Gold at a turn?

You might expect the rally in GOLD to continue through the upper trend line and with increasing volume, that would constitute a bullish breakout. There’s about $165 in potential from 1900 = $2065 which takes us to the recent highs. The important thing to consider is what the environment will look like at those highs, and you have to think it would look pretty good. Prices need to go to 1880 to trigger a point and figure buy signal. Despite a strong dollar, and rising bond yields, the PM’s have done pretty well. If the economy (GDP) reports lower then expect this group to outperform if as expected those other two headwinds subside.

Silver has some catching up to do, if it breaks out of the range the objective is above the old highs. The money flows are structurally very good. The Green Dips represent buy points. The last two Aprils have been seasonally good times to buy Silver, although one April was the 2020 crash, and the 21 April move was positive, not spectacular.

The recent twin oversolds in MFI were deeper even than the 20 bottom, signally an indication of capitulation. The other low trading volume (green) dip was also in 2020. (are we in crash territory here?) That was the worst of the selling and the equity market was a raging buy from that point on.

Silver outperformed equities at twice the rate, from the lows, but equities proved the long term investment, and if you want to apply that, if you own Silver for a double AND the stock market rises as well, then you can shift into equities when the ratio turns. (Just building a model – really aren’t sure equities will be along for the ride this time, but if this is the 1970s, and it increasingly appears that the hyperinflation genie is out of the bottle then keep your Silver for the duration, or until the storm recedes.)

And a bit of cold water. If this is the 95 turn, and this is only a blip in the stock market highs, then Silver seems to be in sync to lose value. Before we go all in on That 70’s Show, here are a few thoughts. Stock market patterns are like tomatoes, you like them fresh.

The 90’s is nearer and not just in years. The 70s was before stocks could be traded in street name, before online trading. Before trading action added was multiplied into liquidity in the markets. And the various asset classes also correlate, to the 90’s: RISING DOLLAR, LOW OR ANEMIC (FLAT) YIELD CURVE (yields were much higher then, but we could easily nudge that benchmark here…) and FALLING PMs.

The 98 dip did not signal the end of the bull market. That was a 20% pullback. From the 98 lows there was another 60% gain, and that implies Dave Hunters Melt-Up or SPX 6250, more or less. In the context of the late 90’s bull market that would send PM prices lower. A good idea to watch both of them. Silver only made nominal gains against the S&P in that 98 pullback.

In the current context that is a 20% lift on Silver – (35% off the lows) and the 98 was around 15%. The patterns are very similar at around five months duration we might expect equities to catch some momentum.

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