Drilling Down Into Gold and Silver
Michele Schneider | Jan 15, 2024 01:26AM ET
With the news on geopolitical escalation, soft versus hard landing, disinflation versus reinflation, growth versus value and credit default versus available disposable income, gold and silver are even more interesting now.
Gold’s behavior has been more of sell strength and buy weakness for some time. What has changed is that the swings from lows to highs have narrowed since mid-December.
Look at October 2023, when gold’s price action brought out the bears. Not us, we bought on the gap up. The price ran from $1876 an ounce in futures or 172 in GLD the ETF, to peak at $2152 in futures by December 4th. GLD went to around 193.
Since then, gold has ranged between $1987 and $2105.
More importantly, if this past week was another low at $2020, then we can see that since last October, the lows are higher, and the ranges are narrower.
Plus, momentum has improved, while it continues to remain an underperformer to the S&P 500.
Next direction should resolve very soon.
On January 7th, I wrote a Daily called Super Cycles Do Not Just Fade Away.
The most burning question we get lately is “How will we know when inflation returns?”
Our answers:
Dollar does something more dramatic.
Silver starts to outperform gold.
Sugar (perfect example of a super cycle type volatility) heads back over 22 cents
Interestingly, none of these scenarios have happened yet.
However, silver in and of itself, looks very appealing.
Silver futures have been experiencing narrower ranges as well.
With higher lows since October, the recent support at $22.50 an ounce, if holds, could mean this week is the week we start to see this metal shine.
A move above the 2 moving averages would be a start. In cash, a breakout over $24 should do it.
In the ETF, that would happen over 21.75.
And, in the futures, the spot price had a mean reversion in momentum.
Should silver get this follow through, the next big event will be if it begins to outperform gold.
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Then we know this move in gold is not just a flight to safety, but very possibly, that super cycle might be starting even a bit earlier than we thought.
h2 ETF Summary/h2S&P 500 (SPY) 480 all-time highs 460 underlying support
Russell 2000 (IWM) 195 pivotal 180 major support
Dow (DIA) Needs to hold 370
Nasdaq (QQQ) 408 now the immediate pivotal number
Regional banks (KRE) 50 support 55 resistance
Semiconductors (SMH) 170 cleared and now must hold
Transportation (IYT) Needs to hold 250
Biotechnology (IBB) 135 pivotal support
Retail (XRT) Not a happy performance in retail Friday-to maintain a bullish stance this should hold 65 and get back over 70.00
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