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I’m not sure of anything, but yesterday I was on the verge of getting stopped out and today was a very nice green day. BOIL is a powder keg with a short fuse, but none of us can say we didn’t know what we were getting into. With the world in its current state of constant crisis, gas prices beat into the ground, and just a few weeks away from the beginning of Natty’s seasonal rally, I think the odds favor upside. Everything I’m reading is doom and gloom for commodities. Seems like nobody loves ‘em right now. Perfect time to buy, imo
Well…
There is an ASK stack and a BID stack - someone ‘gives in’ to someone else (regardless of the MM’s arbitrage).
In the block to which I was referring, the candle produced was a rather large doji, so it took out bids and asks in a wide range. Institutions try to avoid leaving a footprint, but this trade was not one of us.
Price action since then suggests that a big fish is adding to their position.
GT’s to all, 4God
I have added twice to avg dn, can’t put more in this one. Another dn leg takes me out. Sometimes ya gotta risk it to get the biscuit.
People absolutely love to not love gold. When I post bullish gold comments on social media, I am guaranteed to get some not-so-constructive pushback on an optimistic thesis.
Why do people love to hate the gold trade? Well, for starters, it hasn't worked in a long time. But that all may be changing in 2023.
The Long-Term Struggles of the Yellow Metal
Investors have a great long-term memory of painful investment experiences. And the fact that gold performed so abysmally from 2011-2018 certainly didn't win over any investors looking for long-term gains.
Charts and Pics:
https://stockcharts.com/articles/mindfulinvestor/2023/02/the-bullish-case-for-gold-862.html?mc_cid=f00db1dc28&mc_eid=42ad23d581
Here, we're looking at the gold ETF which shows a peak in 2011 around $185. Note how gold struggled through the mid-2010s, as the S&P 500 and Nasdaq were basically in the middle innings of a cyclical bull market phase.
At the bottom of the chart, we have the relative performance of GLD versus SPY. By owning gold during this period, you were basically guaranteed to underperform, because you were allocated away from top-performing stocks and ETFs.
But From the Ashes Emerges Strength
Gold actually did fairly well in 2018-2019, with the GLD outperforming the S&P 500 index coming out of the 2018 lows. While gold held up pretty well during the early days of the COVID era, stocks outperformed the yellow metal through the course of 2020 and 2021.
Are you ready for a deep dive into breadth indicators? In our latest FREE webcast on Tuesday February 21, we'll show you how they're constructed, how they generate buy and sell signals, and what they're telling us about the current markets. Sign up HERE for this free event, Five Favorite Breadth Indicators!
The GLD ended up testing resistance around $185 in 2020 and again in early 2022, further solidifying the importance of this upside price objective. This coincides with about $2000/oz on the chart of spot gold. How bullish do we want to be on gold if it can't get above resistance?
But do you notice the cup-and-handle pattern that has played out over the last 10-11 years? That's where you have a long rounded bottoming pattern, a retest of the resistance level forming the right side of the cup, and finally a shallower pullback to create the handle.
freestar
This emerging pattern suggests a long-term base with strong upside potential, but if and only if the price can break above and follow-through beyond this resistance level. If that were to occur, the height of the pattern suggests an upside target around $344, which would equate to around $3700/oz for spot gold.
Connecting the Short-Term to the Long-Term
Now let's review what's happened so far in 2023. Gold spent most of 2022 in a bearish momentum phase, with the RSI ranging from oversold on downswings to only 60 on upswings. This is classic behavior for a downtrend phase. But something changed in the fourth quarter, just as we saw for equities.
In November, the GLD broke to a new swing high and the RSI finally pushed above 60 to reach the overbought level around 70. This influx of positive momentum suggested a "change of character," or a rotation from distribution to accumulation phase.
After testing $182 at the end of January, the GLD has now pulled back to retrace about 38.2% of the way back down to the October 2022 low. While gold did break below its 50-day moving average (which is less than ideal), I'm encouraged by the fact that the price has so far held the first Fibonacci retracement level, with the RSI remaining just above 40.
In the short-term, if you assume downside risk to the 200-day moving average around 165.50, that would mean about a 2.5 to 1 risk/reward if you expect a retest of the January peak.
Given the uncertainty in the equity markets, the big unknown in terms of the schedule of Fed rate hikes, and the weakness in growth names this week, perhaps gold deserves a second look as a hedge against further downside for stocks.
Gold Futures Stealthed
Adam Hamilton
Archives
Feb 17, 2023
Gold has been hammered lower in recent weeks by what looks like heavy gold-futures selling. Normally these hyper-leveraged speculators' positioning data crucial for gaming gold trends is reported weekly. But unprecedentedly as far as I know, that has gone dark since late January! The gold-futures trading bullying around gold prices is now stealthed, which is troubling and likely contributed to gold's sharp selloff.
Just a couple weeks ago, gold was thriving in a strengthening young upleg. It had powered 20.2% higher in 4.2 months, hitting an impressive $1,951 as February dawned! Gold's January surge had left it short-term overbought, so a healthy mid-upleg pullback was in order to bleed off some of the mounting greed. That soon erupted, but proved way more violentthan usual. Gold plunged 4.4% in just two trading days!
After weathering the last Fed rate hike just fine, early on February 2nd gold fell sharply. The European Central Bank's latest monetary-policy decision was more dovish than expected, hitting the euro which boosted the US dollar igniting a 2.0% gold down day. As the majority of those big losses cascaded in about a half-hour after the ECB signaled a coming rate-hike pause, that looked like big gold-futures selling.
Because of the extreme leverage inherent in gold futures, their traders punch way above their weights in moving gold. Midweek specs were only required to keep $7,400 cash margins in their accounts for every 100-ounce contract traded, which controlled $183,870 worth of gold. That enables maximum leverage of 24.8x! A week earlier with margins lower and gold higher, 27.2x was the limit. This ought to be criminal.
In the stock markets, leverage has been legally capped at 2.0x since 1974 for good reason. The risks to both traders and efficient markets are serious running extreme leverage. At 25x, a mere 4% gold move against traders' positions will wipe out 100% of their capital risked! And at 25x, every dollar traded in gold futures has 25x the gold-price impact of a dollar invested outright! This really distorts global gold markets.
Because gold-futures speculators run crazy leverage, their trading time horizons are crazy-myopic. They can only care about what gold is likely to do in coming minutes or hours. They frantically trade on market developments that affect the US dollar's fortunes, which are their primary trading cue. Sharp gold drops on anything that gooses the dollar nearly always result from big gold-futures selling, usually on the short side.
Gold started rallying back overnight into the 3rd, but suffered another precipitous plunge in the wake of that Job Friday's latest US monthly jobs report. The US government claimed 517k jobs were created in January, shattering the +187k expected with a statistically-impossible eight-standard-deviation beat! That left traders convinced the Fed would have to hike rates faster and farther, so the US Dollar Index soared.
Gold plunged another 2.4% to $1,866 that day, with the lion's share of those losses snowballing within a half-hour after that jobs data. Ironically that upside surprise was literally made up. The Bureau of Labor Statistics' own raw data in that very report actually showed a staggering 2,505k US jobs lostin January! An epic 3m+ jobs seasonal adjustment was fabricated to conjure up that massive politically-expedient beat.
As I explained in an essay last week on sharp gold pullbacks being healthy, 4%+ two-day plunges aren't that unusual. They actually tend to happen a couple times a year or so, driven by hyper-leveraged gold-futures selling. With their lack of leverage and far-longer time horizons, investors don't care about short-term dollar volatility. During that latest gold plunge, identifiable investment demand actually rose slightly!
The best high-resolution daily proxy for global investment demand is the combined gold-bullion holdings of the mighty American GLD and IAU gold ETFs. They dominate that space, acting as conduits for the vast pools of US stock-market capital to slosh into and out of gold. During those two days where gold fell 4.4%, GLD+IAU holdings actually enjoyed a small 0.2% build! Investors weren't responsible for gold's plunge.
While annoying since it really distorts gold prices, normally speculators' collective gold-futures trading is soon disclosed. Every Friday afternoon, the US Commodity Futures Trading Commission publishes Commitments of Traders reports current to preceding Tuesday closes. They reveal what specs as a herd are doing in gold futures. Gold price action is highly correlated totheir super-leveraged buying and selling.
As a professional gold-stock speculator and financial-newsletter guy for decades now, there's no data that I anticipate more than those weekly CoTs. I devour specs' latest positioning within minutes after its late-Friday releases. But for the critical CoT week leading up to early February's violent gold plunge, that data wasn't published. That was really odd, since the CFTC has released CoTs like clockwork since June 1962!
I soon learned the CFTC had issued a notice the day before. A major futures-clearing and data firm called ION Markets was hit by a ransomware cyberattack. This Irish company is apparently essential to the plumbing underlying global futures trading. With a sizable chunk of ION's servers inaccessible due to that event, many automated futures-reporting functions were forced to go manual. So the CoT data went dark.
The CFTC warned "The ongoing issue is impacting some clearing members' ability to provide the CFTC with timely and accurate data. As this incident unfolded, it became clear that the submission of data that is required by registrants will be delayed until the trading issues are resolved. As a result, the weekly Commitments of Traders report that is produced by CFTC staff will be delayed until all trades can be reported."
That seemed reasonable, but no timeline was given for when "A report will be published upon receipt and validation of data from those firms." Since this CoT data is so critical for so many major global markets, I figured it would be a day late. But over a week later, neither that data nor the following CoT week's that encompassed gold's 4.4% plunge were reported! We need to see how much gold-futures selling drove that.
Last Friday the 10th, the CFTC issued another press release saying the same thing. That was fully ten days after that January 31st attack on ION! You'd think firms as important as it and its customers would pull out all the stops, getting all hands on deck to manually gather all that futures data if necessary. It was amazing US futures regulators were tolerating companies still not reporting that critical positioning data.
"Although the impact of the cyber-related incident at ION has been mitigated, firms that are responsible for reporting are continuing to experience some issues with respect to the submission of timely and accurate data to the CFTC. As a result, the weekly Commitments of Traders report, that is produced by CFTC staff, will continue to be delayed until all trades can be reported." Again no ETA on those CoTs was given.
This mess wasn't just a gold-futures thing, it affected many futures markets. According to the Financial Times, the day after that ION cyberattack the US Treasury held meetings to assess whether that posed a systemic risk to broader financial markets! And speculators' collective gold-futures trading going stealthed likely exacerbated gold's selloff. It cloaked how much gold-futures selling they had done to hammer gold.
This chart looks at gold prices superimposed over that weekly CoT data during the last several years or so. Total spec longs and shorts are rendered in greed and red respectively. Gold uplegs and corrections are highly correlated with spec gold-futures buying and selling. Material gold selloffs give up their ghosts as soon as these hyper-leveraged traders have exhausted their very-finite gold-futures selling firepower.
Chart & links:
http://www.321gold.com/editorials/hamilton/hamilton021723.html
Unbelievably the last-available spec gold-futures-positioning data is only current to Tuesday January 24th! ION's servers were taken offline due to its own negligence in hardening them the following Tuesday the 31st. So there was no data to fill that next CoT. Thus neither those speculators nor other traders know how specs were positioned leading into gold's February 1st interim high of $1,951 before that selling hit.
Just over a week earlier, specs collectively had 301.2k long contracts and 120.6k short ones outstanding. Those numbers are meaningless unless you are deeply immersed in ongoing CoT analysis. So to help our newsletter subscribers quickly digest CoT trends, I recast specs' total gold-futures longs and shorts as percentages up into their past-year trading ranges. Those constructs are super-useful for trading gold stocks.
When total spec longs near 0% up into their past-year range and total spec shorts near 100% up into their own, spec selling is likely exhausted. That means a gold trend reversal is highly probable, a bounce to a big new rally. Once speculators have done all the long dumping and all the short selling they are likely to do, all they can do is buy. And that leveraged buying quickly catapults gold sharply higher, like in recent months.
On January 24th when gold closed at $1,937, total spec longs were 33% up into their past-year range and total spec shorts were 32% up into their own. That implied speculators still had room left to do about one-third of their short-covering buying and two-thirds of their long buying. Those are respectively the first- and second-stage drivers of big gold uplegs, fueling enough momentum to ignite stage-three investment buying.
Interestingly during the following CoT week into the 31st, gold actually slumped 0.5% to $1,928. It didn't surge to that $1,951 high until after the next day's Fed decision. So specs likely sold some contracts in that week, which would've left their positioning more bullish for gold with less selling firepower left. Those GLD+IAU holdings only slipped 0.1% lower during that CoT week, so identifiable investment selling was trivial.
During the subsequent CoT week into the 7th, gold first surged 1.2% to that upleg high before plunging 4.4% over the next couple trading days on that dovish ECB and epic US-jobs seasonal adjustment. Gold exited that CoT week with a serious 3.0% loss, implying big gold-futures selling. Investors didn't freak out, as GLD+IAU holdings edged up 0.1% during that gold-slamming week. Those leveraged specs were to blame.
After decades of watching gold action all day everyday and analyzing all following CoT reports, again that sharp selling on those couple days looked like shorting. Triggered by those market events, gold's drops were sharper and more violent than those usually associated with long selling. There's no doubt that speculators had to expend a significant fraction of their remaining selling firepower to so hammer gold.
The crucial question is how much? Where are specs positioned in gold futures now relative to their past-year trading ranges? The answers to these questions are essential to gaming when this gold pullback, or possibly a larger correction, will end. But as long as the CFTC is coddling ION and its customers and not demanding legally-requiredCoT data, no one knows. That includes the gold-futures speculators themselves!
With that extreme leverage they run, they live and die by the sword. They can't afford to be wrong for long or risk getting wiped out. These guys watch the weekly CoT reports like hawks, well aware of what they mean for gold price trends and reversals. I suspect they've dumped more longs and added more shortssince February 1st than they would've had they known how their peers were collectively positioned.
The more gold-futures contracts they sell, the less they have left to sell going forward! That ups odds for a sharp gold reversal as buying resumes. This chart shows the growing black hole in that key CoT data since it was last reported current to January 24th. The green spec-longs line likely fell in recent weeks as gold plunged, while the red spec-shorts line likely surged sharply higher. I'm dying to see the size of those moves.
Unfortunately we have no idea when the CFTC will resume publishing the CoTs, including that back data. Later on Friday the 17th after this essay was published, another CoT report current to Tuesday the 14th is due to be reported. If not, that will mark a scandalous three CoT weeks in a row with no positioning data! Its festering absence will cause gold prices to become even more distorted, impairing market functioning.
Since speculators' hyper-leveraged gold-futures trading is usually the dominant driver of gold price action, I analyze every CoT in our weekly and monthly subscription newsletters. I'm waiting with bated breath to see the CFTC resume publishing that essential data. As soon as it comes out, I'll share its likely big gold implications with our subscribers who pay the bills. It might even spook specs into resuming their buying!
Again the more gold-futures selling they have done in recent weeks, the less they have left to do. Their finite capital firepower available for sellingis exhausting! Unstealthing their collective trading may prove a shock, as these guys realize their likely selling has run its course so they rush to buy. That could catapult both gold and its miners' stocks sharply higher, ending this anomalous selloff exacerbated by stealthed data.
Like usual the biggest beneficiaries of a sharp gold reversal higher will be the gold stocks. They were hit far harder than they should've been in recent weeks as gold's anomalous plunge gutted bullish sector sentiment. Thus they are poised to roar back up in a V-bounce mean reversion as gold's selloff ends. So this outsized gold plunge is a great mid-upleg opportunity to buy into gold stocks at relatively-low prices!
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That holistic integrated contrarian approach has proven very successful, yielding massive realized gainsduring gold uplegs like this underway next major one. We extensively research gold and silver miners to find cheap fundamentally-superior mid-tiers and juniors with outsized upside potential as gold powers higher. Our trading books are full of them already starting to soar. Subscribe today and get smarter and richer!
The bottom line is speculators' gold-futures trading that dominates gold price action has been stealthed in recent weeks. A major futures clearing firm suffered a ransomware cyberattack, taking down automated data systems. Though resolved, US regulators responsible for ensuring compliance have dawdled in demanding legally-required CoT data essential for markets. That missing is increasingly distorting gold prices.
Unaware of how much gold-futures selling they've done, specs don't know how much selling firepower is left. So they've been flying blind, piling on to gold's downside momentum with extreme leverage which is super-risky. When the CoTs come back online and this becomes apparent, it may spark a buying panic for these guys to normalize their gold-futures bets. That would catapult gold and gold stocks sharply higher.
Feb 17, 2023
Adam Hamilton, CPA
Wish I had your money! I bought a small block yesterday and added twice today. Red at the moment, but I think it turns out well. GT’s 4God
I think so too. Added again today to my PHYS.
Added
Added again
Gargantuan Rally in Metals and Miners Next
Sprott Money
2/16/24
You need to get ready for the next run above 2000 in Gold and possibly 30 in Silver. Miners will soar even higher in percentage terms. What look for? Peak DXY and peak bond yields. The Banks are record long Treasury Bond futures. They believe yields are going much lower. They are the smart money. Lower yields are only beneficial for Gold and Silver.
The DXY is approaching its 200-day moving average at ~106. Could it fall a little short of that or go a little higher, sure, but the rebound I forecast back on January 4 is coming to a close soon. If the near perfect inverse relationship with Gold continues, a peak and fall in DXY virtually guarantees much higher Gold and Silver prices. I am looking for the 90s next, perhaps even sub 80, in the DXY. Where would Gold and Silver be then?
What is the trigger for these moves? My guess is a sharp drop in inflation announced in March, followed by a possible “pause” signal from the Fed on rate hikes at the March FOMC. Note that this means we could see lower prices yet across the complex over the next 2 to 3 weeks, but I suspect the PMs and miners will see the writing on the wall ahead of that. We’ll see.
This is the backdrop for where I see the precious metals and miners sector going in the next few months. Let’s look at the targets on the downside for the lows in each and the potential upsides once the rally takes place.
First, how did we get here? DXY rallied on a dovish ECB, pushing the euro down and DXY higher. Far stronger than expected Non-Farm Payrolls and CPI data did the rest. But the technicals on both the daily and weekly charts clearly showed this was coming, Gold was just waiting for the catalysts.
Note the extreme overbought conditions and multiple negative divergences in the RSI and the MACD Histogram (blue) while price was going higher. In addition, we had the biggest peak in the MACD Line (magenta) since the peak at 2079 in March 2022. The breakdown of the ending diagonal / bull flag was the just confirmation that the rally was over for now and the pullback had begun.
Fast forward to now. The RSI has erased the overbought condition and is approaching the extreme oversold 30 level. The MACD Histogram is coming off its lowest level since June 2021 when Gold was at 1775 and is now turning upwards. The MACD Line has fallen off a cliff and is now tagging its support line. Simply put, the conditions are ripe for a rebound sooner or later, or something far bigger. My target on for the next peak in Gold is ~2200.
As for where we bottom out, my targets remain 1820, 1800, or worst-case 1750. We have already broken the 50DMA and a test of the 200DMA is possible next before we head higher.
SILVER
Switching to Silver, let’s start with the Gold:Silver ratio, or “GSR”:
It has reached my target of the 200 day moving average and now the RSI is extreme overbought a negatively divergent. The MACD Histogram is already falling and is negatively divergent also. The MACD Line is turning down from a peak. All of this tells me Silver is about to outperform Gold on the upside.
Silver has been beaten down even more so than Gold, which explains the rising GSR above. However, it is now also more oversold on every indicator and is fast approaching its 200-day moving average. This just reinforces my expectation that Silver will outperform Gold when the turn comes, be it at the 200DMA or slightly lower, a fake breakdown.
The RSI is extreme oversold but it is likely to become even more so, setting up a positively divergent lower low. However it plays out, Silver is close to a major low. The MACD Histogram is already turning up from its lowest level since May.
The MACD Line fell from its highest level since the March 2022 peak and is now at its lowest since July. The ingredients are in place for blast off soon.21-20 is the support zone for Silver. My next target on the upside is the prior high at ~30.
GDX
The Gold:GDX ratio, or “GGR”, is fast approaching its 200DMA now too. The RSI is also approaching the extreme overbought level of 70 and the MACD Histogram is already turning down. This bodes well for outperformance in GDX relative to Gold when the rally begins. No surprise there.
As you can see, GDX has hit my target for the bottom of Wave 2 somewhere between 29-26. So we are already in the buy zone but could fall a little lower yet. The RSI is approaching extreme oversold levels at ~30. The MACD Histogram is already turning up. The MACD Line is hitting its trendline support. Sound familiar? It should, GDX is getting ready for launch too imho. My next target on the upside in wave 3 is 40+.
SILJ
Dare I say it but SILJ may have already bottomed out yesterday. We have a positively divergent, extreme oversold RSI yesterday and follow through to the upside today. The MACD Histogram is already turning up. It’s only a matter of time before the MACD Line follows suit. We have hit my Wave 2 target box on the downside. While I don’t rule out “slightly” lower prices yet, the rally in Silver miners has already begun or its pending. My next target on the upside is 30+.
In conclusion, the entire sector is getting ready to go much higher imho, with Silver outperforming Gold, Gold miners outperforming Silver, Silver miner outperforming Gold miners, and junior miners outperforming senior miners. The triggers may be a few weeks away but like in October 2008 and August 2018, I expect them to bottom out ahead of that, and then just accelerate to the upside once the CPI comes out and the Fed moves towards a “pause” thereafter. Only a drop below 1618 in Gold negates this entire bullish thesis, but the chances of that are remote, to put it mildly. The only other caveat is a stock market crash, but seeing is believing when it comes to that.
CHARTS:
https://www.sprottmoney.com/blog/Gargantuan-Rally-in-Metals-and-Miners-Next-February-16-2023
Hard to understand how the value of the dollar is going UP in this environment. Let’s print another few trillion of them!
I don’t like that 836k share block that traded at 3:05 - might have been a buy, might have been a sell - can’t tell
Bob, got your msg - can’t private reply - but I fulfilled your request - blessings, 4God
Nice turn today - hope it continues tomorrow
Nice turn today - hope it continues tomorrow
Added today
Added again today
In SOYB
Added today
Added to my very small PHYS position this afternoon. Waiting to see what the big dogs do here before committing.
Well, $ up Au dn in pre-market. I’m reminded of the old expression “Don’t fight the FED”.
Re: $GOLD - Today’s long-legged doji on heavy volume, right at the 50dma, might just be the sign of a coming reversal. Tomorrow will tell.
$GOLD finished its decent for today @ 1863.50, sitting right above the 50dma @ 1861.45 - lower volume suggests we might get a little relief in the next couple days, but 1825-1835 seems a more likely support level.
Thinking about playing this. You guys day trade it? Seems as dangerous as a cocked cannon to me. Been swinging UNG, but this thing is beat up really badly. Intrigued.
B PHYS (small position)
Back in PHYS
GDX chart looks unhealthy.
50dma taken out
Support @ 29.77 to 29.99 taken out
RSI @ 40.44 is far from oversold
Lower BB is stretching, but has not been violated
Next support area 28.30-28.41
I think we have more downside here
$Gold chart
50dma @ 1859.38
Next support 1836.90
$Silver chart
Selling volume has been heavy
Took out support @ 22.38
Next support 21.31
200dma 21.05
SLV chart
Looks a bit better, maybe a bottom here?
btw - This in NOT seasonally a great time for pm’s
full disclosure: I am out all PM’s at the moment
Sharp Gold Pullback Healthy
Adam Hamilton
Archives
Feb 10, 2023
Gold was just slammed hard in a sharp selloff, plunging over 4% in only two trading days! That really freaked out traders, gutting bullish sentiment and leaving them worried about more serious downside. It didn't have to though, as gold's powerful young upleg was increasingly due for a pullback. These are essential periodically to maintain uplegs' health, keeping sentiment balanced to maximize their ultimate gains.
One of the great challenges of trading is overcoming our natural immediacy bias. When we formulate opinions on anything, we all tend to weight recent events more highly. Applied to markets, this means we assume whatever price action has just happened will persist into a new trend. We make linear assumptions in a nonlinear world, forgetting about markets' endless cyclical flows and ebbs. This leads to bad decisions.
Traders as a herd generally buy high after big rallies generate greed, then sell low after subsequent major selloffs spawn fear. That's the polar opposite of the buy-low-sell-high strategy necessary for success! In my decades as a professional speculator, I've found the best antidote for immediacy bias and the herd groupthink it inevitably leads to is perspective. All market action should be viewed in the context of longer trends.
Gold plunging 4.4% last Thursday and Friday was certainly a violent selloff. But considered within a six-month timeframe, it didn't do much technical damage. Between late September to last Wednesday, gold powered 20.2% or $328 higher in 4.2 months. That wasn't just a strong young upleg, it boosted gold back into formal-bull-market territory with 20%+ gains! This is essential perspective for the subsequent drop.
That 4.4% or $86 gold selloff was big and mean, but it only reversed about a quarter of those major gains leading into it. And interestingly 4%+ gold plunges over two trading days aren't even particularly unusual. There were actually nine over the last several years since 2020 dawned, spread over six separate events! So these can happen a couple times a year or so. They shouldn't surprise traders who are doing their homework.
After last week's latest Fed decision and rate hike, I wrote an essay on the Fed gold anomaly unwinding. It analyzed how the Fed is running out of room to keep jacking its federal-funds rate higher, so its ability to shock markets with big rate hikes is over. That is really bullish for gold, as last year's monster rate hikes ignited extreme US-dollar buying driving heavy gold-futures selling which crushed gold through mid-2022.
I've written 1,056 of these weekly web essays since early 2000. In order to publish them early Fridays, I have to decide what to analyze then finalize any charts late Wednesdays. So that mid-week close is the data cutoff for these essays, which I pen Thursday mornings then proof those afternoons. Gold closed at an impressive new upleg high of $1,951 on that Fed Day last Wednesday, surging 1.2% despite the latest hike.
Gold's 4%+ plunge last Thursday and Friday didn't change that analysis in any way, as it is based on that critical longer-term perspective necessary to overcome the immediacy bias. But man, the feedback I got was sure hostile! Traders didn't care that gold had just powered 20.2% higher in 4.2 months, they were shocked and angered it had fallen 4.4% in two trading days. Here's an example e-mail from one reader...
He quoted my essay where I wrote, "Gold is finally being freed from its extreme-Fed-rate-hike-cycle shackles to start reflecting this underlying raging inflation." He replied, "Really? Smashed down $100 once again, thus proving that gold is unstable crap and the gold commentators such as you are always full of shit! How much would you pay me to read your newsletter?" Our subscribers weren't surprised at all.
In addition to these weekly web essays, we publish separate weekly and monthly subscription newsletters containing the meat of my analytical work and actual stock trades based on it. That very Fed day last week where gold hit $1,951, I warned our weekly subscribers that a large gold pullback could be ignited that afternoon by the Fed chair's press conference following its decision. Before gold's sharp selloff I wrote...
"If Powell proves hawkish enough, it could ignite a USDX countertrend rally hitting gold. During in-progress uplegs, 50dmas are often major support zones for larger pullbacks. Ominously gold's is way down around $1,831 today! Odds are such a severe selloff won't happen, but even that wouldn't mortally wound gold's upleg." While gold weathered the Fed chair fine, that large pullback started the next morning.
I analyzed the causal chain in depth in our latest weekly newsletter as always, but in a nutshell early last Thursday the European Central Bank was dovish. While it did hike its own benchmark rate by 50 basis points as expected, its monetary-policy statement said it would likely only do one more 50bp hike at its next meeting and then pause its hiking cycle. That is much earlier than the ECB president recently implied.
So the euro fell, fueling buying in the competing US dollar. Its benchmark US Dollar Index had just made a new downleg low the prior day after the Fed, as gold carved that new upleg high. The USDX was as oversold as gold was overbought, neither to major-trend-reversal extremes but both enough to trigger big countertrend moves to rebalance sentiment. These take the form of healthy pullbacks within ongoing uplegs.
Major price trends are never linear, they always take two steps forward followed by one step back. So the longer any upleg runs without any material selloff, and the higher prices get stretched above their baseline 200-day moving averages, the greater the odds for a large pullback. Gold hadn't suffered any significant declines since mid-November! After powering higher for several months, a rebalancing selloff was due.
Gold's 2.0% drop Thursday after the ECB hammered the euro goosing the USDX worsened Friday after another market surprise. Early on the US government released its latest monthly US jobs report, which proved a statistically-impossible eight-standard-deviation beat. Wall Street economists were looking for 187k US jobs created in January, yet the Bureau of Labor Statistics claimed an unbelievable 517k were!
Traders viewed that blistering headline jobs data as Fed-hawkish, arguing for more rate hikes. So the USDX blasted 1.2% higher, its biggest up day since leading into late September's euphoric 20.4-year secular peak! That unleashed what looked like heavy gold-futures short selling slamming gold another 2.4% lower to $1,866. While 4%+ two-day gold plunges aren't rare, back-to-back major market surprises are.
The ironic thing about traders' kneejerk reactions to that highly-suspect jobs report was that headline beat was fabricated. The BLS's underlying raw jobs data actually showeda record 2,505k US jobs lost during January! An epic 3m+ job seasonal adjustment was applied to get that +517k headline number, literally conjured out of thin air in bureaucrats' spreadsheets. Neither the dollar nor gold should've reacted on that fiction.
But with the short-term-oversold USDX starting to rally the day before, and short-term-overbought gold starting to pull back, momentum-chasing trading intensified. Thus gold was pummeled down 4.4% in two trading days, freaking out traders. But had they looked at a simple chart with a six-month-plus duration to regain perspective, their immediacy bias wouldn't have run roughshod. Gold is still looking fine technically!
Charts:
http://www.321gold.com/editorials/hamilton/hamilton021023.html
Prepare to Be Bled Dry by a Decade of Stagflation
February 6, 2023
Our reliance on the endless expansion of credit, leverage and credit-asset bubbles will have its own high cost.
The Great Moderation of low inflation and soaring assets has ended. Welcome to the death by a thousand cuts of stagflation. It was all so easy in the good old days of the past 25 years: just keep pushing interest rates lower to reduce the cost of borrowing and juice credit expansion ((financialization) and offshore industrial production to low-cost nations with few environmental standards and beggar-thy-neighbor currency policies (globalization).
Both financialization and globalization are deflationary forces, as they reduce costs. They are also deflationary to the wages of bottom 90%, as wages are pushed down by cheap global labor and stripmined by financialization, which channels the vast majority of the economy's gains into the top tier of the workforce and those who own the assets bubbling up in financialization's inevitable offspring, credit-asset bubbles.
To keep the party going, central banks and governments pushed both forces into global dominance: hyper-financialization and hyper-globalization. Policy extremes were pushed to new extremes: "temporary" zero-rate interest policy (ZIRP) stretched on for 6 years as every effort was made to lower the cost of credit to bring demand forward and inflate yet another credit-asset bubble, as the "wealth effect" of the top 5% gaining trillions of dollars in unearned wealth as asset bubbles inflated pushed consumption higher.
Corporate profits soared as credit became essentially free and super-abundant and globalization lowered costs and institutionalized planned obsolescence, the engineered replacement of goods and software that forces consumers to replace their broken / outdated products every few years.
Every economic lever was pulled to extend the vast profits generated by hyper-financialization and hyper-globalization. Currencies were manipulated lower to boost exports, cheap credit kept zombie companies alive, bridges to nowhere and millions of empty flats were built to boost jobs and profits, and so on.
At long last, all these gimmicks have reversed or reached marginal returns: they no longer keep inflation suppressed, asset bubbles inflating and profits expanding. The malinvestment of global capital will be revealed and the costs of the policy gimmickry will be paid by years of stagflation: high inflation, low or negative growth and endless debt crises as the reliance on cheap credit to boost profits comes home to roost.
It turns out that the inevitable offspring of hyper-financialization and hyper-globalization are inflation, credit crises and the undermining of national security as the self-serving goal of pushing corporate profits higher via globalization led to fatal dependencies on competing powers for the essentials of modern life.
Correcting these decades-long extremes will take at least a decade as long-suppressed inflation becomes endemic, supply-chain disruptions become the norm and capital has to be invested in long-term national projects such as reshoring and the engineering of a new more efficient energy mix--projects that will only be expenses for many years.
This demand for structural investments with no immediate profit payoff is what drove the stagflation of the 1970s, a factor I explain in The Forgotten History of the 1970s and The 1970s: From Rotting Carcasses Floating in the River to Kayak Races.
The gains will not even be measured by our current outdated economic metrics of GDP and profits. The gains will be in the national security of essential supply chains and production and in the relocalizing of jobs and capital, not corporate profits.
Our reliance on the endless expansion of credit, leverage and credit-asset bubbles will have its own high cost: the collapse not just of the current Everything Bubble but of the engines that inflated one bubble after another.
Central bank and state authorities are thrashing about cluelessly, as all their gimmicks are now problems rather than solutions. The current policy gimmicks laid the foundations for a decade or more of high inflation, low growth and credit crises as the phantom "wealth" of credit-asset bubbles evaporates.
This will drive a reverse Wealth Effect as the top spenders are crushed by the collapse of asset bubbles. Long-term trends in demographics (shrinking workforces and the skyrocketing population of elderly) and depletion of resources will add fuel to the inflationary / low growth / credit crises bonfires.
Gordon Long and I discuss all these mutually reinforcing trends in A Great Stagflation (36 min). This is the culmination of our decade of programs about all the policy gimmicks that were pushed to extremes to maintain the illusion of stability and growth--an illusion that's evaporating as it makes contact with stagflationary realities.
Full article w/charts:
https://www.oftwominds.com/blogfeb23/stagflation2-23.html
Central Banks Gobbled Up More Gold Last Year Than In Any Year Since 1967
Author: Frank Holmes
Date Posted: February 8, 2023
https://www.usfunds.com/resource/central-banks-gobbled-up-more-gold-last-year-than-in-any-year-since-1967/
The way I see it, a 3% gain is a 3% gain, whether you’re a millionaire or a hundredaire, lol
If we keep at it, maybe someday we’ll both be thousandaires!
GT’s, 4God
USO was ripping today!
SLV is in the neighborhood of being ready to make another move here. Maybe back to 22ish, which would be a nice 10% gain. Anyone else thinking the same thing? The caveat is that Ag does not traditionally do well in the spring. Getting kind of close to that reality as well.
In USO