Dow Theory Update for October 3: What’s happening to gold?

Trends unchanged

US Stocks

The primary trend is bullish since November 21^st, 2016, as explained here and here.

The primary trend was reconfirmed on July 3^rd, 2017 as was explained here

The S&P 500, the Industrials and the Transports continue making higher confirmed highs. Thus, no secondary reaction in sight.

GOLD AND SILVER

The primary trend was declared bearish on July 7^th, 2017, as explained here and here

The secondary trend is bullish, as was profusely explained here.

The pullback that got started on September 8^th, 2017 has unambiguously setup SLV and GLD for a primary bull market. An in-depth explanation here.

Of course, the pullback (orange rectangles on the right side of the charts), may likely end up in a violation of the last recorded primary bull market lows in which case the primary bear market would be reconfirmed.

Will there be a primary bull market?

On September 5^th, 2017 everyone was bullish on gold. I was skeptical for purely technical reasons. Recent declines seem to confirm that such a bullishness was premature.

As an aside, which may be totally, BS, if one were to adhere to FOFOA’s thesis, we should see plummeting gold and silver prices prior to the advent of Freegold. The Freegold thesis is a complex one (and one that could change your fortunes if proven true) and you should better read FOFOA’s post to acquaint yourself with it. In a nutshell the main thesis is that there is more paper gold than real gold and that sooner or later the following should happened:

1)     Paper gold will go to near zero.

2)     Physical gold will no longer back currency (so fiat money remains fiat money to the disgust of goldbugs) but gold is set free to be a vehicle of savings. Could you imagine the value of gold is savings currently invested in bonds where to be invested in gold? 

3)     Physical gold will part ways with silver. Silver is to lose lots of value. 

4)     Gold and silver miners would suffer greatly, as, particularly, gold mining exists to cater the “paper” gold market (forward paper gold is sold to be backed in the future by mining production)

Thus, a relatively good health of paper “gold” means that the reset (be it real or just freegolders’ imagination) is not yet on the horizon. No debacle yet. At the very least, the last recorded primary bear market lows should be revisited to give a second thought to a "reset".

If FOFOA’s thesis is to be proven true, we will see it on the charts: The primary bear market would be of a magnitude hitherto unseen. Furthermore, we should see the precious metals miners plummet too. As it was said: "all paper will burn".

So maybe the current weakness of gold, and specially, silver, could be telling us that the days the current pricing system of gold (paper gold suppressing the price of physical gold) might be under stress.

Freegold cannot be condensed in a few lines, but if you are really intend on getting a different perspective (neither that of gold bug, nor that of a fiat money “bug”), you might be interested in FOFOA’s writings. 

GOLD AND SILVER MINERS EFTs

The primary trend is bearish, as was explained here and here.

The secondary trend is bullish as explained here

For the same reasons given when analyzing SLV and GLD, no primary bull market has been signaled for SIL and GDX, as explained here. GDX did not better its secondary reaction closing highs by a hair, but it failed to do so. Furthermore, SIL is very far from its secondary reaction closing highs. All in all, no primary bull market signal in sight.

Sincerely,

The Dow Theorist