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Changing on the fly I turn the spotlight on some charts that help explain some of the things I have discussed from the macro-monetary perspective.

First I note the ‘divergence’ I discussed as it relates to the med-term failure of bullion to extend its appreciation against all global paper currencies, particularly in terms of the dynamic in Eastern Europe.

Evidence the overlay chart on display below in which I plot the price of spot Gold (in USD) against the price of Gold ‘denominated’ in Hungarian Forint and observe the 2005-2006 bull market move where Gold was rallying against both currencies against the recent wide.



Gold in HUF might breakout higher, and resolve the divergence in a bullion bullish manner, or the USD might rally, and Gold could correct downward towards the level currently implied by HUF-Gold, around $575. 

I also highlight the longer-term weekly overlay perspective noted in the chart shown below, plotting the Gold-Silver Ratio against the spot US Dollar Index. Note that the GSR is attempting a mini-upside-reversal with the support of a positive reading in the 52-Week ROC.

Given the lagged-but-tight correlation between the two plots, and given the slight hint of potential disinflation beginning to ‘waft’ from the US side of the credit ledger, I am on the alert for any upside push in the USD, as a negative risk for would-be bullion bulls.



I am closely ‘monitoring’ the relationship between US stocks and Gold, and spotlight the technical view on display within the chart below revealing the weekly plot of the Gold-S&P 500 Ratio Spread. This spread has not ‘confirmed’ the rally in bullion back towards $700, and in fact is in danger of breaking down technically, with pressure on the uptrend line, a downside probe of the 52-Week EXP-MA, and negative reading in the 52-Week ROC.



As for evidence in favor of the still-intact, long-term secular bull trend in bullion, a la an extension of the secular boom in credit expansion as defined by US consumer credit reflation and reflation in bank lending to the Real Estate sector, I examine the final set of charts in today’s CNBC Boot Camp Money Monitor special beginning with the plot below revealing the push to record highs in US Consumer Credit, as it expands towards $2.5 trillion.



In line with that, I note the near record heights to which Commercial Bank Loans in the real estate sector has climbed, with lirtation with $3.3 trillion, and the February record high.



But the risk profile as it applies to a medium-term extension in the secular bullion bull and the potential for a sustained push to new highs above the May '06 high of $731 changes slightly when I shorten the time frame for the chart shown at the bottom of the previous page. And reveal the plot since 1990 on display in the chart shown below. Indeed, in this case I see the downside ‘hiccup’ that has evolved since the February high of $3.378 trillion was reached.

For sure, a macro-monetary environment dominated by overt deflation in bank lending to the real estate sector has been rarely witnessed, dating back to the abandonment of the USD-Gold Standard.



A retrenchment by the US consumer, in line with any intensification in the disinflation already beginning to ‘seize’ hold of the US housing/real estate sector would not be a positive development for would-be bullion bulls.

Note the chart below revealing the year-over-year Rate of Growth in Bank Lending to the Real Estate sector, which does not appear capable of holding above double-digit rates for much longer.



In conclusion, as per the CNBC Boot Camp regiment, I am willing to ‘commit’ very little risk capital (chips) to the ‘gold-poker-pot’ here, making small bets, being prepared to fold quickly, and refusing to go ‘all-in’ on the Gold market’s current ‘hand’ until/unless the divergences dissipate (technically) and the risk profile becomes more clearly advantageous.

Of course should the risk dissipate, I will be prepared to act swiftly, to get my chips into the middle of the table, should the secular long-term trend begin to intensify again.

But, I do not anticipate that happening in the near-term.

Bottom Line: I am cautious and mostly neutral on Gold.