Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
THEY DON'T RING THE BELL AT THE CRPTO MARKET TOP! - 20th Dec 24
CEREBUS IPO NVIDIA KILLER? - 18th Dec 24
Nvidia Stock 5X to 30X - 18th Dec 24
LRCX Stock Split - 18th Dec 24
Stock Market Expected Trend Forecast - 18th Dec 24
Silver’s Evolving Market: Bright Prospects and Lingering Challenges - 18th Dec 24
Extreme Levels of Work-for-Gold Ratio - 18th Dec 24
Tesla $460, Bitcoin $107k, S&P 6080 - The Pump Continues! - 16th Dec 24
Stock Market Risk to the Upside! S&P 7000 Forecast 2025 - 15th Dec 24
Stock Market 2025 Mid Decade Year - 15th Dec 24
Sheffield Christmas Market 2024 Is a Building Site - 15th Dec 24
Got Copper or Gold Miners? Watch Out - 15th Dec 24
Republican vs Democrat Presidents and the Stock Market - 13th Dec 24
Stock Market Up 8 Out of First 9 months - 13th Dec 24
What Does a Strong Sept Mean for the Stock Market? - 13th Dec 24
Is Trump the Most Pro-Stock Market President Ever? - 13th Dec 24
Interest Rates, Unemployment and the SPX - 13th Dec 24
Fed Balance Sheet Continues To Decline - 13th Dec 24
Trump Stocks and Crypto Mania 2025 Incoming as Bitcoin Breaks Above $100k - 8th Dec 24
Gold Price Multiple Confirmations - Are You Ready? - 8th Dec 24
Gold Price Monster Upleg Lives - 8th Dec 24
Stock & Crypto Markets Going into December 2024 - 2nd Dec 24
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Massive Reversal in Precious Metals but Fundamentals Improving

Commodities / Gold & Silver 2020 Mar 03, 2020 - 06:33 PM GMT

By: Jordan_Roy_Byrne

Commodities

To underscore the volatility of this past week, consider the price action in Silver. 

Silver, days ago, had a chance to make its highest monthly close since October 2016. That is well over three years ago. Silver closed the week and the month at its lowest levels in six months.

One week, precious metals (specifically gold stocks) are on the cusp of a historic breakout, and the next, they are blowing through support levels. Such can be life in this sector.

Before I get to fundamentals, let’s look at the technicals and critical levels for gold stocks.


The key support levels for GDX are $25-$26, and that support did produce a bounce Friday. However, we should also note the 400-day moving average and its equivalents, which is at $23.58 and rising. 

The key support levels for GDXJ are $34-$36 and the 400-day moving average, which is at $33.60. 

Note how the 400-day moving average (shown below as the weekly equivalent) has done an excellent job defining the primary trend. Despite the horrific week, the primary trend remains up. 

GDX & GDXJ Weekly Bars

The reason why you should not be discouraged is the fundamentals are strengthening.

In recent days, the real 5-year yield (as measured by the TIPS market) has plunged. We plot Gold and the real 5-year yield in the chart below. Gold is inversely correlated to real interest rates.

Gold & Real 5-Year TIPS Yield

It is possible that inflation expectations could dive, and real rates could rebound temporarily, but the broader trend is for real rates to continue to decline.

Last I checked, Fed funds futures were showing a 91% chance of a 50-point cut (not 25 points) and in March! They are also showing nearly a 1% reduction in rates (four rate cuts) by the end of the year. 

This past week was an orgasm for deflationists, but the data is not in their favor. Don’t expect inflation to decline that much or any decline in inflation to be sustainable.

The banks and housing market are in much better shape than in 2008. The same is true for households. According to BCA Research, household debt service payments as a percentage of disposable income are around 40-year lows!

Elsewhere, another significant bullish development is the potential for Gold and gold stocks to begin an uptrend relative to the stock market. 

This has been the missing ingredient for the precious metals sector in recent years. If we see a new sustained trend of capital moving out of the stock market and into Gold and gold stocks, it would be massively bullish for precious metals. 

Gold vs. S&P 500, GDX vs. S&P 500

To sum things up, precious metals are experiencing a sharp, sudden drawdown within a primary uptrend. The 400-day moving averages could be tested in gold stocks and Silver. 

In some respects, this is a mini-2008.

An outside event is causing forced selling and sudden liquidation, which is leading to a massive response by policymakers that ultimately strengthens the fundamentals of the sector and leads to even more upside potential.  

Look for an initial rebound next week and perhaps another wave of selling that retests Friday’s lows. We want to be buyers on “fishing line” declines in individual stocks. 

This is very painful now, but it’s going to lead to even more 3 to 5-baggers over the next 12 months.

To learn the stocks we own and intend to buy during the next correction that have 3x to 5x potential, consider learning more about our premium service.

Good Luck!

Email: Jordan@TheDailyGold.com
Service Link: http://thedailygold.com/premium

Bio: Jordan Roy-Byrne, CMT  is a Chartered Market Technician, a member of the Market Technicians Association and from 2010-2014 an official contributor to the CME Group, the largest futures exchange in the world. He is the publisher and editor of TheDailyGold Premium, a publication which emphaszies market timing and stock selection for the sophisticated investor.  Jordan's work has been featured in CNBC, Barrons, Financial Times Alphaville, and his editorials are regularly published in 321gold, Gold-Eagle, FinancialSense, GoldSeek, Kitco and Yahoo Finance. He is quoted regularly in Barrons. Jordan was a speaker at PDAC 2012, the largest mining conference in the world.

Jordan Roy-Byrne Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in