Gold Forecast: Prices are Holding, but a Final Drop Remains Possible

The UAW Strike Could Trigger a Recession

The coordinated UAW strike is a war between blue-collar workers and their white-collar overlords. All three automakers (General Motors, Ford, and Stellantis) are striking in unison for the first time. I believe this to be a pivotal turning point. 

Manufacturing data could slow significantly should the dispute drag on through October - slowing production could hit GDP and tip the economy into recession. 

Thousands of striking workers combined with the potential for government shutdowns could shift the narrative from "soft-landing" to fear and uncertainty, which strongly favors gold.

Image courtesy of: https://www.npr.org/2023/09/18/1200052537/uaw-strike-worker-job-plant-la...

The September Effect

September is historically the worst month for stocks of the calendar year. According to S&P Global, the S&P 500 has declined in September 55% of the time since 1928.

Why is this? 

Perhaps, after the summer vacation season, everyone checks their finances: where do they sit on their credit cards, car notes, rent/mortgage, education costs, saving up for the Holiday's, etc.? 

They come to one of two conclusions:

• Everything is fine, and they can keep spending.

• Everything is NOT fine, and they need to make some hard choices.

Conclusion: After three months of summer running, everyone is catching up on current events. Maybe some realize things aren't so great.

Massive Double Top?

The iShares Semiconductor ETF (SOXX) may be putting in a massive double top. A monthly close below the October 2022 low ($285) would confirm a pattern breakdown supporting a measured target between 150 and 170. From today's price (462), that implies a 65% decline and retest of the 2020 Covid lows. 

Yield Curve Screaming Recession

When the 2-year versus 10-year yield curve has been inverted for over two quarters (shaded), and the 10-week MACD EMA (bottom panel) rises above zero – that equals a recessionary bear market. Bad for stocks! Currently, the 10-week MACD EMA is -0.05 and climbing…it could turn positive by year-end.

Could Crude Oil Reach $130+ in 2024?

Some speculate crude oil is the new Fed funds rate because it's the one thing the Fed can't print. This argument holds water, as three of the last four recessions saw oil prices more than double leading into it. Could we see $130+ crude oil in 2024?

Delinquency Rates Soaring

The last time the delinquency rate was above 2.77% was in 2012. Back then, unemployment was 7.7%. Today, unemployment is just 3.8%. Imagine where defaults will be if unemployment keeps rising.

It's important to note that in 2012, mortgage rates were just 3.50% and credit cards 12% -versus- 7.5% mortgages today and credit cards rising above 21%. 

https://fred.stlouisfed.org/series/DRCCLACBS

Precious Metals Update

10-YEAR YIELDS: The yield on the 10-year is breaking higher and could soon surpass 4.5%. The last time rates were at this level was October 2007, just before the great financial crisis.

US DOLLAR- We got a rare up gap in the dollar, which sometimes occurs before an exhaustion top. Prices are nearing significant resistance near 106.

GOLD- Gold formed a swing high after tagging the upper triangle boundary. The lower border is crossing $1920. Breaking the lower barrier and closing below $1900 would support a final flush towards the $1840 to $1860 level. Futures would have to close back above $1960 in the coming days to reverse the post-fed weakness.

SILVER- Silver reversed most of Thursday's weaknesses. Holding the trendline is crucial. Breaking below $22.00 could trigger a swift flush out towards $20.00.

PLATINUM- Platinum formed a swing high, and prices must stay above $900 to maintain the potential for a rounded bottom.

GDX- Miners tagged the downtrend line and reversed after yesterday's FOMC announcement. Prices gapped lower, and downside follow-through below $28.50 would open the door for one a retest of the $27.00 area. GDX must close above $29.50 to reverse the bearish post-fed price action.

Take Away

Sometimes, gold reverses a few days after a Fed meeting. That's still possible, but if prices continue lower from here, we could be headed to a final flush-out. The big-picture outlook for gold remains favorable, and we see $2800 possible in 2024.

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