Technical Scoop: Oil Reliance, Gold Link, Hormuz Impact

Excerpt from this week's: Technical Scoop: Oil Reliance, Gold Link, Hormuz Impact

Gold and Silver

Source: www.stockcharts.com

War has broken out. You’d expect gold and silver to soar. But no, they didn’t. Instead, they joined the stock market sell-off. We’ve seen this before during the 1987 stock market crash, the 2008 financial crisis crash, and the pandemic crash. All saw gold and silver fall (although gold remained just up during the 1987 crash) while the gold stocks took it on the chin and fell more than the stock market. That they fell sharply shouldn’t be a surprise as those markets are thin at the best of times. That’s one reason they can rise fast but fall even faster.

One thing gold likes is a weakening U.S. dollar and falling interest rates. Last week we had none of that. The US$ Index and bond yields rose. Not good for gold. Gold fell 1.7%, while silver was hit harder, down 10.1%. Platinum dropped 9.8%. The near precious metals weren’t spared as palladium fell 7.2% while copper was down 3.5%. The gold stocks suffered the most as the Gold Bugs Index (HUI) was off 11.7% and the TSX Gold Index (TGD) fell 11.8%. Before they fell, they made (barely) new all-time highs. That said, the HUI is up 23.2% and the TGD up 19.0% on the year so far. So, a drop of that magnitude shouldn’t be a surprise. The question now is, what’s going forward?

What now? The major uptrend remains intact. For gold, we’d have to fall through $3,900 to suggest we’ve made a major top. For silver, a drop through the last low near $69 is problematic. It could set up a test of the

major $50 breakout level. Under $50 it’s all over. Gold under $4,700 is a sign we’ll head lower to test the recent low of $4,400.

Gold steadied on Friday after the weaker than expected U.S. job numbers. That may be our catalyst for things starting to rally again. A Fed in confusion and stagflation are good for gold. Continued deterioration on the geopolitical front is also positive for gold. And is the war spreading? According to the latest news, Russia is providing Iran with significant intel and Ukraine is being asked to provide drone interceptors. Already, almost every Middle East country is involved. Is this the opening to World War III, as some believe?

Source: www.stockcharts.com

The question is, how long will this corrective period last? Typically, this period is weak for gold and silver with bottoms usually seen in June or even July. A February top is not unusual and that’s what happened. But this is a corrective period, not the end of the bull market. Geopolitics, domestic politics, slowing economies with rising inflation, and debt, debt, debt will keep upward pressure on gold and silver. We’ll just have to work our way through this corrective period. If the drop following the late January high was an A wave and the recent rebound a B wave, then we may be embarking on a C wave down. Will it be swift or choppy? We lean towards the latter. What’s key is we may not see new lows, or we see new lows for gold or silver but not both. Gold stocks are also vulnerable to further declines. But we see this decline as a buying opportunity. The bull market that got underway in 2023 is not over.

Read the FULL report here: Technical Scoop: Oil Reliance, Gold Link, Hormuz Impact

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. Although Artificial Intelligence (AI) may be deployed from time to time, AI output is monitored and adjusted, if necessary, for accuracy. 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.