Gold at the Bottom? Let's discuss below.
Gold currently has a cup and handle formation on the monthly chart, which I have been watching for over two years now. The larger the time frame, the bigger the move in most cases. In the chart below (TNX), we can see that the 10-year yield is nearing resistance, just as we are heading into the final stages of rate hikes.
$GLD - 2001 - 2023 - Cup & handling forming on the monthly + an inverted head & shoulders
$TNX (10 year yield) - 2003 - 2023 - Nearing a resistance after aggressive rate hike cycles
Since gold runs inversely to the yield (in most cases) and the dollar, and we are nearing the end of rate hikes, I believe we are near the bottom, if not at the bottom, of gold.
If there is a doomsday scenario like in 1929 or 1987 (Black Monday), based on history, it should look like this:
People turning off leverage, meaning they will sell everything no matter what the investment is, good or bad standing, leading everything to take a hit.
People then selling non-leveraged investments, yes, even gold, to go into cash. You might wonder why gold is falling in a doomsday scenario at first.
People then going out of cash and into gold as a safe haven. People have done this during times of war and uncertainty, fear, war, economic turmoil, and currency crises.
Let's say a soft landing does occur, or we do not go into World War III and inflation gets to a point of control. That would mean the Fed would then cut interest rates. This would also lead gold to rise due to the dollar falling with interest rates. In either scenario, good or bad, the probability of gold going up in the next two years is very high in my opinion.
$SPY vs. $GLD (S&P - 500 vs. Gold) 2005 - 2023 - Blue = Gold / Black = SPY This will be the topic of my next article I will be posting tomorrow, stay tuned.
This is not financial advice. Investors should always do their own research before making any investment decisions.
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