The Fed is done hiking and gold is poised for new all-time highs.
Metals and miners may pullback briefly as the dollar rebounds into January.
The odds still favor a recession in 2024, likely starting in the second quarter.
Permanent Fed Pause
The Fed confirmed their rate hiking campaign is over at their last meeting. The next logical step is rate cuts. According to the recent dot plot, they expect three cuts next year, decreasing Fed funds to 4.60% by the end of 2024.
Market Internals
Here’s a great chart from Hussman Strategic Advisors: ‘The chart below shows previous instances when the S&P 500 has been at least 7% above its 40-week average, and at least 4.5% above its 10-week average, as it is presently, with our gauge of market internals still unfavorable.’
Dumb Money Confidence
Retail traders are all in again. Dumb Money Confidence jumped to the 3rd-highest reading in 25 years. Very high Confidence typically precedes modest gains at best until sentiment resets.
Leading Economic Indicators
The LEIs have declined for 20 straight months, their longest losing streak since 2009. The longest negative streak WITHOUT a recession was ten months into January 2008. Then, the Great Recession began. I find it hard to believe we will avoid a recession and the LEIs will return to normal without the economy breaking.
GOLD BIG PICTURE
After a 12-year consolidation, the gold train left the station in 2005, embarking on a breathtaking 6-year bull run to previously unthinkable highs.
Today, gold is in a nearly identical setup, and a breakout above $2100 will confirm the gold train is once again leaving the station.
The first stop will likely be around $3250, followed by $4750, and finally $9450 in late 2029 to early 2030 (estimates based on the preceding bull run).
Note: As the bull market concludes, I anticipate a parabolic blow-off top. This occurs when prices double within just a month or two, and it will serve as my signal to start aggressive selling.
US DOLLAR- It looks like prices are making a swing low after testing the 100 area. A bounce to fill the gap near 102.75 is likely, suggesting metals and miners could correct.
GOLD- If the dollar bounces, as I suspect, gold could pullback to dip below the 50-day EMA in early January. Progressive closes above $2100 would promote an immediate breakout.
SILVER- Silver needs to close above $25.00 or below $24.00 for near-term direction. I’m leaning towards a pullback into early January.
PLATINUM- We have progressive closes above $1000, but I’m not sure it will be sustained – given the setup in dollar. Closing back below $1000 would promote a retest of $950.
GDX- Miners formed a swing high after testing resistance near $32.50. We could see a pullback towards $29.00 or $30.00.
GDXJ- Juniors also formed a swing high, and we could see a pullback towards the $36.00 area, where the 50 and 200-day MAs are crossing.
SILJ- Silver juniors formed a swing high after testing $10.60, and we could see a pullback towards $9.50.
WTIC- Oil formed a swing high, and prices are correcting. The big question is: will the $67.00 area hold, or will prices make a lower low? I think it will hold.
S&P 500- Stocks continue to inch higher. I suspect volatility will increase during the first week of January as traders sell old and take new positions—no evidence of a top.
Conclusion
Gold is very close to a historic breakout, and sub-$2000 prices may become a distant memory. Silver is lagging but always catches up. Gold miners may pull back into January but could become the best-performing asset in 2024.
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