June 19, 2023
Today is a US holiday. NYSE and Nasdaq stock markets are closed. The Toronto market is open. The Gold price this morning is a tad weak, but with Gold dependent mostly on the strength of the US Dollar and the US 10-year Treasury Yield, our observations will probably have to wait until tomorrow.
Tuesday’s 8:30 am ET final report on US New Housing Permits for May will tell us if demand in the housing market recovers from a terrible preliminary report. Another very low number will put pressure on the Fed to ease its Quantitative Tightening stance and even possibly start to drop the policy rates at the next meeting. That would help Gold and serve to kick off a Summer Seasonal Rally after a three-month pause in the Gold Bull.
This morning, US Secretary of State Blinken will make a statement following two days of very important meetings with the PRC in China. The tenor of his remarks will be studied carefully as US-China relations are under pressure now. This could lead to a breakout in the Gold price unless Mr. Blinken indicates that geo-political tensions will likely subside.
Excellent Gold report from James Hodgins, Stifel Canada.
James Hodgins, Stifel Canada research managing director, and one of the few market strategists I make time for, has produced a big-picture report today worthy of all our time.
“Welcome to the Summer of Gold!”
Summary
“Gold is money. Everything else is credit”– J.P. Morgan
This classic quote is especially true today, as Sovereign Debt Levels globally hit new high after new high and the growing BRICS+ Bloc continues to progress toward a Gold-backed currency system.
Key Points
Further, as we highlighted in February, our analysis of Supply and Demand factors for Gold (and Silver for that matter), highlight that The Next Super Cycle Has Begun. Within that Cycle, we are actively looking for Tactical Buying Opportunities.
That time is NOW…
As Summer Officially Begins this Week, we are now heading into an extremely strong Seasonal period for Gold and Related Equities. Further, as we highlight below, in periods when Gold has entered the Summer in an uptrend, as it is now, the Seasonal Strength has been particularly Strong.
Chart 1 – Gold Seasonal Performance Spread in Years With Intermediate Uptrends
Source: Bloomberg, Stifel Research
Chart 2 – Gold Seasonal Performance Spread in Years With Intermediate Uptrends vs Downtrends
Source: Bloomberg, Stifel Research
This Relative Strength is a Key Positive Divergence for Commodities and Related Equities, as highlighted in the Stifel Commodities Strategy Dashboard Vol. 1
Gold is Showing Signs of Divergence From Recent Peak in Real Yields
Chart 3 – Gold Spot (amber US$/Troy Oz) Real Yield (grey- inverted)
Source: Bloomberg, Stifel Research
Gold Showed Similar Divergence in Last September 2022 that We Highlighted then Signaled the November 2022 — Early 2023 Gold Rally.
Chart 4 – Real Yield (inverted -grey) vs Gold Spot Price (amber) September 2022
Source: Bloomberg, Stifel Research
Technically, Gold Equities/GOLD Ratio is at a Tactical Support Level after the Corrective Pull Back within a Strong Bullish Trend Providing an Ideal Entry Point
Chart 5 – Gold Equities (GDX) to Spot Ratio at Support Level
Source: Bloomberg, Stifel Research
Chart 6 – Gold Equities (GDX) to Spot Ratio Intermediate Term
Source: Bloomberg, Stifel Research
Fundamental Demand from Global Central Banks, Especially BRICS+ Nations Continues As Gold Now Makes a Greater Percentage of Reserve Assets than Any Time in the Past 40 Years.
Chart 7 – Global Central Banks Net Gold Purchase (MT 4Q Moving Sum)
Source: Bloomberg, Metal Focus Data
James Hodgins, Managing Director
