Craig Hemke, founder and editor of the TF Metals Report, joins me to reflect on the technical outlook and fundamental factors fueling the longer-term precious metals bull market, after the market bloodbath and strong corrective move to end last week in gold, silver, and the precious metals equities. He breaks down what aspects have be pressuring the precious metals complex over the last few months, culminating the extreme selling we saw at the end of last week; and what this all means for shorter-duration traders versus longer-term buy-and-hold macro-investors as we look ahead.
Key Discussion Points:
The Aftermath Of Fridays Chart Damage: Gold, (GDX), (GDXJ), (SIL), and (SILJ) all saw pricing on their charts pierce down through the 200-day moving average support to end last week on June 5th. Silver went down and tagged the 200-day, but then dropped below it today in Monday’s trading session on June 8th; before closing back above it again.
(GDX) Testing The 200-day SMA In Mid-May Was The Early Warning Signal: Craig mentioned that Gold and the other precious metals ETFs losing their 200-day moving average support levels over the last few trading sessions shouldn’t have been a surprise; because the GDX already dipped below this level a couple of weeks back. He told his subscribers that this was likely coming for gold and silver next, and that is what we’ve seen play out.
Jobs, Inflation, and Manufacturing Data Could Be Setting Up Rate Hikes: While the markets spent the last year convinced we’d see a series of further rate cuts from the Fed and other central banks, the economic data has turned that narrative on its head and now the Fed funds futures markets are not anticipating any cuts, but rather rate hikes by year end.
Central Bank Buying Remains The Prime Mover For Gold: After consistent buying from central banks for the last few years, shifted to a few central banks like Turkey and the UAE central banks to start selling gold to address liquidity challenges and stabilize their currencies, the pricing trends followed. Craig remains encouraged that China has been picking up the slack buying record amounts of gold over the last few months. Additionally, Turkey may be starting to shift back to buying gold again, and other nations with low or no gold reserves may get onto the bid to purchase more gold.
The Great Rotation Out Of Bonds And Into Gold Cuts Both Ways: We discussed that as more individuals and nations sell US treasuries to rotate into gold as a reserve asset, that it helps underpin buying in gold but simultaneously raises interest rates which pressures gold. Craig helps parse out those to forces at work in the markets, and how Fed policy may respond to keep the system afloat.
Gold and Silver Producers Sold Off Hard, Ignoring Strong Fundamentals: Even though its been only a few weeks since most precious metals producers reported record Q1 earnings, and Q2 appears to still be one of their strongest quarters in historic terms, the miners were sold without mercy into the end of last week, and that is after having already corrected hard over the last few months.
Navigating Algo Trading and Machine-driven Market Volatility: Craig doesn’t believe the extreme selling in gold, silver, or the PM equities, last week or even over the last few months has been resource investors parsing out the fundamentals and throwing in the towel. Instead he believes that high-frequency trading algos keep triggering the selling patterns based off interest rates and currencies moves, war headlines, and expectations that central banks will tighten monetary policies. Once the algos start selling, then that selling triggers other machine trading selling, and the waterfall declines show up on the charts.
Gold Is A Long-Term Store Of Value Preserving Purchasing Power: Craig wraps us up sharing why he believes the longer-term fundamentals for gold have not changed and are just as strong today as they were at the end of last year or the early spike this year. He makes the point that gold is the true measuring stick of how much purchasing power that national fiat currencies are losing over time, and that is unlikely to change over the fullness of time. He still anticipates that gold and silver prices will keep rising over time, as fiat units deteriorate, and thus this will translate into higher valuations in the PM equities for patient investors.
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