who understands economics does also... U want to have a good sense of what's cheap and what's expensive

Desperado said...

@AD re: "Who cares?"

I have been gathering signatures for the stop FATCA initiative here in Switzerland. Several times I have been snubbed with statements like "who cares" and "I am not political". Likely my life would be far simpler and likely I would be materially better off if I just drank the kool-aid and stopped caring. If I just went along with the narrative and the momentum.

Since April 2013, some parties keep deliberately slamming gold down at strategic moments and "painting the charts". These parties obviously know that they will not be prosecuted or even investigated. They must be confident not only that some powerful agencies have their backs but also that they will not be treading on the toes of various giants as the FED, Treasury, IRS, SEC, BIS, IMF, ECB and others.

So I would say this precludes some Chinese, Russian or SCO currency war or some rogue bullion bank being behind it. I would say that it has to be the BIS, FED, ECB who are in on this along with many bullion banks and PD's. So they know when they should go short and when to go long, they know the exact timing as well as the specific targets. Its as easy as plucking money that is growing on trees.

So we are living in this world where every market is manipulated and the empire makes its own reality, and we are supposed to "invest" in this environment. I have looking into increasing my leverage (debt) in order to purchase some real estate here in Switzerland. How can I possibly make a sound decision when the time value of money and the determination of what money is is controlled by a small elite who have rigged the game? Obviously all investments are merely bets on their future actions. TA and research have little to do with success in this environment. A much more important determinant is your level of depravity and amorality.

Desperado said...

@Elmer: I will admit that I do not understand or use TA, all these tea-cups and double shoulders mean about as much as football statistics to me. I follow Screw Tape because of the gold and silver bar database and related revelations, and for the odd provocative comment in the comment section.

As far as how far they can push the gold price goes, I would say that if the market had not been deliberately crashed when gold reached 1900 and silver 50 then the dollar collapse would have already happened and gold would be into 5 figures or more. I would assert that by using cartels, HFT, unlimited fiat, corrupt media and political systems that they have managed to maintain power when they might well lost it without these manipulations. So from their point of view the power to make these manipulations are very strategic.

Elmer Habavilo said...

Desperado- I like ur comment on depravity above. I think depravity, amorality, immorality, knowledge of geopolitics, public relations, and a bit of TA are all essential in having a feel for the gold market and economics generally. They're all helpful. I think a lot of "straight shooters" or lets call them "simple shooters", who aren't used to understanding depraved thinking (and therefore arent great thinkers of course) have been very caught off guard by "how long this has lasted", I.e. the monetary hijinks... Of course media and politics and chicanery have been instrumental in keeping gold low. It's a no-brainer to me... People who say otherwise are either misled or not being totally forthright, or some strange combination.

I still maintain tho that TA has some use... Depravity can be charted... It's just another market force... Same with politics and HFT... If resources are secured from other countries and brought to bear on various markets, that also affects charts. It's a big and complicated world, lots of things can happen. Fortunately all science still has some predictive power within certain situations. I mean there are always constraints, necessity, etc... Your statement about gold at 1900 and silver at 50 seems about right... The silver cup and handle chart seems to tell me the same... That chart tells me that things will get interesting if/ when $50 silver is decidedly broken... I'm expected the unexpected at that point tho, since its such an important level...

Elmer Habavilo said...

Desperado-

also, of course the manipulation is hugely important to the cartel. It's to be expected that that would be the case tho. The currency is printed at will for the most part, so of course commodity manipulation would be important at certain points. Also, the masses are really bad at the mathematical operation of division. I mean addition is not a problem, and multiplication is easily understandable from addition. But I mean division-- that just gets 80 percent of ppl a little dizzy... I mean take 87 divided by 6, 7 or 9 say.... WTFF??!! I mean ppl find it easy enough to focus on the numerator, but if the DENOMINATOR is changing?? And , say, getting a lot bigger?? And you're saying even when the numerator is staying the same or getting bigger, just because the denominator is getting MUCH bigger, that means the numerator is actually getting a lot smaller??? That kind of bullshit is too much for most people.. Especially when its playoff season... Depravity + fiat currency + difficulty with/ hatred for division + a decent amount of natural amorality = metals manip... It's all math and physics

Gary said...

Evolution takes time AD and Deperado, I hope you will both live to see that brighter, fairer days lie ahead. The changes will perhaps become more apparent after 2015, when I expect a significant move by the ECB.

20 years or so until a new formal monetary system is agreed.

Jeanne d'Arc said...

@GM - I really can't imagine me pissing anyone off :-p Least of all the lovely Trader Dan.

Gold will at least touch $1,000 this year, and then I might buy. Hell, I might even start to post again, and I'm sure everyone's looking forward to that.

JdA

Elmer Habavilo said...

Jda- gold will not just touch $1000, in part because its such a huge technical support and psych support that so many people would have a buy order at 1000 so if it does go that low, it would n0t just bounce off 1000... It either wouldnt go all the way to 1000, or it would go $50 past or at least $30 past... it would either be something like 1050 1045 or 930 etc... I still think that 1050 is too low tho... most ppl with a clue would be buying at 1000, therefore it won't go to just there... I agree with longhair Eric king interviewee what's his face, surfer dude... That we've seen a double bottom at 1180

I'd be very surprised if the low were within $30 of 1000 on either side

Elmer Habavilo said...

Jda- I.e. just making a psych point about trading, .. Since a fall to 1000 would be so watched around the world... I would sooner believe 900 than 1000 as the bottom... 1045-1100 makes some sense as a bottom tho

Elmer Habavilo said...

By the way, if my above two points sound counterintuitive , they are supposed to... 1000 is such an obvious point that you'd have a lot of dumber but not that dumb money with buy orders at 1000... The bigger money would therefore either buy 1030 or 1045, so that the hordes of less smart money would never get it, or they would buy at 965 and get a better price than 1000... Like I said tho, we probably won't see either

ssgtrader said...

hi Elmer, what is your prediction for silver ? will appreciate if you can share.

Elmer Habavilo said...

For when SSG?... Off the top of my head I'd say 29 by YE 2014.... 2017:100.... 2025: maybe 150.... It could be $120 or it could be $1000 in 2025... That depends on what regimes win wars etc and what mass movements happen...

For me, one of the more interesting things is what happens in the months after silver decidedly breaks 50... And goes to 60, 70, 80... To me there would have to be some sort of paradigm shift there, on many levels of society probably....

I do see the use of solar panels being big for silver.... I'm not an energy analyst or anything tho... But i could see people having solar panels in 2030 like they have Apple products now... Like some ppl had apple products in the 90s but it wasn't huge... Nowadays everyone has apple something... I could see solar power being like that in 12 years... So silver would benefit from that presumably

Some day down the line when we regain a real middle class again and geoploitical and social stability (maybe in 40 - 60 years), I could see silver getting back to and maybe eclipsing its 15:1 ratio with gold.. Maybe even going 1:1, something like that....

Silver has kind of a catch 22 problem now I think, as far as store of value.... Historically its been 15 or 20 or 50 times less valuable than gold... Right now , for example, when dictator X is run out of his country, he typically tries to take his 10 , 20 or 50 tons of gold.. Which is what, like a truckload? give or take size of truck.... You don't hear about his taking silver, mostly I guess because you'd need 50 truckloads now.... So, versus silver, gold is more go-to value storage because it has can fit in smaller spaces.... But it can fit in smaller spaces because its worth more... So that's a bit of a catch 22 in the gold vs silver thing at least.... I do think its conceivable that as part of a new,(more benign (or at least more efficient and sensible if not always more benign, strictly speaking) order arising out of another century of war, I think its plausible that silver could eclipse gold mostly because of its medical and energy applications, in addition to the store of value... That's probably down the line a half century though... Solar power presents a big opportunity though I believe, looking 50-100 years down the line... Solar panels in Saudi Arabia and other deserts could put a "Maserati in every pot", as I believe the physicist gregory Cochran said somewhere... Then there's terraforming of mars and Venus maybe 50-100 years down the line... And more solar paneling.... This is assuming we get past nuclear issues to the point where we can disperse to other planets and throughout the "nearby" universe.... Then the nuclear issues will hopefully dissipate over distance... Having everyone on "lockdown" just being stranded on earth is not healthy in a sense probably.... We need to diversify in a planetary sense.. But I digress...

Elmer Habavilo said...

I'll go with $150 sliver in 2025 though... I see silver as following its role as "the people's money"... Kings deal in gold, commoners deal in silver... I think that guideline will remain for a while... And as such, silver won't gain quite as much as some people say.... The people will remain relatively powerless or even lose more power for a while... I think we are entering a period of LESS law and order, in which commoners won't do well generally.. I think this will be reflected in their money (silver) for a while.... In some decades though, during and coming out of an era of strife and most likely more wars (another century of war maybe), a more efficient and sensible civilization would probably develop where people's efforts are organized more sensibly, lets say, and concomitant with that greater efficiency and sense would come greater independence and power for the "middle class" (let's call them)... I think the palliative terms "liberty" and "freedom" might fall out of use to some degree, and might be replaced by similarly palliative but at least a bit more realistic terms ... What terms they will be I don't know , but they would maybe convey the idea of "small, but respectable, cogs", as opposed to " 'free' deluded clowns"

So I see the price of silver being tethered to the fortunes of the common man or middle class for a while.... A Maloney-like situation of $1000 silver (in 2014 dollars) sounds good and it might be just in a way (looking at it from an egalitarian perspective), but nature isn't egalitarian nor is it just really, and I think this time around the common people are just better off being realistic and modest and keeping away from platitudes that are belied by reality... Civil liberties are if anything being eroded... I'm not a huge political person, but this just isn't a good environment for the common man, so I don't see silver blowing its top right now.... The only way it IS a good environment for the common man is that at least he can see that his suffering is being increased at a pace that has to have some resolution at some point, if he is going to remain viable at all, so to speak... I think silver is rising in tandem with that trend now... But a "free silver" situation, if I can call it that, I don't see in the cards for another few decades at least.... Like I said tho ( and let me take currency vicissitudes out of the equation), silver buying 50 times more food than it does now might go well with a more sensible civilization 50 or 100 years down the line

ssgtrader said...

Elmer, thanks for your quick reply. Me being a Chinese, I am used to reading the horoscope prediction every Chinese New Year (31 Jan 2104) to see what fortune is installed. Mostly I read laugh at it and forget about it the rest of the year. Since I have just read one and is still fresh in my moemory, the master I followed said that the common people will be the winner against the rich in the year of horse Feb 2014 - Jan 2015).

Elmer Habavilo said...

Hmmm SSG... Well I personally don't see common people winning per se in the next year (or winning outright in the next year, that is), but the notion of the suffering of the common man taking on a trajectory that has to be resolved at some point in the next decade or two... That i could see in the next year, and that would be a victory of sorts I suppose... Or from just a monetary perspective, silver breaking 50 would be a victory of sorts for the common man... Not to be accompanied by celebration, but more as the beginning of the end, with the end of the end being 30 or 50 years away

ssgtrader said...

seriously when I read the prediction, I don't know what to make of it. Hmm, after reading your post, could it be silver >$50 ???

Elmer Habavilo said...

SSG- I think it would make sense if consumer price inflation finally started to pick up some steam in the US in the next 6-12 months... Then continuing into 2015, with silver breaking 50 in late 2015- early 2016