Gold Stays Buoyant

Recession fears are spiking. The 10-year versus 2-year yields reached parity (temporarily inverted) for the first time since 2007. An inverted yield curve almost always precedes a recession. However, it’s usually early – sometimes a year passes before the recession officially commences.

The panic into bonds drove 30-year rates to record lows. The nosedive in yields is way overdone, but that doesn’t mean it’s over – it could last a couple more weeks.

Gold remains buoyant as prices examine resistance surrounding $1525. The odds still favor a top in this area, but we probably won’t see a meaningful correction until Treasury yields begin to stabilize.

Unlike gold, the miners did present evidence of topping during the week – sometimes they lead the metals. Junior miners (GDXJ) closed below two significant gaps confirming an interim, and possibly an intermediate top. A multi-week correction from this level could set the stage for excellent buying opportunities.

GOLD DAILY

On Tuesday prices formed a massive outside reversal day as gold swung from $1546.10 – $1488.90. These events often signal a trend change, in this case, a top. However, gold remains firm and continue to inch its way higher as long-term Treasury yields plummet. We probably won’t see a meaningful correction in gold until bonds stabilize.

SILVER BIG PICTURE

Silver has been building a massive base similar to 1997 – 2003. Prices are testing the upper boundary near $17.50. Failing to breakout now would imply a few more months of consolidation followed by a breakout in 2020 (initial target $26.00). Longer-term I’m expecting $100+ silver. I’m incredibly bullish on silver and will continue to add heavily to my core physical position until prices breakout.

GDX 

I’d like to see a decisive close below $28.00 in GDX to confirm a top at $30.00.

GDXJ 

Juniors finished the week below the early August gaps confirming a top. Closing below the $36.78 pivot would prescribe a decline to the $32.50 gap.

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Disclosure: None.

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