Today market veteran James Turk shared with King World News the big picture for gold and silver after the recent pullback.
February 8 (King World News) – James Turk: Eric, the precious metal markets are giving us another bout of frustration. We’ve dealt with it many times before and no doubt will need to again in the future. It comes with the territory.
When it happens, I like to step back and look at the big picture. Then I put within the big picture the slide in gold and silver prices, which this time happened before and after last Friday’s unemployment report…
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Were there really 517,000 new jobs created in January, when less than half that number was expected? Or is the unemployment report also being massaged like the CPI and other measures of inflation?
One has to wonder. A half million new jobs stands in stark contrast to a lacklustre job number reported by Automatic Data Processing, Inc. It is estimated that ADP handles the payroll for a fifth of all private sector employees in the U.S., a much larger group than the sample the BLS uses.
The ADP report of 106,000 new workers in January was only 55% of what economists were expecting. This disappointing number was downplayed by the mainstream media because bad weather hit hiring. Strangely, January’s weather seemingly didn’t impact the BLS data.
It’s easy for the BLS to massage the data with questionable adjustments. For example, as I understand it, this time a population adjustment by the BLS did the trick. But it was only the headline number that was reported in the mainstream media and got all the attention.
The supposedly strong jobs report meant interest rates are headed higher. So the precious metals were hit, even though inflation is still running well above the Fed’s target.
Another thing I do at frustrating moments like this is evaluate the near-term targets that I establish for myself, which means looking at charts. Here’s the weekly gold chart that I have been following for awhile now.
Despite Pullback Gold Remains In Uptrend Channel
There is a recurring pattern, which I’ve circled. It’s been accurately described as gold taking the elevator down because the move happens quickly. And maybe gold has further to drop this time. But the other patterns show that gold bounces back. We’ll find out in time if that happens yet again.
In the meantime, I’ll watch and wait to see if gold continues to climb within this “V” pattern and stays within its current uptrend channel.
The battle lines are drawn, Eric. They are $24 on silver, 102 on the US Dollar Index, and $19.50 on gold. The central planners are going all-in to stop market forces from breaking through these levels, gold and silver on the upside and the dollar in the other direction. They are trying to prevent both a rout of the dollar while the demand for it is declining and a melt-up in the precious metals while the demand for physical gold and silver is climbing, as evidenced by their respective downtrend and uptrend.
These interventions result in volatility. Because the central planners are not likely to change course and instead let free and unfettered markets prevail, more volatility seems likely. But it shouldn’t stop anyone from continuing to accumulate physical gold and silver, and if so inclined, investing in the shares of the companies that mine them.
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