Precious Metals started the week on a stronger note, led by ECB President Lagarde, who expressed a firm stance on fighting inflation and will continue with a series of additional interest rate hikes. Her hawkish tone lifted the Euro Currency and pressured the U.S. Dollar. It was the middle of the week when Precious Metals came under pressure. Jerome Powell on Wednesday signaled that July and September are live meetings fueling speculation that two more Fed interest rate hikes are still on the table. On the economic front, Consumer Confidence, New Home Sales, and GDP blew away expectations. We also saw Jobless Claims retreat to normalized levels, sending Gold below $1900/oz, and tested the 200-day moving average (DMA). The bargain hunters entered the market, and 6 million ounces of Gold exchanged hands in minutes.
Daily Gold Chart
After three weeks of selling pressure, we have the first signs of "exhaustive selling," indicating the potential for "bottoming action" in Precious Metals. Gold briefly traded below $1900/oz and tested the 200 DMA for the first time since March. While it may be too early to call for a bottom, the worst may be behind us, and the focus shifts onto overhead resistance levels. Remember that "old support is new resistance," meaning that $1950-1960 will act as your first resistance level, followed by $1985. You will want to watch the psychological $2000 level and ultimately $2008 as your breakout level. Any close over $2008 should trigger a short-covering rally up to all-time highs and eventually extend up to our long-term target of $2500/oz. We anticipate that the Fed's reckless acceleration in interest rates will ultimately catch up with them, leading to a reversal in policy stance later in the year/early 2024.
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Daily Silver Chart
Silver prices corrected below $23/oz this week for December delivery, allowing an opportunity to build long-term exposure using futures contracts that reflect closest to the spot price level. Considering the price action, Silver corrected the 200 (DMA) at $22.94. The bulls should aggressively defend the $22 level, and any takedown will lead to another wave of new Silver speculators to purchase futures seeking delivery. When it comes to Silver, it is not a matter of if but of when prices take off.
While a price setback would be temporary, our long-term thesis remains that tightness in the physical markets, a decline in mining supply, and solar and E.V. demand should offset any potential for prices to decline further. Over the next 18-24 months, we expect Copper to make new all-time highs and Silver to break $35/oz.
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