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Metals churning out a bottom - could take awhile

Commentaries & Views

Last week, in a piece entitled Metals - time to start buying? we wrote “Note the period of early August to late December 2018. The current setup seems to be mirroring it exactly” metals may have until December, again in 2022 before a sustained rally can begin (recall winter seasonality for precious metals).

On Friday, we cautioned that gold was facing some overhead resistance at its 50-day moving average. That resistance proved strong; gold now trades back in its long down sloping channel. Simultaneously, we showed the Gold/Silver ratio sitting at major support. Both those charts are updated below.

 

Today’s market reaction to a hotter than expected PPI print was muted as the core component data came in as expected. The market is however anticipating tomorrow’s CPI data with greater fervor, which should produce volatility regardless of direction. A hot print would likely drive stocks lower, and metals could be expected to dip on higher CPI number as well. However; a weak stock market might in fact mute declines in gold which continues to outperform relative to indices.

The below chart is an ominous view of what could be instore for stocks, should the gaps created on the way up from the March 202 bottom fill.

Thanks and have a nice day,

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