Gold & Silver Corroborate 2023/24 Inflation/Interest Rate Outlook.
Outlook 2023 – Inflation/Interest Rate Peaks
02-27-23 – The driving force behind much of the market action in 2022 (and early-2023) has been the focus on inflation and rising interest rates. As is often the case at this stage of an inflation cycle, good news becomes bad news and bad news becomes good news.
In other words, any report that shows continued economic growth or expansion fuels the fears of higher interest rates – in order to squelch that inflating growth – and consequently spooks traders into selling stocks. (‘Spooks’ is a highly technical term that conveys a rise in anxiety over something that is out of one’s control… in case you were wondering.)
Conversely, when economic reports show the economy is slowing, traders celebrate and buy stocks on the hopes that remaining interest rate hikes will lessen in their frequency and intensity.
Up is down; down is up.
Transitory
This mindset is transitory (but not in the way Fed Chairman Powell described inflation as being transitory in June ‘21… just before the real inflation began to take hold). It is the underlying fears, factors and fundamentals that are the bigger concern. Much of that is reflected in the price charts of key futures markets and related indexes, stocks, commodities, etc.
In order to understand where things are (likely) headed, it is important to understand where they have been… and what brought us to the present. This issue is focused on setting that stage by reviewing what has unfolded in recent years… and what that means for the coming years. Subsequent issues will elaborate on the specific outlook for 2023/2024.
In 2Q 2020, INSIIDE Track explained how and why Stock Indexes and Silver (a key inflationary commodity) had fulfilled major cycle lows in March ‘20 and entered what was expected to be 1 – 2 year uptrends.
At the same time, related commodities like Copper, Lumber & Natural Gas were also showing convincing signs of multi-year lows while projecting 1 – 2 year advances to follow.
Inflation was forecast to surge.
Prior to that, Bonds had already been showing when this shift was likely to become apparent to the masses – in 3Q ‘20. (There is often a lag between when key markets bottom and inversely-correlated ones top.)
Since July 2016, multi-year cycles had forecast the next multi-year peak in Bonds (low in interest rates) to occur in/around July 2020. As illustrated on page 2 (HCP diagram was published repeatedly in 2019/ 2020), Bonds & Notes were forecast to see a 6 – 12 month low in Nov ’19 followed by a rally into ~July 2020 – when a major, multi-year top was projected. It fit perfectly with the outlook for commodity inflation.
At the same time, INSIIDE Track was explaining why a new phase, and new form, of inflation was poised to begin – exactly 40 years from the culmination of the last great battle with inflation. At the same time INSIIDE Track was warning about this, Jerome Powell was describing why he wanted inflation. The Sept ‘20 INSIIDE Track explained why he would likely get what he was wishing for – and regret it (see pg 4).
Bonds fulfilled that outlook with great precision and have been adhering to related cycles ever since. As described back then (late-2020), a 4-year high-high cycle was expected to be followed by at least a 2-year decline (1/2 of cycle) and potentially as much as a ~32-month decline (2/3 of cycle, allowing time for a 50% rebound in time before the next cycle peak). Bonds & Notes have already fulfilled the minimum but could stretch their declines into Mar/Apr ‘23.
Inflation Shift
2020 – 2022 was/is expected to time the first phase of this inflation (and interest rate) cycle. Much of this was caused by supply-chain disruptions. The next phase could be exacerbated by a falling Dollar (after a 2023 peak) and other supply challenges. Before delving into that, it is critical to understand what brought us to the present [reserved for subscribers]…
Gold & Silver have corrected after reaching multi-month upside price targets in early-Jan ‘23, while fulfilling weekly & monthly cycles in Silver. They were expected to surge into early-Jan ’23 when Silver set a multi-month peak (perpetuating a 6-week high-high-high-high-low-low-low-low-(high) Cycle Progression) while Gold set a shorter-term peak.
Gold then triggered a new buy signal in early-Jan and surged into early-Feb – a ~3-month/~90-degree rally from its early-Nov ‘22 bottom – while attacking its multi-month upside objective (and range-trading target; (1660 – 1820 – 1980/GCJ) near 1980/GC.
That fulfilled most of the upside price potential, for this initial multi-month rally in Gold, and occurred as Silver was retesting its 3 – 6 month upside target at 24.50 – 24.68/SI. Once again, Silver held that critical resistance – reinforcing its significance (and the validity of its early-Jan ‘23 cycle peak) – and triggered a reversal lower.
That projected a larger-magnitude sell-off – a type of ‘2’ wave decline that would correct the entire Sept – Jan ‘23 advance. A low in early-March ‘23 would fulfill a ~6-month high (early-Mar ’22) – low (early-Sept ’22) – (low; early-March ’23) Cycle Progression and a precise 50% retracement in time (4 mos up into early-Jan ‘23, 2 mos down into early-Mar ‘23).
It would also perpetuate a ~1-month/28 – 30 day high-high-high-(low; Mar 2 – 6, ‘23) Cycle Progression.
~9.5-Month Cycle
For much of the past decade, Gold & Silver have demonstrated the consistency of a ~9.5 Month Cycle – timing decisive highs and lows on a repeated basis. In late-2018, the accompanying chart was published in INSIIDE Track – explaining how Silver was poised for a 6 – 12 month bottom in Nov ‘18.
Silver perfectly fulfilled that cycle – producing a low that would not be retested until March ‘20, at which time it held. Following the Nov ‘18 low, Silver rallied into the next phase of that 39 – 41-week cycle – in Sept ‘19. Two phases later (~19 months), Silver set its highest weekly close in May ‘21. ~9.5 months/39 – 41 weeks later, Silver set a lower peak in Mar ‘22.
~9.5 months after that, Silver was set for a multi-month peak in early-Jan ‘23. Once again, it had many other cycles corroborating that – increasing the probability a multi-month peak would take hold. Silver peaked in precise alignment with that cycle and projected a future peak for late-Oct/early-Nov ‘23.
A high in early-Nov ‘23 would also perpetuate an over-arching ~19-month high-high-high-(high) Cycle Progression in Silver and complete a ~1-year/~360-degree advance in Gold.
That could/would be reinforced by an intervening peak in early-May ‘23, creating a corroborating ~6-month/~180-degree low (early-Nov ‘22) – high (early-May ‘23) – high (early-Nov ‘23) Cycle Progression.
From separate perspectives, both Gold & Silver are projecting a future peak for early-May ’23. That would fulfill a ~4-month low-high-(high) Cycle Progression in Silver and a ~3-month low-high-(high) Cycle Progression in Gold.
The Jan ’23 highs completed what had been projected to be a 3 – 6 month advance from major lows set in the final third of 2022 – Silver in Sept ‘22 and Gold in Nov/Dec ‘22. The importance of those cycle lows, and the corresponding wave structure and potential they would validate, was detailed in many previous issues, including the Oct ‘22 INSIIDE Track:
9-30-22 – “Silver has had a different structure – originating from its early-’21 peak. It has declined in a fairly clear 3-wave structure… In Elliott Wave terms, that is a classic 3-3-5 corrective (‘a-b-c’) wave… this entire decline (Feb ‘21 – Sept ‘22) could be a larger-degree ‘B’ wave decline of a multi-year, upside ‘A-B-C’ correction, following Silver’s 2011 – 2020 decline.
In other words, if a 1 – 2 year bottom is set near current levels, Silver would likely embark on a new 1 – 2.5-year advance (to be honed later) and ultimately exceed its early-’21 high… but not its 2011 peak…
Gold’s monthly trend pattern and its wave structure (two successive declines of ~7 months each) are… reinforcing what Silver’s price action has already been showing… there is still a good chance for at least Gold to drop to new lows… the ~7-Year Cycle illustrated above. That has consistently timed multi-year lows in Gold (Silver in 4Q ‘01) in 4Q of the respective years. The latest phase projects a low in 4Q ‘22… ”
The XAU & HUI are steadily tracing out a textbook wave structure, first surging into Jan ’23 and fulfilling ongoing projections for multi-month rallies to 137.29 – 139.84/XAU & 259.42 – 262.31/HUI. They peaked at those target ranges and reversed lower.
They sold off into the latest phase of a 21 – 23-week high-high-high-high-low-(low) Cycle Progression that helped pinpoint the Sept ’22 low and projected a subsequent low on Feb 24 – Mar 10, ’23. All of this is fulfilling what was described in early-Jan:
1-05-23 – “The XAU & HUI have rallied since dropping into Sept ’22, fulfilling a ~5-month (21 – 23 week) high-high-high-low Cycle Progression… That set the stage for a multi-month low with the ongoing outlook for a surge to 130 – 137/XAU & 245 – 251/HUI… The next multi-month low could be seen in the first half of March ‘23, in line with the 23-week Cycle Progression…” .
The first advance – into Jan ’23 and to 3 – 6 month upside targets – reversed the monthly trend to up, a lagging and confirming indicator that usually reverses at/near the culmination of an initial multi-month rally. At the time, the XAU perpetuated a 9 – 10 month/41 – 45 week high-high-high-(high) Cycle Progression and held the descending monthly 21 High MAC.
That usually triggers a 1 – 3 month reactive sell-off, which has taken place, with both indexes spiking down to the convergence of their last two monthly HLS levels (extreme downside targets). A 1 – 2 month (or longer) low is expected on Feb 24 – Mar 10, ‘23.
Platinum sold off in what is likely a ’2’ or ’B’ wave correction after its initial surge from cycle lows in early-Sept ’22 into cycle highs in early-Jan ’23, when it fulfilled an 18 – 19 week low-low-low-low-(high; Jan 3 – 13, ‘23) Cycle Progression. The fact that Platinum spiked higher to begin the year AND attacked its extreme upside 3 – 6 month target (1130/PL) showed that a higher magnitude peak was in the making.
The next multi-month high could stretch into early-to-mid-May ‘23, the next phase of that 18 – 19 week Cycle Progression. In the interim, Platinum sold off into late-Feb/early-Mar ’23 – the same time other 90/180/360-degree cycles came into play (linked to, among other turning points, the June 3 & Dec 1 highs and Sept 1 low) – very similar to cycles in Silver.
A low at this time would fulfill a ~6-month high-low-(low) Cycle Progression and a 50% retracement in time (18 wks up/9 wks down)… but would not be validated until a weekly close above 980.0/PLJ.
Platinum just tested its monthly HLS (extreme downside target for Feb ‘23) at ~905.0/PLJ, where a low is likely. This is also near the levels of the Sept & Dec ’21 lows – creating the potential for an Inverted Head and Shoulders pattern on a 1 – 2 year basis (with neckline resistance at ~1100.0/PL and a breakout target at ~1300/PL).
Palladium is spiking down to multi-year range-trading support (1400 – 2200 – 3000/PA), reinforcing its ongoing weakness. It has declined for almost a full year from its early-Mar ’22 peak and would not show any convincing signs of a multi-month bottom until, at the very least, a weekly close above 1600/PAM.
If a low is set soon and near current levels, Palladium could see an initial rally into early-May ’23 – fulfilling a ~7-month/~30-week high-high-(high) Cycle Progression and a 50% rebound in time (20 week decline followed by 10 week rally).
The next major peak is expected next year when Palladium has coinciding ~2-year (24 – 25-month), 3-year & 4-year cycles. The ~2-year cycle helped time the March ’22 peak and projects a future peak for March/April ’24 – the next phase of a 24 – 25-month low (Jan ’16) – high (Jan ’18) – high (Feb ’20) – high (Mar ’22) – high (Mar/Apr ’24) Cycle Progression. A ~3-year cycle – that timed multi-year peaks in 2008, 2011, 2014, 2018 & 2021 – is also peaking in 2024.
Copper fulfilled the outlook for a rally into early-Jan ’23 – the latest phase of a ~10-month high-high-high-(high) Cycle Progression and the completion of a ~6-month/~180-degree advance It has since corrected but is testing multi-month range-trading support (and levels of previous highs) at 3.92 – 3.9400/HGK.”
Gold & Silver fulfilled the 1 – 2 year outlook for lows in Sept ’22 (SI) and Nov/Dec ’22 (GC), followed by strong multi-month surges. They have since sold off and are poised to set multi-month bottoms at any time. These retracements would complete ‘2’ or ‘B’ wave pullbacks (following the initial impulse waves from the Sept & Nov ’22 lows) and set the stage for strong rallies in 2Q/3Q ’23… potentially coinciding with the outlook for topping interest rates and bottoming Bonds & Notes. However, they would also be a likely harbinger of a new (different) phase of inflation in 2023/24.
The XAU & HUI are similar and portend a multi-month low by March 6 – 10 – during the latest phase of an uncanny ~23-Week Cycle. The monthly trend projects a rally to new intra-year highs to follow.
How High Could Gold & Silver (&XAU) Reach in 2023?
Will the Outlook for Bonds (Bottom in ~March ’23) & Interest Rates Concur?
What Other Factors Could Positively Impact Gold & Silver in 2023?
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.