A New Year For Comex Gold

After a disappointing 2021, the new year for precious metals likely holds a return to the bull market gains seen in 2019 and 2020.

So welcome to 2022. Yes, 2021 was a lousy year for both COMEX gold and COMEX silver. Both positive negative returns, with COMEX silver falling nearly 12%; however, and as you can see below in this chart provided by Ronni Stoeferle, a negative year during a bull market for the COMEX gold price is not unusual. What is unusual is two negative years in a row. Check the periods 2007-2012 and 2016-present. 

We wrote about the lousy year that was 2021 two weeks ago and we'll have our 2022 forecast for you next week. For today, let's just simply take a look at the long-term charts for gold, silver and the GDX and then see if we can discover any patterns that would indicate either optimism or pessimism for the months ahead.

Let's start with COMEX gold. The monthly chart below stretches back twenty years to 2002. I've drawn a few lines on this chart so that you can see what I see, however, it's up to you to draw your own conclusions.

Now whether that "cup-and-handle" formation foreshadows higher prices in 2022 is to be determined. However, and with The Fed currently planning at least two fed funds rate hikes in 2022, you might be sure to note gold's performance the last time The Fed embarked on a regular, quarterly rate hike scheme back in 2003. The Fed hiked 17 times over 17 quarters and, as you can see, COMEX gold prices rose consistently through that period and more than doubled over that time.
Next, let's look at COMEX silver. To my eye, there are three primary things you need to notice on the chart below.

1. Silver prices spent nearly seven years in a range between $14 and $22.
2. After a breakout from $18 to $28 that took place over a three-week period in 2020, price has now spent sixteen months consolidating and "flagging".
3. A monthly close above $28 will be an important signal for the next major rally while a monthly close below $22 would not be helpful.

And finally, let's look at the mining shares using the GDX as a proxy for the sector. Here, the long-term pattern is also quite clear. After a seven-year sojourn in the investment desert, the shares finally broke out in 2020. Then they spent all of 2022 consolidating and back-testing for support. Could they now fall even further in 2022? Of course. However, a more likely scenario involves a breakout to the upside as the pattern resolves itself in the manner these cup-and-handle formations often follow.

Again, please check these pages again next week for a copy of our 2022 macro cast. The year ahead promises to be volatile and unpredictable, but we'll take a stab at predicting it, regardless.