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Cautiously Optimistic Ahead of CPI

gold bars on a graph

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Following the FOMC meeting, monetary metals and miners took off Thursday morning. Gold has broken resistance at 1700. Silver has set a new higher high above 21.31. GDX reached 27, its highest level since August 12. SILJ did even better, reaching its highest price since June 22. We’ve enjoyed some great gains courtesy of the Fed’s pivot, and now we face the next major headwind: The CPI.

CPI C hart

At the risk of stating the obvious, CPI numbers that are higher than expected will keep rate hikes front and center, whereas lower results than forecast would be supportive of even higher prices in metals and miners.


Gold Graph

The momentum displayed by the MACD Line is very bullish, but the RSI is close to being overbought in the short-term. This suggests that another pop to resistance at 1740 or slightly higher is possible prior to a short-term pullback. This all depends on how the CPI plays out tomorrow.


Silver Graph

As stated, Silver took out the prior high of 21.31 and also tested its 200-DMA twice. However, it has failed to close above there. If we get a low CPI, we may get a pop and drop, whereas a high CPI turns Silver back down for now. The RSI is extreme overbought, which supports a short-term pullback soon.


GDX Graph

After taking out the prior high at 26.11, GDX is clearly making higher lows and higher highs. That said, we need to close above the 200-DMA around 30 to get excited about the upside. The RSI allows for a further move higher, but it is getting close to extreme overbought territory.


SILJ Graph

SILJ had been even more impressive, taking out all of the recent peaks going back to early August. It fell back Wednesday after the RSI hit 70, but it now has room for a shot at the 200-DMA. Unless we see a sharp dump in the CPI tomorrow, I expect a short-term pullback from overbought levels soon.

All-in-all, the sector looks bullish on all fronts now that the Fed has made it clear that the biggest rate hikes are behind us. I’ve made it as clear as possible that I believe the Fed has pivoted. I stated back on October 3rd that I believe Silver bottomed at 17.40 on September 1. I now believe that the DXY peaked at 114.75 on September 28 and Gold bottomed at 1618 on November 3. But I’m still waiting for confirmation on Gold and DXY. In the meantime, we may need to take a breather soon to correct overbought levels before heading even higher.





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About the Author

David Brady has worked for major banks and corporate multinationals in Europe and the U.S. He has close to thirty years of experience managing multi-billion dollar portfolios including foreign currency, cash, bonds, equities, and commodities. David is also a CFA charter holder since 2004.

Using his extensive experience, he developed his own process utilizing multiple tools such as fundamental analysis, inter-market analysis, positioning, Elliott Wave Theory, sentiment, classical technical analysis, and trends. This approach has improved his forecasting capability, especially when they all point in the same direction.

His track record in forecasting Gold and Silver prices since has made him one of the top analysts in the precious metals sector, widely followed on Twitter and a regular contributor to the Sprott Money Blog.

*The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.


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