October 2014 metals wrap

 Greetings, friends-

Truly an awful time for gold and silver investors right now. Mining stocks are in one of the worst bear markets in history. E.g. compare five-year charts of the NASDAQ crash to mining stocks below. The terrible irony is that I'm sure many people sold common equities and bought mining stocks after the financial crisis to protect themselves from the Wall Street circus ringleaders. Little did they know that they would transfer up to 90% of their wealth over to them in the next 5 years. And that doesn't even touch upon the opportunity cost of pulling out of stocks, which haven't done too badly.




Again, I don't have too much time for extensive commentary -- but luckily most of the charts I've commented on in the past several posts are still current and performing quite well ...

Watch for the 38% Fib line on the CCI




Still waiting for the green flanging wedge to be hit on the "10-yr treasury yields measured in silver" chart, below, which should mark a cyclical change in the gold market. The basis for my confidence in this prediction, made over a year and a half ago, is that this chart reflects the cost of government borrowing based on a real good (i.e. silver, which has both monetary and industrial value), and that cost has to trend downwards. But, since nothing goes straight down, this cost has shown periodically violent "relief" reversals, that appear to be getting more violent and lasting longer before a continuation of the trend.

Unfortunately, while gold&silver had a worse month relative to equities than it did even in April 2013, yields also fell, so the chart below didn't improve much...


Here's a remarkable monthly chart (NASDAQ vs 10-yr yield) I presented recently, predicting it would have a three-line break reversal. It just did. A textbook bubble is no match for the Fed. I am watching to see if this ratio can finish November up another percent (actually less than that), which would rule out a double top, and probably signify a longer equity bull cycle.


 2014 target hit in sliver. I won't short anymore until I have time to draw new lines in the sand. I would be surprised if the green band is broken to the downside, but not shocked, as I wouldn't rule out $12 based on other charts.

I told y'all this line was important. . . when long term trend lines like these are broken, even if they quickly recover, the other shoe almost always drops, in my opinion.

 Here's the gold vs S&P chart I mentioned above. We're well into my target

I presented these two charts not too long ago as gauges for when to go long stocks, and they were on the money. [added 11/5: sorry, I removed the legend from these charts to avoid clutter, but the moving average on the top, monthly, chart are 21-34 months, i believe (fibonacci), and the one below is based on 20-day EMA envelopes]


And the old standbys



One final note before I leave you for the week ... I hate to pile on here, but I got wind of some positivity amidst the gloom that the Swiss gold referendum may pass. Bollocks. It will not pass. Or more precisely, it will only be allowed to pass if gold will not rise when it does. Gold bugs can be so naive, sometimes.

14 comments:

Gary said...

I'd rather have the opportunity to buy some cheap gold than expensive gold.

Party time for goldbugs.

Maybe not for traders I suppose.

One question please, the purists prefer linear charts (the true picture). Would you try some of those next time, for fun? Thanks.

GM Jenkins said...

Hey Gary, thanks for commenting -- glad to know someone's reading...

I use linear charts sometimes, but I prefer log because it's easier to make comparisons between charts that way. And perhaps more importantly, it's easier to make comparisons between one part of the chart and another -- since I use a lot of long term charts. E.g. check out the linear NASDAQ/TNX ratio chart above, where the first 10 years are useless for any analysis.

I don't totally ignore linear charts though -- I agree being more widely used they can be more important for trend-line breaches and the like. E.g. that long term trend line on the gold chart above that was recently broken on the log chart was broken earlier on the linear, and I noted that. Thinking about this now, i seems to me also (though just unscientific impression) that when either a log or linear chart has a breach, it's a safe bet the other will follow.

Re: "party time for goldbugs" -- I don't believe that. I identify with gold bugs, and it's not party time for me. I wouldn't be buying physical gold now, not with a 15% drop a serious possibility. What's the rush? Trading and investing aren't that different, in that you want to get the best price, especially with physical, where selling can be hard (and taxable, etc). There is, I suppose, the possibility that gold shortages will erupt if there is a serious financial crisis, but once you build a solid position, I would be careful to make investment decisions based on such speculations.

Also, I am completely agnostic on how much gold and silver get jerked around by the "central planners" (a completely accurate term, by the way, that should be used as often as possible; anyone who refuses to use that term is essentially an ignoramus of history), but I do believe that they will pull out any stops to prevent gold from skyrocketing in an out of control way. At any rate, gold bugs should be afraid that their gold investments will not be allowed to pay off in their lifetimes, given the immense power of the central planning forces and probably their puppet masters. I find it hard to see gold bugs ever being truly vindicated, because I see things like windfall taxes in the future, basically any measure, including the most fascistic measures, to prevent the kind of people who buy gold (the kind of people who the central planning coalition detests) from doing well.

I also wouldn't rule out the possibility that timing of the current gold crash isn't related to the swiss initiative. It could be a coincidence. It may not be. Anyone who says it definitely is shouldn't be trusted.

DASK said...

Hi GM,

long time lurker.. yes people are reading, thanks for all you do! Personally, I prefer log charts in most things. Your site as of a couple years ago played part in my decision to build cash to buy future gold rather than to finish buying to my target back then. Worked out well, and am waiting a bit more for serious tears to buy. I currently buy the long term scenario in which paper dwindles in price until a supply crisis, whereupon there will be a cash out and a revaluation of physical. Not something to bet the farm on though.. I am very sympathetic to the opinion that it may not occur in our lifetime..

We shall indeed see about future windfall taxes.. I remain agnostic but am still seriously skeptical about the ability of central planners to adequately enforce such things, with the exception of miners. At the very least, get to know some farmers; there is definitely more than one out there that will take an ounce for a butchered beef cow. Perhaps some kind of value floor..

Anyway; just dropping a note to let you know that there are many reading!

Joe Shmoe said...

Gm,
Have always found your work illuminating/humorous/brilliant maybe. You have helped me save and make a little coin and cured a bit of my gold-buggery along the way. Please continue your work, if you're so inclined.

costata said...

Hi GM,

Glad to see some of the silent readers giving you positive feedback.

I see the gold:silver ratio sitting near the 75:1 ratio you mentioned as a possibility a while back. Do you think this is the high point or there is still some way to go?

Cheers

Gary said...

I was being slightly frivolous with the party time comment, but those of us that buy gold know that the central planners can't maintain their scheme without running into some trouble and needing a revalued asset to bail them out. Gold it will be, via an ECB bid in a couple of years, especially now that long term inflation expectations are suddenly unhinged in the EZ.
One day you may wake up to find gold at $5,000 or more an ounce following an ECB operation, it'll be too late to buy then.

Re my favourite chart, TNX v slv, it hit 1.54 today, so must be very close to hitting the trend line. I think the turn is nigh.

We shall see.....

GM Jenkins said...

Hey DASK - thanks for kind words. Great perspective about the butchered beef, I'd like to hear more of where you're coming from. I find that people who are wise to gold (as something more than just another asset to trade) tend to be very interesting. Outside-the-box insights that I always enjoy hearing. I have a post expanding on this that I haven't had time to write up.

Thanks Joe Schmoe, as well.

There's a quote from A Scanner Darkly I like: "There is nothing more terrible than the sacrifice of someone without his every knowing. If it knew. If it understood and volunteered. But--"

I think gold bugs share this sentiment, they realize that the great mass of humanity is being parasitized by an awful class of top-skimming scum. But moral outrage often mars sober judgment, and if by "cured you of your gold-buggery" you mean sites like ours got you back on the sober rails, then that's great. I know back in 2011 I rode the crazy train for a few stops for sure.

costata - yes, thanks for reminding me --in fact the gold silver ratio shot past 75, which tells me we might be entering a blow off top stage. I'm becoming more and more convinced g&s have a ways to fall yet.

Gary - the chart is indeed right about at the trend line, but because it's weekly, lets see what happens today and tmorrow...

costata said...

Hi again GM,

This situation in PMs is getting beyond ridiculous. I picked up on this analyst from a Tweet by Bullion Baron. He's positioned for further falls before a rally. The stats he quotes are outrageous:

http://shortsideoflong.com/2014/11/expect-bounce-precious-metals/

Sample:

Also of note, Bullish Percent Index is at a reading of 0%. This occurred once during the 2008 crash and a cluster of three times during the 2013. All of them led to major rebounds.

I note also he's looking for a correction in the USD.

http://shortsideoflong.com/2014/11/dollar-rally-correct/

Have you seen the chart for the rouble USD? It looks parabolic to me. Isn't that supposed to be a surefire TA indicator of a top?

Cheers

Elmer Habavilo said...

something looks like its going on with the miners on US exchanges... they were up a lot during the middle of the day yesterday, when the metals were flat on the day and the S&P was up only .3%. So far today, the miners are up on average 5% with gold up 1%. Could just be a relief rally though I guess, given how much they were beaten down before.

Louis Manogue said...

Hello Mr Jenkins,

I must say that firstly I don't particularly like your blog. But as you seem to know so much about silver I must ask, if you and your friends are the criminals behind the "genius silver marketing" bubble of 2011? Perhaps you and your posi orchestrated The Bears videos, Winter Benton and other associated marketing techniques? If so congratulations you are very smart. But at the same time, all criminals regardless of their intelligence must eventually gloat about their crimes which it appears you are doing through your website. One thing I think that the powers that manipulate the price have never understood about silver though is that if they just let the price go up to where all the silver bugs would make money, then this would have positive economic results in the fact that these silver bugs would be cashing out of silver and back into cash and then spending that cash.

Warren James said...

Aw gee, three years of attacking and debunking internet-metals hype, and we attract comments like that?

@Louis I want what you're smoking, because ain't it obvious they DID let the price go up to where all silver bugs made money. The subsequent 3-year decline was because the silver bugs DID cash out of silver, pushing the price back down ;)

AdvocatusDiaboli said...

Hi everybody,

the disappointing(?) fact is: Get real, nobody gives a shit about (physical) gold.

Just look at these:
http://www.anlagegold24.de/5000-Euro-Frankreich-Hahn-2014-Deutsch.html
A legal tender(!) gold coin, 5000€ with 100g gold content, face value. 2000pcs worldwide limited mintage. Regardless on how you look at cash, credit, debt, gold, deflation (hyper)inflation..., however, it is a no-brainer in every aspect!!! They even started shipping it to you for free. Still, it does not sell!!!1111

Am I still stacking? I buy always a roll of all the different Perth Mints classics each year, and special offers like the ones above, and historicals I get close to spot, that's basically it.

Greets, AD

Gary said...

That coin is French, risky....!!

AdvocatusDiaboli said...

Gray,
although you meant that probably sarcastic, although you might be right, if LePen pulls out of the euro, stacking which of the following items do you consider more risky?
- 5000€ french legal tender 100g gold coin
- 5000€ german bundes bank issued paper cash
- 5000€ french banque de france issued paper cash
- 5000€ french commercial bank account balance
- 5000€ german commercial bank account balance

or any other suggestion on how to hold nominal legal tender?
Greets, AD