No Rest For The Weary

By Craig Hemke

We’ve been waiting all year for the eventual Fed “pivot”, but there are no signs of it yet and, for now, COMEX precious metal prices continue to fall.

And what a strange year it has been. In our annual forecast we wrote back in January, we stated that “2022 was going to be a volatile and unpredictable year”, and that has certainly proven to be the case. After an early March rally to near $2100, COMEX gold has fallen over 20% to its recent lows near $1625. So have we seen the lows yet? Maybe not.

Again, our idea was that a 20% drop in the stonk market would be enough to force the Fed to alter its course—just as it did in the fourth quarter of 2018. We’ve gotten that 20% drop in the S&P, yet the Fed remains steadfast and promises another 125 basis points of fed funds rate hikes before the end of the year.

Of course, at some point, the precious metals will “look ahead” and anticipate the eventual Fed pivot. However, it doesn’t appear that we’re at that point just yet.

Next, let’s check the charts of crude oil and copper. As you can see below, neither of these two commodities appear to have bottomed.

So, as the Fed continues to tighten and other key commodities continue to trend lower, it’s clearly too soon to sound the “all clear” for COMEX gold. That day is coming—but it’s not here yet—as you can see below:

The only possible bright spot at present is coming from COMEX silver. How can that be, you ask, given that silver is down over 20% year-to-date too? Well, COMEX silver led gold and the mining shares lower, beginning in April and worsening in May. Perhaps, then, COMEX silver will turn and lead prices back higher once the recovery begins? Perhaps. And you can see some signs of a possible bottom below as price has found some stability over the past 90 days or so. Any move before year end that takes price back above $21 should set us up for a nice rally in 2023.

So look: the Fed WILL pivot again, and they will do so soon.

For now, though, we’ll just continue to acquire physical metal at these ridiculously low digital prices as we wait for lower nominal rates, negative real rates, and a restart of QE in 2023.

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Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.