Big Picture View

Here is a summary of our big picture view of the markets. Note that our short-term views may differ from our big picture view.

In nominal dollar terms, the BULL market in US Treasury Bonds that began in the early 1980s ended in 2012. In real (gold) terms, bonds commenced a secular BEAR market in 2001 that will continue until 2018-2020. (Last update: 20 January 2014)

The stock market, as represented by the S&P500 Index, commenced a secular BEAR market during the first quarter of 2000, where "secular bear market" is defined as a long-term downward trend in valuations (P/E ratios, etc.) and gold-denominated prices. This secular trend will bottom sometime between 2014 and 2020. (Last update: 22 October 2007)

A secular BEAR market in the Dollar began during the final quarter of 2000 and ended in July of 2008. This secular bear market will be followed by a multi-year period of range trading. (Last update: 09 February 2009)

Gold commenced a secular bull market relative to all fiat currencies, the CRB Index, bonds and most stock market indices during 1999-2001. This secular trend will peak sometime between 2014 and 2020. (Last update: 22 October 2007)

Commodities, as represented by the Continuous Commodity Index (CCI), commenced a secular BULL market in 2001 in nominal dollar terms. The first major upward leg in this bull market ended during the first half of 2008, but a long-term peak won't occur until 2014-2020. In real (gold) terms, commodities commenced a secular BEAR market in 2001 that will continue until 2014-2020. (Last update: 09 February 2009)

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Outlook Summary

The Stock Market

Current Market Situation

The S&P500 Index (SPX) not only avoided ending the month of October below its end-September level of 1972, it ended the month at a new closing high for the year and right at its 19th September intra-day high.



The message of some long-term indicators is that we are currently seeing a successful test of the September peak as part of a major top. These indicators are the downward reversal in the SPX/USB ratio featured in the 20th October Weekly Update, the upward reversal in the TLT/SPY ratio discussed in the 27th October Weekly Update, and the inability of margin debt to exceed its February-2014 peak (as noted in last week's Interim Update). Also, the following chart of the Wilshire5000/GDP ratio shows that the US stock market, as a whole, is now much more expensive relative to US GDP than was the case at the 2007 major peak, although it still hasn't reached the stratospheric valuation achieved in 2000.



That being said, last week's action has definitely muddied the waters, for two main reasons. First, although we thought that the SPX could retrace as much as 100% of its September-October decline as part of an emerging bear market and that early-November was the most likely time for a rebound peak, the SPX's failure to achieve consecutive monthly declines means that there is now less evidence in support of the longer-term bearish case than there would otherwise have been. Second, the following chart shows that the gold/GYX ratio, the premier boom/bust indicator, dropped to a new multi-year low last Friday. This tells us that the boom hasn't yet ended.



Our expectation is that regardless of the intermediate-term outlook, the October low (the low-to-mid 1800s for the SPX) will be tested within the next several weeks. In anticipation of this short-term outcome we purchased an initial position in SSO January-2015 $100 put options on 22nd October and added to the position last Friday. Our current plan is to take profits on these puts if the SPX falls to the mid-1800s during the next 6 weeks or exit at a loss if the SPX makes a new high after this week (we are allowing for some additional strength over the next few days).

How will the outcome of the US mid-term elections on 4th November affect the stock market?

The answer to the above question is: We don't know. We've never been able to figure out which of the two major US political parties is worse, as they both opt for Keynesian economic policies and empire-building foreign policies. The stock market could initially prefer it if the Republican Party were to gain control of both houses of parliament, as currently looks likely, but only because such an outcome would crimp Obama's ability to pass new laws and regulations. Historically, the stock market has performed better under Democratic administrations than under Republican administrations, but this is probably a case of correlation not implying causation.

If there is an upward surge on Wednesday 5th November in response to the results of the 4th November elections, it could create the next short-term top.

This week's significant US economic events (The most important events are shown in bold)

Gold and the Dollar

Gold

Gold, Inflation Expectations and Economic Confidence

As a result of what happened during just one of the past twenty decades (the 1970s), most people now believe that a large rise in "price inflation" or inflation expectations is needed to bring about a major rally in the gold price. This impression of gold is so ingrained that it has persisted even though the US$ gold price managed to rise by 560% during 2001-2011 in parallel with only small increases in "price inflation" (based on the CPI) and inflation expectations. The reality is that gold tends to perform very well during periods of declining confidence in the financial system, the economy and/or the official money, regardless of whether the decline in confidence is based on expectations of higher "inflation" or something else entirely.

Inflation expectations are certainly part of the gold story, but only to the extent that they affect the real interest rate. For example, a 2% rise in inflation expectations would only result in a more bullish backdrop for gold if it were accompanied by a rise of less than 2% in the nominal interest rate. For another example, a 1% decline in inflation expectations would not result in a more bearish backdrop for gold if it were accompanied by a decline of more than 1% in the nominal interest rate.

Other parts of the gold story include indicators of economic confidence and financial-market liquidity, such as credit spreads and the yield curve.

That large rises in the gold price are NOT primarily driven by increasing fear of "inflation" is evidenced by the fact that the large multi-year gold rallies of 2001-2006 and 2008-2011 began amidst FALLING inflation expectations. These rallies were set in motion by substantial stock market declines and plummeting confidence in central banks, commercial banks and the economy's prospects. Even during the 1970s, the period when the gold price famously rocketed upward in parallel with increasing fear of "inflation", the gold rally was mostly about declining real interest rates and declining confidence in both monetary and fiscal governance. After all, if the official plan to address a "price inflation" problem involves fixing prices and distributing "Whip Inflation Now" buttons, and at the same time the central bank and the government are experimenting with Keynesian demand-boosting strategies, then there's only one way for economic confidence to go, and that's down.

Since mid-2013 there have been a few multi-month periods when it appeared as if economic confidence was turning down, but on each occasion the downturn wasn't sustained. This is due in no small part to the seemingly unstoppable advance in the stock market. In the minds of many people the stock market and the economy are linked, with a rising stock market supposedly being a sign of future economic strength. This line of thinking is misguided, but regardless of whether it is right or wrong the perception is having a substantial effect on the gold market.

For now, the economic confidence engendered to a large extent by the rising stock market is putting irresistible downward pressure on the gold price.

The manipulation that matters

It's extremely unlikely that the US government or the Fed is involved in manipulating the US stock market upward via the purchase of futures or some other direct means. However, the Fed regularly concocts monetary policies and Fed representatives regularly make statements aimed at boosting the stock market, so indirect upward manipulation often occurs. To the extent that these actions and words are successful in boosting the stock market, they also put downward pressure on the gold price.

This prompts the question: Why doesn't the Fed always do what it has done over the past two years?

The answer is that it does. At least, it always tries to; it's just that the manipulation is often not successful. The reason is that many independent factors that aren't controlled by the Fed have to fall into place for the manipulation to work as the central planners intend. Over the past two years the most important of these factors were 1) the high starting prices of gold and other commodities relative to the prices of equities and real estate, 2) the economic malaise, sovereign debt problems and perceived threat of deflation in the euro-zone, 3) the stagnation of Japan's economy and the attempts to end the stagnation by aggressively monetising government debt, and 4) the perception, which took hold over the past three months, that the ECB would be unable to create enough new money to sustain the bull run in European equities.

Current Market Situation

Last Friday the US$ gold price surprisingly (from our perspective) did what almost everyone has been expecting it to do, which is break to a new multi-year low. We guessed that the 'triple bottom' at $1180 would eventually be breached, but not until next year.

The catalyst for Friday's breakdown was news that the Bank of Japan (BOJ) had quintupled-down on its efforts to revive Japan's economy -- by ramping-up its already-aggressive 'monetary accommodation'. This monetary accommodation is commonly referred to as QE (Quantitative Easing), but it can also be called QD (Qualitative Diseasing) or CO (Counterfeiting Operation).

It's not that QE has become fundamentally bearish for gold, it's that the belief is now strong that QE helps to improve the economy. As discussed above, anything that boosts economic confidence will put short-term downward pressure on the gold price regardless of whether or not the boost in confidence is logical. The BOJ announcement was the catalyst for Friday's downside breakout in the gold market because it fueled a surge in economic confidence that manifested itself in the S&P500 Index achieving a new closing high.

The break below the three lows at $1180 makes it more likely that a major bottom will be put in place this year rather than the first half of next year. However, we don't think that gold is a good short-term buy right now. With the breakdown having just occurred, it would be better to wait for evidence of a reversal before putting more money at risk. Further to the discussion in the 27th October Weekly Update, clear-cut evidence that gold's price trend has turned positive will probably appear in gold/euro or gold/Yen before it appears in the US$ gold price.



Gold Stocks

The Big Picture

It's time to step back and look at the big picture, mainly relying on the historical performance of the only gold-mining index with a very long-term history: the Barrons Gold Mining Index (BGMI).

Like all the other gold-mining indices, the BGMI fell to a new multi-year low last week. However, unlike the HUI and the XAU, both of which ended last week near their 2008 crash lows, the following weekly chart shows that the BGMI is still well above its 2008 low. The red line on the chart is the 200-week MA.



With last week's break to new multi-year lows the price pattern has deviated in a big way from 1976-1978 and 1970-1972, but from a fundamental perspective there are still reasons to like the comparison with the 1970s (further to the discussion in the "Gold" section of today's report, reasons that have nothing to do with "price inflation").

The price pattern from the beginning of 2008 through to the present day is now most similar to 1980-1986, which suggests that the coming low for the gold-mining sector will be equivalent to the H2-1986 low and that a 12-month bear-market rally will soon begin. We don't like this comparison from a fundamental perspective, but it would be a realistic possibility if the general equity bull market were set to continue for another year.

Taking into account last week's break to new multi-year lows, the overall price pattern and the fundamental backdrop, the most appropriate comparison is with 1996-2000.

The 1996-2000 cyclical decline in the gold-mining sector lasted about 4.5 years. The HUI's decline has 'only' lasted a little more than three years to date, but the XAU's decline from its high is now almost 4 years in duration (the XAU peaked in December-2010). As noted on the following weekly XAU chart, last week's break to new multi-year lows could be likened to the final phase of the 1996-2000 decline. This comparison makes the most sense from a fundamental perspective IF a major peak is at hand in the broad stock market.



Our next long-term chart shows the BGMI/SPX ratio. The BGMI has collapsed relative to the SPX since late-2011, but note that the decline is similar, in magnitude terms at least, to what happened in the middle of the 1970s.



Finally, the following table shows all of the cyclical declines in the gold mining sector beginning with the 1968-1970 decline, in both nominal terms and relative to the SPX. The table shows the results using the BGMI throughout, the XAU from the late-1980s (the XAU was born in 1984), and the HUI from the mid-1990s (the HUI was born in 1996). The main takeaway from this table is that the cyclical decline of 2011-2014 is now as big as or bigger than all previous cyclical declines of the past 50 years apart from 1996-2000.

    *In dollar terms the gold-stock indices peaked in 1996, but relative to the SPX they peaked in 1994.

Current Market Situation

From the email sent to subscribers following last Thursday's plunge in the gold-mining sector:

"The gold-mining sector's recent decline, which accelerated in dramatic fashion over the past two trading days, cannot be explained by the so-called "fundamentals". It is not related to the end of the Fed's QE, as most market participants and observers have known for many months that the QE would end this week. It is, instead, primarily a sentiment-driven phenomenon that has fed on itself as price weakness led to forced selling and has resulted in one of the most extreme market-sentiment situations we've ever witnessed (charts illustrating the extreme have just been posted at http://tsi-blog.com/?p=1090). Although it is at the opposite end of the sentiment spectrum, the current situation in the gold-mining sector is, we think, close to the manic tech-stock sentiment near the NASDAQ's blow-off top in March of 2000."

And:

"We aren't planning to do any additional buying of gold-mining stocks in the immediate future, because we refuse to let our cash reserve fall below 25% and because it is the most inopportune time imaginable to free-up cash by selling some gold stocks to buy others. Also preventing us from wading deeper into the gold-mining pool at this time is the fact that while panics invariably exhaust themselves within a few days, the current panic is only two days old and could therefore continue for another 2-4 days. In situations such as this it is usually better to be one day late than 2-4 days early."

The panic selling continued on Friday 31st October and is probably not yet complete, although there is a high probability that it will end within the next three trading days. Our guess is that the panic will be followed by a very sharp rebound that takes the HUI back to at least 190, but whatever low is made over the days immediately ahead will probably be tested within the next two months. For example, the HUI rocketed upward during the 6 trading days following its October-2008 crash low, but then pulled back to test the crash low about three weeks later. For another example, the SPX tested its October-1987 crash low about 6 weeks later.

For fleet-footed traders there is a lot of money to be made on the long side during the first few days following a market crash, but timing needs to be perfect because being 1-2 days early will be costly. For most traders who are interested in taking long positions to profit from the extremes caused by a price crash, the optimum time to buy is generally a few weeks after the crash -- just after a test of the crash low.

The huge volumes in the senior gold stocks and the gold-stock ETFs during Thursday-Friday of last week suggest that the price collapse has been driven by institutions. On Friday, most of the senior gold-mining stocks traded 3-5 times their average daily volumes and the volumes in the gold-stock ETFs were at or near all-time highs. Of particular note, GDXJ's trading volume last Friday was the highest ever and the cumulative trading volume over the final two days of last week was the highest on record for both GDX and GDXJ.

The Currency Market

We reiterate that the US$, as represented by the Dollar Index, is not trading like a safe haven. If it was then it would have fallen during August-September, rallied strongly during the first half of October and pulled back over the past two weeks. Instead, it did the opposite. The reason is that it is being driven almost solely by the relative performance of the US stock market. Recently, the rise to new highs for the year in US equities relative to European equities suggested that there was probably one more new high for the year in store for the Dollar Index, and one more new low for the year in store for the euro, before short-term extremes were put in place.

The following daily chart shows that the Dollar Index made a marginal new high for the year last Friday. This, along with the capitulation in the gold-mining sector and the rise in the SPX to its 19th September intra-day high, points to the week ahead as a likely time for a short-term high in the Dollar Index.



The Yen is the currency that has been trading, and continues to trade, like a safe haven. Along with the Yen's negative correlation with the stock market, this is evidenced by the following chart comparison of the Yen (in black) and the US$ gold price (in gold, naturally). The Yen has had a strong positive correlation with gold, the ultimate safe haven. Both plunged to new multi-year lows last week and both are likely to bottom at around the same time. Major bottoms are possible this month.

Updates on Stock Selections

Notes: 1) To review the complete list of current TSI stock selections, logon at http://www.speculative-investor.com/new/market_logon.asp and then click on "Stock Selections" in the menu. When at the Stock Selections page, click on a stock's symbol to bring-up an archive of our comments on the stock in question. 2) The Small Stock Watch List is located at http://www.speculative-investor.com/new/smallstockwatch.html

Company news/developments for the week ended Friday 31st October 2014:

[Note: AISC = All-In Sustaining Cost, FS = Feasibility Study, IRR = Internal Rate of Return, MD&A = Management Discussion and Analysis, M&I = Measured and Indicated, NAV = Net Asset Value, NPV(X%) = Net Present Value using a discount rate of X%, P&P = Proven and Probable, PEA = Preliminary Economic Assessment, PFS = Pre-Feasibility Study]

  *Clifton Star Resources (CFO.V) is way behind in its paperwork. Whereas most of our Canadian-listed stocks are issuing their mandatory reports for the September quarter, CFO has just got around to issuing its report for the June quarter.

CFO's latest financial statements reveal $2.0M of working capital at 30th June, including net cash of around $1.0M. To proceed with a Feasibility Study at its Duparquet project the company will have to raise more cash, but it won't be able to do so at a reasonable cost under current market conditions.

Therefore, as we said a few months ago, it's a good bet that CFO will conserve its cash for the foreseeable future by doing very little to advance its gold project and devoting the small financial resources at its disposal to the legal pursuit of the $22.5M loan that -- according to CFO -- should have been provided by Osisko back in 2012. This loan is now the obligation of the Agnico Eagle (AEM) -Yamana Gold (AUY) joint venture, which bought Osisko.

Complicating the situation is news that arrived via a CFO press release last Thursday. We are referring to the fact that CFO has become embroiled in litigation between the optionors of the Duparquet project (CFO has the right to earn 100% of the project by making staged payments to the optionors). This litigation shouldn't affect CFO's rights, but it makes raising additional money even more difficult.

  *Dalradian Resources (DNA.TO) issued an updated PEA for its Curraghinalt gold project in Northern Ireland. The original PEA was completed in July of 2012.

DNA's updated PEA is one of the most positive economic assessments of an exploration-stage gold deposit that we've seen over the past 2 years. Although the original (2012) PEA indicated an IRR of 41.9% and the current PEA indicates a slightly lower IRR of 36.2%, the original assessment assumes a gold price of $1378 whereas the current assessment assumes a gold price of only $1200.

At $1200/oz for gold, the estimated NPV(8%) shown in the updated PEA is $504M. This is $37M higher than the NPV(8%) estimated in the original PEA, despite the $178/oz reduction in the assumed gold price. Using a 5% rather than an 8% discount rate, the estimated NPV rises to $716M.

If we take into account all the numbers shown in the updated PEA, including the initial capex estimate of $249M, and compare the project value suggested by these numbers with DNA's current enterprise value, we find that DNA is one of the most attractively valued stocks in the gold-mining sector. The main caveat is that the numbers come from a PRELIMINARY economic assessment, which, for one, means that the assessment involves assumptions that haven't yet been verified by detailed engineering and drilling. Of particular relevance, the PEA is based on the assumption that almost all of the project's Inferred resources will eventually shift into the M&I category.

The bulk of the detailed engineering and drilling needed to firm-up the project's economics will be done over the coming 12 months as part of a PFS. This work is fully funded by DNA's cash on hand.

As per the September quarterly report issued late last week, DNA currently has working capital of around C$37M.

  *Evolution Mining (EVN.AX) announced its results for the September quarter. The company produced 107K ounces of gold at an AISC of around US$1,000/oz, which was roughly in line with guidance and is a satisfactory result. Full-year guidance has been maintained at 400K-440K ounces an AISC of around US$1,000/oz.

EVN is marginally profitable and cash-flow positive at the current gold price. It is, we think, one of the lowest-risk speculations in the gold-mining sector.

  *Timmins Gold (TGD) reported that it made a profit of US$1.6M during the September quarter, which is a worse bottom-line outcome than originally expected. Furthermore, the balance sheet that accompanied TGD's latest quarterly report shows that the company's working capital declined by $3M during the quarter -- from $68M to $65M. This is also worse than originally expected. However, the company's overall financial performance during the quarter was OK considering the record rainfall that slowed production and increased costs in September.

With the period of record rainfall having ended, TGD's operations are apparently now running at the planned efficiency. This should mean that production will be higher and costs will be significantly lower during the current quarter.

The recent collapse in its price has resulted in TGD becoming extremely attractive as an intermediate-term speculation.

    Burkina Faso

In a case of "when it rains, it pours", hundreds of thousands of people have taken to the streets in Ouagadougou, the capital city of Burkina Faso in West Africa, with the aim of bringing about political change. The protests were spurred by the attempts of the country's president (Blaise Compaore) to amend the Constitution to enable him to remain in power (his final term was supposed to end next year). The president has since resigned, but the protestors aren't satisfied because an unpopular general decided to make himself the new head of state. Further complicating matters, a lower-ranking soldier (a lieutenant colonel) also decided to make himself the new head of state and appears to have gained the upper hand.

The current political chaos in Burkina Faso creates a risk for foreign mining companies operating within the country -- the sort of risk that Donald Rumsfeld would probably classify as a "known unknown". We know that there's a problem, but at this stage there isn't enough information to ascertain the ramifications for the companies in question.

For us, the companies in question are Endeavour Mining (EDV.TO) and True Gold Mining (TGM.V). Mining assets that we think account for about 25% of EDV's value and almost all of TGM's value are located in Burkina Faso. Up until now these assets have not been affected by the civil unrest, but there is an unquantifiable risk that they will be affected in the future.

TGM's plunge at the start of trading on Friday (the stock closed at C$0.24 on Thursday and plummeted to C$0.14 shortly after the open on Friday) was indirectly related to the political situation in Burkina Faso. We say "indirectly" because Burkina Faso's increased political instability prompted Casey Research to issue a 'sell' on TGM near the close of trading on Thursday, so Friday's plunge on 10-times average daily volume was mostly due to Casey subscribers stampeding for the exit in reaction to the previous day's 'sell' advice. The stock subsequently recouped more than half its losses and ended the day at C$0.20.

We don't think that it makes sense to sell TGM at C$0.20, because at this price a lot of risk has been factored in. It certainly didn't make sense to sell at C$0.14 on Friday, because at that price the company was being valued at less than its cash in the bank.

We are holders of TGM at the current price and regret that we didn't have a buy order in at C$0.15 on Friday to take advantage of the vicious downward spike at the open. Also, we are holders of EDV at its current price and would be buyers if we didn't already have a full position in the stock. However, speculators should be aware of the risks that exist, even if the risks can't be quantified.

In a market where almost all gold stocks have been crushed, most new buying should be directed towards the high-potential stocks with the lowest risk. In some respects EDV and TGM fit the bill in this regard, but the recent escalation of country risk means that they would no longer be among our first choices for new buying.

    List of candidates for new buying

From within the ranks of TSI stock selections the best candidates for new buying at this time, listed in alphabetical order, are:

1) AAU (last Friday's closing price: US$1.18).

2) DNA.TO (last Friday's closing price: C$0.55).

3) EVN.AX (last Friday's closing price: A$0.60).

4) PVG (last Friday's closing price: US$4.56).

5) TGD (last Friday's closing price: US$1.00).

Note that the above list is limited to five stocks. It will sometimes contain less than five, but it will never contain more than five regardless of how many stocks are attractively priced for new buying.

    Potential addition to TSI Stocks List: Golden Queen Mining (TSX: GQM). Shares: 100M issued, 110M fully diluted. Recent price: C$1.03

GQM is developing the Soledad Mountain gold-silver project in California. The project is fully permitted, almost fully financed through to production and currently under construction. Production is scheduled to commence in early-2016.

Soledad Mountain has an M&I resource of 2.4M ounces of gold plus 44M ounces of silver and is being developed into a mine with average annual gold production of 77K ounces over 14 years. Taking silver as a byproduct, the cash cost is expected to be only US$285/oz.

Based on the 2012 FS, the project has an IRR of 39.7% and an NPV(5%) of US$368M at $1200/oz for gold and $20/oz for silver. Furthermore, the project is still economically viable at $1100/oz.

Due to a financing deal completed in September, GQM's ownership of the Soledad project went from 100% to 50%. Some brokerage analysts stated that this financing deal effectively involved GQM selling half the project for $110M, but this isn't true. GQM only received $55M for half the project. The reason is that the $110M didn't go to GQM, it went to a company that, as part of the deal, became a) the 100% owner of the project and b) 50% owned by GQM. In any case, the details of earlier financings aren't important for speculators assessing GQM's merits today. What matters is the current situation, not how the current situation came to be.

We have been thinking about returning GQM to the TSI List for a few months (a previous position was exited way back in December-2010 when the stock was trading in the C$2.90s), but thought the price was a little high. GQM held up remarkably well until last week, when it finally succumbed to the sector-wide downward pressure and quickly lost about one-third of its market value.

Near its current price of around C$1.00 it offers good value, but there is one issue that prevents us from pulling the trigger. The issue is that the company will have to raise an additional $20M-$30M to fund the balance of the initial project capex and its working capital requirements over the coming 12 months. Moreover, with a current cash balance of almost nothing, a financing will have to be done soon.

Here's what we are going to do: We will add GQM to the TSI List if it trades at C$0.82, because at that price we would be happy to take the financing risk. If the stock doesn't trade that low then we will wait for a financing announcement before deciding whether or not to add the stock.

    Removing two stocks from the TSI List

With the exception of short-term trading positions, we are determined not to let the TSI Stocks List get any bigger. We are therefore going to remove one stock to make up for the 29th September addition of Dalradian Resources (DNA.TO) and remove a second stock to make way for a new stock with less risk to enter the List within the next few weeks.

The stocks that are now leaving the List are Lydian International (LYD.TO) and Sunward Resources (SWD.TO) at losses of 47% and 33%, respectively.

LYD is leaving for two reasons. First, the updated FS published in September suggests that the initial capex of its gold project is too high, relative to the project's NPV and rate of return, to make the project financeable or attractive to large mining companies in the current market environment. Second, considering the project's economics, the company has more country risk (Armenia) than we are comfortable with.

SWD is leaving, despite the fact that it is trading below the value of its cash, because it was added based on an idea that has since been invalidated. Specifically, in July of this year we decided to initiate a group trade comprising three well-financed exploration-stage gold stocks with large, low-grade gold deposits. Our thinking was that if gold completed its basing pattern during September, as we thought likely at the time, then these large, low-grade deposits would start coming back into favour. We made SWD the first member of this group and intended to add two more stocks to complete the group after evidence emerged that gold's basing pattern was complete. However, the evidence we were anticipating never emerged, so other group members were never identified/added. And the basing-pattern idea was completely invalidated by last week's price action.

Chart Sources

Charts appearing in today's commentary are courtesy of:

http://stockcharts.com/index.html
http://research.stlouisfed.org/