NFTRH; Gold, Silver & USD Futures, and Discussion

Against a backdrop where Zero Hedge notes that 77% of Americans are worried about soaring inflation…

 

Just look at the graphic in the tweet above. A big rat is eating US dollars. So sure, the public is on board the inflation theme. But right up to the minute the public is actually starting to love itself some US dollars again according to Sentimentrader‘s Optimism Index. The inflation theme is getting a cool down, as long ago advised by gold and more recently by silver and even more recently, the industrial metals and commodities as a whole.

Inflation expectations and the yield curve have not cooled down (yet, anyway). Nor have nominal long-term yields. But we are looking at a cooling of red hot inflation expectations, not a breakdown of it. These may be more structural indicators of the ongoing inflationary operations that will not pull back, or they may be lagging, yet to pull back.

Regardless, sentiment toward USD is actually rising, which one day could become negative for it and positive for anti-USD markets once again. First, it will finish its aggressive bounce.

Gold is the leader. It led in 2001, 2009, 2016 and 2020. It is not yet ready but with a bleak HGNSI (gold newsletter sentiment index), a CoT getting repaired and sentiment in general in the dumper, it should be getting close to finding a bottom, time-wise.

Gold continues to break down from a bear flag (noted in a post yesterday using GLD). The view has been for a test of the low or a marginal new low to the mid-1600s and/or the channel bottom. But long time participants in the precious metals will know that sometimes the endings come with breathtaking final drops. In that event, don’t take a line drawn on a chart as the be all, end all.There is a low probability shot at a test of the 2020 lows if the bugs really get taken to the cleaners.

As it stands now, it’s still the Handle to a giant Cup that we anticipated last summer and it has been agonizingly long, which we also allowed for. So nothing has changed other than everyone who loved themselves some gold in August hates it now.

gold

Silver is furthering the small H&S pattern noted last Thursday in an update:

Silver finally hit the SMA 200 today and closed back above lateral support (daily chart).

That’s great. But if the precious metals complex is going to correct deeper then this man staring at the chart will respect the small H&S pattern which, if activated would target the 20 +/- area, finally taking out the 21.23 area that I originally expected to be tested on the correction.

It is losing the SMA 200 and looking like a double top with an H&S as the 2nd top. Prepare for 21.23 or at an extreme if a capitulation comes on, all the way to support at the mid-18s.

silver

Meanwhile, the US dollar is starting to get more serious in its bounce. It has cleared the SMA 200 and now targets the mid-upper 94s.

dxy

When the precious metals bottom and USD tops we’d want to be positioned well for the next phase of the inflation. I often talk about how gold is not for inflation and it generally is not. Other items – as once again proven over the last several months – work better. But gold is the first mover to new inflationary phases.

Yesterday we noted a little positive hint with the HUI/Gold ratio ticking above the SMA 50 while gold and silver were negative. I added a couple of items in response to what I thought I saw in some daily charts (i.e. that the miner bounce was still on, within its downtrend). But if a capitulation comes about I’ll probably be made to eat those positions or regurgitate them.

Speaking of which, a final capitulation of the whole sector remains the preferred signal in order to have definitive evidence of a bottom. Let’s see how things play out. Right now, it’s USD furthering its bounce and Au & Ag furthering their bearish situations.