Boost in retail sales knocks gold

U.S. consumer spending jumped by 0.7% in August, boosting the U.S. dollar and sparking another sell-off in gold.

Key Takeaways:

  • After failing at $1,833 earlier this month, gold has dropped 4% so far in September.
  • Retail sales in August beat expectations, signaling a strong recovery through the Delta variant and hurting safe-haven demand for gold.
  • •The tight labor market is boosting wages, but low-income workers are no better off because inflation is eating the gains.
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The Debt Limit, the Stock Market, and Gold

The U.S. stock market surges higher as investors refuse to look at alternatives, even as the government risks defaulting on its debt and jeopardizing the U.S. dollar.

Key Takeaways:

  • Gold turned around at $1,834 for the 4th time but has maintained its short-term bullish pattern of higher lows.
  • Physical gold demand is surging in India and China (gold’s two largest consumer markets) after a slow summer, which could boost returns this month.
  • Treasury Secretary Janet Yellen urged Congress to raise the debt limit as soon as possible, or risk irreparable damage to the United States’ credit rating and currency.
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The U.S. dollar losing steam?

Gold needs a catalyst to jump out of the $1,800 zone, and U.S. dollar weakness might be the answer.

Key Takeaways:

  • Gold’s 200-day moving average and 50-day moving average are headed for a “golden cross,” which might be enough to push gold above the $1,837 resistance zone.
  • Goldman Sachs predicts that the U.S. dollar index has very limited upside potential – all the positive news has already been priced in.
  • The United States’ Afghanistan exit has damaged the nation’s reputation, further deteriorating the post-WWII Bretton Woods economic system where the dollar is king.
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A beautiful bounce, but will gold continue?

As the gold market approaches a period of seasonal strength, investors will be watching for a higher high.

Key Takeaways:

  • Gold has jumped back up to its $1,800 trading channel after putting in a higher low at $1,690.
  • Historically, September has been gold’s strongest month in terms of price performance. Next month could follow suit.
  • The U.S. Dollar continues to strengthen against other currencies, making gold more expensive for foreign investors and threatening gold’s rally.
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Gold vs. Money Supply

The price of gold has tracked the rapid expansion of money supply throughout history, both in the United States and globally. As M2 continues its long-term parabolic growth, so will gold.

Key Takeaways:

  • Gold found a new ceiling around $1,790 after a solid $100 bounce.
  • The ratio between gold and M2 money supply suggests that gold’s long-term bull market has further to climb.
  • The velocity of M2 money supply is sitting at all-time lows. A trend reversal could mean rapid inflation, and a flood of money moving into gold.
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Gold’s flash crash

The recent plunge and subsequent rebound have extended gold’s bearish correction phase in the middle of a long-term bull market.

Key Takeaways:

  • A positive jobs report triggered a $130 drop-in gold last weekend. The price quickly turned back around, supported by Congress’ latest trillion-dollar spending proposals.
  • Gold failed to break through its $1,680 floor, once again showing the strength of this support level.
  • We are experiencing a short-term correction in the middle of a bull market. Looking back at other mid-bull corrections, we see that this phase has actually been quite shallow. Now is the time for investors to add to their gold position at a discount.
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Gold looks strong, but struggles to hold gains

Gold has been stuck in a $40 trading range for over a month, building a base around the $1,800 level and looking toward higher highs.

Key Takeaways:

  • Gold has been trading sideways for a month, but external pressures are mounting to push gold back into its long-term bull market.
  • In August 2020, gold began a retracement phase. It looks like that ended in March, but we need a few higher highs to confirm the end of this bearish phase.
  • The government is fighting to either re-suspend or raise the debt ceiling, which is bearish for the U.S. Dollar and bullish for gold.
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Gold Bounces on U.S. Dollar Weakness

Gold took a $35 jump after struggling to escape the $1,800 range, alongside strength in equities and cryptocurrency markets.

Key Takeaways:

  • If gold puts in a higher high on this rally, the price would be on its way regain June losses.
  • The U.S. Dollar Index dropped below its rising channel after the RSI divergence last week, giving gold a boost.
  • Companies are protecting their margins by passing higher costs to consumers. Despite record inflation, consumer demand for goods has also been rising.
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Gold’s Tug-of-War

Bullish stock market sentiment and unexpected U.S. Dollar strength are putting pressure on gold, while increased volatility in the equities and bond markets support safe haven demand for the yellow metal.

Key Takeaways:

  • The economy seems to encounter new risks every day, from the rise of COVID-19’s delta variant to extended supply shortages and record inflation numbers.
  • U.S. Dollar strength and bullish stock sentiment are creating headwinds for gold, delaying the escape from its year-long correction phase.
  • Gold proved its value as a stable safe haven on Monday, emerging as one of the only winners during the sudden market volatility.
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The Real Risk of Inflation

The fallout from COVID-19 may be reversing the long-term trend of low inflation, which has dominated the U.S. economy for decades.

Key Takeaways:

  • The CPI surged almost 1% in June, the fastest rate in 13 years. Consumer prices have risen 5.4% over the last year.
  • Two variables that have helped suppress inflation for decades might be reversing, which will create major problems for a financial system that runs on cheap money.
  • As global markets face the risk of exorbitant public debt combined with rising interest rates, investors are starting to reconsider portfolio allocation strategies.
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Gold Sets the Stage for its Next Rally

As inflation metrics continue to break records, the U.S. dollar could be reaching a breaking point.

Key Takeaways:

  • Gold has been rising steadily for the past week, recovering from its $100 drop-in June.
  • Existing home prices have increased 24% over the last year and rent is up 9.2% in 2021, yet CPI only reflects a 2.2% increase in housing costs. When will CPI catch up?
  • Premiums on some precious metals products at record highs, reflecting a heavy increase in consumer demand for gold and silver.
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Bullish Indicators Balance the Bad

In both the stock market and the precious metals markets, investors face a paralyzing collection of bearish and bullish evidence. Everyone is looking for the asset that will emerge as the winner in this new era of finance.

Key Takeaways:

  • Gold continues to show some weakness following its recent drop. It looks like it might be headed to retest the March lows, but several indicators are signaling a bullish reversal when or before it gets there.
  • The stock market is as white-hot as the housing market, but some money managers worry equity valuations are in a dangerous position. Stocks look priced to perfection, meaning any shock to the system could trigger a major correction.
  • The next couple of weeks will provide some excellent entry points for gold investors. Precious metals are providing a rare pocket of value in today’s extremely expensive financial ecosystem.
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A $100 Drop Halts Gold’s Bullish Trend

Gold bounced off the 50% correction line after last week’s plunge. The metal’s next move will either strengthen the bullish reversal or signify a continuation of the 10-month bear market.

Key Takeaways:

  • Expectations for rising interest rates buoyed the U.S. dollar and halted the recent rally in precious metals prices.
  • Gold has formed a reverse head and shoulders pattern, which typically indicates a bullish reversal. If the pattern holds, gold could continue the upward stair-step that began in March.
  • The U.S. dollar rose 2% against other currencies last week, but the currency remains in a long-term bearish trend with little chance of a reversal.
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Fed Discusses Interest Rate Hikes

Gold took a hit this week, alongside the stock market, after Jerome Powell announced the Fed’s plan to mitigate hotter-than-expected inflation.

Key Takeaways:

  • After Wednesday’s highly anticipated Federal Open Market Committee meeting, Jerome Powell announced a plan to raise interest rates in 2023 to curb rising inflation expectations.
  • The U.S. Dollar rallied on the news, while gold and the stock market indexes reacted with steep drops.
  • Expectations of rising interest rates can hurt gold in the short term, but history tells us gold ultimately thrives in the inflationary environment that requires rate hikes.
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The Gold Rotation: Institutional Investors Seek Stability

After surging past several resistance points on its climb to $1,900, gold continues to shine in a financial ecosystem wrought with volatility.

Key Takeaways:

  • Hedge funds, money managers, and retail investors are starting to rotate back into gold as cryptocurrencies falter and the stock market gives warnings of an inflection point.
  • This safe-haven demand is reminiscent of the forces that pushed gold to its all-time high in August 2020.
  • The other flagship precious metals – silver, platinum, and palladium – are also showing strength as rising commodities prices underpin gold’s bullish performance.

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Risk Assets Sell Off as Gold Hits a 3-Month High

Investors sent hot technology stocks and cryptocurrencies tumbling downward this week, increasing safe-haven demand for gold.

Key Takeaways:

  • Gold is holding steady around the key resistance level of $1,885, following two months of higher highs and higher lows.
  • The Dollar Index dropped below 90 for the third time this year and took a weak bounce, desperately trying to stay above 2018 support levels.
  • Gold is catching some safe-haven demand as the equity and cryptocurrency markets begin to price in the risk of inflation, interest rate increases, and bursting bubbles.

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