Gold’s Gain on Russia/Ukraine

Query: Were we not having the “on again off again” RUS/UKR skirmish — (the StateSide President having just tactfully stated the invasion “will” occur) — where would Gold be priced today? To be sure, it settled both yesterday as well as on Thursday at 1901. Prior to that, the last time Gold settled above 1900 was on 10 June 2021, since when through this past Wednesday (174 trading days) the average daily closing price of Gold had been 1799.

Response: Based on Gold’s “terrible technicals” (see our 29 January missive) — combined with general price fallout typically in tandem during prior negative linear regression trend rotations that suggested a run down to 1754 (see our 05 February missive) — as further embellished in anticipating the usual post-geo-political price descent (see our 12 February missive), our best “guesstimate” is we’d instead find Gold priced today in the upper 1700s. (After all, as you’ll recall, price had been residing at 1780 in seemingly infinite perpetuity).

Regardless: the market is never wrong: thus Gold 1901 ’tis. Period. ‘Course, our rationale really is rather daft given the above Gold Scoreboard valuation today of 4134. Gold’s gain on Russia/Ukraine notwithstanding, price is miles below where it “ought” be.

Just this past 04 February, Gold printed at 1792 before reaching Friday’s high of 1905: that’s +6.3% in a mere 11 trading days. Like percentage gains have occurred (on a mutually-exclusive basis) three other times from a year ago-to-date; thus a +6.3% burst is not that unusual.

Further, we wonder who is buying Gold into said geo-political skirmish? Certainly no individual nor financial entity managed by anyone under the age of 50: you regular readers already know we’ve well-vetted that fact. The “born in the 70s and later” crowd don’t own Gold and never will, until (as we’ve previously written) the price one day exceeds $10,000/oz. Then we’ll being hearing: “Dude, it’s like totally the new bits**t!”

But for the present, that leaves the balance of the oldsters, hedgies and sovereigns, all of whom in magnificent herd style have suddenly been buying Gold because they’re “supposed to” when geo-politically it all goes wrong. Hopefully the StateSide President shall soon tactfully reverse 180° by stating the invasion “will not” occur, for which diplomatic success can be claimed a week Tuesday during the State of the Union snooze, (along with having cured COVID). Come then — should history repeat — we’ll expect to see Gold again bumbling about in the upper 1700s.

“So you’re routing for Gold to actually go down, mmb?”

Not routing, Squire, rather as noted “expecting” Gold to return from whence it came, simply because that’s what always happens when the geo-politics come off the boil.

And yet as we turn to Gold’s weekly bars, our forecast high for this year at 2254 (at upper right) remains intact:

To be sure, 2254 is still a long row from here to hoe. Yes, there are a good 218 trading days remaining in 2022. But to gain +18.6% (from today’s 1901 to 2254) in that time stint can be considered a challenge, especially given the broader sideways track of price.

Still, Gold increases of +18.6% within 218 days did occur in 2016, 2019 and 2020. And yet per the above graphic across the past year, the price of Gold has stayed diabolically stalled even in the face of rampant currency debasement. “Oh, all that debasement is already priced into Gold”, they say. “Oh, who really wants it if it’s not transactable”, they say. “Oh, it’s a digital world today and with crypto there’s nothing to weigh”, they say. “*Poof* … So where did it just go?” we say.

To maintain integrity in having posted for the past two missives what had been essentially negative near-term regression trends for both Gold (below left) and Silver (below right), here’s the updated view across the past 21 trading days (one month) for the two, their respective grey regression trendlines now in ascent, albeit the white metal hasn’t received as much interest as has the yellow metal:

Aiding Gold’s cause as well are the Federal Reserve Follies. “All the others except for Lagarde have already raised, so we’re gonna raise three times.” … “No wait, were gonna raise seven times!” … “Oooh! And let’s raise by 50s instead of 25s!!” This is really gonna play out great as we stagflate, eh?

Yet, the struggling Economic Barometer actually put in a positive week in accounting for 17 incoming metrics. Notable improvements were recorded for Retail Sales, Industrial Production and Capacity Utilization, Existing Home Sales and Building Permits for new ones, plus the New York State Empire Index. But inflation ramped up at the wholesale level per the Producer Price Index as well as for Import Prices.

Housing Starts slowed as did the National Association of Homebuilders Index, Business Inventories backed up, the Philly Fed Index fell, and (of no surprise to you Econ Baro followers) The Conference Board’s Leading [lagging] Economic Index for January shrank.

‘Course, in the midst of it all the S&P 500 is resuming its tank. Why even James “Bullish” Bullard is calling for rate hikes in double-time (which for you WestPalmBeachers down there means in leaps of +0.50 basis points versus the classic +0.25 basis point moves … are you still owing those variable rate loans and credit cards?) The St. Louis FedPrez went on to say in an interview this past Monday that “our credibility is on the line here”. Really? (Who knew…)

We know for the second week running the significant price increases made by the precious metals in their 10-day Market Profiles. Here is the fortnight’s volume per price point respectively for Gold on the left and for Silver on the right, the underlying supportive trade prices as labeled.

As well, let’s examine the precious metals’ Market Magnets, (which we don’t often display in The Gold Update, but are a mainstay of the website). The Magnet is the volume weighted-average price compiled from the entirety of the Profile, and is updated daily. At present for Gold (lower left) ’tis 1855 and for Silver (lower right) ’tis 23.40.

The graphic’s key for each market is the underlying oscillator panel: that gives us the actual trading deviation from the magnet, to which per its namesake, price always “snaps back”. And as you clearly can see, Gold at present appears an extreme 46 points “high”; Silver’s distance of 0.53 is not nearly as dramatic given her not getting the bid as much as Gold during the RUS/UKR skirmish, (which we hope swiftly comes to a cooler-heads finish):

We’ll wrap it here with this logistical heads-up: these next few weeks we’ll be writing “in motion” whilst attempting to survive a culturally war-torn region. Computer (but hopefully not brain) capacity shall be a bit less and the timing of the daily website updates and commentary shall differ from the norm. Nonetheless, The Gold Update ought maintain Saturday form!

www.deMeadville.com