Technical Scoop: Ambivalent Jobs, Raised Rates, Precious Gain

Excerpt from this week's: Technical Scoop: Ambivalent Jobs, Raised Rates, Precious Gain

Source: www.stockcharts.com

For the second week in a row, gold prices rose, albeit a small 0.2%. This came in the face of the Japanese meltdown that spilled over into North American markets. However, for the rest of the precious metals market it wasn’t such a positive week. Silver fell 2.8%, platinum remains moribund, down 3.9% this past week, and as for the near precious metals, palladium did catch a bid up 1.6% but copper remains in a hole, losing 2.7% this past week. The gold stocks didn’t fare much better with the Gold Bugs Index (HUI) down 2.1% and the TSX Gold Index (TGD) off 3.0%. Gold is being buoyed by thoughts of a Fed rate cut. The potential for an economic slowdown, even a recession, also bolstered gold. Gold has become the number one metal of choice as a safe haven particularly in Asia. Gold is up 19.4% thus far in 2024, outpacing both the S&P 500 and the tech-laden NASDAQ. Yet gold remains undervalued and under-owned, particularly in North America. Asians are much more likely to purchase gold. Gold also responded to a lower 10-year treasury note on Friday as the metal was up some $10.

The pattern that gold is forming is taking on the look of a possible ascending triangle. A breakout to new highs above $2,525 could target up to almost $2,700. The main reason to own gold is as a safe haven in times of geopolitical uncertainty and a low interest rate environment, and as a hedge against currency depreciation. Gold, the metal, is preferred over gold stocks which, while leveraged to the price of gold, have liability. Witness the recent collapse of Victoria Gold when its heap leach pad failed and the contamination spread into local waters, killing fish and threatening drinking supplies. 

Source: www.stockcharts.com

Silver continues to underperform gold. Silver fell this past week by 2.8% but remains up 14.5% for 2024. However, gold is up 19.4% in 2024. We’re also up 32% from the October 2023 low. But gold is up almost 36% from a comparable low. Gold has made ongoing new all-time highs while silver is almost 45% under its all-time high. It all seems odd in the face of huge demand for silver and ongoing supply problems. The structural deficit has been going on for four years, yet silver remains repressed. We did find support above $26, a level we considered quite important to hold if we are to move higher. Support ranges from $26 to $26.50. The low so far is $26.50. But there is considerable to work to be done if silver is to resume a leadership role. A move first above $30 would be important, but silver needs to break above $31.30 to suggest new highs above the May high of $32.75. The gold/silver ratio remains in favour of gold, even if the ratio is overall falling, albeit slowly

Source: www.stockcharts.com

It was not an overly pleasant week for the gold stocks. With the Japanese meltdown spilling over into North America, gold stocks were hit as hard as any other stock. On the week, the TSX Gold Index (TGD) fell 3.0% while the Gold Bugs Index (HUI) dropped 2.1%. As we have often noted, when the stocks suffer a cold the gold stocks get pneumonia, even if the best-performing asset is gold itself. The drop this past week pushed the TGD down to its 50-day MA, but so far it has held. What is needed is upside follow-through this coming week. Regaining 350 would be positive, but we need to regain back above 365 to suggest new highs ahead. However, what is needed is that if any further downside develops it would be important to hold 330. A drop under that level could swiftly send us to 310 or even 300. The 200-day MA is currently at 295. So far, this has the look of a classic ABC-type correction from that July high of 367. The TGD fell just over 10% from the July high. 10%-plus corrections are not unusual for the TGD, even in a bull market. We are reminded that during the 2009–2011 bull run, the TGD had six corrections of 10% or more, including at least one where the index fell 25%. But the TGD rose over 200% from the October 2008 low to the September 2011 high. So far, the TGD is up over 50% from the February 2024 low. However, the index is still down roughly 25% from that 2011 high. That’s 13 years and counting since the last major high. We’ve often cited how cheap the gold stocks are in relation to gold. That hasn’t changed. We’ve never seen such a long period when the gold stocks have remained undervalued vis-à-vis gold itself.

Read the full report here: Technical Scoop: Ambivalent Jobs, Raised Rates, Precious Gain

Disclaimer

David Chapman is not a registered advisory service and is not an exempt market dealer (EMD) nor a licensed financial advisor. He does not and cannot give individualised market advice. David Chapman has worked in the financial industry for over 40 years including large financial corporations, banks, and investment dealers.  The information in this newsletter is intended only for informational and educational purposes. It should not be construed as an offer, a solicitation of an offer or sale of any security.  Every effort is made to provide accurate and complete information. However, we cannot guarantee that there will be no errors. We make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the contents of this commentary and expressly disclaim liability for errors and omissions in the contents of this commentary.  David Chapman will always use his best efforts to ensure the accuracy and timeliness of all information. The reader assumes all risk when trading in securities and David Chapman advises consulting a licensed professional financial advisor or portfolio manager such as Enriched Investing Incorporated before proceeding with any trade or idea presented in this newsletter. David Chapman may own shares in companies mentioned in this newsletter. Before making an investment, prospective investors should review each security’s offering documents which summarize the objectives, fees, expenses and associated risks.  David Chapman shares his ideas and opinions for informational and educational purposes only and expects the reader to perform due diligence before considering a position in any security. That includes consulting with your own licensed professional financial advisor such as Enriched Investing Incorporated.   Performance is not guaranteed, values change frequently, and past performance may not be repeated.