Gold: Seeking a Low transcript

Hey everyone, and thanks for jumping back into the heavy metal verse. Today, we're going to talk about gold and discuss the low that it is trying to seek out. If you guys like the content, make sure you subscribe to the channel, give the video a thumbs up, and also be sure to get your ticket to the first investing through the cycles conference taking place in late November in Miami. Link is in the description below. Let's go ahead and jump in.

So, gold is now at 4,400. Now, if you guys remember kind of throughout this year, what we've sort of talked about was the idea that 2026 would be a reset year for gold, that it would likely top early in the year, and then the rest of the year, most of it would be a reset year, but that there's seasonality to when the lows occur. So, take note of this. The low, as it stands right now, was in like late June, early July time frame.

Okay? Now, what's interesting about that is if you look at the year-to-date RLI of gold and look at the average of prior midterm years going back to the 1970s, what you'll see is that on average there is a drop into the summer, and on average the low is around July 6th. Okay? So, this time is more or less played out like it normally does. The only difference between this year and the average of prior midterm years is the volatility, right?

I mean, the average is somewhere over here, and gold had a large remove to the upside, and then it had a larger move to the downside. But, you would expect the the average to, you know, to obviously not be at those extremes, and we can put one standard deviation onto that average, and you can kind of just see we went above it, and then we went slightly below it. But now, what you'll notice is that gold started moving up when it always does in the midterm year.

Now, some people might get hung up on the fact that in 2022 and 2018, gold did not bottom until like September-October timeframe. Okay, so yes, it's possible that that could happen. Okay, it is it Is it within the realm of possibility that gold could put a lower low in? It's in the realm of possibility. Be that as it may, I don't necessarily know if that should be the base case, right? If you look at the gold bull market support band, which is a which is made up of the 20-month uh SMA and the 21-month EMA, when we look at that, what you'll notice is that we basically bounced right off of it.

I mean, we didn't quite get there, but we got real really, really close. And there are plenty of bull markets in the past where we would, you know, get close to it, but not quite tag it. Okay? Now, I previously have drawn the obvious comparison, right? And I'm sure as everyone goes to sleep at night, they're probably thinking just how similar this gold move has been to 1974, right? I mean, obviously we're on the same boat, right?

Like we're on the same boat there. And And so, what happened in 1974 for gold is that it had a big move up off above the regression band, right? And what ended up happening is it topped in early 1974. And it had a low in the summer. You see that? Now, we're going to zoom in now. But you can pretty clearly see it, right? You had a a high in early 1974, a low printed in the summer that was above the bull market support band, right?

We bounced, found a local top in August, and then a higher low in September. Higher low. And what's fascinating is that gold went on to put in a new all-time high before the end of the year. Now, I don't want to go as far to say that that has to happen. It doesn't. But, what I would say is if you look at this move, we had almost a 30% drop, and then gold bottomed in the summer, and then had about a 50% rally before the year was over.

Now, if you go look and and again, let's actually zoom in a little bit on the weekly because I'd like to show where gold found that higher low. Like, where what week it printed, right? So, the week the higher low formed was the week of September 23rd. Okay? September 23rd. The low was the week of July 1st. Like, keep that in mind. The The low was the week of July 1st. The higher low was the week of September 23rd. Now, when you go look at gold today, the low June The week of June June 29th.

Basically, the same week. Instead of July 1st, it was the week of June 29th. But, that would go into July. Basically, the same week. The higher low potentially forms in a couple of weeks, maybe. Now, what's interesting is that if a higher low were to form, I would suggest that it would bottom before other markets would. If you look at what happened in 1974, while gold found the low, the higher low in September, the S&P, it was going through them.

I mean, we didn't have this AI massive build-out, but there was this seasonal weakness around that time. The S&P found the low uh kind of going into early October. It was the week of September 30th, so it was like a week a week or so after after when gold did. So, and and then the S&P still didn't go anywhere until the following year, right? It went up, but then came back down, was still at those lows while gold was at all-time highs.

So, what I what I want you to think about with this gold move is what's happened this year is really normal move for gold. All right, this is absolutely uh a a a fairly standard move. Gold moves up at the beginning, it drops into the summer, and then it bounces. If you're looking at what happened in September and October as a reason for why it has to go lower, I want to just say that you could be right. Like, I am not against that outcome, but I want to caution people into putting too much faith in it because there are plenty of examples where a higher low is formed in September-October rather than a lower low, okay?

And gold already dropped about 30%, right? So, you know, if it wants to put in a lower low, I I guess you're basically just kind of like backtesting. But even then, I I still think it it could in fact be a higher low. So, what I'm looking for with gold is to print that low, I would say between now and let's call it mid-October. I don't think it's going to take until mid-October, but sometime we should start to see that that move come back.

So, it would look something like that and then you sort of bounce out out of like bounce out of it. That is my assessment into how gold is going to play out from here. Now, if gold is not at new all-time highs by let's call it mid-2027, then I might have to reassess my uh my thoughts about being a local top. I do not think that that that will be like sort of like the long-term secular top. I don't get the impression that it's the same thing as what happened in 2011, but if we are unable to if if gold is unable to make an all-time high by mid-2027, then I would start to get a little skeptical.

If you look at the 2011 move, what happened back then is gold topped, but then about a year later, it still hadn't taken out the highs. We're currently only 8 months later. So, I would like to give it a little bit longer going into say mid-2027 before I would be willing to to to to say, "Okay, the top is in." But until that time, I think you have to give, in my opinion, like I have to give 1974 comparison a chance. I have to give the mid-term average comparison a chance.

Because if this just simply plays out and we're back at the average, it wouldn't be a new all-time high, but we would be right back up at the highs. And I I And the other reason why I think gold is struggling right now is because of the dollar, right? So, the dollar is I know you're like, "Well, the dollar's not strong right now. What's he talking about?" I think it's going to be strong and and that could be where I I'm I'm wrong, but if you look at the dollar, it's at 98.6.

I think it's printing a higher low, right? Like I I I think we're just kind of repeating the same process where you you form a low, you rally, you come back down, and then you move, right? Same thing, right? You you So, the low, the rally, come back down, and then go up. And then the next one on the higher and the next one, right? A low, you rally, you come back down, and then you go up. Same thing. A low, a rally, you come back down, you then go up.

Why would the dollar go up? Because inflation and because the Fed is likely going to start raising rates soon. So, I think the dollar is likely going to go up. And what's interesting is if you look at the path of the dollar in 2018, okay? And again, this is the reason we do this is because it was the same president, right? The same president. Obviously, the administration would prefer the dollar to go down. But you can see there was also a correction in the dollar around this time during Trump's first term.

It went down, but then in just a few days, sort of in the calendar year, it started an aggressive move higher. You see that? And so, I think gold is currently sniffing that out. Like I think gold is aware that the Fed is about to raise rates and that the dollar is about to go up. And that's why it's weak. So, by the time the dollar starts to actually go up, the gold low might be in or be very close to being in because markets price this stuff in ahead of time.

Like gold, in my opinion, right now is pricing in a future dollar rally that will go that will take us into the end of the year, okay? That's what I think. And I I think the the reason it hasn't happened yet arguably a seasonality thing, but also just simply because the market is relatively unsure if we're going to get a rate hike in the first place. If we don't get a rate hike, the long end of the yield curve is is going to struggle to go back down.

And I know Treasury Secretary Besson's going to do what he can do, but when you interfere with markets like the way he wants to, the markets will then just test your resolve. They'll see how far he's willing to go to suppress the long end. Because when when you start intervening, it usually just leads to more intervention, not less. It just is the the acknowledgement that hey, you have to continue to to increase the bond buybacks in order to keep the long the long end of the yield curve down.

The best thing they could do to suppress the long end would just simply be to raise rates. And if they raise rates, the dollar goes up. That's the weakness that gold is sniffing out right now. And by the time we get to mid-September going into mid-October, I think the the low is likely in by that point. And again, it it very well could be a higher low. I am in the camp of it being a higher low. But if it's a lower low, I don't think it negates the overall thesis, right?

It could just be, you know, something maybe the dollar goes up more than what I'm expecting. I don't know, but I don't really think it would negate the overall thesis of what I'm trying to communicate. So, those are my views on gold. If you guys like the content, make sure you subscribe, give the video a thumbs up. Again, check out the sale on ITC Premium. Link is in the description below. Thank you guys for tuning in, and I'll see you next time.

Bye.