The Ukraine debacle turned out to be a “purchase the rumor, promote the very fact” occasion for gold. A minimum of to this point…
by David Brady through Sprott Cash
The market has simply closed as I start to write down this on Thursday. What a day it was. DXY went ballistic. Gold, Silver, and the miners received creamed from the open after Gold tagged 1980 in a single day. Oil was the standout, tagging the magnetic $100 degree earlier than going into freefall in a matter of hours. Yields rebounded. And saving the very best for final, shares started their rebound simply above the 4100 degree, regardless of all of the requires sub 4000 ranges.
Particular to Gold, I shared earlier this week that the Bullion Banks have been loading up brief once more because the Hedge Funds doubled their lengthy place. It was additionally negatively divergent to the peaks in November and June 2021 on each the RSI and the MACD. Gold was additionally excessive overbought and bullish. Not unsurprising on condition that Gold reached its highest degree in 18 months. However it additionally was ripe for a correction. The Ukraine debacle turned out to be a “purchase the rumor, promote the very fact” occasion. A minimum of to this point.
Maybe most unlucky for Gold was that it fell like a lead balloon from its peak of 1980 all the way in which down under 1920 (178.85 GLD) and closed at 1904 (177 GLD). That is worrisome for 2 causes. First, we by no means closed above 1920 so that is still key resistance. Second, this can be a clear pretend breakout to the upside, which is often extraordinarily bearish. Ought to it proceed to fall, the subsequent help zone is between 1840-60 (172-173 GLD). By there and we’re counting on 1780 (166.40 GLD) to carry. The Banks stay closely brief Gold, and Gold has barely corrected its overbought situation.
On a extra optimistic be aware, Gold has been setting increased and better lows and now has hit increased highs above 1880. It examined 1920 and broke it not less than on an intraday foundation. If we get one other increased low at 1780 or increased after which head as much as shut above 1920, I’ll really feel assured that we’re lastly on the way in which to 2300+. If shares take one other flip right down to a decrease low and the Fed alerts its intention to pause any plans for a fee hike and taper of the stability sheet resulting from “geopolitical dangers”—i.e., Ukraine and Taiwan (handy excuses for one more 180)—then we could get that rally sooner relatively than later.
Above are the closing costs for Silver. Identical to Gold peaked at 1980, Silver topped out at 25.70, blowing via its 200-day shifting common for the primary time since April 2021. Nonetheless, it gave most of that again and closed kind of on the similar prior peak of 24.75, nevertheless it was clearly negatively divergent in doing so in response to the RSI and MACD Histogram. Nonetheless, the MACD Line hit a micro increased excessive. This implies that we’re due for extra draw back within the short-term, however we’re heading right down to a better low and we’ll shut above 24.75 the subsequent time round.
Within the interim, 22 is vital help on an intra-day foundation, and 22.20-30 from a detailed perspective.
Sorry for the usage of a unique chart right here, however StockCharts seems to have gotten the shut mistaken on November 15 relative to a number of different sources.
The November 15 closing peak was 34.90. Regardless of 4 makes an attempt to shut above there earlier than right this moment, it failed each time. It broke via in model right this moment however as soon as once more fell again under 34.90. The RSI was negatively divergent at this double prime, signaling additional draw back forward. Nonetheless, identical to Silver, the MACD Line made a better excessive, suggesting we’re heading right down to a better low subsequent. Assist is at 33 and under there, 30.70.
SILJ lastly broke downtrend resistance in purple however then ran right into a brick wall on the 200-day shifting common and dumped again under that purple resistance line. It additionally broke its prior excessive on an intraday foundation however then fell again under it once more. That is one other basic signal of a pretend breakout to the upside, which alerts additional draw back forward. I’m searching for a better low wherever above 11 adopted by a break of that 200-day shifting common to substantiate the underside is in and SILJ is about to go stratospheric!
In conclusion, the information—whether or not it’s a pretend breakout, damaging divergence, or nonetheless excessive overbought— all counsel we’re going decrease within the short-term. However telltale indicators from a better excessive within the MACD Line additionally point out that it’s prone to be a better low subsequent. If that performs out and is adopted by a better excessive, then the pattern has actually turned up, lastly!