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With all the news on geopolitical escalation, soft versus hard landing, disinflation versus reinflation, growth versus value, and credit default versus available disposable income, gold and silver are even more interesting now.

Gold’s behavior has seen more sell strength and buy weakness for some time. What has changed is that the swings from lows to highs have narrowed since mid-December.

Look at October 2023, when gold’s price action brought out the bears. Not us, we bought on the gap up. The price ran from $1876 an ounce in futures or 172 in the GLD ETF to peak at $2152 in futures by Dec. 4. The GLD ETF then went to around 193. Since then, gold has ranged between $1987 and $2105.

More importantly, if this past week witnessed another low at $2020, then we can see that since last October, the lows are higher and the ranges are narrower. Plus, momentum has improved, while it continues to remain an underperformer in comparison to the S&P 500. The next directional move should resolve very soon.

On Jan. 7, I discussed how super cycles don't just fade away. The most burning question we get lately is, “How will we know when inflation returns?” Our answers are as follows:

• When the dollar does something more dramatic.
• When silver starts to outperform gold.
• When sugar (which is a perfect example of super cycle type volatility) heads back over 22 cents.

Interestingly, none of these scenarios have happened yet. However, silver in and of itself looks very appealing.

Silver futures have been experiencing narrower ranges, as well. With higher lows seen since October, the recent support at $22.50 an ounce, if it holds, could mean this week is the one where we start to see this metal shine.

A move above the 2 moving averages would be a start. In cash, a breakout over $24 should do it. In the ETF, that would happen over 21.75. And, in the futures, the spot price had a mean reversion in momentum.

Should silver get this follow-through, the next big event will be if it begins to outperform gold. Then we know this move in gold is not just a flight to safety, but very possibly that a super cycle might be starting even a bit earlier than we thought.

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