GOLD- WHAT HAS (& HASN’T) HAPPENED

Our good friend Ned Naylor-Leyland of Cheviot Asset Management is back with a MUST READ update on gold.

In light of the deep sell-off in the Gold price, I present 3 charts to clarify what has (and hasn’t) happened.
Chart 1 is a chart of Spot Gold, the second an illustration of what makes up the daily ‘Gold’ market, the third shows the enormous flow of physical metal from West to East in the context of Global mine supply.
There is an ongoing clash between the forces of paper supply and physical demand – paper supply has won the latest round, but its objective of satisfying and slaking demand for the real metal has failed entirely.

Source: http://www.silverdoctors.com/ned-naylor-leyland-gold-what-has-hasnt-happened/

4 Absolutely Spectacular Gold Charts & Commentary

With oil surging and gold and silver rebounding, today top Citi analyst Tom Fitzpatrick sent King World News four incredible charts and commentary covering the gold market.  Fitzpatrick takes KWN readers through a fantastic look at the gold market as only he can, and KWN readers around the world will enjoy this extraordinary piece.

Here is Fitzpatrick’s piece along with 4 tremendous charts:  “(Below is an article covering gold from the) New York Times, 29 August 1976 (3 days after the corrective low had been posted in 1975-1976 before Gold started a 3 year rally into late 1979/early 1980):

 

“Two years ago gold bugs ran wild as the price of gold rose nearly six times.  But since cresting two years ago it has steadily declined, almost by half, putting the gold bugs in flight.  The most recent advisory from a leading Wall Street firm suggests that the price will continue to drift downward, and may ultimately settle 40% below current levels.
The rout says a lot about consumer confidence in the worldwide recovery.  The sharply reduced rates of inflation combined with resurgence of other, more economically productive investments, such as stocks, real estate, and bank savings have combined to eliminate gold‘s allure.
Although the American economy has reduced its rapid rate of recovery, it is still on a firm expansionary course.  The fear that dominated two years ago has largely vanished, replaced by a recovery that has turned the gold speculators’ dreams into a nightmare.”

The above note is probably a close representation of consensus market view at the moment.

We are biased to believe that the low in this correction may have been posted for Gold.  However it is early days and we need to see some more positive price action to support this view.

–  Crude has consolidated but still looks bullish overall

Between 1973 and 1974 the DJIA fell 45%.  As the Equity market then recovered Gold went into a corrective phase within 3 months that saw it fall 445 as the Equity market rallied.

This time around gold has in fact been much more resilient.

–  It did not peak until Sept 2011 (2 1⁄2 years after the Equity market bottomed out).

–  It has so far corrected 39% with an Equity market that has rallied 140% off the March 2009 low (DJIA).  In 1975-1976 it corrected 44% as the equity market rallied 76%.

“In 1976 the Gold correction ended in August and the Equity market began a deep correction in September (27% over 18 months).  During that period Gold rallied by about 78% and over the 1976-1980 period it multiplied in value by a factor of 8 from just over $100 to over $800.  The final part of that rally saw Gold rise from about $470 to $850 over about 4 weeks on the back of the USSR invasion of Afghanistan.  Even without that move it still multiplied by about 4.5 times in just over 3 years.

So what are we looking at to increase the likelihood of the low being in?

In addition, daily momentum is turning up from more oversold levels than those seen before the $270 bounce in 2012.  On a daily chart this is the most oversold we have Been since the turn higher in Gold in 2001.

It has become very stretched to the 55-and-200-day moving averages which now have a big gap between them.

An important thing to note is that Gold broke its support level the same week as the S&P broke above its 2007 high.  As long as the equity market stays resilient (As we saw in 1975-1976) it may be a drag on Gold’s ability to rally substantially.  In the 1980-2000 period when financial assets were aggressively rallying, Gold took a back seat.  We may need the market to be more concerned about the financial/economic backdrop before Gold can get any real traction again.

Source: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/7/3_4_Absolutely_Spectacular_Gold_Charts_%26_Commentary.html

Gold Daily and Silver Weekly Charts

Intraday commentary on the precious metals market is here.

As a reminder this is a holiday week in the US as the markets will be closed on Thursday, July 4 for Independence Day.

And a Happy Canada Day for my many friends and acquaintances in that most decent and honorable of countries.

I remember,  about twenty years ago, landing in Ottawa. As I came up to passport control, I handed over my paper driver’s license with no picture.

“Have you no passport? Is this how you come into a foreign country?” the official asked, holding up my piece of paper with an obvious disdain. “Yes sir I do, and I am very sorry for this. But I did not think to bring it, because since my earliest days growing up not all that far from the Niagara border, I have always considered Canada like a second home.”

And with an incredulous laugh at my cheek, and a sweeping wave of his hand, he let me through. That would probably not work so well these days, but this is a true story.

For years when we crossed the border at Niagara we only had to state where we were born and were waved through. I had never once thought of Canada as a foreign land. My wife and I have spent many happy days on vacation and on business in Toronto, Niagara, Montreal, Ottawa, and Québec City.   I have been to Vancouver several times, but never on holiday. Alas, those days are no more.

I think we can expect some interesting things in the precious metals this week.

Typically the more senior people on Wall Street will leave on Tuesday evening for their holiday in the Hamptons.

So trading will be light. Interestingly enough a fairly important Jobs Report is due on Friday morning, and they do not seem to be delaying this until next week. Expected is +175,000 jobs.  As you may recall the financiers like to raid the metals on a Non-Farm Payrolls day.

Tomorrow is ‘rally day’ on the equity exchange so let’s see if the bulls can pull themselves together for one last market operation before their begin their festivities.

I do not think most realize the shocking nature of this excessive move downward in gold and silver.

The manipulation in the paper markets is there for all to see. I cannot help but laugh quietly every time I hear the Lord Haw Haws and the spokesmodels on the financial networks talking about how gold and silver have fallen into disfavor, and how low the volume of physical purchasing has been. They desire what they do not have!

One can keep doubling down on a bluff for too long, and eventually they will be called, and their cards must be shown.

Nothing is more clear to me that the paper gold and silver that has been shorted cannot possibly be covered. It has gone entirely too far. And further price declines to free up bullion from the ETFs, as I have pointed out, is very counter-productive because it is now just stimulating more physical buying in size.

We are entering a new phase of the currency wars, and the metals bears and financiers are worried, despite their bluff and bravado. Their arrogance is so typical as they reach the end of their game.

Yes they are still dangerous in the short term, but they must feel the fear creeping up their spines.  One after another their control frauds and schemes are being exposed.  Their perfidy is there for all to see.

They have been weighed, and are found wanting.