|Gold Price, $/oz||1,236.20||13.70||1.12%|
|Silver Price, $/oz||15.16||0.10||0.69%|
|Dow in GOLD $s||293.34||-6.23||-2.08%|
|Dow in GOLD oz||14.19||-0.30||-2.08%|
|Dow in SILVER oz||1,157.43||-19.56||-1.66%|
|US Dollar Index||94.57||0.13||0.14%|
You never can be quite sure what's moving markets in the beginning, then a form emerges from the fog. Gold has been stubbornly strong in the teeth of a correction: what giveth?
Today Italians in Naples rioted in response to Prime Minister Renzi's pushing through bills to bail out Italian banks. They're hopelessly choked on bad loans, so of course the Italian taxpayers and bank depositors must bail them out. Sure, sure, like the government would bail out you or me if we made imbecilic loans to obvious deadbeats. Sure.
Bank stocks responded by sinking like axheads in a stock tank. Bank Stock Index ($BKX) fell 2.86% today to close at 62.05. Behold, the chart: http://schrts.co/sAeVt2
Observe that the BKX peaked last July & thereafter hath fallen like a meteor. Dropped from 80.87 to 55.99 in February. Relief rally followed, which reached resistance around 66 that stopped it cold as kraut. Has been backing down since March, but today closed below the 50 DMA. MACD turned down. RSI points down. Did I mention that it had broken the uptrend line from March 2009 in January 2015? Did I mention it's going further down? Oh. Okay.
More to our tastes is the Gold/Bank Stocks Index spread. As confidence in the financial system wanes, the bank stock index wanes and gold waxes. Since the spread is a fraction, gold/Bank Stock Index, the higher gold rises and the lower the BKX falls, the higher the Gold/BKX spread rises.
Lo, the chart, http://schrts.co/cF2NSf
Since November 2013 Gold/BKX hasn't been able to stay above 19.50. In 2015 it made a double bottom 13.50 & 13.77. Then it hot up in 2016, complete with runaway gaps, & hit 22.36, a 62% gain. Backed down to correct, even closed below 19.50 and fell as low as 18.63. Turned back up and climbed through the 20 & 50 DMAs. Today it gapped up and closed 20.02, up 4.46%. Probably a runaway gap. MACD has turned up, & the RSI.
So what is driving gold & the bank stock index? Might be the news of an Italian bank crisis has folks running into gold?
That would also explain the euro's lackluster performance & the yen's lustrous performance. Euro today lost 0.22% to $1.1371. Looks like a waterfall waiting to happen. Yen, on the other hand, has since 4 April clambered from 89.83¢/Y100 to 92.43¢, up 2.9% Three days ago it gapped up, then gapped up again today. Looks like a runaway, listen to those hoof beats! Look at the chart to see the runaway, http://schrts.co/UuqBFa
I reckon stocks don't pertickerly care for bank crises, not even furrin ones. Dow today somewhere squandered 174.09 (0.98%). Let us run our minds back in time & ponder. Since the 1 April Dow high, the Dow has been up as much as 112.73 yesterday, but over the four days has lost a total 250.79 or 1.4%. Pretty good example of what government & Fed economists like to church up as "negative growth." Y'all have all seen negative growth in nature. That's where a squash plant sprouts, grows up, leafs out, blooms, sets fruit, then suddenly the ground sucks it all back in. Right.
S&P500 took even harder licks. Left behind 24.75 (1.2%) to close at 2,041.91.
In passing I point out that the chart was already showing a top. The unknown Italian bank crisis was only part of that, the rest was the fullness of time and stocks' indwelling weakness. They topped last May, broke in August, & ain't coming back for years.
I ain't got time nor space to talk about the Dow in Gold & Dow in Silver. Suffice it to say both are proving that they have turned down.
Another sign of antsyness in the markets: Yield on US 10 year treasury note fell 3.65%, pretty steep and through some internal support. That shows bond prices rising, which implies the fearful are edging toward the exits, trying to beat the stampede to come.
On Comex, which closes at 1:30 Eastern, gold gained $13.70 (1.12%) to $1,236.20. Silver added 10.4¢ (0.7%) to 1515.6¢. In the aftermarket Gold was trading around $1,240.70 and silver around1522.5¢.
Gold barely missed closing above its 20 dma ($1,237.50). Look at the chart, http://schrts.co/ghsAJK
Day by day gold continues to scale up that rising trend line intertwined with the 50 DMA. Day by day it refuses to break down. Day by day I grow nervouser and nervouser. Day by day any further correction looks less likely.
Wait a minute, Moneychanger! I though you said that when a crisis drives up gold, the effect quickly wears off and the gain is given back.
That's certainly true of panic caused by political crises, but a financial system crisis feeds the heart of gold demand: monetary demand. That's what drives the gold price, & drives it crazy. This Italian crisis is precisely the sort of catalyst you would imagine as a new several year long gold rally begins.
More, if gold drives through that wall at $1,240, it has a chance to push through $1,308 this time. If that happens, say bye-bye: you will NEVER see gold this low again.
I will NO LONGER be telling anyone to hold off buying gold or silver, unless some big drop hits. I am beginning to believer the gold correction has ended, and the next leg up begun. Hold on! Beginning to believe, I said, not certain.
Aurum et argentum comparenda sunt -- -- Gold and silver must be bought.
- Franklin Sanders, The Moneychanger
© 2016, The Moneychanger. May not be republished in any form, including electronically, without our express permission. To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold or 18 ounces of silver. US $ and US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down.
WARNING AND DISCLAIMER. Be advised and warned:
Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures.
NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day one or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps.
NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced.
NOR do I recommend buying gold and silver on margin or with debt.
What DO I recommend? Physical gold and silver coins and bars in your own hands.
One final warning: NEVER insert a 747 Jumbo Jet up your nose.