Gold has been running this race for months... at least, that’s how it feels.
Perhaps it’s simply making its way to the starting line…
I believe that’s the best way to view gold and precious metals at this stage of the game. Before I get ahead of myself – marking a series of upside objectives – I want to highlight a key level that defines my intermediate- and near-term risks…
Live cattle posted a new all-time high last month. Precious metals are gearing up for a potential rip-roaring rally, as gold retested all-time highs yesterday. And sugar futures refuse to quit.
But when I review my commodity charts, I notice more topping formations underway than bottoming patterns.
Crude oil is front and center as the energy space – commodities and stocks – remains one of the weakest areas of the market.
That’s why yesterday’s action in crude has my full attention…
And not much has changed. Rates churn sideways as bonds carve out tradeable lows.
The market is simply playing a new verse of the same old song.
But the tempo picks up as another antagonist enters the scene – regional banks!
Banks are the market’s weakest link, especially the smaller regional banks. They simply can’t stop falling.
To be clear: This isn’t about possible contagion risks or the next leg lower in the S&P 500. I’m more interested in the implications for interest rates.
The banking sector has captured every investor’s full attention. And regional banks have hinted at underlying problems with the rising rate environment for more than a year.
Check out the dual-pane chart of the Regional Bank ETF $KRE versus the REITs ETF $IYR ratio and the US 10-year yield $TNX:
It’s still messy out there, no matter where you look.
Signs of strength are fleeting, whether we’re discussing gold, the S&P 500, or US Treasuries. It’s one of the few observations everyone agreed upon last week at the 50th annual CMTA Symposium. (I'll have more on that later this week.)
Despite failed breakouts and trading ranges ruling the market environment, one bullish data point stand out regarding precious metals…
"Rates, the US dollar, crude oil, and the S&P 500... repeat!"
These charts swirl atop every investor’s mind as markets await the upcoming rate hike decision.
Meanwhile, it’s messy!
The S&P 500 challenges the upper bounds of a multi-month range. The US dollar and interest rates chop sideways. And crude oil remains resilient despite increased selling pressure.
But not all markets are trapped in a trading range right now. In fact, there’s one forex cross breaking down, suggesting lower yields and cheaper crude oil…
It's the nokkie-stocky, the Norwegian krone and the Swedish krone!
Check out the triple-pane chart of the US 1o-year yield, crude oil futures, and the NOK/SEK cross:
Our precious metals index is hitting fresh 52-week highs despite the waning strength in gold and silver.
Only three markets comprise the index. That leaves only one possible culprit – platinum!
First palladium, now platinum?
It doesn’t matter whether you consider platinum or palladium true precious metals. The industrious side of the family is chipping in, supporting a new structural uptrend for the entire space.
The increased selling pressure across grain markets might not be on your radar.
But pay close attention: The soybean complex, corn, and wheat are edging toward their respective year-to-date lows as demand wanes.
Even if you don’t trade these ag contracts, fresh multi-month lows – especially in wheat – carry broad implications for equities and cyclical assets. (Hint: It has to do with crude oil.)
That’s why I’m on high alert for a potential breakdown in Chicago wheat…
Wheat has been in a strong downtrend since its March 2022 peak, entering a bearish momentum regime last summer.
What caught my attention following the SVB collapse wasn’t the headlines so much as how the markets handled the news and the stress that followed.
It’s difficult to find the silver lining of one of the largest bank failures since the financial crisis. But I’m more of a glass-half-full kind of guy.
Despite the relentless barrage of negative headlines, it’s undeniable that risks have been contained, and the markets have weathered the storm – at least for now.
Investors ditched equities and ran to the safety of US Treasury bonds as the saga unfolded. It was like the good old days when stocks were risk assets, and bonds acted like – well, bonds!
Now that the dust has settled, I believe the renewed classic intermarket relationship between stocks and bonds and the familiar patterns of risk-on/risk-off behavior bodes well for the overall market.
Especially when you consider easing volatility…
Here’s an overlay chart of the Bond Volatility Index $MOVE and the S&P 500 Volatility Index $VIX:
A weaker dollar remains a key ingredient for a risk-on rally. Yet, like interest rates, the buck refuses to roll over.
The US Dollar Index $DXY continues to hover well below last year’s peak, holding within a tight range for the past four months.
Today, we’ll review critical levels for DXY as this trendless action defines the chart.
We’ll also look beneath the surface for signs of broad strength or weakness and revisit a binding intermarket relationship for clues regarding the dollar’s next major move.
First, let’s define the critical boundaries of DXY’s multi-month range:
The 105 level has proven a significant area of resistance.
On the flip side, the February pivot lows at approximately 101 mark the lower boundary of the year-to-date range. That’s where we find DXY today.
In a market overrun with whipsaws and failed moves, our gold mining trades are holding their breakouts and reaching our initial targets. Not many market areas can make that claim.
Today, I outline multiple mining stocks and highlight critical levels of potential resistance for gold and silver.
