Sunday pre-game, 1/19

 I'd very much like to believe that the positive price action the past few weeks augurs a cyclical shift and return to the good 'ol days of 2010-2011 (back when a financial apocalypse, and the immense human suffering that would certainly ensue, appeared to be right around the corner).

And certainly, the strong-ish bounce off the blue trend line below was a good (and in fact, necessary) development if things are to turn around for the gold and silver bulls. But if we look at the charts -- and as per my New Year's resolution, ignore all fundamentals-related news (or pseudo-fundamentals -related hype) about China's insatiable purchases or JPM lawsuits -- I cannot justify being long here, especially aggressively. The 30-week MA (or its rough equivalent, the 144-day MA) is still at $1300. And note that the red dotted line below hasn't even been cleared on a weekly close. No market goes straight down, so this seems to me just another brief rally before the continuing grind down.

And then there's the Canadian dollar chart from last week... It's broken the blue trend line on a weekly close! Not a good sign. 
 The all-important "yields-in-silver" chart could be rolling over, or could simply be returning to its trend line on its way to the green dotted wedge, which has marked the bottom in gold without fail.

However, silver's strong performance does make me think twice about calling bs on this latest gold rally. 

In fact, the chart I've been using with lots of success this year to decide when to go long silver has given a buy signal. Namely, a reversal on the weekly three-line-break chart measuring the GLD:GDXJ ratio.

However, even here, I'd like to see a confirmation on the similar chart that has dependably signaled the legitimate bull-bear cycles in gold. It missed having a reversal by a hair, so it will be interesting to see how this week plays out.


GM Jenkins said...

Not sure if this is just my browser, but all older posts seem to have been removed from our main page. Warren, could you fix that?

Also, costata - I see you mentioned a dollar half-life chart in a previous comment. I couldn't find it. Could you post link again?

costata said...


The link was in a comment responding to a comment from AD. Here's an extract:

...this chart showing the "half-life" of the US dollar was a perspective I hadn't seen before: (There's a follow up post responding to a reader's comment on that post here: titled "Is the Dollar's Fall Over?")

On the priced-in-gold site there is also a chart showing a similar trend in oil priced in gold. That was no surprise as the oil:gold ratio hasn't moved outside its post-WW2 range during the so-called bull market in gold during the past decade.


Unknown said...

GMJ - that half life chart from costata:

...some other pretty good charts there too... In a way its the best financial chart site on the web, if one takes gold as a more fair measure of the true value of things than USD.

I thought miners responded well this week... But yeah we can't rule out a grind lower here for a while for the metals... I'm not particularly looking for gold to gain ground of course... I enjoy my set salary for the year retaining its value

A forecast for gold's grinding lower over the next year or so was set out by billionaire (but self-professed "worst market timer in world") Jim Rogers in mid-2013. He also called for gold to hit 2000 "in 10 years" in 2010, then it went to 1920 in 2011.. The guy is so homespun sometimes, he winds up spinning stuff out of his ass...

... And of further words , there were none...

AdvocatusDiaboli said...

"Oh just look the half life of the dollar, the half life, can you see it....?"

THAT is something I call some real confirmation bias. Preferably, those echo chambers refuses to look at any other charts.
How about that: Since most people put Oil into the equation of dollar and gold (personally I dont, but lets assume for the sake), why not putting the daily domestic oil production of the US into the Half-life-chart. hmmmmmm.... now IMHO the "half life of the dollar" does not look so bullish for gold any more.
Greets, AD

Warren James said...

Below comment was from Slow Loris Larry (who is having google login issues and asked me to post it):

'May I respectively point out, including to some who surely should already know, that in physics the 'half life' of a radioactive isotope is an invariant constant (the redundancy of my terminology is intentional, for emphasis, just to focus attention).

'Using the analogy of radioactive decay rates to refer to the supposed 'half life' of the devaluing dollar is just silly. You can easily see that plainly from the chart that Costata referenced. The fit to the curve is only very approximate, to begin with - not at all exact, and was non-existent before around 2002 and ends around 2013. So, what does it prove? Nothing. What does it suggest? Nothing useful.

The whole idea is reminiscent of the popularity some few years ago of finding a match between a chart of the gold price over some arbitrary time period and some segment of a particular French Curve, as was then often displayed on as if it revealed some cosmic truth about the future.

Come on, guys. Get serious!

Slow Loris Larry'

p.s. GMJ, I've tried tweaking the layout but seems like Google Blogspot is ignoring the '6 posts' ... it must be HTML-tag related so I'll keep trying. Rgds, Warren

Finally I just want to throw my two cents in: I think 'half-life' is a good artistic way of describing currency devaluation because it conveys the concept easily. Once value has been sucked out of our dollar-denominations, similar to atomic decay it can never typically return and any subsequent decay can only operate as a percentage of the remaining. The weakness of the analogy is that atomic decay can be used to create clocks for computing reference because it is constant and predictable - the FED's actions are quite the opposite.

costata said...

SLL and Warren,

The fit to the curve is only very approximate, to begin with - not at all exact, and was non-existent before around 2002 and ends around 2013.

FOFOA and his posse might consider this time frame highly significant. Unless my memory is failing me oil has a similar pattern the same time frame. China commenced buying USG debt in size for the first time in 2001. According to FOFOA's pal Ari the designated year for ending BIS/European support for the dollar system was shifted when the GFC erupted from 2010 to 2013.

I have no opinion on the half-life analogy except that the notion of irreversible decay described b y Warren accords with my perception of the US dollar.

ssgtrader said...

Hi I am not really a fundamental guy but I just thought with all these $ printing gold should not break below the long term support endding the bull trend. But than again I maybe wrong.

S Roche said...


One fundamental I have been focusing on recently is interest rates. Specifically, short term real interest rates in the US per Eddy Elfenbein's thesis.

One suggestion on a related blog comments section (which included David Einhorn) was to track gold as a multiple of the CPI, rather than Dow/Gold ratios or others.

Are you up for this?


ssgtrader said...

ok, the fact that gold cannot bounce up strongly from long term support is not a good sign. I am more technical orientated.

Unknown said...

its not a good sign SSG, but gold hasnt broken down beyond the 1180 lows. Could it be that the stock market will now decidedly break down, and the fed will pour in a ton more liquidity to support it, thereby sending the metals sharply higher again? No, that wont happen hehehehehehehehe

GM Jenkins said...

Hey S. Roche, good to hear from you - I had just sent an email to Warren last week wondering (among other things) where you've been...

Re: the CPI gold thing, I've always been curious about that. The easiest way to check that out, though, would require I upload a user-defined index into (which doesn't have a CPI option). Anyone have that info? Ideally, the format would be:

"a spreadsheet [saved in] "Comma Separated Variable (CSV)" format. You can then upload that CSV file from your computer to the User-Defined Workbench using the "Upload Data from Spreadsheet" link. The spreadsheet can have up to six columns of data (date, open, high, low, close, volume) and must only have one row of data per date."

But I could do it myself too if I had a good link.