From the Desk of Ian Culley @IanCulley

The US Dollar Index $DXY has posted its tenth week consecutive in the green. 

And with the dollar off to a solid start Monday morning, an eleventh looks promising.

This is excellent news for dollar bulls.

But it's a gloomy prospect for risk assets, especially precious metals…

From the Desk of Ian Culley @IanCulley

Precious metals represent an opportunity cost.

The entire complex – gold, silver, platinum, and palladium – has gone nowhere for the past few years.

Yet I can’t overlook the resilience of gold and silver as interest rates and the US dollar rise – two significant headwinds for these shiny rocks. 

Perhaps they deserve the benefit of the doubt.  

I believe they do.

But extending these lackluster metals with a favorable outlook does not equate to taking a long position.

It’s far from it.

Price must prove buying precious metals offers a rewarding proposition.

The following two intermarket ratios will undoubtedly rise if and when it does.

From the Desk of Ian Culley @IanCulley

Precious metals deserve the benefit of the doubt.

These shiny rocks are in the early stages of their next secular bull run. But I won’t let my bullish bias detract from the obvious: Gold has seen brighter days.

Overhead supply dominates the charts while risk appetite cools and prices fall toward critical support levels.

Is it time to buy the dip? 

No, especially as investors focus on more attractive investments…

From the Desk of Ian Culley @IanCulley

It was do or die for the yellow metal a couple of weeks ago.

Gold chose “do.”

Buyers sprang into action, defending a critical former support level while driving prices higher. 

That valiant effort may have only prolonged the inevitable: a period of sustained weakness.

Don’t get me wrong. I’m not playing the role of a Debbie Downer this week.

I still believe gold is in the early innings of a new secular bull run.

Why?

It’s pretty simple. All we have to do is switch the denominator to any other global currency.

Gold has already broken out versus every currency in the world – except the US dollar. 

And that, folks, is the crux of the problem.

The US dollar!

From the Desk of Ian Culley @IanCulley

I’ve had the pleasure of driving cross country multiple times, covering every inch of I-10. 

I made so many memorable moments on those drives …

I pushed through white-out conditions in Kansas. (My brother had an appointment with the State Department in Washington D.C., and we couldn’t stop.)

I "accidentally" crossed into Juarez, Mexico, which turned into one helluva time!

And I picked up more than one speeding ticket on the reservation (highway patrol doesn’t play in Navajo country).

I somehow made it coast to coast every time.

While many details of those treks slip away with the years, I’ll always remember the Alamo.

I know, it’s funny. I didn't even go inside.

To be clear, my memory of the Alamo has nothing to do with the historic battle or the revisionist histories that have been written and rewritten since.

Instead, I picture a meager fort in the twilight – nothing more. A truly humble beacon of strength.

The understated image resurfaces in my mind's eye this week as I plan and plot the best way to trade gold.

From the Desk of Ian Culley @IanCulley

Gold is hanging on for dear life.

Rising interest rates and a strengthening dollar create formidable headwinds for the shiny yellow rock.

I remain optimistic for the entire precious metals space, but hope is not a viable trading strategy – especially if gold undercuts its 2011 highs.

Some gold bugs may find it difficult to accept, but gold’s a short if and when it decisively closes below its prior commodity supercycle peak.

And it’s trading back at those former highs today…

From the Desk of Ian Culley @IanCulley

One of my favorite scenes from "Forgetting Sarah Marshall" is when we get to meet the in-house surf instructor, played by Paul Rudd.

Rudd’s character, Chuck, a transplant local, imparts sage advice, “When life gives you lemons, just say f@&k the lemons and bail!”

I always laugh at that one, even as I write this note.

That’s probably because  I’ve spent the better part of the past twenty years chasing waves – but I don’t share this Hollywood version of a stoner-surfer ethos regarding life.

But I do follow this mindset when it comes to markets…

From the Desk of Ian Culley @IanCulley

The stars have not aligned for gold bugs.

Rates and the US dollar are both catching higher – the opposite of what would likely ignite a precious metals rally.

Yet gold continues to hold above its former 2011 highs! 

Despite these setbacks, my bias remains bullish for gold.

But my desire to own the strongest assets is shifting actionable trade setups toward more profitable opportunities…

From the Desk of Ian Culley @IanCulley

I find the general distaste for precious metals amusing.

It cracked me up when a close friend referred to gold as “hot garbage” at the start of the year. The Nasdaq 100 was trading almost 36% off its 2021 zenith. And gold was within striking distance of its former all-time highs.

Yet gold was trash in this investor’s eyes.

That’s information.

Information that got me thinking about a rally in precious metals…

From the Desk of Ian Culley @IanCulley

Here comes the Fed.

Another FOMC decision is upon us.

But the market has the central bank’s number this time, or so it seems.

The fed fund futures are pricing in an almost certain chance we’ll see a 25-basis-point rate hike come Wednesday.

With general consensus running at all-time highs, the focus will shift toward Jerome Powell’s words, basically the Fed’s forward guidance.

I won’t tune in to that press conference.

What I will do is monitor price.

When it comes to precious metals I’m following absolute trends, as usual, but I’m also tracking these two critical relative trends…

From the Desk of Ian Culley @IanCulley

The US dollar is approaching a slippery slope. 

And few markets embrace a falling dollar quite like precious metals.

Yet gold’s response to a weakening dollar so far has been subdued, perhaps due to elevated real yields.

But gold’s crazy cousin, silver, has enjoyed quite the boost…

The two major catalysts that will propel gold to new all-time highs are veering in different directions. 

US real yields are challenging fresh decade highs (not ideal for a gold rally) while the dollar is pressing against its year-to-date lows.

A breakdown in the US dollar index $DXY would no doubt send gold bugs dancing in the streets everywhere around the world.

I believe a weaker dollar remains critical to the next secular uptrend in Gold. But do real yields need to roll over as well? 

I’m leaning toward no. Here’s why…