We are back to our original big picture parameters in the precious metals, which are support of 1600 to 1625 for gold and 27-28 for silver. In pre-US open gold is at 1631 and silver is at 29.27. These are new lows for the corrective move out of early October’s high. Much like the Thanksgiving time frame, the year-end holiday period has served to provide the backdrop for an ill-fated rise prior to renewed heavy selling (banker cabal or not, it’s happening and that is what matters).
Unless today becomes a whirlwind decline and bullish reversal, please be prepared for the above targets, which we have been marking by weekly charts.
HUI lost the “normal” retrace level at 439 and dumped hard to an area that could be considered short-term support. But the 420 area is a key now, as the previous low for the move was 418.74. I have drawn another, last ditch support at 393.
HUI got corrected but good yesterday from short-term over bought as people began wildly selling everything they could as a normal correction became abnormal when the Fed released some words (delayed jawboning; they know how obsessively enthralled the market is to everything they say or do) about when it may terminate QE.
What gold stock investors don’t get is that it is a backdrop of economic contraction that will help the fundamental cases of their beloved gold stocks. Not the would-be rising costs of every commodity on the planet. But never get in the way of a gold bug and his misperceptions and emotion.
So 2013 starts with another fake out and another dispiriting hit to the precious metals under the all-powerful pressure of the Federal Reserve and those who obsess on everything these debt and interest rate manipulators have to say. The parameters are above and I cannot advise on how unique individuals should go about their business.
The bullish risk vs. reward scenario has not changed but we had allowed for lower prices. It is funny, on Wednesday I was a little concerned that I had been perhaps not actionably bullish enough for the interests of NFTRH subscribers and indeed was not loaded up on precious metals holdings myself. Then yesterday happened and I remembered why it is always good to know what the charts are saying.
Precious metals remain in a bullish risk vs. reward stance subject to holding the parameters set above. A drop by gold below 1600, silver 27 and HUI 393 would greatly hurt the bull case. Short of that, those levels or anywhere above them can be considered as support amid a bullish risk vs. reward backdrop, which – FOMC minutes notwithstanding – includes macro fundamentals and sentiment.
Going forward, it is important to the bull case that the money supply begin to show signs of rising. That and a continuing positive trend in the CoT data would firm the risk vs. reward case. Also, the HUI-Gold ratio remains on its bullish signal as of this writing.
If on the other hand precious metals should unexpectedly be broken, the theme for 2013 would probably shift to a deflationary one. A big caveat to that case? Long-term T bonds are dropping hard. In fact, a quick look at the ‘Continuum’ (aka our oft-viewed monthly chart of the 30 year T bond yield) shows that the opposite condition – an inflationary one – could be on tap for 2013 after all. We’ll review it in this weekend’s newsletter, but remember the old bit about the magician making you look this way when you should be looking that way?