All Star Charts Gold Rush Articles

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…

Rising real yields and a pesky US dollar are making lemons of the precious metals space.

A weakening dollar and falling interest rates lined up to vault gold toward new all-time highs. 

Instead of kick-starting a precious metals rally, both potential catalysts are heading in the opposite direction (higher) – and the focus with it.

I’m not monitoring these shiny rocks for breakouts. I’m tracking fresh breakdowns.

The June pivot lows mark a critical level of interest as the precious metal space...

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

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…

Let’s start at the top: the underlying uptrend in interest rates. 

Check out the US 10-year yield:

The 10-year has yet to resolve higher from this basing formation. Nevertheless, the uptrend remains intact as the market has not given investors any reason to bet on lower yields.

As long as yields continue to rise, procyclical areas of the market will offer better returns.

The overlay chart of the 10-year yield and crude oil versus gold tells the story:

Crude oil outperforms gold as rates rise (no wonder I keep finding quality long setups in energy names), while gold shines as rates fall.

Gold can catch higher along with yields. But...

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

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…

Gold might churn within a range-bound mess over longer to intermediate time frames. But that doesn’t mean we shouldn’t trade it – or other precious metals. 

In fact, I continue to find fresh levels that define outsized risk-to-reward opportunities.

Here’s the Silver Trust ETF $SLV digging in at a critical shelf of former lows:

As long as SLV is trading above 20.50, I like holding SLV in my portfolio with an upside target of 35 (nice profit potential for a commonly discarded investment). 

Yes, I think silver is heading back to the 2012 peak! 

I highly doubt we’ll witness it tomorrow or even next month. Regardless, I think it...

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

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…

First, let’s take a look at the Gold Miners ETF $GDX versus the S&P 500 ETF $SPY:

It’s now or never for gold miners.

Gold mining stocks are, without a doubt, participating in gold’s rally to new all-time highs. It’s difficult to imagine a scenario where they don’t.

And when assets climb within strong uptrends, they tend to outperform their alternatives.

Notice the GDX-to-SPY ratio ripped higher during gold’s rally in 2016 and 2019-20.

I expect similar relative...

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…

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…

Here’s silver reclaiming a critical seven-month polarity zone:

While gold rose 1.6% last week, silver ripped more than 8% – hence the “crazy” descriptor. 

Silver’s explosive gains highlight a crucial takeaway aside from its high-beta status: investor willingness to accept greater risk in precious metals.

Notice gold futures and the silver-to-gold ratio tend to track one another:

Silver outperforming gold represents a healthy risk-on development that supports higher gold prices.

The silver-to-gold ratio led off the bottom last fall… and gold followed, climbing 28% to its May high.

On the flip side, the ratio failed to post a higher high this spring as gold retested an area of overhead supply (and all-time highs).

The silver-to-gold ratio’s bearish divergence...

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…

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…

First, a quick reminder as to why real yields represent a potential headwind for Gold: 

An inverted chart of the US 10y real rate looks almost identical to a chart of gold futures, as the inverse relationship between these two has been strong over the past 15 years.

So it stands to reason that rising rates would hinder any meaningful rally in Gold. 

And so far, they have. Gold has gone nowhere (down roughly 10%) as the 10y real yield has risen almost 300bps since March 2022. That’s not much of a decline considering the explosive increase in the real yield....

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…