Heavy Metals

 Greetings, friends-
Not a happy time for gold and silver bugs, sadly. Here's some mood music to set the tone . . .

 And what will surely upset gold and silver bugs even more is that my long absence from regular posting must needs continue for a while longer, but I see we still get a large number of loyal visitors daily, a few of them not bots, so with September in the books, I felt it incumbent upon me at very least to update some of my regular charts. Once again, the reversals on the two weekly three-line break charts below (with the first, as usual, being the leading indicator) have signaled the recent bear cycles in gold and silver.

My 2014 prediction that the GOLD/S&P500 ratio would hit the yellow line has come to fruition.

 Then the chart from my previous post did what I thought it would: the correlation (red) would reverse and become positive again soon--that was clear--and the only question for me was whether emerging market equities and silver would both move up or down together. The strong resistance line on EEM told me down was far more likely ... and sure enough silver just closed the week at its lowest level since February 2010 (!) ...
 I see $15 in play next, and I wouldn't rule out $12 before a long-term bull rally takes hold. My target (pink circle) here was on the money

My conviction that we won't see the low in gold until the "treasuries in silver" chart hits the green flanging wedge is also looking likely now, a year and a half later, with, unfortunately, still a ways to go:

 The critical long term trend line on weekly gold is now unequivocally broken, and we should expect a foray to the 50% "fib" on the monthly chart of closing prices (as per my 2014 prediction).

Keep this monthly, (very) long term chart in mind: once the moving average ribbon is broken, until the RSI breaks through the green line (which always coincides with a clearance of the moving average ribbon) -- the bear market continues.Check out the vertical, white dotted lines: looks like there might be another third of a cycle to go, if historical cycles have any predictive power.

Just one prediciton for you to close the post: I think the gold/silver ratio is headed for the white line . . .
Till next time -

**bonus chart

Costata mentioned oil entering a bear market in the comments. If crude falls to the $60-80 level, gold would probably hit $800, based on this ratio chart and a few others I don't have time to post.


costata said...

Hi GM,

There will be much wailing and gnashing of teeth if your TA is telling it like it is.

I note this observation from Trader Dan:

There are a huge number of LOSING LONG POSITIONs among the hedge funds and other large specs in the gold market at this time. I noted that several weeks ago in my analysis of the COT reports that those were underwater near $1220 ( some were under at $1240). Below $1200 it gets even worse. If $1180 goes, ALL of the new ones placed last year and/or this year ARE UNDERWATER.



GM Jenkins said...

Hi costata-
Yes, reading trader dan, and then Turd's latest just now, I feel like every one is getting awfully negative and I'm by no means going to pile on short here, though I'll wait and see what happens Monday, as a bad weekly close like today often has some follow through. But looking at the final quarter of 2014, it's hard to see gold breaking above any of the big MAs, such as those in the charts above, and even the 50 and 200 day. You have to believe every time the weak shorts get knocked out, the aggressive short selling will continue. Trader Dan makes a lot of good points about the fundamentals regarding the US Dolar perhaps making a sally to the 100-level, which would be a tough environment for gold. But Turd, too, makes a good point, that with QE3 scheduled to end this month, let's see how the market reacts. Perhaps all this is obvious -- I have stayed true to my NYew years resolution this year and not let any thought about fundamentals influence my trades whatsoever. So far, that outlook has paid off -- the charts looked awful to start the year, despite a relief rally seeming likely sooner or later -- but the rallies never made higher highs, and here we are now.

GM Jenkins said...

Btw -- re-reading my post -- I'd liek to add that the youtube song was for pure comic relief (did the American citizenry really allow videos like to happen??) I'm by no means making fun of "gold bugs" --a word, I should add, that I use ironically, because it is usually thrown about by smug "paper bugs" -- apologists wedded to the house of cards that has been built *essentially* to steal from those who aren't interested (or capable) of trading. Not everybody's a "quant" -- and a world fashioned such that the clever quants are allowed (and encouraged) to suck the non-quants dry is a base world indeed.

costata said...


I realize that you aren't making fun of anyone who is disaffected with the state of the markets and the system today.

Fundamentals don't seem to matter at present and TA rules. I doubt that excessive negativity is a contrarian indicator if everyone is negative because they are looking at the same TA. It could merely reinforce a weight-of-money argument that the trends will continue in the same direction.

The US dollar rally and the weakness in the other currencies reinforces all of the trends you are describing as well.

costata said...


How do you see oil factoring into these trends?

IMO this article gives a good snapshot of the current market.


How would a significantly lower US$ oil price affect your TA? e.g. a price in the $60 to $80 range.

GM Jenkins said...

Good point about the "weight-of-money" effect.

I added a chart re: crude.

costata said...

Thanks for the bonus chart GM. (Though "goldbugs" would probably view this as a bone-us chart.)

The implications of an $800 gold price target are immense. Much food for thought.


Daniel said...

....who's buying everyone and their mother are looking for this to find a bottom here's whats going to happen it won't...everyone else thinks when qe3 ends stocks crash....and honestly fuck turd I was on palins trading corner he kicked me and another guy off for being right time and time again. I called this last month I was short silver switched to gold because it's time for it to play catch up. If 1180 breaks this week which I'm betting it will 1150,1100,1050, then we see 1000 by months end. The only wild card in this whole adventure for gold is nov 30th and the swiss vote. That is the only time I would even consider picking calls up. Otherwise short the thing sell otm put options for added revenue and go to sleep. Yellen's going to print next year. Rate hikes are bs with a dollar approaching 90 europe in a recession. China's not much better and whose left to save the world japan. Theyre about to run a current account deficit for the first time in years that currency is going to 125 in a hurry.

Gary said...

GM, I've copied below a comment I made on a previous post, wonder if you could find the time to answer my query in brackets please? Thanks.


TNX: silver took a leap upwards today toward that ever declining trend line.

(I am confused, as when I divide the TNX by silver I get 0.145, whereas you would get 1.45, am I doing that correctly, or are you doing something else?).

Anyhow, something is in the air today, with the GSR leaping to over 68 as I type, that's a a big red flag.

Fri Sep 19, 06:56:00 PM GMT'

Re gold, and it being a depressing time to be a goldbug, I guess that depends on your timeframe and investing goals.

I'm personally delighted to have had an opportunity to buy more physical gold during this past year at bargain prices (especially in Sterling terms), and the same goes for the gold miners.

We are very close to the turn in the cycle now IMO, and it will be choppy for a little while, and then we're in for a period where gold prices will rise to over $4,000, and miners will outperform gold by a very wide margin, partly due to how lean they've become in the past few years, partly due to a falling oil price (a major cost input), and partly as they will be the only sector showing strong profits growth.

All this doom and gloom is exactly what one should expect to see as an asset class bottoms, and all the gloom-mongers who were predicting $800-$1,000 dollar an ounce gold at the start of 2014 have so far been proved wrong haven't they?

Anyone expecting a falling paper gold price, and miners to keep falling over the next few years (Costata & VtC to name but two) have just been duped by a certain blogger, and have forgotten we have yet to see the period where gold and the USD rise together. That period is about to begin.

Good luck.

Anonymous said...

Gold got down to $1200 without any noteworthy events. Stocks have not even begun to correct - yet they are overvalued as much as they used to be in 2007. What do you think is going to the gold price when we see a repeat of 2008?

$800 as a target is a bit lame, isn't it?

Btw $800/oz gold for me means $53/bbl Brent oil, and that is going to be interesting indeed. Most of the non-conventional North American oil should be out of business when that point is reached...

I know that Another wrote that gold and dollar would rise together. He said this before the launch of the Euro though. At present, I can imagine this only if there is a coordinated attempt to prop up the dollar. Given the geopolitics of the past 15 years, I find this difficult to imagine.


Gary said...


We shall see. I expect gold and the dollar to be well bid in the coming downturn, as safe-haven money flows away from risk. The dollar will need no propping at all, there will be a wall of money heading into the dollar.

You appear not to have noticed that the gold price for the past 3 years has behaved exactly opposite to how it behaved in 2008. That's a symptom of your opinion. back in 08 it moved with commodities, not now. The gold/silver ratio or gold/CCI will evidence this.

The gold/oil ratio is going to expand quite a bit. Another? I don't know, you and others cherry pick his words, discarding some where it suits. He was a lot brighter (and an insider) than any commentator today, bar one perhaps. I know you have a poor opinion of Armstrong, but he gets that gold will rise in all currencies at some point. Money flow, simple.


Elmer Habavilo said...

the low for the metals was in on Friday, or rather overnight Sunday - Monday... as even mainstream outlets are acknowledging these days, the metals are manipulated, but theres only so much that can be done (I realized this about 5 years ago, though of course others realized it decades ago)... Bill Fleckenstein said that 1180 would be the low back at the end of 2013, and I agree with him... we got near to that low again last night...

Ive been wrong before of course, but I made metals purchases for the first time in 18 months on Friday... I agree with Bill F about the Dec 2013 low holding... also, as regards gold $800, the Kitco analyst Jon Nadler (who I believe is no longer at Kitco) used to say years ago that gold would drop to 700 or 800 when it was just over 1000 (in 2009)... in a way he has turned out to be MORE correct than a lot of the more bull forecasters... BUT, that guy is such a gooeyprong chomper, that theres no way that his prediction could be borne out... that's an argument ex hominem I guess youd call it, but I think its the right one... ive said similar things like this before, but I think gold right now is a better buy than it was in the depths of fall 2008

Elmer Habavilo said...

You may be asking yourselves, how did Elmer "the Fuddman" Habs know that the low for silver was in at around $16.6 at right around 3:00am GMT on Oct. 6 ... after all, the charts perhaps point elsewhere... well, $17 - 18 was an important level in the crucial period 2008 - 2010, when things were being decided for the metals (or rather for the dollar)... things were especially decided in 2008 of course ... And it was a feel thing for Habman too... $15 would have of course been very low, and $10 - 12 was certainly too low... I call it "too low" because way too many people would've been on that... too many of the masses too... and that's key-- keeping the masses out... the markets are like a thinking conscious being that purposely makes sure the masses stay "impoverished" (by today's standards of "impoverished" of course)... so if silver went to $10, it might as well have been at $2... if silver were at $2, I think that news would actually have spread to people who have never thought of investing in anything before... 50% of the masses from the western world would have been buying physical silver at that point ($2), so of course it would never get there... but a similar thing could have been said of physical silver at $10 or even $12 (though maybe the percentage would have been 1 or 2% (way too much))... so $16.6 was already quite a deep stab through the "danger zone"...im pretty sure it was the lowest USD silver price in about 4 years...

so Habman Rohstuff relied on his feel for the markets... charts do get thrown out at the very end of the day, as it turns out... often they are useful, but sometimes they are thrown out... interesting about silver though -- it will probably always be capped in some way... I saw a figure somewhere on the net of 25 billion oz of above ground silver in the world... that's about 4 oz for ever man, woman and child in the world... ive always heard there are about 6 billion oz of above ground gold in the world... that's about 1 for every man woman and child... I think we can assume that most people in the world will never be allowed to have their "God-given" 1 oz of gold... most people will never accumulate enough wealth (and knowledge) to obtain their 1 oz of gold... its way too expensive... but families here and there around the earth could manage to save a few oz of silver over time... this would be real wealth of course, and its within their reach in theory... so silver will be manipulated so that this is not seen as worthwhile... the wealthy have a vice-grip lock on gold, so that's their "money" ... silver is the "people's money" but the term "people's money" is a contradiction in terms.. the "people" don't get to have "money".. one way of preventing people from having silver might be by keeping them stupid... this can work or has worked to a large degree... I guess what im saying is that I could see a "freegold" situation well before a "freesilver" situation

GM Jenkins said...

Hey Gary - sorry I missed your comment there - TNX is always 10 times the yield, but I'm not sure that was what you meant. I tend to agree with you by the way that if/when a 2008-type event happens, this time gold won't fall the way it did then.

Victor- glad you're still dropping by. When you say $800 is lame -- I'm not sure I follow - do you think gold will go much lower than that, or that it can't drop so far?

Daniel - good stuff as usual. I agree the $1180 will be a Maginot line. But our friend Elmer H. disagrees (good call). I'd suggest you two duke it out in a special guest post, but I'm not sure either of you could pass the rigorous screwtape drug testing policy. (The good news is, you only have to pass once. Then you are actually encouraged to post crunk)

Elmer, two things. First if gold and silver are manipulated (I don't rule out) everything is manipulated, since TIPS and commodities etc. all are in bear markets. You would have to argue gold and silver are so important that when they are manipulated everything follows. Highly unlikely, although interestingly the heavy-handed Sunday evening silver collapse in April 2011, beginning simultaneously with the release of the Osama news (and idiots chanting "USA USA!") could be argued in favor of that theory. Alternately, perhaps everything is "guided" at some time or other, but gold and silver are the bellwethers and are "watched" especially carefully. Or maybe the crazy up and down action (in illiquid times) is just what it seems, hedge funds out of control, big banks using their power to maximize their profit, etc. , and there's really no gold policy, although without a doubt the plunge protection team is ready to step in if it ever becomes necessary. Probably something like that happened when the swiss franc was tied to the euro right as gold had gone parabolic ... and it tanked.

Second, does anyone have a good explanation why GLD stores are going down while SLV is going up? It's actually all transparent inventories: check Nick Laird's charts at the very bottom of Ed Steer's post here: http://www.caseyresearch.com/gsd/edition/tocquevilles-hathaway-china-has-it-right-about-gold-and-the-dollar

Has Bron or Kid Dynamite ever offered an explanation for that? I'll ask them when I get the chance.

Gary said...

Thanks for the reply GM.

Bron covered the difference between GLD & SLV last year here:


(Basically it's retail v hedge funds).

Anyone that reckons gold is manipulated should head over to Kid Dynamite's blog and read the relevant posts.

Elmer Habavilo said...

GM - I don't know about "everything has to be manipulated", and I don't really know about gold and silver being manipulated. Similarly, I didn't really know at the time FOR SURE that the important low that was hit early Monday morning for silver (at $16.6) was going to be the important cyclical low that it has now become. I guess this will to some degree chagrin some metals bears, and others who were calling for gold $1000, $800 etc. That's fine though.. like I said I wasn't sure myself in the early morning hours of Monday that we had hit an important cyclical low. In fact, I was thinking that maybe it could drop more. The price action later on on Monday gave me the strong sense though that the bottom was in at $16.6 for silver.

Now I regard the bottom as a fait accompli, especially with this afternoon's rally in the metals and metal shares after the fed's meeting. Some of those mining shares really popped after the meeting today as many of you saw. One thing that occurred to me on Monday afternoon, and that contributed to my sense of sureness that the bottom was indeed in (for which this post serves as maybe something of a victory lap), is that I felt that we had reached a point in both gold and silver where most any exogenous event to the system would lead to a sudden pop UP in the metals prices. I.e., if it were announced that hundreds of cases of ebola were discovered in various states... if it were announced that Russia dropped a nuke near Kiev... or Syria fly missiles into Turkey or Israel... or there was a major terrorist attack in the USA... any of these exogenous events would have served to spike the metals up, not down. So even if a "false flag" were conducted by some government or other, that would still only serve to make the metals pop (rather than make the USD out-pop the metals, thus making the metals fall). i.e. there was absolutely no exogenous jarring event that could happen that would not give the metals the advantage over the dollar in the flight-to-safety bid.

Elmer Habavilo said...

in any case, The narrative twists and turns, and the bull phase for the metals is back on... whether it is manipulation or just normal or semi-normal flow of funds or whatever... the metals are back in their bull phase after 3am Monday. And I guess the dollar is entering a bearish downdraft, after the recent updraft. As regards the notion of manipulation, one thing I would say is that if gold ISNT manipulated, it really should be. A paper currency should itself be manipulated too (it is manipulated of course in this case), but also any even theoretically prospective competing currencies should be manipulated also, even if those other currencies aren't of concern to the unwashed masses or many of the financial people. IDK, its a gut thing to me in large part. A paper currency has to be given life and vitality, through a combination of the work and integrity (productiveness etc) of the nation's citizens, and through beating down more "real" stores of wealth which could in theory act as currencies (I put real in quotations, because it's always a relative term) etc. Its just what a nation should do... why not have every advantage you can muster? manipulate in favor of your paper currency by whatever means, and manipulate AGAINST competing or possibly competing more "hard" or more "real" currencies by whatever means you have... I feel like its not rocket science... no need to speculate too much or whatever... it just seems like a workable way to maximize operations... also, needless to say, its not like we have the most incredible efficient workforce/ production etc... just generally speaking, the work ethic isn't great in the USA... I guess people would say, "well they don't need to manipulate gold, silver etc" or "its not practical to do that/ its not necessary" ... idk, one doesn't have to get into too conspiratorial a state of mind to see that its going to help your paper currency if you undercut where possible other COMPETING OR POSSIBLY COMPETING currencies from the past,,, governments lie to start wars, in order to steal resources... ends justify the means , all that shit.. to me it seems like it would be just another part of statecraft...

for those who would still say "the government doesn't care about gold", I would respond that the government starts out by covering all their bases (i.e. the bases that are most important for their fairly small clique to secure their own personal wealth, fortune and security)... nuclear missiles in silos, all sorts of levels of police/ military and bureaucracy to buffer them from the people... control of media to whatever degree is feasible... if I were running a paper currency, id want gold under control, even if mostly no one gives a shit about it... even if (for whatever reason) central banks around the world weren't still hoarding gold to some degree as they do... gold was used as the basis for currency decades ago and centuries ago... id want that shit under control/ under wraps, even if no one spoke about gold in a monetary sense for a century or more... id want that base covered, not for the people , but for myself, Habman Rohstuff.

costata said...

Regarding "manipulation" of markets GM, we have artificial interest rates and the currency issuers interfering in sovereign bond and other debt markets across the globe.

How much "everything" does it take to meet your criteria?

Nice call Elmer. I hope it holds.

Elmer Habavilo said...

Thanks Costata... Yeah my sense is that the "tables have been turned"...the Metal bull is back... For those who like to look at charts, $50 USd for silver will probably correspond to a point of world historical importance... Enormous 34+ year cup and handle chart nearing completion... My guess is silver will be capped again after cup and handle breakout above 50... But capped by a new regime or a new form of the same regime.

costata said...

Hi Elmer,

I read a post recently from Bob Moriarty of 321gold claiming that the parabolic (his description) run-up in the US dollar index was analogous to silver's performance in the run up to $50. (He also maintains that this index merely reflected the dire perception of the Yen and the Euro.)

Moriarty thinks that the US dollar is heading for trouble based on the chart action and fundamentals. He is also apparently on board with the notion of an imminent restart of the gold bull market. Stewart Thomson's last couple of letters have also been encouraging for the "goldbugs". You're gut feeling and timing may end up being vindicated.


Elmer Habavilo said...


Interesting about "dire perception of euro and yen"... Looking at currencies just now, it looks like most major currencies have been declining for the past 3 months, while the Usd index has been rising... All these trends appeared to have stopped at the start of October...

A big factor may be that the USA is heading into midterm elections in early November. So the politicians would do well to keep both the dollar and stock market strong for as long as they can... A strong dollar keeps consumer prices low at the stores for voters. Politicians wouldn't want a weak dollar causing inflation months before an election, but if the dollar and stock market only START weakening in October, the voters likely won't have time to get too angry by early November

Gary said...

Oh dear Costata. Oh dear.

Did you mean 'your gut feeling'?

Most get that one wrong the other way, so thanks for the chuckle this morning.

Good job this isn't Twitter eh?

Gary said...

Re currencies, the next few years are lining up to be a horror show, for those unprepared.

The dollar is medium term very bullish, so after a brief pause here, expect it to head on up again. Money is looking for safety, this bid will increase, some will go into gold and the miners, most will head for the mighty dollar.

Both gold and the dollar rising together is what I expect to see shortly.

costata said...

GM et al,

'Bullion Baron' tweeted a chart with the caption: "Gold / Oil Ratio Breakout?"

Not sure if this link will work:

Is that chart pattern the one that the TA folks call a triple bottom?

My e-mail is having technical difficulties so I may not pick up a reply until tomorrow.


Elmer Habavilo said...

Interesting chart costata... Yeah I guess that would be a triple bottom.... Over the last 50 years, I think 15 has been about the average for that ratio... Like roughly 1500 gold vs 100 oil or so in last 5 years...

Another interesting ratio to me is the s&p vs gold, which GM must be covering from time to time... To me , one chart I've seen is particularly instructive ... And that's the 5 year historical percentage-change comparison between gold and the s&p that is available on market watch.com ...


That's the s&p index, and if u "add" GLD to the chart, and set the time period for 5 years, what you'll see is the mostly inverse relationship between gold and the s&p , over the last 5 years at least... for certain periods, to be sure, they do move UP in tandem... Late 2010 - early 2011 is one example of this... Summer into fall of 2012 is another example... But mostly, they have moved inversely in the last 5 years... With the s&p at record highs this year, this is the situation that goldbugs so bemoan of late.

But the "mirror image" that is formed in that marketwatch comp chart is pretty noteworthy I think... Also of note in that chart is that the s&p and gold have rarely moved DOWN together... That this is rarely seen is due of course to QE... And in those rare instances when they do move down together (the past three months is a rare example I think), we can perhaps claim to have caught a fleeting glimpse of that mythical unicorn-like beast in the market forest-- a real "dollar bull". Normally when we think we see a dollar bull, it is mostly the least of many evils.

But what gets the "flight to safety" bid this time as the s&p drops? Gold? Certainly treasuries have been strong... Will the usd gain vs other currencies? Idk, that dollar index chart looks fairly toppy to me, but we'll see

Gary said...

I am not a robot!

Curiously, since this post appeared, gold has been slowly recovering, whilst the stock market has become unstable.

I've just noticed the Gold/silver ratio has shot above 72 today, liquidity is vanishing once again.

Very high risk indeed of a crash within the next week or so. If not a crash, another large move back down to recent lows is highly likely, and to new lows.

The time to buy gold and HUI is right now.

Gary said...

Chocks away, down we go again.

SPY double-top intra-day, just as my previous comment appeared.

How low do we go?

The next few years are going to be fascinating.

Elmer Habavilo said...

I note that the metals are holding their lows of the evening of oct.5 - 6. Looking forward, what's interesting to me is that the USD in its current form HAS TO collapse if silver breaks 50 and continues for a while to the upside. This is in no way a normative statement on my part... I.e., I don't desire that this should happen. In fact, im guessing it would be better for me if silver does not breach 50 and remain above it for any extended period of time.

It's more akin to a scientific statement on my part. The life cycle of a paper currency (when it reaches a certain point at least) can be read in the chart of a commodity like silver... The USD reached its golden years in the 70s, but after 1980 it got a second wind of sorts... Like a person eating more healthily after a heart attack at age 60... The USD was thereby able to keep itself alive another 31 years until its next crisis point in late April 2011... Now it looks to be on its last legs... The lead up to 50 again, and maybe eventually passing 50 for good...

That lead up to 50 could take 1,5, 10, 20 years... I'm not saying which of these I think it will be... I'm also not saying I think it definitely will break 50 ... What I AM saying is that it will be all over for the current dollar if it DOES decidedly break 50. There could be a "new" US dollar at that point.... but in any case, we would have a currency problem at that point, and ONE resolution of the problem COULD conceivably be a new US dollar. There are other possibly resolutions too of course. But I'm trying to look on the bright side, from my perspective

Gary said...

TNX:Silver now at 1.47, must be touching that downward sloping trendline by now.

Fascinating times, final washout in the HUI? Looks like it to me, and gold at new lows (at least in dollar terms).

Gold/silver ratio flashing red again, and the mighty dollar soaring. A sliding Yen helping no one, sending deflationary waves out to the West.

It's all getting a bit interesting.

And I still think a market crash is possible in Novemeber.

Elmer Habavilo said...

Gary - yeah market crash possible after Nov 4 Election day...

They could even do something as silly as blaming a market crash at that point on something like Ebola (if more cases suddenly "appear" after Nov 4... They would be inclined to downplay Ebola until after the election ( they want people to not be afraid to go to the polls and touch the same voting machine screens that hundreds of people have touched in the last 24 hours... they still want that apparent "mandate to govern" from the voters))

Clearly though, I'll have to stop swinging for the fences... my supposed "cyclical lows" in the metals was broken in pretty short order... I stand by my "dollar collapse after silver breaks $50 to the update" though

costata said...

I think this statement may offer an important insight into the nexus between TA and fundamental analysis:

"Fundamentals are useless until the market decides to price them in."


This analyst/fund manager also describes himself as a long term bull on the PMs while not being convinced that the bottom is in for this phase. Anyway some food for thought :