Friday metals recap, 10/11/2013

My proprietary weekly three-line break charts based on ratios with GDXJ (which indicate when to go long gold and silver, respectively) have reversed, as I predicted a few weeks ago. So, the short gold and silver bull cycle in the intermediate bear cycle would appear to be over. 

I still expect the top of the expanding wedge below (green, dotted) to be hit on my world-famous "yields in silver" chart before gold bottoms. Clearly, there's a ways to go (for example, at the current 10-year yield of 2.7, silver would have to fall to a 15-handle). 

Also, please note the obvious bull flag on the two year version of the ratio.  

Now, take a look at the 20-30 week MA-ribbon below (similar to my old stand-by 144-day MA). I've been emphasizing it for the past several weeks: gold never cracked it, and now we see an obvious (so obvious, could it possibly have been painted??) head and shoulders pattern, with the right shoulder smack at the lower bound of the ribbon.

So, in short, if you're aggressively long PMs here, or have a long position that's unhedged, I'd advise you to do your Christmas shopping now. (And not with credit cards.) Still, I'd be cautious shorting gold at this point.

For one thing, the bull trend has not changed when regarded from the standpoint of a basket of world currencies. See, below, the chart I stole from somewhere, signed "Incrementum" (sorry!), where I drew a more fitting upper-bound trend line (see red arrow).
More to the point, as we all know by now, the American government has been commandeered by the big banks, and (call me paranoid, but ...) I have a sneaking suspicion that the charts will look worst when gold is about to be manipulated upwards (global currency re-valuations, perhaps?). These guys are doing God's work, of course, and have good reason to tip off only their fellow pulpit insiders. But I certainly don't want to be caught with my pants off given such an eventuality; I already have a bad knee from the last time that happened. (I'd be more willing to try to cautiously ride the equity bubble here than to short gold.) 

But far more likely than any black swan currency re-valuation or such, I think we're in for another 10 months of stagnation (at best) in gold and silver. Luckily, that makes trading fairly easy for me. Since I don't believe the long term bull in gold is over yet, I'm waiting for the opportunity to go aggressively long when it resumes. In addition to the above charts, I will be focusing mainly on monthly closes from here for clues.

I had predicted earlier that the May 2013 monthly close at the 31% Fib line (top green dotted line) would be the bottom on the monthly chart. I'll of course be watching it for a bounce, but I now think we're going down to the 50% (green, dotted, lower). However, I'd be really surprised if the lower blue trend line on the below chart is broken on a monthly closing basis, so its intersection with the 50% Fib line looks like a good target. 

On the above chart, please also take a look at the 6-month MA (brown). Gold fell below it in December 2012, when this long (counterintuitive) crash "officially" began.  As long as it's not cleared on a monthly closing basis, things will continue to look ugly for the PMs (and commodities in general), whatever you may read on permabull blogs. Similarly, see the the 34-month MA (pink) (34 is a Fibonacci number, and also similar to the 3-year MA, if you prefer less hocus pocus). Importantly, it served as support for the 2008 crash, but it was broken back in April 2013 for the first time in over a decade. It has now turned, and is headed downwards, also for the first time since this bull market began. It's got a ways to fall, I believe, and until I see an inflection point, I won't easily believe the gold bull market will resume. 

BONUS*** Usually, only my subscribers (paying members privy to my special vault) get to see my ACTUAL price predictions for the future (which, mostly on account of my important contacts, or more specifically, owing to pictures I have of my important contacts in compromising positions when they visit my vault, I typically know well in advance). But, since I might take awhile between posts for the next several months, I figure I'd share with you, the public at large, how the above monthly chart will look for the next 10 months or so.

 Till next time,


Anonymous said...

1050 or thereabouts looks good for a hit. Since the crash I've been waiting to buy gold somewhere between 1000 and 1100. Glad to see your monthly chart backs that up..!

Not so sure about the rate of recovery, though. That bounce back in your final chart (future price prediction) looks dreadfully steep.

So I can easily see 1050 at the start of 2014, but if it's at 1500 by the end of 2014 I'll eat your bag of sex toys.


GM Jenkins said...

Hey JdA,
It's great to hear from you -- hope you're well. On my end, you'll be happy to know the coal cellar is slowly being repaired following your escape last year (who could've guessed what lay behind that giant poster!), and no hard feelings. I suppose I could've indexed your wages to John Williams Alternate-CPI measure, but after reading this, I'll hope you'll come to see my point of view as well. You're welcome back at any time!

Re: charts: the pressure on gold has indeed been inexorable, and we have no reason to think it won't continue (if things like Cyprus, QE4+, no tapering, 5 guaranteed years of negative real interest rates and counting, Janet Yellen's nomination, three debt ceiling fiascoes in the 2 years after what seemed like a watershed debt downgrade, etc. etc. can't put a charge into gold, what can?) , so kudos to you for seeing it coming well before the April crash. While you might be right that the bounce back in my chart looks steep, recall that it's collapsed somewhat since it contains only monthly closing prices. Charts with better resolution may show more sideways action.