Technical Scoop: Unexpected Jobs, Golden Safety, Drill Pressure

Excerpt from this week's: Technical Scoop: Unexpected Jobs, Golden Safety, Drill Pressure 

Source: www.stockcharts.com

Another week, another record high for gold prices. The gold bugs are happy. But silver bugs remained baffled as silver continues to be in the doldrums, well off its 1980 and 2011 high near $50 ($175 and $67 in inflation- adjusted dollars). In inflation-adjusted dollars, gold still hasn’t exceeded that 1980 high. Gold needs to get over $3,300 to achieve that. Still gold’s run has been impressive, now up 9.3% on the year, including 1.9% this past week. Silver impresses as well, up 10.9% so far but only a feeble 0.6% this past week. The gold stocks continue to rise with the Gold Bugs Index (HUI) up 4.7% and the TSX Gold Index (TGD) gaining 3.8%.

Other precious metals and near precious metals also have been rising, but not so much this past week. Platinum fell 2.2% while palladium was down 8.3%. However, copper broke out, rising 7.2% (see chart and commentary that follows).  

We are seeing numerous recommendations from mainstream brokers and business writers to hold gold. Gold has caught all their attention. By that we mean physical gold in coins, bars, etc. Gold has no liability; however, gold stocks leveraged to gold prices do have liability. ETFs hold gold, but one needs to check how the fund operates as some may also hold stock. Gold, unlike Bitcoin, is real as you can touch it. As a monetary metal, gold has been around for 5,000 years and has acted as currency. The collapse of the London Gold Pool in 1968 led to the U.S., under President Nixon, ending the gold standard due to calls on U.S. gold that would have left the U.S.’s vaults empty. At the time, U.S. dollars were convertible into gold at $35/ounce. Following the collapse of the London gold pool a two tiered market developed with the official rate still $35 while in the

other market gold began to trade higher setting the stage for the end of the gold standard. We then entered the world of fiat currencies, where we have been ever since.

Gold is rising because of fear of tariffs and escalating trade tensions between the U.S. and China, and just about anybody. Gold, as we have so often stated, is a safe haven in times of geopolitical, domestic-political, and financial uncertainty. Today we have that in spades. Chaos and volatilty remain our themes for 2025.

London vaults are being cleaned out of gold (and silver). The amount of gold held in London fell a sharp 4.9 million troy ounces in January—a record. Traders, instead of rolling over futures contracts or cashing out have increasingly been asking for physical. They then take the physical and transfer it to vaults in the U.S. Fear of tariffs is driving the move. There is also increased demand from Asia.  London still has a lot of gold, but supplies are dwindling. Lease rates (borrowing costs) are rising, but discounts are being seen for gold stored there. The same thing has been happening with silver. This outflow is reminder of similarities that sparked the collapse of the London gold pool in 1968. All this is occuring despite no word from the Trump administration that gold and silver would be subject to tariffs.

Gold is still rising in that channel that could take us up to $3,000 or higher. We are encountering some resistance at $2,900 and more might occur once we hit $3,000. That’s not unusual. Support is now $2,800. A breakdown under $2,700 could signal more losses. Under $2,500 we could be headed for $2,400. However, we believe, given the strong fundamentals for gold, the odds of a breakdown are low. Even in a stock market crash gold outperforms. Not so much the gold stocks.

Source: www.stockcharts.com

Copper has broken out. The downward correction that started with the top at $5.20 back in May 2024 appears to over. The correction unfolded in a good ABC-type correction. The correction formed a symmetrical triangle. With the breakout, the potential targets are up to $5.70. There is resistance at $4.70/$4.80. Once over $5.00, new highs become highly probable. The leading copper producer is Freeport McMoran (FCX), while Chile is the country with the largest copper production with some 27% of global production. Chile also holds the largest reserves, estimated at roughly 19% of global reserves. We are currently entering overbought territory (RSI 72.4), but we note that overbought as a condition can remain for some time as we saw back in April/May 2024. Volume has picked up. We view copper as a leading indicator for gold. Copper is considered a near precious metal as coins in the past were made of copper. Copper with zinc is brass while copper with tin is bronze. Both brass and bronze are predominantly copper.

Source: www.stockcharts.com

Frustratingly, silver still lags gold by a considerable margin. The gold/silver ratio sits at 89. In October 2024 it did fall to 78, but since then gold has been outperforming. The all-time low for the gold/silver ratio was 14.6, set at the height of the late 1970s frenzy. At the other end, the high was 131.4 set during the 2020 pandemic crash. Since that high, we appear to be forming a potential symmetrical triangle top. We need to break under 75 to tell us that the next move should show silver outperforming gold. Near term, a break under 85 could confirm a top. Silver continues making what appears as a symmetrical triangle. But we need a firm breakout over $34 to suggest we’ll make new highs above $35.07. Targets could be up to $39/$40. A breakdown under $31 would be negative and could project down to $25. We don’t expect that, but do note it.

Source: www.stockcharts.com

The upward march for the gold stocks continues. This past week the ARCA Gold Bugs Index (HUI) gained 4.7% while the TSX Gold Index (TGD) jumped 3.8%. What’s important was that the TGD exceeded 400, suggesting to us that we should see new highs above the October high of 417. The all-time high set in 2011 remains still away at 455. But that’s better than the HUI, which is still down 49% from its 2011 high. Some of the key gold stocks have been making not only 52-week highs but new all-time highs. That bodes well going forward. We are also seeing some movement in the junior gold mining market, many of which trade on the TSX Venture Exchange (CDNX). On the year, the TGD is up 20.5% while the HUI is up 18.8%. So far, they have been the best- performing sectors. A break of 390 would be negative for the near term, but under 350 would start a bear market. The correction from the October unfolded nicely in ABC fashion.

Read the FULL report here: Technical Scoop: Unexpected Jobs, Golden Safety, Drill Pressure 

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.