Mid Week Macro (11/20/2024)

Mid Week Macro

1) The stock market remains the story. The S&P remains above 5900. This is by far the most important data point for gold and silver miners. They are going nowhere until Wall Street loses its interest in the MAG7. 

2) Gold rebounded back to $2656, but the miners refused to rally. The HUI is at 303. Silver is at $31.02. We need the HUI above 350 and silver above $35 for a breakout in miners. I doubt we will see it in Q4. The good news is that with gold at $2656, the gold miners are accumulating a lot of cash and will be ready to double in value very quickly if gold maintains this level for a few more quarters. IMO, the quality producers are all selling at a 50% discount, and are valued as if gold was at $2400. 

3) What’s impressive for the gold price is that the dollar (DXY) is at 106.5. The dollar is strong, and gold doesn’t care. Plus, the 10-yr bond is at 4.4%, which is an indicator of expected inflation. I don’t know if the Fed can get the 10-yr back below 4%. This high expected inflation is supporting gold. The bad news is that gold can’t break out above $2800 with the stock market above 5900. To get above $2800, we need a fear trade. If we can get the S&P below 5500 and the DXY below 104, then gold could begin to trend higher. 

4) Gold is difficult to predict in the near term. I think it is high because of the massive uncertainty with the US economy and US bond market. It’s possible that gold could lead and not correct very much when the stock market crashes. Historically, that is not what happens. Usually, gold crashes with the stock market. Stay tuned. It could go either way. My target remains $2350 to $2400 for the next cycle low in gold, and $26 to $27 for silver. The HUI should bottom around 265, once the stock market crashes (sometime in the next 3-9 months).