Gold – The Immovable Object

Summer’s doldrums, August’s dog days, call ’em what you want: the world’s gone nuts and Gold’s gone to sleep for the one billionth time instead of responding to any one thing in any one direction. Price settled yesterday (Friday) at 1219; the prior Friday’s settle was 1222; the Friday before that also was a settle at 1222. The immovable object, indeed.

To be sure, Gold has recorded down weeks in eight of its last nine: but the overall descent does seems to be leveling off with a soft landing in the offing. As we wrote to some traders earlier in the week: “…I think Gold and Silver are basing: hopefully the 1100s are so ‘obvious’ they shan’t trade…”

That said, the 3Ds (Debasement, Debt & Derivatives) are alive and well and expanding as ever. Then yesterday, the Turkish Lira blew up, in turn tanking the Euro to its lowest closing level ($1.14400) in better than a year with the EuroBanks getting boffed in the balance … but Gold merely peeked out from under its sheets, and as a sporting gesture dropped a minuscule 80¢/oz. for the day before returning to dreamland. ‘Course, “currency contagion” notwithstanding, ought we really be all that concerned? After all: we’re talkin’ Turkey here, the annual gross domestic product for which is smaller than that of California or Texas or New York or Florida. So do we really give a derrière du rat? Gold clearly doesn’t.

“But it cudda been worse for gold, mmb, ’cause the dollar had a strong day…”

May we refer you, dear Squire, to last week’s missive in which was substantively shown concurrent rises in both the Dollar and Gold — along with a rising FedFunds rate — essentially throughout 2005?

Still, ’tis unsettling given all that is unsettling ’round the globe to see Gold being comprehensively ignored. A high-level, hardened, Gold-stackin’ hoarder who can delineate the Gold Story as well as anyone we’ve ever met, let alone read, wrote in the past week rather agog about it all with this simple query: “What’s going on?” In sharing this question with another valued reader, they hit on the key word: “Competition”.

Competition is the irresistible force, made up to be sure by the aforementioned 3Ds, but categorized as well by the stock market: “We must own eBay!” ($34.09, trailing twelve-month loss -97¢), “We must own TripAdvisor!” ($54.35, ttm loss -97¢), “We must own AutoDesk!” ($134.85, ttm loss -$2.38), “We must own Salesforce!” ($145.51, ttm price/earnings ratio 223.9x), “We must own NetApp!” ($81.95, ttm p/e ratio 292.7x), “We must own SBA Communications!” ($156.10, ttm p/e ratio 624.4x). How any of these equities — and many others like them — are even allowed in as S&P 500 constituents is beyond us. The obliteration of such irresistible force upon colliding with the immovable object ought finally morph the latter into motion, sending it well up into the stratosphere … or at least back to Base Camp 1377.

By which we segué to Gold’s weekly bars. And for you counters out there, the present parabolic Short trend is 15 red dots in duration, which for the 36 weekly Short trends millennium-to-date ties for the fourth-most lengthy. But as you can see, the rightmost price bars do have that look of crossing the runway’s threshold toward touching down. A wee bounce here, a giggly jiggle there, and the landing complete. But talk about a late arrival. Time then to refuel:

‘Course to view Gold by-the-day since its All-Time Closing High at 1900 nearly seven years ago, as depicted below, it looks more like wheels still up with nose down, price (1219) having materially penetrated beneath the 300-day moving average (1291). That noted, the depth of penetration is about as far as such “recent” pokes have gone, such that strictly in the technical sense, buyers now ought be frothing at the mouth to get in on the El Cheapo:

Meanwhile as all else “bubbles” along, St. Louis FedHead James “Bullish” Bullard says there’s perhaps “…more blue sky ahead than what people think…” as opposed to the economy reversing into recession, and that as an example “Australia is a country … that has not had a recession in … 25 years or more.”So just as we showed two weeks ago that Gold after all is but Copper, StateSide we might now sing “We are Australian…”–(The Seekers, ’87). Either way, seeking to raise their Bank’s funds rate come this 26 September is the Federal Open Market Committee, (barring one or more of you valued readers faxing to them the following chart of the Economic Barometer):

Just as the Econ Baro and the S&P 500 are parting ways, so too are Gold’s “Baby Blues” ascending from flatlining price as we next see below left across the daily bars for the last three months-to-date. The rising blue dots signal the downtrend’s consistency as becoming less so, another sign that the immovable object is near to getting off its rump. Zooming in on the 10-day Market Profile below right suggests that clearing 1223 ought give price a shot at the 1231 shelf, (ya gotta start somewhere):

As for Silver her “Baby Blues” too are on the upside move, albeit her finger in the Profile still appears flippish. Hardly the happy camper our Sister Silver…

In wrapping it up here, whilst much of the Northern Hemisphere relishes through mid-summer, hardly on vacances next week is the Econ Baro, 16 metrics due either to halt its skid or contain it, else exacerbate it. Then we’ve the stock market, which as measured by the S&P 500 returned to within a whisker of its all-time high of 2872 before coming off the boil at week’s end: a double-top there? We still see 2154 (the 25% correction) as playing out. As for Gold’s remaining the immovable object, the otherwise irresistible force of all that is based on foundationless fluff moves ever closer to facing its fallout. Which we’ll in turn see — finally — as making Gold Simply irresistible!