Fundamental Developments

While the price of gold was up $19 last week, the price of silver was unchanged. Of course, we are not going to bias our discussions of the fundamentals, based on bearish or bullish theory.

 

This week it turned out that the lighthouse is actually more solid than many people seem to think of late… [PT]

 

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Financial Potemkin Village

A rising stock market has the illusory effect of masking the economy’s warts and blemishes.  Who cares if incomes are stagnant when everyone’s getting rich off stocks?  Certainly, winning wealth via the stock market beats working for it.

 

Learning from history, 2018 style [PT]

 

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Alternating Seasonal Patterns

In the last issue of Seasonal Insights we have talked to you about biotech and pharmaceutical companies as industries that withstand the traditional summer weakness in stock markets. Six weeks ago, we have shown that gold is an asset one can purchase in the summer months to offset this phenomenon.

 

Warning: don’t let the media mesmerize you in the summer months – the stocks of media companies are a veritable seasonal minefield in August to October. [PT]

Illustration via crabo.ru

 

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Fundamental Developments –  The Gap Keeps Widening

Last week, the lighthouse went down 24 meters (gold went down $24), or 50 inches (if you prefer, silver went down 50 cents).

 

They done whacked our lighthouse! [PT]

Image credit: Skip Willits

 

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Data Interpretation Problems

Oddly enough, these days it has become more difficult to interpret positioning data. We get more granular data than before, such as e.g. the disaggregated commitments of traders reports (CoT – even if they are still released with a three day delay), but at the same time the goal posts in futures markets have shifted greatly. Former extremes in positioning have been left in the dust with the advent of QE (and the associated desperate “hunt for yield”) and the adoption of large scale systematic trading. Here is a glaring example illustrating the point:

 

Speculator net positions in crude oil futures: after decades in which net long positions rarely exceeded 100,000 contracts, a new post GFC era record has been set in the speculative position at 740,000 contracts net long in early February 2018.

 

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Cold Dark Clouds

The sun always shines brightest in the northern hemisphere during summer’s dog days.  Here in America, from sea to shining sea, the nation burns hot.  But, all the while, cold dark clouds have descended over the land of the free.

 

In case you ever wondered – yes, they really did say it… [PT]

 

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Which Disturbance in the Farce can be Profitably Ignored Today?

There has been some talk about submerging market turmoil recently and the term “contagion” has seen an unexpected revival in popularity – on Friday that is, which is an eternity ago. As we have pointed out previously, the action is no longer in line with the “synchronized global expansion” narrative, which means with respect to Wall Street that it is best ignored.

 

Misbehaving EM currencies – the Turkish lira has become quite unruly of late, which is bad juju for a country with a huge balance of payments deficit and an external debt-to-GDP ratio of well above 50%. Arguably the zaftige move in the Chinese yuan is the more important event though. If it breaches the red resistance line in the chart above, the yuan will be at a new 10-year low. Oh well, who cares? Not the US stock market if recent headlines are any indication.

 

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The Fundamental Price has Deteriorated, but…

Let us look at the only true picture of supply and demand in the gold and silver markets, i.e., the basis. After peaking at the end of April, our model of the fundamental price of gold came down to the level it reached last November. $1,300. Which is below the level it inhabited since Q2 2017.

We will look at an updated picture of the supply and demand picture. But first, here is the chart of the prices of gold and silver.

 

Gold and silver priced in USD

 

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The Goldminbi

In recent weeks gold apparently decided it would be a good time to masquerade as an emerging market currency and it started mirroring the Chinese yuan of all things. Since the latter is non-convertible this almost feels like an insult of sorts. As an aside to this, bitcoin seems to be frantically searching for a new position somewhere between the South African rand the Turkish lira. The bears are busy dancing on their graves.

 

Generally speaking bears have little to celebrate these days, but in some sectors they still do. If you want dancing bears with music, they have those on Youtube.

 

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Historical Evidence

The world grows increasingly at odds with itself, with each passing day.  Divided special elections.  Speech censorship by Silicon Valley social media companies.  Increased shrieking from Anderson Cooper.  You name it, a great pileup is upon us.

 

It was probably Putin’s fault (just a wild guess) [PT]

 

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Closing the Affordability Gap

Up until recently, the Seasonax app was only available to users of Bloomberg or Reuters terminals, putting it out of reach of most non-institutional investors. This has now changed. A  HYPERLINK “https://app.seasonax.com/”web-based version has become available which anyone can use, and it comes at a much lower price point as well. When visiting the site where the app is hosted, this is the welcome screen:

 

Featured patterns at the Seasonax web app page

 

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FRN Muscle Flexing

Shh, don’t tell the dollar-paradigm folks that the dollar went up 0.2mg gold this week. Or if that hasn’t blown your mind, the dollar went up 0.01 grams of silver.

It’s less uncomfortable to say that gold went down $10, and silver fell $0.08. It doesn’t force anyone to confront their deeply-held beliefs about money. But it does have its own Medieval retrograde motion to explain.

 

Even the freaking leprechaun is now offering government scrip…  this really takes the cake. [PT]

 

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