Gold update

October 2, 20232 Comments

Lets take a look at gold today.

Gold vs USD

I’ve noted many times in the past that gold can be a good hedge against a declining USD. The two are very often negatively correlated. The chart below goes back to 2004. Gold is the black line, USD is the red line. Note that when the USD (red) is moving down, gold can rise, or trade flat. The pane below price is a correlation line. When its below zero, that means they are moving in negative correlation. Note how the two are negatively correlated the vast majority of the time. Gold has proven to be a reliable USD currency hedge especially when you can draw a trendline on the correlation line.

The pane at the bottom is comparative relative strength. When its rising, gold is outperforming. Again, a fairly reliable occurrence when the USD is falling.

If you feel that the USD will begin to decline on the back of a high USD debt load, potential credit rating negatives, and an end to rising rates…you may want to keep an eye on gold. History suggests it will rise or at worst, flatline, in such a circumstance.

Gold vs Japanese Yen

Gold (black line) and the Japanese Yen (red line) do not move in negative correlation as consistently as with the USD, as seen in the correlation pane below the price chart. However, when the Yen declines aggressively, you will see the correlation trend down – meaning that gold is acting as a hedge against the Yen. In the past 20 years, this situation has only occurred 3 times with any relevance. It appears that now is one of those times.

 

Gold chart

Here’s a 5 year gold chart. Technically, gold is trapped in the same range its been stuck in since 2020. Not surprising, given the USD’s strength over that timeframe.

  • Big picture: Buy at $1700, sell at just over $2000.
  • Near termed, watch for a potential bounce off of minor support (purple horizontal line) near the mid $1800’s.

Hard to say if that will happen, but if we see any weakness in the USD, its a high probability we will see that bounce. For now, its not for us to predict. But, we should be aware of the potential. Keep an eye on the USD, and on gold for a potential bounce. If the current levels for gold don’t hold out, we could revisit $1700, which has been a strong support level.

 

2 Comments

  • Not surprisingly to me, WPM ( Wheaton Precious Metals Corp ) has not made any head-way in the past 10 days. From my experience listening to John Embry from 20 years ago and later, until he left RBC and joined Sprott, at the time he commented on gold juniors, and the only time I actually made money was buying a junior before it became well known in media circles, or hit payday from gold assays, and was bought out by a major.

    Gold bullion having no dividends, and the BoC, the Fed, ECB and England’s cental bank all have prejudice against gold, as its rise means a drop in public confidence in fiat currency ( monopoly money) and democratic governments.

    That being said, if AEN, ABX or others rise $10, I will sell my stocks at the top, as you say. Buy low, sell high. Do not gold hold long-term as it will always drop again when the public’s opinion of the local government, and world economy is restored from its dips.

    Reply
  • I have 3000 shares of Barrick Gold. I bought it in the low $20 level. I hold it as insurance and I see it moving to $22. This will depend on the gold price. It has had a small correction into the mid-1800s, that is, gold.

    Reply

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