Gold & Silver Reinforce Inflationary Outlook; Crude Bottoming; Focus on July 2024.
12-13-23 – Time for a New Inflationary Surge? “There is an additional reason why multiple inflationary ‘entities’ are now more likely to move higher in the coming weeks or months… the Fed has publicly acknowledged a shift in thinking – hinting that inflation has peaked while revealing expectations that three interest rate cuts are likely in 2024.
Before reiterating some of the other inflationary (or waning deflationary) factors that have been discussed in recent months, it is a good time to revisit another governing cycle in interest rates and Bonds – the 17-Year Cycle – and how it is impacting this outlook…
17-Year Cycle Redux
In 3Q 2006 (July/August ’06), the Federal Funds target rate peaked at 5.25% – completing a ~3-year surge in interest rates at the same time a major real estate peak was taking hold.
Exactly 17 years later – in 3Q 2023 (July/August ’23), the Federal Funds target rate peaked just above 5.25% – completing a ~3-year surge in interest rates at the same time real estate levels are astronomically high.
[17 years prior to 3Q 2006, Fed Funds also peaked in 3Q 1989 – just below 10% – while completing a ~3-year surge in interest rates. The more things change, the more they stay the same… on a 17-Year Cycle basis.]
Inflationary Factors?
At the same time the Fed is breathing a sigh of relief, other factors are signaling the onset of new (inflationary) advances or the completion of deflationary declines. In both cases, it could ultimately complicate what the Fed currently perceives…
The GSCI is one of them.
As discussed in September & October 2023, the GSCI (Goldman Sachs Commodity Index) had fulfilled multi-month upside objectives near 622 and was in a position to begin a new decline that would ultimately take it back to new multi-year lows (below its late-May ’23 low near 522). The synergy of multiple indicators concurred.
This was another case when a powerful convergence of timing and price indicators – many of them with a high level of non-correlation (lending more credibility to their authenticity) – came together to pinpoint a 3 – 6 month peak and to project a subsequent, multi-month decline.
It was/is another powerful teaching tool in the ‘school’ of Tech Tip application – providing new opportunities. The September 20, ’23 Alert (‘Commodity ‘Inflation’ and the Fed’) described why the GSCI was setting a multi-month peak and would, along with its prevailing intra-year downtrend, drive the price of that index to new lows leading into late-2023…
09-20-23 Weekly Re-Lay Alert: Commodity ‘Inflation’ and the Fed – “One of the ways to measure commodity inflation is via the S+P Goldman Sachs Commodity Index (GSCI or GNX)… Since its early-June ’22 peak, the GSCI has set successive highs on a 22-week interval, creating a ~22-week high-high-high-(high; Sept 11 – 15) Cycle Progression that projected a peak at the same time unrelated cycles in Crude had been projecting a peak.
In doing so, it matched the duration of its previous Dec ’21 – Mar ’22 surge while rebounding 50% of its Nov ’22 – June ’23 decline. Timing cycles and indicators converged in mid-Sept ’23, the same time a unique ~5-Year Cycle peaked in Crude (see INSIIDE Track). It is not just the timing features of this recent peak, however, that make it noteworthy. Price features are also revealing a lot…
For starters, the GSCI has rebounded less than a third of what it lost from its 2022 peak to its June 2023 low. That is not a sign of runaway commodity inflation.
Second, it just peaked at the level of its Jan ’23 high – its year-opening range and the primary resistance for its intra-year trend (down turned neutral). That intra-year action is also not overly inflationary.
Third, and this one is price AND time, it initially peaked in the second month after attacking and holding its monthly LHR. A test of that indicator normally leads to a 3 – 6 month peak in the ensuing 2 – 3 months.
So, just as the Fed is announcing things look more inflationary on the horizon… the GSCI is saying this latest bout of ‘commodity inflation’ – for lack of a better term – could be peaking. Perhaps, it is the Fed communique that will drive this top.
At the very least, it concurs with ongoing analysis in the energy markets – which have been projected to surge from their early-May & mid-June ’23 lows into the week of Sept 11 – 18, ’23. While this does NOT signal an automatic shift from inflation to deflation… it DOES show that a crucial level of upside pressure is expected to diminish.” — 9/20/23 Weekly Re-Lay Alert
The rest of that Alert elaborated on expectations for a multi-month decline in the GSCI – ultimately lasting into December ’23. That was reinforced by…
A 2nd then-deflationary factor: Crude/Energy Markets.
Similar to that commodity inflation index, Crude was fulfilling what had been projected all year long – the outlook for a rally into – and final peak during – mid-Sept ’23, when a myriad of cycle highs collided. That was again highlighted in the ensuing weeks…
10-04-23 Weekly Re-Lay Alert: The Energy/Equity/ Inflation Connection – “Throughout much of 2023, Crude Oil and the Energy Complex were focused on one primary cycle – a multi-week & multi-year cycle projecting a decisive top for mid-Sept ’23… discussed repeatedly, particularly once Crude signaled a multi-month low in early-May ’23 and then reinforced it in mid-June ’23.
From that point forward, Crude was forecast to rally into Sept 11 – 15, ’23… reaching 92.00 and possibly 96.00/CL before a multi-month top was most likely. Not only would that fulfill 3 – 6 month & 6 – 12 month cycle outlooks, but also 2 – 3 year ones.
That dovetailed with related cycles and targets in the S+P Goldman Sachs Commodity Index (GSCI or GNX), a gauge of broader commodity inflation…. the GSCI had weekly & monthly cycles converging on Sept 11 – 15, ’23 and projecting a multi-month peak – near 622/GNX.
Since its early-June ’22 peak, the GSCI had set successive highs on a 22-week interval, creating a ~22-week high-high-high-(high; Sept 11 – 15) Cycle Progression that projected a peak in mid-Sept ’23… it peaked precisely at its multi-month upside range-trading target of 622/GNX…
Not only did that coincide with projections for a major shift in energy prices, it also dovetailed with analysis for a divergent stock index peak on Sept 14/15, followed by another (deflationary) sell-off….
Crude Oil, Unleaded Gas & Heating Oil fulfilled the 3 – 4 month outlook for an overall advance into Sept 11 – 15, ’23 and initially reversed lower in lockstep with stocks (Energy/Equity Connection) and analysis for the GSCI to peak… Crude attacked its June ’22 high and reversed lower, fulfilling this 3 – 6 month and 6 – 12-month outlook that could have far-reaching ramifications.”
The 3 – 6 month outlook – for a sharp decline in Crude & GSCI from mid-September into December 2023 – was reiterated in the November ’23 issue of INSIIDE Track:
10-31-23 INSIIDE Track – “Crude Oil, Unleaded Gas & Heating Oil remain below the highs set in mid-Sept ’23 – highs that fulfilled the early-May & mid-June buy signals as well as a 22-week high-high-high-(high: Sept 11 – 15, ’23) Cycle Progression and a ~5-year high-high cycle… Middle East conflict could not even spur a break above those cycle highs and the energy markets could drop into ~Nov 6 and ultimately into early-Dec ‘23 – when a ~7-month high-high-low-(low) Cycle Progression recurs.”
The bottom line is that these inflationary gauges have fulfilled downside objectives – in price AND time – and are poised to set what could be multi-month lows. While there are related cycles… in July 2024… the attainment of these multi-month downside targets lays the foundation for a substantial rally to soon take hold.
And that is overlapping the time when Gold & Silver signaled multi-month lows in early-October ’23 and projected sharp rallies into early-December ’23… another pair of factors that are often associated with inflation (right or wrong).
What are other markets revealing?
Gold & Silver fulfilled ongoing projections for a second sharp multi-week rally in 4Q ’23, projected to stretch into early-December ’23 (Dec 4th would fulfill greatest synergy of cycles) & create a Gold spike above its early-May ’23 peak (2152/GCG = ideal target – where other upside targets converge).
Gold perfectly fulfilled that, peaking at 2152/GCG on December 4, 2023… another prime example of the 90/10 Rule of Cycles! Similar surges could be seen leading into future cycle peaks in mid-April and mid-July 2024… the next phase of Gold’s ~31-Week Cycle Progression. Inflationary cycles concur!
The action since late-2022 is powerfully validating the onset of a new 40-Year Cycle of Currency War in which Gold & Silver possess unique potential for late-2023 – late-2024! This should have a dramatic impact on the US Dollar and could coincide with a pullback in interest rates. Early-December provided the latest corroboration to that outlook with Gold reinforcing its role as the ‘Canary in the Coal Mine’.
How Does Gold’s Recent Surge & Peak Reinforce Analysis for July 2024?
What Type of Events Could be Unfolding to Spur Accelerated Gains in Gold?
The January 2024 INSIIDE Track will begin to elaborate on the outlook for 2024 and the potential for ‘Black Swan’ events in line with the 40-Year AND 17-Year Cycles! Refer to the April 11, 2023 special issue of The Bridge – Gold, Silver and Elliott Wave Structure – and subsequent reports – for expanded analysis and charts as well as discussion on why, how & when Gold is most likely to break out to the upside (in 2024) following a multi-year ‘flat correction’.
“Gold, Silver and Elliott Wave Structure”
“40-Year Cycle – Dollar Dominion, Dilemma & Demise”
“40-Year Cycle – Currency Wars & Cryptos”
“Solar, Seismic & Gold Intensity Cycles”
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.