$Gold Weekly

I had been anticipating a settlement of gold derivatives by the close of the year. Certainly a bearish price skew has given ample opportunity to settle over the last six months.

The lowest price threshold possible was maintained without the volatility smile derivative closing out-of-the money on the last trading day.

Supply from the ETFs such as GLD were pretty much expended early on, but no aggressive rebound occurred. We had a crash almost immediately followed by a capitulation, which was eventually followed by a denouement. The GLD performed exactly as was foreseen early on, that it was meant to suppress prices with excess supply. That would imply that the GLD will underperform going forward.

But we do have a model that can determine for us that gold prices are meant to be priced at this level, which is how much interest rates have fallen below inflation.

The implication should be that the investment scenario for precious metals has changed, that the miners are in a position to take complete advantage, and that all-in cost scenarios are probably grossly overestimated.

Should treasury bill rates in the U.S. fall below zero, then the gold price will respond accordingly, and we'll see another leg up. Gold prices in $ CAD didn't break out though there was heavy volume throughout the month.

In the meanwhile, the hunchback ogre of the stock market rings the bell in the bell tower.

http://scharts.co/1vwVyGL

-F6