Stop and Start Gold’S Recovery Has Been a Bumpy One As It Struggles to Put Its Recent Correction Lows Behind It
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Vol. XLVI December 2020 / January 2021 Stop And Start Gold’s recovery has been a bumpy one as it struggles to put its recent correction lows behind it. While the bottom appears to be in, the near term seems as cloudy as the long term appears clear. By Brien Lundin his month’s lead article was going to write itself — until gold was Gold (London PM Fix) $1,975 dumped on Wednesday morning. T $1,950 That the metal’s correction had ended and a new rally begun seemed obvious up until then. A $1,925 sharp decline on November 24th to a key support $1,900 level (a 50% retracement of gold’s gains since $1,875 March) coincided with the full moon and the De- cember options expiration to mark a clear bottom. $1,850 (I know, throwing the full moon into this seri- $1,825 ous analysis is sheer lunacy, but analysts across $1,800 the Twitterverse were noting the coincidence, and $1,775 not all of their remarks were tongue-in-cheek.) $1,750 Regardless, gold rallied strongly from that point, rising in four out of five sessions from the Oct 6, 2020 Dec 1, 2020 Dec 8, 2020 Sep 8, 2020 Nov 3, 2020 Oct 13, 2020 Oct 20, 2020 Oct 27, 2020 Sep 15, 2020 Sep 22, 2020 Sep 29, 2020 th Nov 10, 2020 Nov 17, 2020 Nov 24, 2020 November 24 low at $1,776 on a spot basis to a © 2020 Gold Newsletter (Chart provided by Thechartstore.com) high on Tuesday of $1,870. It seemed that the planets (and moons) were finally aligned in gold’s favor and the dark days of the correction were finally behind us. And then came the aforementioned sell-off on Wednesday, with gold slipping about $40, back to the low $1,830s. It tried to rally on Thursday, hitting $1,850 at one point, before fading back into the red de- spite supporting data on jobless claims and the CPI. On Friday, gold gained about $5.00 early on as it fought to regain an uptrend. Does this mean that the rebound was nothing more than a head fake? Obviously, it’s impossible to tell at this INSIDE: point. It is worthy of note that I was expecting a typical pattern in which the price would bottom in mid-Decem- 5 Mining Share Update ber. While not unheard of, this bottom would be on the 25 New Orleans 2019 Highlights early end of the spectrum. 75 Potpourri What’s interesting about this set back in gold is that all of the media and pundit reports are blaming it on a re- DECEMBER 2020 / JANUARY 2021 1 GOLD NEWSLETTER turn to “risk on” investing, as positive vaccine Gold Bugs Index news is driving world equity markets to record 360 highs on the day. 350 I guess they didn’t notice that all of the major 340 U.S. stock indices were actually in the red as gold was falling. So the easy “risk on” excuse 330 doesn’t hold water. 320 Given that option expiries are behind us, ma- 310 nipulation by the usual suspects doesn’t seem 300 likely in this case. But considering that stocks and gold had been on a tear over the previous 290 week or so makes a simple corrective move 280 seem a likely excuse for the drop. A slight re- bound in the Dollar Index accompanied by a 270 tick-up in Treasury yields also support that view. Oct 6, 2020 Dec 1, 2020 Dec 8, 2020 Sep 8, 2020 Nov 3, 2020 Oct 13, 2020 Oct 20, 2020 Oct 27, 2020 Sep 15, 2020 Sep 22, 2020 Sep 29, 2020 Nov 10, 2020 Nov 17, 2020 Nov 24, 2020 Major Macro © 2020 Gold Newsletter (Chart provided by Thechartstore.com) While the near term remains muddy, the long-term view is as clear as ever. That macro view has always been based on the ever-easier monetary policies being pursued by the Fed and other central banks since the 2008 financial crisis. It has been bolstered, and in fact made in- evitable, but the monstrously large debts that such policies have encouraged, such that these debts now require negative real interest rates and very significant depreciation of the underlying currencies. The only alternative would be a debt jubilee/financial system reset. Either path would eventually result in gold and silver prices at multiples of current levels. And min- ing stocks would leverage those gains. As long as we keep our focus on the horizon, these U.S. Dollar Index (DX) short-term fluctuations will (Daily with 50 day Moving Average (MA) and Bollinger Bands) fade in importance. 105.00 105.00 I know that’s little consola- tion as we navigate these daily 100.15 100.15 twists and turns in the metals markets, so let’s look at some 95.56 95.00 - 96.00 95.56 evidence that the metals are, 93.20 - 93.80 indeed, setting up for a signifi- 91.18 91.18 cant rebound. DX has broken down and is following the lower Bollinger Band down. Technically 87.00 87.00 %B Speaking... 150 150 125 125 100 100 75 75 I’ve got some interesting 50 50 25 25 0 0 charts to share with you this -25 -25 issue (courtesy, as always, of -50 -50 3/1/17 6/7/18 8/3/18 1/8/20 3/6/20 5/4/20 4/27/17 6/23/17 8/21/17 2/12/18 4/11/18 10/1/18 1/25/19 3/25/19 5/21/19 7/18/19 9/13/19 11/8/19 6/30/20 8/26/20 Ron Griess at 12/30/16 10/17/17 12/13/17 11/27/18 10/22/20 12/18/20 TheChartStore.com), as we Copyright © 2020 Thechartstore.com DECEMBER 2020 / JANUARY 2021 2 GOLD NEWSLETTER close out the year with a num- Thomson Reuters Equal Weighted Continuous Commodity Index ber of markets and indices at (Weekly with 10 week MA and 40 week MA) 750 750 what appear to be important Breaking above a 9 year crossroads. down trend line. 560 560 First, let’s take a look at our 420 420 chart of the U.S. Dollar Index with its 50-day moving average 315 315 and associated Bollinger We interpret the indicator Bands. As Ron notes, and as 235 as being on a buy signal. 235 every investors who’s been 175 175 paying attention already 14 week Stochastic (%K, %D) knows, the Dollar Index has 100 100 90 90 80 80 broken down into a significant 70 70 60 60 downtrend. 50 50 40 40 30 30 20 20 This chart puts it in per- 10 10 0 0 spective, as the index is riding the lower Bollinger Band 12/9/16 12/8/17 12/7/18 12/6/19 12/4/20 12/31/99 12/29/00 12/28/01 12/27/02 12/26/03 12/24/04 12/23/05 12/22/06 12/21/07 12/19/08 12/18/09 12/17/10 12/16/11 12/14/12 12/13/13 12/12/14 12/11/15 Copyright © 2020 Thechartstore.com lower. As I noted earlier, gold’s big sell-off on Wednesday was associated to some extent with a slight uptick in the Dollar Index but, so far at least, it’s not even a speed bump in the path of the greenback’s rapid descent. In short, this trend looks likely to continue over the near term, providing some impetus for gold. Next let’s review Ron’s chart of the Thomson Reuters Commodity Index with its 14-week stochastic. As you’ll remember, I featured this chart in our August issue alongside a similar chart of copper and its stochastic, remarking that... “I had expected copper to begin moving later this time, perhaps in a year or so. Instead, it seems that the way everything is moving at warp speed these days is also affecting copper. The copper bull, by all indications, is already beginning to run. Gold in US$ - London PM Fix (Weekly with 10 week MA and 40 week MA) “And in fact, it’s al- 2,300 2,300 ready affecting much of the rest of the commodity 1,480 1,480 sector, as shown in our 950 950 chart of the Equal We interpret the indicator as being neutral and on a buy signal alert. The actual buy signal will Weighted Continuous 610 be given when %K is above %D, both are above 610 Commodity Index. The 20 and both are rising. stochastic for this index 390 390 is indicating the same surge of upward momen- 250 250 14 week Stochastic (%K, %D) 100 100 tum as that of copper. 90 90 80 80 70 70 “You won’t find this 60 60 50 50 discussed much else- 40 40 30 30 20 20 where, at least not yet, 10 10 but a full-fledged, broad 0 0 12/9/16 12/8/17 12/7/18 12/6/19 12/4/20 commodity bull market 12/31/99 12/29/00 12/28/01 12/27/02 12/26/03 12/24/04 12/23/05 12/22/06 12/21/07 12/19/08 12/18/09 12/17/10 12/16/11 12/14/12 12/13/13 12/12/14 12/11/15 seems to be beginning.” Copyright © 2020 Thechartstore.com DECEMBER 2020 / JANUARY 2021 3 GOLD NEWSLETTER Of course, everyone is Gold (London PM Fix) now talking about the copper (Daily with 50 day Moving Average (MA) and Bollinger Bands) bull market that we alerted 2,435 2,435 The three consolidation/basing areas marked look you to back in August.