Gold Reversal? Have No Fear!

S&P 500 closed in the the red, vindicating my bearish sentiment going into Monday‘s session. And as I have tweeted during the day, the sellling doesn‘t appear to be over. Friday‘s:

(…) selling wave before the close looks to indicate hesitation ahead. Even though VIX is attacking the 16 level, and the put/call ratio ticked higher, the bulls are little disturbed thus far.

While VIX rose yesterday, it finished only a little above 17 – the tide in stocks hasn‘t turned to fear even temporarily in the least, and the current consolidation would still be one to be bought.

That‘s the result of ample liquidity in the system, which is denting the rotations. Yields moved higher yesterday, and defensives including tech or Down Jones Industrial Average rightly felt the pressure more than value stocks.

Gold got caught in the daily selling, but again the miners and commodities reveal how little has changed. Oil and copper keep doing very fine, and the precious metals upleg appears undergoing a daily correction only – one that doesn‘t change the larger trend, which is higher (and for the dollar by the way, it‘s pointing down – I‘m not placing much weight upon the USD link arguing that gold is acting weak to the weakening dollar, and thus has to fall). I look at the ratios, yields and other commodities for stronger clues.

And the matter of fact is that inflation expectations have yet again turned higher, confirming my earlier calls about transitioning to a higher inflation environment made either recently or more than a month ago. Remember that the Fed wants inflation above all, and made so amply clear:

(…) Now, it‘s up to gold and silver to catch up on what they missed since the early Aug 2020. Inflation is running hotter, and the Fed is tolerant of it, amply supplying liquidity. The gold bottom is in, and much brighter days ahead.

Let‘s move right into the charts (all courtesy of www.stockcharts.com).

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