First, a review of the situation to date and our stance with regard to it…
- Elements are in play that would change the macro to a longer-term favorable backdrop for the gold mining sector.
- But the incoming data, such as still relatively firm employment, consumer spending, etc. are not helping engage the proper fundamentals for a longer-term positive macro. The funda are and have been incomplete at best, as we’ve noted along the way.
- What’s more, official jawbones appear to be reacting to the firm economic numbers as opposed to the weakening inflation numbers, and talking up interest rates and by extension, the US dollar. Interestingly, CME Group and its Fed Funds rate tool are not yet in agreement as they still project rate cuts beginning in the spring. But CME’s record over the last couple of years has been spotty. I’ve seen them follow real time happenings and radically adjust on more than one occasion. So… a caveat about the tool’s effectiveness.
- These items (USD & L/T yields) were oversold and were going to bounce (as we projected for both). Might as well have been at the behest of the jawbones. Patience is spelled with a CAPITAL P in 2024.
- We have had targets for GDX of 33-34 and then 40+. But this was a rally in which the miners were running as just another entry in the seasonal rally sweepstakes. A lagging one at that. The miners are not special and will not be special until sometime after the broad markets top out and the bubble supporting them bursts. Cue a steepening yield curve.
- All of that said, I have been advising about an intact rally with the targets noted above. I may well have been wrong (chart below).
- However, getting the broad macro joy fest over with sooner rather than later theoretically brings on the post-bubble macro sooner, and if the anti-USD trades (stocks, commodities, precious metals… in essence, the financial world) do halt in the near-term we should see gold outpacing silver (falling less).
- If what’s going on this week is just a squall, silver would regain leadership and anti-USD trades regain their footing (of note, the TSX-V index is still technically intact to its seasonal rally theme, improbably enough).
So I for one will continue not to force it. A failure sooner will bring on the big picture macro changes sooner. A recovery here in the anti-USD trades would delay it, and keep us on the theme we’ve been on since October. USD is, after all, still lurking at resistance associated with the 200 day moving average.
The GDX daily chart has ticked a lower low to the December low, filled the first gap and has its eyes on the lower one. My focus on the December low may have been faulty in that a drop to the November low and the gap just above it may actually be the key ‘higher low’. Gotta love TA (and those interpreting it).
GDX is becoming oversold and as always depending on what I see in the macro I may actually do a little buying at a lower gap fill (26.90). Of course, if the macro is unwinding sooner rather than later it’ll pay to keep in mind the big Kahuna of a gap in the 22s.
Using HUI to gauge the big picture, the monthly chart shows a pullback from the resistance level it’s been working on for a couple months now.
The weekly chart shows the index taking out support (in-week, the week is not over yet) and 207.53 as the next important low not to be breached.
All of the above is against a backdrop where the fundamentals were not yet in place. I can’t stress that enough because there is a lot of noise to the contrary out there. It’s in process and that is all.
[edit] Here is Uncle Buck stuck right at the SMA 200 and resistance. Your move Unc (along w/ Gold/Silver ratio)…
