Could Stock Outlook (and Interest Rates) Spur Bigger Surge in Gold? Multi-Week Consolidation Intact; When is Gold Likely to Break Out Higher??
07/10/19 Weekly Re-Lay Alert: “With respect to interest rates and interest rate futures (Bonds & Notes), the market has been given about all the positive news it can handle. Since early-Nov. ’18, Bonds & Notes have rallied – bottoming before the final rate hike of mid-Dec. ’19 and well before there was talk of holding rates steady or ultimately lowering them.
In other words, the markets anticipated unforeseen (opposite) moves months before fundamentals ever justified or validated that action.
Price action, technical analysis and intermediate cycles are now showing a contrasting potential – that Bonds & Notes are peaking before an (expected) interest rate cut and before fundamentals shift back to a ‘higher interest rates on the horizon’ mentality.
In the final two months of 2018, Bonds surged about 11 basis points – leading into a fourth interest rate hike and the announced expectation that 2 or 3 additional hikes would follow in 2019. However, these ‘futures’ markets said otherwise.
Today, Jerome Powell left the clear impression that an interest rate cut is still very likely this month… and that others could follow. How did Bonds & Notes respond? With a yawn.
So, what else is left to propel them higher?
On a related basis, equity markets have also rallied throughout 2019 – partially on the heels of this lower-interest-rate mentality (along with other bullish factors). Today’s news is about as good as could be expected from a lower-interest-rate perspective. Of course, there is always the double-edged sword for equities…
If the Fed is wanting to lower interest rates to ‘help cushion the effects of possible future adverse shocks to the economy’, what does that say for stocks?
However, much as the pendulum of sentiment swung so far into the ‘higher and higher interest rates in 2019’ camp in late-2018/early-2019, it is now appearing to swing too far into the ‘lower and lower interest rates in 2019’ camp. Since the markets have already reacted to (or anticipated) those extreme expectations, what happens if they shift to a more neutral stance?…
Gold & Silver have rebounded after Gold retested and held initial support and its daily 21 High MAC. Based on the daily trends, these metals should rally to new highs. They have not yet, however, turned their intra-month trends up. It would take daily closes above 1441.0/GCQ & 1551.0/SIU to do so.
A 12 trading-day low-low-high-high-(high) Cycle Progression is now corroborated by a 6 trading-day low-high-high-(high) Cycle Progression – both of which recur on July 12 and should time a daily peak. If Gold & Silver retest their highs by then, it would set the stage for a double top and extension of the current congestion.
The XAU is reinforcing its underlying strength and the cyclic potential to extend this rally into Aug. ’19. It pulled back to begin July, dropping precisely to support at 80.50 – 80.76/XAU, and rebounded. Since it did not turn its daily or intra-month trend down, during that spike low, the XAU was expected to rally to new highs following that test.
It has done that and is likely to reach its weekly LHR (86.54/XAU) this week. On a 2 – 4 week basis, the pullback to 80.64/XAU triggered what could/should be an overall rally above 91.00/XAU. That is where the monthly Raw SPR and Intra-month PLLR converge with other targets and resistance levels. If the XAU is going to accomplish that, it needs to give a daily and then weekly close above 86.00.”
Gold remains in consolidation and could extend this through July. When is next leg up? Silver, Platinum & XAU already signaling new advances – projected to last into/through Aug. ’19. Gold/Silver Index (XAU) tested decisive support at ~80.76 and should surge above 88.19 in July as part of new multi-month rally into Aug. ’19. Monthly trend signal is also crucial in Aug. ’19, but cannot be triggered until Aug. 30. Silver poised for accelerated rally, as it prepares to outperform Gold.
Could a (projected) July/August ‘19 Stock Swoon Support Gold Again?
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.