Gold is breaking down from a short-term bear flag below the moving averages. That December low was a higher low to the one before it and to remain intact gold will need to hold above it. In breaking down on inflammatory global news I am not overly concerned about gold. It had never given any kind of an actionable signal as it lurked below the 50 & 200 day averages.
Silver did not do what I thought it had a good chance of doing, which was to continue its spike. But it is not broken. It is down to the 50 day moving average once again on big macro news (and associated hysterics). As noted previously, this is how silver rolls. If you liked silver last week (I am not saying you did, but if… ) I see no reason you would not still like it now. The long consolidation continues.
HUI made a short-term break above the handle, which you’d see if I’d drawn a trend line on this chart. But today… inflammatory news and Huey is knocked right back down again. As with silver, the status dials us back to last week; still consolidating an up move from March-April and still a grind.
Silver/Gold (SGR) is getting hit as interest rates drop and the dreaded deflation fears get a little bounce (with T bonds rising). But as of now the SGR is still above the SMA 200 and still willing to allow an inflation-based bounce to resume. Not saying it will, but am saying this indicator is not broken.
Similarly, HUI/Gold ratio has not broken down either.
Bottom Line
The sector is getting clobbered and that makes sense because it has been rising under an inflationary backdrop and inflation expectations and the inflation trade are taking a hit today. That is not my favored backdrop to buy the precious metals sector but it is just the way it’s been lately.
Silver’s continued short-term leadership indicates the play is not yet dead. But the PM complex is getting caught up in the macro volatility. The fundamentals (esp. gold vs. stocks and interest rates dynamics) never did become positive so even if the bounce resumes our enthusiasm should remain tempered.
