Gold GOLD PRO WEEKLY, July 10 - 14, 2023

Sive Morten

Special Consultant to the FPA

Today we prepare general report - the one that like to read most of all, without a lot of indicators, just interesting to read easy thoughts and general comments on situation, based on recent news. In fact the "heavy data' we have discussed yesterday in our FX report. We will consider few stages of any crisis/recession period, take a look how gold historically performed on every stage, identify at what stage we are now and discuss recent political events.

(based on Matterhorn Asset Management analysis)

It is considered the most anticipated recession of all time – the one looming in the US. And although countless indicators ranging from the yield curve, the Leading Economic Index (LEI) and PMIs to producer prices and international trade volumes have been pointing to a recession for months, it has not yet materialized in the USA. However, the labor market, which has been more than robust up to now, is now showing the first signs of a slowdown. A labor market which, due to demographic change, is structured completely differently than it was in the 1970s. Initial jobless claims have been on an upward trend since last fall.

Despite this increasingly widespread gloom, it is not too late to ask the question: Which asset classes are now proving to be good investments in a recession, and which are bad? To this end, we have conducted an in-depth analysis. The Incrementum analysis consider any recession with five different stages. Dividing a recession into different phases can help reduce the risk of losses and maximize gains. It helps investors develop a balanced investment strategy that takes into account the different phases of a recession. This is because, as will be seen, individual asset classes sometimes exhibit significant differences in performance across the five recession phases. After all, each of the five recession phases has unique characteristics.


  • The run-up phase (phase 1) of a recession is characterized by burgeoning volatility on the financial markets. In this phase, the market increasingly starts to price in an impending recession;
  • In phase 2, the so-called initial phase, there is a transition between increased uncertainty and the peak of the economic slowdown. In this phase, the slowdown in economic momentum can also be documented for the first time with negative macroeconomic data;
  • In the middle phase (phase 3), the negative economic data manifest themselves. It also marks the low and turning point of the recession;
  • In phase 4, the final phase, a stabilization of the economy gradually occurs, resulting in a return of optimism on the markets;
  • In the fifth and final phase of the recession model, the recovery phase, the economy returns to positive growth figures.
Official recession declarations are always announced with some delay, be it according to the criteria of the National Bureau of Economic Research (NBER) or other alternative definitions such as the technical recession definition of two consecutive quarters of negative GDP growth. It often takes months for the final quarterly GDP numbers to be released. This poses a major challenge to investors, who should always be one step ahead of the actual development. Therefore, it is of great importance to recognize a recession at an early stage in order to position oneself as an investor in the best possible way.

Let’s now look at the performance of the S&P 500 as well as gold and the BCOM index, which tracks commodities, during the last eight recessions since 1970 and broken down into the five recession phases:


Based on the recession phase model, it is therefore advisable to reduce the share of equities in the portfolio at an early stage. Once the peak of the recession has been reached, an increase in the equity share then makes it possible to benefit from the subsequent recovery rally.

Unsurprisingly, gold has lived up to its reputation as a recession hedge, averaging an impressive 10.6% performance throughout the recession. Most notably, gold has averaged positive performance in all phases of the recession. Gold’s largest price increases are seen in Phases 1 and 2, likely due to the increased uncertainty in the markets during these phases. Another explanation for gold’s strong average performance in Phase 1 is the 120.1% price increase in the initial phase of the recession in 1980, which is an outlier.

In the first three phases of a recession, gold tends to be ahead of equities. It is interesting to note, however, that the tide turns as soon as the first signs of an economic recovery appear, and market uncertainty gradually subsides. In the terminal and recovery phases, equities can often outperform gold. Especially in the early stages of the model, gold manages to act as an ideal recession hedge. It provides excellent diversification, helping to stabilize portfolio performance in times of economic turbulence.

an increased weighting of commodities in the run-up to and recovery phase of a recession is beneficial. This finding is also supported by theoretical considerations suggesting that precious metals, especially gold, are a suitable hedge against uncertainty before the peak of a recession. In addition, energy and base metal commodities prove to be particularly beneficial due to the reflationary effect associated with picking up growth after the peak of a recession.

Finally, we also want to take a look at silver and the mining stocks.

Silver is not a reliable recession hedge, with an average performance of -9.0% throughout the recession. This is probably because silver is perceived much more as a cyclically sensitive industrial metal than as a monetary metal in the midst of the downturn.

Mining stocks also showed a positive performance over the entire recession, but this was only about half as high as that of gold. The significant decline in phase 3, the low point in the recessionary trough, is a major contributor to this.


All these theoretical points sounds good, but where we're now? Here I express only my view, which is arguable of course. But it seems that we're somewhere in 2nd half of Stage II. Big gold rally to 2000+$ area corresponds to analysis of Stage I. Official confirmation of recession has happened with recent Fed minutes and earlier we already have got nominal two negative GDP's in a row. The only thing that should happen is real confirmation of theoretical suggestions. Other words speaking - numbers should be confirmed by real life. Also - gold shows very shy pullback, less than 3/8 of the rally, despite we have outstanding interest rates pressure above 5% and more to come.

But you could ask - it doesn't correspond to S&P performance. It should falling while it is not. True. Still we have a lot of "but" objections. First is, outstanding liquidity pumped in system two years before. Second - market is growing narrowly, leading by FAANG and AI shares only. Major source of the growth is the same excess liquidity - corporate buybacks financed by debt, and households investments. Making adjustment on inflation the S&P growth will be significantly less. It just mean that S&P performance on Stage III might be much worse than usual, accumulating all negative effect that had have to happen on Stage I and II.

Since the debt ceiling deal, the US Treasury has added a staggering $851 billion to the national debt. It needed to replenish cash reserves and unwind the extraordinary measures it took to keep the government running while it couldn’t borrow any money. But the pace of borrowing even surprises me. WolfStreet called it “an amazing freakshow.”

Goldman Sachs analysts had projected that the US Treasury would have to sell up to $700 billion in T-bills within six to eight weeks of a debt ceiling deal just to replenish cash reserves spent down while the government was up against the borrowing limit. The Treasury blew through that number in just four weeks.

Even with the big borrowing spree, the Treasury Department has only partially refilled the Treasury General Account. (Basically, the federal government’s checking account.) The TGA cash balance increased from $23 billion on June 1 to $465 billion as of June 30. This fell short of the Treasury’s $550 billion goal and remains well below the nearly $600 billion balance “consistent with Treasury’s cash balance policy.”

Meanwhile, the Treasury must pile even more debt on top of that to cover massive monthly budget deficits. In order to cover current spending and finish replenishing the TGA, the Treasury estimates it will have to sell $733 billion in marketable securities during the third quarter. Who is going to buy all these bonds? With the Fed still engaged in the inflation fight, the Treasury can’t depend on the central bank to put its thumb on the bond market and create artificial demand through quantitative easing. (I think this is coming in the not-too-distant future.)

That means that the Treasury will have to sell bonds cheap enough with high enough yields to stimulate enough demand to absorb all the supply. But that means higher interest rates — not a good scenario for a government trying to borrow trillions of dollars. This is why the national debt is called a ticking time bomb.
WolfStreet pointed out another problem. The Treasury will soak up a lot of liquidity with its borrowing spree.

Refilling the TGA pulls liquidity from the markets, in the opposite way that drawing down the TGA had added liquidity to the markets. Stocks had soared during the drawdown phases, and they had swooned during the first refill phase from late 2021 through April 2022, when the TGA absorbed nearly $1 trillion.”

This will create upward pressure on other interest rates, including those on corporate bonds, mortgages, auto loans and other debt instruments. How this will play out remains unclear. But we can say this with confidence: the spending will continue. The debt will continue to rise. And if the Fed keeps rates elevated, paying the interest on the national debt will become a big problem.


China added to its gold reserves for an eighth consecutive month, with economic and geopolitical risks as well as a desire to move away from the US dollar driving the purchases. People’s Bank of China holdings of bullion rose by 680,000 troy ounces last month, according to official data released Friday. That’s equivalent to 23 tons. Total stockpiles now sit at 2,330 tons, with around 183 tons added in the run of buying from November. But this is just official numbers. In reality, it is an opinion, that China owns two times greater gold amount. While foreign reserves are counted for ~ $6 Trln - more than enough funds to make a global party! China’s shadow reserves are big. Bigger than the formal reserves of the world’s second largest holder of reserves (Japan). Bigger than the assets of the world’s largest sovereign wealth (Norway, though Singapore would be in close competition if its sovereign fund disclosed its true size).

The scale of these hidden reserves — foreign current currency assets that aren’t formally counted as “reserves” — also highlights an important fact that is often forgotten amid all the talk of China’s domestic debt problems. Globally China is still a massive creditor, and the weight of China’s massive accumulation of foreign exchange is still felt around the globe.


Russia has confirmed that it plans to launch a gold-backed BRICS currency. This issue will be on the agenda at the BRICS meeting in South Africa in August. Indeed, as P. Schiff recently said - Why own bitcoins and other assets if you can own a digital asset backed by gold and solve the problem of transportability of this gold to anywhere in the world in 3-5 seconds and the delivery price is less than $0.01?
Let's go further. With China imposing the export restrictions on two metals critical to the semiconductor, telecommunications and electric vehicle industries, in an escalation of the country's technology trade war with the US and Europe. Neon gas market is totally under Russian control. High-purity neon is used in laser installations used in the production of processors, controllers and other kinds of chips. They are used in all modern technology, including cars and smartphones.
The Ministry of Industry and Trade said in a statement that Russia will independently determine who will have access to inert gases. If any of the major players want to buy something, they can send a request to the government. This is not new event and has happened in winter, but in the shed of new China sanctions light on germanium and gallium takes quite different tune.

China Is Buying Gas Like There’s Still an Energy Crisis.The nation is on track to be the world’s top importer of liquefied natural gas in 2023. And for the third straight year, Chinese companies are agreeing to buy more of it on a long-term basis than any single nation, according to data compiled by Bloomberg News. China is looking well into the future to avoid a repeat of energy shortages, while also seeking to fuel economic growth.


And now recall how stubborn EU was with no wish to sign long-term contracts with Qatar.

Ex-CIA advisor predicts date when U.S. dollar hegemony will collapse. Former CIA and Department of Defense advisor and investment banker James Rickards predicted that August 22 will be the day the U.S. dollar’s status, as the world reserve currency and medium for exchange will formally collapse. Many factors are worth considering, including the weaponization of the dollar against Russia’s economy amid the conflict in Ukraine, the U.S.’ own national debt of $31 trillion, and recent talks on the part of the BRICS+ group to create an alternative trade and reserve currency that would rival the dollar.

“On August 22, about two-and-a-half months from today, the most significant development in international finance since 1971 will be unveiled,” Rickards writes in reference to the upcoming BRICS+ Leaders Summit which will unveil plans for substituting the dollar in global trade.

What is interesting to note is that on that same day in 1971, August 22 was also the day the U.S. dropped the gold standard. “It involves the rollout of a major new currency that could weaken the role of the dollar in global payments and ultimately displace the U.S. dollar as the leading payment currency and reserve currency,” Rickards added, noting that the shift could span over a period of “just a few years.”

Ballooning debt in the coming years will force the Federal Reserve to buy massive amounts of bonds again, according to Michael Howell, managing director at Crossborder Capital. Writing in The Financial Times on Wednesday, he predicted that the central bank will have to abandon its quantitative tightening plan, which would roll back prior stimulus by shrinking the Fed's balance sheet. Instead, the Fed will return to its quantitative easing scheme, lifting stocks in the process, he added.

"Investors should therefore expect a continuing tailwind from global liquidity instead of last year's severe headwinds. This should prove good for stocks, but less positive for bond investors," Howell said. Despite forecasts of a looming funding drain, the liquidity cycle has already passed its bottom and will trend up over the coming years, he said. In coming years they will probably have to bailout debt-burdened governments, too," he warned.

According to Congressional Budget Office estimates cited by Howell, the Fed's Treasury holdings would have to rise to $7.5 trillion by 2033 from nearly $5 trillion today. But he thinks that forecast is too low.

"More realistic numbers point to required Fed Treasury holdings of at least $10 trillion. That translates pro rata into a doubling of its current $8.5 trillion balance sheet size and will mean several years of double-digit growth in Fed liquidity," he wrote.

Conclusion is below...

So, based on all this stuff, crisis is unavoidable, as well as new QE whatever form it takes. Bank of America reports that $7.8 trillion of cash has accumulated in cash funds around the world. Everybody scares of recession. But it seems that more important question is where this money will go after it - in our example on Stage IV and V. it is necessary not only to have a recession, but also the rate will drop back to zero, and preferably even below, so that for sure. Because when, so to speak, there will be no victory over inflation, no one will want to see how money stupidly burns from it at a zero rate.

The money will go, of course, to gold, as a traditional protective asset (take a look what happened to the price of gold as soon as QE started from the Fed), as well as to commodities and commodity companies (through the appropriate funds and directly), which, in fact, will accelerate their price in the coming years. As a result, the raw materials super-cycle will reach a new peak over the next 15 years. Somewhere here is the idea of working out the narrative about the BTC as "protection against inflation", but comparative "pennies" can go there, which, however, should be enough.

Why not to the stocks? Because companies will objectively get worse in a recession, that is, their indicators go down, and after the euphoria subsides, the market should, in theory, begin to look more soberly at the stock market and company valuations. But even if a sober look comes across the problem that there is simply nowhere to put money, then the broad market will clearly not rise above the current levels /multipliers.

As the Western Empire is breaking up currently, the Eastern & Southern Empire is gaining ever more significance. More than 30 countries want to join the BRICS and many also the SCO (Shanghai Cooperation Organisation). There is also the Eurasian Economic Union (EEU) which exists since 2014 and consists of several ex Soviet Union States.

The enlarged group will consist of more than 40 countries and represent around 2/3 of global population and 1/3 of global GDP. This is the area which will experience the fastest growth in coming decades as the West gradually declines/collapses under its own deficits and debt burden together with political and moral decay.

Iran recently has joined the SCO and that Belarus will also become a full member. There was a virtual SCO meeting on July 4 chaired by India. It seems like more than a coincidence that the meeting takes place on the US Independence Day! The BRICS meeting in Johannesburg takes place on Aug 22-24 with Macron trying to gatecrash. But he was rejected. Macron is devious and has always tried to ride several horses simultaneously. But BRICS is not interested in opportunists happy to turn with the wind of success.

At some point, these three groupings might be merged into one, with gold playing a central role. Hardly there will be one gold backed currency at a fixed parity but rather that gold will float at a much higher value than currently with a link to BRICS currencies. The trust in the US and the dollar is now coming to an end after the trigger of confiscation of all Russian assets that was fixed in the US law(!!!). Who would want to hold their assets under the control of a government what can just steal it at will.

The West has not got one single statesman who can pull it out of the swamp. Many countries are now turning to the right like Italy with Meloni and Spain also probably swinging right in July with the Partido Popular and the far right Vox party. Macron is extremely unpopular and Le Pen now leads the opinion polls with 55%. Scholz in Germany has also failed badly and the Nationalist AfD is now ahead of the ruling social democrats in the polls.

The UK is currently the only major country that is likely to turn to the left at the next election in 2025. No one believes in the weak Sunak and Labour leader Kier Starmer is the clear favourite to win. But sadly he is not a statesman either.

So with a motley crew of weak leaders in Europe, things don’t look any better if we look west to the US. Sadly, the US hasn’t got a leader at all. It seems that Biden has got his strings pulled by an unelected and unaccountable team around him. This is an extremely vulnerable situation for what has been the mightiest country in the world. A major military power without a leader is very dangerous. As empires die, weak leaders are the norm and seem a necessary condition to exacerbate the inevitable collapse.

“In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military industrial complex. The potential for the disastrous rise of misplaced power exists and will persist. We must never let the weight of this combination endanger our liberties or democratic processes.” - President Eisenhower, 1950s

it is not just the decline of the West which is happening in front of our eyes, but also the emergence of an extremely powerful cooperation of 40 plus countries which will drive a global commodity based expansion on a scale never seen before in history. Just take Russia. With $85 trillion of natural resource reserves, they will play a major role in this real physical asset expansion as long as the country holds together politically

Lately some big names agree with me whether it is Jamie Dimon of JP Morgan- “Don’t touch US bonds”- or Ray Dalio the very successful hedge fund investor – “It would take 500 years to get the money back”. Yes, but what money??

Firstly, whether it is the Fed or the ECB, their balance sheets are insolvent and no one can ever get real money back. At best it would be another worthless debt/money instrument like CBDC (Central Bank Digital Currency) that would lose 99-100% over 1 to 50 years. Not the best of odds to say the least. The US 10 year treasury bond peaked in 1981 at just below 16% after a 39 year downtrend it bottomed in 2020 at 0.55%. That was the bottom of the interest and inflation cycle. We will now see higher inflation and rates for decades. As major central banks are pressing for higher rates, one wonders if they are aware of the consequences. Because in a debt infested world, higher rates mean a high risk of default, both private and sovereign.

So buying anything commodity based will be a clear growth area for decades. In this group is not just commodity businesses but companies that supply the commodity companies with software or hardware. In addition to the precious metals market whether physical or stocks, we see the potentially most interesting areas being oil and uranium.


You should not hold gold when:
  • There are no deficits and there is a balanced budget
  • There is negligible or no inflation
  • There is no debasement of currencies
  • There is strong statesmanship based on real long-term values
When that day comes, we will also see flying elephants as well as flying central bankers with wings! Anyone who has held a major part of his wealth in physical gold, in any country, in this century has achieved an excellent return and still has his gold asset intact. He has also been able to sleep well at night. Even the cautious investor should hold some gold and silver stocks or a fund or an index, since the upside is substantial.

There has not been a major gold discovery for 4 years.

Major gold discoveries over 1 million ounces:
  • 1990s – 180
  • 2000s – 120
  • 2010 to 2018 – 40
  • 2019 to date – 0
Not only do we have peak oil but also peak gold. So the world is facing a vicious a cycle of increasing energy costs leading to higher costs of extracting precious metals and other commodities. Relatively safe is to hold the physical gold outside your country of residence in private vaults, at least partially. The JP Morgan who has become a joint custodian of the GLD gold ETF is planning to move the gold to Switzerland.

The time has now come for the 99.5% of financial assets which are not invested in gold, silver or precious metals mining stocks to grab both the investment and wealth preservation opportunity of a life time. Even if the percentage invested in physical precious metals and precious metals stocks, goes from 0.5% to only 1.5%, there will not be enough metals or stocks available to satisfy a fraction of that increase at current prices for the metals. So the only way that the increased money flows into metals can be satisfied is through vastly higher prices.


June brings no changes to monthly picture by far, showing inside month performance. So, we could keep the same conclusions here that we've made before. Demand for the gold exists, although even gold feels drain of liquidity. Despite good resistance to external bearish factors, it is still moving lower. Although we have to acknowledge, that it shows outstanding persistence - with the rate above 5%, it has dropped just a little bit, out of the top to 1900$ area. MACD trend remains bullish, while price still stands inside the "bullish sentiment area" between YPP and YPR1. Indirectly we could suggest that despite all talks concerning "strong economy", "inflation defeat" and Fed's pivot - investors keep caution and rely on gold.

Also it should be interesting, what will happen when the price starts flirting with MACDP line, any grabbers? Maybe at the eve of BRICS summit on Aug, 22-24?


Here we have nothing definite by far. Market is doing first step in reaction on strong weekly K-area, let's see how it goes. Whether anything more or less meaningful will be formed here?


So, trend here has turned bullish, divergence is confirmed, but price action doesn't look impressive by far. In worst scenario, if market is really weak - instead of upward bounce we could get sideways action, and our task is to get it clear:


Although not cloudless, but still, our H&S has got the shape. The negative moment - that we haven't got the neckline breakout, that should come theoretically. But maybe it was just the lack of time on Friday. H&S has to help us a lot with understanding of sentiment. It is needless to tell that market should not drop under 1900 lows again to keep bullish context valid.

H&S failure increases chances on wide sideways action instead of upside AB=CD to 1950 area. Weekly K-area should help price to stay flat for some time, but anyway it almost will be a bearish verdict

If you consider long entry, on 1H chart it makes sense to consider only these two levels, with the priority to 1922 because we have a kind of B&B "Buy" here. Drop under 1914 and inability to continue upward action will be the sign of weakness. In this case it would be better to avoid new long entries for some time.

The good sign here is total erasing of ADP collapse. Thus, maybe everything is not as bad.
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Greetings everybody,

So, despite that gold has shown slightly deeper retracement yesterday - it remains above 5/8 intraday support that we've specified and far above invalidation point of 4H H&S pattern. THus, it still keeps short-term bullish context and we consider 1948-1952 daily K-resistance area as the nearest target:

4H H&S is doing well and its nearest target is 1945 which is pretty close to daily K-area. As we will get "222" Sell here, the pullback might be around 30% or to ~1925 area:

On 1H chart picture stands absolutely beautiful - we have butterfly "Sell", inner AB-CD, which is actually the part of another small reverse H&S on top - all of them stand in the same 1945 area:

Thus, those who keep longs - should watch for 1945-1952 area as a target. Those who consider short-entry (Freddy?) - should wait when upside targets will be met and wait for reaction on K-resistance area. Potentially intraday short position could be considered around it.
Greetings everybody,

Gold keeps upward action, and coming to 1948-1952 target that we've set. On daily chart there is nothing new to comment, actually:

On 4H chart the major H&S target around 1945 also is almost completed:

But the most interesting thing is on 1H chart. Yesterday it already was interesting, as we have identified butterfly and inner upside AB-CD with the same target. But today we also could get 3-Drive Sell at the top. Thus, those who consider short entry - could use this pattern as background. At the same time, we call you to use common sense beyond the technical analysis. Weak CPI could let gold to flirt around 1950-1960 area, as daily K is rather wide - 1949-1963. So, with weak CPI it could show a bit more extended action.
For position taking initial stop is better to hide somewhere above daily K-resistance area:
Greetings everybody,

So, CPI impulse was strong enough to push gold through our 1945 intraday target. Still it stands inside while 1948-1963 resistance area. Just recall how we were gambling two weeks ago what particular factors could trigger response to weekly K-support area. And now two of our H&S pattern are mostly done and we even could start thinking about the last one - large daily H&S pattern with the neck around 1980 area. It's not ready yet, but few more dovish comments from the Fed on 26th of July and nothing seems impossible:

On 4H chart, as our OP target easily has been exceeded, now we consider the XOP at 1970$:

On 1H chart XOP stands slightly closer - 1964$:

Thus, as we've said yesterday - use common sense when you want to trade during data release. 3-Drive "Sell" that we've discussed yesterday was a really good stuff, but only if CPI would be around or above expectations. Now we do not consider new longs as price stands very close to the target. But it is also too early for taking new shorts- XOP's have to be reached first, then we need to get clear signs of bearish reactions...
Greetings everybody,

So, gold market stands in the same range by far. Here are just few thoughts on current situation. Price still inside the K-area, so, I do not see reason yet to deny the idea of downside reaction. It still could (and should) happen:

Reaction might be not started yet because of major XOP - it is not done yet. This is the reason for two things - reaction should start once XOP will be done. Second - we should wait for it, and do not take position immediately. Or, anyway you have to place initial stop above XOP:

On 1H chart, minor XOP is also not touched yet. Market shows sideways consolidation, accompanied by strong MACD divergence - sign of bullish dynamic pressure. Taking it all together, it seems that H&S pattern here has good chance to happen:

Thus, maybe it makes sense to not force events and just wait a bit. It is interesting to see what will happen on Retail Sales release.