SX Gold & Metals Advisor | July 13, 2021

Gold: Not There Yet, but Getting Closer

After weeks of being constrained by the dollar’s rally and subsiding inflation concerns, gold finally has what looks to be a new “fear catalyst” to worry about going forward.

Gold still hasn’t confirmed a bottom, but we’re getting closer to one after the recent drop in Treasury yields and the increase in concern over the Delta variant of the coronavirus.

And while some additional near-term weakness is likely, the fundamentals underlying gold’s longer-term bull market remain intact.

We’ll also discuss the increasing strength in the suddenly white-hot lithium market, as well as the return of strength in the closely related nickel market.

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As we talked about in the last report, gold is searching for a catalyst to justify its next extended bull run. I argued that without a clearly defined catalyst, gold’s price would likely remain range-bound between roughly the $1,700 and $1,900 levels for months to come. And while this is certainly still possible, recent developments suggest that by later this fall, gold will have found its “legs” again and thus be able to resume its long-term bull market.
While it remains in a position of relative strength versus gold, silver still hasn’t confirmed a bottom and remains under its key 25-day and 50-day moving averages as of this writing. Investor sentiment for silver has been running too high for comfort lately which, from a contrarian’s perspective, is a concern. The elevated bullish sentiment on the white metal is preventing short interest from building to levels that would support a bull’s raid on the market to “run the shorts.”

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