I had the pleasure of being a return guest on live radio at Dr. Dave Janda’s Operation Freedom today. It was an opportunity to announce the gold price levels we can expect as it climbs into uncharted territory, and resistance levels for silver going forward as it attempts to challenge its 2011 all-time high. Here is the interview on YouTube with notes on all topics covered and links and charts to follow along the way. To view a larger version of any chart below, right-click on it and choose your “view image” option.
- U.S. Credit Rating Downgraded After Friday’s Market Close
Fitch downgrades US outlook to negative from stable… “warning of high debt and deficits made worse by the coronavirus downturn…. to reflect the ongoing deterioration in the US public finances and the absence of a credible fiscal consolidation plan… The US is home to the world’s worst coronavirus outbreak, which has caused tens of millions of layoffs and a historic 32.9 percent collapse in GDP… High fiscal deficits and debt were already on a rising medium-term path even before the onset of the huge economic shock precipitated by the coronavirus. They have started to erode the traditional credit strengths of the US… The agency affirmed the US’s AAA rating but said it expected government debt to hit 130 percent of GDP by 2021.” – AFP, Jul. 31
Following Moody’s and S&P credit downgrade of the U.S. at the tail end of the Great Financial Crisis, the price of gold spot spiked from $1,620 in August 2011 to the former all-time high in September 2011 of $1,920.74 .
- (Real) Interest Rates Have Been Negative (NIRP) for a Long Time (nominal rates minus the rate of inflation).
10-year Treasury Note Interest Rate 1963 – July 31, 2020 close at 0.54% …
Fed Reserve Jay Powell: “We’re Not Even Thinking About Thinking About Raising Rates” – WSJ, Jun.10
The Fed said it doesn’t expect to lift its benchmark interest rate until 2023 – MarketWatch, Jun. 10
Fed Outlook Turns Gloomier as Coronavirus Spreads… “Central bank leaders warn of hits to confidence, higher joblessness and more business bankruptcies.” – WSJ, Jul. 28
Fed Weighs Abandoning Pre-Emptive Rate Moves to Curb Inflation – “Fed officials would take a more relaxed view by allowing for periods in which inflation would run slightly above the central bank’s 2% target, to make up for past episodes in which inflation ran below the target…. It would be a significant change in terms of how they are thinking about” the trade-off between employment and inflation… The changes on their own will do little to provide more support to the economy right now because investors already understand that the Fed isn’t likely to raise interest rates for years.” – WSJ, Aug. 2
U.S. Inflation as of June 2020:
“The charts show two SGS-Alternate CPI estimates: One based on the pre-1990 official methodology for computing the CPI-U, and the other based on the methodology which was employed prior to 1980.” – ShadowStats
Central banks’ nominal interest rates vs. real interest rate (NIRP & ZIRP) as of July 31:
$USD dollar monthly chart as of Jul. 31, 2020 close…
- Mainstream Financial Media: Commitments of Traders Report (CoT) is Now Bearish on Gold (the short-squeeze part of the story is accurate).
A Mighty Short Squeeze May Be Building in Gold… “This creates a specific problem for swap dealers, which are run by the bullion banks that make a market in gold. At present, as the following chart shows, they (Commercials) are very “short” gold, meaning they need the price to decline.” – Bloomberg, Jul. 27
Jan Nieuwenhuijs across the pond in the Netherlands set the record straight on his Twitter feed:
I opined on numerous occasions of how the Futures market functions with regard to positioning on the CoT reports. The most recent was last summer:
Talked Out of a Gold Rally While Whining? A Mid-June Review and Technical Analysis… “Almost without exception, the Commercial traders build short positions during a rising price trend and Large Specs add long positions to capture the momo play.” – TraderStef, June 2019
In that article is a custom graphic of the CoT vs. gold, and points out a rare occasion in the fall of 2018 when the Commercials briefly flipped to net-long. Other rare episodes include a short blip in 2015, and intermittently between 1997 and 2001 as gold exited a 20-year bear market and entered a primary bull (accumulation phase vs. secular bull), which transitioned into a raging secular bull market that lasted until Sep. 2011. Here is a big picture view of the CoT vs. gold futures net-long vs. net-short. Take note of the white arrows:
- Gold & Silver Technical Analysis
If you have not reviewed my charts in “Gold & Silver Chart Exclusive for Precious Hour Subscribers – It’s Showtime!,” published on Jul. 21, do that now before digesting the following technical analysis.
Gold Futures price seasonality…
Gold has reentered a secular bull run following the primary bull accumulation phase. Expect volatility.
Gold Spot monthly chart as of Jul. 31, 2020 close with Fibonacci Extensions beyond the all-time high…
Gold Spot daily chart as of Aug. 3, 2020 at 5:40am EST…
Silver has taken out the important $21.49 Fibonacci level and is on its way to challenging its all-time high. Expect volatility.
Silver Spot monthly chart as of Jul. 31, 2020 close…
Prince – Gold (Official Music Video)
Plan Your Trade, Trade Your Plan
TraderStef on Twitter