What Does Momentum In Metals Mean?
“Gold looks like it wants to run to 1920…with 1921 the major peak in September 2011.”
I wrote the above in a Hit and Run special report, Gold In 2023, on January 5th.
Gold closed at 1854.96 on January 5th and went vertical since, closing at 1920.38 on Friday, January 13th, up $22 on the day.
Hit and Run members have capitalized on the move with positions in UGL, JNUG and NEM to mention a few.
In the 2023 outlook on gold, we went on to say that gold’s turn-up in September 2022 came on cue—on the anniversary of the September 2011 major top at a price of 1921.
Likewise, gold’s all-time high occurred in August/September 2020.
Below is a daily gold from the January 5th report
As is usually the case, bottoms are processed and the September 2022 bottom was tested by putting in a Bear Trap undercut low on November 3rd— two months later.
As a legendary trader, W D Gann observed, trends often turn after two periods of time on the side— be it weekly or monthly.
Gold exploded from an Undercut/Bear Trap sprung in November.
The above daily gold shows this week's overthrow of a Rising Wedge.
See the first gold chart above.
A reversal back through the Rising Wedge suggests a short-term top and a pullback to the region spelled out in the 2023 annual forecast.
The current spike is in keeping with our outlook that gold could run into late January—based on cycles, as well as a potential time/price square-out:
Gold’s all-time 2080 price high is 180 degrees straight across and opposite January 21st.
If gold eclipses and sustains above 1920 and the week of January 21st time frame it opens the door to a continuation into March.
March is opposite the September seasonal turning point and marks the important March 2022 peak which formed a double top with the Aug/Sept 2020 all-time high in this 2080 region.
In our gold outlook for 2023, we used the magic of trend channels to analyze gold’s structure seen in the second gold chart above
We wrote:
“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.
Notice how the bottom blue rail caught the low and the upper blue rail warned of last year’s 607-month correction.
How?
Gold spiked above the line with authority but then broke down with vigor as well, warning of a likely false breakout and Buying Climax. (Is the same pattern on deck currently?).
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 water-filled.
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. (A Ghost Line is a line extended into the future when it appears it has ceased to act as support or resistance and then its influence exerts itself anew). It looks like gold 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?”
2023 sets up as a major turning point for gold.
My expectations are a high sometime in the first quarter with a major low later in 2023.
One factor in this analysis is the 12 or Fibonacci 144-month cycle.
1999 saw a major bottom in gold.
12 years later was 2011 and the major high.
Another 12 years gives 2023.
So a low to high to low cycle looks in the cards.
Let’s take a look at GLD weeklies
A weekly GLD shows the all-time high in August/September 2020 and the high in March 2022 forming a big Cat Ears double top.
Notice that GLD has rallied to the high between the Cat Ears…this is the 178.179 high in early November 1921.
That said, checking the Square of 9 Wheel shows that from the 150/151 October 2022 low, 180 degrees up is 176.
GLD closed at 178.76 on Friday on the weekly closing basis nicely above the aforesaid 176 level, theoretically opening the door to higher prices.
Notice that GLD turned its 3 Week Chart up on the week of Nov 14th and pulled back turning its weeklies down. The one-week turn down followed by breakage above the Nov 14th weekly high elicited a runaway move.
Indicative of this runaway move is that the weeklies have not turned down until late November.
With GLD flirting with initial resistance and the Weekly Swing Chart stretched, it would not be surprising to see a 1 to 2-week pullback.
Checking a monthly gold shows a large range outside up month in December.
Notice how gold extended when it turned its 3 Month Chart up in January 2023–bullish behavior.
If you have been following me over the last year, reading my free updates on Twitter, or as a member of Hit and Run, I have been outlining the bottom structure in the metals into the fall of 2022.
The metals have been following the script.
That said the metals do not often provide a “graceful exit” prior to pulling back.
The same can be said that once it starts going it does not like to provide a “graceful entry”– ie a textbook pullback.
“nice pullbacks” in the metals oftentimes turn into something ugly.
Shallow pullbacks in metals are the hallmark of strong uptrends.
That said, despite GLD exceeding the 176 “square” (180 degrees off low) a short-term chart shows it is at short-term resistance.
A pullback that holds the 176 region opens the door to higher prices quickly—
Especially as the September 26th low vectors 176.
What this all means is the metals are showing very bullish indications, but there is a risk of getting aggressive here if a sharper pullback versus the shallow variety we have seen since the November 4th rally plays out.
GLD is stretched short-term as it has not turned its 3-Day Chart down since November 21st when it installed the Handle of a Cup and Handle pattern.
Where does this leave us?
Since breaking out of the Cup and Handle, GLD has been coasting up its rising 20-day moving average.
However, the rally has become somewhat vertical near term with a pullback to the 20 day now allowing the possibility of an 8-point or 5% pullback.
Hit and Run Members have our projection for the gold…and silver will likely outshine.
We have a plan based on the upside targets I see for the metals this year.
We are going to initiate new positions on a pullback.
Should we see a clear impulsive rally off such a pullback we will add to our position.
Then we will leverage our initial positions on a breakout over wherever the pullback started.
Tomorrow’s Hit and Run Report, for those of you who don’t like your macro wailing wall of worry littered with technical graffiti– what are the reasons that are lighting the fuse for gold and silver’s rally now when the dry tinder has been smoldering for several years.
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