gold, page-77716

Gold stock sentiment indicator.

Ouch, that hurt.

The sell-off in gold is painfully obvious with prices in AUD now at the same price seen at the bottom of the capitulation sell-off in mid-March.

Normally if a treasurer stands up and acknowledges the economy is going into a recession, markets would react accordingly. Ours continued to rise.

This suggests that the market has priced in a recession. Utter rubbish. Now we know where those withdrawals from super funds are going.

One of the big issues is that many people in Australia would not have experienced a recession or its consequences.

The cynic in me is saying that the roundtable meetings to get Australia working again is not going to deliver pay rises. The Unions are going to be forced to compromise and provide tacit support or be branded as un-Australian.

Actually the usual rhetoric is likely to appear – we have to tighten our belts (pay cuts), if we reduce wages we can employ more people (never happens, you only employ as many as you need).

And of course, wealth distribution will not be addressed. If trickle down economic theory is not put to the sword then we are going to have a long and protracted recession.

The economy thrives on consumers and they have now been thrown on the scrap heap but with promises of a bright future.

Youth employment is going to be a major casualty.

Christian Porter in an interview stated everything is on the table but avoided including wealth distribution – we need to create jobs first.

This is obviously not a bipartisan approach therefore I have my concerns.

He government has already made a very bad misstep.

By announcing a home improvement scheme with government grants/subsidies, projects that have already been quoted on and planned will be pulled by clients.

Builders currently fully engaged and have future works planned are going to find themselves idle as soon as the current projects are finished.

Even worse, the projects being proposed are expected to require building code compliance and building board approval and are aimed at the middle/upper end of town. Takes time.

I doubt you are going to spend $50,000 to $100,000 if you have the slightest concern about your current employment.

Certifiers will be rubbing their hands with glee as this is a license to print money in the most broken part of the system.

This is ALREADY happening in the Northern Territory with the home improvement grants scheme.

Approvals are progressing at a snails’ pace and approximately 50% of applications do not comply with the process/procedure.

The federal government should have either keep it to themselves until ready to roll or been far more general about the types of stimulus for the home building sector.

The construction sector has been contracting since mid-2018. Where the hell are the nation building and construction stimulating projects? The private sector has not been investing in this area.

One good element will be a review of the type of skills and jobs and how they are undertaken (e.g. work from home) will get the necessary attention.

The tertiary education sector has a bleak future in the current environment.

Sorry about the rant but this is about policy, not specifically politics. More mistakes are likely to be made.

Having personally gone through recessions, relatively high inflation and high interest rate periods in the past, it is clear many of the lessons learned have been lost.

Back to the main game.

Yesterday I had a look at a number of the larger gold stocks and with the stock price moves a number of the stocks now have a confirmed short term down trend.

A few will be falling with a double top in place. These may get hit a little harder.

I will post a couple of the charts later today.

Leading indicators are now at the same level seen at the beginning of April and May. In the mid 30’s.

One of my fears was that COMEX gold would be dumped into the spot market. This seems to be underway and gold prices are likely to remain subdued for some time.

POG does not have to fall any further for gold stocks to be sold off for an extended period.

It is possible that the next leg up in POG may not begin until next month if stock consolidation patterns are going to fill.

A shakeout might be underway – after all there are heaps of worthless stocks and bonds that need to change hands.

Confidence in the gold sector will be damaged which could be a precursor to the next S&P500 sell-off.

The indicator has delivered a lower high and low therefore I expect the indicator to head towards the 45% level.