Gold GOLD PRO WEEKLY, May 13 - 17, 2024

Sive Morten

Special Consultant to the FPA

As we've mentioned yesterday, there were no big events this week, especially gold specific events. But the progress of existed factors that are supportive for the Gold market and some political events tell that we're on the right course. It is amazing how very small event could trigger big action. I'm speaking about Initial claims report. In 99% cases it is usually ignored or triggers minor reaction. But, as market already was prepared by weaker NFP and dovish comments from the Fed and J. Yellen - minor event has triggered solid action and maybe it is already the starting point of major upside tendency continuation.

Market overview

Gold rose as traders assessed mixed signals on the US economy while awaiting a slew of Federal Reserve speakers for clues about the outlook for interest rates. A softer-than expected US jobs print last week added to evidence the economy is gradually slowing, easing fears that markets are headed for a painful rut marked by high inflation and sluggish growth. Still, inflation remains sticky, which means that there’s a limit on what the US central bank can do and that bond yields may remain in their recent ranges.

Swap traders are now cautiously upping their bets for policy easing this year, and gold investors are upping their bids on views that inflation may remain higher for longer. A record-breaking rally saw the metal hit a succession of all-time highs in April, with those gains linked to strong central-bank purchases, demand from Asian markets and haven buying amid conflicts in Ukraine and the Middle East.

Bullion became less attractive in recent weeks on signs that the Middle East is easing away from a potential full-blown war. However, Israel’s military has told civilians to move out of parts of Rafah, a possible prelude to a long-expected attack on the Gazan city. The move comes after cease-fire talks between Hamas and Israel in Cairo over the weekend stalled, the main sticking point being the Iran-backed militant group’s insistence that any truce is permanent.
"Market is likely to wait for a catalyst for additional upside, whereas the downside does appear to be capped by the limited participation from money managers," said Daniel Ghali, commodity strategist at TD Securities.

Federal Reserve Bank of Boston President Susan Collins expressed confidence that the current setting of monetary policy will slow the economy in the way she believes will be necessary to get inflation back to the Fed's 2% target.

Gold prices climbed on Friday, en route to their best week in five, with zero-yield bullion building on momentum fuelled by weaker U.S. jobs data this week that reinforced expectations for interest rate cut by the Federal Reserve. Gold gained more than 1% on Thursday after data showed a bigger-than-expected rise in weekly claims for state unemployment benefits.
The surge in gold buying is mostly technically driven, but last week's payroll data and Thursday's initial unemployment claims data are lending support, said Phillip Streible, chief market strategist at Blue Line Futures. Concerns about the employment situation are oftentimes the first crack in the economy and could pull forward the Fed's first interest rate cut," Streible added.

Investors are now looking forward to the U.S. producer price index and consumer price index data due next week, both of which could significantly impact gold and silver prices.
"If we get hot inflation or even warm inflation data next week, that's going to throw cold water on any notions that the Fed might be able to cut interest rates as soon as September," said Jim Wyckoff, senior market analyst with Kitco

Meanwhile, near-record domestic prices stifled demand for physical gold in India, the world's second-biggest consumer, during a key festival.

China’s central bank topped up its gold reserves for an 18th straight month in April, although the pace of buying slowed in the face of record prices. In April, the PBOC bought 60,000 troy ounces, according to official data released Tuesday. That’s down from 160,000 ounces in March, and 390,000 ounces in February. First-quarter purchases by the world’s central banks, led by China, were the strongest on record, according to the World Gold Council. Some market watchers have suggested that gold’s 12% rally this year has been partly driven by mystery buyers among those institutions. Gold has also been supported by increased demand from Asian investors, especially in China, where appetite has been sharpened by an under-performing economy and lackluster markets.
“Emerging market central banks drive the gold rush,” Goldman researchers wrote in a note. Bullion holdings are still only 6% of reserves at emerging central banks, half the levels in developed markets.


The only economic news this week is the signing of a free trade agreement between Serbia and China, since this agreement effectively closes the possibility for Serbia to join the EU. It means that the pressing tool that EU was using constantly to force Serbia to do what was said is not working any more. Serbia is despaired to join EU making old proverb works - "You will join EU after the Turkey. And when will Turkey join EU? Never..." So, Serbia has tired to wait and turns to the East. This tells about two things - joining West doesn't look as attractive as before. Second - it confirms acceleration of world's fragmentation.
Another moment is sharp increase in duties on the import of Chinese EV to the United States. Actually, the WTO has already, in fact, died, but an this is just an extra confirmation. All crisis events stand underway. The picture turns out to be, frankly, depressing across the Globe…

Switzerland and Sweden already have cut the rate, not be able to hold high rates pressure. Others, especially BoE and EU are under way to the first rate cut, which is obviously bullish sign for Gold, especially while inflation stands sticky. If this is not a crisis, then what is a crisis? Let's recall that all these data are given in a situation of frankly underestimated inflation. Let's imagine that Summers' estimates are correct - the decline in some indicators becomes generally double-digit, assuming that the main developed countries are doing about the same as in the United States. Besides, the US GDP is also artificially pumped by including there the stock market performance, which is obvious, by its nature has nothing common to "Product".

As we told many times, we're dealing not with recession that is cyclical by its nature and usually short lived, but, with the Structural crisis that is long term. In 1930-32, a similar crisis lasted for almost 3 years. Now, since the structural imbalances are higher, it will be deeper and longer. But it has the same specific feature - constant rate of decline.

If we take into account the role of the state in maintaining the economy, which is much higher today than 90 years ago, the monthly rate of decline is not 1% of GDP, but about 0.5-0.6%. That is, on an annual scale, it was about 10% in 1930s, and today it is about 6-7%. Since the cumulative scale of the recession should be about 55-60% of GDP for the United States, the crisis will last 8-10 years. Of which 2.5 years have already passed (since the autumn of 2021).

It should be noted that at some point the crisis may accelerate dramatically. Today it follows an inflationary scenario, rather than deflationary as it was in 1930. That's why in 1930s crisis started after stock market collapse(In October 1929). Now collapse is yet to happen. But as real GDP falls and monetary policy easing (which has already begun, this collapse is almost inevitable. Therefore, the overall economic picture looks disappointing.

Let's go further. I do not know whether you've signed it or not but in recent few weeks big media start pumping the topic of inflation but in a bit disguised manner, by showing performance of different assets. To name some, Transportation costs began to rise again. The Shanghai index tends to be a leading indicator for the global container index. Bad Weather and War Are Straining the World’s Wheat Supply - so, be prepared for price growth, although there are enough wheat in global storages, but they need something to raise inflation fears. The same is about Copper deficit etc. but now EV production is falling and the US imposes 100% duties on Chinese EV's. So, they warm up the inflation topic.

The inflationary expectations are raising again. Americans do not understand why Big Mac costs 18$, while grandpa in Twitter tells:
My housing plan would provide a tax credit that would give Americans $400 a month to put toward their mortgage when they buy their first home or trade up for a little more space. That’s breathing room.
Translating this into common language it means that "first we will weaken the dollar by printing money, putting the entire real estate sector on even greater leverage, and then, when a consumer solvency crisis occurs and real estate prices begin to fall like in 2008, a series of defaults in credit institutions will sweep across the country, which again will have to be rescued"

As a result, US consumer sentiment starts falling. This should to be expected, since the stock market has been doing very poorly since the beginning of April. That is, the welfare effect, began to weaken, which immediately adjusted the average expected income down and worsened consumer sentiment, which means they will soon begin to spend less if the situation does not change dramatically.

"Great 7" could climb higher, showing the picture of the strong market but analysts are breaking the veil. More than 40% of all companies in the Russell 2000 index have a net income loss. What is doubly interesting is that, obviously, the trend towards an increase in the share of unprofitable companies is a trend of the last 30 years, and not just the current cycle of rate increases. Even the period of zero rates did not help reverse this trend. How they are credited at a loss in principle remains a mystery.


Sentiment impacts on loan activity. In March the increase in card debt practically disappeared and amounted to a symbolic 152 million - the minimum increase since Covid. ️Another interesting point can be found inside the report: non-revolving credit grew by a modest 6.1 billion , which is slightly higher than February's 4.3 billion, and this is exactly half of the average monthly increase in non-revolving credit of 12.2 billion over the past decade.

Meantime, the number of Guru's forecasting soon collapse are raising. Yesterday we've considered it in relation to Forex market, but Martin Armstrong also said few thing about Gold. Previously we've explained why the West urgently needs big war, some people take this with suspicious. But Martin Armstrong tells the same - war is the most simple way to get out from the debt dead way:
I think the US could default on its debt as early as 2025, but probably in 2027. We have kicked the can down the road as far as we can go. It’s not just in the United States. Europe is in the same boat. So is Japan. This is why they need war. They think by going into war, that’s the excuse to default on the debt. They simply will not pay China. If they try to sell their debt–good luck. We are not redeeming it. The same thing is happening in Europe. So, once that happens, you go into war, and that is their excuse on this whole debt thing to collapse, which wipes out pensions etc. Then they can blame Putin. This is the same thing Biden was doing before saying this was Putin’s inflation. Then, with the whole CBDC thing (central bank digital currency) . . . . the IMF has already completed its digital coin, and they want that to replace the dollar as the reserve currency for the world. . . . These people are desperately just trying to hang on to power. Nobody wants to give it up, and nobody wants to reform.”

People will buy gold and silver when faith in government crashes. That is exactly what Armstrong is seeing around the world today. Gold is bouncing around the $2,300 level, and Armstrong sees “a new gold and silver rally coming soon.” War is also coming sooner than later with the announcement that Ukraine will be joining NATO as early as July. When the next war starts, Armstrong warns, “You are going to have to watch the bank because long term interest rates are going to go up. Nobody wants to buy government debt, and you are going to have to hunker down at that stage in the game.”

Sounds not very optimistic, right? But the truth is better than false rosy picture. So, what they could do with the bond market? Hardly they will allow it to fall directly. If problems arise, the market will simply be closed. You are an investor for 30 years - so sit there for 30 years. If you want to out - fine, you can sell it on the over-the-counter market for 1-2%, approximately.
And the main thing is not to miss this moment. Because then it will be impossible to jump out of almost nowhere: repo credit pyramids are tied to treasuries, and many shares bought by banks and much more. All this will be cheap, and the “right” people who have access to liquidity will collect it all from the floor. The US budget will be financed directly by the Federal Reserve, because there will be no other options anyway. Therefore, the key point in the whole scheme is the decision to stop the market. We cannot predict it, but we simply must collect facts for further analysis.

The tightening liquidity and credit conditions is the side of the same coin. Spread between utilities sector dividend yield and 10-year US Treasury yield, at 2007 lows. Nobody should have "excess liquidity" to the "X" moment, except few "right" persons.


Recently we've shared the new GS Gold report. Here we will not put it totally, but bring some extractions that seem important. Major thing is of course - new targets.
Our base case remains that gold appreciates into $2,700/toz by year-end (+17%) on solid demand from EM central banks and from Asian households, and lower interest rates. Based on our model, we estimate that:
  • A further hypothetical rise in financial sanctions equal to the rise seen since 2021 would boost the gold price by an additional 16% (Up to 3130$).
  • A one standard deviation widening in the US CDS spread—similar to the rise seen in 2023Q1 around the debt ceiling debate—would boost the gold price by another 14% (up to 3080$).

There are a lot of interesting stuff in report, you could read it, its just 5 pages length, but here is what seems to be important. Additionally to Gold, Goldman raised its price forecast for copper by the end of 2024 by 20% immediately - up to $12,000 per ton - due to the projected shortage in the market. Goldman Sachs expects very significant copper deficit in 2024. In order to fill the market's potential copper gap of 8 million tons by 2034, mining companies need prices above $10,000 - $12,000 per ton - CEO Trafigura. While Citi Announces Second Massive Copper Bull Market of This Century. Why it is important?

Based on the fact that Goldman is not only predicting growth in copper, but also predicting a rally in gold against the backdrop of sanctions and debt issues, we can conclude that they are not expecting a deflationary contraction/financial/economic crisis. Otherwise, how can a copper shortage arise and the demand for gold continue in the presence of a liquidity shortage between system participants, which always accompanies crises?

It seems that the GS apparently, are confident that any problem (by the end of the year) will be filled with money, and the economy will continue to be stimulated. It means that the US economy will go on inflationary scenario, that confirms our general look of stagflation. Excellent perspectives. The Goldmans also do not have a crystal ball, and they do not know the future, and they have no guarantees (and investment recommendations), but the direction of movement (and the logic of their mathematical model) is probably close to reality. And this might be very good news, but only for those who have, as your humble servant endlessly repeats, Gold (some could add "and BTC", but not me). I won’t ask why this isn’t shown to Westerners in the mainstream media. “Biden Strong, America Strong, Dollar Strong” and all that.

Hopefully you're not too tired from all this stuff. Ok, the last thing, it is really long term. I'll try to bring it short. The problem stands with the new debt issue by the US government. The main intrigue for the next six months is whether or not they will be able to place more than 1 trillion in government bonds for at least 2 years? This is not as trivial as it seems.

Since June 2023, the main issue was in bills, that at high degree financed by the funds of a reverse repo with the Fed, which decreased by almost 2 trillion over the year. Since March 25, the Treasury has been paying off bills (233 billion as of May 2) due to the budget surplus in April and the accumulated 0.8-0.9 trillion cash position on TGA account.

The procedure for replacing bills already was in recent history in 2021, but was picked up by excess liquidity and QE from the Fed for 4.5 trillion over two years, whereas now it is QT, so the conditions are not comparable. The current US national debt is as follows (as of April 30, 2024): bills - 5.87 trillion, notes - 13.96 trillion, bonds - 4.51 trillion, TIPS - 2 trillion, FRN - 0.55 trillion, and in total - 26.9 trillion. Bills account for about 37% in the structure of interest expenses - the maximum in modern history.

Last year, the US Treasury took the path of least resistance, issuing bills as the most accessible way, having 2.3 trillion of excess liquidity in reverse repo. Now this trick won't work. Next year, there are expected to be 5.9 trillion bill repayments, nearly 3.5 trillion note and bond repayments, and another 2 trillion in deficit financing. I do not know what they gonna do with this...

That's being said, we've provided very detailed analysis to wide amount of important driving factors, that are silenced by big media agencies. So everybody could make its own conclusions, which seem obvious to us.

Monthly chart shows nothing new by far. Although upward action starts again but May is still the inside month to April, although we hope that it might be continuation of the major tendency. The only problem here is our target stands around 2565$ while Overbought level is still here, around 2400-2430 top. But, for now we have the space until the top at least, as perspective for upside continuation:


At first glance we have nothing new here, but there is a nuance. Retail Broker chart shows no closing below 3x3 DMA, while COMEX Futures shows that it is. Although it doesn't agrees with general outlook for gold but theoretically DRPO "Sell" pattern on weekly gold is still possible, especially because of monthly overbought that is a good background for the second top. But this is the subject of the next weeks. Meantime trend remains bullish here and we keep watching for upside action:


So, Friday's trading plan has worked - daily Overbought and intraday 2370 resistance area do not let gold to grow more. But recent rally could have special meaning as we already have discussed this. The point is - all trends at all time frames are bullish. It is still some distance until monthly overbought, so, current upside action is not a retracement but continuation of the major tendency.

For example it could take the shape of extended upside butterfly, why not? Besides, its 1.618 extension perfectly fits to the monthly and weekly upside targets.


On 4H chart picture looks the same - untouched XOP around 2790 and downside reaction from 5/8 resistasnce:

On 1H chart those who have taken scalp shorts should feel well, but this is not exactly the DRPO "Sell". Anyway, with the downside AB-CD we have targets around the same levels as before. Thus, in the beginning of the week we keep watching for them and potential long entry .

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Greetings everybody,

So, daily picture remains the same, we do not exclude that current small upside action might become the big continuation of the major upside tendency. Still, with the clear barrier of daily overbought that stands relatively close - 2380-2400 area:

Yesterday market was moving lower, postponing the upside reversal:

But, once 2335 K-support has been reached and our XOP done - reversal starts. Take a look that we also get reverse H&S pattern there. So, upside bounce starts.

If it appears to be short-term, the next support level that we will be watching for is 2315$. But now if you've bought gold - be on guard during PPI report and try to protect position with the tight stop as soon as possible.
Greetings everybody,

It is not needed to talk a lot about gold - everything goes well by far. On a daily time frame, we're watching for 2400+ area as nearest target, which is Overbought level:

Upside XOP on 4H stands around 2380$, which almost the same area:

Now, let's see what CPI will bring us. Yesterday entry setup is done well, and to be honest, I do not see what else we could now. It is not best area for new longs. We do not consider any shorts by far. If you would like to buy and missed both previous entries, the only thing that you could try - use Stop "Buy" order around 2375 area. If Gold will start breaking the top - you'll get the fill and triggered stops above this level should push gold slightly higher that let you to place b/e stop. It is a bit risky, but I see nothing else for now:
Greetings everybody,

So, on Gold mostly the same stage as on EUR - upside intraday journey is done, because all intraday targets are exhaust and we have to come on larger scale, i.e. daily time frame. Here we already have the butterfly pattern. But the question is whether we get immediate upward continuation, or market still will show the pullback first:

On 4H chart our XOP is perfectly done. And now we have to search for something else... For example - reverse H&S on top that in general supports the butterfly idea on daily chart as well:

On 1H chart it is 2340-2350K support of a particular interest, because it coincides with the left shoulder bottom.

That's being said, for big patterns we have to wait. Now I see nothing to do, actually. You could try to play with existed long position if you still have it, say keep it a bit longer totally or partially, because gold could flirt a bit with 2380-2420$ area.
Greetings everybody,

So, here is also not too many things to discuss. On Daily chart we still watch for possible butterfly. Hopefully we will get good retracement and entry point:

4H XOP is done, now market shows the pullback.

The only new thing that I would like to show you today is "222" on top of 1H chart. As I said many times already, the feature of the gold is to form "222" on top. Thus, this pattern might be the starting point of the daily butterfly right wing. We do not consider scalp short positions, but it is not forbidden, if you want.

Theoretically we would not object to see gold around 2320 - 2340 support areas for long entry consideration: