Could Gold Be Getting Close To A Bottom?

1.) BANKS – A new study by Allianz found that 62% of Americans think a major recession is right around the corner. Only one in four believe now is a good time to invest. Fear from the “crowd” is not a reason to be afraid of the current market. Turn on financial television for five minutes and you’ll hear plenty of reasons to be worried. But the market is telling a different story as the S&P Banks Index just closed at a new all-time high. That may not mean much to many people, but it should change the way the fearmongers are thinking. Why? The last time the S&P Banks Index traded at these levels was January 2007. That was nine months before the S&P 500 peaked and the Global Financial Crisis began. Now some will think…“see…it’s coming again!” But let’s stop and think about everything that’s happened since then. The housing market collapsed. Bear Stearns disappeared. Lehman Brothers failed. Hundreds of banks shut their doors and the economy fell into the deepest recession in generations. Then came a pandemic, inflation, and the fastest interest-rate hiking cycle in decades. Through all of it, banks never managed to surpass their 2007 peak…until now. It may be hard to believe, but markets spend more time moving sideways than they do moving higher. Why? Because old investors who bought near the previous peak often spend years waiting for one thing: the chance to finally get their money back. Every time prices return to those old highs, many of them sell. But eventually, those sellers disappear. And when they do, supply dries up, which is when some of the biggest moves often start. Importantly, the longer these moves take to develop, the more meaningful they tend to be. It’s really hard to have a lasting bull market without healthy banks. Banks move money through the economy…banks lend, businesses invest, and consumers spend. And that’s what makes this breakout so important. If the economy were truly on the verge of recession, banks would be one of the last places you’d expect to see historic strength.

2.) GOLD – Gold is still trading in a very weak condition. However, there are some historical precedents that are important to keep in mind, pointing to a potential significant bottoming process in play. Gold’s first real correction (like the correction we’ve seen since the January top) after a major breakout has followed almost the same script every time. So far, this one is no exception. This chart shows the 1973 move, 2006 move, and now this 2023 move. I’ve commented recently that $3,500 could be in the cards. Recently, gold tapped $3,942. Is that the low? Maybe. We just might need to see a little more capitulation…or investors “giving up.” The second chart plots the net fund flows in and out of the largest gold Exchange Traded Fund – GLD. The chart is smoothed out by a 100-day moving average. But the bottom line is that it’s seen some characteristics that would suggest capitulation in recent days. Gold just might need a little more before a lasting bottom. But if you’re a gold buyer, this is an area where perhaps starting a DCA (dollar cost averaging) approach could make some sense.

3.) JOBS – Well, it seems we can finally say AI isn't killing jobs. Firms that adopt AI heavily grew headcount by 10% over two years following adoption. Low adopters see no statistically significant change.