Gold Unleashed – Rip Your Face Off Rally Is Here

S&P 500 had another day in the red, and buy the dippers might be tempted to say enough is enough – but I am not convinced yet. The selling doesn‘t appear as over yet, and the premarket upswing stopped right below my tweeted target of 4,133, overcoming which would have flipped the entry into the U.S. session as bullish.

More of the same is expected for today – the bulls need to demonstrate strength, which I am afraid won‘t convincingly happen right now. The VIX and options traders sense the shifting sands too. We‘re in the correction territory quite firmly now, and it isn‘t over by a long shot.

Nominal yields have retreated a little, reflecting the daily downswing in inflation expectations – but the overall dynamics haven‘t changed as Treasuries keep frontrunning the TIP: TLT. As for liquidity, it‘s still obscuring rotations to a degree, but it must be said that pressure was felt almost fully across the S&P 500 board. That‘s risk-off – a much-needed whiff thereof.

Gold

Gold defied the daily selling stretching over to commodities such as oil. In fact, gold and miners also defied the daily weakness in silver which I rightly found little concerning. The decoupling from the Treasury yields pressure goes on and is further relieved by Treasuries catching a bid again.

The dollar staged a daily reversal, but for how long would that last? The other indicative engine behind the precious metals growth, the USD/JPY pair, is tilting solidly in the yen’s direction, carrying trade suffering a setback, which means unwinding quite a few „no brainer“ trades, including those short precious metals. Remember, when the yen as the safe-haven currency strengthens, gold usually likes that.

Such is the amply clear big picture:

(…) Now, it‘s up to gold and silver to catch up on what they missed since early Aug 2020. Inflation is running hotter, and the Fed is tolerant of it, amply supplying liquidity. The gold bottom is in, and much brighter days ahead.

The stage is set for both gold and silver‘s rip your face of the rally, powered by the miners.

Let‘s move right into the charts (all courtesy of www.stockcharts.com).

S&P 500 Outlook

 

A bit too early to buy the dip, in my view – I would prefer to see signs of strength, including in small caps and emerging markets, above much else.

Credit Markets and Oil

 

There are signs of stabilization in the credit markets, but not sufficiently so for me yet – high yield corporate bonds (HYG ETF) aren‘t able to keep the ground gained through the day, and investment-grade ones (LQD ETF) retreated considerably before the close. Risk on isn‘t in favor yet, and it shows in quite a few S&P 500 sectors, including the persisting weakness in energy or $XOI (the oil sector) that has the power to send black gold lower before it recovers.

By the way, oil is in a precarious position short-term, especially should it break on a closing basis below $61.50. Above that, the price action is just a bullish consolidation. The bullish outlook is intact, despite the weakness in the oil sector. A break below $59 would worry me, though – but I don’t think things would get that bad for the bulls, really.

Technology and Value

 

Down across the board, but the tech heavyweights matter the most right now. And looking at their performance, the correction isn‘t over yet.

Gold and Silver

 

This is as bullish as it gets. Miners are leading, and Treasury yields aren‘t a headwind any longer for now. Naturally, I‘m standing by the call of decoupling from nominal yields getting more pronounced and by increasingly lower dollar values powering precious metals higher, especially in the second half of this year.

 

Silver isn‘t visibly or consistently outperforming, and not only nominal yields as such, but their ratio accounting for copper, is supporting the unfolding precious metals upleg.

Summary

The shallow S&P 500 consolidation doesn‘t appear over just yet, as the risk-off moves were evident across the board yesterday.

Gold and miners sharply recovered from their correction as anticipated, and the trend of higher highs and higher lows in the yellow metal goes on. The unfolding precious metals upleg is doing very well, having also beaten $1,775 on strong internals.

 

Thank you for reading today‘s free analysis, which is available in full at my personal site. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for both Stock Trading Signals and Gold Trading Signals.

 

Thank you,

 

Monica Kingsley
Stock Trading Signals
Gold Trading Signals
www.monicakingsley.co
[email protected]

 

* * * * *

All essays, research, and information represent analyses and opinions of Monica Kingsley that are based on availability and latest data. Despite careful research and best efforts, it may prove wrong and be subject to change with or without notice. Monica Kingsley does not guarantee the accuracy or thoroughness of the data or information reported. Her content serves educational purposes. It should not be relied upon as advice or construed as providing recommendations of any kind. Futures, stocks, and options are financial instruments not suitable for every investor.

Please be advised that you invest at your own risk. Monica Kingsley is not a Registered Securities Advisor. By reading her writings, you agree that she will not be held responsible or liable for any decisions you make. Investing, trading, and speculating in financial markets may involve a high risk of loss. Monica Kingsley may have a short or long position in any securities, including those mentioned in her writings. She may make additional purchases and/or sales of those securities without notice.