Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
The Hottest Sports Stock Of 2020 - 23rd Sep 19
Stocks Wedge At The Edge – Front And Center - 23rd Sep 19
Stock Market Top Almost Confirmed - 23rd Sep 19
Thomas Cook COLLAPSE! 300,000 Passengers Stranded, Flights Cancelled, Planes Grounded - 23rd Sep 19
Massive Stock Market Price Reversion May Be Days or Weeks Away - 22nd Sep 19
How Russia Seized Control of the Uranium Market - 22nd Sep 19
Dow Stock Market Trend Forecast Update - 21st Sep 19
Is Stock Market Price Revaluation Event About To Happen? - 21st Sep 19
Gold Leads, Will the Rest Follow? - 21st Sep 19
Are Cowboys Really Dreaming of... Electric Trucks? - 21st Sep 19
Gold among Negative-Yielding Bonds - 20th Sep 19
Panicky Fed Flooding Overnight Markets with Cash - 20th Sep 19
Uber Stock Price Will Crash on November 6 - 20th Sep 19
Semiconductor Stocks Sector Market & Economic Leader - 20th Sep 19
Learning Artificial Intelligence - What is a Neural Network? - 20th Sep 19
Precious Metals Setting Up Another Momentum Base/Bottom - 20th Sep 19
Small Marketing Budget? No Problem! - 20th Sep 19
The Many Forex Trading Opportunities the Fed Day Has Dealt Us - 19th Sep 19
Fed Cuts Interest Rates and Gold Drops. Again - 19th Sep 19
Silver Still Cheap Relative to Gold, Trend Forecast Update Video - 19th Sep 19
Baby Boomers Are the Worst Investors in the World - 19th Sep 19
Your $1,229 FREE Tticket to Elliott Market Analysis & Trading Set-ups - 19th Sep 19
Is The Stock Market Other Shoe About To Drop With Fed News? - 19th Sep 19
Bitcoin Price 2019 Trend Current State - 18th Sep 19
No More Realtors… These Start-ups Will Buy Your House in Less than 20 Days - 18th Sep 19
Gold Bugs And Manipulation Theorists Unite – Another “Manipulation” Indictment - 18th Sep 19
Central Bankers' Desperate Grab for Power - 18th Sep 19
Oil Shock! Will War Drums, Inflation Fears Ignite Gold and Silver Markets? - 18th Sep 19
Importance Of Internal Rate Of Return For A Business - 18th Sep 19
Gold Bull Market Ultimate Upside Target - 17th Sep 19
Gold Spikes on the Saudi Oil Attacks: Can It Last? - 17th Sep 19
Stock Market VIX To Begin A New Uptrend and What it Means - 17th Sep 19
Philippines, China and US: Joint Exploration Vs Rearmament and Nuclear Weapons - 17th Sep 19
What Are The Real Upside Targets For Crude Oil Price Post Drone Attack? - 17th Sep 19
Curse of Technology Weapons - 17th Sep 19
Media Hypes Recession Whilst Trump Proposes a Tax on Savings - 17th Sep 19
Understanding Ways To Stretch Your Investments Further - 17th Sep 19
Trading Natural Gas As The Season Changes - 16th Sep 19
Cameco Crash, Uranium Sector Won’t Catch a break - 16th Sep 19
These Indicators Point to an Early 2020 Economic Downturn - 16th Sep 19
Gold When Global Insanity Prevails - 16th Sep 19
Stock Market Looking Toppy - 16th Sep 19
Is the Stocks Bull Market Nearing an End? - 16th Sep 19
US Stock Market Indexes Continue to Rally Within A Defined Range - 16th Sep 19
What If Gold Is NOT In A New Bull Market? - 16th Sep 19
A History Lesson For Pundits Who Don’t Believe Stocks Are Overvalued - 16th Sep 19
The Disconnect Between Millennials and Real Estate - 16th Sep 19
Tech Giants Will Crash in the Next Stock Market Downturn - 15th Sep 19
Will Draghi’s Swan Song Revive the Eurozone? And Gold? - 15th Sep 19
The Race to Depreciate Fiat Currencies Is Accelerating - 15th Sep 19
Can Crypto casino beat Hybrid casino - 15th Sep 19
British Pound GBP vs Brexit Chaos Timeline - 14th Sep 19
Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - 14th Sep 19
War Gaming the US-China Trade War - 14th Sep 19
Buying a Budgie, Parakeet for the First Time from a Pet Shop - Jollyes UK - 14th Sep 19
Crude Oil Price Setting Up For A Downside Price Rotation - 13th Sep 19
A “Looming” Recession Is a Gold Golden Opportunity - 13th Sep 19
Is 2019 Similar to 2007? What Does It Mean For Gold? - 13th Sep 19
How Did the Philippines Establish Itself as a World Leader in Call Centre Outsourcing? - 13th Sep 19
UK General Election Forecast 2019 - Betting Market Odds - 13th Sep 19
Energy Sector Reaches Key Low Point – Start Looking For The Next Move - 13th Sep 19
Weakening Shale Productivity "VERY Bullish" For Oil Prices - 13th Sep 19
Stock Market Dow to 38,000 by 2022 - 13th Sep 19 - readtheticker
Gold under NIRP? | Negative Interest Rates vs Bullion - 12th Sep 19
Land Rover Discovery Sport Brake Pads and Discs's Replace, Dealer Check and Cost - 12th Sep 19
Stock Market Crash Black Swan Event Set Up Sept 12th? - 12th Sep 19
Increased Pension Liabilities During the Coming Stock Market Crash - 12th Sep 19
Gold at Support: the Upcoming Move - 12th Sep 19
Precious Metals, US Dollar, Stocks – How It All Relates – Part II - 12th Sep 19

Market Oracle FREE Newsletter

How to Invest in the Esports Revolution

You Buy the Fear in Gold

Commodities / Gold and Silver 2018 Jul 22, 2018 - 12:04 AM GMT

By: Gary_Tanashian

Commodities

This article does not speak to gold’s proper fundamentals, which are not yet very healthy (although some positive signs are finally gathering). For the proper counter-cyclical atmosphere to engage gold bulls would need have risk ‘on’ markets and assets crack. Yet, gold’s (and silver’s) price may well bottom before readily obvious fundamental improvement is apparent to a majority (as was the case in Q1 2016). 

Far too much analysis is put out there linking gold with inflation. It is true that gold often acts as an effective inflation hedge, but it all too often fails in that capacity.

Far too much analysis is put out there linking gold with war, terror, pestilence and other conditions of human suffering. The surest way to spot a gold promoter, if he is not pumping inflation, is his pitch for gold as a disaster hedge. Yes okay, and I have a little Unibomber shack in Montana to sell you too.


Far too much analysis is put out there linking gold with the vast “resources” and “hard assets” trades. These things are of a cyclical nature and gold is ready and waiting as the anchor of stability on the counter cycle, as cyclical assets are liquidated. At best gold under performs when resources and commodities are booming during inflationary growth phases in the global economy, and should be held only for long-term considerations at those times.

On shorter-term phases, you buy the fear in gold when many gold bulls, influenced by factors like those noted above, are puking their metal to the lowest bidder. It is an almost ritualistic “running of the gold bugs” as I call it.

The most recent liquidation was probably instigated by large speculative interests that chased the momentum of the last inflation trade, which gold did lead in December of 2015 as it bottomed 1-2 months before the tide began to lift silver, the miners, commodities and US and global stock markets. This inflation trade has been largely anti-USD, and it has weakened in the face of the recently firm USD. Simple.

But what is not so simple is the concept that as counter-cyclical forces begin to liquidate the various asset trades, the US dollar (the reserve currency counter-party to the… asset party) rises against the wishes of global casino patrons, not to mention a US president who wants his cake and would like to eat it too. The opportunity in gold and especially gold stocks comes when the gold bugs who’ve been chasing the conditions noted in the first 3 paragraphs above finally give up in despair, thinking that Uncle Buck is the enemy.

Now, I had personally expected gold to bounce after the moving average “death cross” on the chart below as so often happens when TAs warn about this scary sounding condition. Indeed, gold did bounce from 1240 into the 1260s just after the cross, but it was a pretty lame affair, after which the liquidation resumed.

I’ve been slowly adding the gold and silver bullion fund Central Fund of Canada (CEF), as noted recently in NFTRH and in-week updates. That is because the risk vs. reward proposition for gold and silver is greatly improved. How do I know that? Check out the bottom panel of this chart where I’ve added the current CEF discount to NAV of around 4%. In other words, gold bugs are not even accepting a 4% discount on CEF’s metal. Seems like a pretty good deal.

After a volume spike and washout yesterday, today painted a positive candle in gold, silver and CEF as well. We’ll see if this marks a bottom or not. But we are talking risk vs. reward, not trying to pick an exact bottom.

Graphics below from Sentimentrader.com and snalaska.com (markups and ‘exhibit’ notes mine).

As we’ve been noting in NFTRH for the last few weeks, the seasonal average turns positive in July. Nothing is a given, but it can’t hurt to have the probabilities on your side.

Public and CoT sentiment indications are contrary positive as well.

The public hates itself some gold.

And the Large Speculators are puking out as the Commercial Hedgers take the other side of the trade. Everybody knows there’s no inflation, after all. <sarcasm alert>. Gold’s CoT structure is similar to 1 year ago, when a good rally was sprung (there’s that seasonal in action). Leading to this juncture we (NFTRH) spent months noting an incomplete trend to a positive alignment. Boink!

Additionally, 3 weeks ago in NFTRH 506 we noted the following exhibits to a gathering positive risk vs. reward situation in gold.

It was certainly better for us to have considered this situation in advance and NFTRH subscribers have been kept abreast every step of the way, both with the bearish fundamentals and the not-bullish technicals, which became very bearish amid the contrary sentiment indications noted above. In other words, we were prepared while many others swallowed the incorrect perceptions noted in the opening, finally puking over the last month.

Gold is almost never a ‘buy’ when it is both loved by the gold “community” (as a well known leader of the bugs calls it) and the cyclical backdrop is positive. It is almost always a ‘buy’ when it is hated by the gold “community” and the cyclical backdrop is counter, bleak and/or not inflationary. This article illustrates that Thing 1 (gold is hated) in play and Thing 2 is yet to be established. We’ve been preparing for a pretty good bounce at least and if the macro turns, a major move at best.

Subscribe to NFTRH Premium for your 40-55 page weekly report, interim updates and NFTRH+ chart and trade ideas or the free eLetter for an introduction to our work. Or simply keep up to date with plenty of public content at NFTRH.com and Biiwii.com. Also, you can follow via Twitter ;@BiiwiiNFTRH, StockTwits, RSS or sign up to receive posts directly by email (right sidebar).

By Gary Tanashian

http://biiwii.com

© 2018 Copyright  Gary Tanashian - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Gary Tanashian Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules