Yesterday afternoon, I had the pleasure of speaking with @Excelsior from the KE Report. We discussed the major washout that we suffered through in the precious metals/mining sectors in September/October 2022, and where we are in the rally to kick-off 2023. We also delved into getting clear on one's time frame, and putting market sentiment into the context of time frame. We also briefly delved into Zoltan Pozsar's revolutionary idea of the 20/40/20/20 portfolio (20% cash, 40% equities, 20% bonds, 20% commodities).

I can't help but notice that bullish sentiment on gold has risen appreciably in the first two weeks of the new year; people that used to hate on gold and gold mining investors are now hosting webinars calling for a $5,000 gold price (sentiment follows price only all the time). Furthermore, the Daily Sentiment Index (DSI) has risen to 90 as of Thursday's close as the 2-year US Treasury yield calls bullshit on the parade of Fed speakers who say they are planning to raise the Fed Funds Rate to at least 5.00% and hold it there for "an extended period".

This seems to be creating an increasingly unstable situation as the market sends a clear message to the Fed that "We don't believe you". Meanwhile, this is a Fed that is sorely lacking in credibility after getting 'transitory' inflation wrong for all of 2021. A quick dovish pivot after jawboning that "there is more to be done on inflation" for the last six months would be the final nail in the coffin for Powell and his cohorts.

While gold may be just beginning to get a bit extended on the daily chart (as it trades to $1915 in the February futures contract as I type these words), the weekly chart shows the early stages of a bullish breakout from an extended consolidation near $1800 that lasted throughout the entire month of December:

Gold (Weekly)

I don't know how this will play out exactly, however, my sense is that the Fed will hike 25bps on February 1st and then proceed to openly entertain the possibility of a pause while remaining "data dependent". At this point, gold bulls are clearly betting on the Fed folding like a lawn chair as soon the employment picture deteriorates a bit.

Monday is MLK Day in the US and it is a market holiday. It should be a fairly quiet day across markets (looking at you Canada and Europe). I will use this relative peace to host my first Twitter Space of 2023 with discovery investor Willem Middelkoop of the CD Fund. Please tune in and ask Willem a question at 11am EST/8am PST on Monday January 16th. 


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