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A balanced discussion on what is driving gold and commodities – Fed policy, China, Currency moves are just a couple factors discussed

Cory댊
August 13, 2021

Marc Chandler, Managing Partner at Bannockburn Global ForEx joins us to recap the roller coaster ride gold was on this week. We look past this short term volatility to focus on the true drivers of gold and commodities broadly. We look domestically and internationally considering currency moves, central bank policy, the US infrastructure bill, and China’s roll.

Click here to visit Marc blog – Marc to Market.

Discussion
30 Comments
    FIH
    Aug 13, 2021 13:33 PM

    In the big picture my thoughts are that the Sunday flash crash down to 1677 was designed to trigger stop losses. Monday stop loss liquidation appeared to be overwhelmed by short covering and they could not get a panic selloff to break 1677. Basel 3 and Basel 4 new rules are at the point where they have to be factored in as well. Kinesis episode 44 with Andrew Maguire is a great listen in my opinion. I love the opinions of the regulars and would love to hear their thoughts!

      Aug 13, 2021 13:21 PM

      Agreed about the Sunday night/ early Monday morning flash crash being about running the stops down to the $1677 support from the March double-bottom in Gold. At least that level held as support, for now, but as Matthew mentioned, it isn’t usually a good thing to see a double bottom tested for a 3rd time in such short order. There are some technicians elsewhere on Twitter and other platforms that have made the case that possible the March and now August level of $1677 is a larger double-bottom pattern, but that still remains to be seen.

      We were noting off-mic with with some of our guest thought leaders today, as we prepared for the weekend show, that if one were to have walked away from the markets the end last week, and not checked, and then came back today and looked, then gold is at about the same place at $1778 and actually closed higher than where it did last Thursday or Friday.

      The other thing a few folks have pointed out today on investing sites is that on the weekly chart, this week’s candle is a bull hammer, which could indicate a change in direction to the upside. We’ll see how that idea pans out in the weeks to come.

      Here’s a weekly gold chart showing that most recent bull hammer candle.

      https://schrts.co/rMVMgKvY

        Aug 13, 2021 13:39 PM

        Gold Weekly Price Forecast – Gold Markets for Massive Hammer Off Support

        Christopher Lewis – Fri, August 13, 2021

        “Gold markets have fallen hard during the course of the week, reaching down towards the $1680 level as we had a bit of a “flash crash” on Monday. We have since turned around and wiped all of that out, so the question now is whether or not that was true capitulation? If it was, then it is very likely that we will see traders trying to pick up “cheap gold”, but you also need to pay close attention to the 10 year yield, because it will have a major influence on what happens with the US dollar, which of course will have a major influence on what happens with gold. By forming the massive hammer that we have, this could lead to something big but keep in mind that the $1835 region continues to be a massive barrier that we have yet overcome.”

        Christopher Lewis
        Fri, August 13, 2021, 9:28 AM
        Gold markets have fallen hard during the course of the week, reaching down towards the $1680 level as we had a bit of a “flash crash” on Monday. We have since turned around and wiped all of that out, so the question now is whether or not that was true capitulation? If it was, then it is very likely that we will see traders trying to pick up “cheap gold”, but you also need to pay close attention to the 10 year yield, because it will have a major influence on what happens with the US dollar, which of course will have a major influence on what happens with gold. By forming the massive hammer that we have, this could lead to something big but keep in mind that the $1835 region continues to be a massive barrier that we have yet overcome.

        “If we were to turn around and take out the $1680 level, that would be catastrophic and open up the possibility of a move down to the $1500 level next. That obviously would accompany a strengthening US dollar, which is something that acts as a wrecking ball against quite a few financial assets, not just this one.”

        https://www.yahoo.com/finance/news/gold-weekly-price-forecast-gold-162806206.html

          Aug 13, 2021 13:40 PM

          Sorry that didn’t format correctly and the first paragraph got posted twice. (maybe that last sentence just needed to be emphasized twice) 🙂

    FIH
    Aug 13, 2021 13:42 PM

    In my opinion domestic and international issues are going to force the Fed’s hand long before December 22. Great interview Marc

    Aug 13, 2021 13:24 PM
      Aug 13, 2021 13:08 PM

      Haha! Those are 2 very solid points IrishT. Thanks for sharing that with the KER crew.

    Aug 13, 2021 13:51 PM

    More positive words from Taylor Dart on AUY. That and Doc taking a nibble on Yamana couple of weeks ago is good enough for me.

    Aug 13, 2021 13:38 PM

    The COT commercials this week are looking the best they have in a very long time. This rally should continue into next week. The closing at the end of the week was right at the 20 month MA of the BBs. We should see more pressure on the PM prices the rest of the year as they settle into a monthly trading range however the carnage in the stocks are slowly coming to an end the rest of this year. The best buying opportunities will be the end of this year.

    Aug 13, 2021 13:45 PM

    The Junior Bag Holder Nightmare is a Contrarians Dream

    David Erfle – Friday August 13th, 2021

    After the safe-haven metal had doubled in price to nearly $2100 per ounce last August, from its low of $1050 in late 2015, a much-needed correction has been taking place for the past year. In March, Gold Futures printed a double bottom at $1675 on its daily chart, which is the 38.2% Fibonacci retracement level of the four-year doubling of the gold price and marked a 20% correction from the high at $2089.

    However, since the return of the Gold Summer Doldrums in June, after a two-year hiatus, the glaring relative weakness of gold stocks in relation to the price of bullion has been signaling the metal still had some downside remaining during the year-long consolidation of its out-sized gains.

    On the downside, a break of the now triple bottom critical support at $1,675 could trigger another algorithmic sell-stop move down to $1550-$1575 region, which is the 50% Fibonacci retracement area after the doubling of the gold price from $1050.

    On the upside, a weekly close above $1760 might be the first sign of a bottom, as this level of support indicates a significant inflection point. Further out, if the $1900 level breaks decisively, then gold prices may go much higher.

    Meanwhile, the GDXJ has been pricing in lower gold prices by selling down towards long-term support at $41, a level that was strong resistance previously when gold was attempting to break above $1550 in 2019. But if the $1675 level is broken soon, we could see a capitulation ending to this correction down to the $35 level in GDXJ, which would most likely clean out the last of the stale longs.

    With strength in the junior miner ETF being sold more quickly since June, junior precious metal stock speculators have been using news releases as liquidity events to capitulate losing positions.

    Although the year-long selloff in the gold complex has been a frustrating affair for participants, capitulation selloffs are what cashed-up, seasoned junior resource stock speculators dream of, as one investor’s tax-loss trash, becomes another long-term investor’s treasure. With many of the quality junior babies being thrown out with the life-style junior bathwater, opportunity is knocking on the cashed-up, contrarians’ door.

    Typically, the mindset of the seasoned junior resource stock speculator holding a quality junior with a mis-timed entry point, is to sell for tax-loss then buy the stock back after 30 days. Once a position is sold for a loss, the U.S. and Canadian Wash-Sale rule states an investor must refrain from buying back a position for 30 days to claim a tax-loss on capital gains.

    Although tax-loss selling season generally takes place during the tail end of the year, with the tiny gold sector being an under-performing boat in a sea of out-performing ships in 2021, junior gold stocks have become hated to the point of early tax-loss fueled capitulation.

    With the gold price teetering on the precipice of either a final flush to the $1550-$1575 region, or having already produced a false breakdown created by opportunistic short-sellers, this is a great time to create a carefully vetted watch list of quality juniors to buy and hold before the next up-leg in this secular gold bull market.

    https://mailchi.mp/9ae345e23c55/david-erfle-weekly-gold-miner-sector-op-ed-1599978?e=3ac1473fe4

    Aug 13, 2021 13:59 PM

    Gold had a great week considering the plunge of last Sunday night.
    GLD finished about 3.5% off of its low:
    https://stockcharts.com/h-sc/ui?s=GLD&p=W&yr=3&mn=5&dy=0&id=p57651599735&a=946008695

    Aug 13, 2021 13:03 PM
    Aug 13, 2021 13:12 PM

    SILJ vs AAPL bottomed right where it should have and looks ready to rise for a long time…
    https://stockcharts.com/h-sc/ui?s=SILJ%3AAAPL&p=D&yr=1&mn=3&dy=0&id=p65673680971&a=991900660

    Aug 13, 2021 13:05 PM
    Aug 14, 2021 14:28 AM

    Thanks for the charts Matthew. How did SILJ:GDX end up? It seemed like my junior silvers were outperforming the gold miners yesterday.

        Aug 14, 2021 14:08 AM

        …but lower for the week. A good performance under the circumstances, in my book.
        https://stockcharts.com/h-sc/ui?s=SILJ%3AGDX&p=W&yr=3&mn=11&dy=0&id=p55412439943&a=1001430508

          Aug 14, 2021 14:16 AM

          Thanks. Looking at the blue Andrews fork on the weekly, it looks like the overshoot on the top bar could mean a slight overshoot to the downside on the middle bar. If that happens which is probably 50/50 chance that could be the culmination of the bear flag on the daily and might come about with one more leg down in gold to say 1590. However, the COT was pretty compelling and with gold DSI in the single digits the bottom could have been in this past Monday.

            Aug 14, 2021 14:28 PM

            You’re obviously right to consider the overshoot symmetry going the other way but I bet it won’t happen because the sector has turned from a rather trendless several years to big-picture (quarterly/yearly charts) very bullish. The confluence of the other two fork supports probably also help.
            It’s similar to the long observed tendency of the RSI(14) readings to shift upward thereby making 40 the new 30 and 80 the new 70 during strong bull trends. In other words, those who wait for 30 to buy get left behind and those who sell at 70 leave a lot of money on the table. That’s typical bull market act. The moves up go way beyond anyone’s expectations and the corrections end well before most obvious downside targets.

            As you’ve probably gathered, I still believe the March low was THE low for gold. The pre-covid 2020 high has been thoroughly tested and retested along with the pre-2020 all-time high annual close. Considering the now very bullish annual chart, I think it is a powerful message that the market held at that significant level of annual scale importance (price barely overshot the 2012 close by 70 cents in March, virtually zero when talking about $1674).
            This correction has been much more significant than the covid crash in important ways and now I believe it is done. 1590 is possible and many probably think we will finally backtest 1370 but I strongly doubt that either will happen. Unless extremely brief and followed by an explosive recovery, even 1590 would be very bad news for the bulls in my opinion.
            I like our odds for next week but a bullish resolution isn’t required so soon for the bullish case for our miners.
            https://stockcharts.com/h-sc/ui?s=%24GOLD&p=W&yr=5&mn=0&dy=0&id=p16447088777&a=974275774

            Aug 14, 2021 14:34 PM

            Based on weekly closes (a TRUE weekly chart), gold looks even better:
            https://stockcharts.com/h-sc/ui?s=%24GOLD&p=W&yr=5&mn=0&dy=0&id=p81020641370&a=975478992

    Aug 14, 2021 14:32 PM

    Doc says the COT report hasn’t looked so bullish in a very long time and he’s right if 6 weeks is what he calls a very long time. Either way, that picture IS bullish but still useless for timing.

    Aug 14, 2021 14:15 PM

    Thanks. I am officially out of Ammo so I hope you are right. I have been feeling very nervous lately so my internal clock is telling me have to be close. The only concern I have is a liquidity crisis that hits everything including the precious metals. It wouldn’t surprise me if that was the plan of the people in charge.

      Aug 15, 2021 15:28 AM

      Hi Charles. I’m in a similar boat in that I’ve shot off most of my dry powder at this point, and am concerned what would happen in a “liquidity crisis” as you mentioned, but in that kind of scenario there is really not a perfect place to hide from the oncoming storm, as fiat currencies, real estate, art & collectibles, the general markets, the commodity markets will all go through many gyrations in their relative valuations to one another, and it’s still up for debate which areas will fare better in a prolonged contraction phase.

      Aug 15, 2021 15:57 AM

      Charles, I am technically also out of ammo but still have things I can sell if even better bargains appear (which I absolutely do not hope for).

      A stock market crash/liquidity crisis looks unlikely to me but I am expecting an intermediate term top and correction to begin soon.

      When the S&P 500 dropped 35% last year, it took care of the “need” for a “normal” bear market lasting 1-3 years. Yes, a normal bear market usually consists of more than a 35% drop but 35% can provide the same cleanout easily when it happens in 5 scary weeks. At worst, I’d say it bought the bulls a lot of time. The coming intermediate top is going to get all the usual bears and deflationists positioned for the big one which will ultimately only feed the next big advance. It reminds me of 2012 when everyone was calling 13,000 Dow a bubble, including guests here on KER. I wasn’t bullish but I disagreed and said my charts made the case for 19,500. That was a far out stance at the time but obviously way too conservative!
      The collapse last year followed a textbook broadening top or megaphone pattern and the breakout above it last November was/is a big deal…
      https://stockcharts.com/h-sc/ui?s=%24SPX&p=W&yr=5&mn=11&dy=0&id=p72096680648&a=942649948

      Aug 15, 2021 15:01 AM

      On Sept. 3, 2019, MarketWatch said:
      A ‘megaphone’ pattern in the stock market sounds scary — but there’s no need for dread

      And that was correct as of November that year (the megaphone was smaller then/had a different and lower top line) but then the collapse came which formed a much bigger pattern that is now well under the market (big picture bullish).
      https://www.marketwatch.com/story/a-megaphone-pattern-in-the-stock-market-sounds-scary-but-theres-no-need-for-dread-2019-09-03

    Aug 15, 2021 15:18 AM

    Thanks Ex. The one difference is you are probably a bit better diversified in the resource space than I am. Going into the year I diversified more than last year, but I have sold out of uranium and my pot stock hasn’t paid off yet. I am not in any lithium and had toyed with adding LIT as a starter. A lot of my stocks are flat lining so I have also had very little opportunity to trade.

      Aug 15, 2021 15:28 PM

      Hi Charles. Understood. Yes, I realized in years past I had become too overexposed to the PMs, and decided years ago to branch out a bit further across different commodity sectors (like Uranium, Lithium, Specialty Metals, Copper, Zinc/Lead, Platinum/Palladium/Nickel, some Oil/Gas etc…) as well as completely different sectors (ie… clean energy, cryptos, cannabis, directional trades on the general indexes, emerging markets, etc…)

      However, over the course of this year (especially in March and then in July & August for the last 2 months), I have shed many of the other positions in the base metals and energy metals, and even other sectors like cryptos, cannabis, clean energy, to concentrate more funds into the Gold and Silver stocks. I feel at this point the PM stocks have a better risk/return set up than many of the other sectors that have already had been runs over the last year like the Uranium, Lithium, PGMs/Nickel, Copper stocks, etc…. This is the most concentrated I’ve been in PMs since 2015-2016, but it does make me a bit uneasy to have the portfolio so weighted to gold and silver miners coming into late summer here, and it remains to be seen whether this was a good strategy or not.

      Like you mentioned, until these stocks get up off the mat and start to fight their way higher, then it’s a waiting game. Wishing you great prosperity and good trading sir.

        Aug 15, 2021 15:04 PM

        Thanks for the response and info as to what you have done with your portfolio. Best of luck to you!