Metals Are Approaching Oversold Territory

Source: Michael Ballanger 11/14/2024

Michael Ballanger of GGM Advisory Inc. shares his opinion of the market and what moves he will be making in silver.

USD Index futures are up 0.32% to 106.71 with the 10-yr. yield (- 0.09%) down to 4.449%, and the 30-yr. yield (- 0.30%%) down to 4.662%.

Metals are again lower, with gold (- 1.07%) down $27.55, silver (- 1.53%) down $.468, and copper (- 0.73%) down $0.03.

Oil is up 0.95% to $69.08. Stocks are up with the DJIA (+ 0.24%), S&P 500 (+ .04%) and NASDAQ (+ 0.05%) all higher. Risk barometer Bitcoin is up 3.64% to another record high at $90,851 (and egregiously overbought).

PPI Day

The Producer Price Index or “PPI” is always important because of prices paid for raw materials by producers are rising at a rate higher than the rate of prices consumers are paying, then profit margins are contracting, at least in theory. Conversely, if the PPI comes in at a lower rate of increase than the CPI, the margins are widening, which is bullish.

Today’s PPI numbers came in “hotter” although the headline was as expected at 0.2%, sending bond yields higher but there has been no respite for the metals and stock continue to move higher.

Gold Price Target

Since the election of November 5, there has been a torrent of analysts, podcasters, and armchair technicians who have been working overtime to explain why they failed to predict what is now an 8.69% decline from the top registered in December gold futures, a mere 14 days ago.

Using 2016 as a benchmark, a decline in 2024 to match the sell-off of 15.6% eight years ago when Trump upset Hillary Clinton would take December futures down to $2,364.72, another $220/ounce lower than where they currently sit. This move would likely run its course by mid-late December, with a likely low around the December FOMC meeting.

The SPDR Gold Shares ETF (GLD:NYSE) put in its top at $257.71 on October 30, and a 15.6% decline from that top would infer a low at $217.50. There are two data points that may mitigate the severity of this current correction:

• In 2016, the Trump victory came as an upset and shocked Wall Street into a gold-hostile positioning binge; in 2024, markets were discounting a Trump victory, so the number of hedges to be lifted may be fewer, thus softening the decline, and
• RSI for GLD is currently at 34.27 and moving quickly toward the oversold 30 level. December gold futures are currently sporting an RSI of 68 this morning, so whether it is spot, futures, or the GLD, they are all moving toward oversold status.

I dumped all silver positions (except the November calls) and am sitting with a 31.84% cash position in the GGMA 2024 Trading Account ($364,438). I fully intend to use this correction to allocate a good portion to iShares Silver Trust (ETF) (SLV:NYSE) and Aftermath Silver Ltd. (AAG:TSX.V; AAGFF:OTCQX; FLM1:FRA) as they move to deeply oversold conditions with RSI readings below 25.

The silver market fell 17.21% in 2016 from its peak and is today down 13.6% from the October 23 top at $35.07/ounce. Silver has another $1.27/ounce to fall before it matches the 2016 post-election decline. The SLV December $30 calls sold at $3.25 on Monday are currently $2.85 bid and will probably trade another $0.50 lower before I even look at them.

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1. Michael Ballanger: I, or members of my immediate household or family, own securities of: All. I determined which companies would be included in this article based on my research and understanding of the sector.
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Michael Ballanger Disclosures

This letter makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents my views and replicates trades that I am making but nothing more than that. Always consult your registered advisor to assist you with your investments. I accept no liability for any loss arising from the use of the data contained on this letter. Options and junior mining stocks contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. One should be familiar with the risks involved in junior mining and options trading and we recommend consulting a financial adviser if you feel you do not understand the risks involved.

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