The Fed confirmed it was done hiking on Wednesday, but Powell pushed back on the potential for rate cuts.
The yield on the 10-year Treasury is bouncing on hot economic data. A rally above 4.20% would be concerning, whereas slipping below 3.75% could send gold to new highs.
ISM Services Sector
Employment in the service sector remains well below 50, which typically occurs during recessions. See the drawdowns of 2001, 2008, and 2020. Maybe this time is different, but those words can be dangerous.
One of the main precious metals are going much higher this decade is because of unsustainable debt. The national debt surpassed $34 trillion and is headed much higher.
One way to value stocks is by comparing the earnings of the S&P 500 to the U.S. 3-month Treasury bill. The chart below shows that the equity risk premium is negative, suggesting no benefit to buying stocks. The last time it was this low was around the 2000 dot.com collapse.
It seems we experience a crisis nearly every presidential election year and gold spikes (2016, 2020, 2024?). Here we are again, and the odds look favorable for a breakout in gold above $2100. When precisely? I’m not sure, nor do I know what crisis may arise; expect increased volatility.
The daily chart of gold reveals prices in the timing window for an intermediate low. Technically: The MACD below crossed positively, and the MFI (top) is reversing the trend. Prices may have bottomed at $2004 if gold stays above $2025 next week. A daily finish below $2025 would be a short-term negative and open the door for a final dip below $2000 in February.
Silver ran into the 50-day EMA, and prices are correcting. Bulls need to hold the $22.50 price gap through next week to promote a cycle low at $22.04. Progressive closes below the $22.50 gap would open the door to a little more downside.
Gold miners fell prey to a rug pull after Thursday’s close above $29.00. Prices need to hold the gap at $27.60 to maintain the potential for a cycle low. Final support arrives at $26.50 should we get a final dip in February.
Gold mining juniors may be completing the right shoulder of an inverse head and shoulder bottom. We have a $50.00+ target should prices confirm a pattern breakout above $40.00.
Bitcoin saw profit-taking after eleven ETFs were approved in January. Prices found support at $38,500 and are bouncing – technically, the trend is higher. Failing to make higher highs (above $50,000) and a breakdown below the 200-day MA would recommend an interim top and open the potential for more downside.
S&P 500 Weekly
Stocks are overbought (top), and I expect a peak sometime this quarter. I’ll look closely for signs of topping once the fear and greed index rises above 80.
Fear & Greed
The stock market has soared since October, reaching new all-time highs. I like to monitor the fear and greed index at turning points. Once north of 80, investors are sufficiently complacent, and I begin looking for signs of topping.
We see gold surging above $2100 ahead of this year’s elections. The odds of a black swan, geopolitical event, or financial crisis in 2024 are significant. Stocks are overvalued, and risk is high. Patience is essential.
AG Thorson is a registered CMT and an expert in technical analysis. For regular updates and daily market commentary, please visit www.GoldPredict.com.