From the ETF update yesterday summarizing the precious metals:
“The environment is improving for the gold mining sector in many ratio indicators, with Gold vs. the US stock market still a concern. The sector is technically above support levels with silver making a lower test than has been desirable.”
Gold is at its critical support this morning, which during Fed Minutes and Jackson Hole week is par for the course. But going by the charts 1270 to 1300 has been a key area not to be violated. With the USD zooming upward (now getting over bought and not too far from target) we could be looking at an event that climaxes the correction that has been in place since early July.
But technicals are there for a reason. As with silver’s 19.50 to 19.75 (the preferred ‘normal’ support zone, which has been violated), gold’s 1270 to 1300 is key as well. In fact, I’d prefer to see 1281 hold on a daily close because below that level makes a short-term lower low to July.
On to the update’s main topic. Yesterday GLD vs. SPY inched down and if this morning’s pre-market activity holds, it would make a definitive lower low, which is not a positive for the gold stock sector, as regular investors would have no reason to go outside the comfort of traditional stocks. Here is the chart from yesterday’s update.
Bottom Line
The time is now (today/tomorrow/Monday) for silver to bottom and retake leadership (given the USD strength that has hurt silver and commodities) and to put on some kind of inflation play, with a USD reversal as its motivation. Otherwise, the shall we say disinflationary signals will become stronger.
In the absence of an inflationary bout, it remains to be seen how strong the stock market can remain, but the bounce has indeed become something more than a bounce and should be respected. I continue not to think about shorting and still hold the long positions.
With the Jawbone warming up in Jackson Hole, the precious metals testing support (ref: support levels noted for the miners in yesterday’s update as well) and the stock market gaining momentum, it’s a play-by-play situation for the short-term.
