Gold Can Stay Afloat if Copper, Silver Cooperate
Ashraf Laidi | Jun 23, 2023 01:46AM ET
Moving the goalposts can be a dangerous endeavor in various fields--health, education, law, and business. In technical analysis, trendlines are defined as identifying the general direction of a chart by connecting the shortest distance between the most proximate lows/highs. The more points, the more relevant the trendline. But where do you draw the line between trendlines and trends?
The chart below highlights the generally sensible relationship between the rising trendline in gold and the falling trendline in USD Index as well as US yields.
“Ashraf, did you say rising trendline in gold?? I've been long gold and lost money”.
Yes, so am I, and so have I. Short-term traders long gold are suffering the 5% decline in bullion from the start of the year, as well as the intensifying selloff of the past 4 days. -5% YTD is bad, while -7% from the year highs is worse.
The opposite holds true for United States 10-Year yields, which have jumped 16% from their March lows, but are 1% down YTD. Gold traders have their eyes fixated on the 3.83/4% level, which is not only the year's open but also the top of the trendline resistance. Any print above 3.90% would trigger an ugly cascade of sell orders across metals and indices (especially Tech).
How is this all relevant to those with longs in metals? Gold can remain in its own (primary) uptrend as long as it holds 1810/20. This requires support from silver upholding 21.80/90 and copper doing the same at 7880. Our intermetals frameworks also examine platinum and real yields. While this can be a dangerous example of shifting the goalposts and redefining boundaries, it remains consistent with capturing the general trend, which is what classic technical analysis is about.
For a recent real-life example of this approach, take a look at how Gold's triple bottom from last autumn finally stabilized well after silver, platinum, and copper did the same.
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