The (beginning of the) End



 Greetings friends!



We’re not yet at the end of the great bear market in gold (2011-2015), but I can confidently say it’s the beginning of the end.

[update 6/9] To clarify, based on a question in the comments, re: my statement to "expect a new low soon." Note that although the chart pattern suggests the next up leg in gold should begin when the $TNX/silver ratio hits the green line, in the past these points have been accompanied by a new low in gold first. So my best guess is that a new low is coming soon, while interest rates may also fall to keep the ratio near where it is.

[*update 6/15] Ratio is indeed still at 1.50 at the close of this week, with gold approaching a new low. One thing I should've made more clear is that the pertinent lows on this chart are for weekly closing prices, so a new low would be < $1158, which was the closing price the first week of March of this year. (It was also the lowest closing price in gold in 5 years, going all the way back to April 2010!) ...Working on some cool charts but no time yet to post.




Let it be widely known that I first called this 2 years ago. It actually surprised even me how relevant that post remains. 


However, I regret to say, a video I had posted at the top, the content of which I have only the vaguest recollection, but the titillation derived whereof I distinctly recall, has vanished…

Well, this one should be timeless. 

Note: Below the fold a chart that illustrates the trend in nominal interest rates since 1980, i refer to it in the comments




This is a monthly 3-line break chart, so although it looks like there's been a 3-line break reversal (see latest bar) -- that actually just happened yesterday, so it isn't permanent until June is over.

My guess is that it will remain though.

 Note how the "up" reversals recently have been singleton events. In fact, one of the reasons I like 3-line break charts is because of the fact that such cases usually do not happen (and thus i make trades betting that if there's a reversal, at least an extra bar or two is forthcoming). But with something as managed as interest rates, it makes sense that the reversals ar ejust head fakes, social engineering bs, and/or "reflief" rallies. In other words, I would not be surprised at all if the next bar is red.

[**Update 6/17]

^HUI, monthly chart, going back to its inception 19 years ago. A few things jump out. First, note from the HUI:GOLD (superimposed, gray) that other than during brief "catch up" stages that occurred in 2001 and 2008, miners as a sector have never really outperformed gold. When the cyclical bear market in gold turns there probably will be another "catch up," since it has underperformed so egregiously. But caution is warranted because note the HUI is at a very important point (dotted grey line), and if it closes the month lower, it will probably have more to drop....

Nothing interesting going with the ratio chart as of yet, still at same spot.


18 comments:

Gary said...

GM, do you remember how you found this correlation please?
So glad I'm a platinum member here, I'd hate to miss this stuff.

GM Jenkins said...

Hey Gary- the TA angle aside (which is three parts hocus pocus of course), as a profoundly serious student of geopolitics, macroeconomics, and both bovine and ursine gynecology, I've actually been looking at this ratio for a long time, along with similar ratios with other commodities. As you know, the bull market in gold that lasted to 1980 was stopped only when interest rates were raised to 15%+. The story since then, though, has been a steady decline until 2008, and then a rapid decline (see chart i put up)

My hypothesis is that the steady decline since 2008 is necessary, thus it cannot be stopped, only stalled, until the financial parasitoids that are now slowly eating their way toward the brain of the Caterpillar of State finally emerge from its hollowed-out soft-tissue shell (unless, of course, they are first expunged; but that is improbable; they have such full spectrum control over the Caterpillar's synaptic networks, they'll likely emerge with wings)

As such, if the steady decline in nominal interest rates is so predictable, i.e. if we can safely assume that the dollars the government gives you in return for lending it dollars will fall--how much more predictable is it that the gold or silver the government must give you for lending it dollars will fall? (and by "government" you understand, of course, i mean the financial parasitoids whom the government serves)

The ratio with silver has always seemed more important to me than the ratio with gold, because silver is the "people's money" of which the government has no stock...

Gary said...

Very interesting, thanks GM.
I'm in the camp that markets set long term rates, not the CBS, they are just trend followers.
So more rate downside to come I reckon, couple more years.

DF said...

Wait a minute. I'm confused.

According to your ratio, gold's next upleg should be starting.

Why new lows?

GM Jenkins said...

Thanks DF- I added to post

DF said...

Thanks

Grumps LaBastard said...

http://www.goldcorp.com/English/Investor-Resources/News/News-Details/2015/Goldcorp-Announces-Increased-Credit-Facility/default.aspx

Goldcorp back on the prowl.

GM Jenkins said...

Thanks for the link, Grumps.

Added an update...

Ryan M said...

I've been following your blog for 2 years. I have been waiting for this moment for a long time. I'm going to play the equities for a levered up move, although I'm not going to make an options play. I'd love to here the regular's opinions on gold juniors or majors. I personally like IAG.

Grumps LaBastard said...

http://www.reuters.com/article/2015/06/15/goldcorp-tahoeresources-sale-idUSL1N0Z128D20150615

Another billion freed up for Goldcorp. And to cut loose Tahoe, a very nice low-cost producer, it must have something up its sleeve.

GM Jenkins said...

Hey Ryan, I added a chart of the HUI and what I'm currently thinking about miners. In short, not excited yet.

Grumps - interesting. . .

Grumps LaBastard said...

I'm itching to buy at HUI in the 150's, but the prospect of a further 20% decline to 120-125 would be a lifetime opportunity to really pull back the bowstring.

Midway Gold has been going bonkers lately. 6M shares yesterday and at least 6M today at 230pm.

Grumps LaBastard said...

There's has been a stealth bull in select juniors. You can't see it by tracking the GDXJ, which if you look at its composition really has some dogs.

http://www.wkrb13.com/markets/640757/klondex-mines-given-new-c5-25-price-target-at-canaccord-genuity-kdx/

Ryan M said...

Wouldn't this be the first time that the ratio has closed above the line? Please could you plot an updated version of this graph?

Grumps LaBastard said...

Anybody seen James Dines lately? Molycorp declared bankruptcy. I remember it was at one point a Dines portfolio pick. Did he get his subscribers out?

Just looking at the Rare Earth etf, REMX, you can see the drop in price, liquidity, and dividends since the 2011 peak.

Goes to show you, all stocks eventually go to zero. Don't be married to your investments. Even gold.

Ryan M said...

I would love an update of the Silver TNX graph. It seems to have broken above the channel for the first time in 15 years.

Gary said...

Let the games begin!

Grumps LaBastard said...

http://www.tanzanianroyalty.com/2015/07/06/tanzanian-royalty-announces-pay-down-to-zero-on-recently-announcedrestructured-convertible-note-financing-minimal-impact-on-share-float-opines-ceo-sinclair/

http://www.lulegacy.com/2015/06/14/tanzanian-royalty-exploration-corp-insider-k2-principal-fund-l-p-the-purchases-662500-shares-trx/513347/

Where did this money come from to retire that desperate equity-theft deal? The K2 money only accounts for a portion. Good for Jim.