“An August August for Gold?”

310721_gold_scoreboard

Moreover, ’twas during August just a year ago when Gold impressively printed its All-Time High at 2089. August indeed, that August. But from the “That Was Then, This Is Now Dept.”, what about this August? Shall it be another august August for Gold? Or rather a month of directionless disorganization, similar to the bedlam from one Dr. August Balls of Nice, (aka “The Great Balls”, so dubbed by Inspecteur Jacques Clouseau)?

To be sure, Gold was at best disorganized throughout July, price settling yesterday (Friday) at 1817. Having opened July at 1771 and not reaching below 1766, price could not clear 1835, the month’s wee 3.9% trading range being Gold’s narrowest since that recorded over two years ago in May 2019.

Our take is that Gold shall record another august August. Not necessarily up to its All-Time High (2089), let alone our forecast high for this year (2401). But nonetheless, an up month in the offing. And if for no other technical reason than price’s refusing to succumb to the ongoing parabolic Short trend as denoted by the rightmost red dots in this chart of Gold’s weekly bars from one year ago-to-date:

310721_gold_weekly

“So mmb, are you already eliminating August for Gold reaching your 2401 level?”

Not absolutely ruling it out, Squire; rather, being seasonally realistic. Our sense is that Gold’s best shot to accelerate upward shall occur during the September-October period when — for everything else — “it all goes wrong”. Such timely market turmoil you and I see as justified both fundamentally and quantitatively, but to which the balance of the investing world seem out to lunch, (which is always how it is before IT suddenly happens).

Still to this day when we query money folk about how they’re prepared to protect their or their client’s portfolios upon waking up with the S&P 500 futures “locked limit-down”, it remains that the subject swiftly is changed and/or we hear crickets. And as we’ve already cited: upon the price/earnings ratio of the S&P reverting to its mean (19.2x) — which it has always done throughout the Index’s 64-year history — the loss this time ’round regressed into “Dow” terms may exceed -20,000 points in as little as three “trading-suspended” days. (As a recent reminder exercise, calculate the “Dow” high from 19 February to its 18 March low of just a year ago).

And now Dr. Anthony Fauci declares our COVID vaccinations shan’t necessarily shield us from DELTA? What’s next? OMEGA? Got Gold?

Surely none of us wish to see Gold soar because the world ends, (“Dow +2”). We merely wish to see Gold rise to meet its Scoreboard debasement value, presently shown as 3888.

Still to date in 2021, hardly is Gold on any run. For as we turn to our BEGOS Markets Standings, the yellow metal is but one notch above the bumbling Bond:

310721_begos_standings

‘Course, we cannot completely discredit the Bond: for as the “red-hot” economy was instead cooling through most of Q2, the price of the Bond today is 7.6% above its 18 March low, the yield since then having fallen from 2.505% to now 1.897%. Clearly that is indicative of Bond traders (who live in reality) following the Economic Barometer, whilst equity traders (who live in lemming land) chase earningless risk. Here’s the Baro, its rightmost pale violet stint essentially representative of the metrics reported for Q2.

Thus when you just saw the “Advanced Gross Domestic Product” annualized pace for Q2 come in nearly flat (6.5%) compared with that of Q1 (6.3%) — whilst all around were projecting a pace some 30% higher (8.5%) — hardly were you surprised when CNBS reported: “U.S. GDP Rose 6.5% Last Quarter, Well below Expectations”. (But that’s why you follow our stuff).

Still, with July’s Chicago Purchasing Managers Index and the Conference Board’s read on Consumer Confidence both improving, June’s Personal Income was flat with Spending hardly higher, New Home Sales slowing, and Pending Home Sales shrinking. “Red-hot”? Not: as so anticipated the Federal Open Market Committee, their only “talking taper” as usual in again voting unanimously last Wednesday to do nothing. They know they’re both stuck as well as a catalyst for “it all going wrong” the instant they jerk the rug a tad.

Meanwhile, we have a positive read on Q2 Earnings Season: with 277 of the S&P 500‘s constituents having reported, 88% having beaten their bottom lines of a year ago, far and away the best year-over-year performance we’ve ever recorded. (‘Course going from “shut” to “open” makes for such substantive improvement). In fact, so “august” are earnings improvements that (thus far) they’ve knocked our “live” p/e for the S&P down from 56.3x a week ago to 49.8x today. Why, a return to the 19.2x median warrants an S&P correction of now just -61%. Are you prepared? (…crick-crick …crick-crick.. .crick-crick…)

As to the yellow metal’s aforementioned state of disorganization, so ’tis further emphasized here per our graphic of Gold & Co’s percentage tracks from one year ago-to-date, all of which are under water save for (barely) Franco-Nevada (FNV) +2%, followed by Newmont (NEM) -4%, Gold itself -7%, the Global X Silver Miners exchange-traded fund (SIL) -11%, Agnico Eagle Mines (AEM) -14%, the VanEck Vectors Gold Miners exchange-traded fund (GDX) -16%, and from worst-to-first-and-back-to-worst Pan American Silver (PAAS) -21%. But upon their all going well when “it all goes wrong”, don’t forget the leverage, luv:

310721_gold_gdx_nem_aem_fnv_sil_paas

Now here’s an eye-opener that is as Pro-Silver as ever. In going ’round the horn for all eight BEGOS Markets by their daily bars from one month ago-to-date, look notably at the ascending grey trendline for precious metal Gold. Look as well at the ascending grey trendline for industrial metal Copper. And yet almost impossibly, the same for Silver is descending. But here’s the good news: rare as ’tis, this phenomena has occurred (on a mutually-exclusive basis) six times since the beginning of 2020. And each time hence Silver has within a matter of weeks settled at minimum three full points higher. So from the yellow and red metals to the white metal, there’s a tradable gift on a Silver platter. Note too that Silver’s baby blue dots indicative of trend consistency have just kinked up:

310721_begos_dots

Next, specific to the last fortnight, here we’ve the Market Profiles for Gold on the left and Silver on the right, their nearby trading supports as noted, (with a little resistance up there for Gold at 1832):

310721_gold_silver_profiles

And it being month-end, we can’t quite wrap it without bringing up Gold’s Structure by the monthly bars. With respect to that mentioned earlier, the rightmost bar shows us just how comparatively narrow was Gold’s July … ahead of what we anticipate shall be a more robust, indeed august, August:

310721_gold_structure

To close, we have these three observations:

  • From the ever-popular “They’re Just Figuring This Out Now? Dept”: Bloomy reported this past week that “Oil Rebounds After Industry Report Shows Shrinking U.S. Supplies”. Given the perfunctory shutdown of otherwise potential U.S. Oil transport facilities in the changeover of the StateSide Administration this past January, ought we be surprised? (See too, in leading the aforeshown BEGOS Markets Standings, Oil +52.4% year-to-date … Thanks Joe).
  • Next week brings the oft-dubbed “Mother of All Numbers Day” (Friday, 06 August) when the Department of Labor Statistics reports Non-Farm Payrolls for July, the expectation being for a 9% gain over those for June, with the Unemployment Rate dropping from 5.9% to 5.6%. That’s nice, ‘cept the ADP Employment Change (Wednesday, 04 August) for July is estimated to be a 6% loss. But who’s counting, right?
  • And last Wednesday, Dow Jones “Red-Hot Economy” Newswires noted in spite of vaccinations, COVID continues to emanate from one surge to the next, but that “…a host of adaptations by governments and businesses have also helped limit economic damage…” Translated to layman’s terms, such “adaptations” are currency debasement and enterprise restriction. Reason enough to follow the stars for Gold’s august August that also shines for Silver!

Cheers!

…m…

www.deMeadville.com
www.TheGoldUpdate.com

Natural Gas Price Fundamental Daily Forecast – Market Edges Lower on Mild Weekend Temperature Forecast

Natural gas futures fell on Friday as investors booked profits ahead of the weekend on fresh uncertainty generated by the latest weather patterns. Rather than guess at the weekend results, traders decided to take to the sidelines instead of risking a potential gap lower opening on Monday if the weekend weather came in milder than expected. According to Natural Gas Intelligence (NGI), traders were focused on a near-term shift in weather that is expected to usher in a reprieve from the oppressive heat that has defined the summer to date over much of the Lower 48.

On Friday, September natural gas futures settled at $3.914, down $0.145 or -3.57%.

NatGasWeather Short-Term Outlook

“National demand will ease to much lighter levels” over the coming week “as weather systems sweep across much of the eastern half of the U.S. with highs of upper 60s to lower 80s,” NatGasWeather said. The firm projected the coolest conditions across the Great Lakes and Northeast. “It will still be hot next week over the West and Plains, including much of Texas, but not enough to counter” the comfortable conditions in the East.

Higher Production Coming?

NGI is reporting that Texas Eastern Transmission Co. (Tetco) notified shippers ahead of trading Friday that it had received approval from federal regulators to return its 30-inch diameter system to full operating pressure, with capacity expected to increase by roughly 0.5 Bcf/d starting in the coming week.

Bespoke Weather Services said this would “have some impact on Henry Hub pricing specifically.” However, the firm doesn’t see the restored capacity “significantly affecting the supply/demand balance,” and it anticipates a return of upward pressure on prices in August.

“Production estimates held around 91.5 Bcf on Friday, shy of the 93 Bcf or higher that Bespoke has said may be needed to keep pace with demand that has been driven by both domestic cooling needs – particularly in the drought-stricken West – and robust levels of liquefied natural gas (LNG) activity. LNG feed gas volumes consistently approached 11 Bcf over the past week, putting export activity near capacity levels,” NGI wrote.

Short-Term Outlook

Although prices struggled last week, it’s not always about heat driven rallies in the summer. Most professionals put the emphasis on low supply heading into winter. If the U.S. starts the winter heating season under supplied then prices are likely to soar if it gets extremely cold.

As far as the summer heat is concerned, sure prices rise when there is intense heat, but production between the end of summer and the start of winter can help increase supply. This is why cold weather rallies are often the most dramatic if the heating season starts undersupplied.

For a look at all of today’s economic events, check out our economic calendar.

Inflation Climbs Higher, but Gold Closes Sharply Lower

However, it came in under analyst expectations and forecasts, which was one factor that took gold prices lower on the last trading day of July 2021.

The PCE price index rose 0.5% in June taking the one-year inflationary change to 4% according to the United States Bureau of Economic Analysis (BEA). It took a combination of four concurrent monthly major upticks in inflation to raise inflation to 4% over the past 12 months. The last time the PCE price index was at this level was in 2008.

pce july

The Federal Reserve’s target has been to maintain an inflationary rate of approximately 2%, this year the fed adjusted its mandate to focus on maximum employment and let inflation run hot. But the fact that inflation based on the CPI is at 5.4%, and now the PCE price index which strips out food costs in energy is double the Federal Reserve’s target it must be running hotter than the Fed expected.

During the press conference held by Chairman Powell this week, he acknowledged that inflation has risen much faster this year than he and other senior Federal Reserve members predicted. He also acknowledged that is possible that inflation “could turn out to be higher and more persistent than we expected.”

The Fed continues to maintain that the current inflationary rate is transitory because rising prices are almost entirely the result of the reopening of the U.S. economy. He blames much of the inflationary pressure is due to supply bottlenecks saying, “Supply bottlenecks have been larger than anticipated.” He also added that “Once these bottlenecks abate and the economy returns to normal.”

While some analysts agree with the Federal Reserve’s assumption that inflation is for the large part a transitory scenario, many analysts believe that the current uptick in inflation is not all transitory citing recent dramatic rises in food cost and energy.

Regardless of the statements by Chairman Powell inflation even using their preferred index which strips out food and energy costs, inflationary pressures are at a dramatic and alarming high. More importantly, because the Fed is assuming that inflation will likely slip back to a number closer to the Federal Reserve’s 2% target next year, if they are wrong, the implications would be alarming.

As of 5:51 PM EST gold futures basis, the most active December 2021 Comex contract is currently down $18.90 and fixed at $1816.90. On a technical basis, we saw a resistance enter the market as gold broke through both its 200-day moving average yesterday, but stalled just below the 50-day moving average. Today gold prices opened just above the 50-day moving average at $$1831.10. Today gold opened at $1832.50. Therefore, the 50-0day moving average is a critical price point that must be breached on a closing basis next week if we are to see the strong price increases witness yesterday marks the continuation of a rally next week.

July Gold July 29

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Price of Gold Fundamental Daily Forecast – Sideways to Lower As Rangebound Trade Resumes

Gold prices are trading sharply lower late in the session on Friday amid profit-taking ahead of the weekend in reaction to a rebound in the U.S. Dollar index. The weakness has wiped out more than half of yesterday’s gains that were spurred by U.S. Federal Reserve Chair Jerome Powell’s reassure that a rate hike was not in the cards for the time being.

At 19:50 GMT, December Comex gold futures are trading $1817.40, down $18.40 or -1.00%.

Although the market is weaker on Friday, it’s still on-track for a weekly gain. In addition to Powell’s initial comment about a rate hike, bullish traders also responded positively to his remark that the U.S. job market still had some ground to cover before the Fed would pull back support.

Most traders agree that gold looks good at current price levels especially after forming a support base over a two-week period. The fact that the Federal Reserve didn’t really say anything that changes its direction on mortgage/bond purchases or rate hikes at least helps to put a floor under the market.

However, since the next Fed meeting doesn’t take place until September 21-22, gold traders are going to be without guidance from policymakers for nearly two-months. This means that they will be at the mercy of volatile economic reports and Fed speaker comments for weeks.

On June 16, the Fed moved up its date for the next Fed rate hike and the gold market collapsed from $1860.40 to $1754.50 in just 10 sessions before recovering to $1839.00 over the next 11 days.

It’s going to be hard to justify $1860.00 gold at this time and without the Fed saying anything meaningful until the third week of September, but the economic reports between now and then could do the talking for them.

Between last Wednesday’s meeting and the September 22 Federal Reserve policy statement, policymakers will have had a chance to see two Non-Farm Payrolls and Consumer Price Inflation (CPI) reports. But gold traders will have had the same chance so I think that over the next seven weeks or so, the U.S. economic data will play a greater role in determining the direction of gold prices.

For a look at all of today’s economic events, check out our economic calendar.

Crude Oil Weekly Price Forecast – Crude Oil Continus to See Upward Pressure

WTI Crude Oil

The West Texas Intermediate Crude Oil market has initially pulled back during the week but found the $70 level to be supportive enough to turn things around and show signs of life again. By the end of the week, we have turned around completely to threaten the $74 level. After forming that massive hammer during last week, it is obvious that the buyers are stepping into pick this market up and as selling is all but impossible. (In fact, I would not be a seller until we break down through that hammer.) Because of this, I think it is only a matter of time before we break above the recent highs and go looking towards the $80 level as demand will continue to outstrip supply in the foreseeable future.

WTI Oil Video 02.08.21

Brent

Brent markets of course are going to be the same story and are much clearer to breaking out to the upside than the WTI grade is. In fact, I look at Brent as a bit of a leading indicator as it typically has a little bit of a premium attached to it anyway. If we can break out higher from a couple of weeks ago, as almost a certainty that we will go looking towards the $80 level and try to break above it. As for the downside, the $70 level looks to be massive support, followed by the $65 level as evident by the massive hammer that we had formed during the previous week. Nonetheless, pay close attention to the US dollar as it also has its say as to where we go quite often.

For a look at all of today’s economic events, check out our economic calendar.

Crude Oil Price Forecast – Crude Oil Markets Continue to Show Strength Into the Weekend

WTI Crude Oil

The West Texas Intermediate Crude Oil market initially pulled back during the day on Friday only to turn around and show signs of strength. By doing so, the market looks as if it is threatening the $74 level, opening up the possibility of a move towards the $75 level. Pullbacks at this point in time will still have plenty of support underneath, especially near the $70 level as it is a large, round, psychologically significant figure and an area where the 50 day EMA has just crossed. After the type of recovery that we have seen over the last couple of weeks, it should be obvious that this is still a “buy on the dips” type of market.

Crude Oil Video 02.08.21

Brent

Brent markets also rallied a bit during the trading session on Friday as we have broken above the $75 level in this market. Brent tends to be the leader in these two markets as there is a bit of a premium attached to it, and therefore I think it should not be surprising to see this market break to a fresh new high before the WTI market does. At that point, then I anticipate that the market goes looking towards the $80 level. Underneath, the 50 day EMA sits at the $72.50 level, and should offer a bit of a “soft floor” for the market, and that of course the $70 level will be much more crucial as far as support is concerned. I think this remains a “buy on the dips” type of situation as it has been four months.

For a look at all of today’s economic events, check out our economic calendar.

Silver Weekly Price Forecast – Silver Markets Form a Hammer

Silver markets have pulled back a bit during the course of the week, but as you can see have turned around to form a bit of a hammer. The hammer sits right on top of the bottom of the overall uptrend line of the ascending triangle, so therefore I think it is only a matter of time before we rally. If the market can break above the top of the weekly candlestick, then it is likely that we break out to the upside, perhaps going towards the $28 level. On the other hand, if we break down below the candlestick, then it is likely that the market could break towards the $24 level, maybe even the $20 level on some type of selloff.

SILVER Video 02.08.21

Keep in mind that silver has a huge correlation to the industrial demand, but with Jerome Powell and the Federal Reserve suggesting that they are nowhere near tightening monetary policy, that could weaken the US dollar just enough to make the silver market go higher. Gold has really taken off, and perhaps will continue to drag silver along with it. Nonetheless, this is a market that is very difficult to risk manage, mainly because the cost involved per text.

Because of this, I would be very cautious about the position size, and only add to the position as the trade works out. Either way, it looks like we are probably going to get a significant move relatively soon. That being said, the market is likely to continue to see noisy behavior, but eventually I fully anticipate seeing some type of impulsive candlestick that we can follow right along with.

For a look at all of today’s economic events, check out our economic calendar.

Natural Gas Weekly Price Forecast – Natural Gas Give Up Early Gains for the Week

Natural gas markets initially rally during the course of the week, breaking out well above the $4.00 level, only to sell off and breakdown. All things being equal, this is a market that I think will continue to see a lot of upward pressure over the longer term, but we are starting to see temperatures cool off a little bit in the United States, so that could drive down demand. Longer-term though, we still have the heat wave coming back and therefore I think buyers will return. This little bit of a pullback might be a nice opportunity to get involved at a better price, and that is how I plan on playing this market.

NATGAS Video 02.08.21

If we can break above the top of the candlestick from the week, then it allows the market to go much higher. At that point, the market is likely to go looking towards the $4.40 level. That is the measured move from the previous consolidation area and the bullish flag that shows up on the daily chart. With that being the case, I think it all the points to higher levels, but this little bit of a pullback should be a nice buying opportunity based upon value as it returns. It is not until we break down below the $3.40 level that I would be a seller of this market and at that point in time I would probably become rather aggressive. In general, this is a market that I believe continues to see upward momentum but given back some of the most recent impulsive move would not be a huge surprise.

For a look at all of today’s economic events, check out our economic calendar.

Gold Weekly Price Forecast – Gold Continues Same Pattern of Consolidation

Gold markets rallied a bit during the course of the week, but initially looked very soft as we were hanging about the $1790 level, an area that is significant support based upon action that we have seen over the last month or so. We then turned around as Jerome Powell and the Federal Reserve announced that they were nowhere near tapering, so therefore gold got a bit of a boost as the US dollar got smoked. Having said that, we did not break out quite yet, and simply test at the top of the range before pulling back on Friday. It will be interesting to see whether or not we can continue to go higher, but we have a very clear area that will be crucial.

Gold Price Predictions Video 02.08.21

If we can clear the $1830 level, then it is likely the gold continues to go much higher, perhaps trying to take that huge red wipeout candle out and go looking towards the $1910 level. On the other hand, if we turn around a break down below the $1790 level, that almost certainly will open up a move down to the $1750 level, followed very closely by the double bottom down at the $1680 level. With that being the case, it is very likely that it would come along with massive US dollar strength and a lot of fear-based trading.

Even though the gold market sometimes get a little bit of a boost when people are concerned, the reality is that the gold markets play second fiddle to the US dollar sometimes, and that will be especially true if we continue to see the yield in the United States drop as people will rush towards bond.

For a look at all of today’s economic events, check out our economic calendar.

Gold at a Crossroads of Hawkish Fed and High Inflation

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!

For a look at all of today’s economic events, check out our economic calendar.

Arkadiusz Sieron, PhD
Sunshine Profits: Effective Investment through Diligence & Care.

 

Silver Price Forecast – Silver Markets Quiet on Friday

Silver markets have gone back and forth during the course of the trading session on Friday after initially gapping lower, and now it looks as if we are trying to digest the gains and figure out where to go next. This not a huge surprise, considering just how explosive silver was during the previous session. That being said, the market is likely to be very choppy in the short term, but that is not overly surprising considering that silver tends to be very erratic.

SILVER Video 02.08.21

There is an argument between whether or not we are going to follow the US dollar, as it has such a huge negative correlation, or are we going to follow the industrial demand going forward? Looking at this chart, you can see that there is a lot of noise just above, especially near the $26.50 level. We also have the 50 day EMA sitting in that general vicinity, which of course is an indicator that a lot of technical traders will pay close attention to. If we break above there, then the $27 level will be targeted, followed by the $28 level as it would fill a gap that had formed back in June. At that point, I think there is a significant amount of resistance it could come into the picture in and cause problems.

To the downside, it is very likely that the market could go looking towards the previous uptrend line, assuming that it can even break down below the $25 level. All things been equal, this is a market that is going to be very noisy and choppy, but looking at this chart, it is obvious that we are trying to form a little bit of a base.

For a look at all of today’s economic events, check out our economic calendar.

Natural Gas Price Forecast – Natural Gas Selloff Into the Weekend

Natural gas markets continue to consolidate around the $4.00 level, as we have pulled back from there, but you can see that the market has been in a little bit of a consolidation range between $3.80 and $4.20. At this point, the $4.00 level is essentially the “fair value” of the market right now. I would also point out that just below at the $3.80 level it is the top of the bullish flag, which measures for a move to the $4.40 level.

NATGAS Video 02.08.21

You should also take a look at the massive consolidation area that we broke out of previously with the $2.40 level underneath has offered massive support, and the $3.40 level has been massive resistance. That measures for a $1.00 move from the breakout price of $3.40, so it all kind of comes together at the same time. That being said, it should be noted that the natural gas markets have been seeing a bit of a boost due to the idea of more demand coming out due to the heatwave. As long as that he wave is still around, that is going to drive up pricing over the longer term.

All that being said, it is not a huge surprise to see a little bit of a pullback from the round figure, because after all a lot of technical traders and options barriers tend to gravitate towards these areas. Ultimately, this is a market that I think is going to offer a little bit of value underneath, thereby offering the opportunity of value hunters to get back into the marketplace.

For a look at all of today’s economic events, check out our economic calendar.

Gold Price Forecast – Gold Markets Sluggish to Close Week

Gold markets continued to show signs of exhaustion near the $1830 level on Friday, after surging there during the day on Thursday. At this point, we are going to have to pay close attention to the US dollar, because if it starts to melt down, that might be the catalyst that gold needs to continue to go higher. If we can break out above the top of the candlestick from the Thursday session, then we could go looking towards the $1860 level. That is the top of the gap that we have seen in this market, and it should offer a certain amount of resistance. If we can break above there, then it is obvious that the market could go much higher.

Gold Price Predictions Video 02.08.21

On the other hand, if we were to pull back just a bit, then we could go looking towards the $1810 level, which is where the 200 day EMA currently sits. Underneath there, the market is likely to go looking towards the $1790 level as well, which is the bottom of the overall range. Breaking down below that level then opens up the possibility of a move towards the $1750 level underneath, where we had bounced from earlier this summer.

If we were to turn around a break down below that level, it is very likely that we would go towards the double bottom underneath at the $1680 level. That is an area that is massive support and breaking down below that level opens up a massive flood of selling from what I can see. Keep in mind the negative correlation to the greenback, that is going to be the most important thing to pay attention to.

For a look at all of today’s economic events, check out our economic calendar.

Gold, USDX: Did Powell Spoil the Party?

The War on Debt

With Jerome Powell, Chairman of the U.S. Federal Reserve (FED), struggling to adequately define “transitory” during his press conference on Jul. 28, the market narrative has shifted from ‘hawkish FED’ to ‘dovish FED.’ And with the U.S. dollar bearing the brunt of investors’ wrath, the ‘all-clear’ sign flashed in front of the PMs. However, with post-FED rallies mainstays in the PMs’ historical record, the recent euphoria is much more semblance than substance. Thus, while Powell’s persistent patience elicits fears of financial repression, today’s economic environment lacks many of the qualities that made the gambit viable in the past.

To explain, financial repression includes measures such as direct government financing (the FED prints money and lends it directly to the U.S. Treasury), interest rate caps (yield curve control) and extensive oversight of commercial banks (reserve requirements, controlling the flow of credit). In a nutshell: governments use the strategy to keep interest rates low and ensure that they can finance their debt. And with the U.S. federal debt as a percentage of GDP currently at 128% (updated on Jul. 29), some argue that’s exactly what’s happening. Moreover, with the U.S. 10-Year real yield hitting an all-time low of -1.15% on Jul. 28, is the FED simply turning back the clock to the 1940s?

To explain, during World War Two, surging inflation helped the U.S. government ‘inflate away’ its debt. Think of it like this: if an individual borrows $100 at a 2% interest rate and repays the balance in full after one year, the total outlay is $102. However, if inflation is running at 4% (negative real yield), putting that money to work should result in an asset that’s worth $104 by the end of the year. As a result, the individual nets $2 (104 – 102) due to the inflation rate exceeding the nominal interest rate. And as it relates to the present situation, if the FED keeps real yields negative, then asset price inflation and economic growth should outpace nominal interest rates and allow the U.S. government to ‘inflate away’ its debt.

However, the strategy is not without fault. For one, financial repression occurs at the expense of bondholders. And with pension funds still required to meet the guaranteed outlays for retirees, suppressing bond yields hampers their ability to match assets and liabilities without incurring more risk.

More importantly, though, the FED doesn’t control the long end of the U.S. yield curve. For one, the FED owns roughly 23% of the U.S. Treasury market, and it has a monopoly on confidence, not long-term interest rates. Second, the U.S. 10-Year Treasury yield has dropped because investors fear that the Delta variant and/or the FED’s forthcoming taper will depress the U.S. economy. And eager to front-run the potential outcome, bond investors have positioned for slower growth, lower inflation, and, eventually, a reenactment of the FED cutting interest rates.

For context, even Powell himself admitted on Jul. 28 that the decline has caught him off-guard:

Source: Bloomberg

Likewise, following WW2, the U.S. government implemented structural reforms that are not present today. For example, prudent fiscal policy emerged in the late 1940s, with the government reducing spending and prioritizing debt reduction. In stark contrast, today’s U.S. government is already finalizing an infrastructure package and the federal deficit as a percentage of GDP is still growing. For context, a deficit occurs when the governments’ outlays (expenditures) exceed its tax receipts (revenues).

Please see below:

To explain, the green line above tracks the U.S. federal surplus/deficit as a percentage of GDP. If you focus on the period from 1943 to 1950, you can see that after the deficit peaked in 1943, reduced spending and strong GDP growth allowed the green line to move sharply higher. Conversely, if you analyze the right side of the chart, you can see that current spending still outpaces GDP growth (green line moving lower), and stoking inflation is unlikely to solve the problem.

U.S. 10-Year Treasury Yield Decouples… By a Lot

Circling back to the bond market, the U.S. 10-Year Treasury yield currently trades at an all-time low relative to realized inflation.

Please see below:

To explain, the scatterplot above depicts the relationship between the headline Consumer Price Index (CPI) and the U.S. 10-Year Treasury yield (available data dates back to 1967). For context, the headline CPI is plotted on the horizontal axis, while the U.S. 10-Year Treasury yield is plotted on the vertical axis. If you analyze the dot labeled “Current Reading,” you can see that the U.S. 10-Year Treasury yield has never been lower when the headline CPI has risen by 5% or more year-over-year (YoY). In fact, even if the headline CPI declined to the FED’s 2% YoY target, the U.S. 10-Year Treasury yield at 1.27% would still be the lowest relative reading of all time.

However, it’s important to remember that different paths can still lead to the same destination. For example, if inflation turns out to be a paper tiger, a profound decline in inflation expectations will have the same negative impact on the PMs as a sharp rise in the U.S. 10-Year Treasury yield.

Please see below:

To explain, the green line above tracks the U.S. 10-Year Treasury yield, while the red line above tracks the U.S. 10-Year breakeven inflation rate. If you analyze the gap on the right side of the chart, it’s a decoupling of the ages. However, while the two lines are destined to reconnect at some point, if the red line falls off a cliff, the impact on the PMs will likely mirror the 2013 taper tantrum. For context, gold fell by more than $500 in less than six months during the event.

Finally, and most importantly, U.S. Treasury yields are only one piece of the PMs’ bearish puzzle. Knowing that one shouldn’t put all their eggs in one basket, betting the farm on the U.S. 10-Year Treasury yield would be investing malpractice. That’s why self-similar patterns, ratios, technical indicators, the relative behavior of the gold miners, the USD Index and the FED’s taper timeline are all prudently considered when forming our investment thesis.

As an example, if gold had a perfect correlation with the U.S. 10-Year real yield, the yellow metal would be trading at roughly $1,940. However, with many other factors worthy of our attention, gold’s material underperformance indicates that a mosaic of headwinds undermines its medium-term outlook.

In conclusion, Powell’s party was in full swing on Jul. 29, as the PMs and the USD Index headed in opposite directions. However, with the yellow metal still confronted with a tough road ahead, the fundamental outlook remains dicey over the next few months. For example, with the all-time imbalance in the U.S. Treasury market eliciting little optimism, it took Powell’s dovish remarks to ignite the recent fervor. And with both developments likely to reverse in the coming months, the PMs’ upside catalysts may fade with 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.

For a look at all of today’s economic events, check out our economic calendar.

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Sunshine Profits: Effective Investment through Diligence & Care

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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.

 

Oil Price Fundamental Daily Forecast – Price Action Indicates Traders Believe Demand Will Outstrip Supply

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading relatively flat on Friday in a lackluster trade as investors do a little position-squaring ahead of the weekend following a volatile, but profitable week.

The catalyst behind this week’s gains has been reduced to the simplest of terms:  bullish traders believe that demand will continue to outstrip supply until at least the end of the year.

At 13:15 GMT, September WTI crude oil futures are trading $73.63, up $0.01 or +0.01%, and October Brent crude oil is at $75.13, up $0.03 or +0.04%.

The week began with a steep sell-off due to concerns over demand destruction as bearish traders increased bets the surging coronavirus delta-variant would slow down the pace of global economic growth.

After a plunge on Monday, buyers stepped in to successfully stop the price slide because they believe that demand will continue to grow the next four months, while vaccinations are expected to alleviate the impact of a resurgence in COVID-19 infections across the globe.

Although buyers and sellers battled it out for two sessions earlier in the week, those with a bullish outlook eventually prevailed when private industry and government inventories data confirmed the strong demand.

The case for stronger demand was further strengthened on Wednesday when the U.S. Federal Reserve confirmed that economic progress was being made. The supply picture even became a little rosier after a story circulated that progress in talks between the United States and Iran over a nuclear deal had stalled, further pushing forward an additional supply from the rogue nation.

Daily Forecast

Although the price action is a little mixed on Friday, the market remains underpinned. This is pretty clear evidence of the presence of buyers even as coronavirus cases rise and parts of the world revert back to lockdowns and restrictions that are not as harsh as we saw during the peak of the pandemic year in 2020. This also offers further evidence that bullish traders believe that higher vaccination rates will keep the new surge under control.

“The oil market no longer appears to be viewing the issue of the Delta variant with quite the same alarm as it was at the beginning of last week,” said Commerzbank analyst Carsten Fritsch.

“There is confidence that the ongoing vaccination campaigns in the industrialized countries will prevent any reintroduction of widespread mobility restrictions,” he added.

“Delta is a risk, but is it going to derail demand growth in the second half?  We may not see that,” said Commonwealth Bank commodities analyst Vivek Dhar.

This bullish theme is likely to carry over into next week with the next major challenge for traders – the fair pricing of crude oil – with OPEC+ expected to begin upping production by 400,000 barrels per day on August 1.

For a look at all of today’s economic events, check out our economic calendar.

Silver Price Daily Forecast – Test Of Resistance At $25.60

Silver Gains Ground Ahead Of The Weekend

Silver continues its attempts to settle above the 20 EMA at $25.60 while the U.S. dollar is gaining ground against a broad basket of currencies.

The U.S. Dollar Index is currently located in the range between the support at the 50 EMA at 91.90 and the resistance at the 92 level. If the U.S. Dollar Index manages to settle back above the 92 level, it will move towards the resistance at 92.15 which will be bearish for silver and gold price today. Stronger dollar is bearish for precious metals as it makes them more expensive for buyers who have other currencies.

Gold failed to settle above the resistance level at $1835 and pulled back towards $1825. The nearest significant support level for gold is located at the 50 EMA at $1815. If gold gets to the test of this level, silver will find itself under pressure.

Gold/silver ratio did not manage to settle back above 71.50 and is slowly moving towards the 71 level. In case gold/silver ratio manages to test the 71 level, silver will get more support.

Technical Analysis

silver july 30 2021

Silver is currently testing the resistance level at the 20 EMA at $25.60. If silver manages to get above the 20 EMA, it will gain additional upside momentum and head towards the next resistance level which is located at yesterday’s highs at $25.80.

A move above the resistance at $25.80 will push silver towards the next resistance at the 50 EMA at $26.10. If silver manages to settle above the 50 EMA at $26.10, it will head towards the resistance level which is located at $26.30.

On the support side, the nearest support level for silver is located at $25.50. If silver declines below this level, it will move towards the support at $25.30. A move below the support at $25.30 will open the way to the test of the support at $25.00. In case silver gets below $25.00, it will move towards the next support level at $24.70.

For a look at all of today’s economic events, check out our economic calendar.

Stocks Retreat As Amazon Drags Down Tech Shares

Stocks Are Under Pressure Ahead Of The Weekend

S&P 500 futures are moving lower in premarket trading as Amazon‘s disappointing quarterly results put pressure on tech stocks.

Amazon released its second-quarter report yesterday, after the market close. The company reported revenue of $113.1 billion and GAAP earnings of $15.12 per share, missing analyst estimates on revenue and beating them on earnings.

The market focused on the disappointing revenue performance and weak third-quarter guidance as Amazon forecasted revenue of $106 billion – $112 billion in Q3 2021.

Currently, the stock is down by about 7% in premarket trading, and Nasdaq futures are down by roughly 1%. It remains to be seen whether traders will rush to buy the dip in Amazon shares and other tech stocks ahead of the weekend or choose to take some profits off the table near record highs for S&P 500 and Nasdaq.

Personal Income Increased By 0.1% In June

U.S. has just released Personal Income and Personal Spending reports for June. The reports indicated that Personal Income increased by 0.1% month-over-month in June compared to analyst consensus whcih called for a decline of 0.3%. Personal Spending grew by 1% compared to analyst consensus of 0.7%.

Today, traders will also have a chance to take a look at the final reading of Consumer Confidence report for July. Analysts expected that Consumer Confidence declined from 85.5 in June to 80.8 in July.

WTI Oil Settles Above The $73 Level As Traders Shrug Off Virus Worries

WTI oil managed to get above the $73 level and continues to move higher as traders bet that demand for oil will continue to increase despite the recent surge in the number of new COVID-19 cases which was caused by the Delta variant of coronavirus.

Recent data indicates that crude inventories are moving lower, which is bullish for oil. Today, oil-related stocks will have a good chance to continue their rebound after strong results from Exxon Mobil and Chevron.

For a look at all of today’s economic events, check out our economic calendar.

Daily Gold News: Friday, July 30 – Gold Broke Above Consolidation

The gold futures contract gained 2.01% on Thursday, as it broke above its July 15 high of $1,835. Precious metals’ prices have followed weakening U.S. dollar after Wednesday’s FOMC Statement release. This morning gold is retracing some of yesterday’s advance, as we can see on the daily chart (the chart includes today’s intraday data):

Today gold is 0.4% lower, as it’s trading slightly below $1,830 mark. What about the other precious metals? Silver is 0.1% higher, platinum is 1.1% lower and palladium is 0.5% higher. So precious metals’ prices are mixed this morning.

Yesterday’s Advance GDP and the Unemployment Claims releases have been worse than expected. Today we will get Personal Income, Personal Spending and Chicago PMI Releases, among others.

Where would the price of gold go following Wednesday’s FOMC news? We’ve compiled the data since January of 2017, a 53-month-long period of time that contains of thirty six FOMC releases. The following chart shows average gold price path before and after the FOMC releases for the past 36 releases. The market was usually declining ahead of the FOMC day. Then it was going up for a week-long period. We can see that on average, gold price was 0.49% higher 10 days after the FOMC Statement announcement.

Below you will find our Gold, Silver, and Mining Stocks economic news schedule for today:

Friday, July 30

  • 4:00 a.m. Eurozone – German Preliminary GDP q/q
  • 8:30 a.m. U.S. – Personal Income m/m, Personal Spending m/m, Core PCE Price Index m/m, Employment Cost Index q/q
  • 8:30 a.m. Canada – GDP m/m, IPPI m/m, RMPI m/m
  • 9:45 a.m. U.S. – Chicago PMI
  • 10:00 a.m. U.S. – Revised UoM Consumer Sentiment, Revised UoM Inflation Expectations
  • 9:00 p.m. China – Manufacturing PMI, Non-Manufacturing PMI

For a look at all of today’s economic events, check out our economic calendar.

Paul Rejczak
Stock Selection Strategist
Sunshine Profits: Analysis. Care. Profits.

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Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were 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 believed to be accurate, Paul Rejczak 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. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s 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. Paul Rejczak, 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.

 

Will Silver Outperform Gold In Q3 2021?

Sentiment towards the precious metals complex turned bullish after Fed Chair Jerome Powell stated that the rising cases of the Delta variant may weigh on a recovery in the labour market and that the central bank was still “along away” from considering raising interest rates.

The main takeaway from the Federal Reserve’s July policy meeting was that the central bank remains firmly committed to their massive quantitative easing program, while allowing inflation to run hotter than usual, for some time yet.

Currently, Silver prices are trading near $25 an ounce, which presents an incredible opportunity for traders to gain exposure in the metal before it really takes off.

Silver is not only an excellent inflation hedge, but it’s also a key component in everything from electric vehicles, renewable energy to 5G technology. Based on our proprietary research, photovoltaic demand for silver could exceed 3000 tonnes in 2021, while the 5G rollout – which is only just beginning – will be a major driver of demand for years to come.

Goldman Sachs see silver prices rising to $33 an ounce in H2 2021, boosted both investment and industrial demand for the precious metal – and our research suggests similar.

In my opinion, Silver is still definitely the best trade right now and any substantial pullbacks should be viewed as buying opportunities heading into August.

Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:

For a look at all of today’s economic events, check out our economic calendar.

Natural Gas Price Fundamental Daily Forecast – Despite Bullish Fundamentals, the Market is Lower for the Week

Natural gas futures are trading lower early Friday amid profit-taking and position-squaring ahead of the weekend. According to NatGasWeather, the heat is expected to taper some in the coming days, which may be one of the reasons for the early weakness.

“National demand will be much lighter this weekend and next week as a series of weather systems over Canada advance aggressively across the eastern half of the U.S. with comfortable highs of 70s to mid-80s,” the firm noted.

At 06:57 GMT, September natural gas futures are trading $3.970, down $0.089 or -2.19%.

On Thursday, the futures contract jumped 2.32%, helped by strong fundamentals and a bullish government storage report. The storage surprise reminded investors that there is a supply/demand imbalance that could create problems this winter.

Weekly US Energy Information Administration Storage Report

The U.S. Energy Information Administration (EIA) reported Thursday that domestic supplies of natural gas rose by 36 billion cubic feet for the week-ended July 23. Ahead of the report, NGI wrote that this week’s EIA storage report was expected to show an injection into storage in the low 40s Bcf.

NGI also reported a Reuters poll found projections ranging from a build of 33 Bcf to 52 Bcf, with a median injection of 42 Bcf. Results of a Bloomberg survey showed estimates spanning 34 Bcf to 49 Bcf, with a median of 41 Bcf and a Wall Street Journal survey produced estimates from 39 Bcf to 47 Bcf with an average of 43 Bcf. The NGI model predicted a 49 Bcf injection.

Total stocks now stand at 2.714 Tcf, down 523 Bcf from a year ago and 168 Bcf below the five-year average, the government said.

Daily Forecast

Today’s early weakness has turned the market lower for the week. Given the bullish fundamentals including tight supply, low production and solid liquefied natural gas (LNG) demand, this move suggests that traders think the market is overpriced and may be due for a short-term pullback.

Daily September Natural Gas

Technically, the main trend is up, but momentum has been trending lower since Monday. A trade through $4.165 will signal a resumption of the uptrend. The main trend will change to down on a move through $3.154. This is highly unlikely however.

The minor trend is down. This is controlling the momentum. A trade through $3.837 will indicate the selling pressure is getting stronger.

The nearest support zone is $3.869 to $3.799. This zone stopped the selling on Wednesday at $3.837.

On the upside, the resistance comes in at $4.001 to $4.040. Trader reaction to this zone could determine the direction of the market on Friday. Look for a strong tone to develop on a sustained move over $4.040, and this week’s weak tone to continue on a sustained move under $4.001.

Buyers could return if the price is right, especially with NatGasWeather predicting heat intensifying August 6-11 with most of the Lower 48 warming back above normal with highs of mid-80s to 100s for a return to strong national demand.

“The big picture still looks bullish” for futures “and could be aided by any hotter weather shift,” Bespoke Weather Services said. “We say it over and over again, but until production can get to 2021 highs, it is difficult to see enough loosening in supply/demand balances to make the market more comfortable with the storage situation.”

For a look at all of today’s economic events, check out our economic calendar.