Gold and silver get haircuts

Disclaimer:  Nothing in this blog post, or in any other post on this blog, should be construed as personal investment advice.  This is for entertainment only and for my own amusement in particular.  If you want investment advice, hire a financial advisor.

 

I mentioned just a few days ago that gold and silver had gone parabolic and that I wouldn't be buying any time soon.  Now y'all know why.  They got some haircuts last Friday.  Gold got a buzz cut, falling by about ten percent, and silver's barber missed the hair completely and outright decapitated it with a wild thirty percent crash.

It was silver's worst single-day drop since 1980.

So now that it looks like the inevitable correction has begun, let's start looking for support levels.  Here's the ten-year chart for gold:

 

 

Upon inspection, it looks like the previous low prior to this bull run was at around the 1620 level, give or take, so we'll go with that for the starting point.  We'll call the peak 5600 even to (hopefully) make the math easy.  That gives us a total rise of 3980.

We'll look at Fibonacci retracement levels of 61.8%, 50%, and 38.2%, because I think those are the most likely to be relevant here.  (We'll use the same percentages for silver in a moment.)

3980 x .618 = 2459.64, for a support line at 4079.64

3980 x .5 = 1990, for a support line at 3610

3980 x .382 = 1344.64, for a support line at 3140.36

Due to the previous retracement of around 50%, give or take, I think the 3610 support line is the likeliest bottom, so if gold does indeed fall to that level, then that's where I'll be looking to buy either gold or gold mining stocks.  If it reaches the 61.8% line, though, and then treads water there for a sustained time, then that line might be the bottom, so I'm not counting that one out.  And, of course, due to the parabolic nature of this latest spike, a decline to the 38.2% level is also possible.  But I'm leaning towards the 50% line.

Now let's look at silver.
 

We'll assume silver began its climb in 2022 at around 17.50, give or take.  We'll call its peak 121.  That gives a total rise of 103.5.  Fibonacci numbers then look like this:

103.5 x .618 = 63.96, for a support line at 81.46

103.5 x .5 = 51.75, for a support line at 69.25

103.5 x .382 = 39.54, for a support line at 57.04

As I write, silver has already fallen through the first Fibonacci line, so I think we can safely eliminate the 61.8% retracement level as a support level.  Silver is more volatile than gold, as Friday's action makes eminently clear, so I suspect even more confidently for this metal to keep falling to the 38.2% retracement level.  It could even fall all the way back to below the previous highs of around 30, because it did something similar in 2022, falling back to below its 2016 highs after a spike up in 2020.  I won't jump into the metal at 57.04; I'll want to see it tread water there for a while before I'm convinced it's a bottom.

So that's my thinking at the moment. 

Tom's silver theory

Tom Bilyeu has a theory about why silver is spiking now.  Not sure I'm completely convinced, but it sounds plausible enough, and I'm kind of leaning in its direction.  Check it out:

 

100/5000

One hundred dollars for an ounce of silver.

Five thousand dollars for an ounce of gold.

That's where we're at now.

Inflation has been the normal state of affairs since before I was born, so none of this is surprising.  There were predictions of gold reaching the 3000-5000 dollar range by 2020 back around the turn of the century when the dot-com bubble burst and the commodity boom was just getting started.  Guys like Marc Faber and Jim Rogers were way ahead of the curve on this.

Of course, if you had put all your money in gold back then, you would have missed out on the bull runs in real estate and stocks and the associated yields/dividends you would have collected along with the capital gains.  I haven't crunched the numbers, but I wouldn't be surprised if you'd have done just as well by parking your money in an index fund in 2002 and just sitting on it for the next 24 years.

In any event, gold and silver are going parabolic now, and I can't help but wonder, "Why now?  Why not a couple of years ago when it looked like de-dollarization was moving forward across the globe?"  And I frankly don't have an answer for that.

All I know is that the precious metals are not cheap right now, and I won't be buying any time soon.  Oil is cheap, and a few other things are "cheap enough," but I'm not jumping on the gold/silver bandwagon.

Ice storm incoming

The upcoming weekend is promising to be cold and slushy.  It will probably be just freezing rain around here, though snow is still a possibility.  Either way, it's going to be a nightmare for traffic, and there's always the possibility of power outages during events like this.  Freezing rain is particularly bad, because it weighs heavily on tree branches, and many of them break off, and some of them fall on power lines.

I'm reminded of the ice storm of 2000.  That one was crazy.  I still remember the sharp scent of pine sap saturating the air due to all the ice-sheathed branches that broke off.  The AJC has a photo gallery of the event here:

https://www.ajc.com/lifestyles/photos-look-back-the-2000-ice-storm/OAW7q77cx9W1iDxQSeL8EM/

Georgia Power is excellent about getting power restored after an outage, so I'm not worried about being without power for days at a time.  The roads are a different matter, though, and I'm expecting lots of car crashes.  And other states might fare differently.  Here's a map of the affected area based on current projections:

 

If you live in the affected area, I suggest getting all your preparations done tomorrow.  And by "preparations," I mean get whatever you need to ride out the weather event for several days without having to leave your home. 

Hoosiers win it all

We've all seen some crazy things in the 2020s.  Murder hornets, a novel new virus coupled with global lockdowns, and toilet paper shortages in 2020.  A 100-year flood in the mountains of North Carolina followed by heroic deeds from Amish builders and race-car drivers in 2024.  And plenty more, more than I care to list in this blog post.  It seems like we're living in an inverted world in which the normally least likely things are now the most likely to actually happen.

And now we've seen perhaps the most unlikely thing of all: the Indiana Hoosiers winning a national championship, not in basketball as one might think, but in football, the sport in which they've been perennial doormats for as long as anyone can remember.

Congratulations, Hoosiers.  Y'all earned it against a very tough Miami team that never quit, and you've made history.  More than that; y'all were due after so many years of doldrums.  It was a real joy watching you play the game at such a high level of proficiency.

Enjoy your moment.  :) 

The CES boost

The Consumer Electronics Show in Las Vegas was this past week.  I don't go to these things, nor do I really keep up with them.  But I did notice a strange spike in the share price of one of my stocks.  After a little research, I found out the sector in general had risen, not just one stock, so this wasn't a company-specific thing.  It was enthusiasm for the sector.

That sector was computer memory, stuff like RAM and hard drives.  Companies like Nvidia get all the media coverage, and rightly so, but the memory-makers are getting some investor attention now.  It turns out AI needs this stuff, too, not just the video cards.

The spike in share price was brief, just a blip on the radar, and the shares have since pulled back quite a bit.  The gains have mostly vanished.  But the event might be a harbinger of what the next "hot thing" will be on Wall Street.

Holiday inflation

No, I'm not talking about monetary inflation.  I mean the length of the holiday season.  It just seems to keep getting longer and longer.

If you start with Halloween preparations, then the holiday season starts in October.  Then comes Thanksgiving.  Then Christmas.  And along the way in November and December, you have to get your Christmas shopping squared away.  Then we get New Year's Eve and the associated bowl games, but bowl season keeps getting extended, and now it goes into the third week of January, finally wrapping up on the 19th. 

It's basically three months of holiday stuff. 

This sort of thing happened in the Roman Empire, too.  They kept adding more and more state holidays, and it eventually got to the point where basically no work was getting done for half the year except by slaves, and even the slaves often got to enjoy the holidays in some circumstances.

Over the long term, this becomes a strategic matter and eventually an existential matter.  If your people are barely working, then other countries with more industrious people will economically surpass you in the global economy.  And if your country is blessed with natural resources, then those other countries will eventually turn their covetous eyes your way and wonder why they shouldn't just take the land away from the lazy bums who live there, move their own people in, and put the place to a more productive use.

I suppose this is just the natural cycle of societies.  "Weak men create hard times" and all that.  I just wish I didn't have to watch it slowly but inexorably happen here where I live.