The FOMC’s Garbage Grinder

Following gold’s (GLD) highs of August 2011, the market began a 45% correction that bottomed in December 2015.  The gold market has been rebounding since then, but excitement in the gold market has been constrained.   Gold saw no days of extreme volatility for three years; from 2017 to 2019.

Gold in 2020 has been a good market for the bulls, a year where gold saw eight 3% days.  Two of them were positive 3% days while the other six were negative 3% days.  But a 3% day, be it positive or negative is still a 3% day.  I’m not surprised with this increase in volatility; gold has finally broken out to new all-time highs above $2000 in August 2020.

If gold is to advance to higher levels in the years to come, I expect 2021 will see even more days of extreme volatility than it did 2020.  And when the heavy hand of “policy” is finally lifted from the gold market, and the price of gold is allowed to rise unhindered, we should see a big spike in 3% days.

C:\Users\Owner\Documents\Financial Data Excel\Bear Market Race\Long Term Market Trends\Wk 687\Chart #7   Gold's Total Days of Ext Vol.gif

Silver’s days of extreme volatility (+/-5%) are plotted below.  The comments for silver (SLV) are for the most part the same as for gold, except silver has seen nineteen 5% days (11 positive & 8 negative) in 2020.

C:\Users\Owner\Documents\Financial Data Excel\Bear Market Race\Long Term Market Trends\Wk 687\Chart #8   Silver' Total Days of Ext Vol.gif

If you look at the post March 23rd advance for gold and silver in the performance table below, gold (#21) since its bottom with its eight 3% days has advanced 19.19% at week’s close, while silver (#6) with its nineteen 5% days has advanced 83.88%.  Quite a difference.

This week my table listing the Major Market’s BEV Values is coming a bit out of sequence, but here it is.  Thursday was a good day for the stock market with twelve indexes closing at new all-time highs.  The market pulled back a bit on Friday; still at week’s close fourteen of these indexes were in scoring position, or within 5% of a new all-time high.  I’m expecting more of the same for the remainder of 2020 and in the first month of so for 2021.

I remain a big-bad bear on this market, but I’m a big bad bear with a bullish outlook on the market for at least the next few months.  Until the Dow Jones (DIA) once again begins to experience those dreaded days-of-extreme market volatility (+/-2% days), that’s my story and I’m sticking to it.

The XAU in the BEV portion of this table is underperforming the financial indexes.  It wasn’t long ago when the XAU was closer to a new all-time high than the Nasdaq Bank index, but not any longer.   But in the performance table at the bottom, the gold miners in the XAU closed the week at #2, up 94% from their March bottom while the Nasdaq Bank index close the week at #15, up a puny 63% from their March bottom.  “Puny?”  In December of 2020 I’d say any major market index that hasn’t see an 80% advance off its March 23rd low is a pathetic underperformer, though I know there are those who will take exception to this.

But what are all of these indexes going to do when the FOMC finally blows out the dollar with their massive levels of monetary inflation, as seen in their unending program of QE?  As 2020 comes to a close, I believe gold, silver and precious metals mining are not just superb investments, but a great hedge against our pending monetary disaster.

Seeing the gold miners (GDX) above outperform both gold and silver bullion is a good sign of even better things to come for precious metals investments.

Gold’s BEV chart below is looking great!  Gold’s correction bottomed on November 30th with a BEV of -13.44%.  The bears, so far, have failed to get gold to close below a BEV of -15%, and this week gold closed above its BEV -10% line, at -8.77%.   

Maybe the bad old days where the price of gold languished below its BEV -27.5% ($1360) line below, and couldn’t get above, and stay above this critical level in the chart below are now over.  Gold has been in a sustained advance since June 2019 when it finally broke above this key level, where for six years the BEV -27.5% line capped every advance gold made – until June 2019.  There is no reason to believe this advance is over.  What’s the gold bull’s credo for 2021?  I’d recommend “upward and onward!”

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Disclosure: None.

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