Is The Low In Place For Gold?

Tyler Durden's picture

Citi's FX Technicals group is biased to believe that the low in this correction may have been posted for Gold. Here's why...

 

Via Citi FX Technicals,

Gold

Two years ago gold bugs ran wild as the price of gold rose nearly six times. But since cresting two years ago it has steadily declined, almost by half, putting the gold bugs in flight. The most recent advisory from a leading Wall Street firm suggests that the price will continue to drift downward, and may ultimately settle 40% below current levels.

 

The rout says a lot about consumer confidence in the worldwide recovery. The sharply reduced rates of inflation combined with resurgence of other, more economically productive investments, such as stocks, real estate, and bank savings have combined to eliminate gold's allure.

 

Although the American economy has reduced its rapid rate of recovery, it is still on a firm expansionary course. The fear that dominated two years ago has largely vanished, replaced by a recovery that has turned the gold speculators' dreams into a nightmare.

The above note is probably a close representation of consensus market view at the moment, except that it is taken from an article in the… New York Times, 29 August 1976 (3 days after the corrective low had been posted in 1975-1976 before Gold started a 3 year rally into late 1979/early 1980)

Long-term Gold Chart

Between 1973 and 1974 the DJIA fell 45%. As the Equity market then recovered Gold went into a corrective phase within 3 months that saw it fall 445 as the Equity market rallied.

This time around gold has in fact been much more resilient.
– It did not peak until Sept 2011 ( 2 ½ years after the Equity market bottomed out)
– It has so far corrected 39% with an Equity market that has rallied 140% off the March 2009 low (DJIA). In 1975-1976 it corrected 44% as the equity market rallied 76%

In 1976 the Gold correction ended in August and the Equity market began a deep correction in September (27% over 18 months). During that period Gold rallied by about 78% and over the 1976-1980 period it multiplied in value by a factor of 8 from just over $100 to over $800. The final part of that rally saw Gold rise from about $470 to $850 over about 4 weeks on the back of the USSR invasion of Afghanistan. Even without that move it still multiplied by about 4.5 times in just over 3 years.

So what are we looking at to increase the likelihood of the “low being in”?

In addition daily momentum is turning up from more oversold levels than those seen before the $270 bounce in 2012. On a daily chart this is the most oversold we have seen since the turn higher in Gold in 2001.

In addition it has become very stretched to the 55 and 200 day moving averages which now have a big gap between them

An important thing to note is that Gold broke its support level the same week as the S&P broke above its 2007 high. As long as the equity market stays resilient (As we saw in 1975-1976) it may be a drag on Gold’s ability to rally substantially. In the 1980-2000 period when financial assets were aggressively rallying, Gold took a back seat. We may need the market to be more concerned about the financial/economic backdrop before Gold can get any real traction again.

The pattern into the low on Gold also reminds us of how the S&P set its low in March 2009

Once the first impulsive low at 741 was regained by the S&P it never revisited it.

A close above $1,322 on Gold, if seen, would look similar

In 1976 the move lower in Gold overshot the 55 month moving average by about 14%

A similar move this time would equate to about $1,185 compared to a low so far of $1,181

The 55 month moving average stands at $1,379

The 200 week moving average stands at $1,459

IF and when we start to overcome these levels from $1,322 to $1,459 our conviction of a bottom being in place will grow. While we remain below these levels (especially if the Equity market continues to remain robust) we cannot rule out the danger that we could get another move lower.  

In that respect we would remain focused on the 1975-1976 correction which if replicated could suggest as low as $1,075

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Martdin's picture

We won't see any meaningful rallies if the dollar keeps strengthening, in my opinion.

Zer0head's picture

http://toronto.ctvnews.ca/elderly-couple-evicted-in-ajax-to-make-way-for...

Tony Kapostins, 90, and his wife, Gaida, 88 forcibly removed from house they lived in for 50 years near Toronto, Canada to make room for toll road.

 A sheriff backed by Durham Police officers delivered an eviction notice Friday to an elderly couple whose Ajax home stands in the way of a planned expansion to Highway 407.

More than two years ago, Ontario’s Ministry of Transportation expropriated a half acre of the couple’s 13-acre property to make way for the construction of an interchange at Lake Ridge Rd. and Highway 401.

The land the MTO expropriated included the home belonging to Tony Kapostins, 90, and his wife, Gaida, 88, who have lived there for 50 years.

 The couple refused to leave, as Tony Kapostins demanded $9 million in compensation for his home. The MTO offered more than $600,000 in compensation plus moving expenses, which Tony did not accept.

On Friday, the sheriff delivered a Superior Court warrant ordering the couple out of the house.

“This has been going on way too long,” an officer could be heard saying inside the home. “They just can't wait any longer and today's the day.”

But Tony Kapostins refused to budge.

“If you want to take me out without paying me $9 million, you shoot me here,” he told officers.

The couple’s son, Greg, explained that his ailing parents “want to live their last few days on the property.”

But construction on the interchange has already begun nearby and the MTO needs to tear down the house to continue the work.

“They have a home for you guys, a beautiful bungalow house,” said the officer. “Everything’s covered, but you have to leave.”

As discussions between the MTO and the couple carried on throughout the day, work crews set up fencing around the home in anticipation of its demolition. The couple was also told they would be issued a trespassing notice if they would not leave.

“Unfortunately this land isn’t yours anymore, so you have to leave one way or another,” an officer said.

After five hours, the couple complied with the eviction order. They were taken by ambulance to a nearby hospital to ensure they were fine after the day-long ordeal.

The couple will be allowed back into the home to retrieve their personal belongings.

The couple has been given a new home in Pickering. However, Greg Kapostins said the home is farther away from the hospital his father is receiving cancer treatment at in Ajax.

The toll road is controlled by
http://investing.businessweek.com/research/stocks/private/snapshot.asp?p...

The person who is the governor of Ontario Canada is Kathleen Wynne
(she is a good person and can help please contact her)

kwynne.mpp.co@liberal.ola.org

kliguy38's picture

EVERYONE knows the low is NOT in.......buyers waiting will continue to wait.....uneducated newbies that held out will sell early as it rises.......only physical holders will survive.....remember......EVERYONE knows its going to sub1000

James_Cole's picture

Last week's analysis from citis crack team didnt play out so now posting shittybank's new call....from the 70s?

What does JPM (circa 1976) have to say about all this?

Spider's picture

We need to take back this country and the only way we can do it is through PM's - we are slaves to the banksters right now but we do have the means to free ourselves.

Together we can break the silver market and break the banksters - if you're interested check out the "Silver Pledge" and join us:

http://www.communitysynergy.com/subscribe/silver_pledge_subscribe.html

markmotive's picture

Marc Faber is still buying...he has roughly a permanent 25% allocation, I think.

http://www.planbeconomics.com/2013/07/marc-faber-on-gold-and-asset-defla...

The Shootist's picture

Everyone knows TA is pointless, hence the 5 hindenburg signals.

cifo's picture

Who's Citi trying to fool?

DoChenRollingBearing's picture

 

 

+ 1 for you here, cifo.

It does not matter what Citi says or what the TA people say.  It is my guess (based on other people's opinions) that technical analysis at this point will not work for gold.  A friend from a while back said he could never get gold charts to "speak" to him anyway, and this was some years ago.  And technical analysis has never been demonstrated to me to actually work.

FranSix's picture

$GOLD Weekly

With an $1179/oz. low, gold prices have now at least confirmed a '4' wave of a Wave One extension.  What that should mean is any comparison of the One Wave extension with a prior Five Wave extension is probably false.  Expectations for a multiples of return such as in the '70's are unfounded.  Returns will probably be confined within an elliot wave paradigm.

http://scharts.co/19Z24MI

The correction we are going through is called a Volatility Smile.  A Volatility Smile is the functioning basis for a long/short derivative strategy. This position is 'in-the-money' as long as trades are maintained below the top blue line in the above chart.  One variable that did not enter into the calculation is that people are buying into the price correction rather than selling.  The simple truth is that the bull market will continue.

http://ectrie.nl/met/pdf/MET11-2-6.pdf

 

-F6

GetZeeGold's picture

 

 

It doesn't matter if the low is in. Gold is the only thing of real value left.

 

You either own it now....or you're playing Russian Roulette.

 

Marco's picture

Power is the only thing of real value ... everything else can be taxed away, including gold.

GetZeeGold's picture

 

 

Germany has a lot of power.....but they can't get their gold back.

 

Gold could go to $35/oz and they still wouldn't get it back....what does that tell you about the real value of gold?

TeamDepends's picture

Speaking of power, that's where lead comes in....

tmosley's picture

Who was it, that makes the rules?

GoldRulesPaperDrools's picture

Rules come from people with power, and I heard somewhere that power eminates from the end of a gun ... in some small form(s) of lead.  I claim if I have enough lead and the ability to deliver it effectively, I can acquire all the gold I want; the question then simply becomes how much is `enough`.

uhb's picture

rules come out of gun barrels ;)

Spider's picture

has gold now become contrarian again?  Hmmm I sure think so...

Schmuck Raker's picture

@ kliguy38 "EVERYONE knows its going to sub1000"

I don't know that.

mayhem_korner's picture

 

 

+1 SM.

kliguy38 is sounding like a scared sheeple looking for someone to validate the tip he got to invest big in GLD puts. 

My buying behavior is the same as it was the last time we went through $1,200, which is the same as it was when it was $1,800.  Because in the final analysis, the only thing that will matter is the weight of my gold holdings, not the price.

DoChenRollingBearing's picture

Yes, that's right, the number of ounces you can accumulate with your fiat, until fiat will no longer buy gold.

mayhem_korner's picture

 

 

Or until you can "buy" it but Comex can't deliver it.  (The proverbial difference without a distinction).

Silveramada's picture

...And the same move, from 76 to 80, an 8 fold move in gold, would put us at about 9,770$, or to be conservative at 7,000$ gold, and beside the fact tha this seem reasonable, we still need the ignition to sparkle the next gold bull rally.

 

 http://zysites.com/silververitas/

unwashedmass's picture

don't worry, the spark is gonna come. may even be the failure of the London Metals Exchange in the next couple of weeks. 

otto skorzeny's picture

if it happens in Canada does it really matter?  Canada used to be alright before they turned into mouthy fuckers like that Israeli boot-licker Harper.

ceilidh_trail's picture

About what I would expect from them- in the old days, this was called "stealing." This shitty company puts up a toll road that doesn't tell you what the toll is. No toll booths, no people, just cameras. I know- I got a bill for about 50 bucks like a year after I drove the damned road. The bill included the threat that they would have my driver license suspended if I didn't pay it. Even though I do not live in nor am a citizen of Canada. First and only bill I got from them. Nice to see they treat there fellow countrymen the same. Somehow, I expected more from Canada. What happened to common decency or morals?

DoChenRollingBearing's picture

 

 

+ 1

An interesting tale.  We just came back form Canada, and thought it was a wonderful place (ex. weather), courteous people and all.  I guess not, we're all under watch and the boot now.

Herd Redirection Committee's picture

Don't paint any country with too broad a brush.  There are some very fine people in North America.  You just have to look outside the cities, by and large.

DoChenRollingBearing's picture

Good point.  There are fine people and jerks everywhere.

greatbeard's picture

>> You just have to look outside the cities,

Isn't that in itself painting with a broad brush?  I'm fairly sure fine people exist no matter what the population density..

lakecity55's picture

How uncomfortable was the anal search upon re-entering the USSR?

You are lucky you were not shot and killed by a state thug, IMO.

TPTB_r_TBTF's picture

Tony Kapostins, 90, and his wife, Gaida, 88 learned that the GovT held allodial title on the house they lived in for 50 years near Toronto, Canada to make room for a toll road, due to eminent domain.

 

Only GovTs can hold allodial title to real estate. 

Doowleb's picture

"The person who is the governor of Ontario Canada is Kathleen Wynne 
(she is a good person and can help please contact her)"

WOW...She's a good person?

Current unelected Premier of the Ontario economic destruction team called the Liberals.

First openly gay woman premier who was previously the minister of Education. The ministry that feels teaching grade two kids about homosexual sex is good governance.

Was deeply involved in just one of the many scandals involving billions of taxpayer dollars. Signed off on relocating two gas plants during the last election in order to curry favour with the leftists in two ridings. This allowed them to hold the two elected seats but cost the Ontario taxpayer well north of half a billion dollars. How many elderly residents had to eat cat food in order to afford their electric bills so her party could keep power?

She may be a good person at home, but her leftist policies are wreaking havoc to the good peoples of Ontario.

 


Enemy101's picture

In Canada, the Crown owns the land, and you purchase Freehold use of that land, but do not truly own it. this prevents strange situations where people demand extortionary rates for way-out-there farmland because they know the government needs to build infrastructure (as can be seen with a 600k market value being extorted for 10 million, 9 million, whatever). Works well in this and many other cases.

mayhem_korner's picture

We won't see any meaningful rallies if the dollar keeps strengthening, in my opinion.

 

You sound like Lady Tremaine with the "if"...conditional prognostications are not worth the keystrokes.

Of course gold is going to weaken if the dollar keeps strengthening, as gold is kryptonite to all fiat currencies (whose fate is sealed, btw).  But that is not the relevant issue.  What's relevant is whether the dollar can keep strengthening when 85 billion of them per month are being injected into the system with no attendant increase in the base of physical goods production.  Anyone who understands math at a 3rd grade level knows that it is an impossibility.  And so the dollar will ultimately lose out to the gravitational pull of its own printing press.

All of the gold monkey-hammering and meme-repeating is to me a blinking red light of CB desperation.  I don't know how long they can keep the orchestra playing, but I can wait them out...

Martdin's picture

Don't get me wrong, long term(I'm talking decades) I am bullish on the price of gold, but it's THIS chart that worries me in the short term.

mayhem_korner's picture

 

 

If you are worried about the price of gold - or GLD, rather - in the short-term, you ought to check your rationale for holding it at all.  I am holding gold as part of my portfolio of protection against debasement of fiat.  As such, the LAST thing I worry about is how much more or less fiat it is worth on any given day.

lakecity55's picture

Man, do not buy PMs if you are not going to hold them at least 5 years! At least!

Do NOT let go of them unless you have acatastrophic emergency!

I would even consider robbing a likker store before I sold mine.

Lets Buy The Dip's picture

Well I can sure see your point....however - Weekly DOW chart looks amazingly good ==> http://bit.ly/14TRH9G

It seems dips in todays economy are nothing more than opportunities for funds and traders to get their asses LONG. 

Handful of Dust's picture

You could also debate, "Is the low in for AAPL?" After all, I read it was the mostly widely held (and loved) stock by hedge funds and big pension plans...and it has plunged 40%.

 

How about oracle?

Blackberry?

 

Each stock, company, commodity is different so you need to look at different issues and ask, "What are the fundamentals?" For the yellow metal, has the Fed stopped pritning? What will happen with over $115 trillion in unfunded liabilities of the US Gubmint as Kotlikoff asks in hi sbook? How about the $400 trillion in global derivatives?

Lord Koos's picture

It's difficult for gold perma-bulls to accept even the smallest heresy.

Redneck Hippy's picture

Interest rates going up.  Dollar going up.  Gold pri  ced in dollars is going down, false correlations with old S&P charts notwithstanding.  Get a grip gold bugs.

q99x2's picture

It is in or nearly in. But if gold crashes the world economy because no more is available then no it is not in.

fonzannoon's picture

I really think this time is different. But maybe I am deluded. I see interest rates and crude oil breaking the back of everything again. The difference is I don't see people running for an etf tied to the thing they want. They will just go looking for the thing they want. Put that scenario alongside a bank going under and getting "bailed in" and you have the perfect storm.

mayhem_korner's picture

 

 

Fonz - you are on the mark.  The things that move the needle fastest are bond yields and oil prices.  Both are becoming nightmares for the CBs.  I view the gold monkey-hammering as some very smart people giving themselves a discount on their harvest of the phyzz.  Unfortunately for them, I have nothing to offer, as all of my bullion was lost in a...well, you know the rest.  ;)

Herd Redirection Committee's picture

With the decline in silver and gold prices, I admit, my first EMOTION (which I don't trade or invest on, ever) was worry.

I've used most of the dry powder at this point.  But it made me think.  How massive are the losses for the guys who are holding interest rate swaps?  How massive the bond losses have been (esp. relative to the losses one would expect w/ bonds), what is coming for the stock and real estate markets (and MBS), and the USD....

Play for the end game.  Don't sweat the small stuff.  Gold is insurance, and silver is a highly useful industrial metal w/ very little in the way of above-ground stocks.  That hasn't changed.

lakecity55's picture

Oil hikes, what a fucking ripoff.

Why? Because of Egypt and the Suez?

The US Military is AT the Suez Canal right now, disguised as MPs to help control riots. There will be no closure of the Canal.

Oil Price Ripoff!

Harbanger's picture

Physical Gold will never "crash", it will find it's real worth when the manipulators can't control it because they no longer own it.  When you live in a unicorn world of socialist make believe, the only things that have any worth are things which are naturally limited.