I was supposed to be taking some time off, but I ended up following the markets closely this week. The month's not over yet, but the monthly charts-in-progress look interesting. Gold finally hit the bottom of the channel on this old standby chart:
I'm also posting the monthly chart of closing prices (with 2 standard deviation confidence band from the midline, although technically the distribution of points isn't independent). It isn't too meaningful mid-month, but we see that a close at this current level just under $1600 would technically be a healthy sign that the trend remains up without any overextension.
Our friend Nouriel Roubini, who's always warning of impending economic apocalypse yet somehow considers gold one of the worst investments imaginable (he went so far as to tell Maria Bartiromo this week that "only inbred, cave-dwelling shit eaters with jutting brow ridges and congenital micro-phalluses concern themselves with gold") recently published a piece for his clients titled "Whither the gold safe haven?" (Whither? Seriously dude?) Anyway, the high net worth clients of Screwtape Global Economics know better, as per our proprietary $GOLD:$CRB chart that captures gold's safe haven quotient. When the top horizontal red line is broken, watch out!
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| Spam has done even better |
Silver closed strong. If you're trading, watch the lowest of 3 green lines (once support) and especially the crossing points with the top red line for future resistance. And by all means take profits and use stops.
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| Is it me, or does this chart look like it's ready to drop trou? |
11 comments:
Good catch with that Nouriel...what a potty-mouth.
Could you please elaborate on $GOLD:$CRB and the red-line.
S Roche, I'm popping off a bit of course (as is my wont) since it's just my interpretation of the chart, but since all commodities go up as global currencies devalue, the extent to which gold outperforms a bundle of all other commodities, especially oil (the major component of CRB) (which though infinitely more important than gold as a commodity, is not a store of value) should indicate the relative strength of the one aspect of gold not shared by other commodities, namely, that it's the fundamental store of value historically. And correspondingly, you see that the chart bottoms right around 2005 when people started catching on that there was a housing bubble that would pop. Then the chart takes on a "Step function" aspect, corresponding to events, with the biggest step up during the 2008 commodity deflation which gold pretty much no sold. The latest step up, albeit a smaller one, occurred during the debt ceiling debacle in August. Even though gold has fallen 20% since then, it's safe haven status relative to other real (non paper) assets hasn't changed. It appears to be waiting for the next event to trigger its next breakout.
I updated the second monthly chart to show a channel indicating the 97% confidence band of closing prices. However, though standard deviation is used a lot in this type of analysis, it's technically a misnomer because e.g. when prices are closer to the top of the channel, the location where the next month will finish is generally going to be weighted near the top.
GM Jenkins,
I love the Gold/CRB ratio !!!
You mention oil. As I understand it, oil is about 1/3 of the CRB index. But the gold-oil ratio does not yet show the safe haven property, but the ratio has been inside a channel between 10 and 25 since WW II:
http://victorthecleaner.files.wordpress.com/2012/05/plot-goldoil.gif
IMO this is one of the big open questions, i.e. when will the gold/oil ratio leave the old channel.
Victor
Thank you GMJ
That's a great chart,Victor. An ounce of gold bought you the most oil in 1988, 50% more than it buys you now. Wow.
You're welcome, S. Roche. Nice posts on Turd's site lately, btw.
GLD just puked 1.35%
Here is Lance Lewis' diagram:
http://1.bp.blogspot.com/-RFlGLfr0fq0/T7wTbw1nPDI/AAAAAAAACdA/5viz4joLKG8/s1600/GLDPuke52212.gif
If the puke is as good as the previous one, we should be fine until about $1750. That will be tough on the gold-oil ratio though.
Victor
Just in time for June 29 Euro mark-to-market right? A five-week surge. Game on.
Well, if anything, it looks like $20/day moves within a few hours have become the new normal.
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