Transcription
If you're waiting for the gold and silver bottom, then you need to watch this. I'm Jordan Roy, a chartered market technician and master of financial technical analysis. And thank you for joining me. And I'm going to get right into what I'm talking about here.
So, let's start and talk about some macro with gold. And what I am talking about here is over the past month or so, gold has started to dig in around $4,000 an ounce. Now, one day it closed below $4,000 an ounce, but other than that, as you can see here, it's been holding above $4,000 an ounce.
Now, what's very important happened in the last week is that we saw higher highs in real interest rates here, the real 10-year yield, and also in nominal yields as well. So, we saw a higher high in the nominal 2-year, higher high in the nominal 10-year yield. And by the way, the nominal 30-year yield, I believe, made a weekly close that was at its highest level since 2007. So, you saw nominal yields moving higher across the spectrum. Again, the third year, highest weekly close was 2007. And look at gold. Gold is holding. It's stabilizing around $4,000 an ounce.
Now, this is important. This is an important development because rising real yields are bearish for gold. Rising nominal yields, especially on the short end, they tend to be bearish for gold. So this is something to keep an eye on. This could be a signal that gold could be putting in a bottom. And this is what happens at turning points, people. At turning points, gold tends to lead real yields and also nominal yields as well. I've mentioned it before. I'm going to show you the charts again. In the past, gold actually bottomed before the 2-year yield peaked.
And so, we know that a Fed meeting is coming up. The odds of a Fed hike are rising. The market probably thinks the Fed, if it doesn't hike in July, probably will hike in September. And so, keep in mind when gold has corrected and is and it's down, it usually bottoms around the first rate hike or slightly before. So that's also in play as well as what we have seen in the last week. So gold, so gold has not confirmed the higher highs in real yields or in nominal yields. That doesn't mean it's going to fly to the moon next week or next month, but it does tell us the selling pressure in gold may be exhausted at this point.
Now digging more into fundamentals here. So let's keep in mind what happened in the last couple cycles when the Fed after a while they started hiking rates again. So they started hiking rates here. You had this big, you had this bottom and rally. They did it again here, bottom, rebound, and then again here at the very end of 2015 and then they paused for so long that I consider this at the end of 2016 the restart of the cycle. But you can see here gold was down into these hikes. Now, it was completely different this time around because we saw this move up with the Russian invasion of Ukraine. This move up right there. Then the Fed started hiking and that's why gold sold off like this into the hike. But what has happened now, even though the Fed hasn't hiked yet, this is discounting higher nominal and higher real rates. I mean, we can see it here. The Fed follows the 2-year yield. We can see the move here. It's up to 4.36. But again, let's keep in mind where the 2-year yield peaked. This yield right here. Where were the recent peaks peaked right here. Here's the gold bottom 2, 3 months before that. Here's the peak right here. It was a bit of a double top. You can say this was the peak right here. There was a bottom right here. But gold's bottom was actually here in 2022. So, gold bottomed here. And the nominal yield kept moving up. And so, as this peak was in, you had a move down and then a lower high here. And from this point, we can see gold really took off.
Now, I just want to go back for a second before I set up the next chart, which is a little different. And so, I mentioned the 30-year yield that on a weekly basis has broken out again to its highest level in almost 20 years. The 10-year yield here, nominal 10-year yield. We can see this is a bullish consolidation here. So, this could possibly move like that potentially. And so rising long-term yields would not be bearish for gold. If we saw these long-term yields like this in the 30-year, they start rising aggressively like this and then the 2-year yield doesn't rise as much. So in that scenario, the curve would steepen and move higher like that. So in other words, longer-term yields start moving up faster than shorter-term yields. That steepens the curve. That's bullish for gold.
Now, the other thing that's interesting, and I'm going to jump here to a chart from my book, is that we all know the fiscal situation is an epic disaster waiting to happen. The interest on the debt is skyrocketing. The net interest this year is going to be over $1 trillion. The gross interest, maybe it's going to be $1.4 trillion, something like that. And interest costs are taking up way too much of the budget. And so this here in black, this is the net interest as a percentage of federal revenue. So sometimes you see the interest divided by GDP as a percentage of the economy. But I like this data better because this is telling us how much of the money that the government is taking in federal revenue, how much of that is going to interest costs. So this right here is about 18%. And you can see gross interest is right here. Gross interest is much higher. So the government does have interest income. So that's the difference. So you have gross interest is about $1.4 trillion. Net interest is about $1 trillion. But this is the problem with higher long-term interest rates, people. This is very important to understand. The average interest rate right now on our debt is 3.4%. Now if that average just goes up 1%, that's another $400 billion in debt. Okay? Just another $400 billion in interest payments. So if this, if this were 4.4% let's say next year, this gross interest that's $1.4 trillion that could approach $2 trillion at that point and so this percentage would be even higher. Same thing with net interest. The net interest would continue to rise. So the larger point is if we see this go like that and break out, that is going to totally blow up the budget.
So, at some point, these higher bond yields and higher interest rates, they start to become bullish for gold because they necessitate yield curve control where the Fed has to get in the market and prevent long-term interest rates from rising. Basically, print money to keep interest rates down like they did in the 1940s. It's super inflationary. So, that along with the coming secular bare market in stocks that to me are the two pillars of this secular bull market in gold. And the third you can add is central bank buying. And I don't have that chart with me, but you can find it in my book. I'll post it next week. But the percentage of reserves of foreign central banks that are in gold, the percentage is still really small. They've been buying aggressively in recent years. But they're going to keep doing that because they got to beef up their reserves and get to the levels they were in the 60s and 70s because they know that some kind of new monetary system is coming in the next 10 or 15 years. And if you don't have gold, you're going to be in trouble.
Okay, now let me get back to the short to medium term. So here's my post major breakout analog chart that you guys have seen for quite a while. If you're new, what I am looking at here is I'm looking at after gold's major breakouts, its first major correction. So after the '72 breakout, this was the first major correction. After the '05 breakout, this was the first major correction. And this correction now is the first major correction after the 2024 breakout. And so the current correction along with the other two historically they have come out looking very similar. Now by this point right here, we saw those other two started to rebound. So gold as we can see here, it's dug in here. Here you can see the base, the one closed below 4,000. And so one thing I do want to add in that scenario where gold does have one more move lower, that would be in line with 2008. So the 2008 bottom on this scale is around here, just above 3,800 in September. So if this is not the bottom for gold here, that would be my guess is at some point in September, October, then you get the final final bottom. So it's always good to have multiple scenarios going so you can understand the realistic potential outcomes.
Okay. Now next, let's look at the gold and silver daily chart. So again here we can see gold is digging in here right around 4,000. And if it could just move up and get above this level here, maybe call it 4200. A move above 4200, that could take it up here close to 4400. Whereas if this fledgling bottoming pattern here fails, it could trail off and then you get a low 3700 in September, October potentially. Now, same thing for silver. So in the scenario that we have put in a bottom for the time being and we do get a rebound where gold could rebound close to 4400, silver in that case should be able to get to 65, maybe a bit higher.
Now next, let's take a look at the weekly charts. And you know, I was really hoping we would have a much stronger week here. Gold sold off the last two days because two days ago, this was looking like a really strong weekly candle. Remember, recall our recent videos. If you look at recent candles, they're actually bullish. This is a bullish hammer. That's another bullish hammer. Another bullish hammer. That was not bullish. This was bullish, as I said, a couple days ago, but now it's not that much of a bullish candle anymore. But nevertheless, we'll see what happens next week. If you get a strong white candle like that, that's going to solidify this low here around 4,000. And again, strong white candle on the weekly chart, that could lead to a rebound up to the 4400 area where there's going to be significant resistance. Okay, you can see right there. Now, for silver, we mentioned 65, 67. $70 is going to be really significant resistance moving forward. So, you have 70 there. Initially, there's some resistance at 65, 67. So again, if and when the metals rally, those are your targets. 65 to 67 for silver, 4400 for gold.
Now I do want to remind you about sentiment. This is from the Bank of America fund manager survey. So this is surveying hedge funds and they tell you if they think gold is overvalued or undervalued. And this data actually is not contrarian. So it's better when we see readings like this. We can see if you go back to 2008 to 2011, this was the GFC, global financial crisis. This was in 2009. This was when gold was in a secular bear all this period. And this is where gold is now. So this is actually the lowest reading in I believe three and a half years or about 3.3, 3.4 years. So that's really encouraging. It's also lower than all these readings other than October 2008. And so you're looking at this data and other data as well, and it tells you we're either at the bottom or there's one more low coming. And that's the same with this chart which I shared in recent weeks. And this is from sentiment. And this is my chart based on sentimenttrader.com's optics data from their GLD indicator. So the sentiment on GLD, what they did is they looked at their daily readings. They used a 50-day moving average to smooth that data. And that reading as of a week or two ago, that was at an extremely low level. And these lines here mark when that data was at a similar extremely bearish level. And so we can see here, this was a couple months before a major bottom. That was a temporary bottom. Couple months before a significant bottom here. Another bottom there. Significant bottom here. And then in 2022, we can see this was three or four months before this significant bottom here. So again, this data tells us we're either at the bottom now or coming off the bottom. Or if not, it's probably coming later this year.
And here's another piece of sentiment information. Here's another chart of some sentiment data I found, and this is from Ned Davis Research. They're a great shop. And this is the sentiment on gold. So, they construct their own sentiment indicator based on a bunch of different sentiment indicators. I'm not sure which they are. We'll have to take their word for it. But we can see down here, look where this was. And this is from July 9th. So, this is a couple weeks old. But we can still see it was down here at a really low, extremely bearish level. Now, I wish, I wish they had a moving average here so they could smooth it out. We could get stronger signals, but that's not the case. But in any event, another really good reading here from a really reputable research shop.
And so people, these are the times when you have to buy. These are the times when big money is made. When you're in a secular bull market and you buy after severe drawdowns and severe corrections, gold is down 30%, silver is down over 50%, the miners are down roughly 40%, even some high-quality companies were down 50% during this draw down. So, if you own individual juniors or individual miners and you're looking for some expertise and guidance with your stock selection, this is the service for you because in the Daily Gold Premium, I cover all the companies that I'm personally investing in. And people, I am looking for a combination of quality companies that have at least 3x to 5x upside potential over the next two to three years. And so, I have been investing in juniors for almost 25 years now. And what I have learned is to keep things very simple. Ultimately, company stock selection is most important. You don't make money trading in or out of a secular bull market. You make real money, big money, by buying the right companies and then holding on to them. And if they grow to the moon, you trim them and rotate that capital and put it somewhere else. That's how we keep things simple. And people, right now you can buy real high-quality companies at excellent values. These are companies that could triple in the next few years if margins stay where they are. But if gold and silver prices move higher, even just modestly higher, these stocks have a chance to be 4x, 5x, and 6x winners. And if the bull market really resumes, as we all expect, these stocks will be even bigger winners. And people, when you buy quality, that protects you on the downside because you know there is real value there and you can hold those positions through draw downs like we have just experienced. So I love to help you improve your portfolio and company selection. Head on over to thedailygold.com/premium. And for those of you who have subscribed, thank you. I appreciate your business.
And so wrapping things up here with the gold stocks. I just want to discuss this chart again. I've cut off the last couple years so we can see more data. So what we're looking at in this chart is it's a breadth indicator. It's the percentage of GDX stocks that have closed above the 200-day moving average. And I have smoothed this data, which is from sentimenttrader.com by the way, with a 20-day moving average. So as of a couple days ago, the 20-day moving average of that data was about 11%. So you can see down here and you can also see the other points when this data fell to these similar levels. And you can see this point right here. This point here as well. This was during a crash. This one was also during a crash in 2013. You have this in 2012 where you had a really good move there. This one marked the 2018 bottom. You did have a couple signals here during the 2020 to 2023 period. Not the best rallies, but they still marked key bottoms. And again, I've cut off the last couple years, but we have this signal again. So, it's very likely that we're looking at a multi-month rebound in miners, okay? And I'd say gold and silver as well. It's just a question of are we seeing it start right now or do we see another round of weakness into September or October 1st? Either way, we're basically at the end of the correction in the big picture, and you have to take advantage of great values and high-quality stocks when they're there. The market doesn't ring a bell at the top, nor does it ring a bell at the bottom. If you're waiting for confirmation of the bottom, trust me, you're going to end up buying much, much higher, and you don't want to do that.
That's all for the video. Thank you so much for tuning in. Hope you had a good week, and hope you have a great weekend ahead. I'll talk to you guys again next week.