GOLD: Inflation And Standard Deviation

Fundamentals

The closely tracked measure of inflation in the United States increased in April, signaling that inflationary pressures in the economy remain high. The key index showed a 0.4% rise in prices from March to April, higher than the previous month’s 0.1% increase. Compared to the previous year, prices rose 4.4% in April, down from a peak of 7% in June 2022 but still above the Federal Reserve’s 2% target.

Despite rising prices, consumer spending experienced a rebound, with a 0.8% increase from March to April, driven by purchases of new cars, computers, gasoline, and clothing. The resilient consumer spending, supported by job gains and wage increases, has contributed to the surprising strength of the U.S. economy.

However, the persistence of high inflation complicates the Federal Reserve’s interest rate decisions. While the Fed is expected to forgo a rate hike in June, some members of the interest-rate setting committee advocate for future rate increases, citing concerns that inflation is not slowing down quickly enough.

The report also highlighted that grocery prices declined for the second consecutive month, while gas and other energy costs saw a 2.4% increase. Core inflation, which excludes volatile energy and food prices, rose 0.4% in April and 4.7% compared to the previous year. Some economists predict a potential easing of inflation in the coming months, pointing to specific pricing factors in April that may not persist.

Overall, the report indicates the resilience of the U.S. economy in the face of inflationary pressures, with strong consumer spending driving growth, while the Federal Reserve grapples with the challenge of balancing interest rate decisions to address inflation concerns.

Inflation, Gold and Standard Deviation

Examining the Gold 360-day cycle standard deviation report published in Seeking Alpha April 16, 2023, covering the period from September 28, 2023, to September 23, 2024, reveals valuable insights. The report identifies the average price or mean as 1,773, and highlights extreme standard deviation levels at 1,896 and 2,093. Notably, the lowest recorded price occurred on September 28, 2023, at 1,656.80, while the most recent high occurred on April 12, 2023, peaking at 2,063.4 per oz. The completion of the initial target of 1,895, coupled with the recent high, increases the likelihood that the 360-day cycle top target range has been reached. Confirmation of this would require a close below 1,895, thereby activating a downside target of 1,773, which represents the average price. Furthermore, a close below 1,895 would reveal support levels at 1,575 and 1,452, situated below the mean or standard deviation.

On May 4, 2023, Gold retested the previous high and made a new high of 2084.5 and closing at 2059.3, making a weekly top reversal and confirming a short-term top. This signal came down to the extreme levels below the weekly mean of 1975 and completed the low of 1939 and testing the 30 – day cycle standard deviation levels of 1949.

Analyzing the Gold 30-day cycle standard deviation report starting from April 1, 2023, provides valuable insights. The report identifies the average price or mean as 1,949, with extreme sell levels at 2,069 and 2,151, determined through standard deviation analysis. Correspondingly, extreme buy levels are observed at 1,867 and 1,747. Notably, the lowest price observed during this period was 1,865.9 on April 3, 2023, while the recent high occurred on April 12, 2023, reaching 2,063.4 per oz. The fulfillment of the first target range of 2,069, along with the recent high, increases the likelihood that the 30-day cycle top target range has been completed. However, a close below the average price of 1,949 would indicate a potential downside scenario, leading to the exploration of extreme levels below the mean, specifically the monthly standard deviation levels of 1,867 – 1,747.

We tested the weekly average price of 1949 and reverted to the upside, confirming a bullish reversion with a close of 1980.8 on June 2, 2023.

Let’s take a look at the standard deviation levels for next month and see what trading opportunities we can identify.

GOLD: Monthly Standard Deviation Report

Jun. 02, 2023 9:51 PM ET

Summary

• The monthly trend momentum of 1884 is bullish.
• The monthly VC PMI of 2011 is bearish price momentum.
• A close above 2011 stop, negates this bearishness neutral.
• If short, take profits 1959 – 1921., If long, take profits 2072 – 2163.
• Next cycle due date is 6/15/23.

Monthly Trend Momentum:

The gold futures contract closed at 1982, indicating a positive trend momentum. The market’s closing price above the 9-day Simple Moving Average (SMA) of 1884 confirms the bullish trend momentum. However, it is important to note that a close below the 9 SMA would nullify the previously bullish monthly trend and shift it to a neutral outlook.

Monthly Price Momentum:

The market’s closing below the VC Monthly Price Momentum Indicator of 2011 suggests a bearish price momentum. This confirms the ongoing bearish trend. However, it’s worth mentioning that a close above the VC Monthly would reverse the bearish signal to a neutral stance.

Weekly Price Indicator:

For those who are short, it is advisable to consider taking profits during corrections at the 1921 – 1859 price levels. On the other hand, if you are long on the market, look for a weekly reversal stop to go long. If you are already long, utilize the 1859 level as a Monthly Stop Close Only and Good Till Cancelled order. As we progress through the month, consider taking profits on long positions as we approach the 2073 – 2163 price levels.

Cycle:

The next cycle due date is projected to be on June 15, 2023.

Strategy:

If you have a long position, it is recommended to take profits when the price reaches the 2073 – 2163 levels. Conversely, if you are short, consider taking profits at the 1921 – 1859 levels.

Disclaimer: The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed herein constitutes a solicitation of the purchase or sale of any futures or options contracts. It is for educational purposes only.