Welcome to 2022, the year when major political, geopolitical, and economic crossroads collide. We'd like to start out this year with a different message. However, there is an old saying. "You can ignore reality, but you cannot ignore the consequences of ignoring reality." And the reality is, 2022 is shaping up to be a year of volatility in the markets (and outside of them too) that the world hasn't experienced in decades.
This is the time to get your trusted news and market sources sorted out, and then pay attention to them as there will be periods of time this year when circumstances change rapidly. Fundamentals will win out as they always do. And some long-suppressed fundamentals regarding economics and monetary policy are about to assert themselves with appropriate consequences.
This is the reason you own precious metals. This is the reason you've spent months or years accumulating precious metals. Our platform was made for such a time as this. We're thankful that you trust us with providing you access to these assets.
The OWNx Team
Gold and Silver
What Do the Charts Say?
Could a long-awaited breakout in gold finally be here?
It looks like it may be. In our last newsletter, we traced out a wedge pattern that had formed in the gold chart. The price of gold had broken out to the upside and then promptly fell back into the wedge. We stated then, "The price action over the last few weeks is a welcome development. It is no surprise that the price of gold has paused and pulled back to re-test the uptrend trend line. That's just the way these things often work out. The next rally will be very important. Should it surpass the recent high near $1,870, it will give strong support to the intermediate price trend having reversed from down to up."
Well, here we are. Gold has once again broken out of the wedge to the upside with January closing the month at $1796. At the moment, a new uptrend line has formed carrying the price out of the wedge formation. During this period, gold rose to $1,850 but failed to surpass the $1,870 level we mentioned as important. Still, a nearly 18-month downtrend appears to have been broken. Now the question is, will the price rise along the trend line, or drift sideways for a while. By our next newsletter, that question will be answered.
Meanwhile, the price of silver continues to be range-bound between roughly $22 and $25.50. Once it surpasses the higher mark, it will set its sights on the $28 to $30 range that has held it in check for those same 18 months.
What we are seeing is typical price action in long-term commodities bull-markets. After major runs, they nearly always move into a period of "basing" where the price moves sideways for an extended period of time, setting a long-term floor. This is welcome action for those who want to accumulate the metals at these levels. As we said last month, outside of a major financial system disaster, the fundamentals are in place for gold and silver prices to firm up here and resume their bull market going into the second half of 2022 when geopolitical and economic events become even more volatile. And that leads us to...
A few thoughts about... volatility.
It is a word that normal investors hate, but many traders love. We'll forego the formal definition and instead just say that increasing volatility means unusually large fluctuations in price over a given period of time. The price could rise rapidly, but generally, volatility is associated with rapid and large price drops - such as the stock markets experienced in January.
Following is a chart of the NASDAQ 100. After the COVID panic of the spring of 2020, it established a well-defined uptrend. Since November of last year, the NDX began to carve out its own wedge formation. Unlike gold, market volatility has pushed it below its wedge in a rather dramatic fashion. It is now attempting to claw its way back into the wedge. If it fails, or bounces off the top line of the wedge and falls below it again, it will likely signal an end to the multi-year bull market in tech stocks.
With the gold and NASDAQ 100 chart patterns telling very different stories, we are watching closely to see if gold and silver are beginning to assert their role as inversely correlated to the stock markets. Once again, by our next newsletter, that picture will be more clear.