Gold Breaks $2,500 Barrier, Setting the Stage for Miners’ Next Bull Run
2024.08.13 02:56
Hedge funds have turned the most bearish on commodities in over a decade, driven by concerns that a deeper economic slowdown could dampen demand for everything from crude oil to metals and grains, according to Bloomberg.
Despite this gloomy outlook, remains resilient, trading above $79 per barrel. has also surged past $2,500, while hovers around $28 an ounce. However, grains have hit historical lows.
Hedge funds might have anticipated these moves accurately – assuming they don’t face a scramble to cover their shorts in the near future.
All year our mantra has been “looking for inflation in all the wrong places.”
Not to mention the Fed will most likely lower rates in September as this week’s and readings might lull them to sleep.
However, I cannot imagine the Fed is not watching gold and oil as carefully as we are.
Gold miners tend to spark when gold becomes a highflyer.
Hedge funds don’t understand the power of this gold bull market.
Gold has made higher highs and higher lows.
Plus, one has to wonder what $2,500 gold does for miners.
Here are the key points we shared with media producers for discussion:
Bullish Outlook on Commodities:
- Oil: Potential rise to $80-$90 per barrel.
- Natural Gas: Room to move beyond $2.20.
- Silver: Still undervalued and trending upward.
- Gold: Likely to approach $2,700.
- Agricultural Commodities: Favorable outlook via DBA.
- : Close to initiating a significant upward move.
Why Commodities Look Attractive:
- Geopolitical Factors: Ongoing uncertainties.
- Government Spending and Debt: No signs of reduction.
- Federal Reserve Policies: Expected easing could support inflation, particularly with CPI and PPI data.
- Risk and Value: Commodities offer better value compared to most equities.
Equities Overview:
Risk On Signals to Watch:
- High-yield bonds outperforming long bonds and SPY.
- Semiconductors (NASDAQ:) remain in a bullish phase.
- Biotech sector (NASDAQ:) showing positive money flow.
- Retail stocks holding critical support despite underperformance.
Risk Off:
- The transportation sector (NYSE:) remains weak.
- Long bonds outperforming SPY.
- Gold holding above $2,400.
- Indices below their 50-DMA or in warning phases.
Stagflation Scenario:
- We anticipate more stagflation than other economic scenarios.
Gold Miners Technical View
Let’s take a look at the miners:
- returned to a bullish phase in price.
- It is outperforming SPY.
- Momentum is beginning to grab the 50-DAM.
- It is also above the July 6-month calendar range low.
- It still has to clear the July 6-month calendar range highs at 38.58.
Regardless, GDX looks like it has a lot of room to go, while the indices remain stuck in warning phases with bearish divergences in momentum.
ETF Summary
- (SPY) 540 resistance with 505 next support
- Russell 2000 (IWM) 210 resistance 199 support
- Dow (DIA) 380 support
- Nasdaq (QQQ) 430 support
- Regional banks (KRE) 50-52 support
- Semiconductors (SMH) 212 support 240 resistance
- Transportation (IYT) 61 support 63.50 resistance
- Biotechnology (IBB) Could not hold recent rally-but ok if maintains a price above 135
- Retail (XRT) 70.00 major support
- iShares iBoxx Hi Yd Cor Bond ETF (HYG) 77.00 the nearest key support
