NFTRH; PM’s; Good, Bad & Ugly

Sentiment Backdrop

Improving CoT data, public opinion in the dumps, Hulbert’s HGNSI at an extreme bearish level and the contributed articles at Kitco uniformly bearish (or at least acknowledging that gold is done for a while).  Getting very bullish, but sentiment is not a very good timer.

Technicals for Gold & Silver

Per NFTRH 307, gold targets 1140 or 1180 based on the Triangle breakdown that everyone sees, which is driving bearish sentiment.  An NFTRH+ update put the GLD target at 113 on the day it poked down out of the Triangle.  These are somewhat conservative measurments.

Silver is testing major support too many times, as noted over the last few weeks.  The more support is tested, the more it weakens.  At least that is the case normally.

Here is the monthly chart of gold from a post at the site (still linked at the top menu bar for reference as long as its theme remains valid) on August 15.  The chart coldly continues to hold its message that gold can easily see 1000, never mind the 1200’s and 1100’s people are now managing.  The 1000 level would test the major support shelf from 2008-2009, and close out the ‘Great Recession’ angst and gently tuck it in to bed.

What is going on in the markets now is a close out of that psychological ‘fear gap’.  Is 1000 likely?  I haven’t got a clue, but gold tends to end trends with a bang, not a whimper.  If the Triangle continues in break down mode, a final plunge* scenario could drive what might one day be known as a major buying opportunity for those who missed it in 2000 to 2005.  With gold my view is very long as you may know.

I first bought it at 390 and then suffered through a 20% drop… and bought again (as a newly minted gold bug not fully knowing what I was doing or what I had gotten myself into) around 310.  For reference, a 20% drop from 1300 is 1040.  That level would also be a 45% drop from the top in 2011.  Don’t they often talk about a 50% (+/-) drop in the 1970’s before gold’s final bull market acceleration?

All of this said, I am not forecasting 1000 because no rational person should pretend that they can make consistently accurate forecasts.  To me it is less than ethical because people put stock (sometimes literally) in these forecasts by people they may believe hold some special powers of analysis.  Predictions are no good, but doing lots of work in keeping right with the market is.

* Enough people are now not only respecting this scenario, but seeing it as a fait accompli to possibly neuter its potential.  But this segment is for the technicals, and they are currently bearish.

Fundamentals for Gold & Silver

The fundamental backdrop is also still incomplete at best.  Very generally, gold needs the positive environment in the economy and stocks to reverse and silver needs an inflationary backdrop.  Neither of those conditions are in play right now.  We will not belabor this segment, as we go over it routinely on the weekends.  The fundamentals continue not to be fully baked.  Funda’s remain Incomplete to bearish.

Gold Stocks

Let’s quiet things down and review HUI’s weekly chart again, to review the parameters we are working to.  We’ll just melt it all down to Mr. Green vs. Mr. Red, the battle of the uptrend and downtrend channels.  220 could hold some support for a bounce, but with the recent failure to get over the red channel’s top line, and considering the geopolitical hype that held it up there for a couple months, the downward resolution looks like it will ultimately come with the green or red channels.  Very simply…

Scenario 1:  Hold channel bottom at around 210 (+/-) and higher low to the old ‘205 parameter) or…

Scenario 2:  Break down below 205 and into a major failure.

It was very important when HUI failed to break out, and it also made sense due to the political backdrop that seemed to be driving gold at the time.  Unfortunately now players are left to decide between 2 very different scenarios.  As noted previously, short-term bearish until proven bullish, not the other way around.


Wrap Up

I just took a look at the live charts of gold and silver.  They were stable when I began the update.  Now, not so much.

All the unhealthy sentiment built up around the Ukraine/Russia hype is getting unwound and surely the Commitments of Traders are realigning to what would be the next bullish phase.  But capitulations have to be allowed to play out and that looks like what may be engaging here.

The sector has gone from over pumped to unsafe to what looks like potential capitulation (by the silver chart above, which is now at the May low, which is the 4th support test) in quick time.  This may spread to the broad markets as well in due time, considering how badly regular commodities are faltering as well.  Both base metals and palladium are looking more bearish now, and these are economically sensitive items that have pretty much resisted the downward pull in commodities.

It is and has been a time for cash and patience… and laying in wait for opportunity (whether to be long or short and depending on the markets in question).  On the precious metals, watch current levels on silver and HUI 210 +/- and consider that it is bounce now or breakdown in silver and the same for HUI at 210.  I would not be surprised if today or tomorrow brings a capitulation to a bounce at least.