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IS GOLD ON THE LAUNCH PAD?

GOLD NORMALLY SHINES WHEN EQUITIES STRUGGLE!

Click All Charts to Enlarge

1 - SITUATIONAL ANALYSIS

Remember that old trick in calling a coin flip? You call it with: "Heads I Win, Tails You Lose". Maybe the Fed is caught by the same sort of double speak?

THE FED CAN'T WIN - GOLD CAN'T LOSE

• If price inflation does come back down and there is a recession. The Fed will cut rates. The budget deficits will keep getting larger. The central bank will go back to QE. That’s bullish for gold.
• If inflation comes down with a weak economy that’s bullish for gold.
• If inflation goes up, that’s bullish for gold, as long as the Fed stops fighting it, which eventually they have to do, because if inflation keeps going up, the economy is going to collapse. The Fed can’t keep raising rates. It’s like a game of chicken. At some point, the rate hikes are too much for this overly indebted economy to bear. We are all levered to the max. It can’t happen.

The Fed is in a no-win position and when the Fed can’t win, Gold can’t lose!

GOLD FALLS WHEN REAL RATES RISE

Gold predictably rises when real rates fall and falls when real rates rise. The chart to the right shows ho, since the beginning of the initial market weakness in January 2022, Gold has separated from that relationship. (Note:The 10Y real rate is plotted inversely).

Gold has actually held up quite well for other reasons. Two of those reasons are strong Central Bank Buying along with its perceived value by increasingly wealthier eastern emerging nation populations. Recently, both of these buying groups have shown some relative weakness.

Below we show the Federal Reserve FRED plot for the 10Y Real Rate going back to 2003. The upward trend channel (shown in red) has not yet been violated. Additionally the 10Y Real Rate has broken a longer term red trend line. There is a strong possibility that Real Rates will continue higher than possibly as high as 2.5%.

The question is whether Gold will fall towards a rising real rate or whether real rates will begin to trend lower as the view of a "Soft Landing" begins to possibly erode?

GOLD IS AT A CRITICAL INFLATION POINT

Currently we find that Gold is trying to break above its short term negative trend line and is up against its 100 day moving average, which comes in right around these levels. A close here or higher and prices will squeeze further, however these are relatively big resistance levels that need to be considered.

Gold is clearly at an important inflection point on multiple fronts.

2 - FUNDAMENTAL ANALYSIS

GOLD PERFORMS BEST WHEN EQUITIES STRUGGLE!

From a bigger picture, history shows us that Gold performs best when equities are struggling. The chart below compares Gold's performance between the difficult market period between January 2008 and December 2009 against Gold's performance since the markets topped in January 2022.

If in fact the US enters into a recession, it is highly likely that over-priced equities will weaken. This suggests Gold will continue to follow the pattern to new highs.

3 - TECHNICAL ANALYSIS

A MAJOR CUP & HANDLE PATTERN FORMATION

From a longer-term technical perspective gold has traced out a classic major Cup-and-Handle formation. At some point gold might be expected to head higher in quite a violent fashion.

SHORT TERM TECHNICAL CHARTS



As we drill down into the short-term charts for Gold, we see a pretty clear Elliott Wave count set-up of Initial 1-2 Waves, suggesting gold is setting up for a major lift. HOWEVER, before that occurs, there is likely one more leg down to complete a smaller Wave 2 (in black).

YOUR DESK TOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

The next chart requiring consideration is the Daily chart with 50/100/200 Daily Moving Averages and the Bomar 3 Standard Deviation Bands.

• The 50 DMA (in red) has crossed below the 100 DMA (blue line) in a downward trend. The 100 DMA is currently in a downward trend towards a potential cross of the 200 DMA.
• The 50/100/200 DMAs are tightening their pattern in a typical "Banding" manner. This usually proceeds a major move - up or down.
• A possible corrective ABC (in red) where "A" = "C" projects a logical support area (gold box).
• The 3 Standard Deviation Bomar bands, which gold has been operating with (which are unusual), suggests a likely classic Bollinger Band Cross, which means a potential touch of the rising lower 3 Std Dev Bomar (lower rising black line).

YOUR DESK TOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

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