Gold continues to hold upside ranges this month despite having a profit taking pullback with the dollar strengthening post-election. Overall, commodities have been range bound for the last month. Perhaps the most interesting aspect of the commodity strength is that we did see oil hold up better than expected with a Trump victory and cease-fire deals in the Middle East. While not a quantitative data point, it should be taken into account a la the adage of “bad news, good price action.”
Just to give some perspective into the dollar rally, here is a one year chart of the dollar, having had almost its entire range carved out to the upside in just the last month, before and after the election. I’m still holding on to the north star that the new administration fundamentally needs a weaker dollar for tariff ideals to really work in their favor, and we did see Trump talking down the dollar a few times during his last stint in office. Nevertheless, Gold seemed to be relatively unfazed by strong dollar surge.
On the sentiment front, we still are continuing to monitor google search trends which indicate well above optimism for gold and related precious metals.
With regard to gold and bitcoin having diverged somewhat earlier in the fall, we can safely say now that animal spirits have re-converged and both have reached their crescendo with the latter almost reaching the $100,000 mark. I do think this will be an important variable to keep in mind as we are still in a technically overlapping important zone.
On the technical side, I’ve been positive on gold this year since it broke out to new all time highs and the gist was we should not be fading the move. I think with the weekly and monthly DeMark signals now active, which indicate upside exhaustion, we should be more careful on gold and precious metals. I’ve attached a weekly chart of the GLD ETF which is indicating a top below 255. The correlation with bitcoin has also been an important factor, and I would be watching both carefully in the short-term to understand how this upside climax may unfold. Given how we have not pierced through the $100,000 magnet on bitcoin yet, one could make the case that gold may not have topped either, and perhaps precious metals may get one more breath or climax to the upside with crypto.
Overall, I’m waiting for resolution of correlated assets like the dollar and bitcoin to give the go ahead to start waving the white flag on the gold rally. In the short-term, there still might be more juice to squeeze on the upside but with sentiment and technicals mirroring similar topping patterns, I’m less optimistic about gold going into 2025.
