Technical Scoop: Historical Crisis, Precious Rally, Oily Poise

Excerpt from this week's: Technical Scoop: Historical Crisis, Precious Rally, Oily Poise

Source: www.stockcharts.com

Both gold and silver finally broke through. Barriers at $2,400 and $30 respectively were finally breached on Friday, May 17. While gold still needs to close over $2,420 to suggest new highs over $2,449, the odds indicate that could occur early this coming week. After that, the next stop could be $2500 with even higher targets coming into focus. For silver, the breakthrough over $30 was far more than expected and the next targets are $39/$40. The mark had stood at $30.35 since February 2021. Silver closed the week at $31.26.

On the week, gold gained 1.8% while silver was up 9.7%, setting fresh 52-week highs. Platinum recovered nicely with an 8.2% gain, making 52-week highs. The near precious metals saw palladium gain about 3% while copper continued its recent strong run, up 8.4%, in turn making an all-time high closing over $5. Copper prices still look higher, although copper, like silver, is now in overbought territory. This doesn’t mean they can’t go higher, but a pullback/consolidation could occur any time. Gold is not yet in overbought territory.

The gold stocks joined the party as the Gold Bugs Index (HUI) gained 4.9% while the TSX Gold Index (TGD) was up 2.9%. Both indices made 52-week highs. We saw a number of individual stocks also make 52-week highs. And, for the first time in a while, junior exploration gold miners that trade primarily on the CDNX or on the Canadian Securities Exchange (CSE) put in a good week. Gains of 10% or more on Friday May 17 on selected junior exploration stocks were not unusual.

If you are a gold bug, you had a great week. Geopolitical concerns, domestic political concerns, and evidence of stagflation setting in were the principal drivers. Geopolitical as Russia advances on Ukraine and Israel advances on Rafah, despite international outcries. Domestic political concerns as the conflict between supporters of Trump vs. Biden intensifies, along with clashes on the streets between pro-Palestine supporters and pro-Israel supporters and threats of violence against the judge and others in the Trump hush-money trial. Stagflation as inflation remains stickily high while there are growing signs of a slowing economy. These events could remain top of mind as we go forward. A sliding US$ Index also helps as the US$ Index fell 0.8% this past week. The strongest currency was the pound sterling, up 1.4%, while the euro gained 0.9%. Despite their gains against the US$, both fell against gold. In Cdn$ terms, gold is just under $3,300. Gold in Cdn$ terms is up 20% in 2024 vs. 16.7% in US$ terms.

Gold continues in fresh territory. As noted, over $2,420 new highs are probable. Targets for gold range from $2,500 to as high as $2,800. Support is now seen at $2,300, $2,200, and $2,100. Only below $2,100 would we consider the gold rally officially over. Silver has resistance at $35/$36, then again at $39/$40. Above $41 new highs above $50 are probable. Silver would have to exceed $150 to take out the 1980 high on an inflation-adjusted basis. To take out the 2011 high on an inflation-adjusted basis, silver would have to hit over $70. For gold, it is over $2,700 when it would take out the 1980 inflation-adjusted high.

Gold is proving its role of maintaining purchasing power during periods of economic and political uncertainty and social upheaval. Gold was the mainstay of the international monetary system during the 19^th century. Following periods of interruption in World War I, a gold standard once again came back into use. The Great Depression and World War II once again disrupted gold as a standard, but Bretton Woods 1944 reestablished the gold standard. That ended in August 1971, and since then the world has been dominated by fiat currencies. The result has seen an explosion of money and debt and loss of purchasing power. There has never been a period of fiat currencies that didn’t end in collapse.

Over the next two weeks, the expectation is that both gold and silver could rise further with periods of pullbacks or backing and filling. The trend is solidly to the upside. The gold stocks are also finally starting to break out as well and the junior miners’ market is showing life, after a long dormant period.
Read the full report here: Technical Scoop: Historical Crisis, Precious Rally, Oily Poise
Copyright David Chapman 2024
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