From the Desk of Ian Culley

Healthy retest or failed breakout?

These are the scenarios rolling through my mind as I watch the Gold Miners ETF $GDX.

It’s easy to lean toward further weakness based on recent selling pressure and the five-year real yield breaking out to fresh decade highs. 

But who likes easy? I certainly don’t. I doubt gold bugs do, either.  

Luckily, I always defer to price action across multiple time frames for insight. As Brian Shannon always says, “It’s price that pays.”

And in the case of GDX, the charts aren’t as bearish as you might think…

Check out the monthly chart of GDX:

GDX closed the month of June above a critical shelf of former highs at approximately 30 despite slipping below that key level earlier in the month.

I find the monthly close constructive for the bullish case. The prospect of a healthy pullback remains viable as long as it holds above that key level.

On the other hand, the notion of a constructive retest loses validity if price undercuts those former highs.

Nevertheless, a look at last week’s candle entertains the possibility of a near-term...

From the Desk of Ian Culley @IanCulley

Buyers are holding the line. 

The former 2011 highs remain front and center for gold futures – and all precious metals.

These shiny rocks will experience increased selling if gold slips back below those former highs marking the prior commodity supercycle peak. 

Silver, palladium, and the Gold Mining ETF $GDX are already printing fresh lows. And new multi-month lows for the silver/gold ratio indicate dwindling risk appetite.

These aren’t the type of developments that support a sustained uptrend.

Yet this action hasn’t deterred gold bugs.

Despite every reason to sleep in and shirk any and all responsibilities, they continue to show up right on time…

From the Desk of Ian Culley @IanCulley

Buyers are holding the line. 

The former 2011 highs remain front and center for gold futures – and all precious metals.

These shiny rocks will experience increased selling if gold slips back below those former highs marking the prior commodity supercycle peak. 

Silver, palladium, and the Gold Mining ETF $GDX are already printing fresh lows. And new multi-month lows for the silver/gold ratio indicate dwindling risk appetite.

These aren’t the type of developments that support a sustained uptrend.

Yet this action hasn’t deterred gold bugs.

Despite every reason to sleep in and shirk any and all responsibilities, they continue to show up right on time…

Even on Monday!

Check out the monthly gold chart:

I’m taunting the chart police, posting an incomplete monthly candlestick. But I’m not interested in analyzing the June candle, so it doesn’t matter.

What does matter is the former 2011 high at 1,923.7. That’s the line in the sand. And the monthly chart provides the cleanest example.

I also find the past two instances gold has traded...

From the Desk of Ian Culley @IanCulley

I left gold bugs an urgent message last week.

“This mess could turn downright ugly for the entire precious metals space if buyers don’t step in and support higher prices in palladium – and fast.”

I am many things, but “alarmist” isn't one of them. I simply find it hard to believe gold will post new all-time highs while palladium falls to fresh five-year lows.

Call me crazy, but those two puzzle pieces don’t seem to fit.

Perhaps we’ll never know for sure, as buyers showed up right on cue, driving palladium higher ahead of the three-day weekend. 

Last week’s strength bodes well for all metals, industrial and precious. So I’ll reiterate critical levels to trade against in palladium.

But I also want to share a strong correlation between this multifaceted metal and a market I would never have guessed…

From the Desk of Ian Culley @IanCulley

I left gold bugs an urgent message last week.

“This mess could turn downright ugly for the entire precious metals space if buyers don’t step in and support higher prices in palladium – and fast.”

I am many things, but “alarmist” isn’t one of them. I simply find it hard to believe gold will post new all-time highs while palladium falls to fresh five-year lows.

Call me crazy, but those two puzzle pieces don’t seem to fit.

Perhaps we’ll never know for sure, as buyers showed up right on cue, driving palladium higher ahead of the three-day weekend. 

Last week’s strength bodes well for all metals, industrial and precious. So I’ll reiterate critical levels to trade against in palladium.

But I also want to share a strong correlation between this multifaceted metal and a market I would never have guessed…

The Nasdaq 100 $QQQ!

Check out these charts Bartelloni shared with JC, revealing the relationship over a decade ago.

(Big thanks to Jan for bringing the article to my attention!)

From the Desk of Ian Culley @IanCulley

Gold can’t do all the heavy lifting.

I believe a generational rally for gold has already begun. But my structural outlook hinges on the former 2011 peak.

Gold must hold above that former high, marking the end of the previous secular bull run. 

It’s held this level so far. 

But if gold has any chance of printing new all-time highs as it has versus most major global currencies, it needs a little help from its friends…

From the Desk of Ian Culley @IanCulley

Gold can’t do all the heavy lifting.

I believe a generational rally for gold has already begun. But my structural outlook hinges on the former 2011 peak.

Gold must hold above that former high, marking the end of the previous secular bull run. 

It’s held this level so far. 

But if gold has any chance of printing new all-time highs as it has versus most major global currencies, it needs a little help from its friends…

I’m talking about the rest of the precious metals space – silver, platinum, and palladium.

Silver is hanging tough as it attempts to reclaim last month’s pivot lows. But this is a lonely bullish data point – one I imagine gold bugs wish they could attribute to palladium.

Check out the Aberdeen Physical Palladium ETF $PALL:

Instead of challenging former support from below, PALL is breaking down to fresh four-year lows. The breakdown in palladium fails to reflect the broad demand for metals I associate with the next secular uptrend in gold.

In short, this is not bull market behavior.

To be clear, I’m not interested in shorting PALL. It...

From the Desk of Ian Culley @IanCulley

What will it take for gold to make new all-time highs?

A weaker US dollar and falling real yields are likely candidates for leading catalysts.

We can also add a significant unwind in commercial positioning to the list. 

Meanwhile, it’s a range-bound mess.

Let's stick to the basics. Uptrends – at the core – come down to more buyers than sellers. And risk-on/risk-off intermarket ratios provide excellent tools for tracking whether bulls or bears dominate a particular market.

After the recent bout of selling pressure, one precious metal risk ratio is approaching a potential inflection point…

From the Desk of Ian Culley @IanCulley

What will it take for gold to make new all-time highs?

A weaker US dollar and falling real yields are likely candidates for leading catalysts.

We can also add a significant unwind in commercial positioning to the list. 

Meanwhile, it’s a range-bound mess.

Let’s stick to the basics. Uptrends – at the core – come down to more buyers than sellers. And risk-on/risk-off intermarket ratios provide excellent tools for tracking whether bulls or bears dominate a particular market.

After the recent bout of selling pressure, one precious metal risk ratio is approaching a potential inflection point…

Check out the Silver Miners ETF $SIL versus the iShares Silver ETF $SLV:

The SIL/SLV ratio speaks to the risk appetite in the same vein as the Gold Miners ETF $GDX versus the Gold ETF $GLD.

SIL/SLV simply sits further out on the risk curve than GDX/GLD.

(A rising line indicates a risk-on environment, while a falling line implies de-risking behavior.)

The last time this ratio traded at these levels in early 2016, gold put in the low of its current decade-long base. And...

From the Desk of Ian Culley @IanCulley

All-time highs remain out of reach for gold bugs.

But not all is lost. In fact, I still see constructive consolidations on longer time frames. 

It’s messy. But I’m impressed with gold's and silver’s resilience as they twist and bend beneath supply.

But how low can they go before they break…

From the Desk of Ian Culley @IanCulley

All-time highs remain out of reach for gold bugs.

But not all is lost. In fact, I still see constructive consolidations on longer time frames. 

It’s messy. But I’m impressed with gold’s and silver’s resilience as they twist and bend beneath supply.

But how low can they go before they break…

For gold, I’m focusing on the prior commodity supercycle peak at roughly 1,924. 

If it loses those former highs, the key retracement level at approximately 1,825 highlights the next potential support area:

I like this level for two reasons.

It marks a former polarity zone, coinciding with last summer’s pivot highs and the March pivot lows earlier this year. And it gives gold room to dance.

Gold futures are simply shimmying within a multi-year range as long as they hold above the March lows. 

I imagine the gold bugs find the sideways action frustrating. Regardless, the bull case remains intact from an intermediate-term perspective. 

On the other hand, the bullish argument becomes increasingly thin on a break below 1,825 as the lower bounds of the...

The bears have found a new home: gold mining stocks.

Silver’s breakdown earlier this month raised the caution flag for the entire precious metals space. 

Less than two weeks later, gold futures and mining stocks are falling under the wrath of increased selling pressure. Precious metals bears are winning the battle as support levels fall to the wayside. 

Meanwhile, the bulls are reluctant to leave without a fight…