Risk Remains, Waiting for the All-Clear August 9, 2022
(David Brady - Sprott Money) Courtesy of the Fed’s inability to communicate in a clear and concise matter on monetary policy and its collective denial of the recession already underway, we’re still waiting for final confirmation that the bottom is in. Unfortunately, Fed policy is the primary determinant of all markets these days, including precious metals and miners. While it is almost impossible to interpret the Fed’s intentions, certain market levels can and will tell us that the bottom is in and the rally to new highs has begun.
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Gold
As I’ve said before, we are looking for a series of higher lows and higher highs. Gold hit resistance at 1805 and may try to close the gap below to 1739. 1739 must hold or lower lows are on the cards. As long as we bottom at 1739 or anywhere above there, then take out 1805, the series of higher lows and higher highs continues. Ultimately, just testing 1883 would cement the fact that the bottom is in imho. I don’t expect it to break on the first attempt and will likely lead to a decent pullback before we do take out 1883. That would provide the final opportunity to jump on the train northward.
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GDX
GDX is the laggard of the group. It may be the one signaling trouble ahead, or more likely, it is getting ready to catch up, as it does at almost every major low in precious metals. In simple terms, it needs to take out 27 next and hold support at the low of 24.38.
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Conclusion
While the recent moves higher have been extremely encouraging, we still do not have confirmation that the low is in. That confirmation comes with higher highs ahead, while holding support levels on the downside. Until then, lower lows remain a risk. We’ll know within the days how this is going to play out next.
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