Gold/Silver: Is $1900 the new ceiling or floor?
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
Looking at the performance data, Gold has gained 2.4% this week, up 3.63% YTD and up 6.75% over the past 52 weeks. Last year, Gold's lack of performance stemmed from accelerating growth in conjunction with rising inflation. That was why you could select any other commodity or any high growth/high beta stock and come out a winner until the November 19th Nasdaq high. From that point, you can see inflation remains sticky (i.e., Crude Oil, Gasoline, Agriculture) while growth stalled and decelerated from the emergence of Omicron. Remember that Gold's best performing economic environment is always stagflation and deflation (both have declining growth), while reflation (rising growth) tends to leave Gold in the dust.
Gold is currently operating with the best of both worlds, the right economic environment, and a geopolitical tailwind which should keep corrections shallow. The Fed caught itself between a rock and a hard place by waiting so long to raise rates that it will begin in a slowing economic environment. That will keep deflation here for the foreseeable future; therefore, you should be "selling the rips" in stocks and "buying the dips" in Gold. To learn more about active trading in Gold futures, we completed a new educational guide that answers all your questions on how to transfer your current investing skills into trading "real assets," such as the 10 oz Gold futures contract. You can request yours here: Trade Metals, Transition your Experience Book.
Daily S&P 500 Chart
Daily Gold Chart
We have three reasons why we believe, even with this breakout, that it is not too late to position in on corrections. We think the U.S. Dollar tops at the onset or early stages of a hiking cycle, and remember, Gold bottomed the day after Fed liftoff in Dec 2016. This time is no different, with a 50% probability the Fed will hike 175bps in 2022. Russia and China are at the helm of geopolitical tensions and have been huge buyers of Gold since 2019. If geopolitical tensions dissipate after Ukraine, wait until China aggresses on Taiwan. Investors like to follow Buffet's stock picks why not Russia/China Gold habits. Investors have not followed Russia/China Gold buying trend, which breeds opportunity. 2021 finished with peak negativity on Gold at the onset of a seasonally bullish time. CME Managed-Money Net Long record is 261k contracts, and currently, at 69k contracts, one could see room for 300% growth.
Resistance: 1900**, 1919.2-1930.3****
Support: 1879.5-1883.3***, 1867-1871**, 1855**, 1837.4-1843***
Looking at the technicals, Gold has made a constructive breakout from the downtrend from the August 2020 peak of $2,067/oz. Watch out for the Pivots, denoted above. Decisive action below here on the session, after an early spike, will signal near-term rejection and exhaustion. Gold's latest leg holds intact while trading out above major three-star support at 1879.5-1883.3. To help you with the technical analysis of Gold, I went back through 20 years of my trading strategies to create a Free New "5-Step Technical Analysis Guide to Gold but can easily apply to Silver." The guide will provide you with all the Technical analysis steps to create an actionable plan used as a foundation for entering and exiting the market. You can request yours here: 5-Step Technical Analysis Guide to Gold.