By: Jeff Cooper
Hit and Run Morning Stock Report: January 5th, 2023
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Gold In 2023
“It’s kind of fun to do the impossible.” Walt Disney
One surprise for the macro-economists this year has been the divergent action in gold and real interest rates
They have moved inversely. Yet while real rates soared past their 2018 peak, gold remained far above its corresponding 2018 low.
This relative strength in gold is one more reason to be bullish on gold—especially with real rates due to falling back into negative territory.
In September, real rates turned down from their year-long rise to 12-year highs--leaving them vulnerable to a year or two of retrenchment.
Succinctly, the turn-up in gold coincided with a top in U.S. real interest rates.
Gold’s turn-up came on cue in September 2022 on the anniversary of the 11th anniversary of the important 2011 top. Likewise, the preceding top occurred in August/September 2020-- two years prior.
This is why I wrote last week that September 2023 should be a turning point in the precious metals complex as it is 12 years---a Fibonacci 144 months from the big 2011 peak.
It will also be three years from the August 2020 peak…the all-time high.
Let’s examine the above daily gold using the magic of trend channels.
One of the best ways to create a true trend channel is to find a “most hits” trend line.
I started with the middle blue rising trend line and paralleled the upper and lower lines.
Note how the bottom blue rail caught the low and the upper blue rail warned of last year’s 6-7 month correction.
It spike above the line with authority but then broke down with vigor as well warning of a likely false breakout and Buying Climax.
The backtest in April sealed the deal for the bearish near-term interpretation.
Notice the bounce off the middle blue rail from May.
When the middle blue line was snapped, gold was water-falled.
Then, once again it rallied to backtest the middle blue line before plunging.
Now gold is flirting with the same middle blue Ghost Line again.
It looks like it wants to clear it with a run to 1920….the middle red declining channel.
1921 is the major peak in September 2011.
It is possible another short-term bearish backtest (green ellipse) is playing out
Be that as it may, you can see why I say a push to 1920 could be followed by a shake-out to 1800ish.
This could get The Street very bearish just prior to a rocket higher.
In other words, if this scenario plays out, a shakeout from the 1900 + region to 1800 would pull the rubber band back for an attack of the double tops (the circled black ellipses).
Conclusion. Notice the confluence of the upper blue and red Ghost Lines between 2020 (price) and 2070.
Clearing that region should see accelerated momentum.
In the meantime, the Square of 9 below shows that 2080, the all-time high level, is 180 degrees straight across and opposite January 21st.
This sets up a turning point near the January monthly OPEX.
Red is 2080.
Purple is Jan 21.
My expectation last week is that gold (and the metals) could see a January spike high with a shot to extend into March.
March 2023 is the one-year anniversary of the March 2022 major top.
This September’s cycle low saw a Pinocchio/undercut with a nominal new low in November that saw a large range outside the up month.
Range precedes price often and November’s outside-up month perpetuated upside continuation and three consecutive monthly higher highs.
Notice that gold’s 3 Month Chart turned down in November for the first time since the March 2022 high.
It has turned up here in January so we must watch it like a hawk now.
Even in a bullish continuation pattern, we could get a knee-jerk reaction on this turn-up of the big 3 Month Chart.
The daily chart above shows a breakout over a Ghost Line.
My expectation is that gold could push higher to the 1900 region and then pull back in a Wave 2.
If so the pullback should be from the 1900 region finding support at/above 1800.
Notice that the 1900 region ties to the 2011 peak and the bottom of the region of the 2020 and 2022 monthly high bars.
So this is pivotal for gold.
If we pull back in the coming weeks we could spike into March.
If we spike from here into March, there is a possibility that we correct into September, 144 months from September 2011 major high.
The bottom line is a Wave 3 acceleration is on deck to start sometime this year.
Timing is a tricky thing, but the idealized time frame is September cyclically.
Notably, March which has exerted its influence of late is 180 degrees/days from September.
Importantly, despite central bank efforts to beat down inflation, gold shrugged.
There’s a message in that 2022 performance.
It reminds me of the big bond bear in 1994. Stocks held their own.
When bonds stopped going down in December 1994, the lid came off the equity market with a runaway move from 1995 to 2000.
When the Fed panics, which is its nature, the lid will come off.
Gold could triple.
The bottom line is gold is set to do the “ impossible”. It will be fun. For the bulls.