It is sometimes frustrating to be a Gold and Silver investor. But think long term folks. Trading them is fine too, but just know there is a lot of volatility in them, more specifically Silver. With a rising US Dollar, Gold and Silver and other metals and commodities felt the pressure.
As I am writing, the US Dollar is making quite the recovery. This might change some of the intraday optimism I had for Gold, but we’ll talk about that shortly. The US Dollar is finding support at 95.50, and is finding support at my moving average. As long as the Dollar remains above this moving average, more upside is possible. Which could mean some more pressure on Gold.
But let’s spin in some positivity for us long term holders. I hold Gold and Silver because I am betting against the debt. Essentially, central banks will have to keep printing money and keeping interest rates low. There was a guy you probably heard of, his name is Ray Dalio, who opened the world’s eyes to the ‘cash is trash’ concept a few years ago. Before Covid, Dalio was warning about cycles and how the central banks might have an issue. Just today, Dalio is back reiterating that cash is not a safe investment even with this heightened market volatility.
“Cash is not a safe investment, is not a safe place because it will be taxed by inflation,” the founder of the world’s biggest hedge fund said Tuesday on CNBC’s “Squawk Box.”
“You can reduce your risk without reducing your returns. You will not market-time this. Even if you were a great market timer, the things that are happening can change the world, so it changes what could be priced into the market,” Dalio said.
“You can’t raise living standards by raising the amount of money in credit in the system because that’s just more money chasing the same amount of goods,” he said. “It will affect financial markets in the ways we’ve seen and it will affect the inflation rate. It won’t raise living standards in an important way. As inflation then begins to bite, it has political consequences.”
As some of you know, Ray Dalio has recommended Gold and Bitcoin as a way to get out of fiat which will be inflated due to central banks. His Gold suggestion is a game changer for funds because he thinks of it as a way to diversify from government debt, or bonds. Asset allocation models are all about a weighting in stocks and bonds, and this shifts as markets go from risk on to risk off. Dalio, and many others, say that you are holding bonds not necessarily for the yield, but trading them. Gold on the other hand doesn’t yield anything (just as bonds don’t yield much now), but can move 3% a month. The key is that Gold is a currency, or should be seen as a currency. It is the safe haven to be in, if you are betting against the debt. Some funds are already pushing up their portfolio allocation to 5% Gold. Thank Mr. Dalio for that. If this picks up, Gold prices will have to be over $2000.
Now onto the Gold chart. It can best be summarized as some more pain before gains.
I want to start off with this weekly chart. This triangle pattern had a lot of potential. We broke out on the week of Nov.8th.2021. The breakout candle is pointed out in blue. A retest of the broken out trendline is something we should expect. Unfortunately, the retest failed, and we closed back below the trendline. This is a false breakout. Now I am watching the huge support zone at $1750 to hold. That would be a great zone for a bounce and a new entry.
Just to show you what can happen on a trendline false breakout, let me show you this daily chart of Gold.
At the beginning of January 2021, Gold broke out above a triangle. Same type of pattern. But it failed, and from the bottom of the false breakout candle, to the lows of $1675, we declined nearly 10%. So there could be some more pain here for us Gold and Silver bulls.
As I am writing this, the Gold chart flipped from green to red. Thanks to a strong US Dollar, which, believe it or not, went from red to green. Powell’s speeding up taper comments are impacting the Dollar and Stock Markets.
Going forward, let’s watch that $1750 support zone. I am looking for some signs of buying and basing there.
Let me sign off with some good news, but it slightly contradicts price action from January of this year. But believe it or not, according to seasonality, January is the best month for Gold.
