Look, you’re either genuinely bullish on gold and silver, or not. If you’re not a real bull, then you may have gotten spooked out of the precious metals market when it tanked last Friday, June 7^th, in response to the Non-Farm Payrolls (NFP) report. If you are really bullish, then you might have bought that dip hand over fist.

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The Monthly Non-Farm Payrolls Report

The NFP report can be mostly a lot of bullshit (pardon my French). If you believe that the US economy really added nearly 300,000 jobs in May, then you’re living in a dream world. Those numbers are phony as a three-dollar bill. Keep in mind the fact that the Bureau of Labor Statistics (BLS) has a vested interest in having the numbers look good for the sake of whoever the current President is. How exactly does a massively rosy jobs report square with the fact that the Labor Department also reported that unemployment rose more than expected, hitting 4% - the highest number in two years?

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In addition to the fact that the NFP numbers almost always get revised to looking less wonderful than they did at first report, there’s the possibility that they’re outright fudged to begin with (hence, my earlier note that the report is BS). Bloomberg – a source of financial news that I consider to be much more reliable than the Bureau of Labor Statistics - just recently published a report that the NFP jobs numbers for 2023 were overstated by a total of 730,000. So, that’s what? – nearly a million fewer jobs than the year’s NFP reports would have led us to believe.

A Harsh Reality – More Americans Forced to Take a Second Job

And it’s important to remember just what the NFP report is a report of. It is not necessarily an accurate report of the number of people who are newly employed. Another problem with the NFP report is that even when it indicates new job openings that were actually filled, that still doesn’t necessarily show people who were previously out of work finding a job. It could, for example, just be a lot of people who – faced with the rising prices of everything – are being forced to take on a second job. That’s a particularly distinct possibility in the current economy, where more Americans than ever before have been forced to take on working at multiple jobs.

A report issued by the financial services firm, Primerica, revealed an alarming statistic: 75% of American households reported that their income level is falling behind the cost of living (in other words, it’s becoming insufficient to cover their monthly expenses – which helps to explain the current sky-high level of private credit card debt in the country). Even worse, only a mere 16% of households think that their financial situation will be looking better a year from now. THAT is the economic reality of life in America at the moment. The NFP report?...well, that might be mostly just a lot of smoke and mirrors.

Listen carefully to the way the NFP report is reported in the news. What they say is, “The Bureau of Labor Statistics’ monthly Non-Farm Payrolls Report showed that the economy created 272,000 new jobs last month.” They do not report the numbers by saying, “The Bureau of Labor Statistics’ monthly Non-Farm Payrolls Report showed that 272,000 people who were previously unemployed got a job last month.” Sneaky, huh?

The NFP report is compiled from a survey of companies basically being asked if they’re hiring – and if they are hiring, then how many positions do they have open that they’re looking to fill. One big hole that’s immediately apparent in the NFP is that it doesn’t tell us the number of companies that aren’t hiring – companies that may, in fact, be laying off tens of thousands or workers or permanently downsizing their workforce.

It's also worth noting that while this report from the hiring side of the economy indicates 272,000 new jobs, the report from the looking-for-work side of the economy is extremely bleak. A survey of individuals or households being asked if they’re working – if they’ve got a job to support their family with - indicates a loss of more than 400,000 jobs last month. Ouch!

Zero Hedge did a very insightful analysis of this “good news” jobs report, digging beneath the headline. Part of what ZH revealed is that the BLS reports 133 million full-time jobs in the US as of May, 2024. But guess what? – One year earlier, May, 2023, it had reported 134 million. That makes the current numbers showing a million fewer full-time jobs in the economy! Basically, all of the net job growth over the past year has only been in part-time jobs. People are having a harder time finding full-time employment.

Zero Hedge’s analysis also revealed more troubling statistics. Over the past four years, there have been negative net job creation numbers for native-born Americans. Virtually all new job creation since 2020 has gone to foreign-born immigrants. In just the past year alone, native-born Americans lost 668,000 jobs, while foreign-born (and mostly illegal) immigrants gained 934,000 jobs.

Don’t drink the government’s Kool-Aid!!

China Abandons Gold Buying (NOT!!)

Oh, what was the other thing that crashed the market? – For the first time in 18 months, China’s central bank didn’t report any gold purchases in May. Don’t believe it. It’s long been assumed that China’s unreported gold purchases are probably larger than its reported purchases. We know that China has been buying gold by the minefull ever since the turn of the century, and at an ever more aggressive pace since 2010. However, if you believe the “official” reports, they include the fact that China’s central bank didn’t report ANY gold purchases for three whole years, from 2019 to 2022. Now, do you really believe that China went three years without buying a single ounce of gold?

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What? – Are we now supposed to believe that China is just completely done with gold buying (both reported and unreported)? Is the new theory that, after a couple of decades of steadily increasing its gold reserves, at an ever-increasing rate, that China (along with Russia, and India, and every other country – including the US - that’s been significantly adding to their gold reserves) isn’t going to continue stockpiling a massive hoard of gold? Are we supposed to believe that maybe China will now be putting downside pressure on the price of gold by selling gold? Well, I could be wrong, but I don’t think so, boys and girls.

Just to reiterate, a statement that China didn’t report buying any gold last month doesn’t necessarily mean that it actually didn’t buy any gold last month.

Gold and Silver – Technical Analysis, Price Support Levels

Technical analysis indicates that the initial significant support price level for silver is in the $29 to $30 range. Support for gold is around $2,300. And that’s pretty much where each of them found some firm price ground and started breaking their fall Friday – silver around $29.35 and gold at around $2,307.00.

A look at a daily gold futures chart with Fibonacci retracement levels plotted on it, starting from gold’s price base level around $2,000, shows that the current price represents approximately a 38.2% Fib retracement from the recent highs. That retracement also shows price finding support around the same level where it found support during the downside retracement that happened around the first of May.

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Silver’s price action also shows about a 38.2% Fib retracement from recent highs.

Now, it’s true that both gold and silver experienced a sharp closing sell-off on Friday, finishing near the lows of the day. Spot gold actually closed below $2,300, at $2,292.40, and silver finished the day at $29.13. However, as I expected they would, both precious metals rebounded substantially the following Monday morning, with silver quickly popping back above the $29.50 level, and gold back up over $2,305 almost instantly following the New York market open. Monday’s closing spot prices for gold and silver were – 

• Gold $2,308.90 - up $16.30 for the day
• Silver $29.55 - up $0.42 for the day

That down move on Friday had exactly zero follow through. Bears couldn’t even manage to put together two down days in a row.

Is the Bull Market in Gold Over? – Summary and Commentary

Just to recap, first, I recommend always taking the NFP report with a hefty grain of salt. The numbers nearly always get significantly revised anyway. I do respect the fact that the NFP has the ability to significantly impact price action in the financial markets, but that impact is not necessarily a long-lasting one. One big down day in gold and silver, thanks to the NFP, isn’t going to diminish my overall bullish outlook on the precious metals market. Rather, I see the market’s price action last Friday as a classic opportunity to “buy the dip”.

Second, I don’t for one single second believe that China is going to stop accumulating gold reserves at a voracious pace. It obviously has a long-term strategy in place to substantially increase its holdings of gold. I don’t think that strategy suddenly ended last month.

Also, retail sales of gold bullion are skyrocketing all across the globe. You may have read one of the many news reports about Costco’s monthly sales of approximately $200 million worth of gold bars. They can’t keep them in stock – the last time the stores restocked their supply of gold, it sold out completely in less than a day. In South Korea, 1 gram gold bars are selling by the trainload in convenience stores and vending machines across the country.

Look, there is up and down price action in any financial market, and in any trend. Yes, it would be nice if the prices of gold and silver just went higher – say, maybe 1% to 2% a day (See? – I’m not greedy – I could have said 10%) - every single trading day of the year for, oh, about 20 years. (Yeah, that would be really nice – I’m getting dizzy just trying to add up what my profits would be in that scenario.) But that’s just not a realistic price action forecast. Even in the most bullish of bull markets, price goes up…then the market downside retraces some of its gains…then it goes up a bit higher…then it comes back a little bit…and then it moves on back up and, over a period of time, makes a new high.

If market analysts at Goldman Sachs predict on the 1st of June that gold will hit $3,000 this year, gold doesn’t just zoom right up to $3,000 on June 2^nd. Again, yeah, it would great if it worked that way…but it just doesn’t. When you’re waiting for the price of a commodity to rise, patience is required.

What I’m saying is simply that days like last Friday are going to happen – days when you open your computer to check prices in the morning and do not get good news. The other thing to keep in mind is that drops in price are nearly always sharper than increases in price. Markets slowly climb upwards, but fall down quickly. You can look at it as being similar to the rate at which you move up when climbing a flight of stairs compared to the rate at which you lose altitude if you fall down a flight of stairs. Market prices aren’t actually subject to the law of gravity, but they kind of behave as if they were.

The market took a hit. That happens. It might take another hit Wednesday when we get the latest comments from the Federal Reserve about likely, or unlikely, interest rate changes. But short-term price action – not at this point and under the current economic conditions anyway – isn’t likely to change my fundamentally bullish outlook on gold and silver. In my opinion, there are still several major, basic economic factors pushing gold and silver prices higher – persistent inflation, utterly unmanageable debt levels for the US and other major Western economies, the move toward de-dollarization, central bank gold buying, and the overall supply and demand picture for precious metals, just to name a few.

Make Rational (rather than emotional) Trading Decisions

I won’t change my market position in gold and silver unless my market analysis changes. Investors much too often allow momentary, relatively insignificant price action – what is essentially “market noise” – to determine their trading decisions, instead of calm, cool, rational market analysis.

What investors need to ask themselves is this: Bottom line, when push comes to shove – do they, or do they not, think that gold and silver prices are, in the long term, going to go higher. So, are you genuinely bullish on gold? – If you are, then days like last Friday shouldn’t bother you that much. It’s just normal market action in an overall uptrend – a strong move to the upside, followed by a bit of a pullback before resuming the controlling uptrend.

Sure, I’d rather open my brokerage account every morning to see how much more money silver has made me today, rather than looking at a 10% loss, but in the overall scheme of things, I’m still doing okay. Having initially started buying silver at around $15, $29 an ounce still looks pretty good in the profits department. (It’s certainly doing a lot better than my buy of Lixte Biotechnology (NASDAQ: LIXT) stock at $3.01, currently trading at $2.41…What idiot talked me into buying that stuff anyway? – I don’t even remember what exactly LIXT does. Oh well, maybe by 2030 it’ll get back up over $3 a share.)

As long as the market pretty much holds up here, then last Friday’s price action will just serve as confirmation of the technical analysis pinpointing the $29-$30 an ounce price level, which was previously significant resistance for silver, as now serving as significant support – a price foundation from which the market can work higher. The same goes for gold and support around the $2,300 level.

(By the way, just for the record, precious metals market expert, Peter Schiff, agrees with me on the current market situation. In his Friday afternoon market wrap up podcast, he characterized the market’s price action as presenting “a unique opportunity to buy silver” at prices that are still 40% below silver’s all-time high of $50 an ounce. And, yes, he’s similarly bullish on gold.)

In closing, to answer the question posed by this article’s title, “Is the bull market in gold over?”…Well, my answer is…NO. 😊

(And here’s some more good news – I hear the ice cream truck coming!)

• J.B. Maverick

P.S. Financial Humor for the Day: I saw a resource from a major financial market news and research website titled, “Best Gold Penny Stocks Right Now – Updated Daily”. But the date on the article was April, 2022. What was that bit about “updated daily”???

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Sources:

https://paradigmpressroom.com/post/63-banks-on-the-brink#2

https://schiffgold.com/friday-gold-wrap/second-chance-for-silver-june-7-2024/

https://www.cbsnews.com/news/inflation-american-workers-are-taking-on-second-jobs/

https://www.primerica.com/public/Fact_Sheet_Primerica_Financial_Security_Monitor_Q2_2022.pdf

https://www.moneymetals.com/news/2024/06/10/what-do-we-make-of-the-recent-knee-jerk-gold-selloff-003247

https://www.zerohedge.com/markets/inside-most-ridiculous-jobs-report-years

https://rubino.substack.com/p/gold-hit-with-one-two-punch

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