It has been over a month since my last entry on the markets, and aside from a few Twitter posts, most of my analysis has been confined to my desktop. The impact of the coronavirus on the retail precious metals market has been historic, with dueling supply and demand shocks, and as president of Texas Precious Metals, my time has been consumed by day-to-day operations. I finally have a bit of a respite this afternoon to share a few thoughts on the metals markets.
Back in November, I identified a 5-wave pattern setting up with two bull wedges that created a series of highly favorable long setups (see chart above). The big sell-off with the COVID debacle was concerning, but as we can see from the chart, horizontal support held and the bounce higher was strong and swift. It is possible (as some suggest) that Wave 5 is now completed, but I continue to think gold is pushing for all-time-highs based on price action and consolidation.
Also encouraging is the fact that gold is sitting right at the anchored VWAP (volume weighted average price) from the March 31st lows. (I used TrendSpider for this chart.)
Zooming out to the monthly chart, the big selloff in March produced a long-legged doji that retraced the move to the 50% Fib retracement level (1450). Since that time, gold has rallied higher and seems to be pushing for a test of all time highs of $1910 (monthly close of $1830).
Silver is also coiling for a move, sitting at both horizontal support and rising channel support. From a risk/reward standpoint, a long entry here with a stop below 14.60 is favorable. The upside should target ~18.80.
Lastly, just a quick comment on the S&P 500. The bearish case is that we have witnessed the beginning of 5 waves down, with wave 1 culminating in March and an A-B-C correction into April and early May. There is a head and shoulders top just below the 61.8% fibonacci retracement and a break of rising channel support would target 2620. The bulls would gain the upper hand if channel support holds and we break above 2940-2950 to the upside. A big rally to 3300 would likely ensue.
As always, we look forward to your feedback. Be safe out there!
The last two weeks have been extremely volatile in the markets, and for the first time in a long time my friends and family have called to inquire about “what is going on in the markets?” Coronavirus contagion fears, coinciding with all-time highs in the markets, has been the scapegoat for a rapid, deflationary decline across nearly all markets except bonds, which resiliently continued to fetch a bid. Even the US Dollar, traditionally a safe haven in deflationary swoons, declined.
Here is how I see the markets:
Happy New Year! We are kicking off the New Year with stocks at all-time highs, oil prices spiking on Middle East tensions, and the precious metals complex following through nicely for our November/December videos. If you haven’t had a chance to watch those videos, they offer a helpful background on the technical setup for metals and the price action we are seeing today.
In this video, I analyze the S&P500 chart, which is now meeting up with 20-year long term resistance and the upper bound of its year long channel, but is also breaking out above the 261.8% Fibonacci extension from the 2007 peak to the 2009 bottom in equities. My short term view is bearish, as I think overhead resistance is stout and the RSI is overbought. However, longer term, the break above the 261.8% extension is significant and supportive of higher equity prices in the coming months.
This compares with a relatively weak Q1 2018, when demand sank to a three-year low of just 984.2t. Central bank buying continued apace: global gold reserves grew by 145.5t. Gold-backed ETFs also saw growth: quarterly inflows into those products grew by 49% to 40.3t. Total bar and coin investment weakened a fraction to 257.8t (-1%), due to a fall in demand for gold bars; official gold coin buying grew 12% to 56.1t. Jewellery demand was a touch stronger y-o-y at 530.3t, chiefly due to improvement in India’s market. The volume of gold used in technology dipped to a two-year low of 79.3t, hit by slower economic growth. The supply of gold in Q1 was virtually unchanged, just 3t lower y-o-y at 1,150t.
Each state in the U.S. is unique, with different economic prospects and opportunities available to its residents.
For example, in a state such as New York, there is a surplus of high-paying jobs available in tech and finance sectors. Meanwhile, in places like North Dakota and Alaska, there is an incredible endowment of natural resources that help create an opportunity for the people living there.
The third quarter saw a 9% year-on-year (y-o-y) drop in gold demand to 915 tonnes (t). Year-to-date (y-t-d) demand was down by 12%.1 ETFs had another quarter of positive inflows, but at 18.9t, they fell far short of the 144.3t influx in Q3 2016. A softer quarter in the jewellery sector (-3%) accounted for 17t of the y-o-y decline. Demand from other sectors firmed: central banks bought a healthy 111t of gold (+25% y-o-y) while bar and coin investment strengthened by 17% (to 222.3t), albeit from a low base.
Millions, billions, and trillions…
When we talk about the giant size of Apple, the fortune of Warren Buffett, or the massive amount of global debt accumulated – all of these things sound large, but they are actually extremely different in magnitude.
That’s why visualizing things spatially can give us a better perspective on money and markets.
The U.S. economy is massive on a global scale, and much of the country’s economic capabilities can be traced back to the innovation, knowledge, and productivity that tends to be clustered in urban areas.
The fact is that 80% of Americans live in cities – and the 10 largest metro areas alone combine for a whopping 34% of the country’s total GDP.