Kelsey Williams

Gold Technical Perspective – Why So Bullish?

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Does technical analysis need to be so convoluted?  Here are a couple of definitions from different sources:

1) Convoluted: (especially of an argument, story, or sentence) extremely complex and difficult to follow. (source)

2) Convoluted sentences, explanations, arguments, etc. are unreasonably long and difficult to understand.

We are not talking about the accuracy or relevancy; or even the general length of an article centered around charts and graphs. But the convolution of most technical analysis does provoke some head scratching.
Another concern might be the nearly universal use of extrapolation. 

1) Extrapolation: the action of estimating or concluding something by assuming that existing trends will continue or a current method will remain applicable.

2) Extrapolate: to infer or estimate by extending or projecting known information. 
Judicious use of extrapolation is warranted. However, the inference of trend continuation can lead to predictions and expectations of little foundation or merit.
In this article we will look at three charts (one-year, five-year, and ten-year) of GLD, the SPDR Gold Shares ETF. (source for all charts)
In order to emphasize simplicity and consistency, I have drawn only two lines on each chart – a rising uptrend line of support; and a descending overhead line of resistance. All three charts are updated as of Friday, February 15th, 2019.
Immediately below is the first chart, a one-year history of daily GLD prices…
From this chart we can see that GLD has worked its way higher since its recent low last August. And it appears that it soon may intersect/test overhead resistance at 126. If it does break through and move higher, most observers would probably think that doing so would signal much higher prices.
That seems reasonable, but how high? And what about the downside risk? If it doesn’t break through soon, it could fall back to its rising uptrend line of support. Currently, that is a drop of about eight percent to 114.
Is there enough upside potential to offset the downside risk by an acceptable margin?
While there is nothing overtly negative in the chart pattern, there is also nothing obviously positive, either; at least to a degree that would warrant excessive bullish optimism.
So, lets look at the next chart, a five-year weekly history of prices for GLD…
On this chart we see that there is a descending line of overhead resistance dating back to at
least February 2014.  And the rising uptrend line of support dates back to December 2015.
The longer time periods in both cases are indications of strength. This means that the overhead line of resistance we talked about before will probably not be broken too easily. And maybe not right away. It has turned back at least three previous attempts in the past three years.
But it also means that the uptrend in place for the past five years cannot be taken lightly, and could provide strong support on any pullback.
So where does that leave us? Is there sufficient technical justification to support wildly bullish claims for new highs in gold prices this year? Next year?
Our final chart just below is a ten-year history of monthly prices for GLD…
From this chart we get an entirely different perspective about gold prices. The rising line of support which has been in place for three years is seen within the context of declining line of overhead resistance which goes back almost six years.
In addition, it is apparent that the two lines will soon intersect; and that the price of GLD will eventually cross at least one of those lines. But which one?
If it is the line of overhead resistance, then that would seem to indicate that recent strength in the price of GLD is the foundation for considerably higher prices.
But the risk on the downside is still significant. Possibly much more than most recognize.
It took twenty-eight years for gold to finally surpass its 1980 price peak of $850.00 per ounce. We are now in the eighth year of declining prices for gold. Can you wait twenty more years to see $1900.00 gold again?
Why so bullish?  (also see Gold Under $1000 Is A Very Real Possibility)

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED!

 

 

Are Gold Bulls Naively Optimistic?

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Are gold bulls naively optimistic? They are certainly optimistic; at least as regards their expectation for higher gold prices. But is that all that is needed to make them happy?

If gold marches higher from here, does that signify that all is well?  Would the gurus and wanna-be millionaires be proven correct if gold were priced at $10,000.00 per ounce?

We could ask when. But if those who expect big things for gold are correct, then when might not matter. 

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Fantasy Prices For Real Estate

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(author note: If you have not read the original article (link below), I suggest you do so before reading this one)

From “How Much Is Your House Worth Today? Another Crisis Brewing?” …

"Maybe it is time to sell the ‘investment’. After all, it has been more than ten years since our investor broke ground on his personal gold mine. But, after speaking with the realtor, our investor is even more discouraged.

Apparently, a reasonable asking price is somewhere in the neighborhood of $690,000.00 – $700,000.00.  That is considerably less than the purchase price of $1.1 million. And it is also less than what is still owed – $850,000.00. Which means it will have to be a short sale – if the bank will agree.

After some negotiation, the bank agrees to a conditional listing at $749,900.00.

Exactly two months later, the asking price is reduced to $699,000.00. And a short two weeks after that, it is reduced again – to $649,000.00.

Ten long weeks later, an offer is tendered. The offered price is $550,000.00. It is quickly turned down by the bank. The listing is removed."

Now for an update. Five months after removing the listing, our investor decided to try again. The house was relisted in July 2018. The listing price of $749,900.00 was identical to the original listing price in August 2017. 

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Need A Second Opinion?

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DO YOU NEED A SECOND OPINION?

Let’s face it. No one plans financially for disaster. We assume that if we are conscientious, persistent, and long-term oriented, that our plans –  generally speaking – will find fruition.

We carry insurance to protect ourselves against financial loss from events such as death,  major illness, disability, property damage, long-term care, etc.

But what about systemic risk?

How will you survive a complete credit collapse and loss of 50-90 percent of the value of all assets denominated in U.S. dollars? What about a full-scale depression?

When most advisors talk about investing in such a way as to minimize risk and avoid market blowouts, there is an implicit assumption that whatever the situation, it will be temporary; that the financial markets will continue to function.

Maybe that isn’t the case. Wide-scale bankruptcies, bank failures, and interruptions in communication channels could effectively stop markets from functioning at all.

Suppose you have an investment that generates huge profits for you during a stock market collapse; say a short position on some individual stocks or an ETF with a similar strategy.

Because of the leverage involved, if a market decline is steep enough and swift enough, there may not be any traders or other investors with money to whom you can sell your profitable ETFs or from whom you can buy back your existing short positions.

What if the U.S. dollar renews its long-term decline in accelerated fashion? Is runaway inflation a possibility and how would you be affected?

Do you understand the concept of fractional-reserve banking and the danger it presents?

Maybe you don’t own stocks. You might own bonds which provide you with interest income. Or real estate; or gold. Extreme negative market conditions will affect all of these things in ways you probably cannot imagine.

If you are worried or concerned about any of  these things, or just feel the need to be better informed, you could benefit from a personal consultation.

Or, perhaps you are a corporate officer who has employees that would gain from a better understanding of these issues.

Whatever your particular situation, take action today. Send me an email with your concerns and questions. I will get back to you quickly.

Let’s talk…  kwilliams@kelseywilliamsgold.com

Bio: KelseyWilliams

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED!

 

Gold Price – US$700 Or US$7000?

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Does either of the above preclude the other?  In other words, if we expect gold to reach $7000.00 per ounce, and we are correct, does that mean that we can’t reasonably expect gold to go as low as $700.00 per ounce? Conversely, if we are predicting or expecting gold to decline from its current level and even breach $1000.00 per ounce on the downside, can $7000.00 per ounce, or anything even remotely close to that number, be a reasonable possibility? 

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Gold – Looking Back, Looking Ahead

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GOLD – LOOKING BACK

Each year we are treated to calls for gold’s next big move. We heard it last year; and the year before, too. And the year before that. It may not be a broken record , but it is the same song.

Predictions for gold’s price are more than guesses, but they might as well be just guesses. That’s unfortunate, because no small amount of time is spent trying to analyze gold. And it is time wasted. 

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Federal Reserve – Conspiracy Or Not?

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Conspiracy surrounding the Federal Reserve is a subject of much debate. A controversial topic, yes;  one which stirs the imagination of some, fires the suspicion of others, and provokes the declamation of not too few detractors. 

From G. Edward Griffin/The Creature From Jekyll Island…

“Back in 1910, Jekyll Island was completely privately owned by a small group of millionaires from New York. We’re talking about people such as J. P. Morgan, William Rockefeller and their associates. This was a social club and it was called “The Jekyll Island Club.”

That was three years before the Federal Reserve Act was finally passed into law. It was November of that year when Senator Nelson Aldrich sent his private railroad car to the railroad station in New Jersey and there it was in readiness for the arrival of himself and six other men who were told to come under conditions of great secrecy.

For quite a few years thereafter these men denied that any such meeting took place. It wasn’t until after the Federal Reserve System was firmly established that they then began to talk openly about their journey and what they accomplished. Several of them wrote books on the topic, one of them wrote a magazine article and they gave interviews to newspaper reporters so now it’s possible to go into the public record and document quite clearly and in detail what happened there.” 

The author does a good job of providing details to support the conspiratorial theme. The details include names of prominent historical figures in banking and politics, as well as dates and places. There is also a lengthy section on fundamental monetary and economic theory. The book totals more than 600 pages. It should not be dismissed as a light thing. 

In addition to possible conspiracy, another concern in the origin of the Federal Reserve, is whether there is a Constitutional basis for its existence. 

Ron Paul, former U.S. Representative…

“First reason is, it’s not authorized in the Constitution, it’s an illegal institution. The second reason, it’s an immoral institution, because we have delivered to a secretive body the privilege of creating money out of thin air; if you or I did it, we’d be called counterfeiters, so why have we legalized counterfeiting? But the economic reasons are overwhelming: the Federal Reserve is the creature that destroys value.” (source)

There are those who see the Fed in a different light; critical of them, but not for the reasons above. Danielle DiMartino Booth, author of the book Fed Up, seems to think the Fed is worth saving, but that a reformation is necessary. She also tends to see the Fed as an institution which is supposed to have the people’s interest in mind – a public institution, if you will. 

If the Federal Reserve is a conspiratorial organization, has it done anything  to redeem itself? In other words, is its continued existence justified when looking back at its past accomplishments? Or its potential contributions going forward; if it were to be reformed? 

Regardless of whether or not the Fed is a conspiratorial enclave, and regardless of whatever ‘need’ for its services might be posited, would a lack of constitutional authorization be sufficient justification for abolishing the Federal Reserve? 

For the moment, lets set aside the conspiracy and constitutional arguments. And lets suppose that any reformation needed can be accomplished effectively and efficiently. 

What sort of track record does the Federal Reserve have? What have they done to merit our confidence? 

One of their self-proclaimed objectives is to manage the economic cycle. What they really meant in proclaiming their ability to do this, is that they could ‘manage’ to avoid recessions and depressions and extend the prosperity phase of the cycle. How well have they done?

The word horrible comes to mind. Abysmal failure is another. 

In their initial attempt at managing the economic cycle, the Fed ushered in the most severe depression in our country’s history beginning with the stock market crash in 1929. Even former Fed chairman, Ben S. Bernanke agrees:

“Let me end my talk by abusing slightly my status as an official representative of the Federal  Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.”…Remarks by Governor Ben S. Bernanke (At the Conference to Honor Milton Friedman, University of Chicago -Chicago, Illinois November 8, 2002) 

But they did do it again.

Six years after his speech, Governor Bernanke presided over another catastrophe in the financial markets. Cheap credit and ‘monopoly’ money had blown bubbles in the debt markets that popped. 

Alan Greenspan was Chairman of the Federal Reserve at the time Bernanke made the above statement. When testifying before Congress after the credit implosion of 2007-08 and after he had been replaced by Mr. Bernanke, Greenspan had this to say: 

“I discovered a flaw in the model that I perceived is the critical functioning structure that defines how the world works. I had been going for 40 years with considerable evidence that it was working exceptionally well.”

And lets not forget the Fed induced bubble surrounding stocks in the late nineties which was pricked in early 2000. Greenspan was at the helm then, too. 

But is this really any wonder? What can you expect after reading what Danielle DiMartino Booth says…

“The economists were satisfied parsing backward-looking data to predict future events using their mathematical models. Financial data in real time were useless to them until it had been “seasonally adjusted,” codified, and extruded into charts.  Fed employees had no interest in financial news.” 

In addition to not-so-stellar management of the stages of the economic cycle, the Fed has managed to destroy the value of the U.S. dollar, too. 

Since 1913, purchasing power of the U.S. dollar has declined by more than 98 percent. Another way of saying this is that $50,000. 00 today is the equivalent of $1000.00 one hundred years ago. 

The U.S. dollar’s loss of purchasing power is the result of inflation created by the Fed. The Fed creates inflation by expanding the supply of money and credit. 

The  expansion of the supply of money and credit cheapens the value of all money in circulation. The inflation is intentional. And since the inflation is ongoing and cumulative, its effects are unpredictable and volatile. 

Both the Fed and the U.S. Government act complicitly in the creation of money…

“The U.S. Treasury, in conjunction with the Federal Reserve, continually expands the supply of money and credit by issuing Treasury Bonds, Notes, and Bills. The Federal Reserve receives the newly certified Treasury securities and then issues a credit to the U.S. Treasury reflecting the corresponding dollar amount. But where does the Federal Reserve get the money that it  gives to the U.S. government? It is created out of nothing.” 

Does any of this support the view of the Federal Reserve as an institution that is capable of providing value added services? Do you think they care what the media thinks? Or the President? 

After a century of irresponsibility and complete abdication of fundamental economics, we have probably passed the point of no return. Current weakness and volatility in the financial markets are telling us that. 

The US dollar is in a state of perpetual decline (by intention) which will ultimately end in complete repudiation.  Whether or not the Federal Reserve continues to raise interest rates is not the real issue.  They will do – or not do – whatever they think will keep the charade going for a while longer. 

Which is exactly what they did ten years ago. And they succeeded temporarily…  But we don’t really know how much systemic damage was done (i.e. exactly how much money and credit were created, how big is the Fed’s balance sheet and how badly inflated are the numbers, how under-capitalized are the banks). I assure you, it is much worse than anything we have been told.

Similar events today would bring about a price collapse in all markets as well as usher in deflation and a full-scale depression. All of this would be resisted on every front by government and the Federal Reserve. They would literally launch an all-out financial war (and maybe another real war, too) by opening the money and credit spigots full force in a futile attempt to reverse the credit implosion and negative price action of critical assets.

In effect, their efforts and intentions would be similar to those observed during the Great Depression of the thirties. The results would be similar – not productive and inefficient.  The depression would also last much longer than needed. And the price declines which are necessary to correct the excesses of the past and cleanse the system would be countered every step of the way by regulations and programs of dubious value. The efforts of government would actually worsen things and prolong the suffering.

It is more likely, though, that the results would be much worse than anything we could imagine. Even a relatively strong U.S. dollar would be unable to survive the onslaught. In their efforts to stave off the natural effects of their own harmful ways, the government would ‘kill’ the dollar. We would likely find ourselves awash in money and credit created without regard to potential damage. All in order to stave off the inevitable results while ignoring their cleansing effects on a very ill economy.

Federal Reserve conspiracy or not, we are in for quite a ride.

(also see The Federal Reserve And Long Term Debt – Warning!)

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED

Gold Not An Investment – You Won’t Get Rich

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GOLD NOT AN INVESTMENT

Perception of gold as an investment is fundamentally flawed. No matter the detail behind the analysis, gold is not an investment. 

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Silver Fails Miserably To Meet Expectations

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No matter how harsh it sounds, it is true. Unfortunately, too many people don’t want to hear it and refuse to listen.

Acknowledgement of the facts doesn’t seem to deter its supporters. We are told that silver’s ongoing underperformance relative to gold makes it “a better buy” with “more profit potential”.

Let’s see what the charts say. 

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Gold, Original Money, Fiat Money

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The first gold coins appeared around 560 B.C.  Over time it became a practice to store larger amounts of gold in warehouses.  Paper receipts were issued certifying that the gold was on deposit.  These receipts were negotiable instruments of trade and commerce which could be signed over to others.  They were not actual currency but are a presumed forerunner to our modern checking system.

Gold is original money. It was money before paper receipts were issued. The paper receipts were not money. They were substitutes for real money. Today, all paper currencies are substitutes for real money. 

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