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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…

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...