Sign up to create alerts for Instruments,
Economic Events and content by followed authors
Free Sign Up Already have an account? Sign In
Mohd Izhar Muslim
Dec 21, 2021 1:49AM ET
this is great 👍
1
0
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Quotes
All Instrument Types
- All Instrument Types
- Indices
- Equities
- ETFs
- Funds
- Commodities
- Currencies
- Crypto
- Bonds
- Certificates
Please try another search
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details
Will This Gold Bounce Be Significant?
www.investing.com/analysis/will-this-gold-bounce-be-significant-200612194
Will This Gold Bounce Be Significant?
By Jordan Roy-Byrne, CMT | Dec 21, 2021 12:14AM ET I think we’ve seen this movie. Gold is in a larger downtrend and correction but rebounds after a Fed meeting, leading many to hope Gold struck an important bottom.
You can probably guess what I’m thinking. The weekly chart below shows that Gold bounced from $1750 again.
It also shows that real yields are threatening a breakout (blue arrow) while Gold against the stock market hasn’t had any meaningful rally in over 18 months!
Gold is showing strength against foreign currencies, but it must outperform the stock market if it will sustain any strength.
The miners already rallied quite a bit on Gold’s reversal. From before the Fed decision on Wednesday to the highs on Friday, VanEck Gold Miners ETF (NYSE:GDX) and VanEck Junior Gold Miners ETF (NYSE:GDXJ) rebounded 10%.
We plot GDXJ below, along with our custom breadth indicators.
GDXJ was very oversold as the percentage of GDXJ stocks trading above the 20-day, and 50-day moving averages was near 0% after Tuesday. In addition, 33% of GDXJ stocks had hit a new 52-week low.
GDXJ could find initial resistance around the 50-day moving average, which is another 7% upside.
Fed tapering is starting, which is a catalyst for a rebound in real yields. That is bearish for Gold.
The chart below plots the real 10-year yield and highlights periods of Fed tapering. Those periods usually entail a rise in real yields.
Real 10Y Yields 2009-2021
Although precious metals (specifically the miners and Silver) are oversold, there are too many reasons to be skeptical of this rally.
Real yields are likely to rise, which will keep a lid on any rally. In addition, unless the stock market corrects dramatically, there will not be a shift in capital into precious metals.
On Friday, Bloomberg showed a 49% chance of a rate hike in March 2022. That is only three months away. There was a 65% chance of a rate hike in May 2022, and that meeting is less than five months away.
History shows that precious metals typically decline in the months leading up to the first rate hike (of a new cycle). The good news is that after the start of the last four rate hike cycles, Gold has rebounded an average of 28% and Silver an average of 42%.
Weakness before the first rate hike should allow you to buy some incredible bargains over the coming months. The tide for Gold will turn after the Fed hikes interest rates.
Related Articles
Black Gold Still Hesitant Despite Bullish U.S. Crude Inventories
By Sébastien Bischeri - May 26, 2022
A drop in reserves was slightly bigger than expected, however, the crude oil market remains hesitant to break out. What’s holding it back? Crude oil prices have been...
What A Recession Now Could Mean For Oil Prices Later
By Ellen R. Wald, Ph.D. - May 26, 2022
7
It's not currently clear if the US is already in recession or if there will be a domestic or global recession going forward. But as talk of the possibility increases, traders need...
At Cusp of $10, Natural Gas May Have Little Choice But To Go Higher
By Barani Krishnan/Investing.com - May 26, 2022
8
It’s getting riskier to be a natural gas bear amid the approaching summer.Gas futures on New York’s Henry Hub flew above the $9 mark for the first time since 2008, stopping about...
Will This Gold Bounce Be Significant?
Comments (2)
William boyle
Dec 21, 2021 12:42AM ET
My buy limit for VanEck Vectors GDXJ is $ 34,00
2
0
Add Chart to Comment
Confirm Block
Are you sure you want to block %USER_NAME%?
By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.
%USER_NAME% was successfully added to your Block List
Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.
Report this comment
I feel that this comment is:
Comment flagged
Thank You!
Your report has been sent to our moderators for review
Add a Comment
We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
Enrich the conversation, don’t trash it.
Stay focused and on track. Only post material that’s relevant to the topic being discussed.
Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.