Tuesday: Market views from Rick Ackerman
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Yup…gold is going to break down. I do not foresee any price recovery and personally would err on the short side on a trend basis. The bear lives on despite the sideways price action. But that will not last forever.
Maybe it is going to 1000 over the summer?
gold is at 1106 Euros too and that was resistance in March now is support and it needs to hold or it could break down in terms of one of the weakest currencies in the world
The gold in GBP was looking good in early 2015 but is looking very mediocre now.
Gold in dollars is in a head and shoulders targetting about $1010. It needs to stay above $1150 or $1010 is in plain sight.
Gold appears to just be in “no man’s land” and is just waffling around 1200. I see how it could make a move up to 1222-1223, and if there is some oomph up to 1239. The main driver would be the US dollar under pressure. If the weak dollar situation was to become as extended as Gary S., Chris T., and Birdman feel is the case, then this may provide a long enough period where Gold could go back and make a move at 1308 (but that is a stretch).
However, if the sell in May and go away crowd hits the sell button at the end of April and going into May, then it is likely we may grind down to test the March 1148 and then maybe the 1132 lows from November.
We still have the Bank of Japan announcement on the 30th about how much they may ease in their QE program. That could rattle the currency markets a bit.
Also the May 8th Job Report could start the move up/down.
So in 1-2 weeks we should get some confirmation as to which way this channel is going to break, but there should be some energy to this move since pressure has been building up around the 1200 level for too long.
Gold has followed the Yen down all the way since September 2012 so more Japanese QE might not be so great for gold unfortunately for goldbugs.
Sure looks like silver is telling us gold will break down shortly. I am looking for further declines tomorrow and believe 1200 will soon become resistance. The dollar is also headed lower tomorrow by my estimations. It has peaked on this cycle of the past many months although virtually nobody is prepared to stick their necks out and say that point blank.
What the heck….let me be the one to say so. Its up for the Euro, down for the buck.
That may very well be how things play out Bird, but if the dollar is going down and the Euro is going up, then wouldn’t that be bullish for Gold? There are of course times where both Gold and the USD move in tandem, and both move against the Euro, but it seems more likely that if the Greenback is down/Euro Up then wouldn’t it be more likely that Gold could go up, even if Silver went down? Silver could be responding to the slowdown in China with it’s Industrial Metal hat on right now and decouple slightly from Gold.
Rick mentioned what is probably one of the most important considerations right now for all the commodity sector. That is China of course. So we really need to ask ourselves what chance resources have of bouncing off their 2009 lows if China really is heading into a low growth slump.
China is indeed slowing. There is no question about that anymore.
The building boom there has been chilled by the cold winds of reality as the recent sharp drop in home prices put truth on the bones of the old saw that what goes up, must eventually come down.
Now keep in mind that gold and silver still function first as commodities and therefore should China suffer an economic setback and the resource industry see further declines in demand that precious metals have dates with much lower prices.
This is the deflationary aspect of a global slowdown that nobody, including our Central Banks, have any power to arrest. So there is a fundamental case for lower prices to be seen in the PM markets based on the hard-landing thesis that is gaining traction where China is concerned.
I think we need to consider one other important factor.
Chinese equity markets are now in bubble territory and to the surprise of most who look on in disbelief, appear to be in the process of doing a rerun of 1929’s stock shock that kicked off the America Great Depression.
All the elements are there. Widespread speculation, extreme levels of margin and throngs of retail investors with little or no experience. In short, we are watching a mania unfold even as real estate prices wither, the Chinese economy slows to stall speed and commodities are hitting multi-year lows.
It has gotten to the point I no longer worry about potential instability in US and European markets when the coming breaking point is clearly under development in Asia. So its pointless to try timing a correction here.
We need only know when the bust arrives over there!
What we therefore need to be alert to is when the Chinese equity bubble peaks and also to appreciate the ramifications that accompany an abrupt loss of personal wealth there and how that scenario will impact the sentiment amongst Chinese investors.
Can you feel the cold wind coming now?
And in all earnestness, how do you think commodities will fare once that bubble bursts and how likely is it the Chinese consumer is really going to pick up the slack and turn into the driving force behind a resurgent growth trend for that country as its export markets weaken?
The popular idea today is that China needs a consumption driven model to displace its declining export and capital investment model. And yet the truth is that China is facing a deep period of recession following the (impending) end of its stock bubble.
Meanwhile, the housing market bubble there has already burst and is closely tracking the experience felt in America when her inflated property markets collapsed sharply back in 2006.
We can now anticipate with great certainty that the China housing bust in motion will inexorably decline back to its mean. That in itself will place tremendous strain on developers, debtors and lenders at all levels. That is to say in other words, it is not “different” there.
China now has the basic ingredients in place for a very significant economic correction. These are: high debts levels and loose lending practices, extremes being seen in private speculation, an equities bubble, export markets in retreat, slowing GDP growth, falling property prices and business that is living on the thinnest air as profit margins have collapsed.
All we need now is a trigger to set off the correction. In an immature market like China’s with the preponderance of responsibility falling on the shoulders of the Central Bank there and the Government to resolve its many issues we need only reflect they can only dig into their treasury of FX holdings but once to stem the troubles.
And 4 trillion does not really buy you much anymore.
China has a date with destiny. So do we because of them. The outlook for commodities has dimmed substantially and thus the prospects for gold remain poor for those banking on a price recovery anytime soon.
Forget about Greece. We need to fear the debt collapse in Asia.
As an aside, I find it interesting that China is not already seen as the most serious risk to our collective economic fortunes during the coming year. The Shanghai is flashing a triple red warning sign that should be obvious to all and yet few are discussing the ramifications of what follows the bust.
While we look on in amazement at how far equity markets there have risen and wonder aloud about the lack of depth amongst a retail trading crowd running in unison toward the usual cliff, most seem to neglect that when the Shanghai blows an artery it is going to be a very shitty day for the Dow and S&P too.
Lets get that on our radar quickly. We could be mere months from a reconciliation and it cannot hurt (in my view) to be cash heavy and light on risk when the bust finally comes.
I would NOT be a buyer of gold or gold stocks at this point. Both will get smashed when the correction comes and at this point we have almost no idea how long it will take for precious metals prices to recover again.
Consider this: As the news rolls in rapidly that individual Chinese investors have lost their life fortunes on a stock bubble that terminated in calamity (don’t they always end in calamity) and the realization sets in that the new illiquidity will only deepen the woes of their housing price decline and lead to an ugly corporate slowdown….that we will suddenly understand the model of a consumption driven Renaissance in China is pure bloody mythology on this cycle.
Professional investors, funds and large commercials are going to react by dumping resources as if they were smoking hot potatoes. Why, you might ask? Well that answer is simple and obvious. It will mean that commodity producers across the globe will face closure or bankruptcy as demand for China abruptly subsides even as supply overwhelms.
China is the biggest buyer of everything. We can be pretty sure a nearly simultaneous stock market and housing bust will dash hopes for a price recovery in resources anywhere on planet earth. So its almost time to put on the rubber boots. We should all be waist deep in muck fairly soon.
And anyway, who the hell wants to be holding commodities, even at deep discounts, when the music stops in the country that is overwhelmingly the largest consumer of raw materials on earth?
For a refresher on reality (fundamentals) look at a list of commodities consumed by China and take note of the percentage role they play in supporting the global producer market.
Feeling sick about a crash in the Shanghai yet?
Well we should all start to worry because this one is baked in the cake. I think it is all but guaranteed. We may also be setting up for one of the fattest, easiest short opportunities in ages if we can accurately time when China equity markets actually do have a bad day and go bid-less while stock prices take a face-plant into the Great Wall of reality.
In short, gold has little hope of seeing a price recovery. Same with silver. My bet would be on a sharp decline and a concurrent shift into US treasury paper. We might also have to say goodbye to the idea that 2009 lows in commodities are not really going to be the bottom at all…
Just one stop along the way to much deeper lows.
Incidentally, my reading of the Shanghai is that its currently in a third wave rally, basis Elliott theory. So the initial correction when the third ends is not going to be what we really need to worry about. A decline will come soon enough but should be followed late summer by a parabolic thrust and when that happens its time to take stock and either get the hell out of Dodge until the smoke clears or put our best skills to the test and make a buck on the crash that must follow.
I am going to add a final note at this point just for clarity regarding my above posts. What I am talking about here is my belief that a very serious stock market crash will manifest in China before six months is out.
By default, I am also now predicting that a global stock market crash will almost certainly unfold as that event takes place. I won’t even bother to hedge myself here as I now feel certain this is what is coming.
So let me be crystal clear on these thoughts. If the Shanghai is indeed in a third wave move based on nine months of price action then it should take six months or less for the fourth and final fifth waves to complete.
That is when we will see our own markets (including Europe) correct in sympathy and the results could be nasty and sharp. The world is connected. Everything is connected now. We will not experience a Chinese stock crash as mere bystanders. Nor should we feel confident that global debt markets and sovereigns can weather a stock crash with any dignity.
I will not however offer anyone advice on this site. That is never appropriate when discussing personal viewpoints which this one certainly is. But I will be telling my own family to take some chips off the table before that ugly day arrives.
Birdman – Great thoughts about China and their coming date with destiny = a Chinese slow-down Shanghai bubble crash, and how that will affect the global picture. I tend to agree that if China does crash, it would put pressure on commodities and equities, as it is a major engine of growth.
Now there is still India, Indonesia, Vietnam, S. Korea, Cambodia, Thailand, Turkey, UAE, Iraq, Saudi Arabia, Brazil, Argentina, Peru, etc…. that are developing infastructure and want phones, laptops, cars, and appliances, but China slowing down would really hurt the globe.
Definitely food for thought!
This is really the gloomiest of my scenarios, Shad. If/when the Shanghai and HK markets correct (er…crash) we are looking at a very destructive period of asset price reconciliation that will have a global tinge to it. I have not yet seen a similar idea expressed elsewhere so I presume this isn’t really on anybodies radar yet but at least we can toy with the idea here at the Kerr report and keep it in the back of our minds. Especially if the Shanghai does go parabolic in late summer as I suspect it will do…… And if it does, we had best plan on keeping plenty of extra diapers on hand because the worst scenario may indeed play out to its expected conclusion. It could get really ugly really fast after that.
Up for the euro down American dollar.
So, down dollar up gold? in American.
American dollar down, Canadian up? gold down in Canadian.
good grief. lol
Yeah, I think that’s got it. If the Euro is up, and Dollar down, and Canadian dollar is up, then gold will be up in US dollars, and down in Canadian dollars. It’s like a game of “whack a mole”.
Funny bb…that had me pretty confused for a minute there too. The dollar is indeed falling in early morning trading as I was asserting last night and metals are slightly off as well. I believe a down day for both is in the cards.
Here is a link to an interesting analysis by Jordan Roy-Byrne on Palisade Radio:
I am hoping NUGT closes above $12 today.
Well, it’s at $11.98-11.99 right now so it is very possible, it could go up $.01.
yep, it just did.
Gold seems to be behaving in this bear market somewhat like the early to mid 1980s.
Gold made a low around $300 USD in 1982 and then again in 1985 with a rally to $500 inbetween.
The second low was on an incredibly strong US dollar with the USDX near 160. So gold did not make a significant new low in 1985 even with an amazingly strong dollar.
That means that in the 1983-84 timeframe, gold held up well in other currencies.
Then from 1985-1987 the US dollar crashed from 160 to 85, about a 45% decline. Gold rallied back to $500, a +67% move.
The gold move from 1985-87 was actually puny, given the fall in the dollar. If you check that bear market rally in gold in a strong currency, there was not even a rally at all. Check gold in Deutschmarks here – gold continued to fall in DM through 1985-87.
http://www.marketoracle.co.uk/Article8701.html
Now, gold’s action is fairly similar. It is holding up well in Euros but not really in US dollars.
Euro gold is up a lot in the past year, so perhaps gold is making a decent bear market rally in a weak currency like the Euro. However in a strong currency like the USD, gold is still in a downtrend.
It is possible that once the US dollar tops and turns down, gold will be strong in USD but weak in other currencies like the Euro.
I other words, during the bear market, the rallies in gold are somewhat illusory.
My goldbug side tells me that gold should have a big rally once the dollar turns down perhaps in 2017-2024 but my gut instinct is that maybe it won’t but will just rally in US dollars (maybe it might double for instance) and not in the strongest currencies.
Basically gold must rally in all currencies if the US dollar tuens down otherwise the secular bear market will continue until about 2030.
Anything less than a triple in the gold price from 2016-2024 is not even worth considering as a speculation.
Great post Dave. It’s interesting you are looking so far out on the time horizon. You could well be right that a new bull won’t form until 2016. I sure cannot see gold closing this year higher than it began but once 2016 hits all that could change depending on how much market drama comes before the year is out. Usually I feel I am just pushing my luck trying to estimate anything longer than a few months in the future.
Ricks longer term outlook is about 800, Bird figured golds about ready to break down, doesn’t look like much upward pressure and the doldrums are close. hmmm