Cautiously Optimistic Ahead of CPI

Did you know you can get the Sprott Money Weekly Wrap Ups, Ask The Expert, 

special promotions and insightful blog posts sent right to your inbox?

Sign up to the Sprott Money Newsletter here. 

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.

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

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

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

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

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 3^rd 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.