gold price

Euro Rises To The Highest Levels Since 2018The euro currency is posting strong gains, rising over one percent on the day. The gains largely on the back of a weakening US dollar.Earlier on Monday, the euro gave back the gains after testing the 1.2000 level. However, this decline saw prices retesting the trend line for support.A rebound from this trend line saw price action breaking past this previous resistance level.At the time of writing, the EURUSD currency pair is trading above the 1.2000 level.The Stochastics oscillator is however posting a lower high. This could signal a possible correction in the near term.The lower price level of 1.1900 is likely to act as support during this retracement.GBPUSD Attempts To Break The Trend LineThe British pound sterling is posting strong gains on the back of a weaker dollar. After price action consolidated above the 1.3300 level, the cable is attempting to push higher.For the moment, prices are stuck near the trend line. As long as the trend line holds as resistance, we could see the sideways consolidation to continue.However, in the event of a breakout off the trend line, then the GBPUSD will be aiming for the 1.3500 level next.For the moment, with the support level firmly established at 1.3300, the GBPUSD will be looking to make further gains to the upside.WTI Crude Oil Losing The 45.00 HandleOil prices are trading weaker on Tuesday. The declines come despite the US dollar taking a strong hit.The move to the downside comes after oil prices failed to make any big moves to the upside.As a result, WTI crude oil was consolidating around the 45.00 level for a considerable period of time.After losing this handle, oil prices are likely to push lower. The next key support is near the 43.50 level.However, we expect the pullback to see prices retracing the 45.00 handle.If resistance is firmly established here, then we could expect to see further declines down to the 43.50 level.Gold Prices Get A Boost From Weaker USDThe precious metal has been posting strong gains on the back of the US dollar. Gold prices are up nearly 2% intraday on Tuesday.The rebound also coincides with the impending correction in gold, as mentioned a day before. For the moment, we expect prices to retrace to the 1817.80 level.If this level holds, then gold prices could establish resistance. This will in turn renew the downside bias in the precious metal.The 1800 level once again comes into the picture, with the potential for gold to post further losses.

EURUSD Pulls Back Off Recent HighsThe euro currency was trading soft on Monday with price action closing nearly flat.This comes as the euro continues to post a modest descent after briefly testing above 1.2170 last Friday.For the moment, a local swing low has formed near 1.2080. As long as this low holds, we could see price action resuming the uptrend.However, a close below this low and a potential retracement back to this level could confirm the downside.The key support area is likely to come from the dynamic support of the trend line. This is likely to coincide near the 1.2000 level in the near term.GBPUSD Drops As Brexit Trade Concerns MountThe British pound sterling was trading rocky on Monday as prices were in a steady decline since morning.This comes as the UK and the EU continue with the post-Brexit trade talks which have failed. The GBPUSD fell, as a result, briefly slipping below the 1.3300 level of support.However, price recovered off the lows before managing to close above this level once again.For the moment, it seems like the 1.3300 level will hold out as support. But if price breaches this level, then we could expect further declines.The Stochastics oscillator is currently nearing the oversold levels, which could suggest a possible retracement in the near term.WTI Crude Oil Gives Back GainsOil prices are trading weaker, down about 0.18% on the day. The declines come after oil price posted steady gains into last Friday’s close.However, price action is pulling back after testing new highs of above 46.50. The declines could see price stalling near the 45.26 level of support.As long as this support holds, we could expect the upside to resume. Oil prices will need to break past the previous highs to confirm the continuation to the upside.However, failure to post new highs could signal a move lower.A close below 45.26 could potentially expose oil prices to test the support level of 43.50 next.Gold Prices Rise 1%, Breaking Past 1850The precious metal is posting a strong recovery as price action zoomed past the 1850 handle.The gains come after gold prices managed to settle comfortably above the key price level of 1818.80.With the 1850 level giving way to further gains, gold prices could continue higher.The next key level of interest is the 1911.50. But prices could likely test this level if there is some support forming near the current levels.This could mean that gold prices might retrace back to the 1817.80 or the 1850 levels.

Euro Drops As ECB Meeting LoomsThe euro currency’s declines accelerated on Wednesday. The common currency is trading below the 1.2100 level which it held over the past few days.The declines come as the ECB will be holding its monetary policy meeting. Speculation is high that the central bank will increase its bond purchases.The current declines could stall near the dynamic support off the rising trend line. This could see a confluence of the 1.2000 level holding up for the moment.However, if the 1.2000 level breaks, then the next key support to look for will be the 1.1900 level.To the upside, price action could stall near 1.2100.GBPUSD Volatile Within A Flat RangeThe British pound sterling is giving back the gains made earlier. The volatility stems as Brexit negotiations drag on with no clear plan yet.The GBPUSD is currently settled within 1.3483 and 1.3300 levels. While the lower end of the range was briefly tested earlier this week, it has held up.The current pace of declines could see the 1.3300 support level coming under pressure once again.If the cable loses this support, then we could expect to see further declines.The next key support level is near 1.3122.Crude Oil Falls Back To 45.50 SupportOil prices continue to trade weak above the 45.50 level. Prices fell once again on Wednesday, testing the 45.50 level of support.So far, no new highs have formed. This consolidation could lead to a potential correction if support gives way.Below the 45.50, the next key support area is seen at the 43.50 level. We could expect this support level to hold in the near term.It would also mean that oil prices could continue trading flat within the newly established range below the 45.50 level.The Stochastics oscillator is also signalling a move lower. This could possibly confirm the downside bias for the moment.Gold Edges Down To 1850 SupportThe precious metal is seen retesting the support level of 1850 once again.This comes as prices barely rose close to the 1880 level before giving back the gains. The market sentiment remains mixed leading to the rather flat price action for the moment.However, the 1850 level will be critical. If gold prices lose this handle, then we could expect further declines to the 1800 level once again.This would come as gold prices will likely test the 1817.80 level to the downside.

Euro Firms Up After ECB MeetingThe euro currency regains its bullish momentum on the day. The gains came after the common currency posted declines for four consecutive days.This led prices to fall and test the trend line which offered dynamic support. Following this, the euro made a quick rebound and is attempting to rise higher.For the moment, price action will need to challenge the previous lows near 1.2150.If the euro can break past this level, then we expect to see new highs forming.However, if the common currency reverses near this level we expect a possible correction down to the 1.1900 level.GBPUSD To Remain Volatile Into Sunday Brexit MeetingThe GBPUSD currency pair continues to trade volatile, in reaction to the Brexit trade talks.Both the EU and the UK have until Sunday to finalize the deals. We expect the GBPUSD will therefore continue trading mixed into the weekend.For the moment, consolidation is taking place near the 1.3300 level of support.If price action closes firmly below this level, then further downside is possible. The bias remains completely mixed at this point.To the upside, GBPUSD will need to retest the 1.348 – 1-3500 level. Only a strong close above this level could confirm further gains.WTI Crude Oil Attempts To Log New HighsOil prices are trading bullish following days of consolidation near the 45.00 level.The gains are driven by news about two oilfields in Iraq under attack.For the moment, with the support level at 45.00 being establishing oil prices have room to rise.Furthermore, the next key challenge will be the psychologically important 50.00 level. However, the rise to this level is likely to be gradual.Oil prices will need to establish support near the upper levels to continue maintaining the bullish momentum.Gold Prices Continue To Remain Trading FlatThe precious metal did not react much to the news of the ECB’s stimulus expansion. As a result, gold prices remain fairly settled above the 1850 levels for the moment.As long as this support holds, we can expect price action to trade flat.To the upside, gains will be very likely capped near the 1900 -1911 levels.To the downside, if the support level gives way, then gold prices could be looking at steeper declines.Prices will likely fall back to the next key support area near 1817.80.

The vaccines are coming – we’re saved! Although the arriving vaccines are great for humanity, they are bad for the price of gold.In November, Pfizer and BioNTech announced that their mRNA-based vaccine candidate, BNT162b2, had demonstrated evidence of an efficacy rate above 90% against COVID-19, in the first interim efficacy analysis. As Dr. Albert Bourla, Pfizer Chairman and CEO, said:Today is a great day for science and humanity. The first set of results from our Phase 3 COVID-19 vaccine trial provides the initial evidence of our vaccine’s ability to prevent COVID-19.Indeed, the announcement is great news! After all, the vaccine is the ultimate weapon against the virus. There’s no doubt that we will get the vaccine one day. Thank God for scientists – they are really clever people who work hard to develop a safe vaccine! Why can’t we have more of them instead of so many economists? As well, the pandemic triggered unprecedented global cooperation to develop a vaccine as quickly as possible. The funds are enormous, while the bureaucrats eventually decided to behave like decent human beings for once and eased their stance in order to speed up the whole process. Great!But… there is always a “but”. You see, there are some problems related to Pfizer’s vaccine . First, all we know comes from the press release, but the company didn’t provide any data for a review. Second, the efficacy rate announced by the company pertains only to the seven days after the second dose is taken – we still don’t know how effective the vaccine is in the longer term, and how long immunity lasts. Third, we still don’t know the efficacy of the vaccine among the elderly and people with underlying conditions – or, the most affected people by COVID-19. Fourth, the vaccine is based on mRNA technology, and such a vaccine was never approved for human use. There is always a first time, but new technologies always give birth to some concerns, which could ultimately reduce the public’s preference to get vaccinated.Another problem is that this vaccine requires two doses that are taken 21 days apart. It delays the moment of immunization and again reduces the motivation to take the vaccine – yes, some people are so lazy, and/or they don’t like injections so much (for whatever reason; we’re not debating whether it’s justified or not) that they can refuse to be vaccinated.Moreover, Pfizer’s vaccine must be stored at a temperature of about -70°C (-94°F), which is quite low indeed, and can be quite chilly in shorts (unless you are Wim Hof ). The problem is transportation and distribution – you see, many hospitals - to say nothing of rural physicians and pharmacies, and healthcare systems in developing countries - do not have adequate freezers to store the vaccine. Last but not least, even if scientists develop the best possible vaccine, it remains useless unless people accept to take it – and this is far from being certain, given the pandemic denial movement and fear of vaccines.Sure, one could say that all these points are not very problematic. After all, Pfizer is not the only company working on the vaccine. There are actually more than 150 coronavirus vaccines in development across the world. For example, Moderna’s vaccine can be stored at a much higher temperature – a more comfortable -20°C (-4°F), So even if Pfizer’s vaccine turns out to not be the best, other, even better vaccines will arrive on the market – and a lack of any vaccine can transform into a crisis of abundance.That’s true, but the sad truth is that it’s unlikely that any vaccine will be widely available until mid-2021 . Pfizer, for example, announced that it hoped to produce 50 million doses by the end of 2020. As the vaccine needs two doses, only 25 million people could be vaccinated this year. So don’t count on being among this group – countries will prioritize healthcare workers, social workers and uniformed services first, and the elderly next. It means that we will not return to a state of normalcy very soon, and most of us will still need to wear masks, practice social distancing and… wash hands!In the meantime, the U.S. is about to enter Covid hell , as Michael Osterholm, one of Biden’s advisers on the epidemic , said . Indeed, the country is nearing 11 million reported COVID-19 cases, and the coronavirus has already killed more than 240,000 Americans. But the worst can still lie ahead for the U.S. As one can see in the chart below, the epidemiological curve is clearly exponential and the daily number of new cases has touched 200,000! Yup, you read it correctly, about two hundred thousand people are infected each day. You don’t have to be a mathematician to figure out that at such a rate of infections, the healthcare system will collapse soon.What does it all imply for the gold market? Well, although the arriving vaccines are great for humanity, they are bad for the price of the yellow metal. The pandemic greatly supported gold prices. So, the expected end of the epidemic in the U.S. should be negative for the shiny metal.However, there are two important caveats to this statement. First, there is still a long way to go before widespread vaccination and a true end to the pandemic. In the interim, we still need to face the COVID-19 challenge, so gold shouldn’t suddenly fall out of favor.Second, gold reacted not only to the pandemic itself, but also – or even more – to the world response of governments and central banks to the health and economic crisis . The easy monetary policy and accommodative fiscal policy will not disappear only because of the vaccine’s arrival. Actually, the harsh winter or “Covid hell” that awaits America will force the Fed and Treasury to continue or even to expand their stimuli, which is good news for gold prices from the fundamental perspective .Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Analysis. Care. Profits.

  Brace yourselves, winter is coming! It may be a harsh period for the United States, but much better for gold. Some of you may have seen snow this year already, but the astronomical winter is still ahead of us. Unfortunately, it could be a really dark winter. Instead of joyful snowball battles and making snowmen, we will have to contend with the coronavirus . The vaccines will definitely help (the first doses of Pfizer’s vaccine were administered this week), but their widespread distribution will begin only next year. So, we still have to deal with the pandemic taking its toll here and now – as the chart below shows, the number of daily COVID-19 cases is still above 200,000 in the U.S. The increasing cases are one thing, but the soaring numbers of COVID-19-related hospitalizations is another, even more terrifying, issue. As one can see in the chart below, the number of patients in U.S. hospitals has reached a record of 100,000, due to a surge in the aftermath of Thanksgiving. Importantly, the situation may get even worse , as people spend more time indoors in winter, and large family gatherings during Christmas and Hanukkah are still ahead us… I know that you are fed up with the date about the epidemic . And I don’t write about the pandemic because I’ve become an epidemiologist or want to scary you; for that all you need to do is read the press headlines or watch TV for a while. I cover the pandemic because it still impacts the global economy, and in particular, it explains why the U.S. economic growth is slowing down. You see, in the summer and autumn of 2020, America’s economy roared back. But that might be a song of the past. As I wrote in Tuesday’s (Dec 8) edition of the Fundamental Gold Report , November’s employment situation report was disappointingly weak, and the high frequency data also point to a slowdown. For example, the number of diners and restaurants, as well as hotel and airline bookings, have declined in recent weeks. So, the increased spread of the coronavirus slows the economy down. A growing share of Americans, even those who were previously skeptical about the epidemiological dangers, worry about catching the virus, thereby reducing their social activity. However, there are also other factors behind the most recent economic slowdown. First, the previous recovery was caused by a low base and the end of the Great Lockdown . The deep economic crisis seen in the spring, with accompanying coronavirus restrictions, will not happen again. Therefore, the initial recovery was fast, but the pace of economic growth had to slow down. Second, the easy fiscal policy helped to increase the GDP , but Congress has so far failed to agree on another stimulus package.   Implications for Gold What does it all mean for the yellow metal? Well, the economy could rise again when the vaccines become widely available. However, we will face a harsh winter first. It means that the coming weeks might be positive for gold – especially considering that in recent years, the shiny metal rallied in January (or sometimes even in the second half of December). But what’s next for gold prices? Will they plunge in 2021 after the rollout of the vaccines? Well, the vaccines are in a sense, a real game changer for the world next year. As they revived the risk appetite, they hit the safe-haven demand for gold. So, yes, there is a downward risk, although it could already be priced in. However, the vaccines are a game changer only in a sense . You see, the vaccines might protect us from the virus, but they will not solve all our economic problems , therefore, caution is still required. On Monday (Dec 7), the Bank of International Settlements warned the public that “we are moving from the liquidity to the solvency phase of the crisis”. Actually, the post-winter, post-pandemic environment might be beneficial for gold. You see, gold is a portfolio-diversifier which serves as a safe haven asset during a period of turmoil, but it performs the best during the very early phase of an economic recovery – especially as the central banks will continue the policy of zero interest rates . Thus, the new stimulus package, low real interest rates , worries about the U.S. dollar strength and debt sustainability, and fears of inflation , which will accompany the economic revival in 2021, should support gold prices. If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!

EURUSD Likely To Challenge Previous HighsThe euro currency is once again back on the front foot as price action inches closer to test the previously established two and a half year high at 1.2176.The gains come as the common currency eased back from its declines earlier this week. Currently, the upside momentum is held by the support from the trend line.However, it will now be critical for the euro to break past the previous barrier. Failure to break out from this two and half year high could result in a possible reversal in price action.This would in turn once again shift focus to the downside.The key support level is near 1.1900. Therefore, in the event that the EURUSD fails to break out any higher, we could probably expect a near term correction in price action.GBPUSD Continues To Trade Flat, Above 1.3300The British pound sterling continues to trade flat albeit, price action is firmly supported above the 1.3300 level.Following the gap higher at the start of the week, the GBPUSD has been pushing lower. For the moment, there remains an unfilled gap from Monday’s open.To the upside, price action is trading well below the key upper range of 1.3483. The weakness in the US dollar is currently helping the British pound to push higher.However, it is unlikely to see any major gains coming in the near term.We expect the sideways range to be held until there is some kind of a resolution to the ongoing Brexit talks between the EU and the UK.WTI Crude Oil Advances To A Nine-Month HighOil prices are trading bullish once again following the previous few sessions where price action was rather subdued.As the bullish momentum slowly grips, oil prices are seen advancing to the previously formed nine-month high.A continuation to the upside could possibly see prices testing a new ten-month high shortly. This would mean that prices would near the 48.00 level for the moment.It would also put oil prices just $2 away from the psychological barrier of $50. The current gains to the upside are supported both by the technicals and the fundamentals in the markets.The key support level at 45.00 remains the downside for the moment.However, it is unlikely that we would see a sharp correction coming anytime soon.Gold Prices Back Near 1850 Technical ResistanceThe precious metal is trading over 1% on Tuesday.The gains come amid fresh talks in the US Congress about a new proposed coronavirus stimulus bill. If this bill is passed, this would put an end to the weeks of speculation in the markets.Gold prices have been trading rather flat after rising above the key support level of 1818.80 in early December this year.For the moment, the technical resistance level of 1850 is being tested once again.However, the stochastics oscillator on the four-hour chart is likely to print lower.This could mean that gold prices could once again retreat back and settle within the range of 1850 and 1818.80.

EURUSD Fails To Post New Highs The euro currency’s rebound after the ECB meeting saw prices rising only to highs near 1.2150. Following this, price action retreated, edging closer back to the rising trend line. We expect the trend line support to once again come into the picture. As long as this support holds, the EURUSD might be looking to aim higher. In the event that the common currency loses the trend line support, then we expect price action to fall toward the 1.2050 level, marking the December 9 lows. To the upside, the EURUSD will have to break out above the previous highs of 1.2178 to continue the uptrend. GBPUSD Loses The 1.3300 Support The British pound sterling slipped below the support level of 1.3300 on Friday. This comes as Brexit talks come to a head. For the moment, the lower support near 1.3122 remains the key price point. As long as this support level holds, there is scope for the GBPUSD to push higher. However, prices will need to break out strongly above the 1.3300 level to continue the uptrend. This will then open the GBPUSD to the upper resistance level of 1.3483. To the downside, a close below 1.3122 could open the way for the cable to retest the 1.3000 round number support once again. Oil Prices Pull Back From A Nine-Month High WTI Crude oil prices rose sharply on Thursday to rise close to the 48.00 level. However, prices pulled back into Friday’s close. This comes as the 45.00 level is firmly establishing as support. Thus, a pullback could see this support level being tested once again. The Stochastics oscillator on the 4-hour chart remains mixed. There is enough room for prices to breakout higher. Above the 48.00 level, oil prices will be contending with a retest of the 50.00 level. To the downside, below the 45.00 support area, a correction could bring the commodity down to test the 44.00 handle next. Gold Settles Within The 1850 And 1825 Range The precious metal continues to trade flat for the second consecutive session. As a result, price action is trading within a tight band of the 1850 and the 1825 levels in the near term. The Stochastics oscillator remains biased to the downside. This could mean that if gold prices lose the 1817.80 level of support, then we expect the downside to continue. The next key level of support will be near the 1750 level. It would also mean that gold prices will be moving lower beyond the 30th November lows of 1764.22. To the upside, price action will need to firmly close above 1850 and continue to the 1900 level to establish the uptrend.

Fed Chair Jerome Powell sounded dovish during his press conference on December 16, where he gave a market update after the Fed’s monetary policy meeting. The Fed will remain accommodative for a long time, which should support gold prices.Last week was full of important events. First, both the Pfizer/BioNTech and Moderna vaccines received emergency-use authorization from the U.S. Food and Drug Administration . In consequence, the first COVID-19 vaccination in the United States has already taken place, which is great news for America, as it marks the beginning of the end of the pandemic .It’s high time for that! As the chart below shows, the U.S. has already lost about 314,000 people to the coronavirus.And what is disturbing, the current wave of infections doesn’t look like it’s going to end quickly. As one can see in the chart below, the number of new daily official cases is still above 200,000 – actually, it has recently jumped to about 250,000.So, the beginning of vaccine distribution is the light at the end of the pandemic tunnel that brings hope for a return to normalcy in 2021. It’s important to note that, contrary to the groundbreaking November news about the efficacy of the vaccines, the approval of vaccines and first injections didn’t plunge gold prices. This suggests that the bridge to normalcy built by the vaccines has already been priced in. That’s good news for the gold bulls .Second, there was renewed optimism about the fresh fiscal support . Indeed, there are higher odds now than at least about $750 billion in aid will be passed and implemented by the end of 2020. Theoretically, the fiscal stimulus is considered to be helpful for the economy, so it should be negative for gold, however, the price of the yellow metal may actually go up amid concerns about rising fiscal deficits , public debt , and inflation .Powell’s Press Conference and GoldThird, the last FOMC meeting took place this year. I’ve already analyzed it in last Thursday’s (Dec. 17) edition of the Fundamental Gold Report , but then I focused on the monetary policy statement and the fresh dot-plot . As a reminder, the Fed tied tapering in its quantitative easing to the progress toward reaching full employment and inflation at two percent, while the economic projections were more optimistic, but they nevertheless didn’t see any interest rate hikes until the end of 2023.However, it was Powell’s press conference that was really crucial, so let’s take a closer look at it. The Fed Chair sounded dovish, as he emphasized the U.S. central bank’s commitment to maintaining its very accommodative stance. In particular, Powell reiterated that the Fed will not hike interest rates or reduce its asset purchase program anytime soon. Actually, Powell said that the bank will normalize its monetary policy only after reaching the maximum employment and price stability:our guidance for both interest rates and asset purchases will keep monetary policy accommodative until our maximum employment and price stability goals are achieved. And that's a powerful message. So substantial further progress means what it says. It means we'll be looking for employment to be substantially closer to assessments of its maximum level, and inflation to be substantially closer to our 2 percent longer run goal, before we start making adjustments to our purchases.In other words, Powell clearly stated that he will keep his foot on the gas until at least 2023, and that he won’t pull the brakes even if inflation increases. This is because Powell believes that although inflation may rebound in 2021, it will be a temporary increase, and the Fed now has a flexible average inflation targeting framework, so it wants inflation to overshoot the target:What we’re saying is we're going to keep policy highly accommodative until the expansion is well down the tracks. And we’re not going to preemptively raise rates until we see inflation actually reaching 2 percent and being on track to exceed 2 percent. That's a very strong commitment. And we think that's the right place to beThis means that in 2021 the Fed is likely to be behind the curve. Higher inflation with the nominal interest rates unchanged imply lower real interest rates – further declines in these rates should push the gold prices up . Moreover, Powell will announce in advance when he wants to take his foot off the gas pedal and start reducing the amount of monetary accommodation. The Fed clearly doesn’t want the replay of the 2013 taper tantrum :And when we see ourselves on a path to achieve that goal, then we will say so undoubtedly well in advance of any time when we would actually consider gradually tapering the pace of purchases.Implications for GoldWhat does it all mean for gold prices? Well, although the Fed did not expand its monetary accommodation in December, Powell was really dovish and he pointed out that the U.S. central bank would continue its current easy stance “as long as it takes until the job is well and truly done.” Gold welcomed Powell’s remarks and gained nearly $40 on Thursday, as the chart below shows.It makes sense – after all, the Fed promised that its monetary policy would remain highly accommodative for a long time. So, although the potential for further accommodation and, thus, a great rally in gold prices is limited (at least until we see a further weakening in the US dollar or an increases in inflation and decrease in the real interest rates), the risk of a sudden tightening in the Fed’s monetary policy , that could plunge the gold prices, has diminished. Therefore, gold could shine again – at least until the markets start to worry about the normalization of monetary policy and start to forecast increases in the interest rates.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Analysis. Care. Profits.

Precious metal and crypto analysis exclusively for Celtic Gold on 22.12.2020After four corrective months and a final bloodbath towards the end of November, it looks as if the low is in! Gold – The bull market continues.ReviewOn August 7th, the price of gold hit a new all-time high of US$2.075 . At that time we warned of the temporary end of the gold rush. As a result, over the past four months, there has been tough and stretched correction, with several pullbacks towards the support zone between US$1.850 and US$1.865.By November 9th, gold prices had just recovered back to US$1,965 when the final bloodbath phase began quite abruptly. In the following days, with their fifth attempt the bears were finally able to break through the aforementioned support zone, forcing the gold market into a small panic sell-off. After all, this sell-off ended on November 30th with an intraday double low at US$1,764.Since 9th of November Mondays have become quite challenging for goldSince then, there has been a clear turnaround over the last three weeks. Quickly, the bulls staged an initial recovery to US$1,876 before gold came back down to test US$1,820 one more time. Since the FED press conference last Wednesday, gold bulls came roaring back pushing prices towards US,1906 further upwards. At the start of this trading week, however, as it happened most Mondays in the last eight weeks, gold got strongly pushed lower after reaching new highs at US$1,905. The sharp slide saw gold tumbling down testing its solid support at US$1,855 once again. In the meantime, prices have recovered that vicious attack and are trading around US$1,875 trying to stage another attack towards US$1,900.Overall, the turnaround is not yet completely in dry cloths, but with a very high probability the bull market in the precious metals sector is now starting again fully.Technical Analysis: Gold in US-DollarGold in US-Dollars, weekly chart as of December 21st, 2020. Source: TradingviewWith a low at US$1,764, the timely forecasted correction bottomed most likely on November 30th. Since then, a recovery wave of more than US$140 has already been seen. The decisive element on the weekly chart now is the downtrend trend line of those last four months. Currently, this downtrend trend sits around US$1,915 and is moving a bit lower every day.The mere sight of this strong line of resistance apparently caused a sudden panic attack among the gold bulls at the start of this week. Hence, gold prices briefly went off from US$1,905 towards US$1,855 within a few minutes. However, we expect a first real test of this resistance line above US$1,900 over the next few days and weeks.Oversold weekly stochastic points to a contrarian opportunityOverall, the chances for a breakthrough during the next one or two months are also very good, and thus further price increases until spring are highly likely. In particular, the new buying signal from the stochastic oscillator looks pretty promising. Since the great panic in the summer of 2018 and the beginning of the fulminant uptrend in the gold market (starting from a low at US$1,160 in August 2018), the stochastic oscillator delivered a similarly oversold setup only in spring 2019 and November 2019. Each of those two setups were a great contrarian buy opportunity as each time followed a very strong rally in the gold market.In summary, we can assume the trend reversal for the gold market. Hence, over the next two to three months gold, silver and mining stocks should all move higher. A rally towards the November high at US$1,965 would be the absolute minimum for gold. More likely, however, would be a rally back above the psychological round number at US$2,000, including an extension towards US$2,015 and maybe even US$2,050. Nevertheless, this uptrend might present itself somewhat jerky and unround. Sharp pullbacks that emerge again and again will probably make life not that easy for trend-followers.A new all time is realistic in mid-summerOf course, a new all-time high above US$2,075 could also happen until early spring, given the exponentially increasing currency creations worldwide. Yet, it is not the primary scenario. More realistic would be a new all-time high during the second seasonally strong phase somewhere in midsummer.Gold in US-Dollars, daily chart as of December 21st, 2020. Source: TradingviewOn the daily chart, the resistance zone between US$1,900 and US$1,920 becomes more obvious. This zone will most likely keep the gold bulls busy for a few more weeks. Moreover, as the stochastic oscillator on the daily chart has already reached its overbought zone, expecting a trading range between US$1,850 and US$1,920 likely well into mid of January is crucial.The support zone between US$1,850 and US$1,865 now has a very important catch-up function. If, contrary to expectations, this support does not hold, a further test of the upper edge of the medium-term uptrend channel around US$1,820 would also be acceptable. The 200-day moving avarage (US$1,816) is also approaching this price level. However, gold prices should not fall much lower, otherwise the bullish scenario will have to be questioned.In the conclusion, the daily chart is still bullish. An attack towards downtrend line slightly above US$1,900 is the most likely scenario in the short-term. However, this Monday’s sharp sell-off gives already a taste of the strength of this downtrend line. Pullbacks towards US$1,850 to US$1,865 and in particular another test of the 200-day moving average around US$1,820 would be another good entry opportunity. Only below US$1,800 will the bull market be in jeopardy. On the other side, the breakout above US$1,920 confirms the bullish case and opens up further potential towards US$1,955 and US$1,965.Commitments of Traders for Gold – The bull market continuesCommitments of Traders for Gold as of December 15th, 2020. Source: CoT Price ChartsAccording to the lastest CoT-report, the commercial short position increased again slightly. Overall, however, the constellation of the last one and a half years has hardly changed at all as the commercial traders continue to hold an extremely high short position. This accumulated  position currently sits at 306.342 short contracts.Commitments of Traders for Gold as of December 15th, 2020. Source: SentimentraderOverall, and on its own alone, the weekly CoT-report continues to provide a clear sell signal for gold. This has been the case for more than a year already and continues to signal a great need for correction.Sentiment: Gold – The bull market continuesSentiment Optix for Gold as of December 18th, 2020. Source: SentimentraderWith the sharp sell-off until the end of November, the precious metals sector was at least partially cleaned up with a final bloodbath lasting several days. The great euphoria of the summer has thus turned into the opposite. Although the quantitative sentiment indicators did not signal any real panic, those low levels of optimism should still have been sufficient for a sustained bottom and turnaround.BofA Global Investment Strategy, EPFR GlobalInterestingly enough, November saw exorbitant outflows from the gold ETFs. Here, huge quantities of gold were thrown onto the market in a panic attack with the push of a mouse click. And this despite the fact that the price of gold simply went through a normal and expected correction since the summer. This chart clearly speaks for a cleanup of the weak hands!Overall, the sentiment analysis thus provides a good starting point for the first quarter of 2021. In the short-term, however, optimism is already a little too high. The path towards a higher gold price should therefore not be straightforward in the next few weeks but might be interrupted again and again by treacherous pullbacks.Seasonality: Gold – The bull market continuesSeasonality for Gold as of December 18th, 2020. Source: SeasonaxSeasonal-wise, all traffic lights are green over the next two months, as the price of gold has statistically been mostly able to rise until mid to end of February and often into spring. Hence, from the seasonal perspective, caution is recommended from early march onwards.Overall, seasonality these days provides a strong buy signal.Sound Money: Bitcoin/Gold-RatioWith prices of US$23,400 for one Bitcoin and US$1,865 for one troy ounce of gold, the Bitcoin/Gold-ratio is currently 12,54. That means you have to pay more than 12 ounces of gold for one single bitcoin! In other words, a fine ounce of gold currently costs only 0,079 Bitcoin, which means another loss of more than 30% for gold against bitcoin. Bitcoin has been mercilessly outperforming the price of gold for the last several months.Generally, you should be invested in both: precious metals and bitcoins. Buying and selling Bitcoin against gold only makes sense to the extent that one balances the allocation in the two asset classes! At least 10% but better 25% of one’s total assets should be invested in precious metals (preferably physically), while in cryptos and especially in Bitcoin, one should hold 1% to 5%. Paul Tudor Jones holds a little less than 2% of his assets in Bitcoin. If you are very familiar with cryptocurrencies and Bitcoin, you can certainly allocate higher percentages to Bitcoin and maybe other Altcoins on an individual basis. For the average investor, who usually is primarily invested in equities and real estate, 5% in the highly speculative and highly volatile bitcoin is already a lot!“Opposites compliment. In our dualistic world of Yin and Yang, body and mind, up and down, warm and cold, we are bound by the necessary attraction of opposites. In this sense you can view gold and bitcoin as such a pair of strength. With the physical component of gold and the digital aspect of bitcoin (BTC-USD) you have a complimentary unit of a true safe haven in the 21st century. You want to own both!”– Florian GrummesPatience is recommended if you are not yet (fully) invested in BitcoinOnly a significant pullback in the next one to four months towards and maybe even below the old all-time high at around US$20,000 would result in another opportunity to enter or allocate into bitcoin.Macro update and conclusion: Gold – The bull market continuesTavi Costa, Crescant Capital, December 20th,2020.For almost 16 months, the balance Sheet of the Federal Reserve Bank (FED) in the US has been exploding. In recent weeks, a new all-time high has been reached. Hence, the devaluation of the US-dollar (=fiat money) is therefore unabatedly continuing and is expected to accelerate further next year.Tavi Costa, Crescant Capital, December 22nd,2020.Over US$1 trillion in US Treasuries will be due in the next 15 days alone! The current pace of currency creation of around US$80 billion per month will not be enough, as much more US Treasuries in the order of US$5.8 trillion will be due curing the course of next year. US central bankers are caught in a trap and will have to create ever-increasing amounts of currency out of nowhere.Tavi Costa, Crescant Capital, December 18th,2020.Logically, therefore, inflation expectations in the US as well as worldwide are rising sharply.Tavi Costa, Crescant Capital, December 22nd,2020.At the same time, commodity prices are also on the verge of breaking out above their 12-year downtrend line and are expected to continue to rise strongly during the course of 2021.MoneyWeek, December 4th,2020.Not surprisingly, investors and financial market participants are therefore in a roaring 20s mood!  For the broad population, however, this is a catastrophic development, as inflation will devalue their monthly salary more and more quickly.For precious metals and the price of gold instead, this is the best of all worlds. At least until the spring, a recovery rally is expected for gold towards US$2,000 and silver towards US$30. Hence, another buying opportunities would present itself should gold drop one more time towards US$1,850 and US$1,820, respectively. Following the current “tax loss-selling” and the start of 2021, mining stocks should take over the lead in the sector again and could then outperform gold and silver until spring. Forecasting the full year 2021, silver in particular should be able to benefit from the rising inflation. Over the course of the year, a test of the all-time high around US$50 is conceivable. In midsummer at the latest, the price of gold should also be able to break out above US$2,100.Overall, silver and bitcoin remain the dream-team for the accelerating crack-up boom.Source: www.celticgold.eu

EURUSD Heading LowerThe euro currency attempted to rise higher but gave back the intraday gains. The rebound off the 1.2177 level of support was met with resistance from the trendline.With prices heading lower, the previous support level near 1.2177 comes under pressure.The Stochastics oscillator is also signaling a hidden bearish divergence. This could mean that price action will drift lower if the support breaks.Below 1.2177, the next key area of support will be the 1.2050 level.Given that this support area was not firmly tested before, we expect to see a possible test of this level.GBPUSD Gives Back Gains As Brexit Euphoria FadesThe British pound sterling is down over 0.6% on Monday. The declines come following last week’s rebound above the 1.3506 level of support.But as the trade deal euphoria fades, prices are drifting lower. As a result, the cable is likely to continue pushing lower.The next key level of support comes in at 1.3210. There is a possibility that the GBPUSD could establish minor support ahead of the decline to 1.3210.To the upside, a rebound could see the 1.3506 level being tested once again.If resistance forms here, then we expect to see a possible confirmation of prices heading lower.WTI Crude Oil Could Likely Form A TopOil prices maintained their bullish continuation with prices rising in early Monday trading. However, after rising to intraday highs of 48.94, the commodity gave back the gains, forming a lower high.If prices break down below the pivot lows of 47.76, then this will confirm that a top is in place. The next support level of interest comes near the 47.17 level.Below this minor support, oil prices could be on track to post further declines.The support area near 45.26 will come into the picture.The Stochastics oscillator is overbought at the moment, validating the short term move lower.Gold Prices Trade Flat Near Previous Swing HighsThe precious metal is on track to close flat on the day for Monday. This comes as prices attempted to rise intraday.However, as the momentum fizzled out, gold prices form a lower high. This could potentially trigger a short term decline.For the moment, the initial support level near 1859.50 comes into the picture. As long as this swing low from December 22 holds, there is scope for a rebound.But a failure at this level will open the way for further declines. The 1850 level of support comes into the picture.Despite the short term declines, gold prices are likely to remain supported at or near the 1850 level for the moment.

2020 is dead! Long live 2021! The new year should be positive for gold, but to a lesser extent than the previous year.Finally, 2020 has drawn to a close! It was a strange year all right, bringing with it disaster for many people all over the world, so it’s a good thing that it’s passing. Few will miss 2020... but gold bulls should count themselves among this small group of people. After all, as the chart below shows, the yellow metal jumped from $1,515 to $1,874, gaining more than $350, or almost 24 percent!Gold prices have been rising since May 2019, amid the Fed’s interest rate cuts. The pandemic was the catalyst for the rally in 2020, and increased the safe-haven demand for the yellow metal . The epidemic in the U.S. also triggered an expansion in monetary policy easing that led to abundant liquidity and negative real interest rates , which pushed the gold prices higher. Last but not least, the loose fiscal policy expanded the fiscal deficits , which ballooned the public debt and increased fears about the debt crisis and inflation . So, gold shined in 2020 , although the aggressive March asset selloff and shift into cash plunged the gold prices for a while.Implications for Gold in 2021We know what happened in 2020, but the key question is what will 2021 bring for the gold market? Given that the price of gold peaked in August and has been unable to return above $1,900, there are justified worries that the best of times are already behind the yellow metal. However, others claim that we are just witnessing an interlude within gold’s bull market ? Who is right?Well, both sides are right. How is that possible? In my view, 2021 should be positive for the yellow metal, but to a lesser extent than the previous year . This claim is based on a careful comparative analysis. Long story short, 2021 should be economically better compared to 2020 (unless we see a solvency crisis). Armed with vaccines, we will eventually win the battle with the coronavirus and the era of economic lockdowns will end.In consequence, although the monetary policy will remain accommodative, room for further easing is limited. Actually, there is a downward risk for gold that the interest rates will normalize somewhat during the economic recovery in 2021. The same applies to fiscal policy: although it will stay loose, the ratio of public debt to GDP should stabilize, especially if Republicans maintain control over the Senate and will block the most extravagant Democrats’ spending proposals. In other words, the economic normalization and strengthened risk appetite could create downward pressure on the yellow metal .However, there are also some upward risks for gold in 2021 . One tailwind is a weakening of the U.S. dollar amid a zero interest rate policy , large fiscal deficits, and capital outflows into foreign markets. Another positive macroeconomic trend for gold is reflation , i.e., the possibility that inflation will increase next year due to the disruptions in the global supply chains, a surge in the money supply , and economic recovery with the realization of pent-up demand.Hence, the greenback’s depreciation and the continuation of easy monetary and fiscal policies should support the price of the yellow metal. History also shows that gold shines during the early phase of economic recovery, so gold bulls don’t have to be worried that the effects of the pandemic are over. At least not immediately, as January is historically positive for gold prices. And inflation may increase finally, creating downward pressure on the real interest rates, although there might be a significant lag between the surge in the broad money supply and increase in the consumer price index .However, with the federal funds rate already at zero and no indications that the Fed wants negative interest rates , investors could start anticipating higher interest rates later in 2021, which should prove negative for the price of gold.If you are interested in a more detailed outlook for gold in 2021, I will provide a thorough analysis in the upcoming January edition of the Gold Market Overview . Here’s a toast to gold in 2021!If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Analysis. Care. Profits.

Famed cryptocurrency trader and Aike Capital founder Alex Krüger tweeted on Jan. 1 that the bitcoin – gold relationship needs closer examination. Central banks (CB) will hold bitcoin sooner or later, says Krüger. The reason, he says, has to do with gold and how central banks treat it. In a series of tweets, Krüger shows how demand for gold has changed in 2020.  I've changed my mind.Major central banks will eventually hold #Bitcoin as a reserve asset.So let's explore how central banks' gold demand looks like — Alex Krüger (@krugermacro) January 1, 2021Habits Are Hard To Break Krüger starts by showing that central bank demand for gold remained steady for much of the past ten years. However, it dropped tremendously in 2020. He also draws attention to the point that adding liquidity drives gold prices higher. So, who bought gold? Without going into detail as to why CBs cut their gold intake so much, Krüger does point out that institutional investors dominated demand in 2020. Jewelry, on the other hand, fell off, as the demand is price sensitive. The Big ‘If’ At this point, Krüger makes an assumption. He tweets: Assume now in five years central bank's demand for bitcoin stands at 5% of their gold demand. That would generate $1.2 billion in additional bitcoin buying pressure.— Alex Krüger (@krugermacro) January 1, 2021If CBs buy into bitcoin with just 5% of their gold demand, that would increase demand for the leading crypto by over $1 billion. Krüger sees the entry of the first CB as an event with some consequences. Prices would jump on the news, and speculators would pile in. However, CB for gold demand would only rise. As Jorge Schneider put it: Small becomes a tidalwave…— Jorge schneider (@Jorgeschneide64) January 1, 2021Can Krüger Make a Case for It? Can Krüger make a case for central banks holding bitcoin? Central Bank Digital Currencies (CBDCs) are on the horizon. But are they a bitcoin killer?  Regarding CBDCs, the answer is that they are probably not bitcoin killers. In fact, there is the possibility that a digital stablecoin could come of it. But the purpose of most CBDCs currently under testing is to create a viable means of transactions. As BeInCrypto reported, China is testing its digital yuan for retail purchases already. A pilot launch for P2P transfers started in December. So far, the European Central Bank and others are declaring the same: digital currencies extend our ability to make transactions. Bitcoin, however, appears to be a store of value more than anything else. The 2020 bull run was not about buying pizza or coffee with bitcoin. In part, it was connected to the long-predicted increased interest by institutional and enterprise investors such as GrayScale and MicroStrategy. Is Krüger right about CBs investing in bitcoin in five years? Or perhaps even this year? Institutional investors took time to become pro-crypto. Only time will tell whether this store of value becomes interesting for the mother of all buyers as well. The post Will Central Banks Hold Bitcoin in 2021? appeared first on BeInCrypto.

EURUSD Drops Into The Year-End The euro currency was down over 0.63% into the yearly close. The declines come amid thin trading and the US dollar posting a modest rebound. The euro currency has been consolidating near the rising trend line over the past few days. While price action was making modestly higher highs, the pace of gains was gradual. The slowing momentum has led to a decline off the trendline consolidation. If the current declines continue, the euro could be looking to test the 1.2177 level of support. However, with the Stochastics oscillator somewhat oversold we may expect to see a modest rebound in prices. The British pound sterling is maintaining a bullish hold with prices posting a gradual rally since 29 December. The pace of gains, however, is likely to stall given the Doji candlestick patterns near the current levels. A bearish follow-through is required in order to confirm the downside. This could potentially see the GBPUSD falling to the 1.3500 level of support. As long as this support holds, the GBPUSD could be looking to make a rebound once again. With the threat of a hard Brexit now out of the way, the GBPUSD is likely to focus back on the fundamentals. The Stochastics oscillator remains overbought at the moment, indicating a possible correction in the near term. WTI Crude Oil Consolidates Near Current Highs Oil prices are trading flat ever since prices touched intraday highs of 49.29 on 21 December. Since then, oil prices pulled back and are trading in a sideways range. For the moment, this sideways range is likely to continue. However, the OPEC+ meeting today could offer something for oil investors. Depending on the outcome, oil prices could see a possible move in either direction. To the downside, support at 47.17 remains. As long as this support holds, oil prices are likely to maintain the upside bias. To the upside, a close above the 21 December highs of 49.29 is required in order to confirm further gains. Will Gold Breakout Higher? The precious metal was seen consolidating near the 1900 level. Price action previously tested this level before pulling back recently. In the process, we have a potential ascending triangle pattern emerging. If the 1900 level of resistance breaks, then we expect to see further gains coming. A breakout above 1900 will validate the bullish ascending triangle. It puts the next minimum target in price action toward 1922 at the very least. But this would also put gold prices above the 1900 level which has proven hard to break as both a resistance and support level previously.

Euro Gaps Higher Testing December HighsThe euro currency gapped higher on the open on Monday as traders returned from the year-end holiday.The US dollar resumed its declines from 2020 pushing currencies such as the euro higher. The common currency briefly rose to test the Dec 30, 31 highs before pulling back.If price action continues on the pullback, we could see a near term decline. This would potentially make way for a triple top pattern as well.A break down below January 1 lows of 1.2121 could validate the bearish pattern. For the moment, the EURUSD is likely to trade within the highs and lows of 1.2312 and 1.2121 respectively.Sterling Falls On Risk Of Lockdown MeasuresThe British pound sterling is posting steep losses on Monday.The declines come amid threats of new tougher lockdown measures in the United Kingdom. The one day implied volatility is once again pushing higher.After trading near the highs, Monday’s bearish close could confirm the downside. This would potentially open the way for the GBPUSD to test the 1.3500 level of support.As long as this support holds, it remains within the long term uptrend. However, the GBPUSD will need to post higher highs to confirm this.Failure near the 1.3500 could open the way for the GBPUSD to extend declines lower to the 1.300 level.WTI Crude Oil Pulls Back From Multi-Month HighsOil prices rose to multi-month highs on Monday in anticipation of the OPEC+ meeting. Furthermore, tensions in the Middle East also added to the bullish fundamentals.Prices rose to highs of 48.97 before giving back the gains. For the moment, oil prices remain consolidated near the current levels between 46 and 49.The uptrend since early November remains intact for the moment. Only a strong close and a lower high around the 46.00 level will confirm otherwise.For the moment, oil prices will need to establish support near the 48.00 level to continue pushing higher.Gold Rises To An Eight-Week HighGold prices popped higher as the US dollar continued to extend declines. The pace of gains in the precious metal was however bigger, rising almost 2% intraday.The gains come amid a mixed set of narratives, including the Georgia senate runoff election.Price action has finally emerged from the consolidation from which there has been an ascending triangle pattern.The current gains put gold prices within reach of the 1950 level next. A strong close above this level is required to confirm further upside.To the downside, we expect prices to retest the 1900 – 1911 level in the short term to establish support.

Gold ended 2020 at $1,891, partially thanks to monetary policy easing. In 2021, the Fed may not trigger a comparable rally in gold, but it should offer gold prices some support.Welcome to 2021! I hope that it will be a wonderful year for all of you; a much healthier, calmer and normal year than 2020 was. And even more profitable of course! Indeed, at least gold bulls could be satisfied with the last year, in which the price of gold jumped from $1,523 to $1,891 ( London A.M. Fix )! It means that the yellow metal gained more than 24 percent, as the chart below shows.I know that 24 percent does not look impressive compared to Bitcoin , which gained more than 260 percent in 2020, but it’s still a great achievement relative to other assets or gold in the past. Not to mention the fact that gold’s price level looks more sustainable, while the recent parabolic rises in cryptocurrencies suggest a price bubble .One of the reasons behind gold’s rally was the easy monetary policy adopted by the Fed (and other central banks) in a response to the pandemic and related economic crisis . In a way, the Fed reintroduced the quantitative easing first implemented in the aftermath of the Great Recession . So, gold’s bullish move shouldn’t be surprising.However, there are also some important differences in the monetary policy that followed the global financial crisis and the coronavirus epidemic . First, when Lehman Brothers went bankrupt, the Fed went big. But when COVID-19 infections spread widely through America, the Fed went not only big, but also fast!Just look at the chart below. As you can see, it took just about two months for the U.S. central bank to slash the federal funds rate to zero in the spring of 2020, while it took over a year during the Great Recession.Moreover, from February to November, i.e., in just nine months, the Fed expanded its balance sheet by about $3 trillion, while a decade ago, such an increase took over six years!Implications for Gold in 2021What does the difference in the Fed’s stance imply for the price of gold in 2021? Well, on one hand, because the Fed acted aggressively, there is less room for further monetary policy easing . In the aftermath of the Great Recession, the Fed gradually fired from increasingly powerful weaponry, announcing new rounds of asset purchases from 2007 to 2013, while in a response to the coronavirus, the Fed has fired a bazooka at the outset. This decreases the odds for further monetary policy easing, pushing market expectations towards normalization. You see, when you are at the bottom, the only possible move is up.This is my biggest worry for the gold market in 2021: that monetary policy has already become so dovish, that now it can be only hawkish – at least on a relative basis. The real interest rates are so low that – given the prospects of economic recovery on a horizon – they can only go up, especially if inflation does not increase.On the other hand, inflation could really rise in 2021. Additionally, the fact that the Fed went both big and fast means that the U.S. central bank became more dovish than in the past , which should be positive for the yellow metal. Moreover, a decade ago the central banks at least pretended that they would like to tighten their stance and normalize monetary policy. They even said that quantitative easing would be reversed, and the Fed’s balance sheet would return to its pre-recession level.Now, the illusions have dissipated. The central banks will buy assets for years to come, if not indefinitely, and there will be no taper tantrum . The eventual exit from the current easy monetary stance will be ultra-slow and gentle. The Fed has a clear dovish bias, so the interest rates may go down further – after all, given the debt trap , the central banks could be forced to cap the bond yields , which should support gold prices.Therefore, in 2020, the Fed no longer only intervened on a large scale as it did a decade ago, but it also acted quickly. The change of strategy from go big to go big and fast can be positive for gold prices, but only when the market participants do not believe that the Fed is out of ammunition and only when they expect the normalization of interest rates. Although some investors expect an interest rate hike this year, I believe that the Fed will remain dovish and successfully manage market expectations in order to suppress market interest rates. So, although without the next crisis (such as a debt crisis ) or inflation, the price of gold may not rally substantively, it should be supported by the Fed in 2021 .If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care

Dollar slips, brushing off ISM dataEuro Trades SubduedThe euro currency is trading subdued following the volatile price action on Monday which closed almost flat.Price continues to remain bullish but a breakout off the current levels is needed.Price action is likely to close with an inside bar on Tuesday. This could mean that a breakout from this range could set the short term momentum in the markets.The bias remains mixed, albeit to the upside. The common currency will need to post higher highs to confirm the continuation of the uptrend.The British pound sterling is posting modest gains on Tuesday following the strong sell-off on Monday. But price action remains subdued in comparison to Monday’s prices.The Stochastics oscillator remains near the oversold levels. However, this bias remains mixed.To the downside, the support area near 1.3500 is likely to come in as support.To the upside, for the uptrend to continue, GBPUSD will need to rise above the previous highs near 1.37.Crude Oil Gains Over 5%Oil prices are bullish on Tuesday, rising over 5% intraday.The gains come on the second day of the OPEC+ meeting. Saudi Arabia, alongside other countries, opposed Russia’s proposal of raising production. The current gains in oil prices will likely push it to the psychologically important level of $50.00 and barrel.Following this, we could expect some profit-taking to push prices back lower. The support level near 49.15 is likely to come in initially.As long as prices hold above this level, we could expect to see a continuation higher.If the 49.15 handle is lost, then a deeper correction could be expected toward the 47.17 level of support.Gold Tests 1950 Once AgainThe gains in the precious metal saw price rising to the 1950 level. This marks the second retest of this level since November 2020.Previously, prices fell back right after testing this level. At the moment, the Stochastics oscillator is in the overbought levels.This could potentially signal another correction lower. The immediate support level is near the 1911 – 1950 level for the moment.In the event that gold prices continue to edge higher, then a higher low needs to form above 1950. Above this level, the next clear challenge will be the psychological level of $2000.

Dollar recovers from a fresh two and half year lowEURUSD Pares Gains Near Trend-LineThe euro currency is down about 0.20% intraday. The declines come right after the common currency rose to a new two and a half year high.However, the test of the trendline from below indicates strong resistance here. For the moment, the current continuation remains questionable.The euro currency will need to post a strong decline and a lower high to confirm the start of a correction.For now, the initial support is near the 1.2215 level. As long as this level holds, the upside bias in the euro remains intact.The Stochastics oscillator is also quite overbought and gives scope for further declines in the common currency.The British pound sterling is seen giving back the gains made on Tuesday. This puts price action to trade rather flat but increases the downside bias.On the short term charts, the formation of a lower high indicates that the pound sterling could push lower.However, prices will contend with the initial support level near 1.3506. As long as this level holds, there is scope for the GBPUSD to make gains.However, if prices close below this level convincingly, then there is scope for a continuation to the downside.This will bring the sideways range of 1.3500 and 1.3100 back into focus.Oil Gains As Saudi Cuts OutputWTI crude oil touched $50.00 a barrel on Wednesday in the early Asian session. The gains came after the OPEC+ meeting saw Saudi Arabia cutting oil output by one million barrels per day.The rise to $50.00 marks the first time testing this level since February 25, 2020. For the moment, price action is seen retesting the rising trendline from below.If the trendline holds, then we expect to see a possible reversal off the $50.00 handle.A breakout above the trendline could see further gains likely. However, for the moment, oil prices could consolidate between the 50.00 and 47.00 price levels.Gold Price Retreats Off 1950 ResistanceThe precious metal once again failed to breakout above the key 1950 level of resistance.Following the failure, gold prices lost close to 2.30% intraday. The declines push gold prices back to the key support level near the 1900 – 1911 price area.As long as this support level holds, gold is likely to post a rebound.However, if price closes convincingly below the 1900 level then that could potentially put an end to the current rally.For the moment, the bias in gold prices remains mixed.

2021 started off well for gold. It’s not surprising, as January is usually positive for the yellow metal, but the Georgia runoff results may constitute an additional bullish factor in the longer term.What a start to the new year! Gold has begun 2021 very well : as the chart below shows, the price of the yellow metal (London A.M. Fix) increased from $1,891 on December 31, 2020 to $1,947 on January 5, 2021.Should we be surprised? Not at all! Our readers are perfectly aware that January is historically a good month for gold, so the recent gains are perfectly understandable.And, as a reminder, although I’m cautious in formulating my bullish outlook for gold in 2021, especially later this year, my view remains optimistic and I expect the continuation of gold’s bull market . Although there are some reasons to worry, I don’t think that gold has had its last word.After all, gold’s fundamentals are staying positive . The Fed continues its dovish monetary policy and the real interest rates are kept deeply under zero. The fiscal policy is also loose and the public debt is rising. Meanwhile, the U.S. dollar has been weakening since March 2020, as the chart below shows.Georgia Runoff’s Implications for GoldGold’s positive fundamentals in the long term can be strengthened by Georgia runoffs. At the time of writing this article, Democrats have already won the U.S. Senate race in Georgia – as Raphael Warnock beat Republican incumbent Kelly Loeffler – and lead in the second, edging closed to control of the chamber.You see, if Democrats win both races in Georgia, they will have 50 Senate seats, the same as Republicans. However, in case of split voting results in the Senate, the Vice President (as president of the upper chamber), is the tiebreaker. So, with Kamala Harris as Vice President, Democrats would have control over the Senate.Along with a change in the White House and a narrow majority in the House of Representatives, we would be seeing a “blue sweep” of Congress. Such a revolution could lead to a higher fiscal stimulus, stricter corporate regulation and higher taxes. In other words, investors expect that a Democrat-controlled Senate would expand the U.S. fiscal deficits even further.Indeed, some analysts expect another big stimulus package of about $600 billion to accelerate the economic recovery from the coronavirus-related recession , if Democrats take over the Senate. With unified control over Washington, really big opportunities lie in front of Democrats, including $2,000 stimulus checks. The expectations of larger government spending is positive for gold prices , as higher expenditures would increase the public debt, weaken the greenback (indeed, the dollar fell on January 6), and they could also bring some inflationary effects, if the Fed decides to monetize the new debt (and why should it refuse to do what it’s done for so many years).However, the prospects of larger government borrowing have increased bond yields , which could be negative for the yellow metal in the short-term. This is probably why the price of gold declined on January 6 (although there was also normal profit taking in the gold market). Wall Street’s main indexes opened lower that day, so equities were also hit by the increased possibility of a blue wave and prospects of stricter regulations and higher taxes. With both bond and equities hit by the vision of a Democratic-controlled Senate, gold could be the biggest beneficiary of the Georgia runoff. As a reminder, this scenario (the blue wave) for the U.S. November elections was considered to be the most positive for the gold prices – and nothing changed here for the past two months.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care

Was the past year good for the yellow metal? What happened in 2020 and what will 2021 be like for the gold market?Nobody the Spanish Inquisition! And nobody expected a pandemic in 2020! Oh boy, what a year… How good that 2020 has already passed! It was an extraordinary year, unlike any other in many decades. Unfortunately, 2020 was a disastrous time for many people all over the world who suffered from COVID-19 or whose relatives and friends died because of the coronavirus or the collapse of the healthcare system… Our thoughts are with them. Many others lost their jobs or income, and all of us suffered from loneliness and limited freedom during the Great Lockdown . Indeed, it’s good that 2020 is over – and we hope that 2021 will be much better!And what did 2020 mean for gold? Well, it turned out that last year was gracious to the yellow metal. As the chart below shows, gold entered 2020 with a price of $1,515 per ounce, and finished the year at $1,888 (London P.M. Fix as of December 30). It means that the shiny metal rose over 24 percent – that’s not bad considering other assets were hit really hard during the economic crisis !Actually, 2020 was definitely better for gold prices than 2019 , when the yellow metal gained “only” over 18 percent. As I didn’t predict the global pandemic (who did?), I didn’t forecast such strong gains in my base scenario. However, given the inversion of the yield curve in 2019, I expected a kind of economic downturn that would positively impact gold prices. One year ago, in a January 2020 edition of the Gold Market Overview , I wrote:unless anything ugly happens, the macroeconomic environment could be less supportive for gold than in 2019. However, bad things do happen, and, according to Murphy’s law, anything that can go wrong will go wrong. Hence, the gold fundamentals may turn out to be more positive for gold over the year. After all, the yield curve has inverted last year and we are already observing some recessionary trends, especially in the manufacturing sector and among the small-sized companies (…) given the amount of black swans flying just above the market surface, gold might provide us with some bullish surprises as well.And indeed, the black swan (or perhaps a white or gray swan) landed in 2020, pleasing the gold bulls. However, despite gold’s impressive performance, some people complain that gold didn’t rally more during the coronavirus turmoil. I completely understand this disappointment – after all, the world suffered its deepest economic downturn since the Great Depression , larger even than the Great Recession , and gold gained only 24.6 percent?However, the crisis was deep but very short, as we quickly learnt how to live with the virus, while our brilliant scientists swiftly developed vaccines. Moreover, this time banks were resilient and there was no financial crisis . Another factor is that gold actually rallied more than 36 percent until its peak in August (or more than 40 percent counting from the bottom), but it later corrected somewhat.Indeed, we can distinguish a few phases in the gold market in 2020:A pre-pandemic bullish phase caused by easy monetary policy and worries about the coronavirus, that lasted until mid-February, with the price of gold increasing from $1,515 to $1,604 (5.9 percent) on February 19, just before the stock market crash.The bullish period (with a short bearish correction) more closely related to the unfolding pandemic, the stock market crash and central banks’ panic and bold responses. It started on February 20 and ended on March 6, when the price of gold reached $1,684 (gaining 5 percent).The bearish phase caused by investors’ panic selloff of all assets in order to raise cash. It lasted until March 19, when the price of gold reached its 2020 bottom of $1,474 (a decline of 12.5 percent).A super bullish phase that lasted until August 6, when the price of gold reached its all-time peak of $2,067, soaring 40.2 percent in just four and half months. This period can be split into: the bullish phase, caused by the coronavirus shock, that lasted until mid-April; the consolidation period, that came when the financial markets calmed down as the initial doomsday scenarios didn’t materialize, and lasted from mid-April to mid-June; and another bullish phase, caused by disastrous economic data for the first half of 2020, and massive stimulus programs delivered by the central banks and governments.The bearish period , during which the yellow metal declined to $1,763 on the last day of November, or 14.7 percent, due to positive vaccine-related news and reduced geopolitical uncertainty after the U.S. presidential elections.The bullish remainder of the year, during which gold rose to $1,888, or 7 percent, caused by the dark COVID-19 winter, poor economic data, strengthened prospects of another government financial stimulus, and related worries about the rising U.S. debt.So, it’s pretty obvious that the course of the pandemic was one of the most important tailwinds for the gold prices in 2020. Thus, the correction caused by the vaccine breakthroughs is not surprising, given the scale of the previous rally . However, please note that gold reacted not to the pandemic itself, but rather to the investors, governments, and central banks’ reaction to it. The yellow metal gained the most when investors were fearful, and when the Fed and Treasury injected liquidity into the markets.This all bodes well for gold in 2021. After all, the U.S. central bank won’t cease conducting its very easy monetary policy , while a Biden-Yellen duo will continue the dovish fiscal policy inherited from the Trump administration. Such a policy mix should support gold prices. Of course, the scale of accommodation would be lower than in 2020, so gold’s performance in 2021 could be worse than last year. But unless we see a normalization in the monetary policy and an increase in the real interest rates , the bull market in gold shouldn’t end.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.

Euro Falls For A Second Consecutive SessionThe euro currency was down over 0.41% into Friday’s close, marking the second session of consecutive declines. The drop comes after the euro touched highs of 1.2284 on Wednesday last week.While it is too early to call for a correction, the current drop remains consistent with the overall view. The EURUSD has been in a strong uptrend with little to no major corrections.For the moment, the line in the sand comes in at the 1.2177 level of support. If the euro loses this handle, then we expect to see a move to the 1.2050 level of support next.While this could weaken the upside bias, there is still scope for a rebound. But a close below 1.2050 will no doubt accelerate the declines to 1.1900 next.GBPUSD Closes Flat As Consolidation ContinuesThe British pound sterling is seen trading flat as the consolidation near the top end of the rally continues.The cable has been in a strong volatile ride since late last year due to the Brexit trade talks. This has pushed the currency to test highs above 1.3650.However, following the gains, price has been trading rather flat. On the short term charts, we see the consistent lower highs forming.This could result in the descending triangle pattern likely to emerge. If the GBPUSD closes below the 1.3500 level of support, then we expect to see further declines lower.The cable will most likely move back within the sideways range of 1.3500 and 1.3150 levels.Crude Oil Rises To A Nine-Month HighOil prices continue to push higher with prices settling near 52.60 last Friday. It marks the highest levels since February.The gains also come with nine weekly consecutive gains so far. With price action cutting past the trendline from below, we expect to see a continuation higher.But if price action retraces the gains, then a correction back to the 49.00 level is quite possible. Establishing support at this level will continue to see the bullish bias intact.The next key level to the upside will come near the 55.00 level which marks a major support/resistance level back in late 2019/early 2020.Gold Prices Push Past 1850The precious metal continues to post strong declines. On Friday, the commodity lost over 3% into the close to settle at 1847.Prices are now trading near a three-week low. The weekly bearish price action candlestick is also likely to signal a continuation lower.The next key level of support comes near the 1817 level. If gold prices lose this handle, then we might get to see a stronger decline.The next main support level will be found near the 1671 level and would potentially mark a strong retracement after testing new all-time highs just a few months ago.

Euro Extends Declines For Third Consecutive SessionThe euro currency is posting declines for the third consecutive day. As a result, the common currency fell to a four-week low intraday before recuperating some of the losses.The broadly stronger greenback has pushed the EURUSD lower, which has been pending a correction for quite a while. For the moment, the euro is seen consolidating near the 1.2177 level.With the Stochastics oscillator currently oversold, there is scope for prices to post a rebound. The longer-term hidden bullish divergence could however see price making an attempt to push higher.As long as the previous highs of 1.2343 holds, we expect the overall trend to remain flat.GBPUSD Breaks Down Lower From Descending TriangleThe British pound sterling finally gave way as price broke down from the descending triangle pattern. This comes even as prices broke down past the key support/resistance level near 1.3500.However, following the initial decline to a two week low, the cable is recovering from the intraday lows. We could now expect prices to potentially retest the lower support area near 1.3542 – 1.3500.As long as this level stalls from price posting gains, we could expect to see further downside. The Stochastics oscillator is currently oversold and coincides with the rebound.However, if prices rise above the 1.3542 level, then it would invalidate the descending triangle pattern. We could expect to see the price either consolidating or renewing its bullish momentum.Oil Price Gains Pause After A 4-Day GainWTI crude oil prices are taking a breather following the strong winning stretch from last week. Price action is largely muted, even failing to post any new highs.As a result, oil prices are confined within last Friday’s range. Since the overall bias remains to the upside, there is scope for the commodity to continue to edge higher.However, on the short term charts, we see the trendline coming under a retest once again from below.If the trendline begins to act as resistance, then we could see some downside correction. The immediate lower support level near 49.00 comes into the picture.This should ideally support prices in the near term. But given that the Stochastics oscillator is likely to signal further upside, oil prices are likely to break the trendline to the upside.Gold Trades Flat Following Last Week’s DeclinesThe precious metal is on track to close flat on Monday. Price briefly slipped to test the 1817.80 level before pulling back.Overall, gold prices are currently confined to trade within the 1850 and 1817.80 levels. Only a strong breakout from this range will confirm the next direction.The bias remains to the downside for the moment, but that could change if gold prices manage to rise above the 1850 handle.This will then potentially set the stage for gold to test the 1911.50 level. The Stochastics oscillator remains near the oversold levels and somewhat mixed.

What a week! First gold soared to almost $1,960, but then its price (London P.M. Fix) plunged to $1,863 on January 8, as the chart below shows.This is quite strange (and bearish) behavior, given what happened last week. First, there were violent pro-Trump protests in Washington D.C. The rioters stormed the U.S. Capitol. During these riots, five people died. Given the chaos in the capital, gold, which is a safe-haven asset , should shine.Second, the December Employment Situation Report came out . It turned out that the nonfarm payroll employment declined by 140,000 last month . The numbers fell short of expectations, as the pundits expected that the U.S. economy would add 50,000 jobs. The contraction in the nonfarm payrolls means that the winter wave of the COVID-19 pandemic hit the U.S. labor market rather significantly.Third, despite the rollout of vaccinations (which is rather sluggish), the epidemic in the U.S. is taking its toll . The number of daily new cases of the coronavirus is above 250,000, the record high, as the chart above shows. So, we see the impact of the winter holidays showing up in the data.Rioting will also not help in limiting the spread of the coronavirus . Furthermore, hospitalizations and deaths are also rising. The past week saw the first time the U.S. reporting more than 3,900 deaths in a single day, as the chart below shows.Lastly, both Democratic candidates won the runoffs in Georgia , which means that Democrats took control over the Senate. The unexpected blue wave raised expectations for higher taxes and larges fiscal deficits , which should be positive for gold.Implications for GoldThese factors should have been bullish for gold and they should have made the price of the yellow metal rally, but they weren’t and they didn’t. It seems that investors generally welcomed the blue wave and focused on a positive side of that development, or it might have been the case that the gold market was reacting to technical developments, not the fundamental ones. In any case, we can see the replay of the 2016 presidential election when everyone expected that Trump’s victory would be bad for the equity markets and positive for the precious metals market. But back then shares soared while gold plunged. We are currently witnessing something similar. Everyone thought that a blue wave would be the best scenario for gold, but the yellow metal dropped again.Why? Well, maybe it was just a “buy the rumor, sell the fact” phenomenon. Or maybe investors just don’t care about the long-term consequences of larger fiscal stimulus, such as rising public debt . Instead, they assumed that more government spending would accelerate GDP growth . This is why the real interest rates rose (see the chart below), which pushed the gold prices lower.Another issue is that when Trump didn’t support the riots, investors assumed that there will ultimately be a peaceful transition of power and started to sell safe-haven assets such as gold. With Democrats taking control of both the White House and the whole of Congress, investors increased their risk-appetite, which created downward pressure on gold prices.Moreover, the minutes of the latest Federal Open Market Committee (FOMC) meeting published last week indicate that further monetary easing is not likely in the very near future.However, sooner or later the Fed will have to step in. The worsening condition of the U.S. labor market and rising bond yields will prompt the central bank to provide further accommodation. After all, the main task of the central banks is to provide the governments with fiscal room. And at some point, investors will start to worry about the rising fiscal deficits and public debt.So, as long as the real interest rates are rising, gold will be in trouble . But at some point the rates should stabilize, or they could even decline again – especially if inflation emerges – which would help the gold prices.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care

USD gains ease following a three-day winning streakEURUSD Consolidates Below 1.218The euro currency is catching a bid following the dollar weakness on Tuesday.The dollar’s gain came to a halt after three consecutive days of gains. This has pushed the euro to test the 21 December lows of 1.2133.Price action has been broadly flat after pulling back off the lows intraday. However, the euro will need to break out strongly above the 1.2180 level.Only a strong close above this level will see further gains coming up. To the downside, a continuation could see the 1.2050 level of support coming under the test of support next.The British pound sterling is posting strong gains on Tuesday. This comes following comments from a BoE official who was speaking out against negative rates.The gains saw the GBPUSD breaking past the 1.3500 level. This invalidates the descending triangle pattern. Prices continue to rise past the trend line as well.This has pushed the GBPUSD to test a two day high following the recent declines over the last week.Despite the short term gains, the bias still remains to the downside. But this could change if the GBPUSD can rise above the January 4 highs of 1.3700.WTI Crude Oil Inches HigherOil prices continue to post modest gains with price action managing to rise above the trend line. As a result, WTI crude oil prices are now close to the next round number level of 53.00.On the intraday charts, we see the bearish divergence on the Stochastics which is suggesting a lower high.Therefore, there is a risk of prices posting a correction in the near term unless oil prices can continue higher.To the downside, the recent swing lows near 51.53 remain the key level to watch.A break down below this level could potentially set the stage for a correction down to the 49.00 handle.Gold Prices Set To Close Flat Yet AgainThe precious metal is likely to close flat once again, marking a flat print for the second consecutive day.Although prices rose higher intraday, the gains quickly disappeared. There is a possibility of prices forming a bearish flag pattern currently.Therefore, if gold prices break down below the 1817.80 level of support, this view will be validated.The bearish flat pattern potentially signals a stronger correction to the downside. This could push prices down to the November 30th lows near 1770.00.

USD steadies on prospects of new stimulus talksEURUSD Rebounds From A 4-Week LowThe euro currency is posting a modest rebound intraday after falling to a four week low earlier on Thursday.The rebound comes as the recent dollar gains take a pause, awaiting more news on the new stimulus talks.Price action in the euro remains currently below the 1.2177 level. Therefore, a continuation to the upside could see this level coming in as resistance.Only a strong breakout above this level could rekindle the upside bias. The Stochastics oscillator is currently signaling a bullish divergence in this aspect.Therefore, the price action near 1.2177 will be critical. To the downside, a continuation below current lows could see the 1.2050 level coming into the picture next.The British pound sterling is posting strong gains, recovering from the declines on Wednesday. The rebound comes following speculation that the Bank of England will not be considering negative interest rates.This has proven to be bullish for the cable which has made a strong rebound. Price action will now be testing Wednesday’s highs of 1.3701.A breakout above this level could post further price gains in the currency pair.To the downside, support is firmly established near 1.3624 which could hold against any pullbacks for the moment. The Stochastics oscillator is also likely to turn higher, adding to the bullish bias.Oil Prices Consolidate Near Highs As Bullish Momentum Slows WTI crude oil prices are trading flat having risen to highs of 53.90 intraday on Wednesday.The declines push the price action back below the rising trend line. This could potentially see the trend line being retested from below.The Stochastics oscillator is nearing the oversold levels and therefore could see a possible move higher once again.However, oil prices will need to break out above the recent highs to continue higher. The next key target will be the 55.00 level.To the downside, if the trendline acts as resistance, then a close below 52.20 is required.Only a strong daily close below this level will open the way for a correction toward the 49.00 handle.Gold Prices Continue To Remain Muted The precious metal is trading subdued, in anticipation of further news on the stimulus proposal from the new Biden administration.Price action is strongly consolidating near the 1850 handle for the moment. This could continue for a while before leading to a strong breakout.The bias also remains mixed at the moment. To the upside, gold prices need to post a strong breakout above the 1850 handle, which will open the way to the 1911 – 1900 resistance level next.To the downside, the 1817.80 level of support once again comes into the picture.

Hurray! The disastrous year of 2020, which brought about the COVID-19 pandemic , the Great Lockdown , and the economic crisis , is over! Now, the question is what will 2021 be like – both for the U.S. economy and the gold market.To provide an answer, below I analyze the most important economic trends for the next year and their implications for the yellow metal.Society gains herd immunity by vaccination and the health crisis is overcome.With herd immunity approaching, the social fabric returns to normality, and the economy recovers.The vaccine rollout increases the risk appetite, reducing the safe-haven demand for both gold and the greenback .The return to normality and realization of the pent-up demand (comeback of spending that was put on hold during the U.S. epidemic ) accelerates the CPI inflation rate .The Fed stays accommodative, but the recovery in the GDP growth and the labor market makes the U.S. monetary policy less aggressively dovish than in 2020.However, the Fed continues to use all of its tools to support the economy in 2021 and, in particular, it does not hike the federal funds rate , even if inflation rises.As a result, the real interest rates stay at ultra-low levels. However, the potential for further declines, similar in scale to 2020, is limited, unless inflation jumps.The American fiscal policy also remains easy, although relative to 2020, government spending declines, while the budget deficit narrows as a share of the GDP.However, the public debt burdens continue to rise. Although the ratio of debt to GDP decreased in Q3 2020 amid the rebound in the GDP, it’s likely to increase further in the future, especially if Congress approves the new fiscal stimulus.Given the dovish Fed conducting a zero-interest rate policy , increasing debt burden, and strengthened risk appetite amid the vaccine rollout, the U.S. dollar weakens further. The American currency has already lost more than 11 percent against a broad basket of other currencies since its March peak.What does this macroeconomic outlook imply for the gold prices? This is a great question, as some of the trends will be supportive for the yellow metal, while others might constitute headwinds, and some factors could theoretically be both positive and negative for the price of gold. For instance, the end of the recession seems to be bad for the yellow metal, but gold often shines during the very early phase of an economic recovery, especially if it is accompanied by reflation , i.e., a return of inflation.The tailwinds include the continuation of easy monetary and fiscal policies . The federal debt will remain high, while the interest rates will stay low, supporting the gold prices, as was the case in the past (see the chart below).There is also an upward risk of higher inflation. In such a macroeconomic environment, the U.S. dollar should weaken against other currencies, thus supporting gold prices . As a reminder, the relative strength of the greenback in recent years (see the chart below) limited the gains in the precious metals market.However, there are also headwinds . You see, levels are significantly different concepts than changes. The latter often matter more for the markets. What do I mean? Well, although both monetary and fiscal policies will remain accommodative, they will be less accommodative than in 2020. Although the real interest rates should stay very low, they will not decline as much as last year (if at all).In other words, the economy will normalize this year after suffering a deep downturn in 2020, so the economic policy will be less aggressive. Hence, the level of bond yields and the ratio of federal debt to GDP should stabilize somewhat – actually, thanks to the rebound in the GDP in the third quarter of 2020, the share of public indebtedness in the U.S. economy has decreased, as the chart below shows.Hence, although the price of gold could be supported by the continuation of easy monetary and fiscal policies, low real interest rates, and weak dollar, it’s potential to rally could be limited. The accommodative stance of central banks and unwillingness to normalize the monetary policy for the coming years should prevent a significant bear market in gold , but without any fresh triggers of further declines in the bond yields or without the spark of inflation, the great bull market is also not very likely. So, unless we either see a serious solvency crisis or sovereign debt crisis , or an substantial acceleration in inflation, gold may enter a sideways trend . Or it can actually go south, if it smells the normalization of monetary policy or increases in the interest rates.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.

My team prepares Custom Valuations Index charts to understand how capital is being deployed in the global markets alongside US Dollar and Treasury Yields.  The purpose of the Custom Index charts in this article is to provide better insight into and understanding of underlying capital movements in various market conditions.  Recently, we discovered the Custom Index chart shares a keen alignment with Gold (and likely the general precious metals sector).  Let's explore our recent analysis to help readers understand what to expect next in precious metals.Weekly custom valuations index chartThe first thing that caught my attention was the very clear decline in the weekly Custom Valuations Index recently, as can be seen in the chart below.  The second peak on the Custom Valuations Index chart occurred on the week of August 3, 2020.  Gold also peaked at this very same time.  This alignment started an exploratory analysis of the Custom Valuations Index and the potential alignment with the precious metals sector.The peak in the Custom Valuations Index on March 20, 2020 (near the height of the COVID-19 market collapse) presented a very clear upside target which was confirmed with a second peak level in August 2020.  The fact that the Custom Valuations Index reached that peak level again and that peak level also aligned with the peak price in Gold may just be a coincidence.  As we continue to explore this unique alignment, we'll explore more unique characteristics to see if there is a link that is more than mere chance.There have been two very clear Pennant/Flag formations as you can see on the above weekly Custom Valuations Index chart.  The first one is highlighted in BLUE and the second one is highlighted in GREEN.  In both of these instances, the Custom Valuations Index broke lower and Gold followed this trend.  Currently, the Custom Valuations Index has begun to breakdown into a new bearish trend. This suggests that Gold and Silver may also move lower as this Custom Index attempts to find a bottom.Now, let's do a more in-depth analysis of Gold and the Custom Valuations Index.  In the following charts, we've attempted to highlight key price traits that took place in Gold over the past 9+ years and wanted to see if these key price points were reflected in the Custom Valuations Index chart.  The purpose of this is to identify if our assumption that the Custom Valuations Index chart is aligned to Gold (in some way) shows any additional (past price) alignment to validate our thinking.Weekly Gold chartFirst, we'll start with a Weekly Gold chart that highlights key price points, peaks, bottoms, and breakout/breakdown events.  We want to see if the Custom Valuations Index chart also aligned with these key price moves/dates.The following Gold Futures Weekly chart highlights the Appreciation/Depreciation cycles we've identified in earlier research as well.  The GREEN ARCs near the bottom of the chart show you where each cycle starts and stops.  The RED descending line represents a Depreciation Cycle and the GREEN Ascending line represents an Appreciation Cycle.  We are focusing on the September 2011 peak price in Gold and the key price events after the “Failure Peak” that took place to set up the bottom in early 2015, the rally in early 2016, and the breakout rally in June 2019.  Does the Custom Valuations Index chart show these same characteristics and dates?weekly customs valuation chart and gold price historyThis next chart is the Weekly Custom Valuations Index chart with the same highlighted price points/dates.  The first thing we see from this chart is that the “Failure Peak” (October 2012) was a higher price peak on this Custom Index chart than the setup on the Gold chart at the same time.  Thus, the Custom Valuations Chart represented the extended “excess phase” top in Gold as a continued upward trend.  The downtrend after the October 2012 peak on this Custom Valuations Index chart does align with the big breakdown on the Gold chart (above).Be sure to sign up for my FREE webinar that will teach you how to find and trade my BEST ASSET NOW strategy on your own!Additionally, the early 2015 bottoming on the Custom Index chart represented a very early sign that Gold may be looking for a bottom as well.  Gold did move lower throughout the next 11+ months, but so did the Custom Valuations Index price. It makes sense that the Custom Valuations Index may be representing underlying key market dynamics that could be applied to the Gold chart in some way.The Initial Gold Rally in February 2016 was the first real clear trigger on both these charts that coincided with a breakout/rally trend in Gold.  This rally attempt eventually stalled near the end of 2016 and began an extended “momentum base” setup.  Notice how the Custom Valuations Index chart represented this momentum base as and extended sideways Pennant/Flag formation that ended near June 2019.  Also, notice how the stalling in the Custom Valuations Index chart initiated many weeks before Gold actually peaked in 2016.From the February 2019 Breakout, we can clearly see the impressive rally in the Custom Index chart aligned with a big rally in Gold.  What is interesting is the DUAL PEAK in the Custom Index chart that first setup from the lows of the March 2020 COVID-19 bottom.  Could it be that extreme price move somehow represented a key future target for Gold and for the Custom Index chart? There is very little corresponding data to compare to – so we'll have to continue to try to dig deeper for any confirmation of this unique setup. Yet, we can't underestimate the DUAL PEAK setup on the Custom Index chart and the fact that the second peak, August 2020, also aligned perfectly with the current peak price in Gold. Since that August 2020 peak, both Gold and the Custom Index chart have continued to breakdown and trend lower.  It makes sense that Gold will continue to move lower, in alignment with the Custom Index chart, attempting to find a new bottom/momentum base.  We believe the 200 to 240 level on the Custom Valuations Index chart may be a suitable range for this new bottom.One thing we can say with a moderate degree of certainty is that the Custom Valuations Index chart appears to lead the precious metals in many instances and it appears to perfectly align in other instances.  Our research suggests the US and global markets have recently entered a Depreciation Cycle phase which may last many years.  The Custom Valuations Index chart is suggesting that the US, global and precious metals sectors are weakening and attempting to find/set up a new momentum/base. This would suggest that capital will move away from precious metals as well as major market sectors and attempt to find opportunities in undervalued or other hot sectors.  Eventually, once the new momentum base/bottom is firmly established in Gold and the Custom Valuations Index chart, the US and Global major market sectors will likely resume a very strong upside price trend.The key take-away from this research is that sector rotations related to precious metals, major global markets and potential early warning signs of strength or weakness may be attainable by focusing on how the Custom Valuations Index trends in comparison to Gold and the major indexes.  Currently, the Custom Valuations Index is suggesting that precious metals will move lower and try to find a new bottom/base.  This means other market sectors will perform better than precious metals for a period of time.This is also an important reason to focus your attention on finding the best and hottest sectors for new trade opportunities.  When broad components of the market enter bearish trends, like the Custom Valuations Index is suggesting for precious metals, it is best to have a proven system for identifying the best sector trends and trade opportunities.  While one sector may stall, others are rallying.  Long term success is found by focus your trading capital on the strongest opportunities while avoiding weaker trends.2021 is going to be full of these types of trends and setups.  Quite literally, hundreds of these setups and trades will be generated over the next 3 to 6 months using my BAN strategy.  You can learn how to find and trade the hottest sectors right now in my FREE one-hour BAN tutorial. For those who believe in the power of relative strength, cycles and momentum then the BAN Trader Pro newsletter service does all the work for you. Those who want even more trades use my BAN Hotlist to make sure their trades are going with the momentum to maximize their odds of success.Don't miss the opportunities in the broad market sectors over the next 6+ months.  2021 and beyond are going to be incredible years for traders.  Staying ahead of these sector trends is going to be key to developing continued success in these markets.  As some sectors fail, others will begin to trend higher.  Learn how BAN Trader Pro can help you spot and trade the best trade setups while mitigating risks at every turn. You owe it to yourself to see how simple it is to trade 30% to 40% of the time to generate incredible results.Please take a minute to visit my website to learn about our BAN Trader Pro and our other services and courses that are all designed to give you that edge you need to be a successful trader. Enjoy your weekend!

Euro Inches Closer To 1.2050 The euro currency resumes the declines with prices now inching closer to the 1.2050 level of support.The declines come as the euro currency remains in a short term downtrend for the moment. This is evident from the lower highs that have been forming since prices retested the trendline from below on the 6th of January.The current declines to the 1.2050 could see a possible rebound taking place. This will most likely keep the EURUSD within a sideways range of 1.2177 and 1.2050.A break out from this range could possibly set the direction for the next leg.The stochastics oscillator is oversold and therefore coincides with the support level near 1.2050 likely to hold up in the short term.GBPUSD Double Top Pattern In Play The British pound Sterling has formed a double top pattern on the four-hour chart and prices broke down below this level on Friday.As a result, this bearish pattern could possibly see the cable likely to continue to push lower. The previous support level near 1.3506 will likely come in as the downside target.However, considering that the stochastics oscillator is also oversold but a possible rebound is likely to occur. This would see the GBPUSD pushing back to retest the 1.3611 level.Establishing resistance at this level could further validate the downside by his.However, if the cable manages to close above the 1.3611 level, then it would invalidate the double top pattern and as a result, we could possibly see either a consolidation or a possible move higher.Oil Prices Give Back Gains Crude oil prices were down close to 3% on Friday. This comes even as prices attempted to make a rebound earlier in the week on Thursday.However, this rebound led to a lower high emerging. Following this, prices gave back the gains on Friday and lost the support from the trend line as well.For the moment, the bias still remains to the upside. We need to wait for evidence to see a lower high forming in order to confirm the downside.For the moment, the lower target remains the support area near 49.00.In the short term, any rebound in prices could see the previous swing low near 52.30 playing a key role. If there is any rebound, then prices are likely to stall near this level.A strong close above 52.30 could potentially see another short term game in prices.Alternately, if we see a reversal near 52.30 or a continuation from the current levels, then we could expect the retracement towards 49.00.Gold Prices Hold Steady In A Sideways Range The precious metal was also trading weaker on Friday with prices down over 1%.However, price action remains subdued for the moment with the sideways range between 1850 and 1818 levels holding up for the moment.The lack of further bearish momentum is likely to see this possible consolidation resulting in either a strong retracement back to the upside. Alternatively, failure of support near 1818 could accelerate the decline.The stochastics oscillator currently remains well above the oversold levels thus indicating further room to the downside.However, the support level near 1818 is likely to hold up for the moment. As a result, gold prices are likely to continue trading in a sideways range for a while.To the upside, only a strong breakout above the 1850 level is likely to accelerate any gains that might come its way. The next key target will be the 1911.50 level of resistance.

USD rises to a one-month high as Yellen TestifiesEURUSD Reversing Just Off 1.2050 Technical Support The euro currency posted a steady decline as price action reversed just a few pips of the 1.2050 level of support. The declines come on the back of a strengthening US dollar.Speculation that the new Treasury Secretary, Janet Yellen will not be pursuing a weaker dollar policy has pushed the greenback higher. This has led to the euro posting a steady decline over the week.Despite the rebound just above the 1.2050 level, the bias remains to the upside. Any gains are likely to stall near the 1.2177 level at best. A reversal near this level will confirm a further continuation lower.On the other hand, we could expect the EURUSD to firmly test the current support near 1.2050.The British pound sterling extended declines but managed to post a reversal above the 1.3050 level of technical support. The rebound comes as prices fell through the 1.3611 level of support late last week.The declines open the way for the cable to retest the support level near the 1.3506 region. However, at the current reversal, we could expect the cable to retest the 1.3611 level once again.Establishing resistance at this level will likely confirm further downside. But this could change if the GBPUSD manages to close back above the 1.3611 level.To the downside, the declines could stall near the 1.3506 level of support keeping prices to move in a sideways range.Oil Prices Attempt A Modest Rebound WTI crude oil prices posted a rebound following the declines from last week. Prices got a boost early on Monday following stronger GDP numbers out of China.However, the current retracement remains somewhat subdued. Unless we see a breakout above the previous highs of 53.74, we could expect a continuation lower.This will mark a correction in crude oil prices which has been in a steady trend for a while.The immediate downside target for oil prices is the 49.00 area. Establishing support there could potentially mark a correction into the longer-term uptrend that oil prices are in currently.Gold Rebounds Off 1817 Support Level The precious metal touched down below 1817 intraday to a one-month low. However, prices quickly reversed losses to rise above this technical support.For the moment, prices remain above the 1817 level and could see some upside. But only a close above the 1850 level can confirm this.In such an event, gold prices are likely to extend gains further. This will open the way for the precious metal to test the next key resistance level near 1911.50.To the downside, only a strong close below the 1817 level will confirm further downside in prices.

EURUSD Reverses Near 1.2144, Will It Push Lower? The euro currency is trading with some modest losses on Wednesday. The declines come after price action made a rebound just a few pips above the 1.2050 technical support.This rebound pushed prices to test their technical resistance level near 1.2144. Following this small rally, price action reversed gains.At the moment, prices remain stuck within the 1.2144 resistance and 1.2050 support. With the stochastics oscillator moving out from the overbought levels, we expect to see a retest back to the 1.2050 level, a bit more firmly.If the euro currency loses the support near 1.2050, then we expect a gradual decline towards the 1.1900 level next.To the upside, a close above the 1.2177 – 1.2144 level, will open the way to further gains.GBPUSD Briefly Rises Above 1.3700 But Fails To Hold The British pound sterling continued its bullish rally with prices briefly rising above the 1.3700 handle once again.However, the intraday gains were quickly scaled back as prices pulled back later in the day. As a result, the GBPUSD is currently trading within the sideways range of 1.3700 and 1.3611.The stochastics oscillator is currently overbought but is likely to head lower. This would mean that if the cable loses the support near 1.3611, then we expect to see price action falling back to the previous lows.This would open up the way towards 1.3506 level of technical support.In the medium-term outlook, we expect the GBPUSD to maintain a sideways range between 1.3700 and 1.3500.WTI Crude Oil Gains Lose Steam Near 53.77 WTI crude oil prices continue to hold a bullish front with price once again testing the 13th January and 15th January highs near 53.77.However, the strong pace of gains is showing signs of weakening. Price action has failed to make any significant highs beyond this level.The failure to close above 53.77 could potentially open the way for a move back lower. This would mean that the previous swing low formed near 51.85 is likely to be the short term support for the moment.If price action breaks down below this level of support, then we could expect to see further continuation lower.For the moment, given the bullish momentum in oil markets, we might see another attempt being made to the upside.In the event that crude oil prices close above 53.77, then it would open the way to further gains.Gold Prices Rise To An Eight-Day High The precious metal has managed to rise to an 8-day high following a close above the 1850 handle on an intraday basis.The Stochastics oscillator currently looks somewhat bullish with the possibility that the overbought conditions may persist.If price closes above 1850 on a daily basis, then we expect to see further gains. The next key technical resistance for gold is the 1911.50 level.In the near term, gold prices will need to establish support once again near the 1850 handle. Given that there has been a strong consolidation taking place near this technical support, there is a good chance that price action might continue to push higher.To the downside, a close below the 1850 handle will open up to the 1817.80 level of technical support.

The price of gold increased on Inauguration Day, arousing investors’ hopes for a new bullish phase.Ladies and gentlemen, it’s official now – Joe Biden and Kamala Harris have been sworn in as the President and Vice-President of the United States, respectively. What does this imply for America?Well, before we move on to Biden, let’s say goodbye to Trump. You can love him or hate him, but there is no denying that the 45th presidency was excellent for the price of gold . As the chart below shows, the price of the yellow metal rose more than 50 percent since January 2017 (although gold initially declined after the election results).But Trump is now out of the White House, while Biden is in. What are the economic implications of this change? Well, I used to claim that people generally overestimate the impact that politics and the power of Presidents have over economic developments. However, this time may be different for two reasons.First, Biden is going to quickly reverse many of Trump’s decisions . For instance, he is going to reverse the construction of the border wall, the travel ban targeting mainly Muslim countries, and the withdrawal from the Paris climate accord as well as from the World Health Organization. Biden will also impose a mask mandate on federal property, reversing Trump’s ambiguous stance on the epidemic in the U.S.Second, the 46th presidency could be remembered in the future as having been fiscally lavish – and Biden seems to be determined to overshadow Trump in that matter. He has already proposed to spend $1.9 trillion to stimulate the economy – on top of previous aid packages worth more than $3 trillion. Importantly, Biden calls his mammoth plan just “the first step” and he is going to soon announce a plan for spending on infrastructure and clean energy which could be worth more than $2 trillion. Additionally, Janet Yellen , likely the next U.S. Treasury Secretary, has recently confirmed the stance of the new administration, saying that the government should act “big” to jump-start the economy, as “the benefits will far outweigh the costs” of being bold.Implications for GoldWhat does Biden’s presidency imply for the gold market? Well, we have already covered this theme in the two latest editions of the Gold Market Overview (and we will continue this topic in the next issue), but let us repeat that, from the fundamental point of view, Biden’s presidency looks promising for the price of gold . Although larger government expenditures can boost the GDP in the short run (the long-term economic impact could actually be negative), they will also expand the fiscal deficits and the federal debt .Higher debts not only makes the economy more fragile and prone to debt crises , but they also make the normalization of monetary policy more difficult. The truth is that the U.S. simply cannot afford higher interest rates. You see, the higher the debts, the lower the interest rates must be to handle the debt servicing costs. Welcome to the debt trap . So, the Fed will have to maintain the federal funds rate at practically a zero level for a long time. The lower the real interest rates , the better it is for gold.Oh, and did I mention inflation already? With the massive amount of stimulus injected into the U.S. economy, there is an overriding risk of overheating and increase in inflation, which would be positive for the gold prices.So, as long as there is a strong risk appetite, hope for better politics (“this time will be different and this president will be different than everyone else and everything will change for the better”) and faster economic growth, gold may struggle.However, when the honeymoon ends and investors acknowledge risks related to the higher fiscal stimulus, or when some economic crisis arrives and the risk appetite vanishes, gold will shine. Indeed, gold investors didn’t appear to be afraid of President Biden, as the price of gold increased on Inauguration Day.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care

EURUSD Gains On A Weaker Dollar And ECB Meeting The euro currency made a rebound, led by a weaker greenback and the ECB meeting on Thursday.The central bank did not make any changes which saw the euro rising as a result. However, the gains were capped near the familiar resistance area between 1.2177 and 1.2144 levels.This has led to another bearish signal from the intraday Stochastics oscillator. As a result, if the euro fails to close above 1.2177, then a drop is likely.This opens the way for the common currency to test the lower support at 1.2050. However, the daily price action looks somewhat bullish at this point. Therefore, only a close above 1.2177 will confirm further gains.This potentially puts the 1.2050 level into the picture at the moment.GBPUSD On Track To Settle Above 1.3700 The British pound sterling continues to keep a bullish hold. After failing to break out above 1.3700 level, prices managed to do so on Thursday.With intraday gains pushing the GBPUSD somewhat higher, we expect the 1.3700 level to hold for the moment.This will potentially open the way for the currency pair to post further gains. The next key target will of course be the 1.3950 level which was briefly tested as support back in April 2018.However, the gains will continue only on a strong continuation to the upside.At the current levels near 1.3700, price action is testing the support from 2018 March. Therefore, with this level now likely to act as resistance, we could see a decline.WTI Crude Oil Settles Into A Sideways Range Crude oil prices trade mixed as the developments on the ground unfold. With the new President Biden being quick to rejoin the Paris climate accord, speculators expect further changes on fossil fuel.President Biden was quick to announce new curbs on the US oil industry. The current sideways range in the oil markets reflect this sentiment. Speculators remain on the sidelines for now in order to ascertain more data.As a result, WTI crude oil prices are likely to maintain a sideways range within 53.77 and 51.87 levels for the near term. Only a strong breakout from this range will set the next direction.The intraday Stochastics oscillator is also currently turning flat. To the downside, a close below 51.87 will open the way toward the 49.03 level of support.While to the upside, a close above 53.77 could see oil prices building up the bullish momentum.Gold Prices Trade Flat As Investors Weight Stimulus Prospects The precious metal is giving back some of the gains made on Wednesday, after rising to a nine-day high on an intraday basis, prices are pulling back.This comes as investors wait on further announcements from the new Biden administration. Speculation is high that the new Democrats government, which also now holds a thin majority in Senate could announce new stimulus measures.For the moment, price action in gold remains flat in anticipation of the news. The current pullback could see gold prices retesting the 1850 level.If strong support is established here, then we expect further gains. The 1911.50 level of resistance becomes the next upside target.If the 1850 handle is lost, then gold prices are likely to head lower. The 1817.80 level comes in as support.

Inflation will be one of the greatest upside risks for gold this year. Will it materialize and make gold shine?The report about gold in 2021 would be incomplete without the outlook for inflation . We have already written about it recently, but this topic is worth further examination. After all, higher inflation is believed to be one of the biggest tail risks in the coming months or years, and one of the greatest upside risks for gold this year .Most economists and investors still believe that inflation is dead. After all, the only way to justify the central banks’ unprecedentedly dovish actions is the premise of low inflation. And the only way to justify the buoyant stock market amid the new highs in the number of Americans in hospital with COVID-19 is the expectation of an inflationless economic recovery this year. In other words, many people forecast the return to the Goldilocks economy after the end of the pandemic .On the surface, it seems that they might be right. We haven’t seen double-digit inflation since the end of 1981. And last time the CPI annual rate was above 3 percent was in January 2012. Actually, in the last ten years, inflation was below the Fed’s 2-percent target most of the time, as the chart below shows.Moreover, the inflation rates dropped significantly during the U.S. epidemic and the Great Lockdown when people distanced socially and limited their spending. So, given the strength of the negative demand shock and the following plunge in inflation, why should we worry about the risk of higher inflation?Well, shouldn’t it be obvious after experiencing a pandemic, i.e., an improbable but impactful event? Even a small probability of a surge in inflation should be worrying, especially given the pile of debt and, thus, limited room for central banks to hike interest rates to prevent inflation.Moreover, the likelihood of an increase in inflation is not so small . As I’ve explained several times, the case for higher inflation is stronger today than in the aftermath of the Great Recession . The first reason is that the broad money supply has surged . This is because the banks haven’t been hit so far (in contrast to the financial crisis where banks suffered greatly), so they have been lending freely, as the chart below shows.Second, in contrast to the previous economic crisis where people did not spend money because they had no income or they decided to repay their debts, this time, people didn’t spend money because they were stuck at home. But when the health crisis is over and people get vaccinated, some consumers may go on a spending spree . The realization of pent-up demand may overwhelm the firms’ capacity, leading to an increase in prices. There are already some signs of bottlenecks, or supply falling behind demand, such as the increase in prices of some commodities like iron ore.In other words, when the world returns to normality, the private sector will find itself flush with cash. And I bet that some households will try to make up for all the time not spent in movie theatres, restaurants and hotels during the last year.Third, there might also be some structural shifts in the global economy, which will reverse the current disinflationary forces . As Charles Goodhart and Manoj Pradhan argue in their book The Great Demographic Reversal , the era of low inflation, caused by globalization, is now ending. You see, in the 1980s and 1990s, China, India and post-communist countries from Europe and Central Asia, entered the global economy. As a consequence, the global labor supply for production of tradeable goods rose enormously, leading to weak inflationary pressure. But all this is going into reverse. Globalization is now weakening and there are no big countries in the queue to enter the global economy. Actually, ageing in China and other countries reduces the global labor supply, thus strengthening inflationary pressure.Last but not least, the politicians and central bankers have become more complacent . The thoughtless and irresponsible stance of politicians is unsurprising, especially given the temptation to inflate away the public debt . However, the central banks also stopped worrying and embraced the inflation bomb. For example, the Fed has changed its monetary regime in 2020, announcing that it would tolerate overshooting of inflation above its target for a undetermined period of time.The bottom line is that inflation should return in the coming months (more precisely, in the second half of the year, when the distribution of vaccines will be widespread). We shouldn’t experience double-digit rates, but the markets don’t expect a deflationary crisis either. As the chart below shows, inflationary expectations have already returned to pre-pandemic levels.All this is good news for price of gold . The case for reflation in the global economy is definitely stronger than after the global financial crisis of 2007-2009. The present risk of higher inflation should support the demand for gold as a hedge against inflation . And the increase in inflation expectations lowers the real interest rates , thereby positively affecting the yellow metal. Although gold will face some important headwinds this year, inflation expectations are likely to outpace the increase in nominal bond yields, which would put downward pressure on the real interest rates and support gold prices.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.

Dollar likely to push higher after FOMC and GDPEURUSD Closes With A DojiThe euro currency continued its attempts to break out from the resistance area near 1.2177 and 1.2144.However, price action closed somewhat flat, resulting in a Doji close on Friday. The Doji pattern in the resistance area could see a possible reversal.However, the sentiment remains mixed for the moment. A strong bullish close could see the euro currency rising above 1.2177.This will open the way forward for the EURUSD to retest the 6th January highs of 1.2349. Alternately, a bearish close following the Doji could signal a possible move back toward the 1.2050 level of support.There is also an ascending triangle pattern emerging near the resistance area. A successful upside breakout puts the near term target toward the 6th January highs, if not closer.The British pound sterling closed on Friday with losses, although price action remains firmly within the ascending price channel.The support level near 1.3500, clearly remains the major line in the sand. Further upside is likely to continue upon establishing firm support near this level on a daily and weekly basis.To the upside, a possible continuation may see the GBPUSD attempting to test the 16th April 2018 highs near 1.4376.Watch the minor rising trendline, which if breached could see the correction back to the 1.3500 handle.But the Stochastics oscillator is likely to signal another short term momentum to the upside.If the GBPUSD fails to break past the 21st January highs of 1.3745, then we might see a possible pullback.WTI Crude Oil Closes Flat On A Weekly BasisThe recent bull run in the oil markets is slowing down with the commodity posting a flat close for two consecutive weeks now.On Friday, oil prices were testing the lower end of the sideways range between 53.77 and 51.87. This comes after the second minor rising trendline was breached.While there was a small pullback into the weekly close, the overall bias remains mixed. This sideways range could continue especially if the current rebound off the floor could see prices attempting to rise back.But in the event that oil prices break down below the 51.87 level, then we expect a correction toward the 49 – 50 region in the short term.The confluence of the major rising trendline alongside the horizontal support could put a lid on the declines.Gold Prices Steady In A Sideways RangePrice action in gold remains stuck within a sideways range with the 1818 level of support holding up for the moment. The overall trend remains flat after gold price touched a new all-time high on 7th August 2020.This sideways shift could either see the trend beginning to change or a possible pause before the bullish run picking up pace.The overall bias remains mixed within this sideways range of the 1950 and 1818 levels.For the moment, price action has formed a lower high and is currently pushing lower. Therefore, a retest of the 1818 level is quite likely.A break down below this support area could see a possible shift in the trend.To the upside, unless the 1950 level gives way, prices might remain stuck in the range.

A new sheriff is in in town, and he’s making some rearrangements. Will the new order of things support the price of gold?What a blitzkrieg! Joe Biden certainly wastes no time in signing executive orders. Since inauguration, he introduced several policies, including mandating masks on federal property, in airports and on certain public transportation, and the end of a travel bank on some countries. Biden also terminated the construction of the wall at the Mexican border, halted the withdrawal from the WHO and placed the U.S. back on the path to rejoining the Paris climate accord.We’re seeing a reversal of many of Trump’s policies. The new President’s actions shouldn’t materially affect the gold market , but if they manage to restore widespread confidence in the U.S. government, they could limit the safe-haven demand for gold .Biden also modified the government’s stance on the epidemic in the U.S., treating it very seriously. He undertook several executive actions intended to speed up the production of COVID-19 supplies, thereby increasing testing capacity, and hopefully reducing the spread of the coronavirus . Biden also started a “100 days mask challenge”, urging Americans to wear masks, and announced a “National Strategy for COVID-19 Response and Pandemic Preparedness”, arguing that “America deserves a response to the COVID-19 pandemic that is driven by science, data, and public health — not politics”.All these actions show that combatting the pandemic will be Biden’s priority and that he intends to deliver a more centralized federal response to the epidemiological threat. It’s high time! As the charts below show, the coronavirus has already infected almost 25 million Americans while killing more than 400,000.Figure 1Figure 2The U.S. equity markets welcomed Biden’s actions by reaching new record highs. However, these gains and increased risk appetite among investors didn’t prevent the modest jump in gold prices in the aftermath of the inauguration. As the chart below shows, the price of the yellow metal increased to above $1,860 on Thursday (Jan. 21).Figure 3Implications for GoldBut what do Biden’s rearrangements imply for the gold market in the medium and long run? Well, mainstream economists and the markets expect that Biden’s actions, including fiscal stimulus, will speed up the fight with the pandemic and will revive the economy. This positive sentiment could be negative for the yellow metal.However, I believe that people overestimate the positive economic impact of the upcoming stimulus. After all, many people have money, but they can’t spend it due to widespread lockdowns, and there will be a huge price to pay for aid coming in the form of a ballooned fiscal deficit and public debt . But the problem is that neither money nor debt constitute the real wealth, so I remain skeptical about the benefits of another government’s fiscal package.Of course, my opinion is irrelevant here. What is important is that Mr. Market likes the idea of additional stimulus, so the bonanza in the financial markets can last. The expectations of higher economic growth and accompanying stronger risk appetite could be negative for gold .However, at some point, the fragility and limitation of the debt driven growth will become clear – you cannot print wealth – and investors will face the harsh reality of a debt trap . It will be delayed, but there will be a reaction to the increased debt and the risk of higher inflation . This reaction, in turn, should be beneficial for the yellow metal.Not long ago, I was afraid that U.S. fiscal policy will be less dovish in 2021 – however, with Biden’s fiscal stimulus in the cards, the fiscal policy could actually become even more lavish this year than it was in 2020. It should also be a supportive factor for the price of gold, especially considering that it would force the Fed to remain very accommodative as well.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care

Dollar trades mixed ahead of FOMC meetingEuro Recoups Losses The euro currency pared losses from Monday as the US dollar weakened on Tuesday.Price action continues to remain to consolidate near the key resistance area of 1.2177 – 1.2144.Since Friday, the euro currency has been stuck in this resistance area. Meanwhile, the ascending triangle pattern continues to remain in play.For price to continue to push higher, a breakout above the 1.2177 level is needed.To the downside, a breakdown of the trend line could open the way for the euro to retest the 1.2050 level a bit more firmly.The British pound sterling followed suit with many of its peers by paring losses from Tuesday.Price action posted a strong rebound, which coincides with the medium-term trend line. This rebound saw prices breaking past the 1.3700 handle once again.Further gains are needed to confirm the continuation of the upside.For the moment, the Stochastics oscillator shows that there could be further room to the upside.However, if prices reverse, then watch for the trend line to break. This will open the way to the 1.3500 level for the GBPUSD.Crude Oil Maintains A Hold On The Sideways Range WTI crude oil prices continue to remain trading flat within the larger horizon. Price action gave back the short term gains made.For the moment, oil prices remain firmly entrenched within the 53.70 and 51.87 levels.With prices failing to push higher, we could see an eventual breakdown.A strong close below 51.87 will no doubt see the 49.00 level coming into play.But for the moment, the sideways range could continue, unless the breakout is driven by some strong fundamentals.Gold Prices Subdued On Stimulus Worries The precious metal was seen trading subdued albeit, trading flat. Price action managed to post intraday gains before giving them back.As a result, gold prices are back trading strongly near the 1850 handle. A close below this level could open the way toward the 1817.80 level of support once again.However, the direction is likely to be determined by some fundamental catalyst for the moment.To the upside, the 1911.50 level is within reach if gold prices can close out above the 1874.00 level.

Markets trade mixed on FOMC dayEuro Briefly Slips To 1.2050 Technical SupportThe euro currency, along with many of its peers was trading mixed on Wednesday. This comes as the dollar briefly strengthened into the run-up to the Fed meeting.Price action lost the support off the minor trend line and briefly fell close to the 1.2050 technical support.However, price action was quickly rejected just above the 1.2050 level. The euro managed to recover the losses rather quickly.The downside bias is likely to rise as the currency pair has failed to make any moves above the resistance area of 1.2177 – 1.2144 level.However, considering that the Stochastics oscillator is likely to trigger a bullish signal, we could see another attempt to the upside.The British pound sterling gave back some of the gains from Tuesday on an intraday basis on Wednesday.Price action once again attempted to post new highs but failed to build up the momentum.The consolidation near the 1.3700 level has resulted in a possible ascending wedge pattern.If price action breaks lower, we could see a retest back to the 1.3050 level in the near term.To the upside, GBPUSD will need to post strong gains to close firmly above the 1.3700 level of resistance.WTI Crude Oil Bounces Off Lower Support Of RangeOil prices remain flat for yet another day. Price action briefly fell to the floor near 51.87 from the sideways range.But prices quickly recovered off this level intraday. For the moment, the sideways range remains intact and oil prices could settle in this range for a while longer.The upside level near 53.77 remains untested yet in the recent few sessions.The Stochastics oscillator has also turned flat currently underlining the sideways movement in the oil markets.Gold Loses The 1850 Support LevelThe precious metal was trading below the 1850 level just ahead of the Fed meeting. However, the declines coincide with the Stochastics oscillator also moving close to the oversold levels.As a result, we could see price attempting to breakout above the 1850 level once again.Above this level, gold prices will challenge the 21 Jan highs near 1874.05.Only a strong close above this level could trigger further gains.To the downside, the support level near 1817.79 remains in play and could put a lid on further declines.

Yesterday‘s recovery ended on a weak note as stock bulls gave up the opening gap. Disappointing in the very short run, especially given that other key markets acted likewise weak. Neither corporate bonds, nor gold, nor oil could get their act together, and are hanging in the balance. Inviting the bears to probe the defences, how far south will they be able to get? We have the Fed meeting later today, and while I am not looking for hawkish surprises or any outright optimism, the investors aren‘t taking chances. Sell now, ask questions later seem to be the mantra before the U.S. open. While Monday‘s hanging man candlestick predictably didn‘t bring follow through selling on Tuesday, I am looking for the bulls to get tested today. Once the dust clears, we can go on making new highs, but the short-term storm (storm in a teacup, more precisely) hasn‘t started yet. In today‘s article, I‘ll examine the S&P 500 standing, look into precious metals, and finally answer a pointed question about gold. Let‘s start (charts courtesy of www.stockcharts.com). S&P 500 Outlook Stocks are hanging in the short-term balance following yesterday‘s weak close. Unconvincing volume, inviting a premarket push to the low 3800s as we speak. The aftermath of the Fed will set the tone for the coming sessions, but I would look for early credit market clues before buying any dip. Credit Markets High yield corporate bonds (HYG ETF) had a weak day yesterday, missing the opportunity to rise. Quite to the contrary, they traded relatively weaker than the S&P 500 did. Any time corporate bonds start underperforming stocks, I am watching closely, and often from the sidelines. Investment grade corporate bonds (LQD ETF) closed about unchanged while Treasuries paused and didn‘t really advance compared to Monday. They appear waiting for the Fed, unwilling to move before discounting possible hawkish surprise (positive assessment of the economy would do that trick) as a false alarm. The ratio of high yield corporate bonds against short-term Treasuries (HYG:SHY) with the S&P 500 overlaid (black line) shows the very short-term vulnerability in stocks. How low will these go as the greed sentiment gets taken down a notch? You see, yesterday I did strike an optimistic tone in the runup to the regular session‘s open, but the bulls missed a good opportunity to act, and the resultant signals favor the bears to step in now. That‘s the essence of my trading style – neither a permabull, nor a permabear, and always ready to turn on a dime should the facts change. The market breadth indicators show we‘re on the doorstep of a push lower. Instead of holding ground, new high new lows solidly declined, while both the advance decline line and advance decline volume muddled through. That‘s not exactly a bullish constellation. Precious Metals in Focus Gold also appears to be acting a bit weak in the short run. No surprise as I don‘t see the lengthy consolidation as quite over yet. This one will more likely wear you out than scare you out. Simply put, the gold bulls better wait for spring to usher in another precious metals upleg as the miners to gold ($HUI:$GOLD) ratio isn‘t sending any kind of confirmation that the sector has made a turn. The gold to silver ratio keeps treading water, and isn‘t declining below its early September lows. On the other hand, it‘s not trading too far from them either, which translates into silver not acting at its weakest exactly. That‘s a bullish sign, showing that this 5-month long consolidation is really getting long in the tooth. Completing the picture, miners (GDX ETF) reveal lackluster short-term performance. Long upper knot and volume as low as could have been, mean that we better brace ourselves for a down session today. From the Readers‘ Mailbag Q: Hi Monica, congratulations and best wishes on your new venture and I look forward to following your work. I'm an English working class boy, now very Grey who follows the gold market like a hawk. I'm a longterm investor in PM's sector and I have a largish position in PM miners (still in profit on most) but the last six month are playing havoc with my nerves. The best metaphor I have that describes my current situation is that I have a large bowl of golden soup with a big fly swimming in it and its name is Mr Radomski. His latest missive of 25 Jan outlines "where to now Gold" with a possible/probable decline of gold to between $1500 - $1600. I was rather hoping you might comment on his analysis and on how you see things developing over the coming months. I appreciate that you don't give financial advice but his very bearish view is discomforting given the mad world we have around us and if Gold could crash to these levels in the current situation it begs the question why bother investing in PM's. A: Thank you for the question and for authorizing me to print it just the way it arrived. I‘ll answer solely from my personal perspective, and won‘t comment on personalities. I understand your frustration with gold being unable to really move, but as I tweeted already yesterday, this months-long correction is one to wear you out, not to scare you out. Please check my Aug 07 article written for Sunshine Profits called S&P 500 Bulls Meet Non-Farm Payrolls, where in the section Calling out gold, I discuss the yellow metal‘s prospects. Compare that with my Monday‘s article Rosy February for S&P 500? Not So Fast to see how things turned out in the sector precisely. It‘s with the same conviction that I say today again that this long consolidation in gold is in its latter stages. For now, gold is still rangebound, and I don‘t see a deflationary crash repeating that would bring it to said $1,500 - $1,600 levels. Definitely not. Looking at the real world around us, the Fed is becoming more active in expanding its balance sheet, new stimulus checks are coming (money flowing directly into the real economy, not sitting on commercial banks‘ balance sheets), and fiscal policy isn‘t tame exactly either. Inflation is making a steady return, and it‘s a question of time (think months) before it becomes broadly acknowledged. In such an environment, a gold drop would be bought with both hands, thank you very much. Copper is rising, base metals aren‘t doing badly, and food price inflation is hot. We‘ve entered a decade of commodities, which would outperform paper assets. Who could tell me why gold would crash, even temporarily? What kind of mayhem in the bond markets would have to trigger that? Make no mistake, no single market moves in a vacuum. Quite to the contrary, I look at gold and Bitcoin as the safe haven plays, with Bitcoin being the wild and volatile one. I am saying that Bitcoin has clearly decoupled, and once gold does the same, it means a vote of no confidence in the financial system. But this is not where we are currently. Gold is taking its cues from interest rates, real ones to be precise. The king of metals is also doing well during times of rising inflation. Take the Fed keeping rates as low as can be for as long as eye can see (practical view of things), rising inflation bringing down opportunity costs of holding precious metals, and you have a great driver of higher gold prices. Given the economic policy steps, how likely is a deflationary shock now? Instead, look for the newly created money to keep entering the real economy, battling the high savings rate. Once you see the velocity of money to pick up, that would be the cherry on the cake. Gold unbound next. For now though, arm yourself with patience, and don‘t let any gloomy forecasts not matching your real world experience of what‘s truly going on in this Brave New World, drive you to abandon your prior decision. Have the facts, the rationale changed? Constantly evaluate these, honestly and truthfully without getting scared. No, the answer is that the drivers are still in place, and will be gaining an upper hand increasingly more over time. I see gold as breaking higher from this lengthy consolidation in spring, and as I‘ve explained in Monday‘s article, miners are set to outperform the metal early in this move when it comes, because they‘ve been beaten down quite sufficiently already. Look also at the gold to silver ratio. Spikes in favor of gold are what I would look for in the next monetary crisis, or liquidity crunch. Currently, none is on the horizon. Summary Time has come for another daily downswing in stocks, and it remains to be seen whether it entices the buyers to act. Technology, communications and consumer staples were among the best performing sectors yesterday, which doesn‘t paint a picture of broad short-term strength. Repeating the final sentence of yesterday‘s summary, the nearest days may (see today‘s session for proof) bring another push lower that won‘t however jeopardize the bull market in the least.

The first FOMC meeting in 2021 has concluded without any changes in monetary policy, while Powell sent a few dovish signals during his press conference.The FOMC released on Wednesday (January 27) its newest statement on monetary policy . Generally speaking, the statement was little changed. The main alteration is that the U.S. central bank has acknowledged that “the pace of the recovery in economic activity and employment has moderated in recent months”. Wow, how did they notice that? They really must hire professionals! All jokes aside, this modification in the FOMC statement is dovish . Consequently, when analyzed separately, it’s positive for the price of gold.Another change is that the FOMC now believes that “the ongoing public health crisis continues to weigh on economic activity, employment, and inflation, and poses considerable risks to the economic outlook”. In December, the Fed thought that the pandemic would impact inflation only in the “near term”, with risks to the outlook “over the medium term”.However, when considered holistically, the January statement is rather bad for the yellow metal , as the Committee neither changed the federal funds rate nor expanded its quantitative easing program . So we have another month without any additional easing of the U.S. monetary policy. Luckily, the ECB also didn’t loosen its stance, but still, the lack of any fresh dovish moves by the Fed is not helpful for gold.Luckily, Powell comes to the rescue! Although he generally sounded rather neutral during his press conference , the Fed Chair has sent a few important dovish signals. First, he clearly excluded the possibility of premature tapering and the replay of 2013’s taper tantrum , saying that “the whole focus on exit is premature if I may say. We’re focused on finishing the job we’re doing, which is supporting the economy, giving the economy the support it needs.” The continuation of the quantitative easing, which will take years, is positive for gold.Second, Powell acknowledged that inflation will increase in 2021, admitting that the Fed will not react to this rise, as it would be only transitory: “We’re going to be patient. Expect us to wait and see and not react if we see small, and what we would view as very likely to be transient, effects on inflation”. This is great news for gold, which is considered by many investors as an inflation hedge . Higher inflation, with the central bank behind the curve, also implies lower real interest rates , which will support gold prices.Implications for GoldWhat does the recent FOMC meeting imply for the gold market? Well, so far, it has reacted little to the Fed’s statement on monetary policy. The reason is simple: the lack of any moves was widely expected, so the markets got no surprises and reacted weakly.However, the easing of the monetary policy could provide a fresh bullish signal that gold seems to need right now. Without such a spark, gold may continue its bearish trend for a while (see the chart below). And, although the markets did not expect any significant announcements from the Fed, some analysts speculated that the U.S. central bank could provide some guidance about the yield curve control. But it didn’t – so further declines wouldn’t be surprising in the short-term.Some analysts even say that the gold’s price pattern of 2020-2021 resembles the period of 2011-2012. If true, it would be a terrible news for the gold bulls. However, history never repeats itself, but only rhymes. The current fundamental outlook is different. Why? Well, this time, in addition to quantitative easing and ZIRP , we also have a very easy fiscal policy with ballooning federal debt and new large fiscal deficits in the pipeline.Another difference is the Fed’s stance. Right now the U.S. central bank openly admits that there is a possibility of upward pressure on inflation , but ask the markets to “expect us to wait and see and not react” (emphasis added). Well, the rise in inflation may be indeed only transitory – but, hey, didn’t they say the same before the 1970s stagflation ?If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

Euro Trades Mixed As Trend-Line Being Tested From BelowThe euro currency is attempting to pare losses from Wednesday. However, price action remains biased to the downside.The short term intraday bounce led the common currency to briefly rise to the 1.2144 level of resistance.A confluence of both the trendline and the horizontal resistance level is keeping prices capped below this level.We expect the EURUSD to probably consolidate within 1.2144 and 1.2050 levels for the near term.Given the fact that the support level near 1.2050 has not been tested yet, we expect prices eventually sliding to test this support level.GBPUSD Rebounds Amid A Mixed BiasThe British pound sterling is posting gains after a rebound from the trendline.Prices remain confined within the ascending wedge pattern. A breakout above the previous highs could confirm further upside.For the moment, price action is likely to range within the ascending wedge pattern.The trend line is currently being tested and a close above this level could signal further gains.However, if price retreats near the trend line, then this will open the risk to the downside.A break down from the ascending wedge pattern will open the way for the GBPUSD to test the 1.3500 level next.Oil Prices Drift Between 53.77 And 51.87WTI crude oil prices continue to maintain a sideways range within the said levels. Prices attempted to make some modest gains, but at the time of writing, oil prices are giving back those gains.The current slide could see the lower end of the range being tested once again. With the previous uptrend now coming to a halt, the current consolidation could see a breakout.The overall bias remains mixed, but a breakout below the 51.87 level could see a possible correction down to the 49.00 level of support.To the upside, above the 53.77 level, we could expect price to test the 55.00 level next.Gold Prices Manage To Recover LossesThe precious metal is seen recovering from the losses from Wednesday. After losing the 1850 handle, gold prices are back above this level once again.However, the pace of the rebound remains weak and we could see price losing the 1850 handle once again.In the medium term, gold prices are firmly above the 1817.79 level of support. As long as this support holds, we expect the precious metal to possibly rise toward the 1874 handle.But in the near term, we could see price action consolidating around the 1850 level for a while.

Euro Resumes Slide, After A Two-Day GainThe euro currency is trading weaker on Monday following two daily sessions of gains previously. Price action remains confined below the 1.2144 level of resistance.Given the current pace of declines, the EURUSD currency pair is likely to test the 1.2050 level of support more firmly.We expect the support level near 1.2050 to hold up for the moment. As a result, the EURUSD could maintain a sideways range within 1.2144 and 1.2050 levels.The stochastics oscillator is currently moving closer to the oversold levels. Therefore, we could expect to see prices rebounding off the 1.2050 handle.In the unlikely event that the EURUSD loses the 1.2050 support, we could expect to see a larger correction down to 1.1900.GBPUSD Testing The Lower Trend-LineThe British pound sterling is also on track to post declines following a period of consolidation since last week.Price action is currently testing the lower trendline of the ascending wedge pattern. A continuation to the downside could potentially open the way for the GBPUSD to test the 1.3500 level of support.However, for this to materialize, the GBPUSD will need to post a convincing breakdown lower.Given that price action closed rather flat on a weekly basis, a bearish close this week could potentially strengthen the downside bias.This could mean that the cable could be looking to post further declines in the medium-term outlook.Crude Oil Bounces Off Lower End Of The RangeWTI crude oil prices are posting modest gains rising over 1% on Monday. This comes as prices briefly slipped below the lower end of the range near 51.87.Despite the current pace of gains, oil prices remain stuck within the range between 53.77 and 51.87. Only a strong breakout from this level will potentially confirm further direction in the commodity.For the moment, the continuation to the upside could see the 53.77 level being tested.On a weekly basis, we see that oil prices are trading flat for three consecutive weeks so far.The stochastics oscillator is currently moving out from the oversold levels and gives support to the upside bounce.Gold Prices Struggle To Breakout Above 1874The precious metal continues to trade flat amid the US dollar strengthening. While prices have managed to stay afloat above the 1850 level of support, the upper resistance level near 1874 is proving hard to break.As a result, gold prices remain caught within the 1874 and 1850 levels for the moment. The stochastics oscillator also signals the rather choppy movement within the said levels.Price action on the higher chart timeframes also continues to remain mixed. As a result, we could expect to see gold prices staying below the 1874 level for becoming few sessions.The bias still remains to the downside, however, a swing low is being formed near the 1835 level.A close below this level will potentially open the way for gold prices to retest the lower support near 1817.79.

The World Gold Council recently published two interesting reports. Gold demand plunged in 2020, but 2021 should be positive for the yellow metal.On Thursday (January 28), the WGC published its newest report about gold demand trends: Gold Demand Trends Full Year and Q4 2020 . The key message of this publication is that the gold demand of 783.4 tons (excluding over-the-counter activity) in the fourth quarter of 2020 was 28 percent lower year-over-year. As a result, it was the weakest quarter since the midst of the Great Recession in Q2 2008. The weak quarter made the whole year quite disappointing, as the annual gold demand in 2020 dropped by 14 percent to only 3,675.6 tons, making it the lowest level of demand since 2009 .The main driver of this decline was the COVID-19 pandemic, that triggered the Great Lockdown and the subsequent surge in gold prices. In consequence, jewelry demand plunged 34 percent to 1,411.6 tons, the lowest annual level on record. It shows that – contrary to popular opinion – consumers are price takers, not price setters, in the precious metals market.So, what is really interesting for me is that the investment demand, the true driver of gold prices, grew 40 percent to a record annual high of 1,773.2 tons . Although there was a slight increase in bar and coin investment, the surge in investment demand was caused mainly by the great inflow into global gold-backed ETFs , whose holdings grew by 877.1 tons last year, a record level.These inflows were, of course, fueled by the spread of the coronavirus and the fiscal and monetary policies that followed in response. Gold was actually one of the best performing major assets in 2020 amid high uncertainty and low real interest rates . Importantly, there were net outflows from the gold ETFs in the Q4, but they were concentrated in November, so the worst may be behind us.When it comes to other categories, the central banks added a net 273 tons in 2020, the lowest level since 2010, as some central banks sold gold amid recession to obtain liquidity. It confirms gold’s role as a safe-haven asset and portfolio-diversifier . Indeed, gold had one of the lowest drawdowns during 2020, reducing investors’ losses. The technology demand fell seven percent in the last year to 301.9 tons due to the economic disruptions of the pandemic . Total supply fell four percent to 4,633 tons, the first annual decline since 2017, as the pandemic disrupted mine production.The WGC’s demand report is, as always, interesting, but it should be taken with a pinch of salt . The reason is that the WGC wrongly defines the demand and supply for gold, narrowing it to the annual supply and its use, and omitting the great bulk of transactions in the gold market. In consequence, the report contradicts simple economic logic. According to the WGC, gold supply fell four percent, while gold demand declined 14 percent – but the average yearly price of gold gained 27 percent (see the chart below)! Whoa, when I learnt economics, the drop in demand (higher than the decrease in supply) was pushing the prices down!Implications for GoldBut let’s leave the past and now focus on the future! In January 2021, the WGC also published its gold outlook for the new year . Not surprisingly, the industry organization is generally bullish , but it notices the headwinds as well . According to the WGC, the hope of economic recovery and easy money will increase the risk appetite, creating downward pressure on gold prices.However, the WGC believes that the low interest rates and potential portfolio risks will support the investment demand for the yellow metal. In particular, ballooning fiscal deficits , the growing money supply and the possibility of higher inflation and the risk of the stock market correction (who knows, maybe the GameStop saga will trigger some broader bearish implications?!) should support gold prices.The WGC’s conclusion turns out to be similar to my own 2021 outlook for gold: that it could be a positive year for the yellow metal, but less so than 2020 – at least under the condition that the global economy will experience a steady recovery without too much inflationary pressure. But inflation may arrive, ending the era of the Goldilocks economy – and possibly starting the year of gold. Only time will tell!If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

Since the precious metals like to ride along with the EUR/USD, and the latest Eurozone data looks grim, what are the implications for the PMs?Just when everyone and their brother thought that silver was going straight to the moon… it plunged. And that’s not the end of the decline.Figure 1 – COMEX Silver FuturesI previously emphasized that silver’s volatile upswing is likely just temporary, and I discussed the Kondratiev cycle which implies much higher gold prices but not necessarily right away, because the value of cash (USD) would be likely to soar as well. The latter would likely trigger a temporary slide in gold – and silver.Well, was silver’s rally just temporary?This seems to have been the case. The white metal declined back below not only the 2020 highs, but also back below this year’s early high. Please remember that invalidations of breakouts have immediately bearish implications and we just saw more than one in case of silver.So far today (Feb. 3), silver is quiet, but let’s keep in mind that back in September, it took only a few sessions for the white precious metal to move from approximately the current price levels to about $22.Will silver slide as much shortly? This is quite likely, although the downswing doesn’t have to be as quick as it was in September.Terms like the silver shortage , the size of the silver market and silver manipulation became incredibly popular in the last couple of days, which - together with huge SLV volume, and this ETF’s inflows - confirms the dramatic increase in interest in this particular market. This is exactly what happens close to market tops: silver steals the spotlight while mining stocks are weak. I’ve seen this countless times , and in most cases, it was accompanied by multiple voices of people “feeling” that the silver market is about to explode. For example, please consider what happened in early September 2020 on both (above and below) charts. Silver jumped and almost reached its August 2020 high, while the GDX was unable to rally even to (let alone above) its mid-August high.Don’t get me wrong, I think that silver will soar in the following years and I’m not shorting silver (nor am I suggesting this) right now and in fact I haven’t been on the short side of the silver market for months. In fact, I expect silver to outperform gold in the final part of the next massive upswing, but… I don’t think this massive upswing has started yet.Gold had it’s nice post-Covid panic run-up, but it didn’t manage to hold its breakout above the 2011 highs, despite multiple dovish pledges from the Fed, the open-ended QE, and ridiculously low interest rates. Plus, while gold moved above its 2011 highs, gold stocks have barely corrected half of their decline from their 2011 highs. Compare that to when the true bull market started about two decades ago – gold miners were soaring and multiplying gold’s gains in the medium run.Let’s take a look at mining stocks, using the GDX ETF as a proxy for them.Figure 2 – VanEck Vectors Gold Miners ETF (GDX)Are miners weak right now? Of course, they are weak. It was not only silver that got attention recently, but also silver stocks . The GDX ETF is mostly based on gold stocks, but still, silver miners’ performance still affects it. And… GDX is still trading relatively close to the yearly lows. Silver moved a bit above its 2020 highs – did miners do that as well? Absolutely not, they were only able to trigger a tiny move higher.And based on yesterday’s decline, most of the recent run-up was already erased.Interestingly, the most recent move higher only made the similarity of this shoulder portion of the bearish head-and-shoulders pattern to the left shoulder ( figure 2 - both marked with green) bigger. This means that when the GDX breaks below the neck level of the pattern in a decisive way, the implications are likely to be extremely bearish for the next several weeks or months.Due to the uncanny similarity between the two green rectangles, I decided to check what happens if this mirror-similarity continues. I used purple, dashed lines for that. There were two important short-term price swings in April 2020 – one shows the size of the correction and one is a near-vertical move higher.Copying these price moves (purple lines) to the current situation, we get a scenario in which GDX (mining stocks) moves to about $31 and then comes back up to about $34. This would be in perfect tune with what I wrote previously. After breaking below the head-and-shoulders pattern, gold miners would then be likely to verify this breakdown by moving back up to the neck level of the pattern. Then, we would likely see another powerful slide – perhaps to at least $24.All in all, it seems that silver’s run-up was just a temporary phenomenon and the next big medium-term move in the precious metals and mining stocks is going to be to the downside.Having said that, let’s take a look at the markets from the fundamental point of view.EUR-on to SomethingFor weeks , I’ve been warning that the fundamental disconnect between the U.S. and Eurozone economies could pressure the EUR/USD.And on Jan. 29, I wrote:The economic divergence between Europe and the U.S. continues to widen. On Jan. 28, the U.S. Bureau of Labor Statistics (BLS) revealed that U.S. GDP (advanced estimate) likely expanded by 4.0% in the fourth-quarter.Figure 3Making its counter move, Eurozone fourth-quarter GDP was released on Feb. 2, revealing that the European economy shrank by 0.7% (the red box below). Even more revealing, France and Italy – Europe’s second and third-largest economies – underperformed the bloc average, contracting by 1.3% and 2.0% respectively (the blue box below).Figure 4 - Source: EurostatIn addition, German retail sales (released on Feb. 1) declined by 9.6% in December – well below the 2.6% contraction expected by economists. And why is this relevant? Because the month-over-month decline was the largest since 1956 and speaks volumes coming from Europe’s largest economy.Please see below:Figure 5If that wasn’t enough, Spain’s (Europe’s fourth-largest economy) Q4 GDP inched up by only 0.40% (the red box below). And not only did the figure come in well below the Spanish government’s December estimate (of an increase of 2.40%), the country’s exports declined by 1.4%, while business investment plunged by 6.2% (the blue boxes below).Figure 6 - Source: Instituto Nacional de Estadística (Spain’s National Statistics Institute)Moreover, as the fiscal situation worsens across Europe’s four-largest economies, the European Central Bank (ECB) has no choice but to pick up the slack. As of Feb. 2, the ECB’s balance sheet now totals more than 70% of Eurozone GDP (up from 69%). More importantly though, the figure is more than double the U.S. Federal Reserve’s (FED) 34.5% (down from 35%).Please see below:Figure 7Thus, while the ECB’s money printer works overtime relative to the FED’s, the dominoes are lining up for a material fall:The ECB’s relative outprinting causes the FED/ECB ratio to declineA declining FED/ECB ratio causes the EUR/USD to declineA declining EUR/USD causes the precious metals to declineTo explain, please see below:Figure 8The red line above depicts the movement of the EUR/USD, while the green line above depicts the FED/ECB ratio. As you can see, when the green line rises (the FED is outprinting the ECB), the EUR/USD also tends to rise. Conversely, when the green line falls (the ECB is outprinting the FED), the EUR/USD tends to fall.As it stands today, the FED/ECB ratio has declined by 0.26% week-over-week and is down by nearly 18% since June. And if you analyze the right side of the chart, you can see that the EUR/USD is starting to notice. As the FED/ECB ratio tracks lower, the EUR/USD is starting to roll over. And if history is any indication, the EUR/USD has plenty of catching up to do.Also signaling a profound EUR/USD decline, I warned on Jan. 27 that the EUR/GBP could be the canary in the coal mine.On Monday (Jan. 25), I wrote that Janet Yellen’s pledge to “act big” on the next coronavirus relief package ushered the EUR/GBP back above critical support.However, on Tuesday (Jan. 26), the key level broke again.Please see below:Figure 9More importantly though, a break in the EUR/GBP could be an early warning sign of a forthcoming break in the EUR/USD.Figure 10If you analyze the chart above, ~20 years of history shows that the EUR/GBP and the EUR/USD tend to follow in each other’s footsteps. As a result, if the EUR/GBP retests its April low (the next support level), the EUR/USD is likely to tag along for the ride (which implies a move back to ~1.08).As it stands today, the wheels are already in motion. On Feb. 2, the EUR/GBP made another fresh low and the initial support level is all but gone.Figure 11Furthermore, notice how the EUR/USD is tracking the EUR/GBP lower? Despite being a fair distance from the ~1.08 level, the euro’s weakness relative to sterling is a sign that the Eurozone calamity is finally starting to weigh on its currency.If you analyze the chart below, you can see that the EUR/USD has already broken below its December and January support.Figure 12More importantly though, we could be approaching a point of no return.Figure 13Barely breaking out of a roughly 12-year downtrend, the EUR/USD has yet to invalidate the declining long-term resistance line. As a result, and with the EUR/USD already rolling over, a break below the 1.16/1.17 level puts ~1.08 well within the range of the 2015/2016 lows.And how could this affect the PMs?Well, notice how they like to tag along for the EUR/USD’s ride?Figure 14Despite silver’s short squeeze providing a short-term reprieve, it’s no surprise that the EUR/USD’s weakness has been met with angst by the PMs.Please see below:Figure 15As a result, the floundering euro is ushering the PMs down a one-way street. And while they may veer off to view the scenery from time to time, they all remain on a path to lower prices. Thus, yesterday’s sell-off highlights the superficiality of Monday’s (Feb. 1) surge. But while finding a true bottom requires time and patience, once it occurs, the PMs long-term uptrend will resume once again.Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.Przemyslaw Radomski, CFA Founder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

The decline in the real interest rates is the most important downside risk for gold. Will it materialize, plunging the price of the yellow metal?The rise in inflation is the most significant upside risk for gold this year, but there are also a few important downside risks. The most disturbing for us is the possibility that the real interest rates will increase. Why? Please take a look at the chart below.As you can see, there is a strong negative correlation between the real yields and gold prices . When the interest rates go up, the yellow metal falls, and when the rates go down, gold rallies . Indeed, the real interest rates peaked in November 2018 at 1.17 percent, just one month before the last hike in the Fed’s last tightening cycle . Since then, they were falling, reaching their historical bottom below -1.0 percent in the summer of 2020. Not coincidentally, gold was experiencing a bull market during this period, reaching its record high of almost $2010, just when the rates bottomed. And, as the rates normalized somewhat, the price of gold corrected to the level below $1,900.Now, the obvious question is whether there is further room for real interest rates to go down . In 2019, they were falling amid the economic slowdown and the dovish Fed cutting the interest rates. Last year, they plunged even further (with a short spike because of the surge in the risk premium ), as a result of the COVID-19 related economic crisis and the U.S. central bank slashing the federal funds rate to practically zero.However, the Great Lockdown and resulting deep downturn are behind us. When we face the second wave of the pandemic and people become vaccinated, there will be an economic recovery. As well, the Fed has already brought the interest rates to zero – meaning that without the U.S. central bank implementing NIRP , the nominal policy rates reached their lower bound. So, assuming that the Fed will not cut interest rates further and that investors will not expect a further slowing down of the economy, the room for further declines in the real interest rate is limited.The only hope lies in the increase in inflation expectations, which is actually quite probable, as I explained in the previous part of this edition of the Gold Market Overview . Given the surge in the broad money supply , the pent-up demand, and some structural shifts, reflation in 2021 is more likely than it was in the aftermath of the great financial crisis .However, gold investors should also be prepared for a negative scenario of low inflation. After all, the Fed has repeatedly undershot its annual inflation target. In this case, the real interest rates may stay roughly the same or they could even rise.Let’s take a look at the chart below, which shows the gold prices and real interest rates after the Great Recession . In the very aftermath of the Lehman Brothers’ bankruptcy , they surged, but after the panic phases ended, they were falling until the end of 2012, just when, more less, the bear market in gold started.Now, somebody could say that the real interest rates were falling for four years until reaching bottom at the end of 2012, so we shouldn’t worry about the normalization of interest rates. However, the COVID-19 related economic crisis was very deep, but also very short. Everything is happening now at an accelerated speed, so we could already be reaching the local bottom in the interest rates (or be close to it).Of course, there are important differences between that period and today . First, as I’ve already emphasized, there is now a higher risk of an increase in inflation. Second, in 2013, there was a taper tantrum , while today, the Fed maintains an ultra-dovish stance and does not signal any interest rate hikes in the foreseeable future. Although the U.S. central bank didn’t expand its quantitative easing in December, showing that it feels comfortable with some increases in the bond yields , it’s not going to accept substantial rises in the interest rates. The dovish Fed’s bias is one of the main factors behind the downward trend in the real interest rates (even if they normalize somewhat, they reach further lower peaks and bottoms over time).Third, the U.S. dollar looks different. As the chart below shows, the greenback started to appreciate in 2011, pushing gold prices down. But today it is more likely that the U.S. dollar will weaken further due to a changing administration in the White House, the economic stabilization and cash outflows into developing countries, soaring public debts, a zero-interest rate policy, and the risk of an increase in inflation.If so, the normalization of the real interest rates (if it happens, which is far from being certain) doesn’t have to plunge the yellow metal . In other words, there are important downside risks to the bullish case for gold this year, but 2021 does not have to look like 2013 in the gold market.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.

EURUSD Falls To A Two-Month Low The euro currency continues its descent, now for the fourth consecutive session. The declines accelerated following two days of subdued price action earlier this week.The current pace of decline opens the downside target to the 1.1900 level of support. But in the near term, the common currency could reverse losses.A retest of the 1.2050 level to establish resistance will be ideal.This will also potentially confirm the downside as the Stochastics oscillator is very oversold under current market conditions.GBPUSD Rebounds On BoE Meeting The British pound sterling reversed losses in one single session, intraday. Price action posted strong gains following the BoE coming out slightly hawkish than expected on negative rates.As a result, the GBPUSD was back near the ascending wedge breakout level of 1.3678.While this coincides with the Stochastics oscillator recovering from just off the oversold conditions, prices are struggling to breakout higher.Therefore, if the GBPUSD fails to move above 1.3678 then we could expect prices to continue to drift lower.But with the recent swing low forming near 1.3585, we could expect this level to hold in the near term.Oil Rally Takes A Pause WTI Crude oil prices are trading weaker following the previous strong bullish sessions.Price action is reversing gains after testing the 56.00 level. The declines could, however, see near term gains once again.For the moment, the bullish bias remains in place. If the declines continue, then oil prices could be testing the 53.77 level of support in the near term.Establishing support here could potentially confirm the long term bias to the upside.For the moment, above 56.00, oil prices could be testing the 57.35 level of resistance next.Gold Prices Fall To A Two-Month Low The precious metal is down over two percent on an intraday basis.The declines accelerated after the precious metal lost the footing near 1817.89 support.The sharp declines could see the precious metal touching down to 1764.22 where the next key support level resides. This will put gold prices down to a three-month low.The formation of a lower low will no doubt change the bias in gold prices to the downside.However, we expect the declines to hold near the 1764.22 level in the medium term.

Joe Biden’s election as president and his first economic proposal proved negative for gold prices, but the presidency might yet turn positive.The 46 th presidency of the United States has officially begun. What does that mean for the U.S. economy, politics and the precious metals market?Let’s start by noting that this will not be an easy presidency. The epidemic in the U.S. is raging, the economy is in recession , and public debt is ballooning. Foreign relations are strained while the nation is strongly polarized, as the recent riots clearly showed. So, Biden will have to face many problems, with few assets .First, as he turned 78 in November, Biden has been the oldest person ever sworn in as U.S. president. Second, his political capital is rather weak, as the 2020 election is more about Trump’s loss than Biden’s victory. In other words, many of his voters supported Biden not because of his merits but only because they opposed Trump. Third, he will have the smallest congressional majorities in several years. Democrats have only ten more seats than Republicans in the House and the same number of seats in the Senate. And even with Kamala Harris as a tie-breaker, Biden could not lose a single Democrat senator’s vote to pass any legislation in Senate.On the one hand, Biden’s tough political position seems to be negative for gold prices, as it lowers the odds of implementing the most radical, leftist political agenda. On the other hand, Biden’s difficulties also lower the chances of sound economic reforms, which is good news for the yellow metal. A divided Congress and Democratic Party with an old president at the helm, who has a weak personal base could result in political conflicts and stalemates which would prove positive for gold.When it comes to economics, Biden has already presented his pandemic aid bill, worth of $1.9 trillion. The proposal includes direct payments of $1,400 to households, $400 per week in supplementary unemployment benefits through September, billions of dollars for struggling businesses, schools, and local governments, as well as funding that would accelerate vaccination and support other coronavirus containment efforts. Biden also wants to raise the minimum wage to $15 per hour, which will not appeal to Republicans. The big size of the package will also be disliked by the GOP.The fact that Democrats have won the Georgia Senate runoffs, taking control over the Senate, increases the chances that Biden will implement his economic stimulus. The equity markets welcomed the idea of another large aid package, in contrast to bond investors who sell Treasuries, causing the yields to go up. The increase in real interest rates pushed gold prices down , as the chart below shows.It seems that investors liked the idea of big stimulus, hoping for acceleration in economic growth. However, printing more money (I know, the Treasury technically doesn’t print money – but it issues bonds which are to a large extent bought by the Fed ) and sending checks to people doesn’t increase economic output. Another problem is that the U.S. can’t run massive fiscal deficits forever and ever , hoping that interest rates will always stay low.So, although Biden’s economic stimulus may add something to the GDP growth in the short-term, it will not fundamentally strengthen the economy. Quite the contrary, the massive increase in government spending and public debt (as well as in taxation) will probably hamper the long-term productivity growth and make the already fragile debt-based economic model even more fragile. What is really worrisome is that Biden doesn’t seem to care about U.S. indebtedness – he has already spoken strongly against deficit worries and hasn’t proposed any actions to reduce the debt – and plans to unveil the additional economic stimulus.Hence, although gold declined initially in a response to Biden’s economic stimulus proposal, the new president could ultimately turn out to be positive for the yellow metal. After all, gold declined in the aftermath of the Lehman Brothers’ collapse , but it shined under Barack Obama’s first presidency. And Biden is likely to be even more fiscally irresponsible than Obama (or Trump), while the Fed under Powell is likely to even more monetarily irresponsible than under Bernanke (or Yellen ). Indeed, according to The Economist , Biden’s proposal is worth about nine percent of pre-crisis GDP, nearly twice the size of Obama’s aid package in the aftermath of the Great Recession . And, in contrast to previous crises, the Fed has announced the desire to overshoot its inflation target. All these factors should support gold prices in the long run.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.

EURUSD Snaps A Four Day Losing Streak The euro currency posted gains on Friday, marking an end to four consecutive daily declines. The rebound comes after price reversed near a three-month low of 1.1951.As a result, prices pared losses to close on Friday near 1.2050. This level initially served as support.If price action forms resistance here, then we expect to see the EURUSD trading within the price band of 1.2050 and 1.1951.A breakout from this range will further set the direction.To the downside, the next support level is at 1.1900. To the upside, a strong close above 1.2050 could open the way for price to test the 1.2144 level next.GBPUSD Price Action Invalidates Ascending Wedge Pattern The British pound sterling continues to hold a strong bullish momentum. The strong reversal after price fell to a two-week low has now invalidated the ascending wedge pattern.This keeps price action biased to the upside. After Friday’s close, the GBPUSD is trading back close to the three and half year high.The currency pair has also now closed with bullish gains for four consecutive weeks.Still, the momentum is slowing and unless the GBPUSD closes strongly above 1.3755, we expect price action to remain flat near the current highs.Oil Prices Settle Near A 13-Month High WTI Crude oil prices continued to advance with price action closing near a 13-month high. Prices briefly traded close to the next key resistance level of 57.35.We could expect a push higher for the commodity to test this level firmly. Further gains can be expected only on a strong breakout above this level.This means that a reversal near 57.35 will potentially see a possible retracement coming.The previously held resistance level near 53.77 remains the initial downside target for the moment.The price level near 40.55 however marks the 61.8 Fibonacci retracement level for the decline from 65.62 in January 2020 through the zero level on 20th April.Therefore, the correction, if applicable could see a stronger pullback.Gold Prices Pull Back From A Three-Month Low The precious metal managed to recover some of the losses on Friday. Price action closed with over one percent gains on the day, after falling to a three-month low previously.The retracement puts gold prices close to the 1817.80 level where resistance could form.Unless we see a strong close above 1817.80, gold prices could hold a sideways range between 1817.80 and the recent lows near 1784.81.Despite the current pullback, gold price closed on a bearish note for the week. Therefore, a continuation to the downside cannot be ruled out.

EURUSD Rises To A Two-Week High The euro currency continues to push higher, rising for the third consecutive day, to a two-week high.The gains, however, are slowing as price moves closer to the 1.2144 – 1.2177 level of resistance. We also continue to see the hidden bearish divergence on the chart, which could suggest a pullback.To the downside, price is likely to stall near the 1.2050 level of support for the moment. However, a close below this level could see the Feb 5 lows of 1.1952 come into the picture.If the current bullish moment continues, then the euro currency will need to break out above 1.2177 to confirm further upside.GBPUSD Pushes Higher But Gives Back Gains The British pound sterling continues to rise higher, marking a new high of 1.3866 intraday. But price action is pulling back after testing this level.The Stochastics oscillator is firmly in the overbought levels supporting the upside bias. For the moment, the downside remains limited until we see a lower high forming.Given the current pace of gains, the GBPUSD is seen testing the support area of 1.3790.A strong close on a weekly basis above this level is needed to confirm further upside.For the moment, the untested support level near 1.3759 will be the likely downside target in case of a correction.Oil Price Grinds Higher To A New 13-Month High WTI crude oil prices continue to maintain a strong bullish moment.Price action rose to fresh highs of 58.73. This makes price action likely to test the unfilled gap from January 20 last year at 59.47However, with price now trading below the trend line, this could act as a potential resistance for price action.To the downside, the support level at 57.35 is already tested albeit only slightly.Therefore, any declines could see this level coming under a firm re-test. Only a strong close below 57.35 will confirm a move down to the 53.77 level of support.Gold Prices Rejected Near 1850 The precious metal is struggling to breakout above 1850 as price action was firmly rejected near this level intraday.Overall, gold prices remain trading subdued compared to the gains made in the previous sessions.We expect the precious metal to maintain a sideways range between the 1850 resistance and 1817.80 level of support in the near term.The Stochastics oscillator is also starting to move a bit down from the overbought levels currently. This will likely mark an end to a three-day winning streak in gold.

EURUSD Reverses Near 1.2144 Resistance Level The euro currency is giving back the gains made from Wednesday as price action failed to rise above the technical resistance level near 1.2144.As a result, price action is quite bearish, amid the hidden bearish divergence as well. However, given the fact that price action has broken out from the falling price channel, this decline could merely be a retracement to the breakout level.We could see EURUSD retest the breakout level near 1.2080 to the downside. Below this level, the lower support area near 1.2050 is also likely to hold the declines.In the near term, we could expect the EURUSD to move in a sideways range between 1.2144 and 1.2080 levels.GBPUSD On Track To Retest 1.3590 The GBPUSD currency pair is giving back the gains made from the previous day with prices turning lower.On the intraday charts, we see prices trading currently below the 1.3821 swing low. A confirmed daily close below this level could potentially see price action testing the previous untested support level near 1.3790.As long as this support level holds, we could expect to see further upside. But for price action to continue higher, we would need to see the GBPUSD rising past the current highs above 1.3850.However, if the GBPUSD loses the 1.3759 level of support, then we could expect further declines in the near term.This would also potentially open the way for the currency pair to slide towards the 1.3500 level of support.WTI Crude Oil Rally Takes A Pause The recent pace of strong gains in the WTI crude oil market is seen to be slowing with prices likely to close flat for a second consecutive day. This could potentially see the onset of a short term correction in the markets.The initial support level near 57.35 is likely to be tested in the short term. As long as this support level holds, we could expect crude oil prices to maintain the upside bias.However, in the event that oil prices lose the 57.35 support, then we might expect to see a steeper correction. Below this level, the next main support comes in near 53.77.Given the recent bullish momentum in the oil markets, there is also strong evidence of a bearish divergence building up.Therefore, this could see a short-term correction which can only be confirmed upon a daily close below the 57.35 support level.Gold Prices Slip To A Three-Day Low The precious metal is down nearly 1% intraday as the short term bearish momentum is strong. Price action is likely to retest the support area near 1817.80.The stochastics oscillator on the intraday charts are also signaling further room to the downside. However, the declines might stabilize after testing the 1817.80 level.In the event that gold prices breakdown below this level, then we might expect to see further declines.The initial price level to watch will be the 1785.25 level which marks the lows from the 4th of February.A close below the swing low could potentially open the way for gold prices to test 1764.22 next.

The pandemic winter will take longer than we thought. The longer we struggle with the coronavirus, the brighter gold could shine.A long, long time ago, there was a bad virus, called the coronavirus , that killed many people all around the world and severely hit the global economy. Luckily, smart scientists developed vaccines that defeated the coronavirus and ended the pandemic . Since then, humankind lived happily – and healthy – ever after.Sounds beautiful, doesn’t it? This is the story we were all supposed to believe. The narrative was that the development of vaccines would end the pandemic and we would quickly return to normalcy. However, it turns out that this was all a fairy tale – the real struggle with the coronavirus is more challenging than we thought .First, the rollout of vaccinations has been very, very slow . As the chart below shows, on February 1, 2021, only about 1.77 percent of Americans became fully vaccinated against COVID-19.Of course, full protection requires two doses, so it takes some time. But in many countries, the share of the population which received at least one dose of the vaccine is also disappointingly low, as the chart below shows.It means that our progress towards herd immunity is really sluggish . At such a pace, we are losing the race between injections and infections. And we will not reach herd immunity until the second half of the year or even the next winter…Second, there is the problem of mutations . The new strains are rapidly popping up which poses a great risk in our fight with the coronavirus. One of these new variants was identified in the United Kingdom and quickly spread through the country. Although it’s not more lethal, it’s more infectious, which makes it more dangerous overall. And the more variants emerge, it’s more likely that we could see a mutation resistant to our current treatments and vaccines. Indeed, some of the mutations change the surface protein, spike, and have been shown to reduce the effectiveness of combating the coronavirus by monoclonal antibodies.The really bad part is that these two problems are strongly connected. The longer the vaccinations take, the more active cases we have. The more active cases we have, the more mutations happen, as each new infection implies more copies of the coronavirus, which gives it more chances to mutate. The more mutations occur, the higher the odds of a really nasty strain. Therefore, the longer the vaccination process takes, the more probable it is that it will not work and that vaccine-resistant variants might emerge.Given that in many countries vaccinations are practically the only rational strategy to fight the virus, the vaccine-resistant strain would be a serious blow. Surely, some vaccines could be relatively easily updated, but their rollout would still require time – time we don’t have.What does it all imply for the gold market? Well, the more sluggish the vaccinations, the higher the risk that something goes wrong and that our battle with COVID-19 will take more time. The longer the fight, the slower the economic recovery. The longer and bumpier road toward herd immunity, the slower lifting sanitary restrictions and social distancing measures, and the later we come back to normalcy. The longer we live in Zombieland, the easier fiscal and monetary policies will be, and the brighter gold will shine.Another issue is that we shouldn’t forget about the possibility of the pandemic’s long economic shadow. A recent paper has examined the effects of 19 major previous pandemics, finding a long shadow of the economic carnage. Although financial markets are still (wrongly, I believe) betting on a V-shaped recovery, the history suggests that a double dip is likely, as eight of the last 11 recessions experienced it. Recessions sound golden, don’t they?However, there is one caveat here. The sensitivity of economic activity to COVID-19 infections and restrictions has significantly diminished since the Great Lockdown in the spring of 2020. There are three reasons for that. First, people fear the coronavirus less. Second, epidemic restrictions are better targeted and implemented. Third, entrepreneurs adopted better to cope with the epidemic.The greater resilience of the economy means a smaller downturn and fewer long-term scars, which will limit any upward COVID-19 related impact on gold prices . But a softer economic impact also implies a quicker recovery, which – together with the upcoming big government stimulus – could increase consumer prices, thus supporting gold prices through the inflation channel. Indeed, commodity prices have been surging in 2021, so gold may follow suit.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.

Slow start to the week with China and US markets closedEURUSD Recovers From A Three-Day Low The euro currency touched a three-day low on Friday at 1.2080 before recovering. Price action is subdued for the past three sessions with a lower high currently forming.This comes after price slipped to a three-month low at 1.1951 on February 5th. The downside bias is starting to build up.The common currency will need to rise above the recent swing high of 1.2187 in order for the upside bias to hold.Failure to do so could potentially open the way for further declines, especially if the swing low of 1.1951 gives way.For the moment, the support area near 1.2050 will be critical to the downside. The Stochastics oscillator is moving up and could signal another test to the resistance area near 1.2144 – 1.2177.The British pound sterling made a sharp recovery with price action on Friday posting a strong rebound.The gains put the GBPUSD back near the previous highs at 1.3866. But with the Stochastics oscillator signaling a lower high, we could see a pullback.The support level near 1.3759 remains in scope to the downside. As long as the cable holds gains above this level, there is room for further gains.But a close below this level could potentially see a larger correction taking place.For the moment, the uptrend remains intact with price making consistently higher lows.Oil Advances To A New Eleven-Month High WTI Crude oil prices resumed the bullish momentum following three days of subdued trading. Prices settled at 59.55 on Friday, marking a new 11-month high.The rebound comes after oil prices briefly fell to the support area near 57.35. This potentially cements the 57.35 level as a strong support area in case of any downside.Despite the gains, oil prices are now nearing a multi-year resistance area between the 65.5 and 61.5 levels.Price action has on previous occasions failed to break past this level.Therefore, unless there is a strong momentum led breakout, we could see price action consolidating in this resistance area.Gold Prices Find Support Near 1817.89 The declines in the precious metal stalled after prices once again tested the 1817.89 level of support. A retest of this level, alongside the Stochastics oscillator attempting to move out from the oversold levels, could keep prices to the upside for the moment.This will mean that gold prices will continue to maintain a sideways range between 1850 and 1817.89 levels in the near term.On the daily charts, gold prices closed flat following the losses from the previous day.Therefore, if price action turns bearish today, we could expect to see the previous lows at 1784.81 from 4th February coming under test once again.To the upside, price action needs to post a strong close above the 10th of February highs of 1855.30 for any signs of further gains.

EURUSD Subdued Amid Thin TradingThe euro was trading subdued, with price action once again attempting to retest the resistance level near 1.2144.Price action in the EURUSD is somewhat flat with the US markets closed on account of the president’s day holiday today.The short term trend appears to be flat for the moment unless the common currency is able to break out above the resistance area between 1.2144 and 1.2177.Meanwhile, the stochastics oscillator is posting a lower high. This could suggest a short-term correction to the downside.The support level near 1.2050 is likely to remain the downside target for the moment.GBPUSD Surges Past 1.3900The British pound Sterling continues to surge ahead with price action rising above 1.3900.So far, GBPUSD has been posting gains for nearly five consecutive weeks.A continuation to the upside could see price action rising towards the 1.4400 level. This would mark the highest level since mid-2016.But the current pace of gains has seen no meaningful pullback just as yet. Therefore, the lack of any support to the downside is likely to open the downside risk.The recent swing high near 1.3867 is likely to act as support. But if the GBPUSD loses this handle, we expect a correction down to 1.3759 next.Oil Prices Rally On Cold WeatherOil prices opened on a bullish note in the Asian trading session rising to a new 13 month high.The gains came as the cold winter has fueled demand for the fossil fuel.Price rallied to a new high of 60.75 before giving back some of the intraday gains. However, towards the late European trading session, oil prices were seen giving back some of these gains.If oil prices continue to pull back, then we might get to see prices covering the gap from Monday’s open. To the upside, the next main resistance level is near 61.35.The current rally in the oil prices also comes as the US dollar has been trading weaker over the past few weeks.Gold Price Confined To Friday’s RangeThe precious metal is trading subdued with price action firmly stuck within Friday’s range.With both the Asian and US markets closed, trading in the precious metal is slow. Price action is back near the support level of 1817 region.For the moment, the support level seems to be holding up which could provide a short-term boost to the upside. The resistance level near 1850.00 will likely once again act as resistance keeping a lid on any further gains.However, watch the stochastics oscillator which is likely to signal a shift in the momentum.In the event that gold prices lose the 1817 support, we could expect price action toward the 4th February lows at 1784.79.

Gold is dodging bullets, as it comes increasingly under fire from rising U.S. interest rates and a USD that is poised to surge.Catching unsuspecting traders in yet another bull trap , gold’s early-week strength quickly faded. And with investors unwilling to vouch for the yellow metal for more than a few days, the rush-to-exit mentality highlights a short-term vexation that’s unlikely to subside.Please see below:Figure 1Destined for devaluation after hitting its triangle-vertex-based reversal point (which I warned about previously ), the yellow metal is struggling to climb the ever-growing wall of worry.Mirroring what we saw at the beginning of the New Year, gold’s triangle-vertex-based reversal point remains a reliable indicator of trend exhaustion.And when you add the bearish cocktail of rising U.S. interest rates and a potential USD Index surge, $1,700 remains the initial downside target , with $1,500 to even ~$1,350 still possibilities under the right curcumstances.Please see below:Figure 2 - Gold Continuous Contract Overview and Slow Stochastic Oscillator Chart ComparisonTo explain the rationale, I wrote previously:Back in November, gold’s second decline (second half of the month) was a bit bigger than the initial (first half of the month) slide that was much sharper. The January performance is very similar so far, with the difference being that this month, the initial decline that we saw in the early part of the month was bigger.This means that if the shape of the price moves continues to be similar, the next short-term move lower could be bigger than what we saw so far in January and bigger than the decline that we saw in the second half of November. This is yet another factor that points to the proximity of $1,700 as the next downside target.In addition, as a steepening U.S. yield curve enters the equation, I wrote on Jan. 27 that the bottom, and subsequent move higher, in U.S. Treasury yields coincided with a USDX rally 80% of the time since 2003.Figure 3 - Source: Daniel LacalleAnd while the USDX continues to fight historical precedent, on Feb. 12, the U.S. 30-Year Treasury yield closed at its highest level in nearly a year. As such, the move should add wind to the USDX’s sails in the coming weeks.Please see below:Figure 4In conclusion, gold is under fire from all angles and dodging bullets has become a near impossible task. With the USD Index likely to bounce off its declining resistance line (now support), a bottom in the greenback could be imminent. Also ominous, a steepening U.S. yield curve signals that the yellow metals’ best days are likely in the rearview. However, as the situation evolves and gold eventually demonstrates continued strength versus the USD Index, its long-term uptrend will resume once again.Before moving on, I want to reiterate my previous comments and explain why $1,700 remains my initial target:One of the reasons is the 61.8% Fibonacci retracement based on the recent 2020 rally, and the other is the 1.618 extension of the initial decline. However, there are also more long-term-oriented indications that gold is about to move to $1,700 or lower.(…) gold recently failed to move above its previous long-term (2011) high. Since history tends to repeat itself, it’s only natural to expect gold to behave as it did during its previous attempt to break above its major long-term high.And the only similar case is from late 1978 when gold rallied above the previous 1974 high. Let’s take a look at the chart below for details (courtesy of chartsrus.com)Figure 5 - Gold rallying in 1978, past its 1974 highAs you can see above, in late 1978, gold declined severely right after it moved above the late-1974 high. This time, gold invalidated the breakout, which makes the subsequent decline more likely. And how far did gold decline back in 1978? It declined by about $50, which is about 20% of the starting price. If gold was to drop 20% from its 2020 high, it would slide from $2,089 to about $1,671 .Figure 6 - Relative Strength Index (RSI), GOLD, and Moving Average Convergence Divergence (MACD) ComparisonIf you analyze the red arrow in the lower part of the above chart (the weekly MACD sell signal), today’s pattern is similar not only to what we saw in 2011, but also to what we witnessed in 2008. Thus, if similar events unfold – with the S&P 500 falling and the USD Index rising (both seem likely for the following months, even if these moves don’t start right away) – the yellow metal could plunge to below $1,350 or so. The green dashed line shows what would happen gold price, if it was not decline as much as it did in 2008.However, as of right now, my initial target is $1,700, with $1,500 likely over the medium-term. But as mentioned, if the S&P 500 and the USD Index add ripples to the bearish current, $1,400 (or even ~$1,350) could occur amid the perfect storm. ~$1,500 still remains the most likely downside target for the final bottom, though.Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.Przemyslaw Radomski, CFA Founder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Euro Gives Back Intraday GainsThe euro currency rose to a four-week high after GDP numbers came out better than forecast.But price action soon gave back the gains as the resistance level proved too hard to breach.Price action briefly rose past 1.2144 before retreating from the resistance level between 1.2177 and 1.2144. For the moment, the EURUSD remains well above the 12th February lows.However, a close below this level could see further short term declines. The main support level at 1.2050 remains the downside target for the moment.GBPUSD Slips But Upside Remains IntactThe British pound sterling continues to post steady gains. Price action was seen trading a bit weaker after testing highs of 1.3951 on Tuesday.But a quick recovery from the intraday lows is keeping the upside bias intact.Further gains could likely see the cable testing the 1.4000 round number level in the near term.To the downside, the current intraday lows near 1.3869 and the highs from 10th February at 1.3866 form the initial support.Only a strong close below this level will open the downside toward the 12th Feb lows at 1.3775.Crude Oil Retreats From 60.92WTI crude oil prices are giving back the gains after prices touched a new 13-month high earlier this week.The declines come after prices fell to fill the gap from last Friday at 59.55. With most of the intraday declines already pulling back, the upside could resume.The fundamentals remain bullish for oil markets especially with the cold winter in the US. This could see oil prices likely to test the 61.00 level next to the upside.Any corrections could likely stall near the 57.35 level for the moment. Establishing support here could also further strengthen the potential for more gains.Gold Slips Below 1817 Technical SupportThe precious metal lost the 1817.79 technical support on Tuesday.However, after prices fell to intraday lows of 1789.37, there was a quick recovery.The current pullback could see gold prices retesting the 1817.79 level once again. The bias remains mixed as we could see some consolidation taking place near this level.Only a strong close below 4th Feb lows of 1784 will see further downside.The next key target for gold is near the 1764.22 level of support. To the upside, gains could be limited to the 1850 handle once again.

USD weaker after a two-day gainEuro Attempts To Pare LossesThe euro currency is making a solid recovery, in a bid to recoup the losses from Wednesday.Price action is posting a reversal after it broke out from the long term daily trendline for the second time.However, the current pace of gains coincides with likely resistance from the trendline and the 50-day moving average.If the euro fails to close above Wednesday’s highs of 1.2107, then we might expect to see a continuation lower.For the moment, the support level near 1.2050 might help to stall further declines in the currency pair.But a daily close once again below this level will confirm further downside.The British pound sterling posted a strong reversal snapping a two-day losing streak. Price action was bullish as it broke past the previous highs near 1.3950.On an intraday basis, the GBPUSD rose to highs of 1.3985 before giving back some of the gains.Further upside is likely to continue as the GBPUSD approaches the key 1.4000 round number level.But given the current set up of the Stochastics oscillator, the bullish momentum might be losing steam.For the moment, the line in the sand is the Tuesday high of 1.3950. A daily close below this level could keep either prices moving sideways or a drop to Wednesday’s lows of 1.3829.Crude Oil Down Over One PercentOil prices are down over one percent on Thursday. The declines come after the commodity rose to intraday highs of 62.22 before giving back the gains.The overall bias in crude oil remains to the upside. Therefore, unless there is strong evidence of a correction, price action is likely to remain bullish.For the moment, the immediate trendline will be key to watch. A break down below this trendline could potentially accelerate short term declines.The main support level is near the 57.35 level. A close below 60.87 could potentially see the short term correction taking place.However, if oil prices manage to reverse the current gains, we could expect to see further upside in the near term.Gold Prices Steady Above 1764The precious metal is trading flat on Thursday following the sharp declines from the day before. Price action has not yet tested the 30 November lows of 1764.22.For the moment, we expect gold prices to consolidate between 1817.80 and 1764.22 levels. A breakout below 1764.22 could however extend declines down to the next key level near 1750.On a weekly basis, prices are consistently posting lower lows.However, the support level around the 1764 region is holding up. A weekly close below this level could open the way for further downside in the precious metal.

Under the Biden administration the economy could overheat, thereby increasing inflation and the price of gold.In January, Biden unveiled his plan for stimulating the economy, which is struggling as the epidemic in the U.S. continues to unfold. Pundits welcomed the bold proposal of spending almost $2 trillion. Some expenditures, especially on vaccines and healthcare, sound pretty reasonable. However, $1.9 trillion is a lot of money! And a lot of federal debt , as the stimulus would be debt-funded!So, there is a risk that Biden’s package would overheat the economy and increase inflation . Surprisingly, even some mainstream economists who support the deficit spending, notice this possibility. For instance, former Treasury Secretary Larry Summers, said that Biden’s stimulus could lead the economy to overheat, and that the conventional wisdom is underestimating the risks of hitting capacity. Although he doesn’t oppose the idea of another stimulus, Summers noted that “if we get Covid behind us, we will have an economy that is on fire”.Indeed, this is a real possibility for good reasons. First, the proposed package would not only be large in absolute terms (the nominal amount), but also relative to the GDP . According to The Economist , Biden’s proposal is worth about nine percent of pre-crisis GDP, nearly twice the size of Obama’s aid package in the aftermath of the Great Recession .And the stimulus is also large relative to the likely shortfall in the aggregate demand. I’m referring here to the fact that the winter wave of the coronavirus would be less harmful for the economy – and that there have already been big economic stimuli added last year, including a $900 billion package passed no earlier than in December.Oh yes, politicians were really spendthrift in 2020, and – without counting the aid passed in December – they injected into the economy almost $3 trillion, or about 14 percent of pre-crisis GDP, much more than the decline in the aggregate demand. In other words, the policymakers added to the economy more money that was destroyed by the pandemic .But the tricky part is that Americans simply piled up most of this cash in bank accounts, or they used it for trading, for instance. Given the social-distancing measures and limited possibilities to spend money, this outcome shouldn’t actually be surprising. However, the hoarding of stimulus shows that it has not yet started to affect the economy – but that can change when the economy fully reopens and people unleash the hoarded money. If all this cash finally reaches the markets, prices should go up.You see, the current economic downturn is unusual. It doesn’t result from the fact that Americans don’t have enough income and cannot finance their expenditures. The problem is rather that people cannot spend it even if they wanted to. Indeed, economic disruption and subdued consumer spending are concentrated in certain sectors that are most sensitive to social distancing – such as the leisure, transport and hospitality industries – rather than spread widely throughout the whole economy. So, when people will finally be able to spend, they will probably do so, possibly accelerating inflation .As well, normally the Fed would tighten its monetary policy to prevent the rise in prices. But now the U.S. central bank wants to overshoot its inflation target, so it would not hike interest rates only because inflation raises to two percent or even moderately above it.Another potential inflationary driver is dollar depreciation, which seems likely, given the zero-interest rates policy and the expansion in the U.S. twin deficit .Hence, without the central bank neutralizing the fiscal exuberance, it’s possible that Biden’s plan would overheat the economy, at least temporarily. Of course, that’s not certain and given the small Democrats’ majority in Congress, the final stimulus could be lower than the proposed $1.9 trillion. But it would remain large and on top of previous aid packages and pent-up demand, which makes the overheating scenario quite likely.Actually, investors have already started to expect higher inflation in the future – as the chart below shows, the inflationary expectations have already surpassed pre-pandemic levels.From the fundamental perspective, this is good news for the gold market. After all, gold is bought by some investors as an inflation hedge . Moreover, the acceleration of inflation would lower real interest rates , keeping them deeply in negative territory, which would also be positive for the yellow metal.So, although the expectations of higher fiscal stimulus plunged gold prices in January, more government spending – and expansion in budget deficits and public debt – could ultimately turn out to be supportive factors for gold. Especially if easy fiscal policy will be accompanied by the accommodative monetary policy – in particular quantitative easing and a rising Fed’s balance sheet – and inflation.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.

Risk on sentiment pushes dollar lowerEuro Closes The Week Almost FlatThe euro currency managed to pull back after hitting a two-week low during the week. Price action remains steady within the 1.2050 and 1.2144 levels for the moment.The overall trend remains flat with the key price level established. Only a strong break out from either of these levels will indicate further direction in the trend.The Stochastics oscillator on the daily chart could likely signal a move to the upside.However, for this to happen, the euro currency will need to break out above 1.2177 – 1.2144 levels.To the downside, support is firmly established at 1.2050 which has held up on the previous retest.The British pound sterling has closed with gains for six consecutive weekly sessions so far.The gains put the GBPUSD over a three and half year high, closing on Friday at 1.4018. This puts the currency pair near a multi-year support/resistance level.A continuation to the upside could see further gains coming.In the short term, price action is able to make consistent higher lows in maintaining the bullish trend. Therefore, further gains are likely as long as the current moment holds.The daily Stochastics oscillator is in the overbought levels since 9th February. This could, however, change if the momentum shifts to the downside.For the moment, the initial level near 1.3851 will be key ahead of any short term corrections.Oil Prices Pullback From A 13-Month HighOn Friday, WTI Crude oil prices closed with back to back losses. This led to the weekly price action closing in the red after prices briefly rose above 61.35 earlier in the week.The declines come after oil prices have been moving in a sharp and steady trend.On the 4-hour charts, we see the trendline breached. This has led to a modest pullback with prices rejected ahead of moving lower.If oil prices continue to move lower, then we could see the 57.35 level of support being tested. Establishing support here could potentially boost the upside.The Stochastics oscillator is currently near the oversold levels and could see some recovery in prices.To the upside, the price level of 60.87 needs to be breached in order for oil prices continue pushing higher.Gold Pulls Back From A Seven-Month LowThe precious metal fell to a seven-month low over the week before managing to recovery with bullish gains on Friday.Price action closed with gains after Thursday’s doji pattern. This also comes near the support level of 1764.With the Stochastics oscillator also turning higher, the current rebound could see gold prices likely to test the 1817.79 level of to establish resistance once again.Overall, price action could remain trading within these levels for the near term. Further downside is likely if gold loses the support near 1764.For the moment, there is a possibility that the precious metal could move to the upside.This is especially true with the Stochastics oscillator on the daily chart moving deeper into the oversold levels.

The narrow trading range in stocks continues, and the shallow sideways correction will eventually resolve itself with another upleg. The signs are countless, and the riskier part of the credit market spectrum agrees. As money flows from the Tresury markets, and sizable cash balances are sitting on many a balance sheet, there is plenty of fuel to power the S&P 500 advance.With volatility in the tame low 20s and the put/call ratio again moving down, the bears‘ prospects are bleak. As I wrote last week, their time is running out, and a new stock market upleg approaches. It‘s the bond market that‘s under pressure, with both investment grade corporate bonds and long-dated Treasuries suffering in the accelerated decline.Gold is the most affected, as the sensitivity of its reaction to the rising long-tern yields, has picked up very noticeably. How long before these draw both the Fed‘s attention and action – what will we learn from Powell‘s testimony on Tue and Wed? And when will the much awaited stimulus finally arrive, and force repricing beyond the metals markets?Before that, gold remains on razor‘s edge, while silver leads and platinum flies for all the green hydrogen promise. The dollar has given back on Thu and Fri what it gained two days before, and remains in its bear market. Not even rising yields were able to generate much demand for the world reserve currency. Its lower prices stand to help gold thanks to the historically prevailing negative correlation, counterbalancing the Treasury yields pressure.Plenty of action that‘s bound to decide the coming weeks‘ shape in the precious metals. And not only there as oil experienced 2 days of lossess in a row – practically unheard of in 2021 so far. On Saturday, I‘ve added a new section to my site, Latest Highlight, for easier orientation in the milestone calls and timeless pieces beyond the S&P 500 and gold. Enjoy!Let‘s get right into the charts (all courtesy of www.stockcharts.com).S&P 500 OutlookThe weekly indicators suggest that a reversal is still not likely. There is no conviction behind the weekly decline, and signs are still pointing to a sideways consolidation underway.The daily chart reflects the relatively uneventful trading – we‘re in a phase of bullish base building before powering off to new highs. See how little the daily indicators have retreated from their extended readings, and the barely noticeable price decline associated.S&P 500 InternalsAll the three market breadth indicators show improved readings, and my eyes are on new highs new lows throwing their weight behind the prior two indicators‘ advance. The overall impression is one of balance.The value to growth (VTV:QQQ) ratio shows that tech (XLK ETF) has fallen a bit out out of step recently – we‘re undergoing another microrotation into value stocks. The stock market leadership is thus broadening, confirming the findings from the advance-decline line (and advance-decline volume) examination.Credit MarketsOne chart to illustrate the bond market pressures – high yield corporate bonds are holding gained ground while investment grade corporate bonds and long-dated Treasuries are plunging like there is no tomorrow. With each of their rebound attempt sold, the dislocations are increasing – a great testament to the euphoric stage of the stock market advance. Gold and TreasuriesGold price action isn‘t as bearish as it might seem based on last week‘s moves. Yes, the readiness to decline in sympathy with rising yields, is diconcerting, but the yellow metal stopped practically at the late Nov lows, and refused to decline further. Low prices attracted buying interest, and due to the overwhelmingly negative sentiment for the week ahead, the yellow metal may surprise on the upside. Time for the bulls to prove themselves as the tone of coming weeks‘ trading in gold is in the balance.The daily chart‘s correlation coefficient has moved into strongly positive territory in 2021, illustrating the headwinds gold faces. Despite the prevailing wisdom, such strongly positive correlation isn‘t the rule over extended periods of time. That‘s the message of the daily chart – but let‘s step back and see the bigger picture similarly to the way I did on Friday witht the $HUI:$GOLD ratio.Not an encouraging sight at the moment. The tightness of mutual relationship is there, and given the decreased focus on timing (one candle representing one week) coupled with the correlation coefficient being calculated again over a 20 period sample, the week just over shows that regardless of the post-Nov resilience, gold is clearly getting under more pressure.Gold and DollarLet‘s do the same what I did about long-term Treasuries and gold, also about the dollar and gold. Their historically negative correlation is receding at the moment as the two face their own challenges. The key question is when and from what level would the fiat currency and its nemesis return to trading in the opposite directions. Such a time is highly likely to be conducive to higher gold prices.On the weekly chart, the negative correlation periods are winning out in length and frequency. Certainly given the less sensitive timining component through weekly candlesticks and 20-period calculation, the current strength and level of positive correlation is rather an exception and not a rule. Combining this chart‘s positive correlation between the two with the daily chart‘s negative yet rising readings, highlights in my view a potential for seeing an upset in the momentary relationship.In other words, the gold decline over the past now almost 7 months going hand in hand with mostly sliding dollar, would turn into higher gold prices accompanied by lower dollar values. How much higher gold prices, that depends on the long-term Treasuries market – that‘s the one playing the decisive role, not the dollar at the moment.Gold, Silver and MinersSilver is doing fine, platinum very well, while gold struggles and needs to prove itself. That‘s the essence of the long silver short gold trade idea – the silver to gold ratio attests to that.Quoting from Friday‘s analysis:(…) The dynamics favoring silver are unquestionable – starting from varied and growing industrial applications, strengthening manufacturing and economy recovery, poor outlook in silver above ground stockpile and recycling, to the white metal being also a monetary metal. Silver is bound to score better gains than gold, marred by the Bitcoin allure, would. Final chart of today‘s extensive analysis is about the two miners to gold ratios, and the divergencies they show. The ETF-based one (GDX:GLD) is sitting at support marked by both the late Nov and late Jan lows, while $HUI:$GOLD is probing to break below its late Jan lows, and these were already lower than the respective late Nov lows.Both ratios are sending a mixed picture, in line with the theme of my latest reports – gold is on razor‘s edge, and the technical picture is mixed given its latest weakness. That‘s the short run – I expect that once the Fed‘s hand is twisted enough in TLT and TLH, and speculation on yield curve control initiation rises, the focus in the precious metals would shift to inflation and its dynamics I‘ve described both on Wed and Fri. SummaryThe sellers in stocks aren‘t getting far these days, and signals remain aligned behind the S&P 500 advance to reassert itself. Neither the Russell 2000, nor emerging markets are flashing divergencies, and the path of least resistance in stocks remains higher.Gold‘s short-term conundrum continues - positive fundamentals that are going to turn even more so in the near future, yet the key charts show the king of metals under pressure, with long-term Treasury yields arguably holding the key to gold‘s short-term future. The decoupling events seen earlier this month, got a harsh reality check in the week just over. Yet, that‘s not a knock-out blow – the medium- and long-term outlook remains bright, and too many market players have rushed to the short side in the short run too.

The recent FOMC minutes are hawkish and negative for the price of gold, but the Fed will remain generally dovish for some time.Last week, the Federal Open Market Committee (FOMC) published minutes from its last meeting in January . They reveal that Fed officials became more optimistic about the economy than they were in December. The main reasons behind the more upbeat economic projection were the progress in vaccinations, the government’s stimulus provided by the Consolidated Appropriations Act 2021, and the expectations of an additional sizable tranche of fiscal support in the pipeline:Most participants expected that the stimulus provided by the passage of the CAA in December, the likelihood of additional fiscal support, and anticipated continued progress in vaccinations would lead to a sizable boost in economic activity.The Committee members were so convinced that the longer-run prospects for the economy had improved, that they decided to skip reference to the risks to the outlook in their official communications:in light of the expected progress on vaccinations and the change in the outlook for fiscal policy, the medium-term prospects for the economy had improved enough that members decided that the reference in previous post-meeting statements to risks to the economic outlook over the medium term was no longer warranted.Hence, the recent minutes are generally hawkish and bad for gold . They show that the FOMC participants turned out to be more optimistic about the U.S. economy over the medium-term, as they started to expect “strong growth in employment, driven by continued progress on vaccinations and an associated rebound of economic activity and of consumer and business confidence, as well as accommodative fiscal and monetary policy.”And, although they acknowledged that inflation may rise somewhat in 2021, the Fed officials generally were not concerned about strong upward pressure, with “most” participants still believing that inflation risks were weighted to the downside rather to the upside. In other words, they expect more growth than inflation.Implications for GoldThe Fed officials that have become more optimistic about the economy are proving negative for gold prices. Gold shines most when the Fed is pessimistic about GDP growth and the labor market, as these two factors are more prone to loosen the Fed’s monetary policy . In other words, gold prices need more inflation than economic growth in order to grow. Alternatively, gold needs the Fed to do something and expand its monetary accommodation.Indeed, the last week hasn’t been good for the price of the yellow metal. As the chart below shows, it declined below $1,800 to $1,773 on Thursday (Feb. 18), the lowest level since November 2020.Of course, the decline in the gold prices was more related to the significant selloff in the U.S. bond market than to the FOMC minutes. The bond yields increased sharply. For instance, the 10-year TIPS yields rose from -1.06 on February 10 to -0.87 on February 18, 2021, as one can see in the chart below.However, both events clearly show elevated expectations about the medium-term economic growth. Both investors and central bankers have become more optimistic about the future amid progress in vaccinations and greater prospects for additional fiscal stimulus. The strengthened risk appetite has supported equity prices, making some investors head for the exits in the gold market .Having said that, although gold prices still have some room to go lower – especially if real interest rates rally further – the fundamentals are still positive . I’m referring here to the fact that the U.S. economy has fallen into the debt trap . Both private and public debt is enormous. In such an environment, the interest rates cannot significantly increase, as they would pose a great risk to an overvalued equity market and Treasury. So, the Fed wouldn’t allow for really high interest rates and would intervene, either through expanding its quantitative easing program or through capping the yield curve .Another issue is that the Fed is not going to change its dovish monetary policy anytime soon. Even in the recent, relatively upbeat minutes, Fed officials acknowledged that economic conditions were far from the central banks’ targets:Participants observed that the economy was far from achieving the Committee’s broad-based and inclusive goal of maximum employment and that even with a brisk pace of improvement in the labor market, achieving this goal would take some time (…) Participants noted that economic conditions were currently far from the Committee’s longer-run goals and that the stance for policy would need to remain accommodative until those goals were achieved.Moreover, the Fed’s staff assessed the financial vulnerabilities of the U.S. financial system as being notable . The asset valuation pressures are elevated, and vulnerabilities associated with business and household debt increased over the course of 2020, from levels that were already elevated before the outbreak of the pandemic . So, given all these fragilities, it is unlikely that we will see a really hawkish Fed or significantly higher interest rates. There is also a possibility of the next financial crisis, given the high debt levels. All these factors should support gold prices in the long-term, although more declines in the short-term are possible of course, due to the more positive sentiment among investors and rising bond yields.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

EURUSD On Track For A Three-Day GainThe euro currency is on track for a three-day back to back gain. Price action is recovering sharply following the declines during the middle of last week.For the moment, price action will be challenging last week’s highs of 1.2168. A convincing breakout above the resistance area of 1.2177 will put the bullish bias back on the table.Currently, the 4-hour chart is also shaping up to show an inverse head and shoulders pattern. Therefore, a successful breakout above 1.2177 will push the euro currency toward 1.231 level at the very least.This will mark a lower high comparing to the highs from January this year.GBPUSD Maintains Its Impressive RallyThe British pound sterling maintains a strong hold on the bullish momentum with six consecutive weekly gains so far.Price action is nearing the April 2008 highs of 1.4376. The strong uptrend could be further cemented if the cable breaks out sharply from the rising price channel.The immediate support to the downside is near the 1.3951 level at the moment. However, with the current pace of gains, we expect prices to continue rising above the 1.4000 level.On the daily chart as well, price action remains biased to the upside following the strong bullish reversal pattern on Thursday last week.Crude Oil Attempts To Pare LossesWTI crude oil prices are looking bullish with price action posting a strong recovery after the declines from Thursday and Friday last week.For the moment, price is yet to breakout above last Thursday’s highs of 62.22. But this is essential for the commodity to maintain its bullish position.Following the reversal in the direction on Monday, we expect the minor support near 58.85 to hold prices from declining further.To the upside, oil prices will be battling the confluence of the horizontal resistance level and the trendline around the 60.87 region.If price fails to close out above this level, we could see a correction down to the 57.35 level eventually.Gold Prices Rise To A Four-Day HighThe precious metal is posting strong gains on Monday, capitalizing on a weaker greenback. As a result, price action is up over 1.5% intraday and is trading near a four-day high.Despite the current gains, XAUUSD will need to breakout above the 1817.79 level of resistance. A breakout above this level will also push price action out from the falling price channel.This could potentially signal the end of the correction in gold prices as the upside resumes.However, ahead of further gains, a high low within the 1817.79 – 1764.22 levels could give it more upside bias. This will potentially confirm the end of the current declines.Above 1817.79, gold prices will challenge the 1850 levels next.

As U.S. Treasury yields rise, gold, which is seen as an inflation hedge, is hurting. Despite the obvious warning signs, investors remain bullish.After Monday’s (Feb. 22) supposedly “groundbreaking” rally, the situation in gold developed in tune with what I wrote yesterday . The rally stopped, and miners’ decline indicated that it was a counter-trend move.Figure 1Despite Monday’s (quite sharp for a daily move) upswing, the breakdown below the neck level of the broad head-and-shoulders remains intact. It wasn’t invalidated. In fact, based on Monday’s rally and yesterday’s (Feb. 23) decline, it was verified. One of the trading guidelines is to wait for the verification of the breakdown below the H&S pattern before entering a position.What about gold stocks ratio with other stocks?Figure 2It’s exactly the same thing. The breakdown below the rising long-term support line remains intact. The recent upswing was just a quick comeback to the broken line that didn’t take it above it. Conversely, the HUI to S&P 500 ratio declined once again.Consequently, bearish implications of the breakdowns remain up-to-date . Having said that, let’s consider the more fundamental side of things.Swimming Against the CurrentAfter trading lower for six consecutive days, gold managed to muster a three-day winning streak. However, with the waves chopping and the ripple gaining steam, every swim higher requires more energy and yield’s decelerating results.For weeks , I’ve been warning that a declining copper/U.S. 10-Year Treasury yield ratio signaled a further downside for gold. And with the ratio declining by 2.88% last week, gold suffered a 2.51% drawdown.Please see below:Figure 3Over the long-term, the ratio is a reliable predictor of the yellow metal’s future direction. And even though the weekly reading (3.04) hit its lowest level since May 2020, it still has plenty of room to move lower.Figure 4For context, I wrote previously:To explain the chart above, the red line depicts the price of gold over the last ~21 years, while the green line depicts the copper/U.S. 10-Year Treasury yield ratio. As you can see, the two have a tight relationship: when the copper/U.S. 10-Year Treasury yield ratio is rising (meaning that copper prices are rising at a faster pace than the U.S. 10-Year Treasury yield), it usually results in higher gold prices. Conversely, when the copper/U.S. 10-Year Treasury yield ratio is falling (meaning that the U.S. 10-Year Treasury yield is rising at a faster pace than copper prices), it usually results in lower gold prices.As the star of the ratio’s show, the U.S. 10-Year Treasury yield has risen by more than 47% year-to-date (YTD) and the benchmark has surged by more than 163% since its August trough.Please see below:Figure 5On Jan. 15 , I warned that the U.S. Federal Reserve (FED) had painted itself into a corner. With inflation running hot and Chairman Jerome Powell ignoring the obvious, I wrote that Powell’s own polices (and their impact on real and financial assets) actually eliminate his ability to determine when interest rates rise.As a result, the central bank had two options:If they let yields rise, the cost of borrowing rises, the cost of equity rises and the U.S. dollar is supported (all leading to shifts in the bond and stock markets and destroying the halcyon environment they worked so hard to create).To stop yields from rising, the U.S. Federal Reserve (FED) has to increase its asset purchases (and buy more bonds in the open market). However, the added liquidity should have the same net-effect because it increases inflation expectations (which I mentioned yesterday, is a precursor to higher interest rates). Opening door #2, Powell’s deny-and-suppress strategy is now playing out in real time. On Feb. 23 – testifying before the U.S. Senate Banking Committee – the FED Chairman told lawmakers that inflation isn’t an issue.“We’ve been living in a world for a quarter of a century where the pressures were disinflationary,” he said.... “The economy is a long way from our employment and inflation goals.”And whether he’s unaware or simply ill-informed, commodity prices are surging. Since the New Year, oil and lumber prices have risen by more than 24%, while corn and copper prices are up by more than 14%.Please see below:Figure 6In addition, relative to finished goods, the entire basket of inputs is sounding the alarm.Figure 7To explain the chart above, the blue line is an index of the price businesses receive for their finished goods. Similarly, the green line is an index of the price businesses pay for raw materials. As you can see, the cost of doing business is rising at a torrent pace.More importantly though, Powell’s assertion that inflation is an urban legend has been met with eye rolls from the bond market . To repeat what I wrote above: Powell’s own policies (and their impact on real and financial assets) actually eliminate his ability to determine when interest rates rise.Case in point: the U.S. 10-year to 2-year government bond spread is now at its highest level since January 2017.Please see below:Figure 8To explain the significance, the figure is calculated by subtracting the U.S. 2-Year Treasury yield from the U.S. 10-Year Treasury yield. When the green line is rising, it means that the U.S. 10-Year Treasury yield is increasing at a faster pace than the U.S. 2-Year Treasury yield. Conversely, when the green line is falling, it means that the U.S. 2-Year Treasury yield is increasing at a faster pace than the U.S. 10-Year Treasury yield.And why does all of this matter?Because the above visual is evidence that Powell has lost control of the bond market.At the front-end of the curve, Powell can control the 2-year yield by decreasing the FED’s overnight lending rate (which was cut to zero at the outset of the coronavirus crisis). However, far from being monolithic, the 5-, 10-, and 30-year yields have the ability to chart their own paths.And their current message to the Chairman? “We aren’t buying what you’re selling.” As such, the yield curve is likely to continue its steepening stampede.Circling back to gold, all of the above supports a continued decline of the copper/U.S. 10-Year Treasury yield ratio. With yields essentially released from captivity, even copper’s 8.02% weekly surge wasn’t enough to buck the trend.As a result, gold’s recent strength is likely a mirage. The yellow metal continues to bounce in fits and starts, thus, it’s only a matter of time before the downtrend continues. Furthermore, with the USD Index still sitting on the sidelines, a resurgent greenback would add even more concrete to gold’s wall of worry.And speaking of gold’s wall of worry, the sentiment surrounding it is far from being negative.Figure 9 - Source: Investing.comThe above chart shows the sentiment of Investing.com’s members. 64% of them are bullish on gold. As you can see above, there are also other popular markets listed: the S&P 500, Dow Jones, DAX, EUR/USD, GBP/USD, USD Index, and Crude oil. The sentiment for gold is the most bullish of all of them. Yes, the general stock market is climbing to new all-time highs every day now, and yet, people are even more bullish on gold than they are on stocks.When gold slides, the sentiment is likely to get more bearish and particularly high “bearish” readings – say, over 80% would likely indicate a good buying opportunity. Naturally, this is not the only factor that one should be paying attention to.The bottom line? As it stands today, being long the precious metals offers a poor risk-reward proposition. However, in time (perhaps over the next several months), the dynamic will reverse, and the precious metals market will shine once again.Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.Przemyslaw Radomski, CFA Founder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

USD fights back from a five-week lowEuro Trades Subdued But Supported By The Trend-Line The euro currency is trading rather mixed, a day after prices almost closed flat on Tuesday.Overall, the long-term trendline on the daily chart is supportive of prices. Therefore, we could see price action attempt to push higher.The 50-day moving average is also close and could come in as dynamic support. For the near term though, the EURUSD currency pair will need to close convincingly above the resistance area of 1.2177 and 1.2144.This resistance area is proving hard to break out in the near term. Therefore, there is a very good chance that the EURUSD might remain in a sideways range for now.To the downside, the 1.2050 level will hold the currency pair from posting further declines.The British pound sterling rose to a fresh three-year high at 1.4140. But prices were rejected intraday with the currency pair likely to close bearish or flat.Given that this pattern comes near the top end of the rally, it could potentially signal the start of a correction in the GBPUSD.The cable has not made any decent pullbacks so far. Therefore, a close below Tuesday’s low of 1.4055 could spell trouble.For the moment, prices might test the support area near 1.3950. This would mark a short-term correction in price action.The Stochastics has also moved out from the overbought levels but could signal a reversal once again.Crude Oil Rises Over 3%, Inching Closer To A Two-Year High Oil prices managed to shrug off the uncertainty of the past few days with price action once again surging.On an intraday basis, spot crude oil prices rose over 3% in what is likely to be a strong recovery. The gains come after oil prices closed bearish last week.However, at the time of writing, crude oil has managed to pare last week losses to rise higher.On the intraday charts, oil prices are yet to close fully above the previous highs of 62.97. But given the bullish momentum, we could expect to see further gains.The only downside scenario here is to see oil prices pulling back. This would mark a failure near the short-term trendline and could open the way to the downside.The support near 60.87 remains critical under such circumstances.Gold Prices Likely To Close Bearish For A Second Day The precious metal is failing to capitalize on the support level it established near the 1764 handle. Prices are falling for the second day, albeit the pace of declines is limited in comparison.To the upside, the reversal comes just a few points below the 1817.80 level. Given that this level was already established as resistance, we expect prices to hold between the two levels for the moment.On the weekly chart, we have the double bottom pattern that has formed around the 1764 handle.Therefore, a breakout above 1817.80 is needed to keep the bullish bias alive.A close above 1817.80 will open the way for gold prices to challenge the 1850 handle next.

Powell testified before Congress and reiterated the Fed’s dovish stance, but nevertheless, gold continued to slide.On Tuesday, Powell testified before the United States Senate Committee on Banking, Housing, and Urban Affairs. He offered no big surprises, so the markets were little changed. But the price of gold ended that day with a slight loss, as the chart below shows – perhaps just because Powell didn’t surprise, and struck a dovish tone.Anyway, what did the Fed Chair say? In his prepared remarks, Powell acknowledged the improved outlook for later this year . As I noted in the last edition of the Fundamental Gold Report about the recent FOMC minutes , a more optimistic Fed about the U.S. economy is bad news for gold.Additionally, Powell downplayed concerns about the recent rises in the bond yields (see the chart below), calling them “a statement of confidence” for an improving U.S. economic outlook, or “a robust and ultimately complete recovery”. This is also a negative comment for the yellow metal, as it would prefer the Fed reacting more aggressively to the increasing rates, and, for instance, implementing the yield curve control . The higher the yields, the worse it is for gold, which is a non-interest bearing asset.However, Powell also made some dovish comments . First of all, he reiterated that the Fed’s easy stance will last very long – longer than it used to be in the past . This is because the Fed implemented last year a new monetary framework, according to which the U.S. monetary policy will be informed by the assessments of shortfalls of employment from its maximum level, rather than by deviations from its maximum level. Moreover, the Fed will seek to achieve inflation that averages two percent over time. These changes imply that the Fed will not tighten monetary policy solely in response to a strong labor market, but only to an increase in inflation . However,But inflation must not merely reach two percent – it should rise moderately above two percent for some time in order to prompt the U.S. central bank to taper the quantitative easing and hike the federal funds rate .The second reason why the interest rates will stay lower for longer is that the economy is a long way from the Fed’s employment and inflation goals, and “it is likely to take some time for substantial further progress to be achieved”. On Wednesday, Powell acknowledged that it may take more than three years to reach these goals. This means that the Fed will treat any possible increases in inflation this year as temporary and will leave interest rates unchanged.Implications for GoldWhat does Powell’s testimony imply for the gold market? Well, gold bulls may be disappointed as the Fed Chair didn’t sound too dovish . He neither announced an expansion in the quantitative easing, nor the yield curve control, nor negative interest rates , nor a “whatever it takes” approach. And it seems that the yellow metal needs such things right now in order to survive – just like fish need water.However, the rising bond yields could become a problem at one point for the Fed. If they continue to rise, Uncle Sam will not be happy, and the Fed will have to step into the market to buy government bonds. The central bank and Treasury are good old friends and the close relationship between Powell and Yellen may only strengthen this beautiful friendship – and support gold prices.Moreover, the increasing bond yields (despite an ultra-dovish Fed) imply that reflation trade is strong. So far, investors just expect a return of inflation to a moderate level, but given the enormous surge in the broad money supply (see the chart below) and Biden’s mammoth fiscal plan, the risk of overheating is non-negligible.It would be really strange if such an aggressive monetary expansion wouldn’t affect the prices. As one can see, the growth in the M2 money supply is 2.5 times faster than during the Great Recession . Actually, we are already seeing inflation – but in the asset markets, not the CPI . The stock and house prices are surging. The commodity sector has also already been gaining and gold may follow suit .If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

USD gives back gains as risk currencies riseEuro Rises To A Three-Month High The euro currency finally broke past the resistance area of 1.2177 – 1.2144. The breakout pushed the common currency to a three-month high on an intraday basis.The gains come as the US dollar failed to maintain its reversal on Wednesday.If the current momentum continues then we might get to see the Euro once again attempting to test the 6 January highs of 1.2349.However, ahead of these gains, a pullback to establish support near 1.2177 would be ideal.For the moment, the EURUSD is still not out of the woods unless we see a higher low forming above the resistance area.The British pound sterling is giving back the gains from Wednesday. The declines come as the cable rose to a new three and half year high earlier this week.The current declines come as investors head into the weekend with the drop likely coming as a result of profit-taking.The GBP currency has enjoyed a strong rally and got an additional boost as the UK is already preparing plans for re-opening its economy.For the moment the pullback is likely to be met with skepticism. A continuation below Wednesday’s low of 1.4080 could, however, see the currency pair making a short-term correction.The downside could be supported near the round number 1.4000 level.Crude Oil Holds Steady At A 13-Month High Oil prices are steady after rising to a new 13-month high. The gains come as the latest report shows a drop in US Crude oil output.The weaker dollar is also helping the commodity to maintain its hold. For the moment, prices are supported near the trendline.Still, even a close below the trendline could keep the upside bias intact.The support area near 60.87 will hold the prices from posting further declines.But a close below 60.87 could potentially open the way for oil prices to fall further. This could see the 57.35 level coming under scrutiny next.Gold Prices Slip As Treasury Yields Rise The precious metal continues to trade weak with price action extending declines for a third consecutive day.The declines come as Treasury yields are rising higher. Investors are betting that the global economy will re-open quicker than anticipated with appetite for further stimulus falling.Gold prices have been trading within the 1817 and 1764 levels since the middle of February.We expect this sideways range to continue.To the downside, gold prices will likely retest the previously formed support at 1764.22.

Precious metal and crypto analysis exclusively for Celtic Gold on 27.02.2021Gold has been in a long and tenacious correction for nearly seven months already. On Friday the gold-market shocked traders and investors with yet another bloodbath similar to the one seen end of November last year. However, this capitulation probably means: Gold – The Final Sell-Off Is Here!ReviewThe price for one troy ounce of gold hit a new all-time high of US$2,075 on August 7th, 2020 and has been in a tough correction since then. After a first major interim low on November 30th at around US$1,764, gold posted a rapid yet deceptive recovery up to US$1.959. Since that high point on January 6th, the bears have taken back control.Obviously, the two sharp sell-offs on January 6th and January 8th had demoralized the bulls in such a strong way that they have not been able to get back on their feet since then. And although the bullish forces were still strong enough to create a volatile sideways period in January, since early February the bears were able to slowly but surely push prices lower.Just yesterday day gold finally broke below its support zone around US$1,760 to 1,770, unleashing another wave of severe selling into the weekly close. Now after seven month of correction, spot gold prices have reached a new low at US$1,717.© Crescant Capital via Twitter ©Tavi Costa, February 18th 2021On the other hand, the relative strength of silver remains strikingly positive. In this highly difficult market environment for precious metals, silver was able to trade sideways to up since the start of the new year. The same can be said of platinum prices.Overall, the turnaround in the precious metals sector has not yet taken place but seems to be extremely close. Since the nerves of market participants were significantly tested either with a tough and tenacious volatile sideways stretch torture or with sharp price drops like yesterday, most weak hands should have been discouraged and shaken off by now. At the same time, however, the sector has become pretty oversold and finally shows encouraging signs of being a great contrarian opportunity again.Technical Analysis: Gold in US-DollarGold in US-Dollars, weekly chart as of February 27th, 2021. Source: TradingviewOn the weekly chart gold lost the support of the middle trend line with the large uptrend channel in January. With a weekly close at US$1,734 the bears are clearly in control. However, Friday lows around US$1,725 hit pretty much exactly the long standing 38.2% fibonacci retracement from the whole wave up from US$1,160 to US$2,075. Hence, gold is meeting strong support right here around US$1,715 to US$1,730. Looking at the oversold weekly stochastic oscillator the chances for a bounce and an important turning point are pretty high. Hence, the end of this seven-month correction could be very near.However, only a clear breakout above the downtrend channel in red would confirm the end of this multi-month correction. Obviously, the bulls have a lot of work to do to just push prices back above US$1,850. If the Fibonacci retracement around US$1,725 cannot stopp the current wave of selling, then expect further downside towards the upper edge of the original rather flat uptrend channel in blue at around US$1,660. The ongoing final sell-off can easily extend a few more days but does not have to.In total, the weekly chart is still clearly in a confirmed downtrend. Prices have reached strong support at around US$1,725 and at least a good bounce is extremely likely from here. However, given the oversold setup including the sell-off on Friday there are good chances that the correction in gold is about to end in the coming week and that a new uptrend will emerge.Gold in US-Dollars, daily chart as of February 27th, 2021. Source: TradingviewOn the daily chart, the price of gold has been sliding into a final phase of capitulation since losing contact with its 200-MA (US$1,858). Not only predominating red daily candles but also lots of downtrend-lines and resistance zones are immersing this chart into a sea of red. That itself should awake the contrarian in any trader and investor. However, it is certainly not (yet) the time to play the bullish hero here as catching a falling knife is always a highly tricky art. But at least, the daily stochastic oscillator is about to reach oversold levels. Momentum remains bearish for now of course.Overall, the daily chart is bearish. Last weeks sell-off however might be overdone and has to be seen in conjunction with the physical deliveries for February futures at the Comex. However, a final low and a trend change can only be confirmed once gold has recaptured its 200-MA. This line is currently far away, and it will likely take weeks until gold can meet this moving average again. Further downside can not be excluded but it should be rather shallow.Commitments of Traders for Gold – The Final Sell-Off Is Here!Commitments of Traders for Gold as of February 27th, 2021. Source: CoT Price ChartsSince the beginning of the year, commercial traders have reduced their cumulative net short position in the gold futures market by more than 21% while gold prices corrected from US$1,965 down to US$1,770.Commitments of Traders for Gold as of February 27th, 2021. Source: SentimentraderIn the long-term comparison, however, the current net short position is still extremely high and does actually signal a further need for correction. However, this situation has been ongoing since mid of 2019. Since then, commercial traders have not been able to push gold prices significantly lower to cover their massive short positions.We can assume that since the emergence of the “repro crisis” in the USA in late summer 2019, the massive manipulation via non-physical paper ounces no longer works as it did in the previous 40 years. The supply and demand shock caused by the Corona crisis in March 2020 has certainly exacerbated this situation. In this respect, COMEX has lost its mid- to long-term weight and influence on pricing. This doesn’t mean however, that short-term sell-offs like yesterday won’t happen anymore.Nevertheless, the CoT report on its own continues to deliver a clear sell signal, similar to the last one and a half years already.Sentiment: Gold – The Final Sell-Off Is Here!Sentiment Optix for Gold as of February 27th, 2021. Source: Sentiment traderThe weak price performance in recent weeks has caused an increasingly pessimistic mood among participants in the gold market. The Optix sentiment indicator for gold is now below its lows from November 30th. In a bull market, however, these rather pessimistic readings are rare and usually short-lived. In this respect, even the currently not extreme negative sentiment could well be sufficient for a sustainable ground and turnaround.Overall, the current sentiment analysis signals an increasingly optimistic opportunity for contrarian investors. The chances for a final low after seven months of correction are relatively good in the short term already.Seasonality: Gold – The Final Sell-Off Is Here!Seasonality for Gold as of February 22nd, 2021. Source: SeasonaxFrom a seasonal point of view, the development in the gold market in recent weeks is in stark contrast to the pattern established over the last 52 years. Thus, a strong start to the year could have been expected well into February. Instead, gold fell sharply from US$ 1.959 down to US$1.717 so far.If one pushes the statistically proven seasonal high point from the end of February to the beginning of January, a grinding sideways to lower phase including interim recoveries as well as recurring pullbacks is still to be expected until April. The beginning of the next sustainable uptrend could therefore theoretically be estimated approximately starting in May. Of course, these are all just abstract seasonal mind games.In any case, statistically speaking, the seasonality for gold in spring is not very supportive for about four months. In this respect, the seasonal component continues to call for patience. At the latest in early summer however, gold should be able to trend higher again. The best seasonal phase typically starts at the beginning of July and lasts until the beginning of October.Sound Money: Bitcoin/Gold-RatioSound Money Bitcoin/Gold-Ratio as of February 22nd, 2021. Source: ChaiaWith prices of US$47,500 for one Bitcoin and US$1,734 for one troy ounce of gold, the Bitcoin/Gold-ratio is currently sitting at 27.39. That means you have to pay more than 27 ounces of gold for one Bitcoin. In other words, an ounce of gold currently only costs 0.036 Bitcoin. Bitcoin has thus mercilessly outperformed gold in the past few months. We had repeatedly warned against this development since early summer 2020!© Holger Zschaepitz via Twitter @Schuldensuehner, February 17th, 2021Generally, you should be invested in both: precious metals and bitcoin. Buying and selling Bitcoin against gold only makes sense to the extent that one balances the allocation in these two asset classes! At least 10% but better 25% of one’s total assets should be invested in precious metals (preferably physically), while in cryptos and especially in Bitcoin, one should hold at least 1% to 5%. Paul Tudor Jones holds a little less than 2% of his assets in Bitcoin. If you are very familiar with cryptocurrencies and Bitcoin, you can certainly allocate higher percentages to Bitcoin and maybe other Altcoins on an individual basis. For the average investor, who usually is primarily invested in equities and real estate, 5% in the highly speculative and highly volatile bitcoin is already a lot!“Opposites complement. In our dualistic world of Yin and Yang, body and mind, up and down, warm and cold, we are bound by the necessary attraction of opposites. In this sense you can view gold and bitcoin as such a pair of strength. With the physical component of gold and the digital aspect of bitcoin (BTC-USD) you have a complementary unit of a true safe haven in the 21st century. You want to own both!”– Florian GrummesMacro update and conclusion: Gold – The Final Sell-Off Is Here!© Holger Zschaepitz via Twitter @Schuldensuehner, February 19th, 2021.In the big picture, the “confetti party” continues. As usual, the Fed’s balance sheet total rose to a new all-time high of US$7,557 billion. The increase in assets again concentrated almost entirely in the securities holdings. The Fed balance sheet total now corresponds to 35% of the US GDP.© Holger Zschaepitz via Twitter @Schuldensuehner, February 17th, 2021In the eurozone, the unprecedented currency creation continues as well. Here, the ECB’s balance sheet climbed to 7,079 billion EUR reaching a new all-time high. The ECB balance sheet now represents 71% of the euro-zone GDP.© Crescant Capital via Twitter ©Tavi Costa, February 12th, 2021.But the Chinese are doing it the most blatantly. Here, the money supply has increased by US$5.4 trillion since March 2020!© Crescant Capital via Twitter ©Tavi Costa, February 15th 2021.As repeatedly written at this point, the expansion of the central bank’s balance sheets has far-reaching consequences. The GSCI raw materials index has risen significantly in the past 11 months. Accordingly, inflation expectations are also rising more and more and still have a lot to catch up.© Crescant Capital via Twitter ©Tavi Costa, February 20th 2021.Wood prices in the USA provide a good example of the rapidly rising commodity prices. Lumber saw the fastest increase since 1974 and has risen by more than 35% since the beginning of the year. During the same period, gasoline increased by 20%, natural gas by 26%, agricultural raw materials are around 25% more expensive and base metals jumped over 20% higher! Hence, inflation is coming, and central bankers won’t be able to stop it.While silver and platinum have been anticipating this “trend” for weeks and have been holding up much better than gold, the precious metal sector is still in its correction phase. This correction began after a steep two-year rally in last August and can be classified as perfectly normal and healthy until now.© Holger Zschaepitz via Twitter @Schuldensuehner, February 18th, 2021.After seven months and a price drop of nearly US$360, the worst for gold is likely over. In view of the recent slight increase in real US yields (currently -0.92%) the pullback over the last few weeks can be justified. Yet, it is important to focus on the bigger picture. This is where the international devaluation race to the bottom continues unabated and will sooner or later lead to significantly higher gold prices too.Technically, Friday’s sell off might have marked the final low for this ongoing correction. As well, the slide could continue for a few more days, but the remaining risk to the downside seems rather shallow. In the worst-case Gold might drop to US$1,650 to US$1,680.To conclude, this means for Gold – The Final Sell-Off Is Here! The Bottom may arrive soon within the next week or has already been seen on Friday.Source: www.celticgold.euFeel free to join us in our free Telegram channel for daily real time data and a great community.If you like to get regular updates on our gold model, precious metals and cryptocurrencies you can subscribe to our free newsletter.By Florian Grummes|February 27th, 2021|Tags: Bitcoin, bitcoin/gold-ratio, Gold, Gold Analysis, Gold bullish, gold correction, Gold Cot-Report, gold fundamentals, Silver, The bottom is in|0 CommentsFlorian GrummesPrecious metal and crypto expertwww.midastouch-consulting.comFree newsletterSource: www.celticgold.euAbout the Author: Florian GrummesFlorian Grummes is an independent financial analyst, advisor, consultant, trader & investor as well as an international speaker with more than 20 years of experience in financial markets. He is specialized in precious metals, cryptocurrencies and technical analysis. He is publishing weekly gold, silver & cryptocurrency analysis for his numerous international readers. He is also running a large telegram Channel and a Crypto Signal Service. Florian is well known for combining technical, fundamental and sentiment analysis into one accurate conclusion about the markets. Since April 2019 he is chief editor of the cashkurs-gold newsletter focusing on gold and silver mining stocks.

None of Friday‘s intraday attempts to recapture 3,850 stuck, and the last hour‘s selling pressure is an ill omen. Especially since it was accompanied by high yield corporate bondsh weakening. It‘s as if the markets only now noticed the surging long-end Treasury yields, declining steeply on Thursday as the 10y Treasury yield made it through 1.50% before retreating. And on Friday, stocks didn‘t trust the intraday reversal higher in 20+ year Treasuries either.Instead, the options traders took the put/call ratio to levels unseen since early Nov. The VIX however doesn‘t reflect the nervousness, having remained near Thursday‘s closing values. Its long lower knot looks encouraging, and the coming few days would decide the shape of this correction which I have not called shallow since Wed‘s suspicious tech upswing. Here we are, the tech has pulled the 500-strong index down, and remains perched in a precarious position. Could have rebounded, didn‘t – instead showing that its risk-on (high beta) segments such as semiconductors, are ready to do well regardless.That‘s the same about any high beta sector or stock such as financials – these tend to do well in rising rates environments. Regardless of any coming stabilization / retreat in long-term Treasury yields, it‘s my view that we‘re going to have to get used to rising spreads such as 2y over 10y as the long end still steepens. The markets and especially commodities aren‘t buying Fed‘s nonchalant attitude towards inflation. Stocks have felt the tremors, and will keep rising regardless, as it has been historically much higher rates that have caused serious issues (think 4% in 10y Treasuries).In such an environment, the defensives with low volatility and good earnings are getting left behind, as it‘s the top earners in growth, and very risk-on cyclicals that do best. They would be taking the baton from each other, as (micro)rotations mark the stock market bull health – and once tech big names join again, new highs would arrive. Then, the $1.9T stimulus has made it past the House, involves nice stimulus checks, and speculation about an upcoming infrastructure bill remains. Coupled with the avalanche of new Fed money, this is going into the real economy, not sitting on banks‘ balance sheets – and now, the banks will have more incentive to lend out. Margin debt isn‘t contracting, but global liquidity hasn‘t gone pretty much anywhere in February. Coupled with the short-term dollar moves, this is hurting emerging markets more than the U.S. - and based on the global liquidity metrics alone, the S&P 500 is oversold right now – that‘s without the stimulus package. It‘s my view that we‘re experiencing a correction whose shape is soon to be decided, and not a reversal of fortunes.Just like I wrote at the onset of Friday:(…) Would we get a bounce during the U.S. session? It‘s possible to the point of likely. The damage done yesterday though looks to have more than a few brief sessions to run to repair. True, some stocks such as Tesla are at a concerning crossroads, and in general illustrate the vulnerability of non-top tech earners within the industry. Entering Mon‘s regular session, the signs are mixed as there hasn‘t been a clear reversal any way I look at it. Still, this remains one of the dips to be bought in my view – and the signs of it turning around, would be marked by strengthening commodities, and for all these are worth, copper, silver and oil especially.As for gold, it should recover given the retreating long-term yields, but Fri didn‘t bring any signs of strength in the precious metals sector, to put it mildly. Look for TLT for directions, even as real rates, the true determinant, remain little changed and at -1%, which means very favorable fundamentals for the yellow metal. And remember that when the rate of inflation accelerates, rising rates start to bite the yellow metal less.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Its InternalsFriday‘s session doesn‘t have the many hallmarks of a reversal. Slightly higher volume, yet none of the intraday upswings held. The Force index reveals that the bears just paused for a day, that there wasn‘t a true reversal yet. The accumulation is a very weak one thus far, and the sellers can easily show more determination still.Credit MarketsHigh yield corporate bonds (HYG ETF) are plain and simple worrying here. The decent intraday upswing evaporated as the closing bell approached. A weak session not indicative of a turnaround.The high yield corporate bonds to short-dated Treasuries (HYG:SHY) performance was weaker than the stock market performance, which isn‘t a pleasant development. Should the bond markets keep trading with a more pessimistic bias than stocks, it could become quite fast concerning. As said already, the shape of the correction is being decided these days.Stocks, Smallcaps and Emerging MarketsAfter having moved hand in hand, emerging markets (EEM ETF) have weakened considerably more over the prior week than both the S&P 500 and the Russell 2000 (IWM ETF). EEM is almost at its late Jan lows – given Fri‘s spike, watching the dollar is key, and not just here.TechnologyTechnology (XLK ETF) didn‘t reverse with clarity on Friday, regardless of positive semiconductors (XSD ETF) performance. At least the volume comparison here is positive, and indicates accumulation. Just as I was highlighting the danger for S&P 500 and gold early Thursday, it‘s the tech sector that holds the key to the 500-strong index stabilization.Gold and SilverReal rates are deeply negative, long-dated Treasuries indeed turned higher on Friday, yet gold plunged right to its strong volume profile support zone before recovering a little. Its very short-term performance is disappointing, It was already its Tue performance that I called unconvincing – let alone Wed‘s one. I maintain that it‘s long-dated Treasury yields and the dollar that are holding the greatest sway. Rates should retreat a little from here, and the gold-dollar correlation is only slightly positive now, which translates into a weak positive effect on gold prices.But it‘s silver that I am looking to for earliest signs of reversal – the white metal and its miners have the task clear cut. Weeks ago, I‘ve been noting the low $26 values as sufficient to retrace a reasonable part of prior advance, and we‘ve made it there only this late. Thu and Fri‘s weakness has much to do with the commodities complex, where I wanted still on Thu to see copper reversing intraday (to call it a risk-on reversal), which it didn‘t – and silver suffered the consequences as well. Likewise now, I‘m looking to the red metal, and will explain in today‘s final chart why.Precious Metals RatiosThere is no better illustration of gold‘s weakness than in both miners to gold ratios that are bobbing around their local lows, rebounding soundly, and then breaking them more or less convincingly again. The gold sector doesn‘t yet appear ready to run.Let‘s get the big picture through the copper to oil ratio. Its current 8 months long consolidation has been punctured in the middle with oil turning higher, outperforming the red metal – and that brought the yellow one under pressure increasingly more. Yet is the uptick in buying interest in gold a sign of upcoming stabilization and higher prices in gold that Fri‘s beaten down values indicate? Notably, the copper to oil ratio didn‘t break to new lows – and remains as valuable tool to watch as real, nominal interest rates, and various derivatives such as copper to Treasury yields or this very ratio.SummaryStock bulls are almost inviting selling pressure today with the weak finish to Fri‘s session. While the sectoral comparisons aren‘t disastrous, the credit markets indicate stress ahead just as much as emerging markets do. Still, this isn‘t the end of the bull run, very far from it – new highs are closer than quite a few might think.Gold and silver took an even greater beating on Fri than the day before. Naturally, silver is much better positioned to recapture the higher $27 levels than gold is regarding the $1,800 one. With the long-dated Treasuries stabilization indeed having resulted in a short-term dollar upswing, the greenback chart (and its effects upon the metals) is becoming key to watch these days. Restating the obvious, gold is far from out of the woods, and lacking positive signs of buying power emerging.

The economy seems to be recovering, while bond yields are increasing again, sending gold prices down.Not good. Gold bulls can be truly upset. The yellow metal continued its bearish trend last week. As the chart below shows, the price of gold has declined from $1,807 on Monday (Feb. 22) to $1,743 on Friday (Feb. 26).What happened? Well, last week was full of positive economic news. In particular, personal income surged by 10 percent in January, compared to only 0.6-percent rise in the previous month. Meanwhile, consumer spending increased 2.4 percent, following a 0.4-percent decline in December. This means that, on an absolute basis, personal consumption expenditures have almost returned to the pre- pandemic level, as the chart below shows.Additionally, durable goods orders jumped by 3.4 percent in January versus a 1.2-percent increase one month earlier. Moreover, initial jobless claims declined from 841,000 to 730,000 in the week ending February 20, as the chart below shows. It means that the economic situation is improving, partially thanks to the December fiscal stimulus.And, on Saturday (Feb. 27), the House of Representatives passed Biden’s $1.9 trillion stimulus package. Although the bill has yet to be approved by the Senate, the move by the House brings us one step closer to its implementation. Although the additional fiscal stimulus may overheat the economy and turn out to be positive for gold prices in the long-term, the strengthened prospects of higher government expenditures can revive the optimism in the financial markets, negatively affecting the safe-haven assets such as gold .Finally, on Saturday, the FDA authorized Johnson & Johnson’s vaccine against COVID-19. This decision expands the availability of vaccines, which brings us closer to the end of the epidemic in the U.S. and offers hope for a faster economic recovery. The new vaccine is highly effective (it provides 85-percent protection against severe COVID-19 28 days after vaccination) and most importantly, requires only one dose, which facilitates efficient distribution. So, the approval of another vaccine is rather bad news for gold and could add to the metal’s problems in the near future.However, the most important development from the last week was the jump in the bond yields . As the chart below shows, after a short stabilization in the first half of the week, the yields on the 10-year Treasuries indexed by inflation rose from -0.79 to -0.60 percent on Thursday (Feb. 25). This surge in the real interest rates is negative for the price of gold.Implications for GoldWhat does this all mean for the price of gold? Well, the increase in the bond yields is clearly bad for the yellow metal. Although they have partially risen to strengthened inflation expectations, the real interest rates have also soared. It means that investors expect wider fiscal deficits and expanding vaccination to accelerate inflation only partially, but in a large part, it will speed up real economic growth. This is a huge problem for gold, as real interest rates are a key driver of gold prices.An additional issue is that the expectations of higher economic growth and inflation create accompanying expectations for the Fed to tighten its monetary policy and hike the federal funds rate , which exerts downward pressure on gold prices.This is what we were afraid of at the beginning of the year. We noted that the real interest rates were so low that the next move could be up. Importantly, there is further room for upward trajectory, as the real interest rates are still importantly below the pre-pandemic level.However, we wouldn’t bet on the return to the levels seen last year. After all, interest rates didn’t return to the pre-crisis level after the Great Recession , so it’s unlikely that they will do it now. Additionally, investors should remember that the U.S. government is now so heavily indebted that if Treasury yields continue to increase, the Fed would have to intervene. A failure to do so would mean that the interest expenses would grow too much, creating serious problems for the Treasury. So, the current bearish trend in gold may not last forever – although it may still take some time.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

Gold remains in a bearish trend as economic confidence has improved, however, inflation can change all that around.The chart presenting gold prices in 2021 doesn’t look too encouraging. The yellow metal continued its bearish trend at the turn of February and March. So, as one can see, the price of gold has declined from $1,943 on January 4 to $1,711 on Wednesday (Mar. 3) This means a drop of 232 bucks, or 12 percent since the beginning of the year.What is happening in the gold market? I would like to blame the jittering bond market and increasing bond yields , but the uncomfortable truth is that the yellow metal has slid in the past few days despite the downward correction in the bond yields. If you don’t believe, take a look at the chart below. This is an important bearish signal, given how closely gold is usually linked to the real interest rates .So, it seems that there are more factors at work than just the bond yields. One of them is the recent modest strengthening of the greenback , probably amid rising U.S. interest rates and ECB officials’ remarks about possible expansion of the ECB’s accommodative stance if the selloff in the bond market continues.Another piece of bearish news for the gold market is that President Joe Biden struck a last-minute stimulus deal with Democratic Senators that narrows the income eligibility for the next round of $1,400 stimulus checks. It means that the upcoming fiscal stimulus will be lower than previously expected, negatively affecting inflation expectations and, thus, the demand for gold as an inflation hedge .Lastly, I have to mention the high level of confidence in the economy. Indeed, the recent rise in the bond yields may just be a sign of more optimism about the economic recovery from the pandemic recession . Hence, despite all the economic problems the U.S. will have to face – mainly the huge indebtedness or actually the debt-trap – investors have decided to not pay too much attention to the elephants in the room. As the chart below shows, the credit spread (ICE BofA US High Yield Index Option-Adjusted Spread), which is a useful measure of economic confidence, has returned to the pre-pandemic level, indicating a strong belief in the state of the economy. This is, of course, bad for safe-haven assets such as gold.Implications for GoldWhat does this all mean for gold prices? Well, from the long-term perspective, the recent slide to almost $1,700 could just be noise in the marketplace. But gold’s disappointing performance is really disturbing given the seemingly perfect environment for the precious metals . After all, we live in a world of negative interest rates , a weak U.S. dollar, rising fiscal deficits and public debt , soaring money supply and unprecedented dovish monetary and fiscal policies . So, the bearish trend may be more lasting, as market sentiment is still negative. Investors usually turn to gold, a great portfolio diversifier and a safe haven , when other investment are falling. But the worst is already behind us, the economy has already bottomed out, so confidence in the economy is now high, and equities are rising.Having said that, the recent jump in the bond yields also means rising inflation expectations . Indeed, as the chart below shows, they have already surpassed the levels seen before the outbreak of the pandemic .Actually, the 5-year breakeven inflation rate has reached 2.45 percent, the highest level since the midst of the Great Recession . So, in some part, investors are selling bonds, as they are preparing for an reflation environment marked by higher inflation . At some point, if the fear of inflation strengthens, then economic confidence will waver, and investors could again turn toward gold.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

Stocks sharply reversed intraday, and closed just where they opened the prior Friday. That indicates quite some pressures, quite some searching for direction in this correction that isn‘t over just yet. Stocks have had a great run over the past 4 months, getting a bit ahead of themselves in some aspects such as valuations. Then, grappling with the rising long-term rates did strike.So did inflation fears, especially when looking at commodities. Inflation expectations are rising, but not galloping yet. What to make of the rising rates then? They‘re up for all the good reasons – the economy is growing strongly after the Q4 corona restrictions (I actually expect not the conservative 5% Q1 GDP growth, but over 8% at least) while inflation expectations are lagging behind. In other words, the reflation (of economic growth) is working and hasn‘t turned into inflation (rising or roughly stable inflation expectations while the economy‘s growth is slowing down). We‘re more than a few quarters from that – I fully expect really biting inflation (supported by overheating in the job market) to be an 2022-3 affair. As regards S&P 500 sectors, would you really expect financials and energy do as greatly as they do if the prospects were darkening?So, I am looking for stocks to do rather well as they are absorbing the rising nominal rates. It‘s also about the pace of such move, which has been extraordinary, and left long-term Treasuries trading historically very extended compared to their 50-day moving averages. Thus, they‘re prone to a quick snapback rally over the next 1-2 weeks, which would help the S&P 500 regain even stronger footing. And even plain temporary stabilization of theirs would do the trick.This is taking me directly to gold. We have good odds of long-term rates not pressuring the yellow metal as much as recently, and inflation expectations are also rising (not as well anchored to 2% as the Fed thinks / says). As I‘ll show you in the charts, the signs of decoupling have been already visible for some time, and now became more apparent. And that‘s far from the only suggestion of an upcoming gold upswing that I‘ll bring you today.Just as I was calling out gold as overheated in Aug 2020 and prone to a real soft patch, some signs of internal strength in the precious metals sector were present this Feb already. And now as we have been testing for quite a few days the first support in my game plan, we‘re getting once again close to a bullish formation that I called precisely to a day, and had been banging the bearish gold drum for the following two days, anticipating the downside that followed. Now, that‘s what I call welcome flexibility, extending to accentuated, numerous portfolio calls.And the permabears keep (losing capital through many bullish years in a row in some cases) calling for hundreds bucks more downside after a respite now, not even entertaining the thought that gold bottom might very well not be quarters ahead. It‘s easier to try falsely project own perma stickers onto others. Beware of wolves in ill-fitting sheep clothing. Look at full, proven track records, compare varying perspectives of yesteryear too, and wave off cheap halo effects.It‘s the above dynamic between nominal rates taking a breather, dollar getting back under pressure, commodities continuing their rise and stocks gradually resuming theirs – see the ebbing and flowing that I‘m laying down in the daily analyses on the revamped homepage, and you‘ll get a knack for my timings of local tops or bottoms just the way I did in the early Sep buying climax or in the corona crash.True mastery is in integrating and arguing opposing views with experience and adaptability daily. People are thankfully able to recognize these characteristics on their own – and they have memory too. Who needs to be told what to read and consider by those embracing expertise only to turn against it when the fruits were no longer theirs? Sour grapes. Narrow thinking is one of the dangers of our era replete with empty and shallow shortcuts. Curiosity, ingenuity and diligence are a gift to power mankind – and what you get from financial analysts – forward in a virtuous circle.If gold prices rise from here, they have bounced off support. Simple as that, especially given the accompanying signs presented. There is time to run with the herd, and against the herd – in both bull and bear trends, constantly reevaluating the rationale for a position, unafraid to turn on a dime when justified.Whatever else bullish or bearish I see technically and fundamentally in rates, inflation and dollar among much else, I‘ll be duly reporting and commenting on as always. It‘s the markets‘ discounting mechanism of the future that counts – just as gold cleared the deflationary corona crash in psring 2020, just as it disregarded the tough Fed tone of 2H 2018, just as it sprang vigorously higher in early 2016 stunning bears in all three cases with sharp losses over many months, or just as stocks stopped declining well before economic news got better in April 2020 or March 2009. Make no mistake, the markets consider transitioning to a higher inflation environment already now (the Fed timidly says that reopening will spike it, well, temporarily they say), when inflation expectations are still relatively low, yet peeking higher based on the Fed‘s own data. Such were my Friday‘s words:(…) Let‘s keep the big picture – gold is in a secular bull market that started in 2018 (if not in late 2015), and what we‘re seeing since the Aug 2020 top, is the soft patch I called. The name of the game now, is where the downside stops – I am not capitulating to (hundreds dollars) lower numbers below $1,650 on a sustainable basis. The new precious metals upleg is a question of time even though the waiting is getting longer than comfortable for many, including myself. Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 Outlook and Its InternalsStrong rebound after more downside was rejected, creating a tweezers bottom formation, with long lower knots. This is suggestive of most of the downside being already in. The Feb 25 upswing had a bearish flavor to it, while the Mar 1 one looked more constructive – and Friday‘s one is from the latter category. That doesn‘t mean though this correction won‘t be in the 5% range. The 3,900 zone is critical for the bulls to pass so as to clear the current precarious almost no man‘s land.The market breadth indicators are actually quite resilient given how far this correction has reached. New highs new lows are holding up still very well, yet they too indicate that this correction has further to go in time. While the bullish percent index still remains in the bullish territory, it indicates how far the correction has progressed technically, and that we can‘t declare the bullish spirits as having returned just yet.Credit MarketsHigh yield corporate bonds (HYG ETF) ilustrate this fragility for they haven‘t rebounded as strongly as stocks. This correction doesn‘t appear to be as really over just yet, also given the sectoral picture that I am showing you next.S&P 500 Sectoral LookTech reversed, but higher volume would be welcome to lend the move more credibility. This sector is still the weakest link in the whole S&P 500 rebound, and not until I see the $NYFANG carve out a sustainable bottom (this needn‘t happen at the 200-day moving average really), I can declare this correction as getting close to over. The bullish take on the volume is that the value sector has undergone strong accumulation, as can be readily seen in the equal weight S&P 500 index (RSP ETF). The above chart shows that cyclicals are performing strongly – with industrials (XLI ETF) and energy (XLE ETF) leading the charge as the tech and defensives are trying to stabilize, and the same is true about consumer discretionaries (XLY ETF).Gold‘s Big Picture ViewGold‘s weekly chart shows two different stages in the reaction to rising long-term rates. The first half was characterized by the two tracking each other rather closely, yet since late Dec, the nominal rates pressure has been abating in strength within the mutual relationship. While TLT plunged, gold didn‘t move down as strongly. Real rates are negative, nominal rates rose fast, and inflation expectations have been trending higher painfully slowly, not reflecting the jump in commodities or the key inflation precursor (food price inflation) just yet – these are the factors pressuring gold as the Fed‘s brinkmanship on inflation goes on. Once the Fed moves to bring long-term rates under control through intervention – hello yield curve control or at least twist – then real rates would would be pressured to drop, which would be a lifeline for gold – the real questions now are how far gold is willing to drop before that, and when that Fed move would happen. Needless to add as a side note regarding the still very good economic growth (the expansion is still young), staglation is what gold would really love.Copper and Silver Big Picture ViewThe red metal keeps rising without end in sight, reflecting both the economic recovery and monetary intervention. This is a very bullish chart with strong implications for other commodities and silver too. That‘s the essence of my favorite play in the precious metals – long silver short gold spread, clearly spelled out as more promising than waiting for gold upswing to arrive while the yellow metals‘ bullish signs have been appearing through Feb only to disappear, reappear, and so on.As you can see, silver performance approximates commodity performance better than gold one. And as the economic recovery goes on, it‘s indeed safer to be a silver bull than a gold bull – another of my early Feb utterances.Miners to Gold Big Picture ViewThis gold sectoral ratio made an encouraging rebound last week, but isn‘t internally as strong as it might appear, because the juniors (GDXJ ETF) aren‘t yet outperforming the seniors (GDX ETF), which had been the case in early 2021 and late in Feb as well – right till I sounded the alarm bells on Feb 23-24. This is precisely why I was not bullish in tone at all in the past week, as gold hadn‘t been acting as strongly now as it had been right before the Feb 22 upswing that I called. And I am missing this ingredient at the moment still.SummaryStock bulls stepped in and repaired much of Thursday‘s damage, flipping the balance of power as more even at the moment. While the medium-term factors favor the bulls, this correction is slated to go on still for longer, as all eyes are on tech (big names) as the deciding sector.Gold still remains acting weak around the lower border of its support zone, silver is refusing to decline more, and signs overall favoring a rebound, are appearing. It‘s still a mixed bag though, with especially gold being far from out of the woods yet.

Forget gold and silver for a moment. Do you hear the music? Yes, it’s coming from the mining ETFs club. But how long will the party last?And more importantly, why miners, you may ask? Because miners tend to outperform in the early days of a major rally.After closing only $0.10 below my initial downside target of $31 on Mar. 1 , the GDX ETF could be ripe for an upward revision. Able to ignore much of last week’s chaos, the GDX ETF’s outperformance of gold and silver signals that the tide has likely turned.Please see below:Figure 1To that point, I warned on Mar. 1 that help was on the way:The GDX ETF has garnered historical support at roughly $29.52. The level also coincides with the early-March high, the mid-April low and the 61.8% Fibonacci retracement level. As a result, a corrective upswing to ~$33/$34 could be the miners’ next move.Furthermore, after alerting subscribers on Mar. 4 – writing that when gold moves to $1,692, we’ll automatically open long positions in the miners – the GDX ETF ended Friday’s (Mar. 5) session up by 3.2% from my initial entry of ~$30.80 - $31. Thus, from here, the GDX ETF has roughly 3.8% to 7.0% upside (as of Friday’s close) before the $33/$34 levels signals that the momentum has run its course.For now, though, positioning for more upside offers a solid risk-reward proposition . Prior to the initial decline, miners were weak relative to gold . However, after outperforming on Mar. 5, their steady hand was a sign of short-term strength. If you analyze the chart below, you can see that the size and shape of the current price action actually mirrors what we witnessed back in April.Please see below:Figure 2 - VanEck Vectors Gold Miners ETF (GDX), GDX and Slow Stochastic Oscillator Chart Comparison – 2020For context, I wrote on Mar. 5:Miners stopped their decline practically right in my target area, which I based on the 50% Fibonacci retracement and the 2020 highs and lows. Moreover, the proximity of the $31 level corresponds to the 2019 high and the 2016 high. Since so many support levels coincide at the same price (approximately), the latter is likely to be a very strong support. Moreover, the RSI was just close to 30, which corresponded to short-term buying opportunities quite a few times in the past.In addition, a short-term upswing could provide a potential pathway to $35 – as this level also corresponds with the GDX ETF’s late-February high, its monthly declining resistance line and its 50-day moving average. The abundance of resistance levels – combined with the fact that an upswing would further verify the GDX ETF’s breakdown below the neckline of its potential head and shoulders pattern – should keep the upward momentum in check.Over the medium-term, the potential head and shoulders pattern – marked by the shaded green boxes above – also deserves plenty of attention.For context, I wrote previously:Ever since the mid-September breakdown below the 50-day moving average , the GDX ETF was unable to trigger a substantial and lasting move above this MA. The times when the GDX was able to move above it were also the times when the biggest short-term declines started.(…)The most recent move higher only made the similarity of this shoulder portion of the bearish head-and-shoulders pattern to the left shoulder (figure 2 - both marked with green) bigger. This means that when the GDX breaks below the neck level of the pattern in a decisive way, the implications are likely to be extremely bearish for the next several weeks or months.Due to the uncanny similarity between the two green rectangles, I decided to check what happens if this mirror-similarity continues. I used purple, dashed lines for that. There were two important short-term price swings in April 2020 – one shows the size of the correction and one is a near-vertical move higher.Copying these price moves (purple lines) to the current situation, we get a scenario in which GDX (mining stocks) moves to about $31 and then comes back up to about $34. This would be in perfect tune with what I wrote previously. After breaking below the head-and-shoulders pattern, gold miners would then be likely to verify this breakdown by moving back up to the neck level of the pattern. Then, we would likely see another powerful slide – perhaps to at least $24.This is especially the case, since silver and mining stocks tend to decline particularly strongly if the stock market is declining as well. And while the exact timing of the market’s slide is not 100% clear, stocks’ day of reckoning is coming . And it might be very, very close.As I explained previously, based on the similarities to the 1929 and 2008 declines, it could be the case that the precious metals sector declines for about 3 months after the general stock market tops. And it seems that we won’t have to wait long for the latter. In fact, the next big move lower in stocks might already be underway, as the mid-Feb. 2021 top could have been the final medium-term top.In conclusion, the gold miners should continue to glisten as oversold conditions buoy them back to the $33-$35 range. Due to the GDX ETF’s recent strength, combined with gold rallying off of the lows on Mar. 5, the PMs could enjoy a profitable one-week (or so) party. However, with the celebration likely to be short-lived, it’s important to keep things in perspective. While this week’s performance may elicit superficial confidence, medium-term clouds have already formed. As a result, positioning for an extended rally offers more risk than reward.(We normally include the "Letters to the Editor" section in the full version of Gold & Silver Trading Alerts only, but today I decided to include it also in this free version of the full (about 10x bigger than what you just read) analysis, so that you get the idea of how this part of the analysis looks like. It might be quite informative too. Enjoy:)Letters to the EditorQ: Could you update your thoughts regarding physical [gold and silver] for those looking to acquire additional positions - specifically, what do you think premiums and availability are going to look like when/if spot goes a $100 or $200 down from here? By way of example, I bought some U.S. gold buffaloes at $1854 spot at $1954. Those same coins at $1710 spot are still around $1930, if there are any to be found.A: It’s a tough call, because the premium values don’t follow the technical patterns. Still, based on the analogy to situations that seem similar to what we saw recently, it seems that we can indeed say something about the likely physical values close to the likely $1,450 bottom.Figure 43 - Source: didthesystemcollapse.orgThe above chart shows the eBay premium for 1 oz Gold American Eagle coins over the spot gold price.In April 2020, the premium spiked at about 14%. It was likely even higher in March (we don’t have the direct data), but the volatility back then was bigger than it is right now, so it seems that the current premium and the April 2020 premium values are a better proxy for the future bottoming premiums than the March 2020 bottom premium would be. If the volatility increases, one could see the premium at about 15% or so.With gold at about $1,450, the above-mentioned information means Gold American Eagle coins can cost about $1,670.Still, since gold futures prices seem more predictable than the prices of bullion coins, I’d focus on the former even while timing the purchase of the latter.Moreover, please note that I’m planning to focus on buying mining stocks close to the bottom and move to metals only later. The reason is that miners tend to outperform in the early days of a major rally (just like they did in the first quarter of 2016). The fact that the premium is likely to be high when gold bottoms in a volatile manner is yet another reason for the above. When switching from mining stocks to physical holdings several weeks or months later, one might be buying at a smaller premium over the spot, and also after having gained more on miners than on the metals. Of course, the above is just my opinion, and you can purchase whatever you want – after all, it’s your capital and your investment decisions.Q: Please note that I am glad to see gold moving downwards but I am a little confused – the trading report I just received recommends selling at 1690ish but the mailing previously said 1450ish - please see attached.Could you please investigate and advise.A: If anything in the Gold & Silver Trading Alerts seems confusing, please refer to the “Summary”, the trading/investment positions, and the “Overview of the Upcoming Part of the Decline” sections for clarification. In this case, we exited the remaining short positions when gold hit $1,693 and almost immediately entered long ones (when gold hit $1,692). We now have long positions in the mining stocks with the plan to exit them in a week or so, and re-enter short positions then, because the next big move is likely to be to the downside (perhaps as low as $1,450 or so). Also, the above is just my opinion, not a recommendation or investment advice.Q: Hi P.R., thanks for the advice on this trend, it’s been an amazing trade.As I’m trading on XAUUSD, are you also able to advise the targets for a gold long entry,or should I wait for the final bottom before opening any longs?A: I’m very happy that you’re making profits thanks to my analyses. While I think that the very short-term (for the next 5 trading days or so) outlook for gold, silver and mining stocks is bullish, I think the targets are more predictable for mining stocks than they are for gold and – especially – silver. Still, this time, the short-term upside target for gold is also relatively clear – at about $1,770. That’s why I put the $1,758 in the “For-your-information target” for gold in the “Summary” section below.Q: Are we looking for the short-term upside move to be 1-5 weeks before the final decline into the 1350-1500 zone? I'm a little unsure of the timing you're laying out.A: I’m looking for the short-term upswing to take place between 1 and 3 weeks – that’s the part of the “Overview of the Upcoming Part of the Decline” section about it:It seems to me that the initial bottom has either just formed or is about to form with gold falling to roughly $1,670 - $1,680, likely this week.I expect the rebound to take place during the next 1-3 weeks.After the rebound (perhaps to $33 - $34 in the GDX), I plan to get back in with the short position in the mining stocks.In my opinion it’s most likely that this counter-trend rally will take about 1 – 1.5 weeks. Then, I think that the decline to about $1,450 in gold will start.Q: Thank you for sending out the Alert # 2 with the new changes in the Gold and Silver trades today. This is necessary, so please send out the alert once you enter back to the short positions, please.A: I’m happy that you enjoyed this intraday Alert. I will indeed send you – my subscribers – an intraday confirmation that the long positions were closed and when we enter new short positions. Still, please note that we already have binding profit-take exit prices in place, which means that when prices move to the target levels (e.g., GDX to $33.92), the long positions should be automatically closed, and profits should be taken off the table – even without an additional confirmation from me (it takes time for me to write and send the message and then some time usually passes before one is able to act on my message).Q: You have informed us to make the move when the Gold price “REACHES” $1693.00. My question is; Does the word “Reach” mean when the price touches that point, if only for a moment, or does “Reach” mean when it closes the day at or below $1693.00?Thank you for your response to this question.A: “Reaching” a price means the same thing as “touching” the price or “moving to” the price. This means moving to this price level on an intraday basis – even for just one tick . If I mean closing prices, I will specifically describe them as such.For instance, I currently have binding exit positions for the current long position in the mining stocks – and these are exactly the price levels that I have put in my brokerage account as a limit sell order.Q: Please comment on the Hindenburg Omen for stocks:Figure 44 - Source: RefinitivA: Thanks. The Hindenburg omen is not one of the most reliable indicators - even on the above chart, it’s clear that most of the signals were not followed by declines. Please note how many fake initial signals there were before stocks finally declined in 2019 or 2020. There are many other reasons to think that stocks are going to move much lower, though. In the very short-term they could still move higher, but this move could be fake and could turn out to be the right shoulder of the head-and-shoulders top formation.Q: 1) for shorter-term trades such as the potential 10% pop in the GDX, is NUGT better?2) the plan after we re-enter a short trade when the GDX gets to $33/$34 might mean a longer haul before we hit rock bottom . You have mentioned time-scales up to 20 weeks (ish). Due to a longer holding period , would the CFD route be a cheaper route when compared to NUGT? I’m asking in general terms because each provider imposes different fees and I don’t expect you to comment on the fees charged by IG, which is the service I use.I also recognize that NUGT only offers 2 X leverage, whereas CFD’s offer up to five times leverage.Finally, the manner in which you detail the rich tapestry of the economic forces that impact PMs is revealing and educational. I find this all fascinating.I have my own views which can be summed up like this: How many inflationary false-dawns and panics has the bond market had? Ever since 2008, when the FED launched QE, there have been numerous bouts and hissy fits of inflationary expectations that have subsequently sunk like a dodgy soufflé. I think this time is no different and it’s entirely possible the 30-year bond could drop to ZERO. I am in the deflationary camp.How might the 10 year at zero or possibly sub-zero and longer, out on the duration curve to (TLT ETF) dropping to 0.5%, affect the price of gold?Your thoughts as ever, are much appreciatedA: 1) That depends on whether one seeks leverage or not, and how much thereof. Please note that some short-term trades could sometimes become medium-term trades if the market decides to consolidate or move in the other direction before continuing the predicted trend. In this case, non-leveraged instruments are at an advantage over the leveraged ones, because they don’t suffer from the back-and-forth trading as much as the leveraged ones do.If one’s desired exposure to the GDX ETF wouldn’t exceed the cash that one dedicated to trading, then in order to have the same exposure one would simply have half of the capital employed in NUGT (which is 2x leveraged). This way, the exposure would be identical, but the NUGT would imply additional risk of losing more capital if the trade takes much longer than planned and/or if the price moves adversely first.Please note that there is also an additional way to gain leverage (it’s not available for everyone, though) and that is through the use of margin on one’s brokerage account. I’d prefer to use margin for the GDX before aiming to gain leverage through NUGT.In other words, I’d first use more cash for GDX before I’d go into NUGT. If I wanted to have even bigger exposure than the one achieved by employing more capital to GDX, I would then consider using margin, and then I would consider using NUGT if I still wanted to get more leverage.There might be some traders who would seek to combine both for even bigger leverage (buying NUGT on margin), but this is definitely not something that I’d recommend to most people. In fact, it seems that in many cases, sticking to the GDX would be a good way to go.2) I think I already replied to the first part of your question (NUGT vs. CFD) above. Also, for other people reading this reply – please note that CFDs (contracts for difference) are not available in many areas, including the USA and Canada.I’m glad to read that you enjoy reading my explanations of the current situation in the markets (precisely, my opinions on it).Real interest rates are one of the most important drivers for gold (along with the USD Index), so a drop in the 10-year rates to zero or sub-zero levels would likely be very beneficial for the gold prices.Figure 45Also, based on the pace at which the rates have rallied recently, they might be topping here, but… There was no decline in the previous 40 years that was as big as what we saw between 2018 and 2020. Consequently, the corrective upswing might be bigger as well. Also, the above chart is not necessarily the scale that is big enough to make very long-term conclusions.Figure 46Over the past centuries, whenever the rates fell very low, they then rallied back up with vengeance. After WW2, it theoretically would have been a “good idea” to keep stimulating the economy with low rates – and yet, they soared. Right now, the monetary authorities strive to be very dovish and keep pumping liquidity into the system, and yet the rates are rallying anyway.So, while the analogy to the previous years – or the past few decades – suggests that the rally in the rates might be over or close to being over, the very long-term chart suggests otherwise.To make the situation even more complicated, if the stock market has already topped in February, and we have already entered the Kondratiev winter cycle, it means that we can theoretically expect the rates to fall, then rise in a credit crunch, and then fall much lower.All in all, the outlook for the interest rates is anything but simple and clear. Perhaps what we see right now already IS the credit crunch and the 10-year rates are on their way to above 2% - after all, they used to return above their 200-day moving average after the previous medium-term declines. It seems to me that the move above 2% in the 10-year rates could correspond with gold’s decline below $1,500.Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.Przemyslaw Radomski, CFA Founder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Gold remains inert to President Biden’s large and hazardous economic plan, and ended up dropping below $1,700.President Joe Biden’s $1.9 trillion COVID-19 stimulus is coming! On Saturday, the U.S. Senate passed the American Rescue Plan on a party-line 50-49 vote. This means that after the House’s vote on Tuesday, Biden could sign the bill into law soon, and those $1,400 payments to most Americans could start to go out as soon as this month.The final bill includes not only $400 billion in checks of $1,400 to most Americans, but also $300 a week in extended unemployment benefits, and $350 billion in aid to state and local governments.The American Rescue Plan would be one of the largest stimulus packages in U.S. history. It would also be one of the most frivolous and superfluous economic programs. There is simply no need for such a large plan. Please take a look at the chart below.As one can see, U.S. personal income has increased during the pandemic, not decreased. Once again, people are now receiving higher income than one year ago. So, Biden’s stimulus with another round of $1,400 checks is not economically or socially justified.Indeed, the U.S. economy is already recovering. On Friday (Mar. 5), we got surprisingly good data about the American labor market , that showed the economy added 379,000 jobs in February, much above expectations. Meanwhile, the unemployment rate has slightly decreased further, as one can see in the chart below. Employment is still down by 9.5 million, or 6.2 percent, from the pre-pandemic level seen one year ago, but additional unemployment benefits or plain checks will not help bring people back into employment – in fact, the effect may turn out to be the reverse.Hence, Biden’s fiscal stimulus will bring little benefit to the economy, while significantly expanding the federal debt and risking overheating the economy. Indeed, the plan is estimated to increase the already high public debt (see the chart below) by an additional ten percentage points as a share of GDP .Implications for GoldWhat does this all mean for gold prices? From the fundamental point of view, Biden’s plan should be positive for the yellow metal. This is because it can increase inflation in the long-run, if people finally decide to spend all the money they got from Uncle Sam. It will not happen in the immediate future, as households will initially save the received payments, and some of them will repay their debts, but they are likely to spend more this year, to compensate for curbed consumption in 2020.However, whether Biden’s plan turns out inflationary or not, it will expand the already mammoth public debt. It should weaken the position of the greenback and increase the odds for a debt crisis or paying out this debt through inflation or financial repression. The higher the debt, the more difficult it will be for the Fed to normalize interest rates (welcome to the debt trap , my friends). All these factors should support gold prices in the long run.However, gold remains deaf to Biden’s disharmonious symphony. Indeed, as the chart below shows, the yellow metal has declined below the important level of $1,700 last week. It seems that the fiscal stimulus (together with the rollout of vaccinations and the economic recovery) has so far strengthened the risk appetite among investors who don’t focus on long-term consequences of the fiscal stimulus.This may change one day, but the sentiment in the gold market is clearly negative right now, and the fundamentals are more positive. The fundamentals may come to the fore in the end. However, gold may struggle further, especially if real interest rates go up again.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

The 2019-2021 gold chart is disturbingly similar to that of 2010-2012, but it does not have to be the harbinger of a bear market.Many ancient cultures saw history as cyclical. According to this view, society passes through repeated cycles. Can this apply to gold as well? I’m not referring here to the simple fact that we have both bull and bear markets in the precious metals – I refer here to the observation that gold’s price pattern seen in 2019-2021 mirrors that of 2010-2012 . Please take a look at the chart below.As you can see, in both periods, gold was steadily rising to a peak in the third quarter of the second year. A decade ago, the yellow metal gained 29 percent in 2010 and 74 percent as it hit the top. Then, it declined 19 percent by the end of 2011. Fast forward to more recent times. Gold gained 18.4 percent in 2019 and 62 percent at the peak. Afterwards, it declined 9 percent by the end of 2020.So, although the magnitude has now been weaker than in the aftermath of the Great Recession , the pattern is quite similar. The next chart – which presents the normalized gold prices in both periods to indices (when the starting point equals 100) – nicely illustrates how gold in 2019-2021 closely resembles gold from 2010-2012.This similarity may be disturbing. Should the pattern hold, then gold could go down significantly and stay in a sideways trend for years. As a reminder, this is what happened a decade ago. Gold bulls fought until the end of 2012, when they gave up and the yellow metal entered a full bear market, plunging 45 percent from the top to the bottom in December 2015. Then, it stayed generally flat till the end of 2018. If this cycle replays, we could see the price of gold go below $1,200 by the end of 2024.To be clear, there are some arguments to support the bearish case . Just as in the 2010s, the world is recovering now from the global economic crisis . The recession is over and the prospects are only better. Perhaps they’re not rosy, but they’re certainly better than many previously expected, which is what matters for the financial markets. As the worst is behind us, the risk appetite is returning, which could put gold and other safe-haven assets into oblivion. Actually, some could even argue that gold may now plunge even earlier, as a decade ago it was supported by the European sovereign debt crisis , which peaked in 2011-2012.However, there are also important reasons why gold could break the pattern and diverge from the 2010-2012 trend. First, we now have a much more dovish Fed . The U.S. central bank slashed the federal funds rate much quicker and expanded its balance sheet more decisively. Additionally, to avoid a taper tantrum caused by its announcement about tapering asset purchases, this time the Fed will normalize its monetary policy in a very, very gradual way, if at all. It means that interest rates will stay lower for longer. Lastly, the U.S. central bank changed its monetary policy framework, i.e., it prioritized the labor market over price stability and became more tolerant to higher inflation .Second, we also have a much easier fiscal policy . Even before the global pandemic , Trump significantly expanded budget deficits , but the Great Lockdown made them even larger. As pundits believe that the fiscal response in the aftermath of the global financial crisis of 2007-2009 was too small, they now want to go big – indeed, Biden’s $1.9 trillion economic plan is waiting to be passed by Congress.Third, this recovery might be more inflationary than a decade ago . This is because not only did the monetary base increase, but the broad money supply did as well. Last time, the Fed injected a lot of liquidity to the banking sector to bailout the banks. Now, the money has flowed much more through Main Street and the household sector, which could turn out to be more inflationary when all this money will be spent on goods and services. Also, last time we observed some deleveraging in the private sector, while now the supply of loans is continuously increasing at a positive rate. We are also already observing reflation in the form of a commodity boom, so gold may follow suit.To sum up, the patterns seen in the gold market in 2010-2012 and 2019-2021 are remarkably similar. So, the recent gold’s weakness may be really disturbing. However, this resemblance does not have to be a harbinger of further problems coming for gold bulls . After all, as Mark Twain is reputed to have said, “history doesn’t repeat itself, but it often rhymes”. Indeed, the macroeconomic and political environment is now clearly different than a decade ago – it’s more fundamentally positive for the price of gold.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.

Stocks spiked higher, but not before going sideways to down prior on the day. And the close to the session hasn‘t been convincing either – does it count as a reversal? In my view, we haven‘t seen one yesterday really, regardless of this correction not being over just yet. There are still some cracks I tweeted yesterday about in need closing first, such as the worrying corporate bonds performance, manifest in the HYG:SHY ratio, or the tech searching for the bottom (it‘s $NYFANG precisely). Quoting from yesterday‘s extensive analysis spanning beyond stocks, metals and the Fed:(…) Stocks have had a great run over the past 4 months, getting a bit ahead of themselves in some aspects such as valuations. Then, grappling with the rising long-term rates did strike.So did inflation fears, especially when looking at commodities. Inflation expectations are rising, but not galloping yet. What to make of the rising rates then? They‘re up for all the good reasons – the economy is growing strongly after the Q4 corona restrictions (I actually expect not the conservative 5% Q1 GDP growth, but over 8% at least) while inflation expectations are lagging behind. In other words, the reflation (of economic growth) is working and hasn‘t turned into inflation (rising or roughly stable inflation expectations while the economy‘s growth is slowing down). We‘re more than a few quarters from that – I fully expect really biting inflation (supported by overheating in the job market) to be an 2022-3 affair. As regards S&P 500 sectors, would you really expect financials and energy do as greatly as they do if the prospects were darkening?Stocks are well positioned to keep absorbing the rising nominal rates. What has been the issue, was the extraordinarily steep pace of such move, leaving long-term Treasuries trading historically very extended compared to their 50-day moving averages. While they can snap back over the next 1-2 weeks, the 10y Treasury bond yield again breaking 1.50% is a testament to the Fed not willing to do anything at the moment. Little does the central bank care about commodities moves, when it didn‘t consider any market moves thus far as unruly.Gold market offered proof of being finally ready for a rebound, and it‘s visible in the closing prices of the yellow metal and its miners. Being more than a one day occurence, supported by yesterday presented big picture signals, the market confirmed my yesterday‘s suggestion of an upcoming gold. It appears we‘ll get more than a few days to assess the legs this rally is made of, facilitating nimble charting of the waters ahead my usual way:(…) Just as I was calling out gold as overheated in Aug 2020 and prone to a real soft patch, some signs of internal strength in the precious metals sector were present this Feb already. And now as we have been testing for quite a few days the first support in my game plan, we‘re getting once again close to a bullish formation that I called precisely to a day, and had been banging the bearish gold drum for the following two days, anticipating the downside that followed. Flexibility and broad horizons result in accentuated, numerous other portfolio calls – such as long Bitcoin at $32,275 or long oil at $58 practically since the great return with my very own site. We‘re now on the doorstep of visible, positive price outperformance in the gold miners (GDX ETF) as gold prices didn‘t break the higher bullish trend by declining through both the Mar 4 presented supports of my game plan. As I wrote yesterday, if prices move higher from here, they have simply bounced off support, especially given the accompanying signs presented, not the least of which is the dollar getting back under pressure. Make no mistake, the greenback isn‘t in a bull market – it‘s merely consolidation before plunging to new 2021 lows. I have not been presenting any USDX declining resistance lines and breakout arguments, because prices can be both above such a line, and lower than at the moment of „breakout“ at the same time – ultimately, rising and declining supports and resistances are a play on the speed of the move, where pure inertia / deceleration / reprieve doesn‘t break the prior, higher trend. And as I called in summer 2020 the dollar to roll over and keep plunging, that‘s still what‘s unfolding.How does it tie in to commodities and stocks? We‘re not at extreme moves in either, and I see copper, iron, oil, agrifoods as benefiting from the reflationary efforts greatly. Similarly and in spite of the $NYFANG travails, it would be ill-advised to search for stock market tops now (have you seen how well the Dow Industrials is doing?) – no, we‘re not approaching a top that I would need to call the way I did in the early Sep buying climax. This is still the time to be running with the herd, and not against it – you can ignore the noise to the contrary for both the S&P 500 and commodities have a good year ahead. As for precious metals, we might have seen the bottom already – and in any case by the current shape of things, I don‘t see it occuring quarters ahead and hundreds buck lower.Bringing up the constant reevaluation of position‘s rationale, market reactions and narratives:(…) It‘s the markets‘ discounting mechanism of the future that counts – just as gold cleared the deflationary corona crash in psring 2020, just as it disregarded the tough Fed tone of 2H 2018, just as it sprang vigorously higher in early 2016 stunning bears in all three cases with sharp losses over many months, or just as stocks stopped declining well before economic news got better in April 2020 or March 2009. Make no mistake, the markets consider transitioning to a higher inflation environment already now (the Fed timidly says that reopening will spike it, well, temporarily they say), when inflation expectations are still relatively low, yet peeking higher based on the Fed‘s own data. Gold is in a secular bull market that started in 2018 (if not in late 2015), and what we‘re seeing since the Aug 2020 top, is the soft patch I called. The name of the game now, is where the downside stops – and it‘s one of the scenarios that it has just happened, especially if gold convincingly closed back above $1,720 without undue delay.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 OutlookWe have seen two intraday reversals to the downside yesterday, yet I think the effects would prove a temporary obstacle to the bulls only. Such candlestick patterns usually slow down the advance, but don‘t end it – and that‘s consistent with my yesterday‘s words of most of the downside being already in. Once the 3,900 zone is confidently passed, the bears would have missed the chance to reach below Thursday‘s lows.Credit MarketsHigh yield corporate bonds (HYG ETF) still ilustrate ongoing fragility for they have plunged below their Feb lows. This correction doesn‘t appear to be as totally over just yet, also given the sectoral picture that I am showing you next.Put/Call Ratio and VolatilityOption players clearly aren‘t concerned by yesterday‘s S&P 500 price action, and the VIX is painting a similarly neutral picture – just as the sentiment overall. Very good, we‘re primed to go higher next, from a starting position far away from the extreme greed levels.Technology and ValueThe sectoral divergence continues, and tech is still the weakest link in the whole S&P 500 rebound. The big $NYFANG names, the Teslas of this world, are the biggest drag, and not until these carve out a sustainable bottom (this needn‘t happen at the 200-day moving average really), I can declare this correction as getting close to over. It‘s the cyclicals, it‘s value stocks that is pulling the 500-strong index ahead, with financials (XLF ETF), industrials (XLI ETF) and energy (XLE ETF) leading the charge.Treasuries and DollarNominal, long-term Treasury rates have at least slowed their quickening Feb pace, even in the face of no action plan on the table by the Fed – the dollar moved higher on the realization next, and it‘s my view that once new Fed intervention is raised, it would have tremendous implications for the dollar, and last but not least – the precious metals.Gold and SilverFinally, this is the much awaited sign, enabling me to sound some bullish tone in gold again – the miners are outperforming the yellow metal with more than a daily credibility, which I view as key given the lackluster gold price action before yesterday (absence of intraday rebounds coupled with more downside attempts). It would turn stronger once the gold juniors start outperforming the seniors, which is not the case yet.Coupled with the 4-chart big picture view from yesterday, it‘s my view that the gold market is laying the groundwork for its turning:(…) Real rates are negative, nominal rates rose fast, and inflation expectations have been trending higher painfully slowly, not reflecting the jump in commodities or the key inflation precursor (food price inflation) just yet – these are the factors pressuring gold as the Fed‘s brinkmanship on inflation goes on. Once the Fed moves to bring long-term rates under control through intervention – hello yield curve control or at least twist – then real rates would would be pressured to drop, which would be a lifeline for gold – the real questions now are how far gold is willing to drop before that, and when that Fed move would happen. Needless to add as a side note regarding the still very good economic growth (the expansion is still young), stagflation is what gold would really love.Silver is carving out a bottom while both copper and platinum are turning higher already – these are That‘s the essence of one of my many profitable plays presented thus far – long silver short gold spread – clearly spelled out as more promising than waiting for gold upswing to arrive while the yellow metals‘ bullish signs have been appearing through Feb only to disappear, reappear, and so on.SummaryStocks haven‘t seen a real reversal yesterday, but more backing and filling till the tech finds bottom, appears due. The medium-term factors favor the bulls, but this correction isn‘t over yet, definitely not in time.Now, gold can show some strength – and silver naturally even more. The signs overall favoring a rebound, are appearing with increasing clarity for the short term, and the nearest weeks will show whether we have made a sustainable bottom already, or whether the $1,670 zone will get tested thoroughly. The bulls have the upper hand now.

The yellow metal’s behavior looks more bearish now than it did in 2017-2018. The USDX has a lot of bullets in its chamber, and gold can be riddled with them.Plenty of warning signs on the near-term horizon: The USDX is after a long-tern breakout, traders are reducing net-short positions, and the slightest shift in U.S. dollar sentiment can lead the rest of the herd to follow. If a USDX resurgence is combined with an equity shock, then the precious metals are in for trouble.Last Friday (Mar. 12), we focused quite a bit on the moves in the gold miners and how their related ETFs (GDX and GDXJ) are faring and which will suffer most during the next phase of the decline. We also touched on this subject last Wednesday as well. It was important to shed light on the miners because they’ve been leading the charge in the corrective upswing. I also wanted to explain the Eurozone’s impact on the precious metals and how crucial it is to examine the bigger picture and how the pieces are all connected. Today, let’s shift our attention over to the currency perspective, namely the USDX.The price shape and time analogies are truly remarkable right now. It’s quite often the case that history rhymes, but it’s rare for it to rhyme so closely and clearly to what we now see in the case of the USD Index. And the implications for precious metals investors are profound.On Mar. 8 , I warned that with the USD Index confronting its mid-2020 lows (resistance), a short-term dip could occur in the coming days. But after declining by 0.34% last week, the negativity could be short lived.Case in point: the 2017-2018 analogue is already in full swing, and while short-term dips were part of the historical journey, the USDX could be about to exit its consolidation phase.Please see below:You can also see the similarity between two periods and the technical patterns that they included in the chart below:Even while looking at the price moves for just a second, the size and shape of the 2017-2018 analogue clearly mirrors the 2020-current price action . Although this time, it took less than 118 days for the USD Index to move from peak to trough.In 2017-2018, it also took 82 days for the USDX to form a final bottom (the number of days between the initial bottom and the final bottom) and the duration amounts to 21.19% of the overall timeframe. If we applied a similar timeframe to today’s move, then the USD Index should have bottomed on Feb. 12. It actually bottomed (finally) on Feb. 25, which was just 8 trading days away from the former date. Taking into account the sizes of the moves that preceded the previous declines (they took approximately one year to complete), this is extremely close and an excellent confirmation that the self-similar pattern remains intact.In addition, as the USDX approached its final bottom in 2017-2018, gold traded sideways. Today, however, gold has been in a downward spiral. From a medium-term perspective, the yellow metal’s behavior is actually more bearish than it was in 2017-2018.Finally, the USD Index’s breakout above its 50-day moving average (which it still holds today) is exactly what added gasoline to the USDX’s 2018 fire. Case in point: after the 2018 breakout, the USDX surged back to its previous high. Today, that level is roughly 94.5.Moreover, gold’s trepidation alongside the USD Index strength on Mar. 12 adds even more validity to the 2017-2018 analogy.I wrote on Mar. 10:It’s not true that there were no pullbacks during the 2018 rally. There were, but they were simply too small to be visible from the long-term point of view.The first notable pullback took place in early May 2018, and it contributed to a corrective upswing in the precious metals market. To be precise, the USD Index declined after rallying for 56 trading days, but gold rallied earlier – 51 trading days after the USD Index’s final bottom. The USDX’s immediate-top formed 16 trading days after its final bottom, and gold’s bottom formed 10 trading days after the USD’s final bottom.Comparing this to the size of the previous decline in terms of the trading days, it was:51 – 56 trading days / 283 trading days = 18.02% - 19.79%10 – 16 trading days / 283 trading days = 3.53% - 5.65%More importantly though, when the USD Index turned a short-term decline into consolidation in mid-2018, gold’s hesitant reaction highlighted the yellow metal’s anxiety. And what followed? Well, gold’s next move was significantly lower, while the USD Index’s next move was significantly higher. This means that it was likely a good idea that we took profits from our long positions recently when the GDX moved to $32.96 (opening at $30.80 - $31).Please see below:In addition, if we analyze the pairs’ very recent price action, it’s a splitting image.On Friday (Mar. 12), the USD Index rallied by 0.28%, while gold was (roughly) directionless despite the intraday volatility. And just like in 2017-2018, the yellow metal’s behavior signals a forthcoming climax . As a result, gold and the USD Index are behaving exactly as they did before going their separate ways in 2017-2018. And this means a bearish gold price prediction for the following weeks (not necessarily hours, though).Please see below:To explain, I wrote on Mar. 10:Let’s examine the current situation: the preceding decline lasted for 200 trading days and there were 41 – 42 trading days between the final USDX bottom and the short-term reversals in gold and USDX. Comparing this to the final USDX bottom, we get 7 – 8 trading days.Applying the previous percentages to the length of the most recent medium-term decline in the USD Index provides us with the following:18.02% - 19.79% x 200 trading days = ~36 - ~40 trading days3.53% - 5.65% x 200 trading days = ~7 - ~11 trading daysThe above estimation of about 36 – 40 trading days almost perfectly fits the current 41 – 42-day delay, and the estimation of about 7 – 11 trading days almost perfectly fits the current delay of 7 – 8 trading days.In other words, the analogy to the 2018 performance does not only remain intact – it actually perfectly confirms the validity of the current corrective upswing. Once again, it’s very likely just a pullback, not a big trend reversal.The bottom line?Given the size of the 2018 upswing, 94.5 on the USD Index is likely the first, of many, potential upside targets.Adding to the list of upside catalysts, the USD Index still has plenty of other bullets in its chamber. For instance, we’re also in the early innings of a shift in U.S. dollar sentiment. With short interest hitting an all-time high in late-2020, it was a complete fire sale. Today, however, short interest may have peaked.Please see the below chart based on the CoT report :Please consider how big rallies followed the moments when the net speculative position as % of total open interest started to rally back up after being oversold for months. The situation here is still more extreme than it was in early 2018 and 2014, suggesting that the upcoming rally might be bigger than the ones that we saw then.As further evidence, speculative futures traders ( non-commercial ) actually reduced their net-short positions by 1,216 contracts last week (the net of the two values in the red box below). As a result, the slightest shift in sentiment could lead the rest of the herd to follow.Finally, let’s not forget that the USD Index is after a long-term, more-than-confirmed breakout. This means that the long-term trend for the U.S. dollar is up.In conclusion, the USD Index is likely shifting from consolidation to ascension. With the size, scope and duration of the recent price action mirroring 2017-2018, it’s only a matter of time before the USD Index’s medium-term breakout gives way to a material breakthrough. What’s more, the USD Index is finally reacting to the rise in U.S. Treasury yields . Initially ignoring the late-2020 surge, a bottom, and subsequent rally in the U.S. 10-Year Treasury yield has lifted the USD Index 80% of the time since 2003. And with the relationship seemingly restored in 2021, the combination is profoundly bearish for the PMs, especially given today’s triangle-vertex-based reversal in gold.Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.Przemyslaw Radomski, CFA Founder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

The ECB accelerated its asset purchases, but unless the Fed follows suit, gold may continue its bearish trend.On Thursday (Mar. 11), the European Central Bank decided to accelerate its asset buying under the Pandemic Emergency Purchase Program :Based on a joint assessment of financing conditions and the inflation outlook, the Governing Council expects purchases under the PEPP over the next quarter to be conducted at a significantly higher pace than during the first months of this year.The decision came after a rise in the European bond yields that has mirrored a similar move in the U.S. Treasuries (see the chart below). Christine Lagarde , the ECB President, was afraid that increasing borrowing costs could hamper the economic recovery, so she decided to talk down the bond yields.Indeed, the growth forecasts for the EU have deteriorated recently amid the persistence of the pandemic and painfully slow rollout of the vaccines. According to the ECB, the real GDP of the bloc is likely to contract again in the first quarter of the year. So, the increase in the market interest rates could additionally drag down the already fragile economic recovery:Market interest rates have increased since the start of the year, which poses a risk to wider financing conditions. Banks use risk-free interest rates and sovereign bond yields as key references for determining credit conditions. If sizeable and persistent, increases in these market interest rates, when left unchecked, could translate into a premature tightening of financing conditions for all sectors of the economy. This is undesirable at a time when preserving favourable financing conditions still remains necessary to reduce uncertainty and bolster confidence, thereby underpinning economic activity and safeguarding medium-term price stability.Implications for GoldWhat does this all mean for gold prices? Well, the ECB’s move should prove rather negative for the price of gold , at least initially. This is because the loosening of the European monetary policy could weaken both the euro and gold against the U.S. dollar. Indeed, as the chart below shows, although the price of gold increased on Thursday, it declined one day later.Moreover, the acceleration in the ECB’s quantitative easing could further widen the divergence in the interest rates (that started rising in the third quarter of 2020, as one can see in the chart below) between the U.S. and the EU, which should also support the greenback at the expense of the yellow metal.On the other hand, the fact that the ECB has intervened in the markets – announcing acceleration in the pace of its asset buying program, after a certain rebound in the bond yields – could turn out to be positive for gold prices, at least in the long-run. This is because it shows how fragile the modern economies are and how dependent they have become on cheap borrowing guaranteed by the central banks.As I noticed earlier in the past, we are in the debt trap – and the central banks will not allow for the true normalization of the interest rates. The latest ECB’s action is the best confirmation that suppression of the real interest rates will continue, thus supporting gold prices. After all, the ECB has effectively put a cap on bond yields, introducing an informal yield curve control.So far, only the ECB has intervened in the markets, but other central banks could follow suit. This week, the Fed will announce its decision on the monetary policy. And we cannot exclude that the American central bank will also signal a more dovish stance to calm the turmoil in the bond markets and prevent further increases in the interest rates. One thing is certain: gold needs some fresh dovish hints from the Fed to go up. Unless the Fed further eases its stance, I’m afraid that gold will continue its bearish trend .If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

Twin deficits could negatively affect the U.S. economy, thereby supporting the yellow metal.Twins. Many parents will tell you that they double the blessing. But economists would disagree, claiming that twins – i.e., twin deficits – could be negative for the economy. The recent deterioration in the U.S. current account and fiscal balance has sparked renewed debate over the twin deficit and its impact on the exchange rate – and the price of gold.A twin deficit occurs when large fiscal deficits coexist with big trade deficits . The former happens when the government spends more money than it raises with taxes, while the latter is the result of imports exceeding exports. A historical example of the U.S. twin deficit occurred in the 1980s, when a significant expansion in the federal budget deficit accompanied a sharp deterioration in the nation’s current account balance. According to the Institute for International Economics’ report , “from 1980 to 1986, the federal budget deficit increased from 2.7 percent of GDP to 5 percent of GDP ($220 billion) and the current account deficit increased from 0 to 3.5 percent of GDP ($153 billion).”Another example might be the 2000s. According to the New York Fed’s research paper , from 2001 to 2005, the U.S. current account and fiscal balances plunged by 3 and 4 percent of GDP , respectively. So, there is some correlation between these two. And some economists even believe that there is a causal relationship, i.e., that increases in budget deficits cause an increase in current account deficits. The link is believed to work as follows: higher deficits increase consumption, so imports expand and the trade deficit widens. However, both deficits actually have a common root: the increase in the money supply . When the Fed creates money ex nihilo to monetize the federal debt , it enables America to both borrow and consume more goods from abroad.Regardless, in absolute terms, these old twin deficits were miniscule compared to the current one. As the chart below shows, the U.S. current account deficit (green line) has expanded significantly under Trump (despite all the trade wars !) and is approaching the historical record of $800 billion seen in 2006.But what happened to the U.S. trade deficit is nothing compared to the fiscal deficit! As you can see in the chart above, it ballooned from $984 billion in fiscal year of 2019 to $3.1 trillion in 2020!So, if we simply add these two deficits together, we will see that that the U.S. twin deficits have reached a record level . As the chart below shows, it has expended from $850 billion in 2014 to $3.8 trillion in 2020!Now, the question is how the twin deficits could affect the price of gold. Well, from looking at the chart above, it’s hard to tell. Gold rallied in the 1970s, when the twin deficit was miniscule, while it entered a bear phase when the twin deficit started to increase. However, the yellow metal skyrocketed both in the 2000s and in the 2020s, when the twin deficit ballooned.The key issue is what distinguishes the 1980s from the 2000s (and 2020)? I’ll tell you. In the former period, expansionary fiscal policy coincided with tight monetary policy . In consequence, the real interest rates increased, which encouraged capital inflows and strengthened the U.S. dollar. So, gold was melting.Luckily for the yellow metal, this time, the easy fiscal policy is accompanied by the accommodative monetary policy . The Fed has already slashed the federal funds rate and it’s conducting quantitative easing to suppress the bond yields . Actually, some analysts believe that the U.S. central bank will implement the yield curve control to prevent any significant increases in the interest rates .Hence, the combination of American monetary drunkenness and fiscal irresponsibility that largely contributed to the great expansion in the twin deficits should result in the weakening of the greenback . This, at least, is what we observed in the 2000s, as the chart below shows.And this depreciation of the U.S. dollar should ultimately support gold prices , especially if we see reflation and the next commodity boom. It’s true that since its peak in August 2020, gold has been positively correlated with the greenback, but the inverse relationship can be restored one day. Investors shouldn’t forget that the dollar is not the only driver of gold prices – other factors also play a role. In the second half of the past year, both the real yields and the risk appetite increased, which outweighed the impact of the weakening dollar. Luckily, the Fed is ready to prevent any significant upward pressure on the Treasury yields coming from the twin deficits. That’s good for gold.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.

Although dovish, Powell downplayed the bond yield rally. The Fed’s more tolerant stance on inflation is good for gold, but the metal may continue its bearish trend in the short-term.In the last edition of the Fundamental Gold Report, I analyzed the latest FOMC statement on monetary policy and economic projections . Today, I would like to focus more on Powell’s press conference . My reading is that the Fed Chair sounded like a dove. First of all, he emphasized several times that the jump in inflation this year will be only transient , resulting from the base effects and rebound in spending as the economy continues to reopen. And Powell explicitly stated that the US central bank will not react to this rise in consumer prices (emphasis added):Over the next few months, 12-month measures of inflation will move up as the very low readings from March and April of last year fall out of the calculation. Beyond these base effects, we could also see upward pressure on prices if spending rebounds quickly as the economy continues to reopen, particularly if supply bottlenecks limit how quickly production can respond in the near term. However, these one-time increases in prices are likely to have only transient effects on inflation (…) I would note that a transitory rise in inflation above 2 percent, as seems likely to occur this year, would not meet this standard [i.e., the Fed’s goals of maximum employment and stable prices].Second, Powell also pointed out that we are still far, far away from reaching the Fed’s employment and inflation goals. So, investors shouldn’t expect any hikes in the interest rates or any taper tantrum anytime soon. He was very clear on that, saying that it’s not yet time to start talking about tapering, and that the Fed will announce well in advance any decision to taper its quantitative easing program. Indeed, in a response to the question “is it time to start talking about talking about tapering yet”, he said:Not yet. So, as you pointed out, we’ve said that we would continue asset purchases at this pace, until we see substantial further progress. And that's actual progress, not forecast progress. (…) We also understand that we will want to provide as much advance notice of any potential taper as possible. So, when we see that we’re on track, when we see actual data coming in that suggests that we're on track to perhaps achieve substantial further progress, then we'll say so. And we'll say so well in advance of any decision to actually taper.Third, the Fed Chair reiterated a few times that the Fed’s changed its approach and it will not react to the forecast progress, but only to the actual progress , stating that:the fundamental change in in our framework is that we’re not going to act preemptively based on forecasts for the most part. And we’re going to wait to see actual data (…) And we’re committed to maintaining that patiently accommodative stance until the job is well and truly done.It makes some sense, of course, but it also increases the risk that the Fed’s response to rising inflation will be delayed. The same stance was adopted in the 1970s, when the central bankers believed that they would have plenty of time to react to any dangerous increases in consumer prices. But such an approach resulted in inflation getting out of control, leading to great stagflation . Gold shined then.Implications for GoldWhat does this all mean for the gold prices? Well, latest Powell’s remarks were dovish, which should support the yellow metal. But, as the chart below shows, we don’t see such a support reflected in the gold prices (London P.M. Fix).Part of the problem is that the bond yields continued to rise, after a short pullback amid the FOMC statement, exerting further downward pressure on the gold prices. A related issue here is that although Powell sounded generally dovish , he expressed a relaxed view on the current rally in the interest rates. Indeed, when replying to a question on the bond selloff, Powell just said that “we think the stance of our monetary policy remains appropriate”. So, his comments imply that the bond yields have room to move further up in the near-term, thus hurting the price of gold .However, there is certainly a level of interest rates that would be uncomfortable for the Fed (and Treasury), forcing it to intervene more decisively in the financial markets, and we’re not necessarily far from this level. Furthermore, given the rising inflation and inflation expectations, the real interest rates should rise at a slower pace than the nominal yields, and if they do actually fall, they would support the price of gold.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

Both Powell and Yellen testified before Congress. They sounded upbeat on the U.S. economy, but gold’s reaction was weak.What a combo! Both Fed Chair Jerome Powell and the U.S. Treasury Secretary Janet Yellen testified before Congress this week. They spoke about the economic response to the economic crisis caused by the Covid-19 pandemic and the Great Lockdown .In his prepared remarks , Powell sounded rather hawkish , as he noted that “the recovery has progressed more quickly than generally expected and looks to be strengthening.” As well, during the Q&A session, the Fed Chair seemed to be very confident about the economy and the central bank’s monetary policy . In particular, Powell told senators that 2021 was “going to be a very, very strong year in the most likely case.”He also downplayed worries about higher inflation expressed by some lawmakers, arguing that the environment of low inflation we have observed for years before the epidemic won’t change anytime soon:We think the inflation dynamics that we’ve seen around the world for a quarter-century are essentially intact — we’ve got a world that’s short of demand, with very low inflation. We think those dynamics haven’t gone away overnight, and won’t.And Powell dismissed concerns about the supply disruptions as well, saying that “a bottleneck, by definition, is temporary”.In a sense, Powell is right. A lot of supply disruptions are short-lived. But there are more inflationary factors operating right now, to name just a surge in the broad money supply . So, I’m afraid that he might be too conceited and understated the risk of higher inflation. You know, a lot of economic trends last – until they don’t. I’m referring here to the fact that the macroeconomic conditions change not gradually but rather abruptly. Inflation may remain low as long as inflation expectations are well-anchored, but if they become unanchored, inflation may rise quickly.Importantly, Powell was also unmoved by the recent rally in the bond yields :Rates have responded to news about vaccination, and ultimately, about growth (…) In effect there’s been an underlying sense of an improved economic outlook (…) That has been an orderly process. I would be concerned if it were not an orderly process, or if conditions were to tighten to a point where they might threaten our recovery.Yellen also sounded rather hawkish in her prepared remarks , as she wrote that “we may see a return to full employment next year.” Yellen also admitted that asset valuations are high, but that she wasn’t worried about financial stability, nevertheless: “I’d say that while asset valuations are elevated by historical metrics, there’s also belief that with vaccinations proceeding at a rapid pace, that the economy will be able to get back on track”. However, she argued that economy needed more help to recover fully.Importantly, Yellen admitted that higher taxes would be likely needed to raise revenues for increased government spending: “But longer run, we do have to raise revenue to support permanent spending”. Tax hikes could be negative for Wall Street and the economy, and thus, supportive for the price of gold.Implications for GoldWhat do Powell and Yellen’s testimonies imply for the gold prices? Well, the two most important economic figures in the U.S. didn’t surprise the markets, so the yellow metal reacted little to their statements, as the chart below shows.However, as both Powell and Yellen sounded rather optimistic about economic growth this year, their remarks might prove negative for the yellow metal. What can be particularly bad for gold is Powell’s calm stance regarding the rising bond yields. Of course, he could just put a good face on higher interest rates , but gold would prefer a more dovish stance. However, gold’s lack of a larger bearish reaction to rather upbeat testimonies from Powell and Yellen can actually be taken as an optimistic symptom. Anyway, a more accommodative stance of the Fed would be very helpful for the yellow metal.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

Many analysts expect silver to outperform gold this year. It’s possible, but investors shouldn’t count on improving economic conditions and industrial demand.Silver has recently become a hot investment theme. For months, if not years, some analysts claimed that silver is undervalued relative to gold. Then, at the beginning of 2021, Reddit revolutionaries tried to trigger a short squeeze in silver. Although that attempt failed, silver has, so far, clearly been outperforming gold this year , as the chart below shows. So, is silver now a better investment than gold?Well, why would it be? After all, many investors buy silver for the same reasons that they purchase gold – it’s a rare, monetary metal which may be used as an inflation hedge , a safe-haven asset against tail risks , or a portfolio diversifier . It’s just cheaper than gold – and this is why it’s often called the poor man’s gold.Indeed, silver has a very high positive correlation with gold . Just take a look at the chart below, which illustrates the movement of gold and silver prices since April 1968. The shapes of the lines are very similar and the correlation coefficient is as high as 0.90!On the other hand, silver may indeed outperform gold. After all, silver has a dual nature. It is not only a monetary asset – like gold – but also an industrial commodity. This implies that silver is more business cycle -sensitive than gold. Therefore, given that the global economy is recovering from the deep recession caused by the coronavirus pandemic and the Great Lockdown , silver may outperform gold. In other words, although both gold and silver could benefit from reflation during the recovery, improving economic conditions could support the latter metal more .Another argument for silver shining brighter than gold in 2021 is the historical pattern according to which silver prices tend to follow gold prices with some lag, just to catch up with them later – often overreacting compared with gold’s behavior.So much for theory. Let’s move on to the data now and analyze the previous economic crisis , i.e., the Great Recession , and the following recovery. As the chart below shows, both metals moved generally in tandem, however, silver was more volatile than gold .For example, from its local bottom in mid-2007 to its local peak in early 2008, silver rose 79 percent, while gold “only” 57 percent. Then, in the first phase of the global financial crisis , silver plunged 58 percent (from $20.92 to $8.88), while gold slid 30 percent (from $1011.25 to $712.5). Subsequently, silver skyrocketed 448 percent, reaching a peak of $48.7 in April 2011. Meanwhile, the price of gold reached its peak of $1875 a little bit later, in September 2011, gaining 166 percent. Finally, silver plunged 46 percent by the end of 2011, while gold dropped only 19 percent. This shows that the economic recovery and industrial revival that followed the Great Recession didn’t help silver to shine. Actually, the bluish metal underperformed gold .Similarly, silver plunged more than gold (25 versus 17 percent) in the run-up to the burst of the dot-com bubble , as one can see in the chart below. It also gained less than gold in the aftermath of the 2001 recession (25.4 versus 27.5 percent), and then it plunged in the third quarter of 2002, significantly underperforming gold.Therefore, the recent history doesn’t confirm the view that silver should be outperforming gold in the early stages of a recovery, because it’s an industrial commodity that benefits from improving economic conditions. Silver was never in a bullish mode when gold was in a bear market, and it rather tends to rally rapidly in the late stage of the commodity cycle, like in the 2000s.Actually, one can argue that silver has the best period behind itself. After all, it soared 141 percent from late March to September 2020, while gold rallied “only” 40 percent. So, it might be the case that the catch-up period, in which silver outperforms gold, is already behind us. Indeed, as the chart below shows, the gold-to-silver ratio has recently declined to a more traditional range of 60-70.This, of course, doesn’t mean that silver cannot rise further. However, it seems that the metal has already caught up somewhat with its more precious cousin . So, it’s possible that silver can outperform gold in 2021, as Biden’s focus on renewable energy may help silver – as a major part of the metal used in industry is now linked to solar panels and electronics, but history teaches us that investors shouldn’t count on industrial demand . Silver didn’t outperform gold during recoveries from the previous recessions. Although silver has a dual nature, its price is highly correlated with gold prices. Therefore, macroeconomic factors, such as the U.S. dollar , real interest rates , risk appetite, inflation , public debt , monetary policy , fiscal policy , etc., should have a stronger impact on silver than industrial demand . As always, those entering the silver market should remember that silver price movements are more violent than in the gold market.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.

Neither the Suez Canal blockade nor the SLR exemption’s expiration should significantly affect gold, whose price is likely to be soon shaped by other factors.Do you think you’ve had a bad day? If yes, then imagine the helmsman of the Ever Given who somehow managed to get his giant container ship stuck in the Suez Canal, disrupting global trade and causing economic damage worth millions of dollars each hour. Sure, the blockade won’t sink the global economy (pun intended), but it won’t help it either. After all, the Suez Canal is the gateway between Europe and Asia, through which around 12-13% of world trade flows, as does 30% of the world's daily shipping container freight. So, every day of obstruction disrupted the movement of goods worth about $9 billion, having a significant impact on global trade.Of course, the world won’t end, and ships can always choose an alternative route around the Cape of Good Hope at the southern tip of Africa, but this route takes several days longer. So, the blockade has significantly delayed the consignments of goods and fuel, and exacerbated the already pandemic-disturbed supply channels. As a reminder, there are shortages of containers, semi-conductors, and other inputs and finished goods, that have significantly lengthened delivery times and pushed prices up. Although the blockade of the Suez Canal was temporary, it added additional disruption on top of existing supply problems. Meanwhile, the central banks and governments interpret everything as demand problems that need to be addressed through easy monetary policy and loose fiscal policy .The accident of the Ever Given won’t significantly impact gold prices. And, as the chart below shows, we haven’t seen any substantial effects so far.However, the blockade could remind investors (if they somehow managed to forget amid the pandemic ) that black swans exist and fly low, and it’s reasonable to have a portion of one’s investment portfolio in safe havens such as gold (for instance, the insurance part of the portfolio ). Additionally, the upward pressure on prices (although limited) could strengthen the appeal of gold as an inflation hedge , especially considering that officially reported inflation is likely to jump next month because of the low base effect and all the recent supply disruptions.Fed Allows for Expiration of SLRAnd now for something completely different. The Federal Reserve Board announced that the temporary change to its supplementary leverage ratio , or SLR, for bank holding companies will expire as scheduled on March 31. What does this mean for the U.S. economy and the gold market?The SLR is a regulation that requires the largest U.S. banks to hold a minimum level of capital. The ratio says how much equity capital the banks have to hold relative to their total leverage exposure (3% in the case of large banks and 5% in the case of top-tier banks). To ease strains in the Treasury market during the Covid-19 epidemic , the Fed temporarily excluded the U.S. Treasuries and central bank reserves from the calculation. In other words, banks could increase their holdings of government bonds and central bank reserves without raising equity capital.But now, with the exemption expired, their equity capital will be calculated again relative to the banks’ total leverage exposure, including Treasuries and central bank reserves. So, it might be the case that the banks will have to either increase the amount of equity (which is rather unlikely) or reduce the amount of government bonds. And if they sell Treasuries, it would add to the upward pressure on the bond yields . This would prove rather negative for gold, which is a non-interest-bearing asset.However, it doesn’t have to be the case. I mean here that the U.S. eight large and systematically important banks wouldn’t fall below their 5% regulatory minimum. Actually, they are said to have a roughly 25% buffer above minimum thresholds, so the expiry of the SLR exemptions doesn’t have to significantly affect the functioning of the Treasury market, at least not immediately. Hence, the impact of the expiration of the SLR exemption could have limited effect on the gold market , if any.It seems that the price of the yellow metal will be rather shaped by the real interest rates , the U.S. dollar, inflation, the level of confidence in the U.S. economy, etc. In the short-term, the focus on economic recovery could continue the downward pressure on gold prices, but in the long-term, the stagflation theme could resurface and push the price of the yellow metal up.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

Confirmed, unconfirmed, verified, and invalidated: breakouts and breakdowns are now ubiquitous. And the implications are bearish for gold.Let’s start today’s analysis with a discussion of the key market that everyone is interested in – gold.Gold’s Failed Breakout – A Sell SignIn short, gold just invalidated its small breakout above the declining blue resistance line. The previous breakout was small and thus it required a confirmation. It never got one, and instead gold plunged, invalidating the move. This is yet another sell sign that we saw.It also serves as further proof that ever since the beginning of the year, gold permabulls (many people continue to claim that gold can only go up, even now) were destroying value rather than creating it. On a side note, we have nothing against checking out the work of other analysts, but we encourage you to check if someone was both bullish and bearish on a given market. If they never changed their mind, it seems that you can save some time by not reading what they come up with, as you already know the outcome. Besides it’s not like they would prepare you in advance for any decline (in case of permabulls).Getting back to the current market situation – since gold moved lower quite visibly yesterday (Mar. 30), and even (almost) reached its early-March high, it might be tempting to think that the decline is over. This seems unlikely in my opinion.The less important reason for the above is visible right on the above chart. Earlier this month, gold topped very close to its triangle-vertex-based reversal. The previous two triangle-vertex-based reversals also triggered declines. So, if something similar triggered similar moves, then it might be worth checking how big did the previous declines end up being.Both previous 2021 declines were followed by quite visible declines. The one that started in early Jan. took gold over $130 lower, and the one that started in mid-Feb. took gold over $170 lower. The current decline started at $1,754.20, so if the history is to rhyme (as it often does), gold would be likely to decline to at least $1,584 - $1,624. This target area corresponds quite well to the support provided by the early Mar. and early Apr. 2020 lows.The more important reasons due to which it seems likely that the decline will continue are: the rally in the USD Index and the rally in the long-term interest rates.The USD’s RallyAs far as the latter is concerned, it seems unlikely that we’ll see the Fed stepping into action with another Operation Twist until the general stock market slides. Otherwise, such a big intervention might seem uncalled for. Consequently, the long-term rates are likely to rally some more. And gold is likely to respond by declining further.As far as the USD Index in concerned, it just moved to new yearly highs, and since the nearest strong resistance is relatively far (from the short-term point of view), it seems that the move higher will continue with only small corrections along the way.The USD Index has not only confirmed the breakout above its Feb. highs, but it even managed to break above the rising red support line. This line, along with the rising black line based on the Feb. and mid-March lows, creates a rising wedge pattern that was already broken to the upside. The moves that tend to follow such breakouts often are as big as the size of the wedge. I used red, dashed lines for this target-determining technique. Based on it, the USD Index is likely to rally to about 96.65.The above target is slightly above the mid-2020 highs, so it might seem more conservative to set the upside target at those highs, close to the 94.5-94.8 area. The mid-2020 highs are likely to trigger a breather, but it doesn’t have to be the case that the USD Index pauses below these highs. Conversely, it could be the case that the USD Index first breaks above the mid-2020 highs and consolidates after the breakout. In fact, that’s what it did with regard to the breakout above the Feb. 2021 highs.Consequently, I’m broadening the target area for the USD Index, so that it now encompasses also the more bullish scenario in which the USDX takes out the mid-2020 highs before consolidating.Either way, we’re currently in the “easy part” of the USD’s rally. Even if it’s going to consolidate at or below the mid-2020 highs, it’s still very likely to first get there, and this implies a move higher by at least another full index point. This means that the gold price is likely to decline some more before finding short-term support. The scenario fits very well with the situation that I outlined based on the gold chart earlier today.Silver LossesSilver just broke to new 2021 lows. Everyone buying silver (futures) in Jan. / Feb. is now at a loss and in an increasingly inconvenient situation.Why would this be important? Because it means that everyone who jumped into the silver market with both feet based on just very brief research (“research”?) which in many cases was following instructions provided at various forums is in a losing position right now.Sometimes the losses are small – for the very few, who were early, but in some cases, the losses are already quite visible – especially for those, who bought close to $30.Why is this important? Because it emphasizes the need to verify the quality of the information that one chooses to act on, and because it’s a tipping point after which the previous buyers are likely to start becoming sellers, thus adding to decline’s sharpness.The “new silver buyers” losses are not huge yet, but after another move lower, they will likely become such and the sales from those buyers would likely make these declines even bigger.When everyone and their brother was particularly bullish on silver a few months ago, I wrote that they might be quite right, but the timing was terrible. So far, the losses for those, who bought silver earlier this year are not that big, but, in my opinion, they are likely to become much bigger in the following weeks.Of course, I expect silver price to soar in the following years (well over $100), but not without plunging first in the short and/or medium term.The Miners’ Relative StrengthLet’s take a look at the mining stocks. In yesterday’s analysis , I explained the likely reason behind the temporary strength in the mining stocks, and I emphasized that it’s not likely to last. This explanation remains up-to-date:Ultimately, it’s never possible to reply to the “why did a given market move” other than that “because buyers won over sellers”. It’s not particularly informative, though. The reason that seems most likely to me is that it was… a purely technical development that “needed” to happen for a formation to be complete.This hypothesis would explain also one odd thing that happened yesterday. Namely, while the GDX closed the day slightly higher, the GDXJ ended the day lower. This would make sense if the general stock market declined ( junior mining stocks – GDXJ tend to follow its lead more than seniors – GDX) – but the point is that the general stock market ended yesterday’s session basically flat (declining by mere 0.09% decline).“Ok, so what kind of formation are miners completing?”Quite likely the head and shoulders formations. The reason for yesterday’s underperformance of the GDXJ would be the fact that in case of this ETF’s head-and-shoulders formation , the neckline is descending much more visibly. These formations are more visible on the 4-hour charts – so, let’s zoom in.Currently – based on yesterday’s (Mar. 30) closing prices – both formations are completed, and while it could still be the case that both ETFs move back to their previous necklines to verify the breakdowns, the implications are already bearish for the short term.The price targets based on those formations are $29.6 and $40.7 for the GDX and GDXJ, respectively. However, let’s keep in mind that the H&S-based targets should be viewed as “minimum” targets, not necessarily the final ones.All in all, the technical picture currently favors lower precious metals (and mining stock) prices over the next several weeks. In my view, this is either the middle or the final part of the very final decline in the precious metals market, before it takes off based on multiple positive factors of long-term nature.Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.Przemyslaw Radomski, CFA Founder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Biden just announced an ambitious and expensive infrastructure plan. Will it rebuild gold?Yesterday (Mar. 31), President Joe Biden the big infrastructure plan , the second major legislative initiative after the $1.9 trillion coronavirus relief plan passed in early March. The proposal includes about $2.2 trillion in new spending over eight years, boosting government expenditures even further .Despite the name, the plan assumes that only a part would be spent on infrastructure. To be more specific, Biden wants to spend $600 billion on transportation infrastructure (such as bridges, roads, airports, etc.), and more than $300 billion on improving utilities infrastructure (drinking-water pipes, electric grids, broadband). He also proposes to put more than $300 billion into building and upgrading housing and schools, $400 billion to care for elderly and disabled Americans, and almost $600 billion in research and development infrastructure, manufacturing, and job training.That doesn’t sound bad at all (after all, infrastructure is critical), but there is a catch. The plan assumes that all the spending will be financed by tax hikes. Biden proposes to raise the U.S. corporate tax rate from the 21 percent set by Trump to 28 percent, as well as to eliminate all fossil fuel industry subsidies and loopholes. So, according to the proposal, the tax reforms will add about 0.5 percent of GDP in fiscal revenues, which are believed to fully pay for investments within the next 15 years.Implications for GoldWhat does Biden’s infrastructure plan mean for the U.S. economy? Well, I won’t argue that American infrastructure needs upgrading. There is a bipartisan agreement here. The problem is, however, that government spending programs are usually inefficient, and cost more than initially planned . Additionally, the plan seeks to give the government a significant role in new important areas, and to introduce anti-business and pro-labor unions regulations.So, generally speaking, the proposal stems from Biden’s progressive belief that government can and should be a primary driver for economic growth, which is just plain wrong. As both economic theory and empirics show, the private sector is inherently more efficient than the bureaucrats (you can ask people in the former communist countries whether it’s true). Such a revolution in U.S. economic policy will weaken the allocative efficiency and hamper the long-term pace of economic growth.Last but not least, the idea to raise taxes when the economy hasn’t fully recovered from the pandemic recession is controversial, at least. Higher taxes will weaken corporate America and redistribute resources from the private sector to the public sector, negatively affecting the economy in the long-run. As well, I don’t believe that the tax revenues will fully finance the plan, so the fiscal deficits will increase further, ballooning even more the already mammoth pile of federal debt (see the chart below).And how will Biden’s infrastructure plan affect the gold market? Well, in the long-run, higher government spending, public debts, inflation , and corporate taxes should hamper the pace of economic growth and weaken corporate America and Wall Street. Hence, the proposal could be positive for gold prices, at least from the fundamental point of view .However, Biden’s bold actions seem to be welcomed so far by the financial markets. This is because the fiscal stimulus – and the rollout of vaccination – is strengthening the risk appetite. There are also hopes that the “go big” approach will allow the American economy to recover more swiftly than previously expected and quicker than its European peers. These expectations could propel the bond yields further up (see the chart below), also strengthening the U.S. dollar, and creating additional downward pressure on the gold prices .Therefore, although the Fed will have to step in and ease its monetary policy if the interest rates rise too much, the bond yields have room to move higher. This upward trend could continue to put gold under pressure , unless the yellow metal finds a way to diverge from its relationship with interest rates, for example, by attracting more investors worried about inflation.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

The March nonfarm payrolls were surprisingly strong. If the current favorable trend in the U.S. labor market continues, gold may struggle.As the chart below shows, in March 2021, total nonfarm payrolls rose by 916,000 , following gains of 468,000 in February (after an upward revision). The latest gains were the largest since August 2020. It’s important to note here that job growth was widespread, although led by gains in leisure, hospitality, education, and construction.Furthermore, the U.S. economy added significantly more jobs than expected . Economists surveyed by MarketWatch forecasted 675,000 additions, but it turned out that employment in January and February combined was 156,000 higher than previously reported. Also on the positive side, the unemployment rate declined from 6.2 to 6 percent , as the chart below shows. As the unemployment rate is much below its high from April 2020, it’s clear that the U.S. labor market is recovering from the pandemic recession .However, significant slack remains. First, the unemployment rate is still 2.5 percentage points higher compared to February 2020, before the pandemic started. Second, the broader unemployment rates, which paint a more accurate picture of unemployment, are even further from their pre-pandemic levels. For instance, the broadest U-6 rate was 10.7 percent in March, i.e., 3.7 percentage points above the level seen in early 2020. Third, the labor-participation rate is 1.8 percentage points lower than its pre-pandemic level, which means that many people simply dropped out from the labor market instead of searching for a job.Implications for GoldWhat does it all mean for the yellow metal? Well, gold’s reaction to a generally good employment situation report was positive . As the chart below shows, the London price of the shiny metal increased from $1,726 on April 1 to $1,745 on April 6, 2021, when the fixing resumed after the holidays.The explanation for gold’s positive reaction might lie in the fact that although the employment report was positive, it won’t be enough to alter the Fed’s monetary policy . As a reminder, the U.S. central bank wants to see “substantial further progress” towards labor market repair before tapering the asset purchases and raising the interest rates . Of course, further such reports with almost one million job gains would force the Fed to admit that the situation improved substantially.However, the Fed would like to see a continuation of the current trend for a while before it will alter its stance. Indeed, as Chicago Federal Reserve Bank President Charles Evans recently said, “those conditions will not be met for a while (…) Policy is likely on hold for some time.”And it won’t be easy to sustain the current favorable trend in the labor market. This is because the large share of the unemployed are long-term unemployed, roughly 43 percent, and there is a risk that these people will get discouraged and drop out from the labor market. It’s easier to put short-term unemployed than long-term unemployed into work again.Regardless, gold’s reaction amid the surprisingly strong nonfarm payrolls report and the accompanying rise in the bond yields could be seen as encouraging . Some analysts even believe that the yellow metal has bottomed out.However, given that the U.S. outpaces its major peers in the pace of economic recovery, it might be too early to call the return of the gold bulls . So, the medium-term downside risks remain present in the gold market. Although the single report won’t cause an immediate shift in the Fed’s stance, if this trend continues, the market expectations of the Fed’s tapering and hikes in the federal funds rate could move up, exerting downward pressure on gold prices.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

Inflation is coming. Gold may benefit from it, especially if inflation turns out to be more long-lasting than central bankers and markets believe.Brace yourselves, inflation is coming ! Importantly, not only grumblers such as myself are talking about rising prices right now, but even the Fed officials themselves admitted that inflation will jump this year. Indeed, in the latest dot plot , the Federal Open Market Committee (FOMC) expects that the PCE annual percent change will soar from 1.3 percent in December 2020 to 2.4 percent at the end of this year. Importantly, their projections increased significantly in the last three months when they amounted to 1.8 percent.And remember, we are talking here about the official inflation figures. The real inflationary pressure, which also affects asset prices, is much stronger. Furthermore, the pandemic changed the composition of consumption, as people are buying more goods and less services. And guess what, the prices of goods are rising more than the prices of services, so many people’s actual consumption baskets have become more expensive than official ones, implying that true inflation is higher than the officially reported one, as the IMF has recently admitted .Does this mean that the FOMC members have all suddenly become monetary hawks worried about higher inflation? Not at all. The Fed believes that inflation will be temporary, caused by the base effects (very low inflation readings in the second quarter of 2020) and by the reopening of the economy that will trigger higher consumer spending and some increases in prices.The U.S. central bank might be right. After all, there will be some temporary forces at play. There always are, but – oh, what a funny thing! – the Fed always cites “transient effects on inflation” when it’s increasing, but not when it’s declining. The problem is, however, that the markets don’t believe the U.S. central bank . Please take a look at the chart below, which displays inflation expectations over the next five and ten upcoming years.As you can see, both medium-term and long-term inflation expectations have significantly increased in the last few months. It means that investors don’t only expect a temporary rise in inflation – on the contrary, they forecast a more persistent increases in prices . Indeed, Mr. Market believes that inflation will be, on average, 2.5 percent in the next 5 years and almost 2.3 percent in the next 10 years, significantly above the Fed’s target of 2 percent.Of course, it might be the case that Mr. Market is wrong, and Mr. Powell is right. But what is disturbing is the Fed’s confidence – or, rather overconfidence – that it can contain inflation if it turns out to be something more than only a temporary phenomenon. Such a conceit led to stagflation in the 1970s. Gold shined at that time.Then, as today, the central bank focused more on the maximum employment than inflation, believing that it can always control the latter by raising the federal funds rate if necessary. But, as Robert J. Barro, from Harvard University, points out , “the problem is that hiking short-term rates will have little impact on inflation once high long-term expected inflation has taken root.”And the recent Fed’s actions, including the new monetary framework, according to which the U.S. central bank tries to overshoot its target for some time, may easily waste the reputational capital that was created by Paul Volcker and de-anchor inflation expectations.In other words, a negative shock can be accommodated by the central bank without long-lasting effects, as people understand that it’s a unique one-off event, after which everything will return to normalcy. But the Fed is far from normalizing its monetary policy . On the contrary, it has recently signaled that it wouldn’t raise interest rates preemptively to prevent inflation, as it could hamper the economic recovery. The risk here is that if people start to view exceptional as the new normal, their inflation expectations could shift, and become unanchored.To sum up, it might be the case that markets are overstating short-term inflation risks. But it’s also possible that politicians and central bankers understate the longer-term inflationary dangers , as Kenneth Rogoff, also from Harvard University, argues . After all, unlike in the aftermath of the Great Recession , when only the monetary base skyrocketed, the pace of growth of the broad money supply also soared this time – and it’s still increasing, as the chart below shows.In other words, while all the created liquidity after the global financial crisis of 2007-2009 flowed mainly into the financial markets, during the pandemic , it flowed into the real economy to a much larger extent, which can create more inflationary pressure.What’s more, the easy monetary policy is now accompanied by a very loose fiscal policy and the unprecedentedly large fiscal deficits , which could push the economy deeper into the debt trap . This could undermine the central-bank independence and prevent a timely normalization of interest rates , not to mention the weakening of globalization’s downside impact on inflation, caused partially by demographic factors and reshuffling in supply chains. Last but not least, the rising commodity prices and international transport costs, accompanied by the weakening U.S. dollar, may be harbingers of an approaching inflation monster.What does it all mean for the gold market? Well, the jump in inflation in 2021 should be positive for the yellow metal , which could gain as an inflation hedge . The downward pressure on the real interest rates should also be supportive for gold prices, although the rally in the bond yields may counteract this effect. But if Powell is right and inflation turns out to be only temporary, then gold may be hard hit, and we could see a goldilocks economy again (i.e., fast economic growth with low inflation). However, if markets are right, or if the long-term inflationary risks materialize, which even investors may understate, gold should shine.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get a 7-day no-obligation trial for all of our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.

The latest FOMC minutes were dovish, especially in light of the recent increase in inflation. That’s good for gold.Last week, The Federal Open Market Committee (FOMC) published minutes from its last meeting in March . They show that – in light of positive economic indicators – the members of the Committee turned out to be more optimistic about the U.S. economy since the previous meeting. But this is what we already know from the March economic projections.What is new and much more important is that Fed officials expressed the view that despite all the progress, the economic situation remained unsatisfactory with many indicators still far from the pre-pandemic level and the Fed’s long-term targets:Despite these positive indicators and an improved public health situation, participants agreed that the economy remained far from the Committee's longer-run goals and that the path ahead remained highly uncertain, with the pandemic continuing to pose considerable risks to the outlook.In consequence – and this is probably the key message from the recent minutes – the FOMC members reaffirmed that they are in no rush to taper the quantitative easing . Furthermore, the U.S. central bank will announce a change in the pace of asset purchases well in advance:Participants noted that it would likely be some time until substantial further progress toward the Committee's maximum-employment and price-stability goals would be realized and that, consistent with the Committee's outcome-based guidance, asset purchases would continue at least at the current pace until then. A number of participants highlighted the importance of the Committee clearly communicating its assessment of progress toward its longer-run goals well in advance of the time when it could be judged substantial enough to warrant a change in the pace of asset purchases. The timing of such communications would depend on the evolution of the economy and the pace of progress toward the Committee's goals.And the hike in the federal funds rate will happen only after the start of the normalization of the Fed’s balance sheet . So, given a lack of any communication in this regard, investors shouldn’t expect any increases in the interest rates for years .Last but not least, the Fed not only started to expect higher inflation – as a reminder, the FOMC participants expect 2.4 percent PCE inflation in 2021 – but it also “viewed the risks of upside inflationary pressures as having increased since the previous forecast”. However, the central bankers still believe that the increase in inflation this year will be transitory due to the base effects and supply disruptions:In the near term, the 12-month change in PCE prices was expected to move above 2 percent as the low inflation readings from the spring of last year drop out of the calculation. Most participants also pointed to supply constraints that could contribute to price increases for some goods in coming months as the economy continued to reopen. After the transitory effects of these factors fade, however, participants generally anticipated that annual inflation readings would edge down next year.This is a puzzling view in light of the fact that many participants “judged that the release of pent-up demand could boost consumption growth further as social distancing waned.” So, in some magical way, the release of pent-up demand could boost consumption, but not prices, and inflation could be increased only by supply factor, but not by demand factors.Implications for GoldWhat do the recent FOMC minutes imply for the yellow metal? Well, the increase in expected and actual inflation rates combined with the Fed’s dovish stance could create downward pressure on the real interest rates and the U.S. dollar, thus supporting gold prices . The yellow metal could also benefit from the elevated demand for inflation hedges in an environment of stronger upward pressure on prices.Indeed, the price of gold jumped shortly on Thursday (Apr. 8) above $1,750, as the chart below shows. This upward move was temporary, though, but that can change soon, as the inflation genie has popped out of the bottle.The Producer Price Index increased by one percent in March , twice more than in February, and significantly above the expectations of a rise of 0.4 percent. As well, the final demand index moved up 4.2 percent for the twelve months ended in March, the largest increase since September 2011. Meanwhile, the index for all commodities surged even more (12 percent!), in the fastest pace since the Great Recession , as the chart below shows. Importantly, the Consumer Price Index has also been rising recently (I will cover this report in the next edition of the Fundamental Gold Report).Of course, the rise in inflation may also increase the nominal bond yields, which could be negative for the gold market. However, the rally in the bond yields was mainly caused by the fact that investors priced in a more aggressive path of the federal funds rate than the FOMC members have indicated. But after the recent minutes it seems that these traders are starting to capitulate and will not fight the Fed anymore. This would be good news for the gold market.Indeed, the second quarter started much better for the yellow metal than the awful beginning of the year, and there are some reasons (dovish Fed, higher inflation, limited potential for further rally in the bond yields) for cautious optimism. But the key problem is that the Fed is still relatively hawkish compared to the Bank of Japan or the European Central Bank . Well, we will see, stay tuned!If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

The recent rally in the bond yields pushed gold prices down, but this trend won’t continue forever, as the Fed will likely be forced to step in.In March, we saw a continuation of the rally in bond yields that started in February. As the chart below shows, the 10-year real interest rates have soared from -1.06 on February 10 to -0.66 percent on March 23.What is clear from the chart is the strong correlation between the 10-year TIPS yields and the gold prices. As a consequence, the rising bond yields made gold struggle. However, in March, the real interest rates were much more choppy compared to February, when they surged decisively. It may signal a lack of fuel for the further rally, at least for a while.Now, what is important here is that despite the recent jump in the real yields, they remain extremely low from the historical point of view . And they remain well below zero! This is good news for the gold market, as the yellow metal shines the most when real interest rates are negative.Of course, the direction of change is also very important, not just the absolute level. So, the question is, will the rates increase further? Well, it’s unfortunately possible, as the improving economic outlook and risk appetite are encouraging investors to buy stocks rather than bonds.On the other hand, the rising inflation expectations suggest that real yields may struggle to increase further , or they actually may go down. As the chart below shows, the market expectations of inflation in the next 10 years, derived from the Treasuries, have risen from 0.50 at the bottom in March 2020 to 2.31 on March 24, 2021.Given the increase that has already taken place, the further rise may be limited. But the broad money supply is still rising at an accelerating pace, and investors still don’t believe that the Fed will not hike the federal funds rate to combat rising inflation. They don’t buy the new monetary framework and all the talking about letting inflation overshoot the Fed’s target. Of course, the promise to be irresponsible in the future is not very credible, but investors shouldn’t underestimate the recklessness of central bankers .You see, we live in an era of weak policymakers unable to make serious commitments, or take unpopular actions, contrary to the needs of Wall Street and the government. For example, Janet Yellen , as a Treasury Secretary, should stress fiscal discipline – instead, she praised the “go big” approach of the new administration. Congress has already passed the $1.9 trillion fiscal stimulus and the next additional spending is coming . The legislative proposal of new government expenditures on infrastructure and other priorities (such as climate change and the labor market) could collectively cost more than $3 trillion.It’s true that the additional government spending and the necessary borrowing could push up the yields (this is an important downward risk for gold). But rising interest rates could hamper the economic recovery and make government financing more costly, further ballooning already mammoth fiscal deficits . So, the Fed will likely have to step in and expand its quantitative easing program or introduce other measures, such as the yield curve control, to curb the long-term interest rates. It will weaken the dollar, thus supporting gold prices.As a reminder, the Bank of Japan has started to target the yield on 10-year government bonds at around zero percent in 2016, as it decided that the rapid monetary base expansion via large-scale asset purchases was unsustainable. More recently, the European Central Bank has announced in March the acceleration in the pace of its QE in a response to the rally in bond yields.So, do you really think that the Fed won’t follow suit? That Powell will not help Yellen, his former boss from the Fed? The sharp increase in yields would be inconsistent with the Fed’s dovish policy and the overall debt-driven economic growth. Hence, if the interest rates increase too much, be sure that the Fed will do something, providing a long-awaited support for the price of gold.What is “too much”? Not so much, at least not in the debt-trap we live in. Some analysts believe that this could occur if nominal 10-year Treasury yields rise over 2 percent, not too far from the current levels, as one can see in the chart below.Should we be surprised, given the bond bubble created by the central banks? They have kept the bond yields artificially depressed for years, so even a modest normalization – perfectly justified by the expectations of economic recovery and rising inflation – could collapse the house of cards and cause a financial crisis . Hence, although markets have become more optimistic recently, I’m afraid that bears and black swans haven’t said the last word yet. And neither has gold.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get a 7-day no-obligation trial for all of our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.

A culminating point has been reached. With the USD Index being backed up by solid fundamentals, can gold hold the line?Have you ever noticed how often the language of war is used in finance and economics articles? A given company is on the defensive or the offensive, a stock is pushing forward, something else is rallying, positions are being taken… who will fire first? It’s the case of continuous push and pull factors that makes military strategies and concepts relevant to the subject of money.Now, when it comes to gold and the USD Index, it’s not the great battle of our time (in reference to today’s title), as Gandalf explained to Pippin in The Lord of the Rings, but it’s a battle, nonetheless. For the yellow metal, it could even be the deep breath before the plunge. We’ll soon find out.With an epic struggle for supremacy set to unfold in the coming weeks, battle lines have officially been drawn: with the USD Index hovering near its 50-day moving average and gold recapturing its 50-day MA, negatively correlated assets have officially collided. And, as the rules of engagement specify that to the victor go the spoils, which one is likely to wave the white flag?Well, with the USD Index built on a foundation of relative fundamentals and gold a beneficiary of shifting sentiment, the former remains locked and loaded and poised to neutralize the threat. Case in point: despite the USD Index’s recent recoil, non-commercial (speculative) futures traders actually increased their net-long positions last week .Please see below: Source: COTMoreover, let’s keep in mind that when net-speculative short interest as a percentage of total open interest (based on the CoT data) became extremely high in 2014 and 2018, the USD Index recoded two of its sharpest rallies in history. How sharp? Well, let’s take a look at how things developed in the past – after all, history tends to rhyme.Let’s focus on what happened when the net speculative positions were significantly (!) negative and then they became significantly (!) positive, without paying attention to tiny moves (like the one that we saw last summer).In short, rallies that began with extreme pessimism include:The big 2008 rally (over 16 index points)The big 2009 – 2010 rally (over 14 index points)The 2011 – 2012 rally (over 11 index points)The 2013 rally (“only” over 5 index points)The big 2014 – 2015 rally (over 20 index points)The 2018 rally (over 15 index points)The current rally started at about 89, so if the “normal” (the above shows what is the normal course of action) happens, the USD Index is likely to rally to at least 94, but since the 5-index point rally seems to be the data outlier, it might be better to base the target on the remaining 5 cases. Consequently, one could expect the USD Index to rally by at least 11 – 20 index points, based on the net speculative positions alone. This means the upside target area of about 105 – 114. Consequently, a comeback to the 2020 highs is not only very likely, but also the conservative scenario.In addition, let’s keep in mind that the very bullish analogy to the 2018 rally remains intact. If you analyze the chart below, you can see that back in 2018, the USD Index rallied sharply and then corrected back to its previous highs. And in similar fashion, the current weakness is nearly identical. More importantly, though, with the 61.8% Fibonacci retracement level sitting just below the USD Index’s 50-day MA, the cavalry is already on the way.Please see below:The current correction is much bigger than what we saw in mid-April 2018, so it seems that what we see right now is more of an analogy to what we saw in June 2018. That was the first big correction after the breakout – above the 50-day moving average and the declining blue resistance line – that definitively ended the yearly decline.I marked the situation from 2018 that seems similar to what we see right now with a dashed, horizontal line. Back in 2018, the pullback ended when the USD Index moved to its first Fibonacci classic retracement level (the 38.2% one). In case of the current rally, I marked those retracements with red. The USD Index is already below the first two (taking today’s pre-market decline into account) and it seems to be on its way to reach the final – most classic – 61.8% retracement. This kind of retracement provides substantial short-term support and it’s something that’s likely to trigger a rebounding.This retracement is slightly above the 90.7 level, and at the moment of writing these words, the USD Index is trading at 91.14. This means that the USD Index can reach its very strong short-term support any day – or hour – now.The very important detail about the June 2018 decline (and bottom) is that while this was the moment after which the USD Index’s started to move higher at a slower pace, it was also the moment after which the precious metals market started to decline faster.At the beginning of the year, I wrote that the precious metals market was likely to decline and that the preceding rally was likely fake. That’s exactly what happened.Right now, I’m writing that the recent rally was also fake (a correction within a medium-term decline) and – even more importantly – it seems likely that the next downswing could take place at a higher pace than what we saw so far this year. And – just as was the case in 2018 – this upcoming (fast) decline is likely to lead to the final bottom in the precious metals sector.Of course, just because the bottom is likely to be formed in the following months, doesn’t mean that it’s in at this time or that it’s a good idea to ignore the bearish implications of the situation in the USD Index (as well as other indications pointing to lower gold prices).As further evidence, the USD Index’s 2020 decline has not invalidated its long-term breakout. And with the long-term implications taking precedence over the medium- and short-term ones, the USDX still has its guns pointed in the right direction.Adding reinforcements to its infantry, the USD Index also has another ally in the U.S. 10-Year Treasury yield. After sitting out much of the rally in 2020, the former has been following in the latter’s footsteps since the New Year’s Day. And while the U.S. 10-Year Treasury yield’s frailty has been a negative over the last two weeks, the dynamic could be about to flip.Please see below:Trending in the opposite direction of the USD Index futures, non-commercial (speculative) futures traders have moved from net-long to net-short the U.S. 10-Year Treasury Note . For context, bond prices move inversely of yields, so a lower U.S. 10-Year Treasury results in a higher U.S. 10-Year Treasury yield. And after non-commercial (speculative) futures traders reduced their long positions by nearly 43,000 contracts and increased their short positions by more than 44,000 contracts, speculators went from being net-long nearly 84,600 contracts to net-short nearly 2,700 contracts.Please see below:As a result, if the U.S. 10-Year Treasury yield and the USD Index engage in an all-out offensive, their military might could indicate the death knell for the precious metals. Case in point: if you analyze the table below, you can see that gold, silver and the mining stocks often move inversely to the U.S. dollar.The bottom line?Given the magnitude of the 2017-2018 upswing , ~94.5 is likely the USD Index’s first stop. And in the months to follow, the USDX will likely exceed 100 at some point over the medium or long term.Keep in mind though: we’re not bullish on the greenback because of the U.S.’s absolute outperformance. It’s because the region is doing (and likely to do) better than the Eurozone and Japan, and it’s this relative outperformance that matters , not the strength of just one single country or monetary area. After all, the USD Index is a weighted average of currency exchange rates, and the latter move on a relative basis.In conclusion, the generals have mapped out their strategies, soldiers have manned the perimeter, and the loser of the upcoming battle will likely end up losing the war. However, with the precious metals being outmanned and outgunned, the USD Index will likely plant its victory flag, while gold, silver and the mining stocks are forced to retreat and regroup. As a result, a major fallback is likely before the precious metals can resume their long-term uptrend. Due to the USD’s breakdown below the 50% retracement, they could decline in the very near term (while gold rallies a bit more – say to $1,800 or so), but don’t let that trick you into thinking that the next big move is going to the upside. In my view, that’s actually likely to be an important top that’s then going to be followed by an even more important decline in the precious metals and mining stocks. Then, after several weeks or months of declines, PMs can bottom and finally soar without huge declines on the horizon.Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.Przemyslaw Radomski, CFA Founder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Several economic indicators have surprised us on the positive side. Nevertheless, the price of gold has rebounded.Finally! The price of gold has been rising recently . As the chart below shows, the yellow metal rebounded from the late March bottom of $1,684 to above $1,770 on Friday (Mar. 16). This could be a promising start to the second quarter of 2021, which looks better than the first.As you know, gold struggled at the beginning of the year, falling under strong downward pressure created by the improving risk appetite and rising bond yields . But the strength of these factors has begun to fade. You see, it seems that economic confidence has reached its maximum level, and it could be difficult for markets to become even more euphoric.Please take a look at the chart below which shows the level of credit spreads – as you can see, they have fallen to very low levels, which implies that they won’t get much lower than they are right now. So, it appears that the next big move will rather be a rise in credit spreads or a decline in economic confidence.Second, it seems that the rally in bond yields has run out of fuel , at least for a while. The U.S. long-term real interest rates reached their peak of minus 0.56% on March 18 of this year. Since then, they are in a sideways or even downward trend, declining to almost -0.70% last week, as you can see in the chart below.As I explained earlier several times, the markets didn’t buy the Fed’s story of allowing inflation to rise substantially without hiking interest rates for several weeks or even months. However, it seems that Powell and his colleagues have finally managed to convince investors that they are really serious about the new framework, which puts full employment over inflation.Of course, there are also positive geopolitical factors contributing to the rebound in the gold prices . The tensions between the U.S. and China, as well as the U.S. and Russia, have been rising recently. However, it seems that the decline in bond yields allowed gold to catch its breath, and that the macroeconomic outlook – including the credit spreads, interest rates, inflation, monetary policy and fiscal policy – will remain the key driver of gold prices throughout the year.Implications for GoldWhat does all this mean for the price of the yellow metal? Well, the recent jump in the price of gold is encouraging. What is important here is that this rebound occurred amid the flood of positive economic data . For instance, the initial jobless claims have decreased to 576,000, a lower level than expected and the lowest since the pandemic started, as the chart below shows.Additionally, retail sales surged 9.8% in March , following a 2.7% decline in February, while the Fed’s Beige Book reported that “national economic activity accelerated to a moderate pace from late February to early April”. Additionally, both the Philadelphia Fed manufacturing index and the Empire State manufacturing index surprised us on the a positive side.The fact that gold held its gains and continued the rebound even after the publication of several positive economic reports is bullish . Of course, it might be simply the case that the reduction in the real interest rates simply outweighed other indicators, but it’s also possible that gold’s bears got tired.Indeed, the sentiment was so negative in the gold market that it couldn’t get much worse than it already was. Gold shined brightly during the Great Lockdown and economic crisis . But now, when the economy is recovering, gold has become persona non grata . However, this might imply that we are either close to or we have already reached the bottom. Only time will tell, of course, but the macroeconomic outlook seems to be rather friendly for the price of gold, especially if the real interest rates stop rising or even start declining again.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

The price of gold rebounded further, despite hawkish Powell’s letter to Senator Rick Scott.The second quarter of 2021 started much better than the first one for the gold bulls . As the chart below shows, the yellow metal rebounded from the late March bottom of $1,684 to $1,778 on Tuesday (April 20).Is it a temporary recovery in a long, downward slide or a return to the bull market that started in 2019? Well, it’s probably too early to determine whether that’s the case. What is, however, crucial here is that the yellow metal has managed to go up, despite some bearish news. The most important fact is that Powell has replied to the letter from Senator Rick Scott on rising inflation and public debt . The Fed Chair’s reply was rather hawkish , as he said that any overshoot of inflation target would be limited:We do not seek inflation that substantially exceeds 2 percent, nor do we seek inflation above 2 percent for a prolonged period (…) we are fully committed to both legs of our dual mandate – maximum employment and stable prices (…) We understand well the lessons of the high inflation experience in the 1960s and 1970s, and the burdens that experience created for all Americans. We do not anticipate inflation pressures of that type, but we have the tools to address such pressures if they do arise.Although Powell didn’t say anything surprising, his tone and emphasis on the commitment to stable prices could be interpreted as generally hawkish and, thus, negative for the gold prices. However, the yellow metal continued its rebound, which is encouraging .Implications for GoldSo why has gold been rising recently? Well, in a sense, the reason might be simple: the sentiment was so negative that the downward trend had to reverse. However, there are also some fundamental factors at play here. First of all, the rallies both in the bond yields and the US dollar have stalled . As the chart below shows, both the greenback and the real interest rates have receded from their March peaks..The declines in the bond and forex markets enabled gold to catch its breath. Of further importance is that they started falling when it became clear that the Fed would be more dovish and tolerant of higher inflation than was originally believed by the markets.Second, there has been a surge in global coronavirus cases which renewed a demand for the safe-haven assets, such as gold . Also, in the US, the number of confirmed cases and hospitalizations is increasing in some areas of the country, despite the vaccination progress. That is the effect of the new variants of the virus and the pandemic fatigue, i.e., many people tired of it have dropped their infection control measures.Third, inflation is accelerating , which is becoming increasingly visible. For example, the latest IHS Markit U.S. Manufacturing PMI shows that costs and charges have historically elevated in March.Supplier lead times lengthened to the greatest extent on record. At the same time, inflationary pressures intensified, with cost burdens rising at the quickest rate for a decade. Firms partially passed on higher input costs to clients through the sharpest increase in charges in the survey’s history.Commenting on the numbers, Chris Williamson, Chief Business Economist at IHS Markit, said:Raw material prices are increasing at the sharpest rate for a decade and factory gate selling prices have risen to a degree not seen since at least 2007. The fastest rates of increase for both new orders and prices was [sic] reported among producers of consumer goods, as the arrival of stimulus cheques in the post added fuel to a marked upswing in demand.What matters here is that the inflationary pressure is likely to remain with us for a while, despite the pundits’ claims that it’s triggered merely by temporary factors. In the 1970s, they were talking the same – until stagflation emerged and gold shined .If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

We've been talking a lot about the long-term downtrend of gold that's been the case since July 2020. Frequently, the price goes above and below that channel but then inevitably gets back into it. Since the end of 2020, that channel's upside has been mostly coinciding with the 100-MA. Now, golf is up there testing 100-MA below $1,800. Will it break the trend then?First, even if it does, the trend may still stay valid just like it's been before: 80% of the time, the price was within the channel, but 20% still saw it deviate from the trend. Therefore, what we see now is just a possible breakout - whether it'll be a true trend change, only time will show: fo that, the changing configuration of the Moving Averages will serve as an indicator; so far, they're all aligned in a downward formation.Second, gold may go as high as 200-MA at $1,850 just as it did twice previously. That all will not be an impediment for it to get back down into the channel: whatever the bullish breakaway is, it won't change the trend unless it goes beyond the resistance of the 200-MA at $1,850. Lastly, observe an interesting thing: there is a double top at $1,955, and there is a double bottom at $1,680. The gold price failed to cross either. That suggests a possibility that in the coming months, it'll trade between the two revolving around the core channel of $1,800-1,850. Let's watch it!Download the FBS Trader app to trade anytime anywhere! For personal computer or laptop, use MetaTrader 5!

Revolution, baby! There is growing acceptance for an aggressive fiscal policy, which could be supportive for gold prices from the fundamental, long-term point of view.We live in turbulent times. The pandemic is still raging and will most likely have lost lasting effects on our society. But a revolution is also happening right before our eyes. And I don’t mean another storming of the U.S. Capitol or the clash of individual investors with big fish on Wall Street. I have in mind something less spectacular but potentially more influential: a macroeconomic revolution.I refer here to the growing acceptance of easy fiscal policy . In the aftermath of the Great Recession , the central banks adopted an aggressive monetary policy , slashing interest rates to almost zero and introducing quantitative easing . It has become a new norm since then.But fiscal policy was another kettle of fish. Although almost nobody cared about balanced government budgets, people at least pretended to worry about overly large fiscal deficits and an overly quick accumulation of public debt . For example, while Obama wanted $1.8 trillion in fiscal stimulus in a response to the global financial crisis of 2007-09, Congress passed a package of about $800 billion, as Republicans opposed larger spending. But in March 2020, Congress passed the CARES act worth about $2 trillion (and additional significant stimulus in December 2020), with the full support of Republicans.Even Germany – the country famous for its fiscal conservatism – ran a fiscal deficit in 2020 and – what’s more – agreed to issue bonds jointly with other EU countries, although it was previously a taboo. The International Monetary Fund (IMF), another bastion of economic orthodoxy, which advocated for austerity and balanced budgets for years, gave up during the epidemic and started to call for more fiscal stimulus to fight the economic crisis .And this fiscal revolution is already seen in data. As the chart below shows, the U.S. fiscal deficit has increased from 4.6 percent of GDP in 2019 (which was already at an elevated level) to 15 percent of GDP in 2020, the highest level in the post-war era.According to the IMF’s Fiscal Monitor Update from January 2021 , fiscal deficits amounted to 13.3 percent of GDP , on average, in advanced economies, in 2021, a spike from 3.3 percent seen in 2019. As a consequence, the gross global debt approached 98 percent in 2020 and it’s projected to reach 99.5 percent of the world’s GDP by the end of this year.What is important to note here is that government support wasn’t limited mainly to the financial institutions and big companies (such as automakers), as was the case in 2009, but it was distributed more widely. There was a huge direct money transfer to Main Street, including checks for practically all citizens. This is important for two reasons.First, money flowing into the economy through nonfinancial institutions and people’s accounts may be more inflationary. This is because money doesn’t stay in the financial market where it mainly raises asset prices, but it’s more likely to be spent on consumer goods, boosting the CPI inflation rate . Higher officially reported inflation (and relatively lower asset prices) should support gold , which is seen by investors as an inflation hedge .Second, the direct cash transfer to the people creates a dangerous precedent. From now, each time the economy falls into crisis, people will demand checks. It means that fiscal responses would have to be increasingly larger to meet the inflated expectations of the public. It also implies that we are approaching a universal basic income, with its mammoth fiscal costs and all related negative economic and social consequences.Summing up, we live in revolutionary times. The old paradigm that “central banks are the only game in town” has been replaced by the idea that fiscal policy should be more aggressively used. Maintaining balanced budgets is also a dead concept – who would care about deficits when interest rates are so low?However, assigning a greater role to fiscal policy in achieving macroeconomic goals increases the risk of higher inflation and macroeconomic instability, as politicians tend to be pro-cyclical and reckless. After all, the economic orthodoxy that monetary policy is better suited to achieve macroeconomic stability didn’t come out from nowhere, but from awful experiences of the fiscal follies of the past. I’m not a fan of central bankers, but they are at least less short-sighted than politicians who think mainly about how to win the next election and stay in power.Hence, the growing acceptance of easy fiscal policy should be positive for gold prices , especially considering that it will be accompanied by an accommodative monetary policy. Such a policy mix should increase the public debt and inflation, which could support gold prices. The caveat is that investors have so far welcomed more stimulus flowing from both the Fed and the Treasury. But this “go big” approach of Powell and Yellen increases the longer-term risk for the economy, which could materialize – similar to the pandemic – sooner than anyone thought.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get a 7-day no-obligation trial for all of our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.

The tax hike proposal shock is over, and S&P 500 took again on the ATHs on Friday. Buying pressure throughout the day lasted almost till the closing bell, and is likely to continue this week as well. And why shouldn‘t it – has anything changed? The artificial selling any capital gains tax hike would generate, is likely to come before year end – not now:(…) Look still though how little has changed, as if the tax raising plans haven‘t been around since the infrastructure bill or implicitly even before. It‘s still April, and markets are pricing in not only this select reality, but broader tax increases coming. Yes, they have woken up, and the reflation paradigm is getting an unwelcome companion. This hit won‘t bring down the bull, but will slow it down – and the implications for broader economy will only hasten the pronounced advent of the commodities supercycle (well underway since the corona deflationary crash last year). The move towards risk-on was clearly there, overpowering the USD bulls yet again as the dollar bear market has reasserted itself. It‘s not just about EUR/USD on the way to its late Feb highs, but about the USD/JPY too – the yen carry trade is facing headwinds these days, acting as a supportive factor for gold prices. While these went through a daily correction, commodities pretty much didn‘t – lumber is powering to new highs, agrifoods didn‘t have a down day in April, copper and oil scored respectable gains. The market is in a higher inflation environment already, and it will become increasingly apparent that commodity-led inflation is here to stay.Back to stocks and bonds, the S&P 500 took well to a daily rise in Treasury yields – and that‘s the key factor overall. The turnaround was most clearly seen in tech heavyweights but defensive sectors such as consumer staples or utilities didn‘t do well (they‘re interest rate sensitive, after all), and Dow Jones Industrial Average traded closer to the optimistic side of the spectrum. The second piece of the puzzle came from value stocks and financials, which are working to put an end to their own shallow correction – just as you would expect when rates take a turn higher.So, another volatility spike has been banished, but option traders aren‘t yet satisfied, and keep piling into protective instruments. I view this as a fuel of the upcoming rally continuation, unless the tech‘s earnings batch doesn‘t disappoint as Netflix subscriber base growth did.One more argument in favor of the S&P 500 upswing, comes from the smallcaps – the time of their outperformance, is approaching. Likewise emerging markets are starting to do better, and the dollar effect is part of the explanation.Gold took sensitively to the rise in yields, and retreating dollar didn‘t lift it up really. The yellow metal disregarded proportional increase in inflation expectations, and so did the miners – indicating that a brief soft patch in the precious metals sector can‘t be excluded. This doesn‘t change my Friday‘s thoughts that:(…) The precious metals upleg has started, we‘re in a real assets super bull market, and this little hiccup won‘t derail it. The sad implication would actually drive it as capital formation would be hampered, unproductive behaviors encouraged, and potential output lowered. Pretty serious consequences – add to which inflation as that‘s what the Fed ultimately wants, and the recipe for more people falling into higher tax brackets through illusory gains, is set. Then, as inflation starts firing on all cylinders – a 2022-3 story when the job market starts overheating – the pain would be felt more keenly. Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 OutlookIt‘s not an issue that the two latest upswings happened on decreasing volume as I view the preceding modest volume spike as a sign of weak selling turning into accumulation. There is plenty of doubt to drive further S&P 500 gains.Credit MarketsBoth high yield corporate bonds to short-term Treasuries (HYG ETF) and investment grade ones (LQD ETF) have risen on Friday, and the divergence to long-dated Treasuries is another key factor driving the risk-on return conclusion.Technology and FinancialsThe $NYFANG strength was the key deciding factor in the S&P 500 upswing, and value stocks didn‘t stand in the way much either. Financials joined in the upswing by tech are a sign of the shallow correction drawing to its end.Gold & Miners WeeklyCompare this chart to the one that I published on Thursday – the red candle smacking of reversal is actually just an initial rejection in my view. It‘ll take a while to return back above the 50-day moving average, but that‘s a question of time merely. Gold miners are still outperforming, and the upside momentum in the gold sector merely paused. We may see a brief pullback as the bears try their luck, but it will be only a temporary setback – there is no telling weakness in any of the markets I am looking at that would indicate otherwise.Gold, Silver and Key RatioThe copper to 10-year Treasury yield ratio shows that the markets aren‘t buying the transitory inflation story – the rush into commodities goes on, and justifiably so. Just look how much silver has been resilient, and the white metal is uniquely positioned to benefit both from the economic recovery, forced shift into green economy, and building monetary pressures.Seniors vs. JuniorsThroughout the 10+month long correction, juniors had been the more resilient ones, but it was the seniors that I called to lead gold out of the bottom. And they did, meaning that juniors had underperformed over the coming month clearly. Once animal spirits return even more to the precious metals sector, their outperformance is likely to return as the market appetite for ounces in the ground grows. We aren‘t there yet, but the new upleg is well underway.SummaryThe S&P 500 turned around convincingly, and new highs are a question of a rather short amount of time – be prepared though for headline risks should we get an (unlikely) earnings disappointment.Gold and miners are in consolidation mode as they failed to take advantage of plunging dollar and rising commodity prices, but the precious metals sector is likely to play a catch up relative to commodities as its sluggish post Aug performance would get inevitably forgotten.

Stocks went on to push higher yesterday – the pressure is building. Trends in place since last week, remain in place for this earnings rich one too. Reflation still rules, reopening trades are well underway, and inflation expectations are modestly turning up again without putting too much strain on the Treasury markets.While Monday wasn‘t an example of a risk-on day, the markets are clearly moving there:(…) overpowering the USD bulls yet again as the dollar bear market has reasserted itself. It‘s not just about EUR/USD on the way to its late Feb highs, but about the USD/JPY too – the yen carry trade is facing headwinds these days, acting as a supportive factor for gold prices. While these went through a daily correction, commodities pretty much didn‘t – lumber is powering to new highs, agrifoods didn‘t have a down day in April, copper and oil scored respectable gains. The market is in a higher inflation environment already, and it will become increasingly apparent that commodity-led inflation is here to stay.Yesterday was a great day for commodities again as these scored stronger gains than tech or $NYFANG, the main winners within the S&P 500 (defensives took it on the chin – seems like we‘re about to see rates move higher again). Anyway, VIX didn‘t object as options traders piled into the clearly complacent end of the spectrum again. Both the Russell 2000 and emerging markets loved that – the best days for smallcaps are clearly ahead:(…) the time of their outperformance, is approaching.Gold miners didn‘t outperform the yellow metal yesterday while silver did – are the ingredients for a metals‘ top in place? I don‘t think so, and have actually called out on Twitter the GDX downswing as likely to be rejected and ending with a noticeable lower knot. And here we are. No changes to my Friday‘s thoughts that:(…) The precious metals upleg has started, we‘re in a real assets super bull market, and this little hiccup won‘t derail it. The sad implication would actually drive it as capital formation would be hampered, unproductive behaviors encouraged, and potential output lowered. Pretty serious consequences – add to which inflation as that‘s what the Fed ultimately wants, and the recipe for more people falling into higher tax brackets through illusory gains, is set. Then, as inflation starts firing on all cylinders – a 2022-3 story when the job market starts overheating – the pain would be felt more keenly. When even Larry Summers starts talking the dangers of an inflationary wave, things are really likely getting serious down the road. On a side note, my tomorrow‘s analysis will be briefer than usual, and published probably a bit later as I have unavoidable dental treatment to undergo. Thank you everyone for your patience and loyalty – it‘s already a little over 3 months since I could start publishing totally independent. Thank you so much for all your support!Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 OutlookThe bears are certainly running (have certainly run) out of time, and the upper knot of yesterday‘s session looks little concerning to me. Tesla enjoying the Bitcoin moves, more tech earnings soon, and favorable sectoral composition of the S&P 500 advance favor the coming upswing.Credit MarketsDebt instruments got under pressure – high yield corporate bonds (HYG ETF) and investment grade ones (LQD ETF) have declined in a signal of non-confirmation, and joined the long-dated Treasuries in their downswing. I am not yet convinced this is a serious enough more to warrant a change in S&P 500 outlook.Technology and FinancialsThe $NYFANG strength continues, powering tech higher – and that‘s the engine behind solid S&P 500 performance. Notably, financials weren‘t waiting yesterday on other value stocks turning higher, and that‘s bullish.Gold, Silver and MinersGold caught a bid, and refused to decline intraday, which almost matches the miners‘ performance. Given these two daily stands, I‘m in favor of disregarding the usual outperformance warning of silver doing considerably better.This is the proper view of the miners and miners to gold ratio – noticeable outperformance in the latter while the former is getting ready to rise again.Gold and the Key RatioAs is visibly even more true today than yesterday, the copper to 10-year Treasury yield ratio shows that the markets aren‘t buying the transitory inflation story – the rush into commodities goes on, and justifiably so. This chart is clearly unfavorable to lower metals‘ prices.SummaryThe S&P 500 keeps pushing for new all time highs, which looks to be a matter of relatively short time only. Credit markets non-confirmation is to be disregarded in favor of strong smallcaps, emerging markets and cornered dollar in my view.Gold and miners are in consolidation mode, but this is little concerning to the bulls. No signs of an upcoming reversal and truly bearish plunge - the precious metals sector is likely to play a catch up relative to commodities as its sluggish post Aug performance would get inevitably forgotten.

The worst may already be behind the euro area’s economy. This bodes well – both the euro, as well as gold, can benefit from it.The Governing Council of the European Central Bank met last week, keeping its monetary policy unchanged. The inaction was widely expected - no surprises here. The June meeting could be much more interesting as the ECB will have to decide whether or not to slow its bond buying under the Pandemic Emergency Purchase Programme that was accelerated in the second quarter of the year. Given the dovish stance of the European policymakers, and the bank’s pledge to provide the markets with favorable financing conditions during the pandemic, we shouldn’t expect any tapering soon.Certainly, there are important dovish parts of the latest ECB’s statement on its monetary policy . It stems from the grim economic situation in the euro area. The real GDP declined by 0.7 per cent in the fourth quarter of 2020, and it is expected to decrease again in the first quarter of 2021. The nearest future doesn’t look promising:The near-term economic outlook remains clouded by uncertainty about the resurgence of the pandemic and the roll-out of vaccination campaigns. Persistently high rates of coronavirus (COVID-19) infection and the associated extension and tightening of containment measures continue to constrain economic activity in the short term.However, investors should always look beyond the near-team outlook. In the medium-term, the situation in the euro area looks much better. As the ECB notes, this is because the current virus wave seems to have peaked in Europe, while the pace of vaccination is accelerating:Looking ahead, the progress with vaccination campaigns, which should allow for a gradual relaxation of containment measures, should pave the way for a firm rebound in economic activity in the course of 2021.Furthermore, the European Union’s 750 billion euro recovery fund has cleared a key court challenge. Last week, the Germany’s constitutional court dismissed objections to the European aid package.All these factors are positive for the euro and, thus, also for the price of gold. As you can see in the chart below, gold was highly correlated with the spread between the American and German long-term government bond yields - the widening divergence in the US and European interest rates that started in August 2020 pushed the yellow metal down.Implications for GoldThe third wave of pandemic has already peaked in Europe; therefore, the old continent may somewhat catch up with the US. This could narrow the divergence in yields, creating downward pressure on the greenback while supporting the gold prices .Another positive factor for the euro and the yellow metal is the fact that although inflation jumped in both the US and the euro area, it’s much higher in the former country as the chart below shows. So, the purchasing power parity could support the common currency, as well as gold, against the greenback.What’s funny here is that Lagarde , just as Powell , argued that inflation “has picked up over recent months on account of some idiosyncratic and temporary factors and an increase in energy price inflation”. Sure, some idiosyncratic and temporary factors helped inflation to soar, but there are always some idiosyncratic and temporary factors. All the same, the central bankers point to them only when inflation rises, never when it declines. They always refer to these factors to justify their dovish bias and easy monetary policy.Of course, it might be the case that inflation won’t materialize, just like it never did after the Great Recession . But this time may be really different due to the surge in the broad money supply and a huge increase in government spending in the form of direct cash transfers to citizens who are hungry for traveling, eating in restaurants, and generally a normal life with all its money-spending. So, inflation is the wild card, which makes it reasonable to have some gold in investment portfolios . Investors should remember that gold is an investor’s asset rather than a demand asset, which means that in periods of reflation , gold initially lags commodities, only to outperform them and shine brightly in later phases.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

The Fed left its monetary policy unchanged. However, the lack of any action amid economic recovery is dovish – good news for gold.On Wednesday (Apr. 28), the FOMC has published its newest statement on monetary policy . The statement wasn’t significantly altered. The main change is that the Fed has noticed the progress on vaccinations and strong policy support, and that, in consequence, the economic outlook has improved.Previously, the US central bank said that indicators of economic activity and employment “have turned up recently, although the sectors most adversely affected by the pandemic remain weak”, while now these indicators “have strengthened”, while “the sectors most adversely affected by the pandemic remain weak but have shown improvement”. So, the Fed acknowledged the fact that the economy has significantly recovered .Similarly, the US central bank is no longer considering the epidemic as posing “considerable” risks to the economic outlook. Instead, the pandemic “continues to weigh on the economy, and risks to the economic outlook remain”. It means that the Fed has become more optimistic and does not see risks as considerable any longer. This is bad for the price of gold although it’s not a very surprising modification, given the progress in vaccinations. However, no hawkish actions will follow, so any bearish impact for gold should be limited.Another important alteration is that inflation no longer “continues to run below 2 percent”, but it “has risen, largely reflecting transitory factors”. This would be normally a hawkish change with bearish implications for gold. But the Fed doesn’t worry about inflation and is not going to hike the federal funds rate anytime soon, even when inflation remains above the target for some time. As Powell pointed out, “the economy is a long way from our goals, and it is likely to take some time for substantial further progress to be achieved.” Thus, gold bulls may sleep peacefully .Implications for GoldIndeed, they can relax with Mr. Powell on guard. The Fed Chair has reiterated during his press conference that the US central bank is not going to tighten its dovish stance and reduce the quantitative easing:It’s not time to start talking about tapering. We'll let the public know well in advance. It will take some time before we see substantial further progress. We had one great jobs report. It is not enough to start talking about tapering. We'll need to see more data.Uncle Jay and his bedtime stories… about inflation that is only “transitory”. Once upon a time,the PCE inflation [is] expected to move above 2% in the near term. But these one-time increases in prices are likely to have only transitory effects on inflation.Well, sure. Nonetheless, this is the favorite story of central bankers all over the world told to naive citizens. Just wait for the April inflation readings – they will be something! Of course, it is going to be too early to declare persistently higher inflation, but I’m afraid that the Fed may be too carefree about such a possibility.So, in the aftermath of the generally dovish FOMC meeting, the dollar slid yesterday, while the price of gold went up . Gold continued its recovery from the March bottom, as depicted in the chart below. This makes sense: after all, the Fed reiterated that it would maintain its current ultra easy stance for the foreseeable future, despite the fact of acknowledged improved economic outlook.In other words, the Fed’s inaction made the US central bank more dovish given the better economic outlook and higher inflation. The statement’s language about the coronavirus and the economy was more optimistic, but inflation was considered to be transitory and no hawkish actions were signaled. So, the recent FOMC meeting should be positive for the gold prices from the fundamental point of view , although gold may continue its recent, generally lackluster performance for a while. Of course, the expansion of Fed’s accommodative monetary policy would be much better for the yellow metal, but the lack of any hawkish signals could still clean the room for gold for further upward moves.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

Inflation surged 4.2% in April, but gold declined in response. What is happening?Unbelievable! The “non-existent” inflation keeps getting stronger. The CPI increased 0.8% in April , after rising 0.6% in March. The pundits cannot blame energy prices for this jump, as the energy index decreased slightly. This shows that the surge in inflation wasn’t caused just by the base effect. Apart from energy, all major component indexes increased last month. In particular, the index for used cars and trucks rose 10.0%, which was the largest monthly increase since the series began in 1953.As a result, the core CPI, which excludes food and energy, soared even stronger in April, i.e., 0.9%, following a 0.3% jump in March. It was the largest monthly increase since April 1982. But still, there is no inflationary pressure in the economy…And now for the best part, the true crème de la crème of the recent BLS report on inflation : As the chart below shows, the overall CPI surged 4.2% over the 12 months ending in April , while the core CPI jumped 3.0%. These annual rates followed, respectively, 2.6% and 1.6% increases in March.So, there was a huge acceleration in inflation last month! The last occurrence of such high inflation was in 2008 during the Great Recession . The quickening was a surprise for many analysts, but not for me. When analyzing the March CPI report , I wrote that it wasn’t an outlier:What’s important is that the recent jump in inflation is not a one-off event. We can expect that high inflation will stay with us for some time, or it can accelerate further next month.And indeed, inflation escalated in April. In May, however, inflation could be softer, but it will remain relatively elevated, in my view.Implications for GoldWhat does the hastening in inflation imply for the precious metals market? Well, the London P.M. Gold Fix has barely moved, as the chart below shows. What’s more, the New York spot gold prices have decreased in the aftermath of the April report on the CPI.What happened? Shouldn’t gold have reacted more positively to the surprising speeding up of inflation? As an inflation hedge – it should. But this is far more complicated. First, the bond yields have increased to reflect higher inflation, as traders started to bet that the Fed would have to hike interest rates faster than previously expected.But the April CPI report won’t force the U.S. central bank to alter its monetary policy and adopt a more hawkish line . After all, they expected acceleration in inflation, and they will simply describe it as a transitory development. As a reminder, the Fed focuses now more on the labor market than price stability – and with employment still more than 8 million short of the pre-pandemic level, the Fed will likely maintain its dovish stance .Indeed, Fed Vice Chair Richard Clarida reiterated that the U.S. central bank is far away from tightening its monetary policy and confirmed that higher inflation than anticipated won’t alter the Fed’s course, as it would prove to be temporary:The economy remains a long way from our goals, and it is likely to take some time for substantial further progress to be achieved (…) This is one data point, as was the labor report (...) We have been saying for some time that reopening the economy would put some upward pressure on prices.What’s more, although traders focused initially on the implications of higher inflation on the federal funds rate and the U.S. monetary policy, in the longer-term gold should come into more favor as a hedge against higher inflation or even stagflation – after all, in April, we witnessed surprisingly disappointing nonfarm payrolls and a surge in inflation. Of course, single reports are not enough, but inflationary risks have definitely risen recently, and we could see some portfolio rebalancing toward gold later this year.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

Market participants are very optimistic about an economic recovery, but these positive expectations may be exaggerated. The end of this euphoria should be good for gold.The optimism about the pace of economic recovery from the 2020 recession is growing. The analysts race in upward revisions of GDP growth in the coming quarters. For example, the IMF – in the April 2021 edition of the World Economic Outlook – expects at the moment that the US economic output will increase by 6.4% this year, compared to the 5.1% growth forecasted in January.The euphoric mood has some justification, of course. The vaccination is progressing, entrepreneurs are used to operating under sanitary restrictions, economies are reopening and governments are spending like crazy. At the same time, central banks are maintaining ultra-easy monetary policy , keeping financial conditions loose.Furthermore, some economic data is consistent with strong rebounding, especially in manufacturing. For instance, the IHS Markit U.S. Manufacturing PMI Index posted 59.1 in March, up from 58.6 in February – being the second-highest value on record since May 2007 when data collection began. Services are also recovering vigorously, as the IHS Markit US Services PMI Index registered 60.4 in March, up from 59.8 in February. It’s the fastest rate of growth since July 2014.Now, the question is how strong the current boom is and how long it is going to last. Well, there is no need to argue that we will see a few strong quarters of GDP growth in the US and other countries. But for me, the euphoria is exaggerated. You see, the current recovery is not surprising at all. As the Great Lockdown plunged the world into a deep economic crisis , the Great Unlocking is boosting the global economy.And there is the base effect . There was a low base in 2020, so the seemingly impressive recovery in 2020 is partially merely a statistical phenomenon. Let’s illustrate this effect. In Q2 2020, the real GDP plunged from $19,020 to $17,302 trillion or 9.03%year-over-year, as the chart below shows.However, the rebound to the pre-recession level would imply the jump of 9.93%, almost one percentage higher! This is how the math works: when you divide a numerator by a smaller denominator, you get a greater percentage. So, it would be alarming if the recovery were not strong after one of the deepest crises in history.Another issue that makes me more skeptical than most pundits is the fact that the main reason behind economic growth upgrades is massive fiscal stimulus . Uncle Sam injected more than 13 percent of the GDP in government spending (only in 2020) that ballooned the fiscal deficits . Meanwhile, the Fed widened its balance sheet by almost $4 trillion. So, it would be quite strange if we didn’t see impressive numbers in light of such unprecedented inflows of monetary and fiscal liquidity. But it means that the impressive recovery in statistics is driven, at least partially, by soaring money supply and public debt (see the chart below).And my three last concerns. First, the job recovery is more sluggish than the GDP recovery . The unemployment rate is still above the pre-pandemic level, while the labor force participation stands significantly below the level seen in February 2020. Second, a full return to normal life will occur if vaccines remain effective. But there is a tail risk of new variants of the virus, which could even be vaccine-resistant . Third, history teaches us that when the pandemic ends, social unrest may reemerge. After all, the epidemic left us with deepening inequalities and rising living costs.What does it all mean for the gold market? Well, the market euphoria about the economic rebound is negative for gold. We have already seen how these optimistic expectations freed the risk appetite and boosted economic confidence, sending bond yields higher, but gold prices lower.However, just as the doomsday scenarios created in the midst of the epidemic were excessively negative, the current ones seem to be too optimistic. I expect that with the year progressing, these expectations will soften or shift to the medium-term, which could be more challenging. After all, the low base effect will disappear, and both the monetary and fiscal policies will have declining marginal utility. At the same time, there will be an increased risk of high inflation , debt crisis , stock market correction or even financial crisis . After all, the current levels of stock indices are partially caused not by fundamentals, but by the elevating risk tolerance thanks to the central banks standing behind most asset classes ready to intervene in case of problems.It seems that this process has already begun and the reopening trade is waning. Economic confidence is very high, so the room for further increases is limited. The low-hanging fruits have been collected, and when economies reopen fully, the structural problems will become more important than the cyclical ones. Investors have started to worry about higher inflation, especially because the Fed remains unmoved by rising prices. A jobless recovery would prolong the Fed’s very dovish stance , as the US central bank focuses now on full employment rather than on stable prices. All these factors explain why the price of gold has been rebounding recently, and why it can rise even further later this year , although the fact that the US enjoys a stronger recovery than the EU or Japan could support the interest rates and the greenback , creating some downward pressure on the yellow metal.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.

Bitcoin’s popularity and price are rising. However, cryptocurrencies could be seen as complementary, not substitutive to gold.What a rally ! Unfortunately, I’m not referring to gold, but to Bitcoin . As the chart below shows, the price of the first and the biggest of cryptocurrencies rose to above $60,000 in April 2021 from scratch (or $124) in October 2013 when the chart starts. I wish I had bought more coins in these early years of cryptocurrencies and held them for longer! More recently, Bitcoin has skyrocketed almost 1200% from its bottom of $4,945 during the asset sell-off in March 2020.OK, but why am I writing about Bitcoin in the Gold Market Overview? The reason is the narrative that the cryptocurrency has already become or will become soon the substitute for gold. Some people even call Bitcoin “new gold” or “millennial gold”. And this is what Jerome Powell has recently said about cryptocurrencies:Crypto assets are highly volatile and therefore not useful as a store of value. They are not backed by anything. It is a speculative asset that is essentially a substitute for gold rather than for the dollar.Others echo Powell’s remarks, claiming that Bitcoin is displacing gold as an inflation hedge , or that it could supplant gold as a safe-haven asset . Are they right?Well, there are, of course, some similarities between Bitcoin and gold which make these two assets substitutes to some extent . It would be surprising if that wasn’t the case, given the fact that Bitcoin’s system was designed to mimic the gold standard . In particular, there is a cap on the number of bitcoins to make this cryptocurrency rare just like the yellow metal. In other words, the idea is to make its supply inflexible, just as – or even more – in the gold standard. So, both Bitcoin and gold are anti-inflationary currencies whose supply cannot be arbitrarily changed like in the case of national fiat currencies . And both these assets have a libertarian, anti-government flavor – in the sense that demand for them stems from the lack of confidence in the government monies.However, there are also important differences between Bitcoin and gold. First of all, although Bitcoin is believed to be an alternative anti-fiat asset, it’s actually also fiat money . It’s a private, decentralized, non-governmental currency, but it doesn’t change the fact that Bitcoin is not backed by anything, and it has no intrinsic value. Of course, value is subjective, but gold has some non-monetary use (in jewelry or technology), which implies that its price is not likely to drop to zero in a worst-case scenario in which people cease to see gold as a monetary asset. Unlike the shiny metal, Bitcoin has only monetary value – i.e., you cannot use it either as a consumer good or as an input in a production process – so there is no floor below its price (if the officials try to ban Bitcoin, its price could plunge really deeply).Second, Bitcoin is much more volatile than gold . Sure, it might be just a problem of Bitcoin’s young age. But it doesn’t change the fact that price declines in the cryptocurrency are a few times bigger than in the gold market. Hence, although – thanks to the network effects and speculative appeal – Bitcoin offers potential for quicker and larger gains, it’s also associated with higher downward risks. It makes the cryptocurrency an inferior store of value and a safe haven. So, Bitcoin could be seen rather as a risky asset, not necessarily a safe haven that goes up together with risk appetite. This may explain the recent divergence in cryptocurrencies and gold.What does it all mean for the gold market ? Well, it’s true that some money has flowed from gold into Bitcoin and that some investors may prefer now to treat Bitcoin as a major alternative asset in their investment portfolios . However, such flows and rebalancing of portfolios as we’ve seen recently are perfectly normal, especially given that Bitcoin is still benefiting from the network effects, i.e., the accelerating institutional interest and mainstream acceptance.More importantly, there are important differences between gold and Bitcoin, which imply that the latter won’t replace the yellow metal . The correlation coefficient between the weekly prices of these two assets is only 0.38 percent, so they are really far away from being perfect substitutes. Also, please take a look at the chart below which shows their prices in 2019-2021.As you can see, gold reached its peak in early August, while the rally in the cryptocurrency started in October, two months later. Hence, it should be clear that Bitcoin didn’t cause the plunge in gold prices . We could even hypothesize that gold has undergone (or is undergoing) a healthy correction, which is still ahead of Bitcoin. After all, its price chart looks parabolic, which brings to mind the possibility of a bubble (although network effects can be partially responsible for this shape).Anyway, for us, these two assets are rather distinct despite all the similarities. And they both can coexist together as hedges against national fiat currencies, as they complement each other. Bitcoin can be used in instant payments, cross-border payments and as a highly risky speculative asset, while gold has non-monetary value and provides long-term stability. But Bitcoin’s rise in popularity doesn’t pose an existential threat to gold. After all, the yellow metal has an exceptional track record of being the ultimate money, proving its value over millennia .Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.

As we know, history tends to rhyme. It’s never the same, but when you zoom out, the bigger picture often looks very similar. What does it mean for gold?Short-term implicationsWith gold’s back-and-forth price action mirroring its behavior from 2012, the yellow metal is likely destined for devaluation.Back then, gold zigzagged with anxiety before suffering a material drawdown. In fact, in early October 2012, it moved slightly above the initial highs right before sliding.Moreover, while the yellow metal has bounced above its declining resistance line (the black line below), the price action mirrors gold’s behavior from early January. If you analyze the blue line below, you can see that investors’ optimism regarding gold’s short-term breakout quickly faded and the yellow metal sunk like a stone. In addition, with gold’s RSI (Relative Strength Index) moving slightly above 70 before the January swoon occurred, an identical development is already playing out in real time.Gold seems to be insisting on repeating – to some extent – its 2012 performance, and – to some extent – its 2008 performance. Either way, it seems that gold is about to slide.The reversal in gold took place after gold moved very close to its mid-January highs and the 50% Fibonacci retracement based on the August 2020 – March 2021 decline.The sizes of the current rally (taking the second March bottom as the starting point) and the rally that ended at the beginning of this year are practically identical at the moment.Just as the rallies from early 2012 and late 2012 (marked with blue) were almost identical, the same could happen now.The March 2021 low formed well below the previous low, but as far as other things are concerned, the current situation is similar to what happened in 2012.The relatively broad bottom with higher lows is what preceded both final short-term rallies – the current one, and the 2012 one. Their shape as well as the shape of the decline that preceded these broad bottoms is very similar. In both cases, the preceding decline had some back-and-forth trading in its middle, and the final rally picked up pace after breaking above the initial short-term high.Interestingly, the 2012 rally ended on huge volume, which is exactly what we saw also on May 19 this year. Consequently, forecasting much higher gold prices here doesn’t seem to be justified based on the historical analogies.The lower part of the above chart shows how the USD Index and the general stock market performed when gold ended its late-2012 rally and was starting its epic decline. In short, that was when the USD Index bottomed, and when the general stock market topped.Back in 2008, gold corrected to 61.8% Fibonacci retracement, but it stopped rallying approximately when the USD Index started to rally, and the general stock market accelerated its decline. This time the rally was not as volatile, so the lower – 50% Fibonacci retracement level will hold the rally in check.Taking into consideration that the general stock market has probably just topped and the USD Index is about to rally, then gold is likely to slide for the final time in the following weeks/months. Both above-mentioned markets support this bearish scenario and so do the self-similar patterns in terms of gold price itself.MACD and the Long TermApproaching the subject from a different side, remember the huge gap between the U.S. 10-Year Treasury yield and the U.S. 10-Year breakeven inflation rate? The situation in the very long-term MACD indicator is yet another confirmation that what we saw recently is similar to what we saw before the huge 2012 – 2013 slide. We get the same confirmation from the gold to bonds ratio, and I’ll move to that a bit later.With February’s monthly close the last piece of the puzzle, the MACD indicator’s sell-signal is now perfectly clear. If you analyze the chart below (at the bottom right), you can see that the MACD line has crossed the signal line from above – a development that preceded significant drawdowns in 2008 and 2011.Based on gold’s previous performance after the major sell signals from the MACD indicator, one could now expect gold to bottom in the ~$1,200 to ~1,350 range. Given the price moves that we witnessed in 1988, 2008 and 2011, historical precedent implies gold forming a bottom in this range. However, due to the competing impact of several different variables, it’s possible that the yellow metal could receive the key support at a higher level.Only a shade below the 2011 high, today’s MACD reading is still the second-highest reading in the last 40 years. More importantly though, if you analyze the chart below (the red arrows at the bottom), the last four times the black line cut through the red line from above, a significant drawdown occurred.Also ominous is that the magnitude of the drawdowns in price tend to coincide with the magnitude of the preceding upswings in MACD. And with today’s reading only surpassed by 2011, a climactic move to the $1,250/$1,450 range isn’t out of the question for gold. The above is based on how low gold had previously declined after a similarly important sell signal from the MACDNow, the month is not over yet, so one might say that it’s too early to consider the sell signal that’s based on monthly closing prices , but it seems that given the level that the MACD had previously reached and the shape of the top in the black line, it makes the situation so similar to 2011/2012 that the sell signal itself is just a cherry on the bearish analytical cake.Considering the reliability of the MACD indicator a sell signal for major declines, the reading also implies that gold’s downtrend could last longer and be more severe than originally thought. As a result, $1,500 remains the most likely outcome, with $1,350 still in the cards.As further evidence, if you focus your attention on the monthly price action in 2008, you can see that gold is behaving exactly as it did before it suffered a significant decline.Please see below:To explain, after making a new all-time high in 2008 (that was a breakout above the 1980 tops), gold declined back to its rising support line before recording a short-term corrective upswing. This upswing ended approximately at gold’s previous monthly closing price. I marked it with a horizontal, blue, dashed line.Similarly, if you analyze the right side of the chart, you can see that an identical pattern has emerged. With gold’s corrective upswing following a reconnection with its rising support line, history implies that a sharp decline should occur in the coming months and that the reversal is at hand or already behind us. After all, the thing that triggered the decline almost a year ago was the fact that gold made a new all-time high . Moreover, the recent high was very close to the previous high in terms of the monthly closing prices (Dec. 2020 - $1,895.10 vs. the recent intraday high of $1,891.30).What about the HUI Index?Not only are ominous signs emerging from gold’s medium-and-long-term charts, but beneath the surface, the gold miners are also folding their hands. If you analyze the chart below, you can see that the HUI Index back-and-forth price action mirrors its behavior from 2008 and 2012 and its bearish head & shoulders pattern is also gaining similarity. In addition, the BUGS (after all, HUI is called the Gold Bugs Index) stochastic oscillator has moved all-in like the 2012 analogue (depicted at the bottom part of the chart below), and thus, it seems to be only a matter of time before the HUI Index completely blows its bankroll.Please see below:To explain, the HUI Index retraced a bit more than 61.8% of its downswing in 2008 and in between 50% and 61.8% of its downswing in 2012 before eventually rolling over. And with investors rejecting the HUI’s recent attempt to break above the 61.8% level, the house of cards is slowly coming down.The bottom line?If the HUI Index hasn’t already peaked, history implies that a top is increasingly imminent. As a result, in my opinion, now is the time to enter short positions and not exit them.Now, in both (2008 and 2012) cases, the final top – the right shoulder – formed close to the price where the left shoulder topped. And in early 2020, the left shoulder topped at 303.02.That’s why I previously wrote that “it wouldn’t be surprising to see a move to about 300 in the HUI Index”. And that’s exactly what we saw (a move above 320 is still close to 300 from the long-term point of view). To clarify, one head-and-shoulders pattern – with a rising neckline – was already completed, and one head-and-shoulders pattern – with a horizontal neckline – is being completed, but we’ll have the confirmation once miners break to new yearly lows.In addition, the recent rally is not a game-changer, but rather a part of a long-term pattern that’s not visible when one focuses on the short term only.The thing is that the vast majority of individual investors and – sadly – quite many analysts focus on the trees while forgetting about the forest. During the walk, this might result in getting lost, and the implications are no different in the investment landscape.Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.Przemyslaw Radomski, CFA Founder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

The latest IHS Markit Flash U.S. Composite PMI signals very fast economic expansion – but also strong inflationary pressure. Good news for gold, overall.On Friday, the recent IHS Markit Flash U.S. Composite PMI has been published . There are two pieces of news for gold - one good and one bad. Let’s start with the negative information. The report signals an unprecedentedly fast expansion in business activity in May . Indeed, the composite index surge from 63.5 in April to 68.1 this month established a new record.More importantly, both manufacturing and services sectors’ markets have shown strong growth. The former index rose from 60.5 in April to 61.5 in May (also a new record), while the PMI for services soared from 64.7 to 70.1, marking the sharpest jump since data collection for the series began in October 2009. Such an unprecedentedly fast acceleration of growth in the PMI signals strong economic growth, which is clearly bad news for the safe-havens such as gold (however, strong economic growth is something everyone expected, so it might be already priced in as well).The good information is, however, that at least part of this growth is inflationary , as soaring demand greatly improved the firm’s pricing power. And the input costs have surged, leading to the sharpest rise in output charges since the end of the Great Recession when the data collection started:Increasing cost burdens continued to be keenly felt, as the rate of input price inflation soared to a new survey record high, often linked to a further marked worsening of supplier performance. Commonly noted were increases in PPE, fuel, metals and freight costs amid significant supplier delays.The steep rise in costs fed through to the sharpest increase in output charges since data collection began in October 2009, with record rates of inflation registered for both goods and services as soaring demand boosted firms’ pricing power.What’s more, wage inflation is also coming , as the report says that entrepreneurs couldn’t find people to fill the vacancies. It seems that generous benefits introduced in a response to the recession discouraged people from searching for work, and slack in the labor market is greatly exaggerated.Although a solid expansion in staffing levels eased some pressure on backlogs in the service sector, manufacturers registered the fastest rise in work-in-hand on record amid raw material shortages. While job creation was again seen in the goods-producing sector, the rise was the slowest for five months, linked in part to difficulties filling vacancies.In other words, the post-pandemic natural employment will be simply lower because of the institutional changes, not because of weak aggregate demand. How would you explain otherwise the fact that entrepreneurs cannot find workers amid employment lower by 8 million when compared to the pre-pandemic level?But this is good news for gold. The subdued employment would be a great excuse for the Fed to say that there is slack in the labor market, the aggregate demand is weak, and the economy remains fragile and below the Fed’s targets, so it still needs easy monetary conditions. Hence, Powell would stay passive and would even avoid starting to think about tapering the quantitative easing and hiking interest rates . Dovish Fed and rising prices would support gold prices.So, high inflation (see the chart below) should remain with us for a while . Indeed, manufacturers worry that raw material shortages “could extend through 2021” and producer price inflation translates into consumer price inflation with a certain lag. Anyway, high inflation won’t disappear in one or two months, but it could last for at least a few or even several months if the Fed remains ultra- dovish and people lose confidence in the central bank’s ability to maintain price stability.If this scenario happens, inflation expectations could cease to be “well-anchored” and inflation could get out of control, just as it did during stagflation in the 1970s. Chris Williamson, Chief Business Economist at IHS Markit, seems to agree with me in his comment on the report:The May survey also brings further concerns in relation to inflation, however, as the growth surge continued to result in ever-higher prices. Average selling prices for goods and services are both rising at unprecedented rates, which will feed through to higher consumer inflation in coming months.Implications for GoldWhat does the recent IHS Markit Flash U.S. Composite PMI imply for gold? Well, strong economic activity is bad for gold, given that it usually shines during bad times. However, the yellow metal doesn’t like genuine, real growth, but it performs pretty well during inflationary periods . Of course, part of the growth comes from the reopening of the economies, but there is no doubt that this expansion is accompanied by high inflation.I’ve been warning readers since the very early part of the pandemic that the following expansion will be more inflationary than the previous one. This is excellent news for gold, which entered a bear market in 2011-2013 (i.e., when the former expansion settled down). What’s important here is that the economic environment is more inflationary (we have easier monetary and fiscal policies ) while at the same time the Fed is highly tolerant of high inflation – this is a truly dangerous cocktail, but it could be quite tasty for gold.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

Exact weather is hard to predict, even with forecasts, but we can look for clouds on the horizon to prepare ahead of time.During the dry season, people near the equator feel like the sun is getting closer each day, making the heat unbearable at some point. The weather needs to periodically correct itself, allowing for some torrential downpours – this way life can survive. The same happens on the market; we can’t try to reach the sun by rallying incessantly. Patience is key. One thing is certain – a major storm front is moving closer, taking into account how the PMs behave.Gold just moved higher once again, but mining stocks refused to follow. This is one of the most reliable indications that a top is being formed.Before moving to the precious metals sector, let’s take a look at the USD Index.When I described the above chart yesterday (May 25), I wrote that the USD Index had been trading at about 89.6. Since this is the level at which the USD Index closed the day (approximately), practically everything that I wrote about its chart remains up-to-date:This week’s move lower is a continuation, and most likely the final part, of a specific multi-bottom pattern that the USD Index exhibited recently.I marked those situations with green. The thing is that the U.S. currency first declined practically without any corrections , but at some point it started to move back and forth while making new lows. The third distinctive bottom was the final one. Interestingly, the continuous decline took place for about a month, and the back-and-forth declines took another month (approximately). In July 2020, the USDX fell like a rock, and in August it moved back and forth while still declining. In November 2020, the USDX fell like a rock (there was one exception), and in December it moved back and forth while still declining.Ever since the final days of March, we’ve seen the same thing all over again. The USD Index fell like a rock in April, and in May we’ve seen back-and-forth movement with lower lows and lower highs.What we see right now is the third of the distinctive lows that previously marked the end of the declines.And what did gold do when the USD Index rallied then?In August, gold topped without waiting for USD’s final bottom – which is natural, given how extremely overbought it was in the short term.In early January, gold topped (which was much more similar to the current situation given the preceding price action) when the USDX formed its third, final distinctive bottom.The USD Index is after a two-month decline, half of which was the back-and-forth kind of decline. It’s forming the third – and likely the final – bottom, and gold just refused to react positively to this situation in today’s pre-market trading.This might be “it” – the markets might be forming their final reversals here, starting to follow the most bearish (in the case of gold) part of the analogy to the price action in 2008 and 2012.The Repeating PatternGold has now moved higher, and it even moved slightly above $1,900 in today’s pre-market trading, which seems positive. But it doesn’t change anything with regard to gold’s analogies to how it performed in 2008 and 2012 right before the slide.Gold seems to be insisting on repeating – to some extent – its 2012 performance, and – to some extent – its 2008 performance. Either way, it seems that gold is about to slide.The initial reversal in gold took place after gold moved very close to its mid-January highs and the 50% Fibonacci retracement based on the August 2020 – March 2021 decline. Yesterday’s close was the first close above this important resistance, so the breakout was not confirmed.The sizes of the current rally (taking the second March bottom as the starting point) and the rally that ended at the beginning of this year are practically identical at the moment. The current move is only a little bigger.Just as the rallies from early 2012 and late 2012 (marked with blue) were almost identical, the same could happen now.The March 2021 low formed well below the previous low, but as far as other things are concerned, the current situation is similar to what happened in 2012.The relatively broad bottom with higher lows is what preceded both final short-term rallies – the current one, and the 2012 one. Their shape as well as the shape of the decline that preceded these broad bottoms is very similar. In both cases, the preceding decline had some back-and-forth trading in its middle, and the final rally picked up pace after breaking above the initial short-term high.Interestingly, the 2012 rally ended on huge volume, which is exactly what we saw also on May 19 this year. Consequently, forecasting much higher gold prices here doesn’t seem to be justified based on the historical analogies.The thing I would like to emphasize here is that gold didn’t form the final top at the huge-volume reversal on Sep. 13, 2012. It moved back and forth for a while and moved a bit above that high-volume top, and only then the final top took place (in early October 2012).The same happened in September and in October 2008. Gold reversed on huge volume in mid-September, and it was approximately the end of the rally. The final top, however, formed after some back-and-forth trading and a move slightly above the previous high.Consequently, the fact that gold moved a bit above its own high-volume reversal (May 19, 2021) is not an invalidation of the analogy, but rather its continuation.There’s one more thing I would like to add, and it’s that back in 2012, gold corrected to approximately the 61.8% Fibonacci retracement level – furthermore, the same happened in 2008 as you can see in the below chart. Consequently, the fact that gold moved above its 50% Fibonacci retracement doesn’t break the analogy either. And even if gold moves to $1,940 or so, it will not break it. It’s not likely that it is going to move that high, as in both cases –in 2008 and 2012 – gold moved only somewhat above its high-volume reversal before forming the final top. So, as this year’s huge-volume reversal took place close to the 50% retracement and not the 61.8% retracement, it seems that we’ll likely see a temporary move above it, which will create the final top. And that’s exactly what we see happening so far this week.The lower part of the above chart shows how the USD Index and the general stock market performed when gold ended its late-2012 rally and was starting its epic decline. In short, that was when the USD Index bottomed, and when the general stock market topped.Back in 2008, gold corrected to 61.8% Fibonacci retracement , but it stopped rallying approximately when the USD Index started to rally, and the general stock market accelerated its decline. This time the rally was not as volatile, so the lower – 50% Fibonacci retracement level will hold the rally in check.Taking into consideration that the general stock market has probably just topped, and the USD Index is about to rally, then gold is likely to slide for the final time in the following weeks/months. Both above-mentioned markets support this bearish scenario and so do the self-similar patterns in terms of gold price itself.While gold moved to new highs, the GDX ETF didn’t (and neither did silver ).It moved mere nine cents higher and this move took place on relatively low volume – making that a bearish indication, not a bullish one.Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.Przemyslaw Radomski, CFA Founder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Gold surpassed $1,900 most recently – and it’s likely that the rally will continue for a while.Gold bulls have an opportunity to celebrate. As the chart below shows, the price of gold has been rising recently. And yesterday (May 26) it finally jumped above $1,900, which is an important psychological level.The question we should ask now is “what’s next?” Well, as the jokes go on, the price of gold will either go up or down. But in earnest, there are significant downside risks for the yellow metal. First of all, the Fed could overreact to rising inflation and increase real interest rates .However, these worries seem to be overblown. The Fed’s monetary policy is always asymmetrical, i.e., it eases its stance in response to recession more than it tightens it in response to inflation. The federal funds rate gets lower and stays at these low levels for longer, partially because of all the enormous indebtedness of the contemporary economy.The tapering is surely the risk that looms on the horizon. But the Fed will maintain its quantitative easing and zero-interest-rate policy for at least the rest of 2021. So, there is still room for gold to move further north , especially after the recent turmoil in the cryptocurrency market resulting in renewed confidence in gold as an attractive inflation hedge .After all, the US monetary policy is loose, and real interest rates are still in negative territory. The fiscal policy remains very easy, and the public debt is high. Inflation is huge and rising. And there is also an issue of depreciation of the greenback . The Fed’s easy stance, low interest rates and high inflation weaken the US dollar, supporting gold prices.Last but not least, the level of risk appetite/confidence in the Fed and the economy has already reached its peak, as the GDP has recovered with an unprecedentedly high pace of growth. In other words, the post- pandemic euphoria is behind us – now the harsh, inflationary reality sets in. Maybe we won’t repeat the 1970s stagflation , but inflation is probably more deeply embedded than the Fed thinks. And it seems that the markets are finally getting this idea, pushing some investors into gold’s warm and shiny embrace .Implications for GoldWhat does it all mean for gold prices? Well, recently two broad trends have dominated the markets: rising inflation expectations and rising economic confidence. In other words, market participants expected reflation . However, economic confidence has peaked, and now investors focus more on inflation. So, we are moving slowly from the reflation phase to the inflationary phase, which is beneficial for gold – if this trend continues, the yellow metal could continue its upward march.Every investor should remember one great historical pattern, basically as old as the Roman Empire. The money supply is first aggressively boosted with the excuse that “there is no inflation”. When upward pressure on prices becomes clear, that excuse transforms into “inflation is transitory” or into “the rise in inflation is caused by idiosyncratic factors”. Have you heard about Arthur Burns, the Fed Chair in the 1970s and the predecessor of Paul Volcker ? As Stephen Roach notes on him:Over the next few years, he [Burns] periodically uncovered similar idiosyncratic developments affecting the prices of mobile homes, used cars, children’s toys, even women’s jewelry (gold mania, he dubbed it); he also raised questions about homeownership costs, which accounted for another 16% of the CPI. Take them all out, he insisted!Finally, the officials admit that there is inflation, but they blame it on speculators and other external, unfavorable or even hostile factors. To be clear, I’m not predicting hyperinflation or even double-digit inflation in the US, but recent economic reports suggest that upward price pressure could be more lasting than the Fed and the pundits believe.So, inflation could remain elevated for a while , especially given that the description of Burns downplaying it is worryingly similar to the current Fed’s stance under Powell . As Stephen Roach points out, the current size of fiscal and monetary stimuli is unprecedented, especially taking into account the pace of the recovery:Today, the federal funds rate is currently more than 2.5 percentage points below the inflation rate. Now, add open-ended quantitative easing – some $120 billion per month injected into frothy financial markets – and the largest fiscal stimulus in post-World War II history. All of this is occurring precisely when a post-pandemic boom is absorbing slack capacity at an unprecedented rate. This policy gambit is in a league of its own.Indeed, but gold loves chess, gambits included. After all, chess is a royal game, while gold is a royal metal!If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

Biden proposes $6 trillion of government spending in the 2022 fiscal year. This continuation of ultra-loose fiscal policy could support gold in the long run.On Friday (May 28), the White House presented the President’s budget for the 2022 fiscal year that starts on October 1, 2021. Biden trumped Trump and proposed $6 trillion, over one trillion more than Trump in his last year’s proposal for $4.8 trillion. Furthermore, POTUS wants to raise government outlays to up to $8.2 trillion by 2031.According to the White House, the proposed fiscal agenda will further increase the total federal debt-to-GDP ratio , from the current 129.1% to 136.9% by 2031. Meanwhile, the federal debt held by the public is estimated to rise from the current 100.7% to 108.5% of the GDP. The current level of the US public debt compared to the size of the economy is presented in the chart below.Despite the increase, Janet Yellen , Treasury Secretary, said that “it is a fiscally responsible program”. Yeah, right. Of course, it’s true that real interest rates are very low, and therefore the debt service costs are bearable; but the interest rates could go up one day. And even when the bond yields are low, there is still the crowding out effect and other negative consequences, as higher government expenditures imply higher taxes and fewer resources for the private sector. Last but not least, the GDP has practically returned to the pre-pandemic level, so such big fiscal programs are clearly excessive and could add to inflationary pressure.Implications for GoldWhat does the budget for the next fiscal year mean for gold prices? Well, although Trump was trumped in the last elections, trumpism is still doing well. Here I’m referring to the fact that Trump started to balloon the government spending and fiscal deficits well before the pandemic . Then the coronavirus hit and the fiscal policy became even looser. And now President Biden raises the stake, widening the budget deficit and public debt despite the recovery from the economic crisis .In the short term, it doesn’t have to be good news for gold. This is because big deficits and federal debt could exert upward pressure on the Treasury yields, resulting in higher interest rates, which would suppress the price of gold.Also of importance is the fact that the 2021 fiscal year was a period with an unprecedented size of the fiscal stimulus. So, although Trump proposed ‘only’ $4.8 trillion of government spending and almost $1 trillion of deficit, the actual numbers were much bigger: $7.2 and $3.7 trillion, respectively. In contrast, Biden’s proposal sees the budget deficit worth ‘only’ $1.8 trillion. In relative terms, the fiscal deficit is projected to decline from the current 16.7% to 7.8%.Of course, the actual numbers will probably be bigger than the White House’s projections. But still, when compared to the previous year, the fiscal policy will become tighter – on a relative basis. However, the fiscal policy will remain ultra-loose; the fiscal deficits are never assumed to decline below $1.3 trillion or 4.2 percent of the GDP, and the public debt is projected to reach a level not seen since World War II.However, the Fed is ready to intervene if the interest rates increase too much. And, at some point, the current ‘debt elephant’ will become too big to pretend it’s not present in the room. The current policy mix of ultra-loose monetary policy and ultra-loose fiscal policy (despite the economic recovery) is unprecedented and raises the risk of a debt crisis in the more distant future. It seems that some policymakers are starting to notice that, as they switched their narrative from “debt is no problem” to “we have to pay for it through raising corporate taxes”. We can see that even in the White House’s document, as it factors in an increase in the corporate tax rate from 21% to 28%.Hence, the continuation of the US’s irresponsible fiscal policy could add to the positive momentum in the gold space, especially while taking into consideration that all these new social and infrastructure programs arrive during a period of economic expansion and inflationary pressure. So, the era of big government (with bigger government expenditures and fiscal deficits) and higher inflation is back. It could be, thus, an era of shining gold.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

Gold is fluctuating around $1,900 amid a sideways trend in real interest rates and a decline in inflationary expectations.Gold surpassed $1,900 at the end of May. However, it has been struggling since then to rally decisively above this level. Instead, the price of the yellow metal has been oscillating around this level, as the chart below shows.Why is that and what does it mean for the gold market? Well, on the one hand, we could say that the yellow metal is in a normal pause during an uptrend. However, the lack of more aggressive price appreciation amid high inflation , ultra-loose monetary policy , depreciating dollar and super easy fiscal policy could be seen as disturbing.From a fundamental perspective, the timid price behavior of gold could be explained by a sideways trend in real interest rates . Their lackluster movement, in turn, could have resulted from the downward correction in long-term inflationary expectations (blue line), as the chart below shows.Investors’ inflation bets have lost some steam, starting a debate about whether expectations of inflation have already peaked. After all, it might be the case that inflation fears have been exaggerated and investors have overshot, as they often do. In addition, some of the FOMC members signaled that it could be a good idea to begin discussing tapering quantitative easing .If this was really the peak of inflationary expectations, the news would be bad for gold, which is seen as a hedge against inflation . However, many analysts expect that inflation expectations have room for further rises and could reach levels close to 3%.Implications for GoldWhat does all this mean for the price of gold? Well, market-based inflationary expectations have recently declined, dragging the real interest down and restraining gold from moving upward. However, inflation worries won’t disappear anytime soon . After all, the PCE inflation , the favorite Fed’s inflation gauge, jumped 3.1% in April, beating the expectations. Even in the Eurozone, where price pressure is usually lower than in the US, the inflation rate rose from 1.6% to 2% in May, which is the highest level since October 2018.Furthermore, consumer-based inflationary expectations jumped from 3.4% to 4.6% in May, so inflation worries are still around. They could increase the uncertainty and increase the safe-haven demand for gold . Although higher uncertainty could limit some spending, we should remember that households have accumulated more than $2 trillion in excess savings during the pandemic . So, inflation may be more lasting than many policymakers and pundits believe . If inflation doesn’t turn out to be merely transitory, gold could gain some fuel for the upward march.Higher inflation implies weakened purchasing power of the dollar. If we add America’s growing public debt problem to constantly rising prices, the downward trend in the greenback could continue, supporting the price of gold.Of course, only time will tell whether or not current inflation worries are justified. However, please note that the economy didn’t collapse last year due to a lack of liquidity but due to the Great Lockdown . The implication is that the Fed has increased money supply well above demand , injecting a lot of liquidity into the system. The expansion in the Fed’s balance sheet and commercial banks’ credit (after all, this time not only the monetary base has jumped, but the broad money supply as well), combined with the Great Unlocking, generated a great inflationary wave that lifted all asset classes: from commodities, through equities, to cryptocurrencies , including crypto-memes like Dogecoin.And it might be just a coincidence, but the Fed introduced a new monetary regime that is prone to higher inflation also during the last year. A cynical interpretation could be that the Fed knew very well that its last year’s monetary expansion could result in higher inflation.Hence, inflationary expectations didn’t have to peak, and they could increase later this year supporting gold prices . Having said that, if inflation really turns out to be only transitory, the current situation wouldn’t be much different from 2011-2013, when gold prices struggled amid expectations of monetary policy tightening . Of course, the Fed is even more dovish now under Powell than under Bernanke or Yellen , but higher inflation would be an additional argument for a bull market in gold .If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

Gold rallying on low volume yesterday was a clear bearish sign; the yellow metal dropped about $15 in today’s pre-market trading. What will happen next?Yesterday’s (Jun. 2) and today’s sessions were quite rich in signals for gold, silver, and mining stocks, but only if one knows where to watch.Gold: Short-Term MovesGold closed ~$5 higher yesterday, and this move took place on relatively low volume. In fact, gold hasn’t rallied on volume this low since Apr. 26. This is a bearish sign for the short term, and indeed after the Apr. 26 session, gold moved lower in the following days.And, right on cue, gold was about $15 down in today’s pre-market trading . While this decline might seem surprising to some, it’s actually a perfectly natural thing for gold to do right now.The low-volume daily rally was only a confirmation, as we knew that Tuesday’s daily reversal was critical all along – based on the triangle-vertex-based reversal we recently saw. Combination of this with highly overbought RSI, a sell signal from the stochastic indicator, and, most importantly, the analogies to how the situation in gold developed in 2008 and 2012, provides us with an extremely bearish outlook for gold.Many other factors are pointing to these similarities, and two of them are the size of the correction relative to the preceding decline and to the previous rally. In 2012 and 2008, gold corrected to approximately the 61.8% Fibonacci retracement level. Gold was very close to this level this year, and since the history tends to rhyme more than it tends to repeat itself to the letter, it seems that the top might already be in.In both years, 2008 and 2012, there were three tops. Furthermore, the rallies that took gold to the second and third top were similar. In 2008, the rally preceding the third top was bigger than the rally preceding the second top. In 2012, they were more or less equal. I marked those rallies with blue lines in the above chart – the current situation is very much in between the above-mentioned situations. Also, the current rally is bigger than the one that ended in early January 2021 but not significantly so.Since I realize that it’s most difficult to stay on track right at the top, let me remind you about two key facts:We have open-ended QEs – money is being pumped into the system at an unprecedented pace, even when stocks are well beyond their all-time highs. The world has been in a pandemic for over a year, and the economies were hit hard. And yet, gold – the king of safe hedges – did not manage to soar above its 2011 highs and then stay above them. Given how extremely positive the fundamental situation is, gold’s reaction is even more extremely bearish. This market is simply not ready to soar without declining significantly first. The bull market and bear markets move in stages, and the final slide was postponed multiple times, but it’s clear that gold is not ready to soar to new highs without completing this final stage – the downswing.Remember what happened when gold previously attempted to break above major long-term highs? It was in 2008 and gold was breaking above its 1980 high. Gold wasn’t ready to truly continue its bull market without plunging first. This downswing was truly epic, especially in the case of silver and mining stocks; and now even gold’s price patterns are like what we saw in 2008.Lessons Learned From HistoryMy previous comments on the analogies to 2008 and 2012 remain up-to-date:Back in 2008, gold corrected to 61.8% Fibonacci retracement , but it stopped rallying approximately when the USD Index started to rally, and the general stock market accelerated its decline.Taking into consideration that the general stock market has probably just topped, and the USD Index is about to rally, then gold is likely to slide for the final time in the following weeks/months. Both above-mentioned markets support this bearish scenario and so do the self-similar patterns in terms of gold price itself.What would change my mind with regard to gold itself? Perhaps if it broke above its January 2021 highs and confirmed this breakout. This would be an important technical indication on its own, but it would also be something very different from what happened in 2008 and 2012. If that happened along with strength in mining stocks, it would be very bullish. Still, if the above happened, and miners didn’t react at all or they declined, it would not be bullish despite the gains in the gold price itself.The March 2021 low formed well below the previous low, but as far as other things are concerned, the current situation is similar to what happened in 2012.The relatively broad bottom with higher lows is what preceded both final short-term rallies – the current one, and the 2012 one. Their shape as well as the shape of the decline that preceded these broad bottoms is very similar. In both cases, the preceding decline had some back-and-forth trading in its middle, and the final rally picked up pace after breaking above the initial short-term high.Interestingly, the 2012 rally ended on huge volume, which is exactly what we saw also on May 19 this year. Consequently , forecasting much higher silver or gold prices here doesn’t seem to be justified based on the historical analogies.The thing I would like to emphasize here is that gold didn’t form the final top at the huge-volume reversal on Sep. 13, 2012. It moved back and forth for a while and moved a bit above that high-volume top, and only then the final top took place (in early October 2012).The same happened in September and in October 2008. Gold reversed on huge volume in mid-September, and it was approximately the end of the rally. The final top, however, formed after some back-and-forth trading and a move slightly above the previous high.Consequently, the fact that gold moved a bit above its own high-volume reversal (May 19, 2021) is not an invalidation of the analogy, but rather its continuation.There’s one more thing I would like to add, and it’s that back in 2012, gold corrected to approximately the 61.8% Fibonacci retracement level – furthermore, the same happened in 2008 as you can see in the below chart. Consequently, the fact that gold moved above its 50% Fibonacci retracement doesn’t break the analogy either. And even if gold moves to $1,940 or so, it will not break it. It’s not likely that it is going to move that high, as in both cases –in 2008 and 2012 – gold moved only somewhat above its high-volume reversal before forming the final top. So, as this year’s huge-volume reversal took place close to the 50% retracement and not the 61.8% retracement, it seems that we’ll likely see a temporary move above it, which will create the final top. And that’s exactly what we see happening so far this week.The lower part of the above chart shows how the USD Index and the general stock market performed when gold ended its late-2012 rally and was starting its epic decline. In short, that was when the USD Index bottomed, and when the general stock market topped.Also, please note that while it might seem bullish that gold managed to rally above its declining black resistance line recently (the one based on the 2020 top and the 2021 top), please note that the same happened in 2012 – I marked the analogous line with red. The breakout didn’t prevent gold from sliding. When the price reached the line, we saw a short-term bounce, but nothing more than that – the gold price fell through it in the following weeks.Meanwhile, the USD Index has just confirmed its short-term breakout, suggesting that the analogy to 2016 and the similarity to how it bottomed (triple bottom with lower lows) in mid-2020 remains intact – and so does the bullish outlook for the universally-hated-and-massively-shorted U.S. currency.The USD Index reversed yesterday in a supposedly bearish manner, but today’s pre-market price action shows that it was just a fake reversal. It seems that a major bottom in the USDX is already in, as the breakout above the declining short-term resistance line (that started with the April top) was verified. And with the outlook for the USD Index being bullish, the implications for the precious metals market are bearish.Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.Przemyslaw Radomski, CFA Founder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Inflation broke into the economy violently. It’s a destructive, dark force. But gold can resist it, being after all a much stronger asset than Anakin Skywalker.Last month, I wrote that “inflation is knock, knock, knockin’ on golden door”. I was wrong. Inflation didn’t knock, it broke down the door! Indeed, as the chart below shows, the core CPI surged 3%, while the overall CPI annual rate soared 4.2% in April – this is twice the Fed’s target!Now, the question is whether this elevated inflation will turn out to be just “transitory”, as the Fed and the pundits claim, or become more permanent. On the one hand, given that April-May 2020 was the worst phase of the pandemic with the deepest price declines, the current high inflation readings are perfectly understandable, and we could see lower numbers later this year.On the other hand, inflation may be higher and/or more persistent than many analysts believe . After all, the April reading came as a shock for them and even for the top US central bankers. For example, Richard Clarida, the Fed Vice-Chair, said: “I was surprised”. It shows that there is more in high inflation than just the base effect. Indeed, the CPI index with February 2020, i.e., the last pre-pandemic month as a base, has jumped 3.1% so far – lower but still significantly above the Fed’s target.It shouldn’t be surprising given the surge in the broad money supply and increase in fiscal transfers to citizens. Incomes are higher and people are ready to spend their money. Stronger demand met with supply shortages, so the prices rose. And what is important, the increases are widespread: from commodities to used cars and houses.However, there are a few important upside risks to inflation . First, a rise in wages. Although employment is far from the pre-epidemic level, entrepreneurs struggle to find workers. Therefore, they could be forced to increase wages to pull employees away from generous government benefits. If passed on, higher input costs would translate into higher consumer prices.Second, a housing boom . Rising housing prices show that inflationary pressure is something more than just CPI inflation, and all this could drive shelter inflation higher. More importantly, though, as shelter dominates in the CPI basket, the official inflation would rise as a result.Third, an increase in inflationary expectations. In May, the University of Michigan index that gauges near-term inflation expectations surged to 4.6%from 3.4%in April. What’s important, the index that measures inflation expectations for the next five years also rose – from 2.7% in April to 3.1% in May, which is the highest level in a decade. As the chart below shows, the market-based inflation expectations have also been surging recently.This is a very important development, potentially even a game-changer. You see, inflation remained low for years partially because Americans didn’t expect high inflation. They used to see persistent inflation as a thing of the past. They had strong confidence in the Fed , believing that the US central bank would quickly intervene to prevent inflation.However, that belief could go away now . The Fed’s new monetary framework and officials’ speeches clearly indicate that the US central bank has become more tolerant of higher inflation. The Fed has returned – just like in the 1970s – to focus on full employment and its “shortfalls” instead of deviations, forgetting that economies can become too hot as well as too cold. Given the dominance of doves in the Fed – but also in the Treasury with Yellen as a Secretary – one can reasonably doubt whether or not the US central bank is ready to hike the federal funds rate in response to higher inflation. Just like in the years before the Great Stagflation , the Fed could decide that it’s better to live with inflation than bear the pain of combating it.More importantly, such a fight would be challenging now, as the public debt is a few times higher.As the chart below shows, the federal debt held by the public is now 100% of the GDP , four times larger than throughout the 1970s. Hence, the increase in interest rates would amplify fiscal deficits even more. To paint the perspective, April’s core CPI was the highest since 1982, when the Fed was trying to control inflation, and interest rates were double-digit. So, the government would be obliged to cut its expenditures, while the climate is rather to spend as much money as possible. Therefore, the Fed is under strong pressure not to tighten its monetary policy .What does all this mean for the gold market? Well, when people question the willingness or ability of the government and central bank to tame inflation, they expect it to go higher, which increases the actual inflation and make it more persistent. Such a negative surprise, with inflation expectations unanchored, would make prices rise abruptly – but also the demand for gold as an inflation hedge would increase . Given the widespread economic repercussions and elevated uncertainty triggered by higher inflation – which is one of the biggest threats to this economic cycle – gold could gain as a safe-haven asset .Of course, gold is not a perfect inflation hedge in the short term. If interest rates increase or the Fed tightens monetary conditions in response to inflation, gold may struggle. Actually, a start of normalization of the monetary policy could push gold downward, just as it happened in 2011.However, given the current pretending that “there is no inflation” by the Fed, it’s likely that the US central bank won’t react promptly, remaining behind the curve. The delay in tightening could de-anchor inflationary expectations and trigger an inflationary spiral, pushing real interest rates down but also gold prices up.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.

With the current situation suggestive of a Monty Hall problem, investors are clinging to the first, bullish door. But what if a different option is more likely?The Monty Hall problem is a form of a probability puzzle, and what it shows is immensely unintuitive. Suppose you are on a game show, and you need to choose one of three doors. Behind one of them is a car and behind the others, goats. You pick a door, and then the host (who knows what’s behind them) opens one of the remaining doors, behind which there is a goat. The host now asks: “Do you want to change your door choice for the remaining doors?” So, what do you do?It turns out that if you change the door, the probability of winning the car increases… two times! You have a 2/3 chance, instead of a 1/3. Tremendously unintuitive, indeed, but what if the same is happening on the market now? With a bullish prospect representing the door of the first choice, and the technicals and fundamentals the host’s help, wouldn’t it be safer to switch the door to win eventually?The Gold MinersWith investors stuck in their own version of the Monty Hall problem , guessing ‘what's behind door No.1’ has market participants scrambling to find the bullish gateway. However, with doors two and three signaling a much more ominous outcome for gold, silver and mining stocks, the key to unlocking their future performance may already be hiding in plain sight.Case in point: with the analogue from 2012 signaling a forthcoming rush for the exits, there are no fire escapes available for investors that overstay their welcome. And because those who cannot remember the past are condemned to repeat it (George Santayana), doubters are likely to lose more than just their pride.While the most recent price action is best visible in the short-term charts, it is actually the HUI Index’s very long-term chart that provides the most important details (today’s full analysis includes 44 charts, but the graph below is one of the key ones). The crucial thing happened two weeks ago, and what we saw last week was simply a major confirmation.What happened two weeks ago was that gold rallied by almost $30 ($28.60) and at the same time, the HUI – a flagship proxy for gold stocks… Declined by 1.37. In other words, gold stocks completely ignored gold’s gains.That shows exceptional weakness on the weekly basis and is a very bearish sign for the following weeks. And it has important historical analogies.Back in 2008, right before a huge slide, in late September and early October gold was still moving to new intraday highs, but the HUI Index was ignoring that, and then it declined despite gold’s rally. However, it was also the case that the general stock market declined then. If stocks hadn’t declined back then so profoundly, gold stocks’ underperformance of gold would likely be present but more moderate. In fact, that’s exactly what happened in 2012.The HUI Index topped on September 21, 2012, and that was just the initial high in gold. At that time the S&P 500 was moving back and forth with lower highs – so a bit more bearish than the current back-and-forth movement in this stock index. What happened in the end? Gold moved to new highs and formed the final top (October 5, 2012). It was when the S&P 500 almost (!) moved to new highs, and despite both, the HUI Index didn’t move to new highs.The similarity to how the final counter-trend rally ended in 2012 (and to a smaller extent in 2008) ended is uncanny. The implications are very bearish for the following weeks, especially given that the gold price is following the analogy to 2008 and 2012 as well.All the above is what we had already known last week. In that case, let’s move to last week’s confirmation. The thing is that the stochastic oscillator just flashed a clear sell signal . This is important on its own as these signals often preceded massive price declines. However, extremely bearish implications come from combining both: the sell signal and the analogy of 2008 and 2012. Therefore, we should consider the sell signal in the HUI-based stochastic oscillator as yet another sign serving as confirmation that the huge decline has just begun.Thus, if history rhymes, as it tends to, the HUI Index will likely decline profoundly. How low could the gold stocks fall? If the similarity to the previous years continues, the HUI could find medium-term support in the 100-to-150 range. For context, high-end 2020 support implies a move back to 150, while low-end 2015 support implies a move back to 100. And yes, it could really happen, even though it seems unthinkable.But which part of the mining stock sector is likely to decline the most? In my view, the junior mining stocks.The Junior MinersGDXJ is underperforming GDX just as I’ve been expecting it to. Once one realizes that GDXJ is more correlated with the general stock market than GDX is, GDXJ should be showing strength here, and it isn’t. If stocks don’t decline, GDXJ is likely to underperform by just a bit, but when (not if) stocks slide, GDXJ is likely to plunge visibly more than GDX.Expanding on that point, the GDXJ/GDX ratio has been declining since the beginning of the year, which is remarkable because the general stock market hasn’t plunged yet. And once the general stock market suffers a material decline, the GDXJ ETF’s underperformance will likely be heard loud and clear.Please see below:Why haven’t the juniors been soaring relative to senior mining stocks? What makes them so special (and weak) right now? In my opinion, it’s the fact that we now – unlike at any other time in the past – have an asset class that seems similarly appealing to the investment public. Not to everyone, but to some. And this “some” is enough for juniors to underperform.Instead of speculating on an individual junior miner making a killing after striking gold or silver in some extremely rich deposit, it’s now easier than ever to get the same kind of thrill by buying… an altcoin (like Dogecoin or something else). In fact, people themselves can engage in “mining” these coins. And just like bitcoin seems similar to gold to many (especially the younger generation) investors, altcoins might serve as the “junior mining stocks” of the electronic future. At least they might be perceived as such by some.Consequently, a part of the demand for juniors was not based on the “sympathy” toward the precious metals market, but rather on the emotional thrill (striking gold) combined with the anti-establishment tendencies ( gold and silver are the anti- metals, but cryptocurrencies are anti-establishment in their own way). And since everyone and their brother seem to be talking about how much this or that altcoin has gained recently, it’s easy to see why some people jumped on that bandwagon instead of investing in junior miners.This tendency is not likely to go away in the near term, so it seems that we have yet another reason to think that the GDXJ ETF is going to move much lower in the following months – declining more than the GDX ETF. The above + gold’s decline + stocks’ decline is truly an extremely bearish combination, in my view.In conclusion, once gold, silver and mining stocks’ doors finally slam shut, over-optimistic investors will likely go down with the ship. And with the most volatile segments of the precious metals market eliciting the most bearish signals, those left holding the bag will likely wonder how it all went wrong. Moreover, with gold’s relative outperformance signaling waning investors’ optimism, the miners – and more specifically, the GDXJ ETF – will likely suffer the brunt of the forthcoming selling pressure. The bottom line? With the walls closing in on gold, silver and mining stocks, the game show will likely end with investors left empty-handed.Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.Przemyslaw Radomski, CFA Founder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Gold and silver prices experienced quite a roller coaster ride over the last few days. Given the fast recovery on Friday we see two potential scenarios for the precious metal markets to unfold. Gold – Healthy Pullback or Escalation Until Midsummer?ReviewThe double low at US$1,676 in mid-March and at US$1,678 at the end of March marked the end of the eight-month correction in the gold market. In the past two months, gold was able to recover from this double low by a whopping US$240. Our conservative recovery targets of US$1,785 and US$1,855 were quickly achieved. Furthermore, gold continued its recovery until US$1,916 so far.Over the last two weeks however, the bulls (despite various attempts) failed to recapture the psychological US$1,900 level. Not surprisingly, a fast pullback brought prices back to US$1,856 on Friday early morning in the Asian markets. From here, gold came roaring back to US$1,895 as the latest non-farm payroll US job data missed expectations later during that day.The silver price, on the other hand, was able to hold up somewhat better than the gold price during the entire correction since last august. However, once the attack on the resistance zone around US$30 failed at the beginning of February, silver prices got beaten down together with the falling gold price. Accordingly, Silver reached its low on March 31 at US$23.78. But in contrast to gold, this level thus marked a higher low within the correction that began on August 7th. Currently, silver is trading just below US$28 keeping eye contact with the crucial hard resistance zone around US$30.Overall, thanks to the significant recovery over the last two months, the picture for the precious metals sector has improved significantly. The healthy pullback has been completed. The bull-market is intact. The question now remains how much time gold and silver will need to break out to new all-time highs and what type of pullback(s) we are going to see during the run up to new all-time highs.Technical Analysis: Gold in US-DollarWeekly Chart – Clear Breakout from the Downtrend ChannelGold in US-Dollars, weekly chart as of June 6th, 2021. Source: TradingviewOn the weekly chart, gold prices had managed to easily jump above the downtrend line of the previous nine and a half months in mid of May. Thus, the correction, which began with the new all-time high at US$2,075 on August 7th, 2020, has now most likely ended. Ultimately, this healthy correction seems to have unfolded in a bullish flag pattern.At the same time, gold has been reaching the midline of the three-year uptrend channel (currently around US$1,920). In addition, the 61.8% retracement of the correction at US$1,923 has been missed so far. Thus, the zone between US$1,920 and US$1,925 remains a strong hurdle. If the bulls would manage to break through US$1,925 a quick rally towards the next resistance zone around US$1,950 to 1,960 is extremely likely. This zone around US$1,960 however is a concrete resistance as gold had failed miserably in early November and early January at this level.Overall, the weekly chart is bullish with a slightly overbought stochastic. But there aren't any signals pointing to a pullback or a trend change here. In fact, the bullish momentum makes the continuation of the rally towards US$1,960 quite likely. If on the other hand the pullback from last week gains strength, expect a target zone of US$1,820 to US$1,845. Here, a very good buying opportunity would probably arise shortly before the seasonally best time of the year.Daily Chart – Stochastic With A Fresh Sell SignalGold in US-Dollars, daily chart as of June 6th, 2021. Source: TradingviewOn the daily chart gold had to weather a quick pullback last Thursday and early Friday morning. This pullback led prices back to the upper edge of the former downtrend channel, hence testing the resting breakout. So far, bulls managed to come back immediately, and the daily cycle might have ended in an extremely quick fashion with a low Friday morning in Asia.In the best case, the bulls still have enough fuel to extend the recovery towards the 61.8% retracement at US$1,923 and especially towards the hard resistance around US$1,960. Such an advance would likely free some more momentum (especially in silver) and could even create an escalation until midsummer. An escalation would mean that gold would test the US$2,000 to US$2,025 range before any more significant pullback can unfold.A more defensive perspective on the other hand would be, that a healthy but larger pullback has already started last Wednesday. Gold would likely come under some more selling pressure in this scenario. This could mean a continued sell-off down to the 200-day moving average (US$1,843) and the 38,2%-retracement at US$1,825 within June and July.In both cases gold will test its 200-day moving average at some point. In the “escalation” scenario it would take quite some more time and gold would first explode towards around US$2,000 before a larger pullback would then wipe out all the euphoria later in autumn again. Alternatively, we will get the pullback towards the upper edge of the former downtrend now and gold uses this little correction as a launch-pad for higher prices later in the summer. Subsequently, an attack on the US$2,000 level is expected sooner or later this summer (July to September). Overall, the picture in the precious metals sector has certainly improved considerably thanks to the strong recovery over the last two months. As well, it needs to be noted that the real momentum is going to be in silver market, once the resistance at US$30 is has been overcome.Commitments of Traders for Gold – Healthy Pullback or Escalation Until Midsummer?Commitments of Traders for Gold as of June 6th, 2021. Source: SentimentraderDue to the gold price recovery over the last two months, the Commitment of Trades Report (CoT) has deteriorated again. The cumulative net short position stood at 248,175 contracts as of last Tuesday. In the long-term comparison, this set-up however, is rather high and continues to urge caution and patience. Hence, the CoT-report delivers a sell signal.Sentiment for Gold – Healthy Pullback or Escalation Until Midsummer?Sentiment Optix for Gold as of June 6th, 2021. Source: SentimentraderSentiment numbers for gold are showing a rather neutral rating at the moment. So far, the recovery has not created any significant optimism let alone extreme euphoria. It is however extremely likely that the ongoing recovery will at least see some form of exaggerated optimism before it rolls over or pauses. Thus, sentiment does not stand in the way of a continuation of the rally.Seasonality for Gold – Healthy Pullback or Escalation Until Midsummer?Seasonality for Gold over the last 53-years as of June 6th, 2021. Source: SeasonaxOver the last 53-years a strong seasonal pattern has evolved for the gold market. Accordingly, gold would find its typical early summer low somewhere in June or July. Subsequently, a strong advance would follow in the next step pushing gold prices to a seasonal top around late September or early October.In the current situation this could mean a continuation of the pullback that started last Wednesday over the next few weeks. From a projected low around US$1,820 to US$1,840 gold would then be ready to strongly rally during midsummer.Seasonality for Gold over the last 5-years as of June 6th, 2021. Source: SeasonaxHowever, reducing gold´s historical movements to the last five years shows quite a different seasonal cycle! Hence, in the current bull market since 2016 gold tends to show strength up until mid to end of August before rolling over significantly in September. The weakness in June and July has not been evident over the last five years.Given this statistical evidence gold has quite a high probability of simply continuing its rally towards US$1,960 and US$2,000 to US$2,025 over the next two to three months! Only after such a rally a large pullback would be likely.Sound Money: Bitcoin/Gold-RatioSound Money Bitcoin/Gold-Ratio as of June 6th, 2021. Source: TradingviewWith prices of approx. US$36,000 for one Bitcoin and US$1,890 for one troy ounce of gold, the Bitcoin/Gold-ratio is currently sitting at around 19. That means you now have to pay only 19 ounces of gold for one Bitcoin. Put the other way around, an ounce of gold currently only costs 0.052 Bitcoin. Thus, Bitcoin has lost around 45% against gold to where it traded in March and April.You want to own Bitcoin and gold!Generally, buying and selling Bitcoin against gold only makes sense to the extent that one balances the allocation in those two asset classes! At least 10% but better 25% of one’s total assets should be invested in precious metals physically, while in cryptos and especially in bitcoin one should hold at least between 1% and 5%. If you are very familiar with cryptocurrencies and bitcoin, you can certainly allocate much higher percentages to bitcoin on an individual basis. For the average investor, who is primarily invested in equities and real estate, 5% in the still highly speculative and highly volatile bitcoin is a good guideline!Overall, you want to own gold as well as bitcoin, since opposites complement each other. In our dualistic world of Yin and Yang, body and mind, up and down, warm and cold, we are bound by the necessary attraction of opposites. In this sense you can view gold and bitcoin as such a pair of strength. With the physical component of gold and the pristine digital features of bitcoin you have a complementary unit of a true safe haven for the 21st century. You want to own both! – Florian GrummesMacro update and Crack-up-Boom:FED Balance Sheet. © Holger Zschaepitz via Twitter @Schuldensuehner, June 3rd, 2021.As in almost every other week, the Fed balance sheet has hit a fresh all-time high. Fed chairman Jerome Powell keeps the printing press rumbling despite rising inflation. The total assets expanded by 0.4% to a new record of US$7.94 trillion. The Fed’s balance sheet now equals 36% of the GDP for the U.S..ECB Balance Sheet. © Holger Zschaepitz via Twitter @Schuldensuehner, June 5th, 2021.Of course Madame Lagarde is pushing even harder and the ECB balance sheet is now on course to 80% of Eurozone’s GDP. This rise to the moon looks more and more parabolic as the total assets rose by another 14.5 billion EUR on QE . You can be sure that none of these irresponsible central bankers will have the guts to return to a more sustainable monetary policy.World total stock market cap. © Holger Zschaepitz via Twitter @Schuldensuehner, June 6th, 2021.One of the most obvious consequences is asset price inflation of course. While the worldwide economic has been rather muted the market cap of all stock markets combined hit a new all time driven by the overflowing liquidity provided by nearly all central banks on this planet.But while further rising equity portfolios are certainly to be welcomed by most investors, the increased cost of living is becoming a serious problem for many people. This is true especially since the vast majority of people in any society is always struggling to meet ends needs. They simply don´t own anything that they could invest. Hence the rising tension within most western societies. Those who at least understand what’s going on are forced to become speculators and often use credit and margin to somehow profit from the asset price inflation. However, with credit and margin but without experience they only increase the imbalances in the system.Inflation pops © Holger Zschaepitz via Twitter @Schuldensuehner, May 31st, 2021.Overall, the crack-up-boom is up and running and accelerating. Like a dance on the volcano. And Central bankers are doing everything to outpace any deflationary forces by simply printing more and more. Yet, the worldwide race to the bottom has no exit but is a dead end.Conclusion: Gold – Healthy Pullback or Escalation Until Midsummer?Never before in the last 50 years it was more important to own some physical gold and silver. Independently of any price appreciation or any potential speculative gains. Simply as a protection against the loss of purchasing power and many other looming worst case scenarios.As well from a technical point of view it is vital to now own a full physical position in precious metals. The 8-month pullback from the new all-time high is done and the bulls are back in the driving seat. Once gold sustainably takes out its all-time high at US$2,075 expect an acceleration and a rather quick rally towards approx. US$2,500 and probably higher. By then you will only run behind a train that has left the station. Physical supply is already tight, and premiums are often absurdly high.Technically speaking, gold is in a recovery since March 31st which still has room to continue towards US$1,960 and approx. US$2,025. Judging from the past, gold bulls should have enough strength to push prices towards those two numbers over the coming two to four months. Any pullback or breather on the way higher should be welcomed as one of the last chances to buy gold below US$2,000 and silver below US$30.Hence, the “healthy pullback” scenario over the coming weeks might be perfect for anybody who still needs to get positioned. However, in a bull market surprises are usually happening to the upside and a direct escalation until midsummer would leave many marveling at the wayside.To conclude, buy any dip.Source: www.celticgold.euFeel free to join us in our free Telegram channel for daily real time data and a great community.If you like to get regular updates on our gold model, precious metals and cryptocurrencies you can subscribe to our free newsletter.About the Author: Florian GrummesFlorian Grummes is an independent financial analyst, advisor, consultant, trader & investor as well as an international speaker with more than 20 years of experience in financial markets. He is specialized in precious metals, cryptocurrencies and technical analysis. He is publishing weekly gold, silver & cryptocurrency analysis for his numerous international readers. He is also running a large telegram Channel and a Crypto Signal Service. Florian is well known for combining technical, fundamental and sentiment analysis into one accurate conclusion about the markets. Since April 2019 he is also chief editor of the cashkurs-gold newsletter focusing on gold and silver mining stocks.

Gold may benefit from government money flooding households and people less willing to work – as evidenced by the low value of nonfarm payrolls.According to the recent BLS Employment Situation Report , total nonfarm payrolls rose by 559,000 in May, following disappointing increases of 278,000 in April, as the chart below shows. What is disturbing here is that this time the US economy also added significantly fewer jobs than expected – economists surveyed by MarketWatch forecasted 671,000 additions. Moreover, labor force participation and employment-population rates were little changed, remaining significantly below the pre-pandemic levels.On the positive side, the unemployment rate edged down from 6.1% to 5.8%, as the chart above shows. However, even though the number of unemployed people fell considerably from its recent high in April 2020, it remains well above the level seen before the Covid-19 epidemic. In February 2020, 5.7 million Americans were without a job, while now it is 9.3 million. It means that the labor market is still far from recovery . Or, actually, given all the generous unemployment benefit supplements introduced during the pandemic, the new equilibrium unemployment rate may be simply higher than in the past.Implications for GoldAnyway, the new employment situation report is positive for the gold market . May nonfarm payrolls report is disappointingly weak and missed expectations for the second month in a row. It means that the April report wasn’t just an accident, and the US labor market has to face some serious problems.The sad truth is that Americans don’t want to work. Even the decline in the unemployment rate was caused to a large extent by the drop in the labor participation rate, as workers just left the labor market. This fact explains why employers report worker shortages despite an army of a few million unemployed people. According to the recent Fed’s Beige Book , many companies have difficulties finding new employees, so they had to boost their wages to attract candidates:It remained difficult for many firms to hire new workers, especially low-wage hourly workers, truck drivers, and skilled tradespeople (…) A growing number of firms offered signing bonuses and increased starting wages to attract and retain workers.Even the BLS admitted that “rising demand for labor associated with the recovery from the pandemic may have put upward pressure on wages”. Indeed, wage increases accelerated to 2% in May year-over-year, up from just 0.4% in the previous month. They could add to the inflationary pressure or reduce companies’ margins and investments, reducing the pace of real economic growth. So, the jump in wages seems to be good for gold . Hence, the yellow metal could continue its long-term upward trend after the recent pullback below $1,900 (see the chart below).Additionally, disappointing employment situation news will postpone tapering of the Fed’s quantitative easing . The weak nonfarm payrolls report gives a strong hand to the doves within the FOMC who don’t want to even start talking about talking about tapering. Hence, the US monetary policy should remain very dovish , with the real interest rates at ultra-low levels supporting gold prices . Indeed, the expected path of the federal funds rate , derived from the Fed Fund futures , has declined from the prior levels.In other words, although May nonfarm payrolls report is an improvement when compared to April, the level of employment is still 7.6 million below its pre-pandemic peak. So, even if we see further improvement later this year (which is likely, as many states end the unemployment benefit supplements this month), it will take several more months to fully eliminate the slack in the labor market. The implication is clear: precious metals investors shouldn’t bet on a change in the Fed’s stance anytime soon. And as the yellow metal is very sensitive to tapering fears, this is positive news for gold bulls.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

S&P 500 hard at work erasing that early bear raid, but the bulls managed to stage a comeback. Yet, the risk off atmosphere is palpable in bonds, rallying as if no inflation were on the horizon. Or as if no taper was coming.Rest assured, it isn‘t:(…) The dollar doesn‘t look to be turning around – Thursday‘s upswing has been erased, but look for the greenback to reflexively rise when confronted with „taper now“ prospects. But is the Fed ready to welcome higher rates, and work towards them? I look for plenty of assurances that the support would be very gradually withdrawn so as not to affect the markets…Toothless compromises for public consumption fit into the picture greatly too...Look, the $6T boondoggle is dead on arrival, and won‘t turn out nearly so in the end and fast enough, which would take a little pressure off the still hot inflation trades. Commodities, followed by silver, and finally gold would feel (by extent of reaction) the short-term pinch, but remember that inflation fires on two engines - and the job market one is arriving:(…) Commodities exerting cost-push influence, and job market pressures, would be a one-two punch to the transitory inflation arguments. Deflationary shock simply isn‘t likely at the moment – the market will more probably find out the Fed isn‘t as serious about taper as it pretends to be – the ostrich pose. Or we might be cushioned into a higher inflation environment actually (thank you, Janet), being told it‘s for our own good.Gold is more vulnerable than silver to a scared dump, and the miners weakness shows it won‘t be smooth sailing for the yellow metal either. Copper consolidation doesn‘t add to the certainty, but the red metal‘s bullish bias is clearly there, both in the short run and medium-term as I had been stating months ago that you can‘t (attempt to) build a green economy without copper, silver, or nickel, among much else. It‘s massive and we‘re in a commodities superbull already – and the lumber arguments (not confirmed by timber weakness as I remarked) can be easily refuted by the $CRB index performance.Crude oil daily consolidation didn‘t reach far, again – and the oil index still doesn‘t support deeper downside that could be bought. Yes, the days of higher oil are still coming, for black gold prices can‘t wreck the real economy just yet. Last but not least, the U.S. is no longer a swing producer (wildcard for prices) as the rig count shows.Bitcoin is showing rare daily strength, testing the late May lows while both Ethereum and Cardano are way weaker. The Bitcoin upswing is thus likely to run out of steam.Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq OutlookS&P 500 again defended gained ground, and Nasdaq 100 again rose a little – the 500-strong index rally is still likely to be driven by the tech sector in the very short term.Credit MarketsHigh yield corporate bonds‘black candle looks ominously – but only for the short term. Quality debt instruments rising is a sign of rush to safety and uncertainty ahead of tomorrow‘s CPI. It‘s though still a bullish sign that HYG rose.Technology and ValueTechnology including $NYFANG had a relatively good day, but the black candle is a sign of unease in stocks, underlined by value.Gold, Silver and MinersGold held up quite well once again, but the miners repeated non-confirmation is a loud warning, in spite of the nominal yields retreat. Rebalancing in safety trades ahead.Silver isn‘t flashing warning signs of outperformance in any way, and it‘s the copper chart indecision that‘s soundly affecting the red metal‘s ratio to the 10-year Treasury yield. So far so good.Crude OilCrude oil bulls had to defend against meek premarket selling yesterday, and the volume still supports them.SummaryS&P 500 tremors will likely be resolved to the upside when the CPI and other dust settles, and I am not looking for a Nasdaq disappointment either.Gold and silver are likely to repel the onslaught miners‘ weakness is signalling, with the white metal getting under pressure more than the yellow one – at a time when GDX and HUI would attempt to throw off the PMs bulls.Crude oil chart remains bullish, and dips are likely to be bought. Getting stretched but no real breather on the horizon just yet (apart from CPI).Bitcoin upswing better be viewed with a healthy dose of suspicion while Ethereum keeps sideways consolidating.Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the four publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals and Bitcoin Trading Signals.

Copper is often overlooked when looking for gold price movement clues. But this time, its breakout invalidation may have the high ground.Do you know what the key commodity in today’s world is? Crude oil. It’s the most commonly used good on the planet. In terms of versatility and number of applications, silver is not far behind, but there is also one more market that definitely comes to one’s mind when one hears “world commodity” – copper. And for a good reason – while it doesn’t have as unique properties as silver or gold, copper is much cheaper and thus more widely available.Consequently, what’s happening in copper prices might have quite profound effects on the rest of the world, including the precious metals market. And the thing is: something very important happened to the price of copper recently.The Importance of the Brown MetalNamely, copper has just invalidated its breakout to new highs, which means that – just like in the case of gold in August 2020 – it wasn’t strong enough to soar higher. Well, it’s not to say that copper is weak, as it has more than doubled its price since the 2020 lows. However, it does mean that it’s likely time for a bigger corrective downswing, especially given that we haven’t seen one in many months. For instance, when gold invalidated its breakout above the 2011 high despite very bullish fundamentals, it meant that forecasting gold at lower levels was very much justified.Likewise, when copper failed to hold its breakout above the 2008 high back in 2011, it was followed by a multi-year decline. Will the same happen this time? I wouldn’t bet on that given the amount of money being pumped into the system, but even if this is not the case, copper is likely to suffer a significant drawdown on a temporary basis. No market can move up or down in a straight line, and neither copper nor gold nor silver are exceptions to this rule.Ok, but why is it important for the precious metals investors?Because of two things:Both markets tend to move in a big way at similar times. The more local moves can vary, but the really big price moves are usually aligned. For example, the 2008 – 2011 rally and the fact that they both bottomed in late-2015 / early-2016.The copper price is quite closely related to the general stock market and the former’s inability to hold above its previous highs seems to be an indication of a change in the trend in the general stock market as well.As I wrote before, the general stock market’s decline is not required for the precious metals sector to decline, but it would likely exacerbate the decline, just like it did in 2008 – especially in the case of silver and mining stocks.And speaking of stocks, let’s check what the S&P 500 is doing.The markets are self-similar (which is another way of saying that they have a fractal nature), which generally means that while the history tends to rhyme, it also tends to rhyme in similar shapes of alike or various sizes.For example, the rally from 2018–2020 seems very similar to the rally from 2020 to the present. Both rallies started after a sharp decline, and the first notable correction took the form of back-and-forth trading around the previous high. I marked those situations with big rectangles.Then the rally continued with relatively small week-to-week volatility. I created rising support lines based on the final low of the broad short-term consolidation and the first notable short-term bottom.This line was broken, and some back-and-forth trading followed, but it was only about half of the previous correction in terms of price and time.Then, we saw a sharp rally that then leveled off. And that was the top . The thing that confirmed the top was the visible breakdown below the rising support line right after stocks invalidated a tiny breakout to new highs. That’s what happened in February 2020, and that’s what seems to be taking place right now.Back in 2020, the rally ended when the weekly RSI moved above 70 once again and when the S&P moved slightly to its new highs. While the history doesn’t have to repeat itself to the letter, if we see another small move higher – to new highs – that also takes the RSI above 70, please keep in mind that it’s not really a bullish development, but actually history forming its final rhyme. And the implications appear bearish for the precious metals sector, as it’s likely to be hit by the first wave of stock market declines – just like it was the case in 2008, 2020, and… 1929.Moreover, mining stocks’ performance relative to hold has been heralding the declines across the precious metals market for some time now.While gold is not doing much today, it’s important to note that yesterday it moved quite close to its previous highs (and visibly above $1,900) before declining. And how did gold miners react?In short, they didn’t. And the GDX ETF has just closed at a new monthly low.Even without considering the invalidation of the breakout to new highs, the sell signal from the RSI and stochastic indicators, and even without noticing that the GDX corrected to its 61.8% Fibonacci retracement without invalidating it, one can clearly see that gold stocks refused to follow gold higher during the most recent rebound. This is bearish – and quite profoundly so.Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.Przemyslaw Radomski, CFA Founder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

May was certainly a positive month for the yellow metal. Gold could keep its momentum later this year, but a lot depends on the Fed and inflation.We left May in the rearview mirror, and as the chart below shows, it was the second positive month in a row for the yellow metal. Gold rose 7% last month – this is 12.3% since the local bottom on March 31, 2021 . The jump was driven mainly by inflation fears, a weak greenback and a decrease in real interest rates .Hence, I was right: the second quarter has been so far much better for the shiny metal than the first one, in which it declined by 11%. Gold even jumped temporarily above $1,900 at the turn of May and June. Since then, it has been fluctuating around this level. All this means that the yellow metal fully recovered its Q1 losses, finishing last month virtually flat year-to-date.Now, the key question is: what’s next for gold? Outlooks are, as always, divided. Some analysts point out that gold’s struggle to move decisively north above $1,900 amid all the increase in the money supply , public debt and inflation is disturbing and has bearish implications for the future. For instance, the French bank Société Générale still believes that we will see $2,000 per ounce by the end of the year, but its conviction towards this forecast has weakened. I have to admit – the lack of a stronger rally in gold is something I also worry about.But on the other hand, some believe that gold is still in a long-term bull trend . For instance, the World Gold Council , in its latest Gold Market Commentary , points out that sentiment towards gold became more bullish in May , as net positioning on COMEX futures rose to its highest level since February. Moreover, not only gold ETFs recorded their first monthly inflows since January 2021, but also the highest ones since September 2020.Furthermore , the WGC’s 2021 Central Bank Gold Reserves Survey reveals a slightly stronger conviction towards gold , as there is a growing recognition among central banks of gold’s performance during periods of economic crises . The report notes that 21% of central banks expect to increase their gold reserves within the next year (value relatively unchanged from last year’s survey) and that no central bank expects to sell gold this year – down from 4% in 2020.Also, Commerzbank remains bullish on gold despite recent volatility . Although the German bank expects that the Fed will start tapering its quantitative easing by the fourth quarter, it’s forecasting rising inflation. As a result, nominal interest rates will stay below the inflation rate leaving real bond yields significantly below zero.Implications for GoldWhat does all this imply for the gold market? Well, there are both downside and upside risks for gold in the future . Possible drawbacks are the unwinding of the Fed’s bond-buying program and the new tightening cycle . Strengthening expectations of asset purchases tapering and normalization of the ultra-dovish monetary policy could trigger an increase in the interest rates and outflows from the gold market.To the other group of factors, I would include higher inflation. After all, we have never seen such coexistence of dovish monetary policy and easy fiscal policy . Not surprisingly, investors started to worry about record-breaking inflation. As the chart below shows, market-based probabilities derived from options (calculated by the Minneapolis Fed , which computes probabilities from option prices) show that the previous expectations of the CPI annual rate above 3% over five years have significantly increased recently. Higher inflation would increase demand for gold as an inflation hedge and decrease real interest rates, supporting gold prices.So, gold’s future depends on the Fed’s reaction to rising inflation , or whether or not investors will focus on nominal and real interest rates. If the US central bank stays behind the inflation curve, real interest rates will stay in the negative territory, supporting the price of gold. However, if the Fed tightens its monetary policy decisively, or if investors focus on rising nominal bond yields in a response to inflation, the yellow metal may go down.To that point, the most recent changes in the Fed’s framework, comments from the FOMC members and disappointing data about the US labor market suggest that we are far away from any serious tightening. So, gold has room for moving higher.Having said that, it seems that gold needs more negative events (or even a kind of financial crisis ) to rally decisively further . So far, the US economy remains in the boom phase and higher inflation doesn’t seem to significantly disrupt the functioning of the markets. Perhaps gold bulls will have to wait a bit longer until we move from reflation to stagflation . Today’s report on inflation and upcoming FOMC meeting could provide more clues about gold’s future – stay tuned!If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

Inflation is back, and that’s usually depicted as good for gold. But is the yellow metal still a hedge against inflation, or has something changed?Inflation has returned. This is partly understandable. After all, during the Covid recession , consumers and businesses accumulated a lot of cash as their spending was reduced, while revenues were sustained by money transfers from the government. These funds are now entering the economy, which makes demand grow much faster than supply, thus boosting prices. After some time, supply may catch up, curbing inflation. However, there is an important risk that inflation will turn out to be higher and/or more permanent than many analysts believe.From the fundamental point of view, gold should benefit from higher inflation. But why? In theory, there are several channels by which inflation supports the yellow metal. First, the inflationary increase in the money supply makes all goods and services more expensive, including gold. Indeed, the scientific paper by Lucey and others finds a reliable long-run relationship between gold and the US money supply.Second, gold is a real, tangible and rare good with limited supply that cannot be increased quickly or at will. These features make gold a key element during the so-called flight into real values or into hard assets, which happens when inflation gets out of control. In other words, gold is the ultimate store of value which proved to hold its worth over time , unlike paper currencies that are subject to inflation and lose their value systematically.Third, inflation means the loss of purchasing power of the currency, so when the greenback depreciates quicker than its major peers, the dollar-denominated price of gold increases. Fourth, when inflation is unexpected or when the Fed remains behind the curve and doesn’t hike nominal interest rates , real interest rates decline, supporting gold prices.Fifth, high inflation increases economic uncertainty, which increases safe-haven demand for gold . In other words, an outbreak of inflation introduces some turbulences and leads to portfolio rebalancing, thus increasing gold’s appeal as a portfolio diversifier . During inflation, bonds underperform, so gold’s attractiveness increases.And last but definitely not least, gold is perceived as an inflation hedge . But is it really a good hedge against inflation? I analyzed this issue a few years ago – it would be nice to provide an update in light of more recent developments. So, let’s take a look at the chart below, which shows gold prices and CPI annual inflation rates.As one can see, the relationship between these two series is far from being perfect. Actually, the correlation coefficient is significantly below zero (-0.41), which means that the correlation is negative ! It means that although there are certain long-term trends – for example, gold rallied during stagflation in the 1970s and entered a bear market during the disinflation period in the 1980s and 1990s – there is no positive relationship between the CPI annual percentage change and the price of gold on a monthly basis.In other words, the data shows that gold may serve as an inflation hedge only in the long run , as gold indeed preserves its value over a long time (for example, in the period from 1895 to 1999, the real price of gold increased on average by 0.3% per year). It is a good choice for investors also when there is relatively high and accelerating inflation, usually accompanied by fears about the current state of the U.S. dollar and a lack of confidence in the Fed and the global monetary system based on fiat monies .However, let’s not draw conclusions too hastily. The chart below also presents the CPI and gold – but this time both series are year-on-year percentage changes (previously we had gold prices, now we have annual percentage changes in these prices).Have you noticed something? Yup, this time both series behave much more similarly . Indeed, the correlation coefficient is now positive (0.44). Hence, there is a positive relationship between gold and inflation although not always seen in absolute prices (but in changes in these prices), and not always seen in the CPI (as inflation has broader effects not limited only to consumer prices).Summing up the above analysis, it seems justified to claim that gold could benefit from the current elevated levels of inflation, especially if it turns out to be more lasting than commonly believed. It will also be good for gold if the Fed remains dovish and tolerant of inflation surpassing its target significantly.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.

With the CPI annual inflation rate spiking 5% in May, gold could have gained a lot in response. However, it rallied only $20. Should we prepare for more?Whoa! Inflation soared 5% in May – quite a lot for a nonexistent (or transitory) phenomenon! But let’s start from the beginning. The CPI rose 0.6% in May, after increasing 0.8% in April. Meanwhile, the core CPI, which excludes food and energy, soared 0.7%, following a 0.9% jump in April. So, given that the pace of the monthly inflation rate decelerated, we shouldn’t worry about inflation, right? Well… we should.First of all, inflation was higher than expected , as the consensus forecast was a 0.4% increase. Inflation surprised pundits once again, but not me. Last month, I wrote in the Fundamental Gold Report that “Inflation escalated in April. In May, however, inflation could be softer, but it will remain relatively elevated, in my view” – and this is exactly what happened. However, the unexpected rise in inflation is positive news for gold, as such a surprise should decrease the real interest rates .Second, pundits cannot blame energy prices for this jump, as the energy index was flat. Apart from energy and medical care services, which decreased slightly, all index components increased last month. In particular, the index for used cars and trucks soared again (7.3%). Also, the indexes for new vehicles and apparel surged in May, which shows that inflationary pressure is broad-based .Last but definitely not least, the latest BLS report on inflation reveals that the overall CPI skyrocketed 5% for the 12 months ending May (before seasonal adjustment), followed by a 4.2% spike in April. For context, the annual inflation rate has been trending up every month since January, when the 12-month change was just 1.4%. Therefore, we’ve just seen the largest move since a 5.4% jump for the period ending in August 2008 , just one month before the bankruptcy of Lehman Brothers that triggered the global financial crisis and deflationary Great Recession .But that’s not all! The annual core CPI rate soared 3.8% last month after rising 3% in April, as the chart below shows. It was the fastest pace since June 1992. So, the Fed cannot by any manner of means blame higher inflation on food or energy prices.Supply disruptions are not a credible explanation either, as the inflation acceleration is broad-based. How likely would it be, that the production of virtually all goods and services would face supply bottlenecks at the same time and extent? Indeed, a significant boost in the broad money supply is a much more convenient explanation for widespread price increases.Implications for GoldWhat does accelerating inflation imply for the gold market? Well, on the one hand, higher inflation should be positive for the yellow metal , as it means a stronger demand for gold as an inflation hedge . Additionally, higher inflation could lower the real interest rates, also supporting gold prices. And indeed, the price of gold has risen from about $1,870 to $1,890 in a response to the inflation spike.On the other hand, some analysts point out that stronger inflation could be rather negative for the yellow metal , as the Fed would have to tighten its monetary policy , taper its quantitative easing and hike the federal funds rate to contain inflation. After all, the overall CPI annual rate is more than twice as high as the Fed’s target. Moreover, the mediocre gold’s reaction to the surge in inflation suggests that investors are worried about a normalization of the ultra-dovish monetary policy .However, the Fed has recently become more tolerant of higher inflation, and Powell is likely to continue claiming that inflation is merely transitory. Also, on Thursday, the European Central Bank held its regular monetary policy meeting and maintained its elevated flow of stimulus, even though recovery takes hold. And the Fed may do the same, i.e., nothing, tomorrow.Nevertheless, the relaxed stance of the ECB and the Fed could come out as incorrect. We have the economy operating above potential, with big fiscal injections along with a very easy monetary policy. Such a combination could bring us to an environment of higher and more lasting inflation, which could disrupt the market later in the future.After all, many indicators suggest that financial markets believe in the narrative of “transitory” inflation. But if inflation proves to be more permanent than expected, there could be some turmoil in the markets – and gold could benefit from it. Gold is not always a good inflation hedge, and it could suffer somewhat if the nominal interest rates increase; however, it should prosper if the real interest rates decline further.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

Depending on the upcoming FOMC meeting, gold will need to choose one of the two ways down – the ski trail or the black slope. Which one lies ahead?In the skiers’ vernacular, a ski trail is a very easy way down, with a light gradient at full length. It looks like the late-2012 decline in gold. However, there is also a black slope – a steep and dangerous road on which inexperienced skiers can hurt themselves badly; it’s very similar to what happened to gold in 2008 and 2020. While we don’t know yet which way we will choose to go down (as we have probably just reached the top), the nearest FOMC event will most likely shove us towards one of them. Let’s put our helmets on.The world is holding its breath for today’s comments from the Fed, knowing that one of the approaches would be a game-changer.If the Fed hints that it’s ready to taper its stimulus, the long-term rates will likely rally, whereas stocks, precious metals and commodities will likely slide. But if they don’t do that, it seems that whatever has been going on in the above markets will likely continue based on their technical developments.In the case of gold, it means either a measured late-2012-style decline or a more powerful slide similar to the moves we saw in 2008 and 2020. Which one will it be? Either way, the next big move is likely to be to the downside (even if dovish comments were to spur some immediate-term gains). Why? Because history tends to rhyme, and right now, gold is simply repeating its price patterns from the past that were preceded by relatively similar events (invalidation of the breakout to new all-time highs – just like in 2008; similarity with regard to price moves, volume, and key indicators – just like in 2011-2012).Gold declined once again today, but since it remains between the declining medium-term support line and the rising short-term resistance line, the tug-of-war between bulls and bears remains in place.The above chart is likely either perplexing, confusing or appearing random for those who haven’t stumbled upon the technical analysis toolkit. But to those who have learned about its principles and have used it themselves, the above chart is very exciting. And to those who took the expertise to the next level and see an even bigger picture, the chart is relatively calm, and normal.Gold: How Exciting Are Recent Moves?Why would the above chart be so exciting? Because gold just broke below its rising dashed support line and closed the day below it. This is the first time that it managed to do that, despite coming close to it a few times before. The excitement is even bigger because of what happened on an intraday basis – gold moved back to its declining support line based on the 2020 and 2021 highs and then it moved back up. Consequently, based on the same session, both bulls and bears have an indication that “they were right all along”. Was yesterday’s session a major breakdown, or a confirmation of the May breakout?But how excited can you get if it’s clear that gold is simply repeating its price patterns from the past that were preceded by relatively similar events (invalidation of breakout to new all-time highs – just like in 2008; similarity with regard to price moves, volume, and key indicators – just like in 2011-2012).Watching a football match is not as exciting when you already know the outcome, is it?What’s likely to happen now? Gold is likely to move back and forth, but will ultimately break below the declining support line, which will be a major “uh-oh” moment for those who think that gold will move higher from here based on the very positive fundamental situation. Yes, it is very positive, but it doesn’t mean that gold would rally right away. It could decline despite the fundamentals, just like it did in 2008 and in 2013. And it seems that it’s about to slide.Back in 2008, gold corrected to 61.8% Fibonacci retracement , but it stopped rallying approximately when the USD Index started to rally, and the general stock market accelerated its decline.Taking into consideration that the general stock market has probably just topped, and the USD Index is about to rally, then gold is likely to slide for the final time in the following weeks/months. Both above-mentioned markets support this bearish scenario and so do the self-similar patterns in terms of gold price itself.Moreover, while the pace of gold’s decline in 2012 started off slow, the momentum picked up later on as the drawdown became more vicious. As a result, the tepid pace of gold’s current slide remains deceptive and isn’t a cause for concern.Please see below:The relatively broad bottom with higher lows is what preceded both final short-term rallies – the current one, and the 2012 one. Their shape as well as the shape of the decline that preceded these broad bottoms is very similar. In both cases, the preceding decline had some back-and-forth trading in its middle, and the final rally picked up pace after breaking above the initial short-term high.Interestingly, the 2012 rally ended on huge volume, which is exactly what we saw also on May 19 this year. Consequently , forecasting much higher gold prices here doesn’t seem to be justified based on the historical analogies.The thing I would like to emphasize here is that gold didn’t form the final top at the huge-volume reversal on Sep. 13, 2012. It moved back and forth for a while and moved a bit above that high-volume top, and only then the final top took place (in early October 2012).The same happened in September and in October 2008. Gold reversed on huge volume in mid-September, and it was approximately the end of the rally. The final top, however, formed after some back-and-forth trading and a move slightly above the previous high.Consequently, the fact that gold moved a bit above its own high-volume reversal (May 19, 2021) is not an invalidation of the analogy, but rather its continuation.The lower part of the above chart shows how the USD Index and the general stock market performed when gold ended its late-2012 rally and was starting its epic decline. In short, that was when the USD Index bottomed, and when the general stock market topped.Also, please note that while it might seem bullish that gold managed to rally above its declining black resistance line recently (the one based on the 2020 top and the 2021 top), please note that the same happened in 2012 – I marked the analogous line with red. The breakout didn’t prevent gold from sliding. When the price reached the line, we saw a short-term bounce, but nothing more than that – the gold price fell through it in the following weeks. Consequently, if history rhymes, the support provided by the current declining medium-term support line is unlikely to trigger anything more than a short-term bounce. And since we’re already after this event, gold’s next attempt to break below it might be successful.Having said that, let’s take a look at silver.Silver’s Failed Attempts to Break OutSilver price confirmed its breakdown below its rising support line, and it has just finished invalidating its fifth attempt to break above the early January highs. This is a clearly bearish combination, even without taking into account the similarity between now, 2020, and 2008.Let’s keep in mind that silver might hesitate to decline substantially at first, but then play a huge catch-up close to the end of the decline – just as it did in 2020.Miners: Breaking Below Support Lines Without USDX HelpThe breakdown in the GDX ETF is also crystal clear. Moreover, it’s almost confirmed, as the GDX ETF closed below its rising dashed support line for the second day in a row.We saw a buy signal from the stochastic indicator, but the breakdown in terms of closing prices is more important, as the buy signals from the stochastic (below 20) were not that reliable so far this year. Please note that the mid-January buy signal was followed by much lower prices in the following weeks. The same was the case with the first buy signal that we saw in late February.And indeed, the supposedly bullish signal has already been reversed by another sell signal. Thus, the trend remains down and the outlook remains bearish.The breakdown is also clear in the case of the 4-hour chart featuring the proxy for junior miners – the GDXJ ETF.On the above chart, we see that the huge-volume rally has once again worked as a sell signal – in the past, it often heralded short-term declines like the current one.What’s particularly interesting, gold and gold miners have broken decisively below their rising support lines without the USD Index’s help. This is a sign of weakness in the PMs market.Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.Przemyslaw Radomski, CFA Founder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

The US GDP has already recovered from the pandemic recession. What’s next for the economy and the gold market?Ladies and Gentlemen, the economic crisis has ended. Actually, not only is the recession over but so is the recovery! This is at least what the recent GDP readings are indicating. As the chart below shows, the US nominal GDP has already jumped above the pre-pandemic level . The real GDP, which takes inflation into account, remained in the first quarter of 2021 below the size of the economy seen at the end of 2019, but it will likely surpass this level in the second quarter of the year.As one can see in the chart below, in terms of GDP growth, the situation is a bit worse, as the annual percentage changes are still below the pre-epidemic level . However, this should change in the second quarter of 2021 when the growth pace is likely to peak amid base effect and reopening of the economy.So, the question is: what’s next? Will the economic boom become well-established or will we see a lot of volatility or even new slumps? Given the recent flux of disappointing high-frequency indicators that fell considerably short of expectations (just think about April’s nonfarm payrolls ), the question is very relevant.Well, there are many threats to growth , that’s for sure. The first is, of course, the ever-evolving coronavirus and its new variants. However, judging by preliminary evidence, the vaccines should remain effective, allowing economies to function freely.The second obvious danger is clearly the economy overheating and higher inflation . The Fed and the Congress injected a lot of liquidity into the economy although it would recover if it was left to its own devices thanks to the rollout of vaccinations and easing lockdowns. So, much of government funds arrived just when the economy practically recovered, which is a recipe for higher prices and inflation-related turbulences in the financial markets.Third, the increase in debt – both private and public – makes the global economy more fragile. Given the level of indebtedness, even small increases in real interest rates would be dangerous. They would increase the costs of servicing debts for the governments and could hit the asset prices. The fact that the Fed will be under great pressure to remain very dovish is, of course, positive for gold prices . Even if we see some effort to normalize the monetary policy , interest rates and the Fed’s balance sheet will never return to the pre-recession levels.Last but not least, there is a threat of financial crisis . Many people are worried that there is a bubble in the stock market (and in other markets as well, such as the cryptocurrency market). Indeed, the equities have been reaching new peaks and the valuations are elevated. The margin debt has also jumped. Not surprisingly, the relative frequency of Google searches for the “stock market bubble” has recently risen (just as for the word “inflation”).Even the Fed in its latest Financial Stability Report expressed some concerns. This is what the Fed Governor Lael Brainard said in a statement linked to the report :Vulnerabilities associated with elevated risk appetite are rising. Valuations across a range of asset classes have continued to rise from levels that were already elevated late last year. Equity indices are setting new highs, equity prices relative to forecasts of earnings are near the top of their historical distribution, and the appetite for risk has increased broadly, as the "meme stock" episode demonstrated. Corporate bond markets are also seeing elevated risk appetite, and the spreads of lower quality speculative-grade bonds relative to Treasury yields are among the tightest we have seen historically. The combination of stretched valuations with very high levels of corporate indebtedness bear watching because of the potential to amplify the effects of a re-pricing event.To sum up, the US economy has already recovered from the coronavirus recession, which is bad for safe-haven assets such as gold , as the yellow metal doesn’t like economic expansions. However, there are important threats to sustainable economic growth, which should support the price of gold.Actually, there is still room for gold to rally further . This is because we are in an inflationary phase of the economic expansion (this boom will be more inflationary than the post- Great Recession period), and all the money created during the pandemic has flowed into the asset markets, pushing their prices into elevated levels not necessarily justified by fundamentals (just think about Dogecoin). Gold could benefit from such a bubble, as well as from an inflationary and hot environment. Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.

The newest Fed’s statement and dot-plot indicated a much more hawkish tone among the FOMC members than the markets expected, and gold dropped.On Wednesday (June 16, 2021), the FOMC has published its newest statement on monetary policy . The statement was barely changed. The main alteration is that the Fed has ceased saying that “the pandemic is causing tremendous human and economic hardship across the United States and around the world”. Furthermore, with the CPI annual rate jumping to 5% in May, the US central bank acknowledged that inflation is not any longer “running persistently below this longer-run goal”. Hence, both modifications are slightly hawkish , as the Fed noticed an improvement in the epidemiological situation, as well as higher inflation. Bad news for gold.However, the statement was only slightly changed, so the investors focused more on the accompanying dot-plot and Powell’s press conference instead. According to the fresh economic projections , the Fed forecasts higher GDP growth and higher inflation this year, as the table below shows.As one can see, the FOMC expects that the GDP will soar 7% in 2021, compared to a 6.5% rise expected in March. They also assume that the pace of economic growth will be slightly higher in 2023. Meanwhile, the Fed officials believe now that the PCE inflation (core PCE) will jump to 3.4% (3%) this year , compared to 2.4% (2.2%) seen in March. They also forecast a slightly lower unemployment rate in 2022.But the most impactful change occurred in the expected path of the federal funds rate . The FOMC members now forecast that the US policy rate will be 0.6% at the end of 2023, an important upward change from 0.1% projected in March. In other words, the US central bankers believe that two interest rate hikes will be appropriate in 2023 . It means that they started to think about tapering, which is fundamentally negative for gold prices.Indeed, Powell said during his post-meeting press conference that we can “think of this meeting that we had as the talking about talking about meeting [at which the Fed will start tapering], if you like”.Implications for GoldWhat does the recent FOMC meeting imply for the gold market? Well, the Fed struck again. As a result, the price of gold plunged. As the chart below shows, the London P.M. Fix slid from about $1,865 on Tuesday to $1779 on Thursday.The reason is simple : the fresh dot-plot shows that a majority of the Fed officials currently forecasts two quarter-point rate hikes in 2023 . 13 of 18 FOMC members see some interest rate increases in 2023 compared to just 7 members in March. Moreover, 7 participants now predict some upward moves next year. These changes lifted market expectations of future interest rates . In consequence, the bond yields increased, which raised the opportunity costs of holding non-yielding bullion . Furthermore, the more hawkish stance of the Fed strengthened the US dollar, creating downward pressure on gold prices. In other words, the new economic outlook revealed some hawks among the FOMC members and that there might be less tolerance toward higher inflation than previously thought.However, the bullish case for gold is not over yet . After all, the Fed maintained its very accommodative monetary policy, and it will not hike interest rates this year and probably not also in 2022. Additionally, the dot-plot is not the official projection of the future path of the federal funds rate, so it should be taken with a grain of salt. A lot may happen by 2023. Also, the Fed leadership seems to be more dovish than many of the regional Fed presidents.Last of all, Powell repeated that inflation is merely transitory. But why hike interest rates if inflation is merely transitory and federal debt is ballooning? Hence, it might be the case that the Fed is testing the markets. High inflation is still with us, and it may be more lasting than the Fed believes. Even with two interest rate hikes, the real interest rates should stay negative.Having said that, the hawkish Fed’s statement and hawkish economic projections are fundamentally negative for the yellow metal in the medium term . The chances of a replay of 2013 have increased. It seems that gold may struggle without an inflationary turmoil, stagflation , the dovish counter-strike at the Fed, or a debt crisis .If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

Gold sank profoundly on Jun. 17, taking its crew along. While it has the strength to go up for one more breath, other PM assets may not be that tough.The Gold MinersWhile investors believed that superficial strength indicated clear skies ahead, I warned on Jun. 14 that storm clouds were likely to rain on gold, silver and mining stocks’ parade.I wrote:Not only has gold’s RSI fallen precipitously, but the yellow metal’s stochastic oscillator is also at levels that preceded significant historical drawdowns. As a result, while a $100+ decline is likely to materialize in the short term , an even larger decline will likely occur over the medium term. And with the 2008 and 2012-2013 analogues becoming even more valid by the day, gold’s ominous path forward will likely catch many market participants by surprise.And with the technical realities finally drowning the yellow metal, it was a tough pill to swallow for those that didn’t heed the warning.Please see below:As part of the problem, the vast majority of individual investors and – sadly – quite many analysts focus on the trees while forgetting about the forest. However, once one zooms out and looks at the situation from a broad perspective, it’s clear that: “What has been will be again, what has been done will be done again; there is nothing new under the sun.” (-Ecclesiastes 1:9)Therefore, while investors often focus all of their attention on the yellow metal, I warned on Jun. 14 that the HUI Index’s ominous behavior signaled significant downside for gold, silver and mining stocks.I wrote:With the HUI Index acting as the PMs’ canary in the coal mine, the bearish implications are as clear as day when eyeing the long-term chart. In the past three weeks, two key events unfolded:The stochastic oscillator delivered a clear sell signal.The self-similarity patterns became increasingly valid.And with last week’s price action adding further confirmation, investors’ optimism is showing severe cracks in its foundation.On top of that, even though the HUI Index plunged by more than 10% last week , the carnage may not be over. Case in point: the HUI Index is in the midst of forming the right shoulder of its bearish head & shoulders pattern, and if completed, could result in a profound decline over the medium term. For context, with gold approaching its late-April bottom and its rising medium-term support line, the yellow metal could bounce at roughly $1,750. In the process, the gold miners may follow suit. However, the bearish implications remain intact over the medium term, and a significant slide is likely to follow.Please see below:To explain, if you held firm in 2008 and 2013 and maintained your short positions, you almost certainly realized substantial profits. And while there are instances when it’s wise to exit one’s short positions and re-enter at more attractive prices, the smooth declines of gold, silver, and mining stocks mean that the risk-reward of doing so is tilted toward the downside. Or to put it more bluntly, the prospect of missing out on the forthcoming slide makes exiting the short positions a risky investment decision. For context, we believe that holding the short position is the most prudent course of action. However, if gold, silver and mining stocks become extremely oversold, we may consider covering on a short-term basis.If that wasn’t enough, I warned previously that the recent plunge was weeks in the making:I wrote the following about the week start started on May 24 :What happened three weeks ago was that gold rallied by almost $30 ($28.60) and at the same time, the HUI – a flagship proxy for gold stocks… Declined by 1.37. In other words, gold stocks completely ignored gold’s gains. That shows exceptional weakness on the weekly basis and is a very bearish sign for the following weeks.To that point, the HUI Index is still following two medium-term historical analogies. To explain, back in 2008, right before a huge slide, in late September and early October gold was still moving to new intraday highs, but the HUI Index was ignoring that, and then it declined despite gold’s rally. However, it was also the case that the general stock market declined then. If stocks hadn’t declined back then so profoundly, gold stocks’ underperformance relative to gold would likely be present but more moderate.Moreover, in 2012, the HUI Index topped on Sep. 21, and that was just the initial high in gold. At that time the S&P 500 was moving back and forth with lower highs – so a bit more bearish than the current back-and-forth movement in this stock index. And what was the eventual climax? Well, gold moved to new highs and formed the final top (Oct. 5). It was when the S&P 500 almost (!) moved to new highs, and despite both, the HUI Index didn’t move to new highs. Thus, the similarity to how the final counter-trend rally ended in 2012 (and to a smaller extent in 2008) ended is uncanny .On top of that, the stochastic oscillator (which flashed a clear sell signal ) is singing a similar tune. Not only do these signals often precede massive price declines on their own, but the analogies of 2008 and 2012 serve as confirmation that the huge decline has only just begun and that forecasting lower gold prices is currently justified.Thus, if history rhymes, as it tends to, the HUI Index will likely decline profoundly and find medium-term support in the 100-to-150 range. For context, high-end 2020 support implies a move back to 150, while low-end 2015 support implies a move back to 100. And yes, it could really happen, even though it seems unthinkable.The HUI Index retraced a bit more than 61.8% of its downswing in 2008 and in between 50% and 61.8% of its downswing in 2012 before eventually rolling over. Now, in both (2008 and 2012) cases, the final top – the right shoulder – formed close to the price where the left shoulder topped. And in early 2020, the left shoulder topped at 303.02.That’s why I previously wrote that “it wouldn’t be surprising to see a move to about 300 in the HUI Index”. And that’s exactly what we saw (a move above 320 is still close to 300 from the long-term point of view). To clarify, one head-and-shoulders pattern – with a rising neckline – was already completed, and one head-and-shoulders pattern – with a horizontal neckline – is being completed, but we’ll have the confirmation once miners break to new yearly lows.Furthermore , three of the biggest declines in the mining stocks (I’m using the HUI Index as a proxy here), all started with broad, multi-month head-and-shoulders patterns. And in all three cases, the size of the declines exceeded the size of the head of the pattern.As a result, we’re confronted with two bearish scenarios:If things develop as they did in 2000 and 2012-2013, gold stocks are likely to bottom close to their early 2020 high.If things develop like in 2008 (which might be the case, given the extremely high participation of the investment public in the stock market and other markets), gold stocks could re-test (or break slightly below) their 2016 low.Keep in mind though: scenario #2 most likely requires equities to participate. In 2008 and 2020, the sharp drawdowns in the HUI Index coincided with significant drawdowns of the S&P 500 . However, with the Fed turning hawkish and investors extremely allergic to higher interest rates, the likelihood of a three-peat remains relatively high.Let’s zoom in.To explain, the senior miners’ weekly decline occurred relatively uninterrupted, with little buying pressure witnessed on Jun. 18. Moreover, not only did the GDX ETF close below its April lows and its March highs, but it also dipped below the 61.8% Fibonacci retracement level. Thus, while the senior miners’ RSI (Relative Strength Index) signals a buying opportunity (by falling below 30), the technical damage (breakdown below the 61.8% Fibonacci retracement) justifies the bearish outlook even in the short run. Of course, I remain on the lookout for this breakdown’s invalidation as it would be a sign of potential strength.Finally, let’s consider the size of the possible corrective upswing based on the analogy to 2012. Back then, the GDX ETF’s corrective upswing didn’t recapture 61.8% or even 38.2% of its previous decline, and the bullish correction was rather “muted” relative to gold. Thus, the notable detail here is that the GDX ETF started its November 2012 correction with the RSI close to 30, but also when it moved slightly below its previous (August) lows, and the final short-term bottom took place after the second (!) day when it declined on big volume.So, if history is going to continue to rhyme (which seems likely), even if gold corrects quite visibly, gold stocks’ corrective upswing might not be that significant. If we see “screaming short-term buy signals” or something like that, we might close or even briefly switch to the long side, but for now, the trend remains down.In conclusion, gold, silver and mining stocks’ plight was a humbling experience for many investors. And while the recent slide highlights the importance of investing without emotion, we remain confident that the precious metals will soar once again. However, because secular bull markets don’t occur in a straight line, based on the similarity to how similar situations developed in the past, a final profound decline will likely occur before the metals resume their resurgence. As a result, even though gold, silver, and mining stocks are poised to shine in the long run, I still think that short positions in the precious metals sector – especially in the junior miners – currently remain attractive from a risk-reward perspective.Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.Przemyslaw Radomski, CFA Founder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

As resilient as it had been before Wednesday, S&P 500 met selling pressure on Friday, including the best performing tech sector. Bullard‘s comments on the „inflation surprise“ and first rate hike before 2022 is over – are they full of hot air, testing the waters before taper, or serious intent? Given the ease with which precious metals and then select commodities such as copper or soybeans tumbled, rate hikes might appear to be baked in the cake now – but in reality, it‘s the unyielding inflation that would prove rather persistent than transitory.The Fed did the bare minimum, acknowledging inflation in passing, implying it would go away on its own. But it‘s more complicated than that – bank credit creation isn‘t strong, and had been declining before bond yields bottomed in Aug 2020. Are banks reluctant to lend, or customers to borrow? The result of production not ramping up as wildly as expected (reopening trades) is compounding the disturbed supply chains and commodity prices rising (cost-push inflation). Add to that job market pressures, and you have a recipe for inflation being more transitory than originally thought. In other words, cyclical and structural as import-export prices hint at too..Money in the system isn‘t flowing into production or capacities expansion – inventories have instead been drawn down, and need to be replenished. Just as I have written the prior Monday, that would be putting upside pressure on prices as much Europe awakening or hard hit countries such as India springing back. So, fresh money results in excess liquidity, trapped in the system, and flowing to bonds, which explains the Fed‘s need to act and fix repo rate at 0.05%. So much for the recent spike in Treassuries – this whiff of „almost deflation“ has it wrong, and yields will revert to rising – regardless of when exactly (or if) other parts of the intended $6T stimulus package get enacted.Sure, the Fed actions have shortened the (sideways) lull in Treasuries, made the dollar spike, but haven‘t changed the underlying dynamic of the free market not willing to pick up the slack in credit creation should the Fed indeed taper. Chances are, they would still taper, but later in 2022 – such was and still is my expectation, with bank credit creation being (hopefully) the key variable on their watch as a deciding factor. In the meantime, the inflation problem will get even more embedded – not a fast galloping inflation or hyperinflation, but a serious problem raising its ugly head increasingly more through the years to come.In short, the Fed played the dot plot perceptions game which amounts to no serious attempt to nip inflation in the bud. The markets (precious metals, commodities) got thrown off prior trends, but will see through the bluff that can‘t be followed by actions. The inflation trades (and by extension modest rise in yields as we drift towards 2.50% on the 10-year before that tapering actually starts, with positive consequences for financials and cyclicals) haven‘t been killed off, and will reassert themselves when the markets test the Fed (and they will). To be clear, I am calling for persistently elevated (not hyper) inflation (PCE deflator readings coming soon) with the 10-year yield reverting to its more usual trading range – so essential to financial repression reducing the real value of all obligations.Keep also the following macroeconomic point on your mind – inflation isn‘t strong enough currently to knock off the P&L to make stocks roll over, we‘re still in a reflation and commodities super bull market. Lower GDP growth potential equals growth (tech) doing fine, but expect the stock market leadership to broaden yet again to include the beaten down industrials and financials.So, there is no taper (wait for Jackson Hole), but we‘re enduring almost a taper tantrum, and stocks might need to test the 4,050 – 4,100 broad support zone that has more chances of holding than not. Doing so, it would confirm that value is far from down and out, and that we have further to run. As menacing as the VIX looks, the put/call ratio is already positioned on a rather cautious side, meaning that no great S&P 500 correction is starting here. It doesn‘t look so currently – the dislocation in credit markets (high yield end) appears temporary.Gold and silver are being hit by the hawkish Fed bets, and so are the inflation expectations. Miners are buying into it, meaning that the miners to gold ratio is threatening a downswing on the weekly chart. Has the true downtrend in the metals started? The yellow metal is actually sitting at two strong supports, and silver to gold ratio remains still in an uptrend. Simply put, the last 3 days trading action appears too exagerrated given the bond market disequilibrium amplifying the dollar upswing. Sure, it‘s a stiff headwind, but the Fed is still as easy as can be, and the copper to 10-year yield ratio remains constructive on the weekly chart, and starting to doubt the decline‘s veracity on the daily one.Oil is a great example of the commodities fever being far from over, and I‘m looking for more (basing) strength in black gold in spite of the oil index getting inordinarily spooked alongside many real assets. That‘s consistent with the persistent inflation not yielding much at all.Bitcoin and Ethereum also appear buying into the hawkish Fed narrative, when in reality money is still loose. But the dollar effect is in play in cryptos too – even if the dollar is range bound on high time frames, its current upswing hasn‘t fizzled out yet – the markets aren‘t yet near doubting the Fed.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Nasdaq OutlookS&P 500 daily downswing still looks to be part of a correction, and no topping pattern. Nasdaq has held up relatively well, and I‘m expecting more strength in tech, followed gradually by value.Credit MarketsThe intraday reversal in high yield corporate bonds is what matters the most, and better be followed by local bottom forming here.Technology and ValueTechnology has been quite resilient, contrasting with the doom and gloom in value or more lag in smallcaps.Gold, Silver and MinersGold and miners are reacting as if tightening was already on, and real rates actually not declining. While the dollar link has been more influential, gold price action next would decide the fate of both technical factors mentioned in the caption. Another, stronger support line including 2019 lows, is below.Silver has been and is likely to outperform gold, and in hindsight, the current storm would be of the rea cup variety. While copper rebound isn‘t here yet, the ratio to 10-year yield indicates a reprieve.Bitcoin and EthereumNeither Bitcoin nor Ethereum chart is bullish, and the only argument not to boot, is the presence of two BTC supports.SummaryS&P 500 is approaching a deciding point in its still reflationary era. Value stabilizing in the face of rising tech and Treasuries would be the next bull market run objective.Gold and silver aren‘t out of the woods just yet but tentative signs of stabilization look to be here. Conquering the pre-FOMC levels, attacking $1,900 seems for now to be more than a few weeks away.Crude oil remains well positioned to extend gains as the commodity selloff on Thursday barely touched it. The oil outlook remains bullish.Bitcoin and Ethereum aren‘t on an immediate winning streak, and the recent closing lows in Bitcoin (below 33,000) remain to be monitored for a turn in sentiment. The weekly basing pattern though can‘t be ignored, making a break below 30,000 unlikely to succeed the earlier we were to move into the 35,000 – 40,000 range. That‘s a big if.Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the four publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals and Bitcoin Trading Signals.

The recent Fed’s hawkish turn is fundamentally negative for gold prices but there is still some hope.The hawkish counter-revolution within the Fed continues. On Friday, St. Louis Fed President James Bullard said that the recent FOMC shift towards a faster tightening of monetary policy was a natural response to faster economic growth and higher inflation than anticipated:We were expecting a good year, a good reopening, but this is a bigger year than we were expecting, more inflation than we were expecting, and I think it's natural that we've tilted a little bit more hawkish here to contain inflationary pressures.Bullard also noted that “Powell officially opened the taper discussion this week”. Indeed, in my Friday edition of the Fundamental Gold Report , I focused on the changed dot-plot , which suggested that FOMC members were ready to hike interest rates twice in 2023. However, the second major shift in the stance of the US central bank was that the Fed officials started to “talk about talking about” tapering.In his prepared remarks for the press conference, Powell said:At our meeting that concluded earlier today, the Committee had a discussion on the progress made toward our goals since the Committee adopted its asset purchase guidance last December. While reaching the standard of “substantial further progress” is still a way off, participants expect that progress will continue. In coming meetings, the Committee will continue to assess the economy’s progress toward our goals. As we have said, we will provide advance notice before announcing any decision to make changes to our purchases.In plain English, it means that the Fed could announce tapering at any of its future meetings, depending on the assessment of the incoming data. However, to avoid a replay of the taper tantrum , the Fed will “give advance notice before announcing any decision”. So, September is the first probable date of a hawkish announcement about tapering of quantitative easing , which could be preceded by some clues as early as in July:That is, you know, the process that we're beginning now at the next meeting. We will begin, meeting by meeting, to assess that progress and talk about what we think we're seeing, and just do all of the things that you do to sort of clarify your thinking around the process of deciding whether and how to adjust the pace and composition of asset purchases.Another hawkish shift in the Fed’s thinking, which is worth pointing out, is that it dropped the phrase in the statement saying that the pandemic is weighing on the economy. So, although it’s still cited as a risk, Powell and his colleagues officially ceased to see the pandemic as a constraint on economic activity. It means that, as I already wrote earlier in my reports, the US economy has returned to the pre- epidemic level or has shifted from the recovery to the expansion phase.Implications for GoldWhat does it all mean for the yellow metal? Well, the Fed triggered some panic selling in the gold market last week. Actually, on Thursday, there was the largest one-drop of 2021 in response to the more hawkish stance of the US central bank, as the chart below shows.The bearish reaction is understandable, as the Fed’s readiness to reduce its asset purchases and end the policy of zero interest rates is fundamentally negative for the yellow metal . More hawkish FOMC implies higher real interest rates and a stronger dollar, the two most important drivers of gold prices. Furthermore, when the US central bank becomes more hawkish, it means that it’s more confident in the economy – and gold struggles when the economy is strong.However, some analysts claim that the selloff was exaggerated . After all, the Fed still maintains that higher inflation is transitory; but transitory inflation doesn’t mix with earlier interest rate hikes. So, we will have either more lasting high inflation (but the Fed is slow to admit it), or the Fed doesn’t really want to increase its interest rates substantially. In both cases, gold should benefit, either from higher inflation and lower real interest rates, or from more dovish Fed than it’s currently perceived.So, the bullish case for gold is not dead yet, but if the Fed really becomes more hawkish and determined to tighten its monetary policy (while high inflation turns out to be transitory), gold may struggle during the upcoming tightening cycle , unless it triggers some economic turmoil.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

Fed pumped so much money into the financial system, that the latter started sending it back. How will this and Fed’s more hawkish tone impact gold?With Jerome Powell, Chairman of the U.S. Federal Reserve (FED), testifying before Congress on Jun. 22, his prepared remarks signaled that the FED remains on autopilot. Despite saying that “job gains should pick up in coming months as vaccinations rise,” he added that “we at the FED will do everything we can to support the economy for as long as it takes to complete the recovery.”And while Powell supported our thesis by saying that “labor demand is remarkably strong and over time we will find ourselves with low unemployment and wages going up across the spectrum,” when asked if inflation is transitory, he responded:“[Perhaps] all of the overshoot in inflation comes from categories such as rising used car and trucks, airplane tickets, hotel prices that have been affected by the reopening of the economy. [And while] these effects have turned out to be larger than we expected , the incoming data are consistent with the view that these factors will wane over time .” For context, of course inflationary pressures will “wane over time.” That’s not up for debate. However, “when” is the key question.But in a bid to remove any doubt, he added:" We will not raise interest rates preemptively because we fear the possible onset of inflation . We will wait for evidence of actual inflation or other imbalances."Thus, while investors clearly cheered the FED Chair’s dovish sentiment on Jun. 22, Powell (for better or worse) still remains out of touch with reality. Case in point: the Philadelphia FED released its Nonmanufacturing Business Outlook Survey on Jun. 22. And while “the full-time employment index fell 20 points to 4.3 in June after rising 17 points last month,” the report revealed that “both future activity indexes suggest that the respondents expect overall improvement in nonmanufacturing activity over the next six months.”Please see below: Source: Philadelphia FEDMore importantly, though, with the inflation drama still unfolding, the report showed more of the same:“After reaching its all-time high in May, the prices paid index mostly held steady in June at 49.0 Forty-nine percent of the firms reported increases, none reported decreases , and 33 percent of the firms reported stable input prices. Regarding prices for the firms’ own goods and services, the prices received index rose 12 points to 28.9 in June, its highest reading since June 2018.”Please see below: Source: Philadelphia FEDSimilarly, the Richmond FED also released its Survey of Manufacturing Activity on Jun. 22. And while the report cited that “average growth rates of both prices paid and prices received by survey participants declined slightly but remained elevated in June,” employment was more optimistic, with the report revealing that “many manufacturers increased employment and wages in June and [expect] further increases in the next six months.”Please see below: Source: Richmond FEDWhat’s more, while the FED admitted its inflation error on Jun. 16 – as evidenced by the increase in its forecast for the headline Personal Consumption Expenditures (PCE) Index – Powell is now pretending that growth doesn’t exist. For context, the FED increased its 2021 real GDP growth estimate from 6.5% to 7.0% on Jun. 16, so Powell’s assertion on Jun. 22 that the economy "is still a ways off" is quite the contradiction.Moreover, absent a severe spread of the Delta variant – which White House chief medical advisor Dr. Anthony Fauci said was “the greatest threat in the U.S. to our attempt to eliminate COVID-19” – U.S. economic growth should easily outperform its developed-market peers.For example, many deflationists cite the slowdown in loan activity as a sign of a weak U.S. economy. However, with U.S. commercial banks releasing their deposit figures on Jun. 22, the argument is much more semblance than substance.Please see below:To explain, the green line above tracks deposits held by U.S. commercial banks, while the red line above tracks consumers’ revolving and credit card loans. If you analyze the right side of the chart, you can see that a material gap is present. However, with unprecedented fiscal policy (stimulus checks and enhanced unemployment benefits) flooding consumers’ bank accounts with dollars, why borrow money if you already have the cash to make the purchase?To that point, if we compare U.S. commercial banks’ deposits to the U.S. federal debt, the connection is even clearer.Please see below:To explain, the green line above tracks deposits held in U.S. commercial banks, while the red line above tracks the U.S. federal debt. If you analyze the sharp move higher in 2020, it’s another sign that U.S. citizens don’t need to borrow money when the government is already writing the checks. For context, there is a slight lag because the U.S. federal debt references Q1 data and U.S. commercial banks’ deposits reference Q2 data.Likewise, while rising U.S. nonfarm payrolls remain the key piece to solving the FED’s puzzle, the idea that monetary support is helping the real economy lacks credibility. To explain, the FED sold a record $792 billion worth of reverse repurchase agreements on Jun. 22. Moreover, when the FED buys $120 billion worth of bonds per month, the cash filters throughout the U.S. banking system and then financial institutions exchange that cash for Treasury securities on a daily basis, is QE really helping anyone?Please see below: Source: NY FEDFor context, I wrote previously:A reverse repurchase agreement (repo) occurs when an institution offloads cash to the FED in exchange for a Treasury security (on an overnight or short-term basis). And with U.S. financial institutions currently flooded with excess liquidity, they’re shipping cash to the FED at an alarming rate.More importantly, though, after the $400 billion level was breached in December 2015, the FED’s rate-hike cycle began. On top of that, the liquidity drain is at extreme odds with the FED’s QE program. For example, the FED aims to purchase a combined $120 billion worth of Treasuries and mortgage-backed securities per month. However, with daily reverse repurchase agreements averaging $520 billion since May 21, the FED has essentially negated 4.33 months’ worth of QE in the last month alone.To that point, the flood of reverse repurchase agreements signals that financial institutions have no use for the FED’s handouts. Think about it: if commercial banks could generate higher returns by originating loans for consumers and businesses, wouldn’t they? And with 74 counterparties participating on Jun. 22 – up from 46 on Jun. 7 – the FED’s liquidity circus is now on display every night.If that wasn’t enough, I’ve highlighted on several occasions that gold exhibits a strong negative correlation with the U.S. 10-Year real yield (inflation-adjusted). And unsurprisingly, when the latter peaked in late 2018 and began its descent, it was off to the races for gold.Please see below:To explain, the gold line above tracks the London Bullion Market Association (LBMA) Gold Price , while the red line above tracks the inverted U.S. 10-Year real yield. For context, inverted means that the latter’s scale is flipped upside down and that a rising red line represents a falling U.S. 10-Year real yield, while a falling red line represents a rising U.S. 10-Year real yield.More importantly, though, if you analyze the relationship, you can see that before the U.S. 10-Year real yield plunged, gold was trading below $1,250 (follow the arrow). Conversely, once the U.S. 10-Year real yield hit an all-time low of – 1.08% in 2020, gold was trading above $2,000.Thus, what emotional gold investors fail to appreciate is that the yellow metal benefited from abnormally low interest rates. And with further strength dependent on another all-time low, the FED’s tightening cycle (which is already subtly underway) paints an ominous portrait of gold’s medium-term future.To that point, with Morgan Stanley telling its clients that “ We are past “Peak Fed” for the cycle and the market knows it ,” overzealous gold investors ignore the difficult realities that lie ahead.Please see below:To explain, the blue line above tracks the U.S. 10-Year real yield and important fundamental developments are marked in red. If you analyze the “Peak Fed” labels near 2012 and 2020 and compare them with gold’s behavior on the first chart above, you can see how abnormally low U.S. 10-Year real yields coincided with abnormally high gold prices. As a result, with the former poised to move higher in the coming months, the yellow metal will likely head in the opposite direction.What’s more, not only are the PMs dodging bullets from the bond market, but the USD Index has barely made its presence felt. For example, while the FED’s hawkish shift (even if Powell won’t admit it) is extremely bullish for the greenback, market participants – who are willing to give the FED the benefit of the doubt – still remain skeptical of the recent rally.Please see below:To explain, the black line above tracks Citigroup’s USD Positioning Alert Indicator (PAIN). For context, the index gauges whether or not positioning is crowded in the currency market. If you analyze the right side of the chart, you can see that U.S. dollar sentiment has fallen off of a cliff. However, with all signs pointing to a September taper, a violent short-covering rally could catch many investors off guard.As further evidence, when the FED delivered its taper announcement in December 2013, the USD Index recorded (with a delay) one of its sharpest rallies ever.Please see below:To explain, the green line above tracks the USD Index. If you analyze the left side of the chart, you can see that after the FED revealed its hand, the USD Index found a bottom and surged roughly six months later. Thus, with a similar announcement likely in the fall, the PMs could be confronted with even more negativity.And no, Basel 3 is not likely to be a game-changer for the gold market in the near term – I discussed that on June 2 .In conclusion, while the gold, silver, and mining stocks remain ripe for a short-term rally (no market moves in a straight line and PMs are no exception), their medium-term outlook remains extremely treacherous. And though Powell calmed investors’ nerves on Jun. 22 and market participants remain loyal followers, it’s important to remember that he is far from omniscient. After a significant about-face regarding the future trajectory of the headline PCE Index – a forecast that he made only three months ago – his confidence game is all about sentiment. Thus, while investors will give him the benefit of the doubt until the bitter end, the recent behavior of the bond market, the USD Index and the precious metals signal that the winds of change have already begun to blow.Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.Przemyslaw Radomski, CFA Founder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

S&P 500 declined, but the risk-off move looks exaggerated, of base building before another upswing flavor – just as I wrote in yesterday‘s summary. VIX is trending down again, and the option traders don‘t have their guards raised too high – the only fly in the ointment are thus the closing prices in credit markets. But again, yesterday was a risk-off day, and the sectoral S&P 500 view mirrors that – take it as pushing the spring down before it recoils. Let the open S&P 500 and Nasdaq profits rise!That‘s when the S&P 500 breadth would widen once again, now that the markets got a feel for what the Fed hawkishness was all about – remember, bank credit creation isn‘t there to take up the slack (and tomorrow, look for Fed‘s PCE deflator interpretation to give them an excuse to safely defer tightening to 2023 as they talk job creation some more next):(…) So, we got a preview of what a true tightening attempt could look like at its earliest stages, and at the same time the Powell pledge not to raise rates unless the recovery is complete, so to say. So as not to disturb the the job market recovery, assuring us at the same time that 1970s stagflation isn‘t on the horizon. For now, it indeed isn‘t as economic growth is still running faster than (current) inflation, which means that any growth scare is far down the road. Yet, the no stagflation assurances smack of this inflation narrative progression, so a healthy dose of suspicion is well placed. It‘s my view that the inflation expectations jawboning bought the central bank just a little time before the inflation trades regain traction. The Fed simply doesn‘t appear to want to act decisively.With more taper discussions deferred to Jackson Hole, the best the Fed can do now, is to attempt to reinterpret the meaning of the word transitory – and that‘s exactly what Bostic is already doing. Suddenly, the phase of higher inflation won‘t be less than 3 months as originally expected, but perhaps 2 to 3 quarters. That‘s a world of difference!Gold and silver keep basing, and haven‘t yet made a serious recovery attempt – and neither have inflation expectations (unless you look at RINF, of course). I see commodities – CRB, agricultural ones amongst which grains (wheat) are best positioned for an upswing, and of course the bludgeoned copper (now at $4.30, it‘s a great point to go long using both my Standard and Advanced money management techniques). It‘s that the copper to 10-year yield ratio doesn‘t favor much precious metals downside (nominal yields aren‘t a risk here – only the dollar that appears consolidating before another push higher, seriously is).Crude oil is wavering, and so are oil stocks – but that‘s a short-term situation only. Black gold, XOI and XLE remain my mid-term bullish picks (once this so far too shallow consolidation is over, look for more gains ahead), and the commodity has already brought nice profits yesterday and earlier today.Cryptos base building is intact, and both Bitcoin and Ethereum have rejected more downswing attempts. Much higher prices though must be achieved to flip them into a bull market again.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Nasdaq OutlookS&P 500 daily consolidation after a prior steep upswing bodes well for continued gains, driven yet again by Nasdaq.Credit MarketsAll the debt instruments down, giving up intraday gains, in what appears a daily retreat only (check the low volume).Technology and ValueThe sectoral S&P 500 view could hardly be more risk-off than yesterday.Gold, Silver and MinersGold and miners are holding on to the recent lows, giving impression of being about to peek higher as the Fed noises die down for now – and today‘s premarket price action confirms the prior sentence taken from yesterday‘s daily report.Silver has been equally to gold beaten down, but the copper to 10-year yield ratio suggested an upswing attempt hasn‘t indeed been that far away.Crude OilIt‘s not a daily reversal, but a daily hesitation in oil – I‘m still not looking for an overly sharp price drop.SummaryS&P 500 led by Nasdaq looks set to close at new all-time highs today, in a reversal of yesterday‘s very much risk-off session.Gold and silver buyers are back in action, very humbly thus far. Not even miners yet confirm bullish spirits as having returned – the journey to pre-FOMC highs will be a long one.Crude oil consolidation is arriving, but don‘t look for it to break the uptrend. We have much further to run before black gold prices become an issue.Bitcoin and Ethereum keep staving off further downside,with the accumulation hypothesis favored by the weekly charts apparently underway. The bulls though need to break above 44,000 minimum in Bitcoin so as to regain bull market momentum.Trading position – S&P 500 (short-term; futures; my take): the already initiated long positions (100% position size) with stop-loss at 4000 and initial upside target at 4250, are justified from the risk-reward perspective.If you’re using e-mini S&P 500 futures, 1-point move in the S&P 500 amounts to $50. Multiply that with the difference between the entry and stop-loss, and better don’t risk more than 6% or maximum 8% of your trading account on this trade alone.Advanced money management trading position – S&P 500 (short-term; futures; my take):  the already initiated long positions (50% position size) with stop-loss at 4000 and initial upside target at 4250, are justified from the risk-reward perspective.If you’re using e-mini S&P 500 futures, 1-point move in the S&P 500 amounts to $50, and taking me up on this trade idea means adding one half to your currently open position. Multiply that with the difference between the entry and stop-loss, and better don’t risk more than 9% or maximum 12% of your trading account on the combination of the standard money management (featured here as trade #1) and advanced money management trade (introduced just below as #2).Trading position – Nasdaq 100 (short-term; futures; my take): long positions (100% position size) (opened via a buy limit order at 13,520) with stop-loss at 12,500 and initial upside target at 13,700, are justified from the risk-reward perspective. If you’re using e-mini Nasdaq-100 futures, 10-point move in Nasdaq 100 amounts to $200. Multiply that with the difference between the entry and stop-loss, and better don’t risk more than 6% or maximum 8% of your trading account on this trade alone.Thank you for having read today‘s free analysis, which is available in full here at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the four publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals and Bitcoin Trading Signals.

Powell’s testimony to Congress failed in generating a rebound in gold prices; thus, the bearish trend could continue.On Tuesday (June 22) the Fed Chair testified before the Select Subcommittee on the Coronavirus Crisis, U.S. House of Representatives . Before Powell’s appearance in Congress, there were some hopes that he would soften the Fed’s hawkish signals from the previous week. However, these hopes only partially materialized.This is because Powell’s testimony was basically a confirmation of the last FOMC meeting . In particular, he reiterated the view that higher inflation would be transitory, as “a substantial part or perhaps all of the overshoot in inflation are from categories directly affected by reopening.”Actually, some of his remarks were quite hawkish , as he said that the price pressures “don't speak to a broadly tight economy, but these effects have been larger and may persist longer than expected”. The admission that strong inflationary pressure could last longer than expected suggests that Powell is more worried about inflation than several months ago. He even explicitly admitted that “5% inflation is not acceptable.”Luckily for the gold bulls, there were also some dovish comments . In particular, Powell said that the Fed wouldn’t hike the federal funds rates too quickly based only on inflationary worries:We will not raise interest rates preemptively because we fear the possible onset of inflation. We will wait for evidence of actual inflation or other imbalances.Of course, it doesn’t make any sense, as actual inflation is already 5%, more than twice the target, and the Fed hasn’t reacted. The US central bank remains passive because it believes that inflation will prove to be transitory. However, it means that it actually acts based on expectations, not the current data, contrary to what the Fed is saying when justifying its ultra-dovish stance.And Atlanta Fed President Raphael Bostic also sent some dovish signals in an interview with National Public Radio’s Morning Edition he gave the next day after Powell’s testimony. He adhered to the view about temporary inflation, but he explained that the time horizon of this temporariness would be longer than previously thought:The recent jump in prices will prove temporary, but "temporary is going to be a little longer than we expected initially... Rather than it being two to three months it may be six to nine months.However, Bostic didn’t mention the necessity to hike in the face of prolonged high inflation. On the contrary, he pointed out that the Fed shouldn’t announce the victory in the jobs battle too quickly: “We have to make sure our policies don't pivot in ways that make it look like we are declaring victory prematurely.”Implications for GoldWhat does all this mean for the yellow metal? Well, theoretically, more lasting high inflation with unchanged dovish stance of the US central bank s hould be positive for gold prices , as an unresponsive Fed implies lower real interest rates , which usually support the yellow metal.However, gold hardly reacted to either Powell’s or Bostic’s comments . As the chart below shows, contrary to some hopes, Powell’s testimony failed in sending strong dovish signals that would be able to overwrite the hawkish turmoil triggered by the recent dot-plot . So, there was no rebound in gold prices. Instead, the price of the yellow metal merely stabilized at about $1,775.The lack of any rebound is a bad sign, indicating gold’s weakness (especially given that some other assets rebounded a bit this week after the post-FOMC turmoil ). This suggests that gold prices have room for further declines. It seems that gold would need a very dovish surprise from the Fed to go the other way, which is not likely without some kind of economic crisis or at least an influx of significantly negative economic data.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

Just before the hunt begins, the hunter needs to be sure its prey feels safe. Will we see a promising short-term rally in gold?After the USD Index reasserted its dominance once again, its bellowing howl sent shivers down the spine of currency traders. When the U.S. Dollar Index is on the hunt, the precious metals are often its prey. The alpha wolf is poised to lead the pack over the medium term, and the sheep will likely be sent to the slaughter, but the predator needs to gather force first; a peaceful period of prosperity should ensue over the next several days. And this short-term decline could help uplift gold, silver, and mining stocks.To explain, I warned last week that a short-term decline was likely after the USD Index’s RSI (Relative Strength Index) jumped above 70. And after eliciting some weakness, another pullback to the 38.2% Fibonacci retracement level also aligns with the price action that we witnessed in 2016.Please see below:To that point, after the USD Index broke above its short-term declining resistance line in 2016, it followed that up by retreating a bit below its rising support (dashed) line and then consolidated for about a month before rallying sharply. In the process, the USD Index corrected to approximately its 38.2% Fibonacci retracement level before rallying once again (in fact, it moved slightly below it). For context, there was also a huge intraday reversal in the following days, but it was an event-driven one (it was when Donald Trump won the elections), so it’s unlikely to be repeated. As of today, with the 38.2% Fibonacci retracement level at about 91.3, the USDX could bottom close to this level. Now, this might not seem like a big deal, but it becomes quite important once one considers what happened in gold during the final part of the move to the 38.2% retracement in 2016. That was when gold made most of its gains.However, given the yellow metal’s inability to bounce after its profound decline, the forthcoming rally will likely be weaker than originally expected. For context, the initial projection was based on the similarity to gold’s behavior in 2012. However, with the yellow metal struck in neutral and failing to gain any traction, the current environment seems more bearish than it was in 2012. The bearish gold price forecasts currently seem justified , in the medium term.Moreover, if the USD Index can surpass 93, the greenback will complete its inverse head & shoulders pattern, and the milestone implies a short-term target of roughly 98.Let’s keep in mind that the near-term decline in the USD Index is likely to be small – and nothing more than a blip on the radar screen, when viewed from the long-term point of view. The USD Index often records material upswings during the middle of the year. If you analyze the chart below, you can see that summertime surges have been mainstays on the USD Index’s historical record. Likewise, double bottoms often signal the end of major declines and often ignite significant rallies. For example, in 2004, 2005, 2008, 2011, 2014 and 2018, a retest of the lows (or close to them) occurred before the USD Index began its upward flights. In addition, back in 2008, U.S. equities’ plight added even more wind to the USD Index’s sails. And if the general stock market suffers another profound decline (along with gold miners and silver ), a sharp re-rating of the USDX is likely in the cards.Please see below (quick reminder: you can click on the chart to enlarge it):If that wasn’t enough, the thesis is also supported by the USD Index’s long-term chart. To explain, the USDX’s long-term breakout remains intact, and if we steady the binoculars, the greenback’s uptrend is clearly in place.Please see below:Moving on to the Euro Index, the recent symmetrical decline mirrors the drawdown that we witnessed in mid-2020. And if the Euro Index breaks below the neckline of its bearish head & shoulders pattern, the slide could be fast and furious. For context, completion of the right shoulder signals a decline to (roughly) the June 2020 lows or even lower. However, with a short-term corrective downswing in the USD Index likely to usher the Euro Index higher, the development should help support gold, silver, and mining stocks this week.Please see below:For context, I wrote previously:The completion of the masterpiece could have a profound impact on gold, silver and mining stocks. To explain, gold continues to underperform the euro. If you analyze the bottom half of the chart above, you can see that material upswings in the Euro Index have resulted in diminishing marginal returns for the yellow metal. Thus, the relative weakness is an ominous sign. That’s another point for the bearish price prediction for gold.Circling back to the 2016 analogue, the USD Index has already hopped into the time machine. And with the flashback eliciting memories of past glory, a reenactment won’t be applauded by the PMs.As you can see on the above chart, what we saw this year was quite similar to what happened in 2016. The analogy that I described previously worked just like in the past. Namely, the back-and-forth movement after the breakout was followed by a quick rally.The bottom line?Once the momentum unfolds , ~94.5 is likely the USD Index’s first stop. In the months to follow, the USDX will likely exceed 100 at some point over the medium or long term. Keep in mind though: we’re not bullish on the greenback because of the U.S.’ absolute outperformance. It’s because the region is outperforming the Eurozone and the EUR/USD accounts for nearly 58% of the movement of the USD Index – the relative performance is what really matters .In conclusion, while wolves will likely circle gold, silver and mining stocks over the medium term, the leader of the pack – the USD Index – is well-fed for now and shouldn’t disrupt the precious metals’ short-term corrective upswing. However, when its stomach growls and the hunt continues, the alpha’s bared teeth, fixed stare, and horizontal ears may scare gold, silver and mining stocks to death. Thus, while the precious metals are likely safe in the short term, the nights might grow colder and darker even amid the summer sun.Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.Przemyslaw Radomski, CFA Founder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

When credit spreads narrow, it’s bad for gold. But this time there is a silver lining we can look for, although it’s quite adverse for the economy.There are several important factors affecting gold prices. Many analysts focus mainly on the US dollar and real interest rates . However, what is sometimes even more important is economic confidence. Of course, the level of economic confidence is partially reflected in the strength of the greenback and the bond yields . However, I would like to focus today on credit spreads , an often overlooked indicator of economic confidence.Why such a topic? It’s simple, just take a look at the chart below. As you can see, the ICE BofA US High Yield Index Option-Adjusted Spread, which is a proxy for a spread between the yield on below-investment-grade-rated corporate debt and Treasuries of the same duration, has recently declined to a very low level. To be more precise, the analyzed indicator slid from almost 11 in March 2020 to 3.1 at the end of June (the lowest reading since July 2007 , the time just before the Great Recession started).Implications for GoldOK, great, but what does this mean for the gold market? Well, this is a negative development for gold prices, but with a silver lining . Let me explain. When credit spreads are narrow or in a narrowing trend, it means that economic confidence is high or in a rising trend. In such an environment, risk appetite is strong and demand for safe-haven assets such as gold is low. The fact that credit spreads have reached their multi-decade lows indicates that the economic expansion is doing well. If the boom continues, the Fed will eventually normalize its monetary policy a bit, and the interest rates will increase. Additionally, US banks have cleared the Fed’s recent stress tests, which means that they will no longer face restrictions on how much they can spend buying back stock and paying dividends. This change might strengthen the financial sector, additionally boosting economic confidence among investors. And this is all bad for the yellow metal.However, we can look at very low credit spreads from the other side. After all, they have already decreased profoundly and further significant declines are not very likely. Furthermore, the last time they were so narrow was mid-2007, i.e., just a couple of months before the outbreak of the global financial crisis .Hence, it might be the calm before the storm . The economic crisis , by definition, occurs when confidence is high and almost nobody expects any problems. A related issue here is whether the markets are properly assessing the risk. The low risk premium partially results from the low Treasury yields, which push investors who seek profits into riskier securities.Some analysts point out the risks related to the surge in the public debt or inflation . For example, David Goldman notes that the rising gap between prices paid by the producers and prices received by customers ( June Philadelphia Manufacturing Business Outlook Survey ) could depress output in the future, as companies wouldn’t be able to maintain profit margins in such an environment.The bottom line is that the US economy has recovered and the economic expansion continues undisturbed. Given this trend and high economic confidence, despite the soaring prices and indebtedness, gold may struggle for some time .However, credit spreads may widen abruptly when the next crisis hit, as they did in the aftermath of the collapse of the Lehman Brothers . In other words, although the economic confidence is strong, some important downside risks for the US economy are still present, and they could materialize later in the future . Perhaps investors know this – according to the WGC , we saw inflows to the gold ETFs last week, despite the plunge in gold prices. It shows that investors could have been taking advantage of lower prices to buy gold as a portfolio diversifier and protection against tail risks .If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

While we might see a small uptick in gold prices soon, it’s not likely to last long. We should be prepared to open our parachutes any time now.The decline in gold continues, and while we might see a small pop-up higher here, it’s unlikely to last. And why could gold move slightly higher and correct the recent declines?Because it has just reached the rising support line based on its previous important lows. The possible rebound could take place based on this single development. However, just because it might happen doesn’t make it very likely, and it doesn’t mean that taking any action now is justified. The medium-term forecast for gold remains bearish.The situation in the USD Index is one of the reasons for this outlook:We recently saw a breather that was similar in terms of time and price to the previous patterns which happened after quick short-term rallies. And now, the USDX is moving higher once again. As soon as it exceeds the previous June highs, it’s likely to rally more substantially, perhaps stopping temporarily at the late-March high or rallying even higher, to 95 or so.Either way, gold is likely to get the bearish push off the cliff that will likely take it below the above-mentioned rising red line. Gold’s next support is at the previous 2021 lows – close to $1,670.Besides, while gold bounced off the rising red line visible on the first chart, the yellow metal actually broke visibly below a much more important support line.In fact, that was the first time when gold managed to break below this line and not rally back up. This time is already different.Moreover, let’s keep in mind that gold stocks’ relative performance not only hasn’t stopped indicating the bearish outlook recently but also provided a screaming sell sign once again on Monday.Namely, the GDX ETF declined and closed below its previous monthly lows as well as below the late-April lows. This breakdown took place without gold’s help, which makes it particularly bearish.Please note that the volume that accompanied this week’s declines is relatively low, and the declines tend to end on huge volume. Consequently, the low-volume readings imply that we’re not at the bottom yet. Also, silver hasn’t broken visibly lower, and it didn’t “catch up” with the miners, which could indicate that the bottom is in. So, it likely isn’t.The above-mentioned breakdown was even more profound in the case of the GDXJ – a proxy for junior mining stocks .The size of the recent “upswing” was comparable to the mid-November 2020 one, so it confirms the analogy to this period that I mentioned while discussing the gold’s chart yesterday .The next short-term downside target is at about $42 – a bit below the previous lows, as that’s where the 50% Fibonacci retracement line coincides with the previous highs and lows (and also with the 2019 highs that are not visible on the above chart).The 4-hour candlestick chart shows that junior miners moved slightly higher at the beginning of yesterday’s session only to decline in its final hours. So, it’s not that we’re not seeing any corrections – we do have them, but they are so tiny that they are barely noticeable from the daily perspective.All in all, it seems that the outlook for the precious metals market – especially for the junior gold miners – is very bearish for the following weeks and months, and it seems that the profits on our current short position will grow much more quite soon.Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.Przemyslaw Radomski, CFA Founder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

June was a terrible month for gold. Without a fresh crisis or a strong dovish signal from the Fed, gold may continue its disappointing performance.June wasn’t too kind to gold. As the chart below shows, the yellow metal plunged more 7.2% in the last month , the biggest monthly decline since November 2016. In consequence of the June rout, the whole first half of this year was awful for gold, which lost 6.6% in that period, the worst performance since H1 2013.The dive was a result of the latest Fed’s dot-plot published in the aftermath of the June FOMC meeting which showed that the US central bankers could want to hike the federal funds rate earlier than previously thought . Although the dot-plot is not a reliable forecast of what the Fed will do, and a quarter-point hike in the interest rates in two years from now isn’t particularly hawkish , the change was sufficient to alter the crowd psychology. As a result, the market narrative has shifted from “the Fed will tolerate higher inflation, staying behind the curve” to “the Fed won’t allow inflation to run wild and will hike earlier because of the stronger inflationary pressure”.The subsequent comments from the Fed officials helped to consolidate the new narrative . For example, only this week Thomas Barkin, Richmond Fed President, noted that the US central bank has made “substantial further progress” toward its inflation goal in order to begin tapering quantitative easing . Meanwhile, Fed Governor Christopher Waller stated that the Fed could begin tapering as soon as this year to have an option of hiking interest rates by late next year. Robert Kaplan, Dallas Fed President, went even further, saying that he “would prefer [a] sooner” start of reducing the pace of Fed’s asset purchases than the end of the year.The hawkish U-turn among the Fed led to higher nominal bond yields , real interest rates , and a stronger US dollar , which also contributed to gold’s weakness. Meanwhile, inflation expectations reversed in June after a peak in May, which increased the real yields and also hit gold prices.Implications for GoldWhat do the changes in the Fed’s stance on the monetary policy and the market’s new narrative imply for gold? Well, the hawkish revolution is fundamentally negative for the yellow metal . Investors are now less worried about higher inflation , as they believe that the Fed will tighten its monetary policy sooner than previously thought. Such expectations boost the market interest rates, making the dollar more attractive compared to its major peers, while non-interest-bearing assets such as gold become less alluring.However, this narrative, like all narratives, may quickly change. If we see more disappointing economic data coming, the Fed could return to its previous dovish stance . Also, if high inflation turns out to be more persistent or disruptive than expected, the demand for inflation hedges or safe-haven assets such as gold may increase again.Furthermore, if inflation turns out to be merely transitory, as the Fed and the pundits believe, the US central bank will remain behind the curve, and gold may survive . Or, the Fed will have to lift the interest rates aggressively, increasing the risk of recession .What is important here, the yield curve has already flattened. It is still high and far from the negative territory, but the peak is behind us. Thus, gold will suffer initially because of the hawkish Fed only to rebound later during the next economic crisis . But well, it seems that gold indeed needs a new catalyst to rally , and without any crises or dovish signals sent by the Fed, it will struggle .If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

Although gold doesn’t have to suffer during the actual tightening cycle, the Fed’s hawkish turn is fundamentally negative for gold prices.Oh no, my worst nightmare related to the precious metals has materialized. In the June edition of the Gold Market Overview, I wrote:Of course, gold is not a perfect inflation hedge in the short term. If the interest rates increase or the Fed tightens the monetary conditions in response to inflation, gold may struggle. Actually, the start of normalization of the monetary policy could push gold downward, just as it happened in 2011.And indeed, the Fed turned hawkish in June . The FOMC members started talking about tapering quantitative easing , and at the same time the recent dot-plot revealed great willingness among them to hike interest rates . And, in line with the prediction, gold prices plunged in response to the Fed’s hawkish signals about possible normalization of the monetary policy . As the chart below shows, the London (P.M. Fix) price of gold declined from $1,895 to $1,763 in June.Now, the key question is: what’s next for gold? Was the June slide just a correction? An exaggerated reaction to the not-so-meaningful economic projections of the FOMC members? After all, “they do not represent a Committee decision” and they “are not a great forecaster of future rate moves”, as Powell reminded in the prepared remarks for his press conference in June.But maybe it's the other way around? Did the Fed’s about-face mark the end of the bull market in gold ? Are we witnessing a replay of 2013, where expectations of the Fed’s tightening cycle and higher interest rates (and later the taper tantrum ) sent gold lower, pushing it into bears’ embrace?To find out, let’s check how gold behaved in the previous tightening cycles. As one can see in the chart below, the last tightening cycle of 2015-2019 wasn’t very detrimental for the yellow metal ; gold prices weren’t declining, they remained in the sideways trend.Of course, the tightening created downward pressure on gold. We can see that its price started to rally when the normalization ended, and it accelerated when the Fed turned dovish and started the cycle of interest rate cuts. However, gold didn’t enter a bear market ; it’s consoling news for all gold bulls.Neither the tightening cycle of 2004-2006 was negative for gold prices . On the contrary, the price of gold appreciated in that period. Interestingly, it was a period of rising inflation , as the chart below shows. Similarly, the tightening cycle of the mid-1970s was accompanied by accelerating CPI annual rates , and it was also a positive period for gold.Hence, the upcoming tightening cycle doesn’t have to be bad for the yellow metal . If it is accompanied by rising inflation, gold may rise in tandem with the federal funds rate . So, it turns out that the key is not the actual changes in the Fed’s policy and interest rates, but the expectations of these changes, which translate into the real interest rates .Indeed, the chart below reveals a strong positive correlation between gold prices and real interest rates. It shows that gold suffered not from the actual previous tightening cycle, but from the expectations of the tightening cycle . As one can see in the chart, the yellow metal definitely entered a bear market in late 2012, just when the real interest rates bottomed out. And then, gold prices plunged in 2013 amid the taper tantrum, when the surprising announcement of tapering of asset purchases by Ben Bernanke pushed the bond yields much higher. Importantly, the actual tapering began a few months later, while the first interest rate hike came only in December 2015.So, what does this short review of the previous tightening cycles imply for the gold market? Well, the good news is that gold doesn’t have to suffer from the tightening cycle , especially if higher inflation turns out to be more lasting than commonly believed. This is because the real interest rates will remain low. And, given the increase in the public debt , Wall Street’s addiction to easy money, and the Fed’s dovish bias, the upcoming tightening will probably be less tight than the previous ones.However, I also have some bad news. First, it might be the case that inflation and inflation expectations have already peaked in May, while the real interest rates have reached the bottom. In this scenario, the outlook for gold is rather grim .Second, although gold may be fine with the actual tightening cycle, we are in the expectations phase. And what do I mean by that? Investors are betting that the Fed will start tightening its monetary policy soon; for example, they expect the official announcement on tapering as early as September 2021. And the expectations are what matters. The Fed’s meeting in June could have been a mini taper-tantrum, as it surprised investors, the bond yields rose, and the price of gold plunged. So, if history is any guide, it seems that gold still has more room to slide .Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.

The US economy created 850,000 jobs in June. It could be another nail in gold’s coffin – what will the yellow metal do?850,000. This is how many jobs the US economy added in June. It means that the recent nonfarm payrolls came above the forecasts (economist predicted 700,000 created jobs) and are much higher than the 583,000 in May or the deeply disappointing 269,000 in April (see the chart below). Big gains occurred in sectors heavily hit previously by the pandemic, i.e., in leisure and hospitality (343,000), public and private education (269,000), professional and business services, retail trade, and other services.Furthermore, employment in April and May was revised upward by 15,000. The acceleration in the pace of job increases is a good sign for the US post-pandemic economy and a bad development for the gold market.The only relief for gold could be the fact that the unemployment rate increased from 5.8% to 5.9%, as the chart above shows. This increase was a negative surprise, as economists forecasted a decline to 5.6%. This is also quite paradoxical –unemployment remains relatively high despite a record number of job openings.Another potentially supportive factor for the gold market could be the 3.6% annual increase in wages, which means there will be higher wage inflation that could add to the consumer inflationary pressure. On the other hand, stronger wages could also support the Fed’s hawkish arguments for reducing quantitative easing and raising interest rates rather sooner than later.Implications for GoldThe newest employment situation report is negative for the yellow metal mainly because it strengthens the position of hawks within the FOMC. With strong labor market, there are higher chances that the Fed will normalize its monetary policy earlier. As a reminder, some of the central banks believe that the Fed has already reached its inflation targets. So, the labor market target is what’s left. Strong job gains in June moved the US economy much closer to achieving this Fed’s goal and erasing worries that came in the aftermath of the extremely disappointing April reading.In other words, the strong employment report may add to the current weakness in gold in the medium-term. What the yellow metal needs right now is the flux of unambiguously poor economic data that could trigger the dovish counterrevolution within the US central bank, not the positive reports that strengthen further the expectations of earlier hikes in the federal funds rate. So, the recent report could increase the bond yields and support the American dollar, creating downward pressure on gold.However, the initial response of the yellow metal was positive. As the chart below shows, the price of gold increased on Friday. This is probably because the report wasn’t as good as it could be – i.e., although the nonfarm payrolls release beat expectations, the unemployment rate increased, suggesting that the Fed may, after all, not taper as soon as some investors believe.Gold’s performance amid strong payrolls data is reassuring a bit. The yellow metal is still in the game; it may even return more decisively to the spotlight if investors cease to be relaxed about higher inflation. So far, the US central bank believes that inflation is transitory and markets are calm, but inflation may turn out to be more persistent than the Fed officials and the pundits claim. In such a scenario, the FOMC will have to catch up, which could trigger volatility or even recession; this is an environment in which investors could again switch to gold. But this is still a song of the future, and in the meantime, gold may struggle.Anyhow, for now, investors are focused on the upcoming (tomorrow!) minutes from the latest FOMC meeting. They should provide us with more clues about the Fed’s monetary policy and the direction of gold prices in the future.If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

At the end of June, the Basel III accord became binding for European banks. This new set of rules could have an effect on the entire gold market.On June 28, the Basel III agreement came into force for EU, Swiss, and US banks. On January 1, 2022, it will also be binding for British banks, so I guess it’s high time to cover this issue in the Gold Market Overview.So, let’s begin by explaining what the Basel III accord is. It is a set of financial reforms that were agreed in 2010 after the Great Recession revealed some “deficiencies” in the global financial system. The name comes from the Basel Committee on Banking Supervision at the Bank for International Settlements, which is based in Basel, Switzerland. The main idea behind the third Basel Standards is to strengthen bank capital requirements in order to limit the risk taken by commercial banks and prevent the replay of the global financial crisis of 2007-2009.OK, great, the idea of more prudent commercial banks is glorious, but what does Basel III have to do with gold? Well, it turns out quite a lot! First, physical or allocated gold could be treated as a risk-free asset. As we can read in the Basel framework (p. 192), “at national discretion, gold bullion held in own vaults or on an allocated basis to the extent backed by bullion liabilities can be treated as cash and therefore risk-weighted at 0%”.This reform, if introduced now and analyzed separately, would be bullish for gold, as considering gold a risk-free asset makes it less costly and more attractive for banks to hold. However, the announcement of this particular decision goes back to 2017 and its implementation to April 2019. The chart below shows that this announcement didn’t cause any rally in gold.However, now this change will be accompanied by another rule. It’s the Net Stable Funding Ratio requirement, which obliges banks to hold enough stable funding to cover their long-term assets. The key ramification is that this new rule requires banks to have stable funding at 85% of unallocated gold. In other words, the precious metals transactions undertaken by clearing banks have to be backed now in 85% by gold. Or, the reserve ratio has, in a sense, increased from the pre-Basel III level of 0% to 85%. As mentioned in the framework (p. 977), “Assets assigned an 85% RSF [requires stable funding] factor comprise: (…) physical traded commodities, including gold”.So, for example, let’s assume that a bank has $10 billion in gold positions, with $2 billion in allocated gold and $8 billion in unallocated gold. Under Basel III, the allocated gold is fine, but unallocated gold is considered as risky as equities, and banks have to provide collaterals for 85% of its value, in cash or physical gold.The direct consequences for the banking sector are clear. The handling of unallocated gold will become more expensive, undermining the pre-Basel bullion business model. So, some banks will exit the precious metals market (Nova Scotiabank has already exited it), while remaining clearing banks will be forced to increase the costs they charge or to raise the shareholders’ equity to provide the required reserves.The indirect effects on the yellow metal are more difficult to predict. Some analysts believe that Basel III will hit the precious metals market, sending gold prices down. The reason is that the new framework makes unallocated gold less attractive, and unallocated gold performs some valuable functions like providing liquidity for gold producers, refiners, jewelry, etc. So, the gold market will become less liquid, which will reduce gold’s attractiveness as a portfolio element for all would-be investors.In other words, under Basel III, the cost of holding gold on banks’ balance sheets increases, undermining the clearing and settlement system of the precious metals and hurting the part of gold demand that relies on the unallocated gold market.However, some claim that Basel III will be fundamentally bullish for gold, especially for physical gold. The reasoning goes as follows: the new regulations will diminish the profitability of trading gold derivatives, reducing the supply of unallocated paper gold. Meanwhile, as physical, allocated gold is a risk-free asset, market participants will move from paper gold to physical bullion, pushing its price higher. As there is – the argumentation continues – price suppression in the paper gold derivatives like Comex gold futures and London LBMA forwards, the significance of physical gold will increase and the true price of gold will rise. In other words, Basel III is believed to cause a liquidity squeeze in the physical metal, which could send gold prices higher.As one can see, this view assumes the existence of systematic price suppression, which is far from being proven. But we can hold the bullish view without assuming price manipulation. This is because unallocated gold accounts function similarly to fractional reserve banking: banks have only part of gold deposited at them. But now, the reserve ratio is 85%, up from 0%, which means that the supply of unbacked gold positions will have to diminish (or banks will have to buy more physical gold or other risk-free assets to back them). In other words, banks will try to cover their short positions of gold in order to fulfill the NSFR requirement; and the decrease in the supply of gold should increase its price.However, I suspect that gold bulls’ hopes about Basel III could be exaggerated. It doesn’t have to be a game-changer for gold prices – instead, we could just see fewer clearing banks, higher costs charged by the remaining ones, and lower liquidity in the gold market. Stronger demand for physical gold doesn’t have to transform into a rally in gold prices, as these are shaped in the international ‘paper’ markets.Additionally, the announcement of reclassification of the risk weighting of gold didn’t make gold skyrocket. The price of gold did start to rally in 2019, but it was quite likely caused by the dovish U-turn of the US central bank. So, the recent regulatory changes don’t have to push gold prices higher, especially if expectations of the Fed’s tightening cycle increase and the real interest rates rise. But maybe later, closer to 2022 (when Basel III finally takes effect in the UK), we will see some upward movement, as most of the unallocated gold is traded on the London gold market.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter. Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care.

Inflation surged in May, and some worry that it has already reached its peak. Has it indeed? This issue is key for the Fed and the gold market.Inflation has soared recently. The CPI annual rate surged 5% in May, which was the fastest jump since the Great Recession. However, the Fed officials still maintain that inflation will only be temporary. Some of the analysts even claim that inflation has already peaked, and it will decelerate from now on. Are they right?Well, they present a few strong arguments. First, there is no doubt that the recent rise in prices has been partially caused by the problems with the supply chains. But, luckily, the bottlenecks are short-lived phenomena, and they always resolve themselves, i.e., by the magic of market mechanism. The best example may be lumber prices which were skyrocketing earlier this year but which have recently declined, as production surged in response to rallying prices.Second, the detailed data on inflation shows that the surge in the overall inflation index was partially driven by categories that were heavily distorted by the pandemic, such as used cars or airline fares. The increases in these categories are not surprising or worrying, given the current recovery from the epidemic.Third, the market-based inflation expectations have already peaked. As the chart below shows, both 5-year and 10-year breakeven inflation rates have reached their heights in May. Since then, the former ones have declined from above 2.7% to about 2.3%, while the latter from above 2.5% to about 2.2%It means that the markets bought the Fed’s narrative about temporary inflation and started to worry less about it.Should gold investors do the same? I’m not so sure. To be clear, I acknowledge and always acknowledged that the supply problems contributed to the acceleration in inflation. However, the risk of inflation doesn’t solely depend on continuously rising commodity prices. And the Fed officials always say that increases in inflation rates are temporary, as they don’t want to admit they failed in maintaining price stability.Some fundamental factors supporting high inflation are still in force. First, as the chart below shows, the broad money supply is still increasing fast (although there was a deceleration since February), as the monetary impulses probably haven’t been fully transmitted into the real economy yet.Second, both the monetary and fiscal policies remain very easy. Given President Biden’s fiscal agenda and the continuous increase in the public debt, the Fed is unlikely to materially normalize its monetary policy.Third, we know that in response to input cost inflation, producers raised their charges at an unprecedented pace. It means that their power to pass on greater costs has increased, which could increase both inflation and consumers’ expectations of inflation in the future.Fourth, we have just finished recovering from the economic crisis. Usually, inflationary pressures only intensify with the progress of the business cycle. With a developing and then maturing economic expansion, employment will rise, manufacturing capacity will be more fully utilized, and inflation could prove to be more persistent than anticipated by the pundits. Please remember that the fiscal stimulus the economy got was greater than the estimated size of the output gap, so the risk of overheating is still present, even if some bottlenecks have resolved.Last but not least, the rise in inflation wasn’t driven solely by the recovery from the pandemic. Some categories which were severely hit by the epidemic are not surging. For example, the index for food away from home rose annually by 4% in May 2021. Meanwhile, some core components surged. For instance, the index for shelter, which makes almost one-third of the overall index, increased from 1.5% in February to 2.2% in May 2021, as the chart below shows. It suggests that inflation may be more broad-based than many analysts think.What does all this mean for the gold market? Well, if inflation remains high or even continues to rise, the real interest rates will remain in negative territory, supporting gold prices. However, there is an important caveat: upward inflationary surprises could force the Fed to send fresh hawkish messages or even taper its quantitative easing earlier than planned, pushing the nominal bond yields higher and creating selling pressure on gold prices.It seems that so far investors were more worried by the sooner-than-expected hikes in the federal funds rate than by the rising inflation and the fact that the FOMC members have raised their inflation forecasts by an entire percentage point. Gold bulls need a shift in investors’ focus. Otherwise, the markets could remain optimistic about the future, purchasing risky assets rather than safe havens such as gold.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter. Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care.

Powell admits that inflation is well above the Fed’s target, but he still considers it transitory. Gold increased in response – only to fall again.Last week, Powell testified before Congress. On the one hand, Powell admitted in a way that inflation had reached a level higher than expected and is above the level accepted by the Fed in the longer run:Inflation has increased notably and will likely remain elevated in coming months before moderating.It means that the Fed was surprised by high inflation, but it doesn’t want to admit it explicitly. Instead, Powell admitted that inflation would likely stay at a high level for some time. The obvious question here is: why should we believe the Fed that inflation will really moderate later this year, given that the US central bank failed in forecasting inflation in the first half of 2021?What’s more, Powell acknowledged that he hasn’t felt comfortable with the current level of inflation:Right now, inflation is not moderately above 2%; it is well above 2%. The question is, where does it leave us six months from now? It depends on the path of the economy.It means that, at some point in the future, if high inflation turns out to be more persistent than expected, the Fed will act to bring inflation back to lower levels. However, nobody knows when exactly it could happen – and I bet that, for political reasons, it would happen rather later than sooner.Indeed, even though inflation turned out to be higher than previously thought, Powell downplayed the danger of rising prices, reiterating the view that inflation is transitory. In particular, Powell maintained that recent price hikes were closely related to the post-pandemic recovery and would fade after some time:The high inflation readings are for a small group of goods and services directly tied to reopening.I dare to disagree. It’s true that the hike in the index for used cars accounted for one-third of the June CPI jump. But two-thirds of 5.4% is 3.6%, still much above the Fed’s target! Anyway, in line with its narrative, the Fed doesn’t see a need to rush with its tightening cycle. After all, the US labor market is – according to Powell and his colleagues from the FOMC – still far from achieving “substantial further progress”, with 7.5 million jobs missing from the level seen before the start of the pandemic. So, the tapering of quantitative easing is – as Powell noted – “still a ways off”. So, overall, Powell’s remarks were dovish and positive for the yellow metal.Implications for GoldWhat does Powell’s recent testimony imply for the gold market? Well, the yellow metal initially rose after his appearance in Congress. This is probably because investors bought the narrative about transitory inflation and decided that monetary taps would stay open for a long time and tapering would start later than investors expected in the aftermath of the recent dot-plot. The rising cases of the Delta variant of the coronavirus is another reason why investors could bet that the Fed would maintain its accommodative monetary policy. So, the bond yields declined, while the price of gold increased as the chart below shows.However, gold’s reaction was disappointingly soft given the dovishness of Powell’s remarks, and the yellow metal declined again later last week amid some better-than-expected economic data. It seems that there is hesitancy among precious metals investors about whether or not to take a more decisive step with purchases of gold. The reason is probably that, sooner or later, the interest rates will have to rise in response to inflation. It means that the opportunity costs of holding gold will increase, exerting some downward pressure on gold.Nevertheless, the real interest rates should remain low, so gold prices shouldn’t drop like a stone. Actually, in the longer run, when inflation creates some economic problems while the economic growth slows down, the yellow metal could finally benefit from the stagflationary conditions.If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

After the sharp drop in the first half of June and a tenacious sideways bottoming out, the gold price recovered to US$1,834 and thus reached its 200-day moving average (US$ 1,827) again. Gold – Has the summer rally already begun?ReviewSince gold prices reached a new all-time high at US$2,075 on August 7th, 2020, the entire precious metal sector has been in a multi-month correction. After eight months within this correction, gold fell back to an important double low at around US$1,676 in mid and late March. From there, prices recovered strongly in April and May. This wave up ended at US$1,916 (+14.3% in eight and a half weeks). Subsequently, gold prices came under strong selling pressure once again. A quick and steep sell off took prices down by US$142 within just one week between June 11th and 18th. But it was not until June 29th that the gold market finally found its turning point at US$1,750. From here, an initially tenacious but step by step more dynamic recovery towards US$1,834 began. Over the last few days, gold slipped back below US$1,800 only to recover quickly back to US$1,815.While central bankers, politicians and the media have been talking down the increasing fears of inflation (US consumer price index +5.4% in June), gold was only able to recover slowly from the severe pullback in June. Nevertheless, gold current trades about US$65 higher than at its low point a three weeks ago. Is this the end of the typical early summer correction in the precious metals sector or is there still some more downside to come?Technical Analysis: Gold in US-DollarWeekly Chart – The series of higher lows remains intactGold in US-Dollars, weekly chart as of July 20th, 2021. Source: TradingviewOn the weekly chart, gold has been moving higher within a clearly defined uptrend channel (dark green) since autumn 2018. The lower edge of this trend channel was tested in April 2019. The sharp pullback in June, on the other hand, has so far ended at US$1,750 and thus at the connecting line (light green) of the last three higher lows. At the same time, the upper edge of the former downward trend channel (red) was successfully tested for support.If the correction is now over, gold could already be on the way to its upper Bollinger Band (US$1,911). In any case, the stochastic has turned upwards again and thus provides a new buy signal.Overall, the weekly chart is not (yet) convincing, but the bullish tendencies prevail. To confirm the uptrend, a higher high is needed in the next step, which would require gold prices above US$1,916. Until then, however, the bulls still have a lot of work to do. If, on the other hand, the low at US$1,750 is being taken out, another retracement towards the lower edge of the uptrend channel at around US$1,670 to US$1,700 is very likely.Daily Chart – Around the falling 200-day moving averageGold in US-Dollars, daily chart as of July 20th, 2021. Source: TradingviewOn the daily chart, gold had good support at the cross of a downtrend and an uptrend line. Starting from that zone and the low at US$1,750, gold did already recover slightly above the still falling 200-day moving average (US$1,824). However, as the stochastic oscillator has already moved into the overbought zone and created a new sell signal. As well, the upper Bollinger Band (US$ 1,831) is blocking the bulls. Hence, a consolidation around the 200-day moving average would be a highly conceivable scenario.Bulls need to gain confidence againOnce the important 200-day moving average will have been sustainably recaptured and the bulls will have gained some confidence, the rally could continue and transform into the typical summer rally. The next target would then be the downward trend line from the all-time high via the high from the end of May. This line is currently sitting at around US$1,892 and is falling a few dollars a day.In summary, the daily chart is overbought in the short term. This means that the risk/reward ratio is not good right now. Ideally, however, the bulls will succeed in consolidating around the200-day moving average for at least a few days or even several weeks. This would provide the launching pad for the summer rally and higher gold prices. If, on the other hand, prices fall below US$1,790 again, the correction will likely continue. However, only below US$1,765 the promising setup for a midsummer rally would be destroyed.Commitments of Traders for Gold – Has the summer rally already begun?Commitments of Traders for Gold as of July 19th, 2021. Source: SentimentraderThe commercial traders used the sharp pullback in June to cover their short positions again. This has eased the setup in the futures market somewhat. Nevertheless, with 221.028 contracts sold short as of last Tuesday, commercial traders still hold a relatively high short position on the gold future in a longer-term comparison.In summary, the current Commitment of Trades report (CoT) still does not provide a contrarian buy signal but calls for caution and patience.Sentiment for Gold – Has the summer rally already begun?Sentiment Optix for Gold as of July 19th, 2021. Source: SentimentraderThe Sentiment in the gold market fell to a low at the end of June and has since recovered quite a bit. However, this low did not represent an extreme, but rather showed only a slight increase in pessimism. The last “real” panic low in the gold market, on the other hand, was last seen in August 2018 with the sell-off at that time down to US$1,160. No one can predict when and if such a good contrarian opportunity will arise again in this bull market. It remains to be said that the correction in June did not lead to any extreme pessimism, and that confidence has already prevailed again.The sentiment thus tends to reinforce the doubts about a sustainable and imminent wave up.Seasonality for Gold – Has the summer rally already begun?Seasonality for Gold over the last 53-years as of July 14th, 2021. Source: SentimentraderA strong green light, on the other hand, currently comes from the seasonal component! Statistically, a major bull move in the gold market begins precisely in these days. This wave up usually lasts until the end of September or even mid-October. Although the price action of the last three weeks left the impression of an early summer doldrums, it is precisely this price behavior that fits the seasonal pattern.Hence, as soon as the gold market will start to move, the chances of a strong movement up are very favorable from a seasonal perspective.Sound Money: Bitcoin/Gold-RatioBitcoin/Gold-Ratio as of July 20th, 2021. Source: TradingviewWith prices of around US$29,500 for one bitcoin and US$1,815 for one troy ounce of gold, the Bitcoin/Gold-ratio is currently around 16.25. This means that you currently must pay a bit more than 16 ounces of gold for one bitcoin. Conversely, one ounce of gold currently costs 0.0615 bitcoin. Since the sharp sell off at the beginning of May, the bitcoin/gold ratio has mainly been running sideways. Another price slide does not seem out of the question given the continued weakness of bitcoin. However, the long-term uptrend in favor of bitcoin remains intact, while the stochastic on the ratio chart is heavily oversold.You want to own Bitcoin and gold!Generally, buying and selling Bitcoin against gold only makes sense to the extent that one balances the allocation in those two asset classes! At least 10% but better 25% of one’s total assets should be invested in precious metals physically, while in cryptos and especially in bitcoin one should hold at least between 1% and 5%. If you are very familiar with cryptocurrencies and bitcoin, you can certainly allocate much higher percentages to bitcoin on an individual basis. For the average investor, who is primarily invested in equities and real estate, 5% in the still highly speculative and highly volatile bitcoin is a good guideline!Overall, you want to own gold as well as bitcoin since opposites complement each other. In our dualistic world of Yin and Yang, body and mind, up and down, warm and cold, we are bound by the necessary attraction of opposites. In this sense you can view gold and bitcoin as such a pair of strength. With the physical component of gold and the pristine digital features of bitcoin you have a complementary unit of a true safe haven for the 21st century. You want to own both! – Florian GrummesMacro update and Crack-up-Boom:FED Balance sheet as of July 10th, 2021. Source Holger ZschaepitzIn terms of monetary expansion, the global uptrend continued in recent weeks, of course. The balance sheet of the US Federal Reserve grew by US$19 billion to a total of US$ 8,097.8 billion and thus once again reached a new all-time high. The Fed’s balance sheet total is now equivalent to 37% of the GDP in the USA.ECB Balance sheet as of July 13th, 2021. Source Holger ZschaepitzThe ECB’s balance sheet rose by another EUR 18.7 billion last week to a new all-time high of EUR 7,926.6 billion. With this, the ECB also created new billions out of thin air, as it does every week, completely irrespective of which of its various goals (symmetric or average price target, pandemic emergency purchase program PEPP or quantitative easing) is currently supposedly being pursued.ECB Balance sheet in percentage of Eurozone GDP as of July 10th, 2021. Source Holger ZschaepitzThe ECB’s balance sheet total is now equivalent to over 75% of the GDP of the entire Eurozone, reflecting the ECB’s huge increase in power. The central bank has long since been unable to concentrate on its actual goal of price stability. Instead, it has taken on too many other tasks in the ECB Tower in Frankfurt. And these fiscal and monetary interventions are becoming increasingly vertical.Central banks are destroying the free marketDigital Euro as of Jul 14, 2021. Source: European Central BankHowever, printing money has never worked in the history of mankind. It will not work this time either. The question remains how long the music will continue to play for the dance on the volcano, and whether it will still be possible in time to finally and completely eliminate the free markets with a new digital EUR currency.ECB = Reichsbank 2.0 as of July 8th, 2021. ©Stefan SchmidtIn the end, Madame Lagarde, just like Rudolf Havenstein, is a prisoner of the absurd financial policy that has maneuvered itself into a dead end thanks to an unbacked paper money system. Havenstein, by the way, was also an inflationist and, until his death in November 1923, interpreted the Weimar hyperinflation as a product of the unfavorable balance of payments and did not get the idea that it had come about through the unbridled use of the printing press.Conclusion: Gold – Has the summer rally already begun?After the sharp pullback in June and an initially tenacious bottoming phase, gold recovered towards US$ 1,834 in the last two weeks. Even though this rally took quite some effort, gold makes the impression that there is more upside to come. The summer rally has probably already started. After a temporary consolidation around the 200-day moving average, August should bring significantly higher gold prices (US$1,865 and US$1,910). Short-term pullbacks towards and below US$1,800 are therefore buying opportunities.However, the performance of the mining stocks does not quite fit into this optimistic picture. The GDX (VanEck Gold Miners ETF) is currently trading well below its 200-day moving average. And heavyweights such as Newmont Corporation and Barrick Gold have not been able to get back on their feet at all since the sell-off in mid-June. Despite this weakness in gold mining stocks, the call for a summer rally in the sector will have to be canceled if gold moves back below US$1,765.Analysis initially written on July 15th and published on July 19th, 2021, by www.celticgold.eu. Translated into English and partially updated on July 20th, 2021.Feel free to join us in our free Telegram channel for daily real time data and a great community.If you like to get regular updates on our gold model, precious metals and cryptocurrencies you can subscribe to our free newsletter.By Florian Grummes|July 20th, 2021|Tags: Bitcoin, Bitcoin correction, bitcoin/gold-ratio, Gold, Gold Analysis, Gold bullish, gold correction, Gold Cot-Report, gold fundamentals, gold mining, Gold neutral, Silver, The bottom is in|0 CommentsAbout the Author: Florian GrummesFlorian Grummes is an independent financial analyst, advisor, consultant, trader & investor as well as an international speaker with more than 20 years of experience in financial markets. He is specialized in precious metals, cryptocurrencies and technical analysis. He is publishing weekly gold, silver & cryptocurrency analysis for his numerous international readers. He is also running a large telegram Channel and a Crypto Signal Service. Florian is well known for combining technical, fundamental and sentiment analysis into one accurate conclusion about the markets. Since April 2019 he is also chief editor of the cashkurs-gold newsletter focusing on gold and silver mining stocks.

The ECB has become the exact opposite of the FED in terms of monetary policy. This dovishness might actually be bad news for gold.The European Central Bank held its monetary policy meeting last week. It was an important event, as it was the first meeting since the adoption of the new ECB’s strategy, and as the ECB has introduced some changes. It left the interest rates unchanged, but it modified its forward guidance.Long story short, the ECB announced that it would keep its policy rates at ultra-low levels for even longer than previously pledged, as it doesn’t want to tighten prematurely:In support of our symmetric two per cent inflation target and in line with our monetary policy strategy, the Governing Council expects the key ECB interest rates to remain at their present or lower levels until we see inflation reaching two per cent well ahead of the end of our projection horizon and durably for the rest of the projection horizon, and we judge that realised progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilising at two per cent over the medium term. This may also imply a transitory period in which inflation is moderately above target.Previously, the ECB maintained that it would keep the interest rates unchanged until inflation expectations converge with the central bank’s target. The change implies that the ECB is unlikely to raise the interest rates until at least 2023, as this is when the projection horizon ends. Central bankers want inflation to be stable at the target, and they won’t hike without tapering quantitative easing earlier.Additionally, the ECB has decided to keep the pace of its asset purchases under the Pandemic Emergency Purchase Programme at the current (faster than it was originated) pace over the third quarter of 2021:Having confirmed its June assessment of financing conditions and the inflation outlook, the Governing Council continues to expect purchases under the pandemic emergency purchase programme (PEPP) over the current quarter to be conducted at a significantly higher pace than during the first months of the year.So, the ECB’s monetary policy has become even more accommodative. The alteration could be explained by two factors: the ECB’s new strategy and the Delta variant of the coronavirus. But the real reason is, of course, protecting the European government from the market interest rates – however, this is a topic for another discussion.I have covered both of the ‘official’ factors recently, warning my readers that the change in the strategy implies that the ECB has adopted an even more dovish stance and that the spread of Delta could prompt the central banks to further loosen their stance. This is exactly what has happened – as Christine Lagarde pointed out during her press conference:The recovery in the euro area economy is on track. More and more people are getting vaccinated, and lockdown restrictions have been eased in most euro area countries. But the pandemic continues to cast a shadow, especially as the delta variant constitutes a growing source of uncertainty.Implications for GoldWhat does the change in the ECB’s monetary policy imply for the gold market? Well, one could say that more dovish central banks are positive for gold, which likes the environment of low interest rates and bond yields.However, economics is about relative values. So, from the point of view of the comparative analysis, the ECB’s dovish shift is bad news for the yellow metal. This is why the Fed looks hawkish in comparison to the ECB, its main counterparty. After all, the Fed has actually started talking about tapering and monetary policy normalization, while the ECB has just announced that it would keep its quantitative easing at an elevated pace and would maintain its ultra-low interest rates for even longer.Hence, the greenback appreciated relative to the euro after the ECB’s monetary policy meeting. Although a stronger dollar creates downward pressure on the yellow metal, the price of gold barely moved and is still trading around $1,800, as the chart below shows.However, there is a silver lining here. Some market participants were actually disappointed that the ECB didn’t provide a stronger adjustment. Indeed, no monetary bazookas this time. Moreover, the ECB’s decision was not unanimous, so there is some sort of a hawkish camp. Last but not least, it might be the case that the Fed will also loosen its stance if the Delta variant spreads in a dangerous way. Having said that, the divergence in monetary policy and interest rates across the pond should be a headwind for gold prices for a while.If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

The bond yields dropped despite surging inflation. It’s not a usual thing on the market, so we have to ask: what does it mean for gold?The markets hide many mysteries. One of them is the recent slide in the long-term bond yields. As the chart below shows, both the nominal interest rates and the real interest rates have been in a downside trend since March (with a short-lived rebound in June). Indeed, the 10-year Treasury yield reached almost 1.75% at the end of March, and by July it decreased to about 1.25%, while the inflation-adjusted yield dropped from -0.63% to about -1%.What’s intriguing, this drop happened despite the surge in inflation. As you can see in the chart below, the seasonally adjusted annual CPI inflation rate surged to 5.3% in June, the highest level since the Great Recession. Even as inflation soared, the bond yields declined.Why is that? Are bond traders blind? Don’t they see that the real interest rates are deeply negative? Indeed, the TIPS yields are the lowest in the history of the series (which began in 2003), while the difference between the nominal 10-year Treasury yields and the CPI annual rates is the lowest since June 1980, as the chart below shows.The pundits say that the decline in the bond yields suggests that inflation will only be temporary and there is nothing to worry about. This is what the central bankers repeat and what investors believe. However, history teaches us that the bond market often lags behind inflation, allowing the real interest rates to plunge. This happened, for example, in the 1970s (see the chart above), when the bond market was clearly surprised by stagflation.Another issue here is that the central banks heavily influence the bond markets through manipulation of interest rates and quantitative easing, preventing them from properly reacting to inflation. Actually, some analysts say that the bond market is the most manipulated market in the world. So, it doesn’t have to predict inflation properly.Implications for GoldWhat does the divergence between the bond yields and inflation imply for gold? Well, as an economist, I’m tempted to say “it depends”. You see, if inflation is really temporary, it will start declining later this year, making the real interest rates rise. In that case, gold would suffer (unless inflation decreases together with the pace of economic growth).It might also be the case that the divergence will narrow as a result of the increase in the nominal interest rates. Such a move would boost the real interest rates and create downward pressure on gold.However, if inflation turns out to be more persistent than expected, investors will fear an inflation tail risk, and they will be more eager to buy gold as an inflation hedge. As I’ve explained, the decline in the bond yields doesn’t have to mean low inflation expectations. It may also indicate expectations of slower economic growth. Combined with high inflation, it would imply stagflation, a pleasant environment for gold.Another bullish argument for gold is the observation that the price of gold has recently lagged the drop in the real interest rates, as the chart below shows. So, it might be somewhat undervalued from the fundamental point of view.However, given the upcoming Fed’s tightening cycle and the record low level of real interest rates, I would bet that the above-mentioned rates will increase later this year, which should send gold prices lower. But if they rise too much, it could make the markets worry about excessive indebtedness and release some recessionary forces. Then, the current reflation could transform into stagflation, making gold shine. So, gold could decline before it rallies again.If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

Gold has been trading sideways recently, but this won’t last forever – the yellow metal is likely to move downward before continuing its rise.So, so you think you can tell heaven from hell, a bull market from a bear market? It’s not so easy, as gold seems to be at a crossroads. On the one hand, accelerating inflation should take gold higher, especially that the real interest rates stay well below zero. On the other hand, a hawkish Fed should send the yellow metal lower, as it would boost the expectations of higher bond yields. The Fed’s tightening cycle increases the interest rates and strengthens the US dollar, creating downward pressure on gold.However, gold is neither soaring nor plunging. Instead, it seems to be in a sideways trend. Indeed, as the chart below shows, gold has been moving in a trading zone of $1,700-$1,900 since September 2020.Now, the obvious question is: what’s next? Are we observing a bearish correction within the bull market that started in late 2018? Or did the pandemic and the following economic crisis interrupt the bear market that begun in 2011? Could a new one have started in August 2020? Or maybe gold has returned to its sideways trend from 2017-2018, with the trading corridor simply situated higher?Oh boy, if I had the answers to all the wise questions that I’m asking! You see, the problem is that the coronavirus crisis was a very special recession – it was very deep but also very short. So, all the golden trends and cycles have intensified and shortened. What used to be years before the epidemic, took months this time. Welcome to a condensed gold market!Hence, I would say that the peak of July 2021 marked the end of the bull market which started at the end of 2018, and triggered a new bear market, as traders decided that the vaccines would save the economy and the worst was behind the globe. This is, of course, bad news for all investors with long positions.I didn’t call the bear market earlier, as the combination of higher inflation and a dovish Fed was a strong bullish argument. However, the June FOMC meeting and its dot-plot marked a turning point for the US monetary policy. The Fed officials started talking about tapering, divorcing from its extraordinary pandemic stance.So, I’ve become more bearish in the short-to-medium term than I was previously. After all, gold doesn’t like the expectations of tapering quantitative easing and rising federal funds rate. The taper tantrum of 2013 made gold plunge.Nonetheless, the exact replay of the taper tantrum is not likely. The Fed is much more cautious, with a stronger dovish bias and better communication with the markets. The quantitative tightening will be more gradual and better announced. So, gold may not slide as abruptly as in 2013.Another reason for not being a radical pessimist is the prospects of higher inflation. After all, inflation is a monetary phenomenon that occurs when too much money is chasing too few goods – and the recent rate of growth of the broad money supply was much higher than the pace needed to reach the Fed’s 2% target. The inflationary worries should provide some support for gold prices. What gold desperately needs here is inflation psychology. So far, we have high inflation, but markets remain calm. However, when higher inflation expectations set in, gold may shine thanks to the abovementioned worries about inflation’s impact on the economy – and, thanks to stronger demand for inflation hedges.In other words, gold is not plunging because the Fed is not hawkish enough, and it’s not rallying because inflation is not disruptive enough. Now, the key point is that it’s more likely that we will see a more hawkish Fed (and rising interest rates) sooner than stagflation. As the chart below shows, the real interest rates haven’t yet started to normalize. When they do, gold will suffer (although it might not be hit as severely as in April 2013).Therefore, gold may decline shortly when the US central bank tapers its asset purchases (and the bond yields increase) while the first bout of inflation softens. But later, gold may rise due to the negative effects of rising interest rates and the second wave of higher inflation.In other words, right now, the real economy is thriving, so inflation is not seen as a major problem, as it is accompanied by fast GDP growth. However, the economy will slow down at some point in the future (partially because of higher inflation) – and then we will be moving towards stagflation, gold’s favorite macroeconomic environment.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter. Once you sign up, you’ll also get a 7-day no-obligation trial for all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care.

Powell’s recent dovish remarks started a sugar high among investors. However, it seems like the hangover has already begun.The Gold MinersWhile gold, silver and mining stocks jumped for joy following Fed Chairman Jerome Powell’s dovish remarks on Jul. 28, their sugar high ended on Jul. 30. And while I warned that FOMC press conferences often elicit short-term bursts of optimism, it was likely another case of ‘been there, done that.’I wrote prior to the announcement:While the PMs may record a short-term bounce – which often occurs following Powell’s pressers – lower lows are still likely to materialize in the coming months.In the meantime, though, did you notice the tiny buy signal from the HUI Index’s stochastic indicator? And taking that into consideration, is it time to shift to the long side of the trade? Well, for one, it seems very likely that gold miners are declining similarly to how they declined in 2008 and 2012-2013. In both cases, there were local corrections within the decline. As a result, the recent strength does not justify adjusting our short positions in the junior mining stocks, and I continue to view them as prudent from the risk to reward point of view.Second, after the HUI Index recorded an identical short-term buy signal in late 2012 – when the index’s stochastic indicator was already below the 20 level (around 10) and the index was in the process of forming the right shoulder of a huge, medium-term head-and-shoulders pattern – the HUI Index moved slightly higher, consolidated, and then fell off a cliff.Please see below:Can you see the HUI’s rally at the end of 2012 that followed a small buy signal from the stochastic indicator? I marked it with a purple, dashed line.No? That’s because it’s been practically nonexistent. The HUI Index moved higher by so little that it’s impossible to see it from the long-term point of view.With the shape of gold’s recent price action, its RSI, and its MACD indicators all mirroring the bearish signals that we witnessed back in December 2012, the current setup signals that we’re likely headed for a similar swoon. Thus, with both gold and the HUI Index sounding the alarm, if the bullish momentum continues, it’s likely to be very limited in terms of size and duration. Conversely, the following slide is likely to be truly profound.For context, I warned previously that the miners’ drastic underperformance of gold was an extremely bearish sign. I wrote the following about the week beginning on May 24:(…) gold rallied by almost $30 ($28.60) and at the same time, the HUI – a flagship proxy for the gold stocks… Declined by 1.37. In other words, gold stocks completely ignored gold’s gains. That shows exceptional weakness on the weekly basis and is a very bearish sign for the following weeks.If it wasn’t extreme enough, we saw this one more time. Precisely, something similar happened during the week beginning on July 6. The gold price rallied by $27.40, and the HUI Index declined by 1.39.Likewise, with the HUI Index’s ominous signals still present, if history rhymes (as it tends to), medium-term support will likely materialize in the 100-to-150 range. For context, high-end 2020 support implies a move back to 150, while low-end 2015 support implies a move back to 100. And yes, it could really happen, even though such predictions seem unthinkable.In addition, the drastic underperformance of the HUI Index also preceded the bloodbath in 2008. To explain, right before the huge slide in late September and early October, gold was still moving to new intraday highs; the HUI Index was ignoring that, and then it declined despite gold’s rally. However, it was also the case that the general stock market suffered materially. If stocks didn’t decline back then so profoundly, gold stocks’ underperformance relative to gold would have likely been present but more moderate.Nonetheless, bearish head & shoulders patterns have often been precursors to monumental collapses. For example, when the HUI Index retraced a bit more than 61.8% of its downswing in 2008 and in between 50% and 61.8% of its downswing in 2012 before eventually rolling over, in both (2008 and 2012) cases, the final top – the right shoulder – formed close to the price where the left shoulder topped. And in early 2020, the left shoulder topped at 303.02. Thus, three of the biggest declines in the gold mining stocks (I’m using the HUI Index as a proxy here) all started with broad, multi-month head-and-shoulders patterns. And in all three cases, the size of the declines exceeded the size of the head of the pattern.Furthermore, when the HUI Index peaked on Sep. 21, 2012, that was just the initial high in gold. At that time, the S&P 500 was moving back and forth with lower highs. And what was the eventual climax? Well, gold made a new high before peaking on Oct. 5. In conjunction, the S&P 500 almost (!) moved to new highs, and despite bullish tailwinds from both parties, the HUI Index didn’t reach new heights. The bottom line? The similarity to how the final counter-trend rally ended in 2012 (and to a smaller extent in 2008) remains uncanny.As a result, we’re confronted with two bearish scenarios:If things develop as they did in 2000 and 2012-2013, gold stocks are likely to bottom close to their early-2020 low.If things develop like in 2008 (which might be the case, given the extremely high participation of the investment public in the stock market and other markets), gold stocks could re-test (or break slightly below) their 2016 low.In both cases, the forecast for silver, gold, and mining stocks is extremely bearish for the next several months.As further evidence, let’s compare the behavior of the GDX ETF and the GDXJ ETF. Regarding the former, the senior miners’ (GDX) RSI rose above 50 last week. However, the milestone preceded several corrective tops in 2020 and 2021. Thus, last week’s Fed-induced strength has only broadened the right shoulder of its bearish H&S pattern, and if completed, the size of the head implies a drawdown to roughly $28.Please see below:Meanwhile, the GDXJ ETF invalidated the breakdown below the neckline of its bearish H&S pattern last week. However, with the milestone likely a speed bump along the junior miners’ bearish journey, a mosaic of indications signal that their medium-term outlook remains quite somber. For context, with the junior miners’ RSI at 48.35, several flirtations with 50 coincided with the short-term peaks in 2021 and were followed by material declines. I marked these cases with red ellipses. And yes, it was also the case during the final corrective pre-slide upswing in March 2020.The bottom line?If gold repeats its June slide, it will decline by about $150. Taking the entire decline into account (since August 2020), for every $1 that gold fell, on average, the GDX was down by about 4 cents (3.945 cents) and GDXJ was down by about 6.5 cents (6.504 cents).This means that if gold was to fall by about $150 and miners declined just as they did in the past year (no special out- or underperformance), they would be likely to fall by $5.92 (GDX) and $9.76 (GDXJ). This would imply price moves to $27.76 (GDX) and $35.78 (GDXJ).In conclusion, gold, silver, and mining stocks received a helping hand from the Fed last week, as the charitable contribution uplifted the precious metals. However, while the central bank achieved its objective and talked down the U.S. dollar, prior bouts of short-term optimism faded once reality reemerged. As a result, with the USD Index now in season and the 2012 analogue looking more prescient by the day, gold, silver, and mining stocks will likely suffer profound declines in the coming months. However, with their long-term fundamentals still extremely bullish, new highs will likely dominate the headlines in the coming years.Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

The latest WGC reports show that institutional allocation to gold will increase. What if there is more to it than just “higher demand, higher price”?In July the WGC published three interesting reports. The first one, Rethink, Rebalance, Reset: Institutional Portfolio Strategies for the Post-Pandemic Period, is an interesting survey of 500 institutional investors around the world ran by Greenwich Associates between October 2020 and January 2021. The study investigated investors about portfolios, allocations and views on various markets, gold, and other individual asset classes.The main result of the survey is that institutional allocations to gold are expected to increase over the next three years. To be more specific, the study finds that, currently, only 20% of institutions have an allocation to gold in their portfolios, which amounts to 4% of their portfolios, on average. However:Almost 40% of current gold investors expect to increase their allocations in the next three years, and about 40% of institutional investors who do not have gold exposure but have a target or have considered it, plan to make an investment in that time frame.The growing allocation to gold partially reflects rising concern about inflation and a search for inflation-protection assets. According to the WGC, gold performs well in periods of high inflation: in the years when the US CPI annual rates were higher than 3%, gold prices rose 15%, on average. My own research shows that gold doesn’t protect against low inflation readings; it hedges only against high and accelerating inflation.However, the study suggests that institutional investors have a broader view of gold than just as an inflation hedge. Actually, portfolio diversification tops inflation-hedging as the major role gold plays in the portfolios. After all, market downturns often boost demand for gold, as the yellow metal has a negative correlation to risk assets, which often increases when these assets sell off. Also, institutions use gold for long-term risk-adjusted return enhancement, especially in the environment of negative interest rates.Importantly, gold may be useful not only for commercial financial institutions but also for the central banks. The second recent WGC report, Monetary gold and central bank capital, discusses the vulnerabilities specific to central bank balance sheets and discusses how gold holdings can mitigate the risks posed. The publication points out that gold provides central banks with extra protection, as it mitigates the risk of asset losses. In particular, gold offsets gains and losses in the US dollar held as a reserve by central banks all around the world:Gold can play a role as a counter-cyclical hedge to USD exposure because, as the dollar weakens, gold strengthens. Hence, revaluation gains on a central bank’s gold portfolio should offset losses suffered on its USD portfolio and help to maintain its core equity.The last report is Gold mid-year outlook 2021: Creating opportunities from risks. The main thesis is that the negative impact of higher bond yields would likely be offset by inflation and stronger demand for gold as a portfolio-diversification in an environment of ultra-low real interest rates and strong risk-taking.The WGC’s thesis corresponds with my observation that gold is at a crossroads of a more hawkish Fed and higher inflation (I will elaborate on this in the upcoming edition of the Gold Market Overview). The report rightly states that gold’s performance in H1 2021 was driven primarily by higher interest rates, which could continue to create headwinds for the yellow metal in the second half of the year.However, the WGC believes that the Fed will be cautious with its tightening cycle. Although that may be true, gold is likely to struggle during the period of strengthening expectations of quantitative tightening and rising interest rates.Implications for GoldWhat can we learn from the recent WGC reports? Well, I believe that the most important information is that the institutional allocation to gold is going to increase in the upcoming years. Given that investment demand for gold is the most important driver of its price, this is positive news for gold bulls.The survey results should always be taken with a pinch of salt, but the recent ETF flows confirm that there is still significant interest in gold. In June, the inflows to gold ETFs slowed down, as the chart below shows, but remained positive (+2.9 tons) despite the plunge in gold prices.According to the WGC, this adjustment suggests that “investors may have taken advantage of the lower price level to gain long gold exposure”. In other words, gold could decline even more, but inflation concerns provided some support. What’s important, the recent dynamics of the ETFs flows don’t look as bad as in 2013 (at least not yet) when gold definitely sank into the bear market. So, although ETFs flows don’t necessarily drive the gold prices, there is a hope that the upcoming Fed’s tightening cycle will be less harmful to gold than the infamous 2013 taper tantrum.If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

The Fed acknowledged the economy’s progress, but it’s still not “substantial progress.” In short, Powell merely slowed the hand of the tapering clock.Last week (July 28, 2021), the FOMC published its newest statement on monetary policy. The publication was barely altered. The Fed noted that the US economy has continued to strengthen, although the sectors most heavily hit by the pandemic haven’t fully recovered yet. According to the FOMC members, the economy continues to depend on the course of the coronavirus, but not “significantly” anymore. So, the Fed acknowledged that the American economy has strengthened (even with the recent worries about delta variant) and that we are returning to post-epidemic normalcy. Theoretically, it’s bad news for gold, but this is something we all know, so the practical impact should be minimal.A much more interesting change in July’s FOMC statement is the part about the Fed’s asset purchases:Last December, the Committee indicated that it would continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage‑backed securities by at least $40 billion per month until substantial further progress has been made toward its maximum employment and price stability goals. Since then, the economy has made progress toward these goals, and the Committee will continue to assess progress in coming meetings.As one can see, the US central bank admitted that the economy had made progress towards its goals, but it was just “progress”, while the Fed needs “substantial further progress” to normalize its monetary policy. So, we still have some distance to the tapering of quantitative easing.However, the emphasis that economy has made progress towards Fed’s goals is a hawkish signal that the tightening cycle is on the way. This is, at least, how markets interpreted the message, as the likelihood of a 2022 interest rate hike has initially increased after the FOMC meeting, according to the CME’s FedWatch tool.This would be bad for gold, but Powell held out a helpful, dovish hand. During his press conference, Fed Chairman noted that the US economy is far away from reaching “substantial further progress” toward the maximum employment goal.So, what would substantial further progress be? I'd say we have some ground to cover on the labor market side. I think we're some way away from having had substantial further progress with max -- toward the maximum employment goal. I would want to see some strong job numbers. And that's kind of the idea.Powell also reiterated that the Fed would provide advance notice before tapering its asset purchases and that the liftoff of the interest rates is still a long way ahead of us, as the Fed won’t raise the federal funds rate before tapering:In coming meetings the Committee will again assess the economy’s progress toward our goals, and the timing of any change in the pace of our asset purchases will depend on the incoming data. As we have said, we will provide advance notice before making any changes to our purchases (…)We’re clearly a ways away from considering raising interest rates. It’s not something that is on our radar screen right now. You know, so when we get to that question, when we start to get to the question of liftoff, which we are not at all at now or near now, that’s when we’ll ask that question. That is when that will become a real question for us (…)And, again, it’s not timely for us to be thinking about raising interest rates right now. What we’re doing is we're looking at our asset purchases and judging what is right for the economy and judging how we -- how close we are to substantial further progress and then tapering after that.Implications for GoldWhat does the recent FOMC meeting imply for the gold market? Well, as the chart below shows, the recent statement on monetary policy wasn’t particularly impactful on the yellow metal. Gold declined slightly below $1,800 on the day of the publication, but it increased to $1,829 the next day. Since then, the price of the yellow metal has returned to the level of around $1,800.However, the FOMC’s decision may have some longer-term implications for the gold market as well. On the one hand, the statement and Powell’s press conference were dovish, as they emphasized that – despite some progress – the substantial progress hasn’t materialized yet, so we are still ahead of the tapering, not even mentioning any hikes in the interest rates. So, gold could catch its breath.On the other hand, the tapering clock is ticking. In June, the Fed started talking about tapering, while last month it noted that some progress has been made towards its goals. It’s likely that within a few months mere progress will transform into substantial progress, especially given that the job gains in July were strong and above the forecasts. With further improvements in the labor market, the expectations of a more hawkish Fed should strengthen, exerting downward pressure on the gold prices.If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

What a week! Gold has dropped almost $60 since Friday, and silver came along reaching new yearly lows! Are you prepared for a wild ride downwards?The USD Index (USDX)While many investors forecasted a sharp decline in the USD Index, I warned on Aug. 2 that the stars were aligning for the greenback. And with gold, silver and mining stocks exhibiting strong negative correlations with the U.S. dollar, the latter’s rise could result in the former’s demise.I wrote:With the USD Index demonstrating late-week strength and bouncing off of the 38.2% Fibonacci retracement level, the greenback may have recorded a short-term bottom. In both 2008 and 2014, small moves lower solidified the USD Index’s short-term bottoms and remarkable rallies followed. In fact, the rapid reversals in both cases occurred with RSIs near 50 (close to the current reading of 53.32) and it’s likely a matter of when, not if, the greenback records a significant upward re-rating. The bottom line? The PMs will likely bear the brunt of the USD Index’s forthcoming strength.And after the USD Index soared back above the neckline of its inverse (bullish) head & shoulders pattern last week – and caused gold, silver and mining stocks to plunge in the process – the USDX remains poised to recapture ~98 over the medium term.Please see below:To explain, the USD Index often sizzles in the summer sun and major USDX rallies often start during the middle of the year. For example, summertime spikes have been mainstays on the USD Index’s historical record and in 2004, 2005, 2008, 2011, 2014 and 2018, a retest of the lows (or close to them) occurred before the USD Index began its upward flights.What’s more, profound rallies (marked by the red vertical dashed lines below) followed in 2008, 2011 and 2014. And with the current situation mirroring the latter, a small consolidation on the long-term chart is exactly what occurred before the USD Index surged in 2014. Likewise, the USD Index recently bottomed near its 50-week moving average; an identical development occurred in 2014. More importantly, though, with bottoms in the precious metals market often occurring when gold trades in unison with the USD Index (after ceasing to respond to the USD’s rallies with declines), we’re still far away from that milestone in terms of both price and duration.Please see below (quick reminder: you can click on the chart to enlarge it):Just as the USD Index took a breather before its massive rally in 2014, it seems that we saw the same recently. This means that predicting higher gold prices here is likely not a good idea.As further evidence, the eye in the sky doesn’t lie. And with the USDX’s long-term breakout clearly visible, the smart money is already backing the greenback.Please see below:The bottom line?Once the momentum unfolds, ~94.5 is likely the USD Index’s first stop, ~98 is likely the next stop, and the USDX will likely exceed 100 at some point over the medium or long term. Keep in mind though: we’re not bullish on the greenback because of the U.S.’ absolute outperformance. It’s because the region is fundamentally outperforming the Eurozone, the EUR/USD accounts for nearly 58% of the movement of the USD Index, and the relative performance is what really matters.In conclusion, the USD Index’s comeback dropped the guillotine on gold, silver and mining stocks, and with the GDXJ ETF (profits on our short position here increased further) also plunging by more than 5% last week, the greenback is having a profound impact on the precious metals. Moreover, with the latter also pressured by rising interest rates and the Fed’s increasingly hawkish rhetoric, lower lows are likely to materialize over the medium term. However, with robust fundamentals signaling a significant comeback over the long term, we eagerly await the opportunity to go long the precious metals once again.Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

The US economy added almost 1 million jobs in July, building solid ground for tapering. Meanwhile, the PMs’ sandy foundations crumbled spectacularly.Another blow to gold! July’s nonfarm payrolls came in strong. As the chart below shows, the US labor market added 943,000 jobs last month, following 938,000 additions in June (after an upward revision). More than one-third of all gains occurred in leisure and hospitality, reflecting the economy’s reopening after the Great Lockdown.What’s more, the nonfarm payrolls surprised the markets on the positive side. The economists surveyed by MarketWatch forecasted “only” 845,000 gains. Additionally, the employment in May and June combined was 119,000 higher than previously predicted. Another positive revelation was the decline in the unemployment rate from 5.9% to 5.4% – a much lower level than it was expected (5.7%), as the chart above shows.Although the number of employed people is still down by 5.7 million from its pre-pandemic level in February 2020, it’s much higher than in April 2020 (by 16.7 million) – a clear sign that the US labor market is recovering from the last year’s recession and heading into full employment.Importantly, the July nonfarm payrolls came in one week after the strong advance estimate of the US GDP in Q2 2021. According to the Bureau of Economic Analysis, the real GDP increased 12.2% year-over-year (or 1.59% quarter-to-quarter or 6.5% at an annual rate). As the chart below shows, it was the quickest pace of economic growth since the fourth quarter of 1950. Of course, the number results from a very low base last year, but it doesn’t change the fact that the economy has strengthened recently.Implications for GoldWhat does the recent employment report imply for the gold market? Well, in the last Fundamental Gold Report, I pointed out that the Fed started the countdown to the tapering of its quantitative easing and would announce it later this year:The tapering clock is ticking. In June, the Fed started talking about tapering, while last month it noted that some progress has been made towards its goals. It’s likely that within a few months mere progress will transform into substantial progress, especially given that the job gains in July were strong and above the forecasts. With further improvements in the labor market, the expectations of a more hawkish Fed should strengthen, exerting downward pressure on the gold prices.The latest surprisingly strong nonfarm payrolls bring us closer to the beginning of the Fed’s tightening cycle. You see, the thing the Fed lacked to recognize “substantial progress” towards its goal of maximum employment was a few strong employment reports. Last month, the US economy added almost 1 million jobs, which significantly reduced the slack in the labor market.If August turns out to be similarly strong, the FOMC could announce the start of the tapering of its asset purchases in September. Actually, some analysts believe that Powell could signal it in his speech in Jackson Hole at the end of August.So, in line with my previous commentary, the strong nonfarm payrolls lifted the expected path of the federal funds rate, sending gold prices much lower. According to the CME FedWatch Tool, the odds of an interest rate hike in December 2022 increased after the publication of the employment report from 58.8% to 66.2%. As a result, the price of gold plunged from around $1,800 to $1,760, as the chart below shows.Unfortunately, gold has further room to continue its slide. Each positive economic news or any hawkish signal from the Fed (e.g., Richard Clarida, Fed Vice Chair, expressed his belief last week that “necessary conditions for raising the target range for the federal funds rate will have been met by year-end 2022”) could add to the expectations of higher interest rates and to the downward pressure on the yellow metal.If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

Another day, another decline in junior miners – and another increase in profits from short positions in them. Shouldn’t we expect a rebound though?Well, no. The rebound already happened in late July and early August, and what we see now is the trend being resumed. Consequently, even if it wasn’t for all the long-term analogies to the 2012-2013 declines in gold and gold stocks (HUI Index), one should expect the current short-term decline to be significantly bigger than the counter-trend upswing which ended earlier this month. At this time, the move lower is just somewhat bigger than the preceding rally. Thus, it’s not excessive and can easily continue.However, let’s keep in mind that periods of very high volatility usually need to be followed by periods of relatively low volatility. That’s when investors verify if the “new reality” – the price levels after the decline – are justified or not. If the market votes “no”, we get huge rebounds and breakdowns’ invalidations. So far this week, the markets have been voting “yes”.Consequently, the current back-and-forth trading is perfectly normal, and it’s in tune with what I wrote in the previous days – even in the case of the details. While the precious metals are taking a breather, the gold mining stocks continue to decline, but in a steadier manner. That’s what happened earlier this year (in February and in late-June / early-July 2021) and during the 2013 slide.While a steady decline might not get as many heads turning as big daily slides, it also serves a very important purpose. You see, the mining stocks (GDX includes both: gold stocks and silver stocks) are now verifying the breakdown below the neck level of the head and shoulders pattern. Once this breakdown is verified (just one more daily close is needed), miners will be likely to fall much lower, as the target resulting from this formation is based on the size of its head. In this case, it implies a move to about $28.In the case of the junior gold miners, the situation is even more bearish, as they just moved below the previous yearly lows, and they are confirming the breakdown.Please note how the junior miners lost their momentum right after declining on relatively big volume. In yesterday’s analysis (Aug. 10), I commented on junior miners’ breakdown in the following way:This move was not yet confirmed, but with the significant volume on which it took place, it looks quite believable. Therefore, it wouldn’t be surprising to see a few days of consolidation before senior miners move much lower.As I wrote earlier today, gold and silver were not doing much yesterday (and in today’s pre-market trading at the moment of writing these words), but it’s a perfectly normal phenomenon.In fact, if gold moves back to the previously broken lows at about $1,750, it won’t invalidate the bearish narrative.The Most Powerful Tool – Self-SimilarityGold has a triangle-vertex-based reversal close to the end of the next week, which means that it could continue to consolidate or move a bit higher in the next several days, and then slide once again. Please note that this would make the current decline very similar in terms of its pace to the decline that we saw in June. While the moves don’t have to be identical, the gold price quite often moves in similar patterns – I’ve seen this many times in the past decade (and beyond). For example, please note how similar the short-term declines that we saw between August 2020 and December 2020 were.And while gold is consolidating after breaking below its June lows, the GDX is doing so after breaking below the neck level of the head-and-shoulders pattern and the GDXJ is trading sideways after breaking to new yearly lows, silver is also consolidating after a breakdown to new yearly lows.Unless silver manages to soar back above the March lows shortly (and it seems unlikely that it does), it will be likely to fall profoundly once again soon.The inverse of the above is likely the USD Index, which is verifying its second attempt to break above its inverse head-and-shoulders pattern.The August 2020 highs are the next short-term resistance for the USD Index, but I don’t expect it to decline significantly from there. Instead, it seems to me that the USDX will rally to almost 98 based on the inverse H&S pattern, and then it might consolidate.So, while the USD Index and the precious metals market might consolidate for a few days (or even up to two weeks), they are likely to continue their most recent sizable moves shortly thereafter. Consequently, while I can’t make any promises with regard to the performance of any asset, it seems that the profits on the short positions in junior miners are going to increase substantially in the coming weeks.Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

The WGC believes that gold will shine in September. Given the whole context, I’m not so sure – in fact, not sure at all.Following three previous reports, the WGC revealed two more interesting publications at the turn of July and August. The first one is the report about gold demand trends in Q2 2021. As we can read, the demand for gold was virtually flat in Q2 (y-o-y), but in the first half of the year it decreased 10.4%. Importantly, there were modest inflows into gold ETFs in Q2 and also in July, but they only partially offset the huge outflows of the previous quarter. Hence, investors’ sentiment turned more positive in the second quarter, which helped gold prices rebound somewhat after Q1.Indeed, as the chart below shows, the price of gold plunged 10% in Q1 2021. Then, it rebounded 4.3% in the second quarter, but it was not enough to offset the blow from the first three months of the year. In July, the price of gold jumped 3.6%, although it retraced most of that increase in August (it decreased 2.1% in a single day – Aug. 6). So, gold prices declined more than 6% year-to-date.Unfortunately, there is potential for further declines. After strong July’s nonfarm payrolls, the Fed has no excuses not to start tapering of its quantitative easing. What’s more, the current levels of the real interest rates are very low, so they are likely to normalize somewhat later this year.The second WGC publication is the newest edition of the Gold Market Commentary entitled Equity yields support gold as investors position for historical September strength. The main thesis of the article is that “August could be the opportune time to position for the historically strong September gold performance”. Well, given last week’s plunge in gold prices, this suggestion looks rather amusing, but who knows? There is plenty of time until September, which is historically quite positive for gold.The justification for this thesis is two-fold. First, central banks focus now more on employment than inflation, which could prolong tapering activity. It’s true that the upcoming Fed’s tightening cycle will be very gradual, and the Fed’s balance sheet (as well as the federal funds rate) won’t probably return to the pre-pandemic levels. However, it’s also true that the Fed has already started the tapering clock and will likely tighten its monetary policy somewhat this year. This is what the markets are pricing in, and such expectations boost the real interest rates and create downward pressure on gold prices.Second, the S&P 500’s real yield (i.e., companies’ earnings yield plus the dividend yield minus inflation) has turned negative, which reduces the opportunity costs of holding gold. Well, the equity market looks overbought, but with low interest rates, high inflation and the Fed always ready to reach out a helping hand, investors may continue to flow into this market.Implications for GoldWhat can we learn from the recent World Gold Council reports? Well, just like the WGC, I’m bullish on gold in the long run, but I’m more bearish in the shorter timeframe. In other words, I believe that gold may go down first before it rallies again. September is a historically good month for gold, but this year it might also be the month when the Fed announces the start of the tapering of its asset purchases. The hawkish Fed would push bond yields higher and strengthen the dollar, sending the price of the yellow metal down in the short-to-medium term.Luckily, an abrupt taper tantrum similar to the one from 2013 is not likely to happen again. Moreover, a bit later either the post-tightening recession or inflation running out of control could make gold shine again. After all, inflation is well above the Fed’s target, while the real yields will likely remain negative for a long period. These factors should provide support for gold over a longer horizon, but investors shouldn’t downplay the upcoming tightening cycle and rising interest rates.If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

What do the portents say? Well, we’ve been looking for connections between gold and bitcoin, and we see a chance to fatten the coffers. Read on.But first, let’s talk about gold and the miners. Yesterday’s session provided us with a perfect confirmation of the bearish case in the precious metals sector for the short term.The reason is that what happened was bearish in two ways:Nothing happened in goldDaily declines in mining stocksShort Term: Miners Still Looking WeakFirst, the decline in mining stocks. A price action following a confirmed breakdown was exactly what I expected to happen to both junior miners and senior miners.Senior miners – the GDX ETF – declined after verifying the breakdown below the neck level of the head and shoulders pattern.Junior miners – the GDXJ ETF – declined after verifying the breakdown to new yearly lows.Both are very bearish on their own as the confirmed breakdowns imply that another – bigger – short-term slide is about to start.But they are even more bearish when compared to what happened in gold.Nothing happened in the case of the gold price, which means that miners had no good reason to decline yesterday. Well, except for the reason that they have been in a medium-term downtrend and due to myriads of technical reasons that I discussed previously. However, on a day-to-day basis, since gold didn’t move, miners shouldn’t have moved either, if their outlook was at least neutral.Their outlook, however, is not neutral. It’s clearly bearish as they showed weakness relative to gold. What just happened is the exact opposite of what one should see at or after an important bottom – at that time gold stocks should outperform gold.Consequently, the precious metals sector is likely to slide shortly, and profits from our short positions in the junior miners are likely to increase sooner rather than later.That’s as far as the short-term implications are concerned.Gold and Bitcoin: What’s in It for Me?There is something else that I’d like to share with you today, though. I previously wrote that there’s a tendency for gold and bitcoin to move in the opposite directions in the short run, despite that they both moved higher in the long term – since 2014. I wrote that I’ll get back to this topic at some later date – and that day is today.The upper part of the above chart features gold (regular colors) and bitcoin (blue), and the lower part of the chart features the USD Index.At first glance, the performance of gold and bitcoin doesn’t seem to be that connected, besides the fact that they both moved higher in recent years. However, taking a closer look reveals that the link between them is not only present, but it’s actually quite strong.I used the vertical, dashed lines to mark the moments when gold formed short-term bottoms and when bitcoin responded with declines. There were multiple cases like that! What’s remarkable is that even if bitcoin was soaring, it managed to correct a bit when gold was regaining strength. There were also some cases when bitcoin did nothing after gold’s bottom, but the moments when bitcoin ignored gold’s bottom and just continued to rally were rare.I marked the first two (2014) cases with bold lines as that’s when the USD Index had been rallying particularly strongly. Since it seems that the USDX is starting a sizable upswing, these analogies might be most important.Bitcoin declined in 2014 and the decline took the form of two smaller declines. One of them started close to the middle of the year (practically right at the vertical line) and the second started in the final few months of the year. What is most interesting, is that both bitcoin declines started when gold was forming short-term bottoms.Bitcoin has been on the rise in the last several days, and given what we saw in gold – and in light of the above-discussed link – it’s perfectly normal, since gold has been declining (the recent pause seems too small to trigger any price moves). But most importantly, it tells us that when gold rebounds, it could be bitcoin’s chance to slide.The 2014 decline might not seem like a big deal on the above chart, but that is only due to the perspective. When you look at the prices (the axis on the left side of the chart), you’ll see that bitcoin actually declined from about $600 to about $150. In other words, its price was reduced fourfold. That’s a huge decline. And a huge opportunity for those who are able to see it in advance.This might or might not provide us with a great shorting opportunity in case of bitcoin, when gold rebounds (likely close to the previous 2021 lows), increasing this year’s profits, but it’s too early to say so with certainty at this time. I’ll keep looking for confirmations and I’ll report accordingly.Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Gold commanded its unit to make another raid only to find itself stranded. The gold miners had already fled as fugitives, retreating without orders.The Gold MinersWhile gold shrugged off the Aug. 8 ‘flash crash’ and bounced back above its June lows, the yellow metal’s renewed sense of swagger hasn’t been mimicked by its precious metals peers. For example, while gold ended the week up by 0.86%, the GDXJ ETF (our short position) ended the week down by 1.72%.Please see below:Furthermore, while gold jumped by roughly $15 last week, the HUI Index declined by five index points. And with the bearish underperformance often a precursor to profound medium-term drawdowns, the precious metals are behaving like its 2012-2013. Last week is yet another confirmation of the analogy.Case in point: after the HUI Index recorded a short-term buy signal in late 2012 – when the index’s stochastic indicator was already below the 20 level (around 10) and the index was in the process of forming the right shoulder of a huge, medium-term head-and-shoulders pattern – the index moved slightly higher, consolidated, and then fell off a cliff.Please see below:To explain, can you see the HUI’s rally at the end of 2012 that followed a small buy signal from the stochastic indicator? I marked it with a purple, dashed line. No? That’s because it’s been practically nonexistent. The HUI Index moved higher by so little that it’s impossible to see it from the long-term point of view. On top of that, with the shape of gold’s recent price action, its RSI, and its MACD indicators all mirroring the bearish signals that we witnessed back in December 2012, the current setup signals that we’re likely headed for a similar swoon.For context, I warned previously that the miners’ drastic underperformance of gold was an extremely bearish sign. I wrote the following about the week beginning on May 24:(…) gold rallied by almost $30 ($28.60) and at the same time, the HUI – a flagship proxy for the gold stocks… Declined by 1.37. In other words, gold stocks completely ignored gold’s gains. That shows exceptional weakness on the weekly basis and is a very bearish sign for the following weeks.And why is this quote so important? Well, because the bearish phenomenon still remains intact. As mentioned, with gold rising by roughly $15 and the HUI Index declining by about five index points, the bearish underperformance is accelerating. Precisely, something similar happened during the week beginning on July 6. The gold price rallied by $27.40, and the HUI Index declined by 1.39. As a result, with the HUI Index’s ominous signals still present, if history rhymes (as it tends to), medium-term support will likely materialize in the 100-to-150 range. For context, high-end 2020 support implies a move back to 150, while low-end 2015 support implies a move back to 100. And yes, it could really happen, even though such predictions seem unthinkable.In addition, the drastic underperformance of the HUI Index also preceded the bloodbath in 2008. To explain, right before the huge slide in late September and early October, gold was still moving to new intraday highs; the HUI Index was ignoring that, and then it declined despite gold’s rally. However, it was also the case that the general stock market suffered materially. If stocks didn’t decline back then so profoundly, gold stocks’ underperformance relative to gold would have likely been present but more moderate.Nonetheless, bearish head & shoulders patterns have often been precursors to monumental collapses. For example, when the HUI Index retraced a bit more than 61.8% of its downswing in 2008 and in between 50% and 61.8% of its downswing in 2012 before eventually rolling over, in both (2008 and 2012) cases, the final top – the right shoulder – formed close to the price where the left shoulder topped. And in early 2020, the left shoulder topped at 303.02. Thus, three of the biggest declines in the gold mining stocks (I’m using the HUI Index as a proxy here) all started with broad, multi-month head-and-shoulders patterns. And in all three cases, the size of the declines exceeded the size of the head of the pattern.Furthermore, when the HUI Index peaked on Sep. 21, 2012, that was just the initial high in gold. At that time, the S&P 500 was moving back and forth with lower highs. And what was the eventual climax? Well, gold made a new high before peaking on Oct. 5. In conjunction, the S&P 500 almost (!) moved to new highs, and despite bullish tailwinds from both parties, the HUI Index didn’t reach new heights. The bottom line? The similarity to how the final counter-trend rally ended in 2012 (and to a smaller extent in 2008) remains uncanny.As a result, we’re confronted with two bearish scenarios:If things develop as they did in 2000 and 2012-2013, gold stocks are likely to bottom close to their early-2020 low.If things develop like in 2008 (which might be the case, given the extremely high participation of the investment public in the stock market and other markets), gold stocks could re-test (or break slightly below) their 2016 low.In both cases, the forecast for silver, gold, and mining stocks is extremely bearish for the next several months.As further evidence, let’s compare the behavior of the GDX ETF and the GDXJ ETF. Regarding the former, the senior miners (GDX) are in the midst of forming an ominous bear flag and the volume that accompanied Friday’s (Aug. 13) corrective upswing was relatively weak and it declined while the flag pattern was formed – just as it should if the formation was valid.Conversely, the GDX ETF did invalidate the breakdown below the neckline of its bearish H&S pattern (which is a bullish sign). However, the GDXJ ETF did not. And with the junior miners’ initial plunge (the pole) implying a continuation of the downtrend (following a consolidation that forms the flag), there are more indicators weighing down the gold miners than lifting them up.Please see below:Wave the Flag! The Bear Flag!Speaking of the GDXJ ETF, not only are the junior miners lagging behind their senior counterparts, but the four-hour chart provides a clear visual of the initial breakdown and the formation of the current bear flag.Please see below:The flag is perfect, and it took place on relatively declining volume, suggesting that another move will also be to the downside. After all, the moves that follow flags tend to be similar to the ones that preceded them.The price levels at which the flag was formed are also very important, and it’s clearer on the daily chart.Junior miners broke below the previous 2021 lows, and they held this breakdown, even though gold rallied quite visibly last week. This serves as a great confirmation that the move lower is about to take place.And how should we expect the climax to unfold? Last week, I wrote the following:Well, the GDXJ ETF may consolidate in the short term, but lower lows are still likely, and initial support should materialize at roughly $37 (the 61.8% Fibonacci retracement level). Thereafter, a short-term corrective upswing should follow before the GDXJ ETF reverses course once again and records its final bottom near the end of the year – at much, much lower price levels. All in all, it seems that our profits on the GDXJ (short position in it) are going to become MUCH bigger before this decline is over.The above remains up-to-date. In fact, we already saw the short-term consolidation last week, so the decline could resume any day now.In conclusion, the gold miners’ continued underperformance of the yellow metal is akin to a fire alarm signaling an impending blaze. And while many investors have forged through the smoke in 2021 and suffered a loss of breath in the process, our medium-term forecast does not change our outlook for gold, silver and mining stocks over the long term. With the trio underpinned by robust long-term fundamentals and their medium-term drawdowns likely to elicit secular buying opportunities, we’re confident that the precious metals will remain atop investors’ wish lists for years to come.Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Inflation softened slightly in July and gold prices rose, but the bullish joy may be premature. How should we respond?Inflation eased a bit in July, but it remained disturbingly high. According to the latest BLS report on inflation, the CPI increased 0.5% in July after rising 0.9% in June. The core CPI, which excludes food and energy, also softened, as it rose 0.3% in July after increasing 0.9% in June. The deceleration was mainly caused by a much smaller advance in the index for used cars, which increased only 0.2% (it was 10.5% in June).However, on an annual basis, inflation practically stayed unchanged since June, as the chart below shows. The overall index surged 5.4% for the second month in a row (on a seasonally unadjusted basis), while the core CPI soared 4.3%, following a 4.5% jump in the previous month.So, at first glance, it seems that inflation has peaked. This might be true, but please notice that it remained disturbingly high despite the deceleration in several subindexes, including the index for used cars. I dread to think what would be if these categories didn’t moderate!What’s more, the producer price index for final demand rose 1% in July (MoM) and 7.8% over the past 12 months, as one can see in the chart below. It was the largest advance since the 12-month data was first calculated in November 2010. Part of this increase could be passed on to consumers later, as companies have recently gained more ability to lift prices seeing weak resistance to price increases.Additionally, the index for shelter – the biggest component of the CPI, not hit by the pandemic as strongly as restaurants and hotels industries – has been rising gradually since February 2021, and it has accelerated to 2.8% in July. Last but not least, the US Senate passed Biden’s infrastructure plan, which could also add something to the inflationary pressure by an increase in the money supply. All these developments suggest that inflation isn’t going away just yet.Implications for GoldWhat does the recent inflation report imply for the gold market? Well, theoretically, softer inflation should be negative for gold, which is seen as an inflation hedge and which historically shined during periods of high and accelerating inflation.However, as the chart below shows, the price of gold has rebounded somewhat from last week’s low, gaining about $50 from Tuesday to Friday. It seems that steady (and partially below expectations) inflation gives the Fed room to maintain its ultra-dovish monetary policy. Indeed, according to the CME FedWatch Tool, the expectations for the Fed’s tightening cycle have diminished slightly from the previous week, which supported gold prices.However, a bullish hurray might be premature. Inflation is still high and significantly above the Fed’s target. Inflation expectations remain elevated, and some measures even increased slightly in July. Unfortunately, markets seem not to worry significantly about inflation any longer, and the stock market continues its rally.Even if inflation really softens later this year, which is likely given that some supply disruptions will probably resolve, it shouldn’t suddenly dive below 2%. So, the July report shouldn’t materially change the Fed’s stance, especially that the US central bank focuses more on the labor market now. Hence, gold investors should brace themselves for the upcoming tapering of quantitative easing.However, just as day comes after night, upward waves come after bearish trends. The most likely macroeconomic scenario is that inflation will remain high, while the economic growth will slow down, which means stagflation. Indeed, the downward trend in the bond yields – despite high inflation – could signal weak growth, requiring dovish monetary policies. If history is any guide, gold will shine during stagflation.If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care