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CPI & FOMC: Prime Movers For Gold

1.   Wet paint eventually dries, and in the case of gold, the CPI report and FOMC announcement (next Wednesday) could change the game… and light the gold price paint on fire.

2.   Please click here now. Click to enlarge this short-term gold chart.  While the rally in oil is so recent that it’s unlikely to cause the CPI number to be hotter than investors are expecting…

3.   The gold chart suggests that’s exactly what will occur.  A swoon back to $1900 or even to $1850 is possible… and it’s a key reason why investors should always keep lots of dry fiat powder on hand… to take advantage of the big price sales that often occur when they are least expected.

4.   Please click here now.  Click to enlarge this 3hour candlesticks US rates chart. 

5.   The 10year rates chart is a mirror image of gold and right now only a dip under 4.20% would turn the “rally time” light to green for gold.  That 4.20% zone is the right shoulder low of the inverse H&S pattern on this chart.

6.   In terms of being a prime mover for gold, the dollar is a little more than a side show for interest rates.

7.   For a look at a key daily rates chart, please click here now. Clearly, 4.10% and 4.33% are lines in the interest rate sand.

8.   Tactics?  Well, if the inflation report comes in hot and rates surge to 4.5%, investors could (and arguably should) buy more short-term time deposits and T-bills.

9.   To buy more gold, I would need to see a price of $1850.  For silver and the miners, I would need to see gold trading at about $1810.  The bottom short-term line:

10.         Indian premiums have widened, and recent COT reports have shown commercial selling.  While the rally from my $1900 area buy zone saw some miners rally 20% and more... 

11.         Most miners have not performed very well, and that’s because gold only rallied to $1960.

12.         Please click here now. Click to enlarge this GDXJ junior miners ETF chart.  The rally from the gold price buy zone of $1900 has been (so far) disappointing, but… where’s the damage?  There is no damage, even though this is a juniors ETF.

13.         Junior miners can outperform everything when the gold price is in rally mode.  

14.         When investors buy value and buy it properly, they don’t need to look at the value of their portfolio every day, let alone multiple times a day.

15.         I don’t like averaging down.  Instead, investors should buy price zones that are well spaced apart, where price is highly likely to rally, and where key indicators are all in sync…

16.         As they were at $1900.

17.         The key indicators to look for: COT reports showing aggressive commercial short covering, fresh and strong Asian (especially India) physical market buying, a decent resistance zone for rates, a big support zone for gold, “demolished” investor sentiment, and…

18.         These indicators need to be in play at the same time.

19.         For a look at oil, please click here now. While “oilflation” from the current rally is unlikely to have seeped into the CPI components yet, that’s not a guarantee.

20.         Gold and silver stock enthusiasts can buy a bear bond ETF like TBF, but shorting a market isn’t for everyone. For many gold bugs, owning some oil and oil stocks is the more prudent play. 

21.         Oil looks to be making a beeline to $93, and $100 could be hit before year-end.  Also, the Chinese zodiac shows 2024 will be the year of the Dragon.  That loosely means “reasonable prosperity” could lie ahead for the gold and savings-oriented citizens of China, but for the debt enthusiasts of America… it could quickly become more of a stagflation-linked quagmire.

22.         Please click here now. Click to enlarge.  Yellowcake (uranium) is another sector that mildly dejected gold bugs may want to focus on until US rates tumble again. Investors with no exposure to yellowcake could grab a grub stake in URNM right now, but the $36 area is a better buy zone for anyone who has the patience to wait for it.

23.         What about the “Mining Stock Maestro”, the GDX ETF?  Please click here now.  Click to enlarge.  GDX stalled at $30 as 10year rates hit 4.10% again, but it’s holding the buy zone low.

24.         Investors who bought miners around $1900 gold don’t need to worry too much about what comes next.  The next downside buy zone is $1810 but it’s unlikely to happen.  Now it’s just a matter of getting comfortable with the allocations done at $1900.  If oil shoots well past $100, it could create institution panic buying of gold.  If it stalls there, Jay is likely to announce the end of his hiking program.  This is a comfortable place for fresh gold stock investors, and even more comfortable for those with a bit of exposure to oil and yellowcake too!  




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