NFTRH; A Familiar and Welcome Sight in Gold

The sight of gold getting whacked while good news envelopes the land is something those of us who participated in the last bull market (2001-2011) remember well. Frankly I am relieved by it because now the correction in the miners makes sense and as we noted in NFTRH 615…

Gold has made a bullish Cup and is very overbought on all time frames. It has earned a rest. But when theorizing a Cup I always like to see the right side of the Cup higher than the left side and that is exactly the work gold has done in July and August. It could start building a downward consolidation Handle now or after more upside, but that’s what I’m expecting if I am going to give weight to a Cup & Handle pattern.

Regardless, the chart includes the new measurement of 2790, which I personally do not expect to be registered any time soon. But then again, I thought silver 24-26 was months out, so…

If gold is truly going to form that monthly chart Cup & Handle and target 2790, then it needs a fuel stop. The EMA 20 (1951) is a candidate to arrest the pullback, but a drop all the way to 1830 – depending on how punch drunk the mainstream becomes (as just one example, see the old Golden Cross canard in the MSM: Transports and Russell 2000 see ‘golden cross’ materializing) on China relief, Corona vaccine & US virus trends relief, a desperate Trump wizard feverishly pulling tax relief levers and other fiscal and monetary stimulus.

Gold needs this.

It needs the herds to get out and go back to chasing stocks, perhaps in a climactic way now that outliers like the RUT and Transports are getting on board. Bond yields are bouncing, the US dollar is sagging and the yield curve may or may not be ready for its next leg up in the fledgling steepening. Herds see rising yields and think ‘interest rates up = bad for gold’. Not necessarily. Not during a curve steepening backdrop (the low was last August).

Notably, copper is not partying with the rest of the macro this morning. It’s down by a teeny and currently at 2.85/lb., well below the key 3/lb. level.

Bottom Line

Gold is fine technically, and will be fine even with a more extreme drop to the mid-low 1800s.

Gold is fine fundamentally, as long as debt strapped governments are using monetary and fiscal print and spend policies to keep the racket going and the yield curve continues to expose it as inflationary or worse, subject to deflationary failure.

I shorted (hedged) the miners yesterday (per the an NFTRH+ update) and will now watch to see what the market’s reaction is. The miners had been leading the metals down for the last four trading days (including the pop & drop reversal last Wednesday) and now we see the result in the metals. I’d look for the miners to diverge in a positive way at some point soon.

The bottomest line is that this is normal stuff. I remember it well from the last bull market. If gold is going to the next upside target and the miners are going to fulfill the targets per NFTRH 615’s weekly charts, fuel is needed. Corrections and shakeouts of the momos provide fuel.