This note is coming out a little early this week as I finish loading up the moving truck and am driving 922 miles from Chicago to Florida. There were two clear winners in the metals space this week, with Copper reaching its highest level since 2011 and Palladium making a new all-time high. One thing they say about "all-time highs" is that it is a very long time.
I had the pleasure of contributing to Kitco's video commentary on Wednesday hosted by David Lin. I always enjoy our discussions as they hit on various topics and cover several different commodities. After each video gets posted, I frequently have listeners reach out and ask me specific questions surrounding Gold and Silver. The repeating narrative I am hearing is that "Gold should go up because of rising inflation like in the 1970s."
Addressing the 1970's, specifically 1976-1980, rising Oil prices coupled with rising unemployment and multiple periods of declining growth caused "Stagflation." Stagflation is one of the best performing periods for Gold. Looking back to the continuous chart, we can see how these periods have responded.
Shifting to the near-term while looking at Thursday's market action, Gold and Silver are sharply off their overnight highs and each down about 1%. A reversal in Treasuries has been a leading factor impacting precious metals. Further tailwinds to that narrative came with a strong than expected Q1 GDP at 6.4% versus 6.1%. The dovish Fed rhetoric and the talk of $4 trillion in spending in Washington has bond buyers very nervous. We created a guide that will provide you with all the Technical analysis steps to create an actionable plan used as a foundation for entering and exiting the Gold market. You can request yours here: 5-Step Technical Analysis Guide to Gold.
To make matters worse, the U.S. Dollar is strengthening from overnight lows. Overall, Gold and Silver exuded some exhaustion, struggling to extend gains as other commodities surged in recent days. We will look for constructive technical groundwork upon this pullback to find a buying opportunity.
Technicals: Price action has sliced through major three-star support levels for each Gold and Silver, levels that buoyed waves of selling over recent sessions. All is not lost quite yet though, Gold had two strong support layers, and the second comes in a rare major four-star support at 1752.7-1756.1. Can Gold respond to here and manage to settle the week above this level? For Silver, it is now decisively below the 50-day moving average but faces first key support at 25.79 and major three-star support just below. If you would like to be up to date on the developments of our specific strategies in the futures and commodities markets, please register for a Free two-week trial by clicking on the link here: The Blue Line Express Two-Week Free Trial Sign up.
Resistance: 1777-1779*, 1785-1787**, 1796.3-1800**
Support: 1752.7-1756.1****, 1736.3-1737.9***
Resistance: 26.25**, 26.47**, 26.74-26.89***, 27.63-27.68***
Support: 25.79**, 25.45-25.59***
Good luck and good trading,
Chief Market Strategist
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