The 79th Element Continues To Shine

From the Desk of Steve Strazza @Sstrazza

The price action from commodities has been lackluster, at best, this year. Our equal-weight commodity index is at its lowest level since early 2021.

Despite the broad weakness, gold continues to shine. The 79th element closed this week at its highest price in history.

Here’s a look at gold futures, trading at our first objective measured from the multi-decade base that resolved higher back in Q1:

As long as this breakout sticks, the bias remains higher for the yellow metal. 

On a more tactical note, gold has just completed a multi-month continuation pattern and is in the early stages of a fresh leg up:

We want to use our initial objective of 2,500 as our new floor. With a logical potential support zone slightly below at 2,450, we can let it dance a bit as long as we’re above the year-to-date pivot highs.

Our new targets are 2,845 over the next 1-3 months and 3,345 over longer timeframes.

One of the best gauges of risk appetite in precious metals is the silver/gold ratio.

While silver has underperformed gold recently, the ratio is coming off a well-defined level of support and bouncing higher:

While this ratio is still rangebound, we’re betting silver will revert higher relative to gold. 

This is what we would expect during a bull market for precious metals. silver is simply the higher-beta play.

Here are silver futures climbing up the right-hand side of a four-year base:

The bottom line is we expect silver to follow the path of gold and break out from this consolidation.

We’re buying Silver on strength above 30, with a target of 37.75.

COT Heatmap Highlights

• Commercial hedgers extended their largest net-short position for Japanese yen in three years.
• Commercial's net-long exposure to soybean futures is 14,000 contracts away from a fresh three year record. 
• Commercial hedgers added to their largest net-short position for 30Y T-Bonds in three years.

Click here to download the All Star Charts COT Heatmap.