Cautiously Optimistic on Gold and Silver

This article explores the current market trends of gold and silver amidst uncertain economic data. Discover the potential impacts on precious metals and get insights on the market outlook. 

The Interplay Between Economic Data and the Outlook for Precious Metals

It appears that economic data is not what it once was. Back on July 5, I posted this tweet:

Here is the actual data:

My point was, how could employment data consistently beat forecasts and exceed those expectations by a cumulative 39%, given the deteriorating state of the economy?

Now we get this:

So, the payrolls data was exaggerated, but for what purpose? In order to justify rate hikes by the Fed?

Then we got this:

And this:

I believe it is suffice to say that the employment data is unreliable at best.

And if that were not enough, GDP and inflation data are also revised down: 

Why did statisticians get these important data points so wrong? That’s a discussion for another day, but it has three primary effects: first, the data cannot be trusted; second, it means that the economy is in much worse shape than we were led to believe; and third, the Fed is out of ammunition for another rate hike.

Markets across the board responded as expected. Stocks jumped, the dollar dumped, as did yields, and metals, miners, and bitcoin soared:

Data Manipulation and Its Effects on Gold and Silver

Looking forward, we have both the ISM Manufacturing data on Friday and the normally market-moving Non-Farm Payrolls. I say “normally” because will anyone but the algorithms believe the data?

With rate hikes seemingly off the table for now, what could stop gold and silver going higher, the dollar falling further, and yields too?

The most recent COT data for gold showed the following:

This is bullish to say the least. In silver, the banks remain LONG too:

Suffice it to say that everything is looking good for both gold and silver right now, but until we take out 2011 in gold, I remain cautiously optimistic.

Bullish:

Bearish:

Markers to Watch for Silver

Silver is overbought here on multiple indicators. A pullback looks likely in the short term, but will it be brief and then continue higher again? Or will it break the 200D MA and, more importantly, the rising channel since it bottomed in September last year?

Conclusion: Precious Metals Trajectory

I’m long both metals and miners, but I remain cautious. That said, if we do go back down, I expect that to be the low once and for all before we finally head higher.

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