Gold/XAU Dichotomy as Gold Projects Retest of High in July ’24!

06-19-24 – A common question involves the disparity between price moves in a particular commodity (let’s say Gold) and related shares or stocks. 

That disparity often expands when it is the comparison between that commodity and a related index of stocks (let’s say the XAU Index).

The following principles and observations apply just as aptly to the price of oil & gas vs. energy shares, interest rate vehicles vs bank stocks, coffee prices vs. coffee stocks, etc.  (And in some cases, a gain in the price of the commodity actually hurts the price of a ‘related’ stock since that involves their ‘cost of goods’.)

This topic has again come to light, and already been addressed by incoming inquiries, with relationship to the outlook for Gold to (likely) set its highest peak in July 2024 and the XAU to (likely) set its highest peak in September 2024.

First and foremost, these conclusions are based on synergy…

Gold is expected to set a multi-month peak in July ’24 – when it has its greatest synergy of weekly, monthly & yearly cycles converging.

The XAU is expected to set a multi-month peak in September ’24 – when it has its greatest synergy of weekly, monthly & yearly cycles converging.

This is consistent with almost every significant turning point in the two… over (at least) the past 15+ years…

The 2010/2011 peak(s) were separated by ~9 months (Dec ’10 & Sept ’11).

The 2015/16 low & 2016 high were each separated by a month or more.

The same with the 2018 lows (with the XAU lagging in all three cases).

From there, Gold rallied into August ’20 and set a multi-year peak.  In contrast, the XAU rallied and did not peak until June 2021 – 10 months later.

Gold finished its correction in March ’21 and embarked on a ~year-long rally to new highs In March ’22.  The XAU did not bottom until Oct ’21 – 7 months after Gold’s bottom.

The 2022 peaks were again separated by a ~month (Gold in March & XAU in April 2022).

Both bottomed in Sept ’22.

The XAU had a moderate rally into April ’23 while Gold surged to new all-time highs into May ’23.

Gold then corrected into October ’23 and again surged to new highs in Dec ’23.  Meanwhile, the XAU trended lower until finally bottoming in February ’24… 4 months after Gold’s low.

In almost every case (since the beginning of this bull market in early-2016), the XAU is playing ‘catch-up’ and does not set corresponding peaks until 1 – 2 months (or longer) after Gold has peaked.

The lows are often similar, with the XAU bottoming after Gold since all the mining shares are not metals… they are stocks.

As a result, they act and trade differently. 

One reason (a big one) is that there is a normal lag between the change in the price of a commodity… and its underlying impact on the profit of a related product and the stock of the related company.

Another has to do with the timing of new information (quarterly earnings vs daily price data).

From a trader’s/speculator’s perspective, there is also a ‘delay of acceptance’ (for lack of a better term)… or a mentality of ‘prove it to me’.  Let me explain…

If Gold has been heading lower for a year and then bounces, it is just viewed as ‘more of the same’.  If/when Gold subsequently begins a new decline, traders sell off the related stocks and drive them to new lows.

However, if Gold stops declining before making new lows… it creates some minor divergence.

In Elliott Wave terms, this is a ‘1-2’ wave structure.  Then Gold rallies and exceeds its initial high.  Traders buy some related shares but are not yet convinced.

Wait a minute! 

Gold begins to drop again and the jittery stock traders sell shares again… and drive them to another round of new lows.  But Gold again bottoms at a higher level.

In Elliott Wave terms, this is a ‘1-2, 1-2’ wave structure where the first rally & pullback are a primary wave ‘1’ & ‘2’.  The second rally & pullback are all part of the subsequent primary wave ‘3’… but only the first two lesser-degree waves within that ‘3’.  That is the fractal nature of Elliott Wave.

During Gold’s subsequent rally – which is likely some form of ‘3’ of ‘3’ wave rally (a more dynamic/accelerated advance following a pair of ‘1-2’, ‘1-2’ rally/decline sequences) – it gains with more conviction and traders of XAU stocks are finally convinced Gold bottomed… 1 – 2 months ago.

Now they need to play ‘catch-up’ and start buying related stocks with a new fervor… since they have driven those stocks to successively lower lows – even as Gold created a sequence of ascending lows – in the mistaken assumption that Gold was on the verge of another convincing sell-off.  A divergent low is set.

The opposite often occurs at a peak, when Gold initially sells off and the now-bullish stock traders just wait for a pullback low (in Gold) to add to long positions in corresponding stocks.  They want to keep buying.

In that scenario, Gold begins to rally after its initial drop and the stocks are quickly driven to new highs… but Gold does not follow suit.  Gold pulls back again… as do the XAU shares.  But then Gold starts to gain and the stocks are pushed to another round of new highs… as Gold sets another lower peak.

Eventually, Gold sells off again (2nd or 3rd time) and breaks intermediate support – confirming a multi-month peak is intact (a month or more ‘ago’).  NOW… stock traders are finally convinced a top is in place and begin to liquidate – or sell short – positions in related shares… often in a more abrupt manner (panic).

This is the norm, which is why divergent tops and bottoms are more likely… instead of the opposite.

In the current case, both markets could soon rally into July ‘24 after the current sell-off – creating a divergent peak.  After a July pullback, they might [reserved for Weekly Re-Lay subscribers]…

After a subsequent pullback, they could again rally into September ’24, with the XAU setting higher highs while Gold rallies to a lower high.

In that case, Gold would have peaked in July and the XAU would have peaked in September.

That would be a similar divergence to almost every other peak.

Also, the XAU includes a lot of stocks with Silver (and other metals).  That also has a diverging impact.  If anything, it would be more unusual – from a historical perspective – for both of them to peak at the same time.

Related to this topic, there is another valuable tool that assists in timing when a lagging market (in this case, the XAU) is more likely to enter an accelerated advance or decline – following similar moves in the underlying commodity.  That is a topic for another discussion.”


Gold & Silver fulfilled intermediate cycle lows (June 7 – 14th) and should subsequently ultimately rally into July 2024 – when Gold is projected to set a decisive, multi-month peak while retesting its recent high.  (Silver had greater synergy of cycles in May 2024, so a July ’24 peak could be a divergent/lower high than Gold.)  They have not yet triggered new signals, so consolidation remains in force.

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 2024!  Gold is acting as the ‘Canary in the Coal Mine’ and portending an ongoing battle with the Dollar Index that should intensify in 2025 & 2026.

 

Gold & Silver Fulfill Projected Pullbacks into June 7/10th; Multi-Week Low Likely.

June ’24 Low Should Spur New Rally into July 2024 Peak!

How Does Weekly Trend Pinpoint Likely Level for July 2024 Gold Peak?.

 

“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.