NFTRH+; status of gold as the market relief rally arrives

I’ve been waiting for the relief bounce/rally in stocks to arrive due to the bleak sentiment profile. This morning in pre-market ES is +1.5%. Maybe this is it.

Gold, which got clubbed with the inflation trades is getting clubbed again this morning. Foul??? Well, copper is down also while some other commodities are positive. I will choose not to see a conspiracy against poor old gold. But this does illustrate again why those touting gold and inflation together are often destined for disappointment.

As to the technicals, it lost the SMA 200 and the 1930s, which was the preferred support area. In holding PHYS I have a decision to make because to me that is not gold, it is a price mechanism tied to gold (err, I cannot nearly afford the minimum Sprott would require to actually take position of the metal, and have some of that stuff anyway). For now, I am going to hold it pending the handle breakout.

With gold it seems that when you plan out a nice logical low well ahead of time the rule of thumb should be ‘okay, now plan on whatever the next level is below that’ and in this case that level will be very important, technically, or the old monetary metal goes back to the drawing board and we accept it rather than fight it. Gold, real gold is about long-term value, not price plays.

The black dashed line coincides with the next lateral support area.

On the weekly chart that black line is actually the ‘handle’ breakout line to the big picture Cup and it is being tested now. If it holds this support it is still in handle breakout mode. If it ultimately loses it (1797 to 1780) then the Cup’s handle becomes messy and could morph into a ‘lower high’ double top. Just reporting the technicals, folks.

Dialing out to the big picture monthly, we can see that there is additional long-term support in this area from 2011-2012. If gold fails this support the handle will become sloppy and the bullish Cup would be compromised (as would my operating view). For that to happen it is likely that any relief to come in broad stocks would be serious relief that could paint the bear market in stocks (mini variety as it has been) and probably the inflation hysteria, done already. A potential Goldilocks scenario or at least an extended phase of relief for casino patrons.

Bottom Line

Speaking technically, gold must hold 1800 to 1770 or its technical status will be very much compromised. That would probably go in tandem with some kind of Goldilocks backdrop in stocks. A fierce bear market rally at least.

But as yet, counter-cyclical forces are still in the macro and gold’s charts are still intact. But we need to look ahead to confirm or negate that. If/as the inflation unwinds there will be a lot of crosscurrents and again we need to remember that a majority of gold bugs are inflation bugs.