Investors are dumping lower yielding assets like gold to buy higher volatility securities like Tesla shares and bitcoin, said Gareth Soloway, chief market strategist at In The Money Stocks, but Soloway is not selling his gold yet. Soloway’s comments come as Friday’s nonfarm payroll report showed a loss of 140,000 jobs in December, the most since the start of the pandemic.
Gold is taking a huge hit on Friday. As we speak it's down nearly 3% Gareth Solloway chief market strategist, and in the money stocks.com is here to break down. What's going on Gareth happy new year. It's been an interesting start to the new year, first week. Nothing. Gosh, not short on news. No. No, absolutely.
Thank you. And happy new year to you too, David, I'm certainly not short on news. I mean, we've seen the fireworks coming quick, fast and furiously, and we thought we were getting the craziness out of the way in 2020, but certainly hasn't started like that. But yeah. Gold is getting pounded today. Um, and you know, the one thing I would say to investors that are in the gold is stick with it.
This to me is a classic retrace. It had a great move up. Um, it's seeing a sell off. Uh, if you look at the chart here, you can see this channel that it was in, which is actually a bullish channel. And you broke above the channel. Now you're kind of back in, but keep an eye on this area here, because if it can close right around this, then I think this is just your run of the mill.
Pull back. Now, this is a big pull back to be run of the mill. And I understand that, but the one thing to keep in mind is that. You know, right now you have this panic into Bitcoin and I'm a big fan of Bitcoin. Um, but it is getting a little frothy. It's a little insane. Uh, just the last time you had me on, I think it was around 22,000 and that was just a few weeks ago.
So we're basically doubled that. And I think you have a scenario where investors are saying, and this is kind of the, not the. The longer term holders, but the, the shorter term investors are saying, why am I in gold when Bitcoin is going up 5%, every single day or 10% a day. And they're selling their gold assets.
And I think as a logical investor, you want to step back and say, wait a minute, don't let me. Get swept up in this euphoria, stick with gold as part of your portfolio. Now it doesn't mean you can't have some Bitcoin in your portfolio, but don't go running for the Hills, especially considering gold is, is going to go up continually.
The dollar is going to get depreciated. It's going to fall more. We know the Democrats took the Senate. Now that means more printing of money. Um, so look for goal to perform well, even on pullbacks, I'd be a buyer here. I really would be here's my theory as to what happened. And, uh, you can feel free to disagree me if you think I'm wrong.
The jobs report came out today. The U S lost and Canada to the economies here, lost jobs for the first time since, uh, since basically the pandemic. And so I think what's happening is if I'm looking at the, uh, inflation expectations that tip ETF. That went down. So with jobs lost, the economy seems to be not back on track.
Inflation expectations are down and inflation expectations are correlated with gold. So I think that's what happened today. Well, yeah, I think that's part of it. Absolutely. So you have a scenario where the recovery is getting pushed out a little bit. People are going to have less money to spend in theory.
Um, so you're going to have that dollar. The dollar is actually up today. Last I checked. So that does put pressure on gold, but, um, for such a big move, if you look at the dollar, the dollar is not up tremendously on the day. This is a big drop in gold. And I still think absolutely what you're saying does hold some, some water, but also you have this.
Asset class, which is what the metals and in some way, which are not this euphoric, you know, running 10 20 mean we're not going to see gold double in two weeks. Like we saw Bitcoin let's. I mean, let's be honest. That's not going to happen. So I do think there's some money getting pulled out and people are chasing things like Bitcoin and Tesla and other big names like that, looking for that return at this point.
So you brought up a key point, they're pulling money out, but they're not putting it in cash. You're saying they're putting it in risk acids, right? Tesla. Bitcoin. These are high risk, high volume, high volatility assets. Yeah. Yes. And, and that's that's to me and listen, I'm, I'm, I've been around, I've been trading since the late nineties.
Um, I've taken my lumps. Um, occasionally I'll take another lump. I try to learn from my mistakes and chasing things as much as I like Bitcoin. Long-term it's just up a little too much in the short term here. So I think that you do see that chasing, but you want to kind of keep a level head and say, listen, let's let's step back and not.
Get overexuberant or irrational exuberance here on certain things and, and continue to play with what's made money. Remember gold has been around for, you know, tens of thousands, hundreds of thousands of years as an asset for people, and it continues to perform. So yes, there's room for gold and Bitcoin. I just think again, you'll have some situation where Bitcoin falls and you'll actually see money go into gold from Bitcoin when it starts to see that fall.
It's just a puzzling day for me, because I'm looking at a stock indices now. The major indices have moved up a lot. So I can't even call this a risk on day. I mean, yeah. Certain stocks like Tesla was up like seven and a half percent today as of a, you know, intraday. So, you know, certain, certain sectors are doing well, but overall the stock indices aren't up.
So would you characterize this as just a risk arm, move people moving away from risk as a safe Haven assets? Is that what's going on? How did you feel this morning when you, when you woke up and started trading? Well, you know, the first thing I said I did was I checked, I checked Bitcoin and I checked some of the leaders and we saw the leaders that have been running and saying they're continuing to run.
So I, I think personally I've talked to a few hedge fund managers and, and they've been talking about actually paring back on risk right now, but you have the average investor. Really willing to go, you know, go all in at this point and chase these returns because I mean, let's be honest, some of these stocks, they're making millionaires overnight in these names and that's a very lucrative, I mean, that's a very sexy kind of thing for an average investor to do so the average investors are no doubt putting risk on, but I do think.
The assets, if you look at the Dow and the S and P and even the NASDAQ, they're not up tremendously, because I do think that you are seeing institutions pair back on that risk. I mean, it's, it's getting a little crazy and, and remember, you know, yes, there's going to be more stimulus. And we talked about this the last time I was on is that if the Democrats took the Senate, More stimulus would occur, which it will happen, but they're also going to be raising corporate taxes, likely not to where they were before, but they'll raise them up a little bit.
They're going to raise long-term cap gains taxes on the highest income earners. They're going to raise the tax bracket on those. So you're going to have some, some kind of negative information on tax hikes coming out likely towards the end of January and early February. Okay, let's go back to the jobs numbers now, because the expectation was actually a positive number in terms of jobs gained.
But instead we had the opposite of 140,000 jobs lost us. Non-farm payrolls. That's a significant divergence from consensus forecast. So does that change any of your trades in terms of the consumer discretionary consumer staple sectors that you originally may have liked? Yeah, I think, I think in the very short term it can, but as long as you believe that the vaccine will get out and get distributed, obviously it's been a lot slower than we all had hoped for, but at some point, those will come back and it just may take a little bit more time.
Um, but yeah, I mean, there's no doubt that the jobs number was weaker than wall street expected. Right? But interestingly enough, the markets didn't really sell off. When that jobs number came out, they actually initially pulled back then pop right back to where they were. And then it faded a little bit throughout the morning session here.
But I think, again, it's, it's the weaker. I said this to, to a lot of investors yesterday, the weaker, the jobs number. The more stimulus you're going to get, right. Especially now that you have all three branches of the government controlled by the Democrats. So is a weak number, bad for the stock market.
Maybe it's even slightly positive. I don't know. All right. So what are we doing with gold now? It's it's, it's trending down towards 1850. Is that a key level for you? What happens if it breaks 1850 on the downside? Yeah. So let's take a look at a chart real quick here. I'm going to bring up a chart and I want to show us so you can see here and let me zoom in for everyone.
You can see these pivot points right here on the, on the supports. So that's right where we kind of are right now, this 1850 level. That is a key support on gold right now. Uh, if that breaks then you're likely headed to about the 1825 to 1830 level, um, If you go back to a live chart of the GLD, I'm watching this kind of channel, because if we do close below this channel, that does show a short term weakening, and we might head back down to this support here.
There's a gap. Fill on the GLD at one 71 50. All right. And then also potentially if things were continuing or to continue to really sell off, you could actually go to the lower end of the channel here. Um, if we did get down to that channel, I would be buying with both hands though. Um, that would be a no brainer by you could see the parallel lines, how the chart of the GLD has just stayed within until it broke out recently.
And now it's kind of getting a check. Sorry. How much downside, how much downside did you say we could have until you could eat until you would buy the bottom? So, so I'm already long gold, right? So, so I bought gold, um, around one 69 on the GLD a few months ago when we kind of did right around here in, in late November.
Um, we've written it up and I was hoping it would continue up once we broke out. But what I told I told investors is that if we got back down to this low channel, I would add to gold. So you're looking at potentially a move down to maybe one 60, one 75, one 60, one 50 on the GLD. So it would be another two days, maybe another 6%, 7% downside from here.
Um, I don't think that's likely, but don't get me wrong guys. I mean, Um, that's as a trader, I always have to look at all sides. Right. I have to look at what my upside is. And then also my downside. So I'm giving you my downside max here, but overall, I don't anticipate it going there. I think as soon as Bitcoin starts to drop five, 10, 15% per day for a few days, you're actually going to see gold from up here.
Um, and start to turn back around. And I wouldn't be surprised if. By Monday or Tuesday, we're back above this upper trendline and actually making our way back towards the recent highs. So this is an overreaction. I do view it as that. I do view it as that. Um, again, I think it's just, you know, this is such a finicky market.
It's a market that I like it to the late nineties. Uh, when I traded it was my early career and it was just so insane where people were chasing a small group of stocks, but they were willing to dump anything that wasn't paying huge amounts of money. Um, in profits to buy this small group of stocks and back then it was the.com.
It was the Cisco systems. Um, now it seems to be, you know, Bitcoin and Tesla and plug power and these names. And, you know, ultimately we know what happened in 1999, 2000. I'm not saying the exact same thing is going to happen, but when some of the air does come out and you see a retrace, I do think that.
Safe safe havens, like gold will then become an outperformer and we'll go back to where they should be, which is up on the back of a weaker dollar. Okay. Should traders and investors be riding the tread now, should they be also liquidating their gold to buy some of these higher yielding assets like Bitcoin and Tesla and whatnot?
I would, I mean, listen, I thought Tesla was overvalued hundreds of dollars ago, to be honest. Um, but you know, we all have to remember that investing is a long-term game. It's I always say to investors it's about singles and doubles. You know, I want to be the Wade Bob's of. Of baseball, hitting singles and doubles, and just keep doing that.
And I'll be a hall of Famer when all is said and done. Uh, if you look at someone who, who swings for the fences and tries to hit home runs, what do they do? They strike out. They strike out a lot. Um, in this investing world, we can't afford to strike out a lot where we go broke. So, um, I would definitely not recommend it, um, because preservation of capital has to be in the forefront.
Could it, could Tesla go to a thousand short? Could it go to 1200? Sure. But I'd much rather preserve my money and be safe rather than chase these names at this point. All right. So here's my, here's my last question. Not Gareth. And we'll wrap it up here. Momentum for gold. Where is it on the downside right now?
Where the upside you are you still all right now, where are you going to be selling into weakness and then buying at a lower dip? What's happening now. I'll still, I'll still hold my goals here. And I'm still in the money by about $4 or so on, uh, the GLD, um, at this stage, I want to continue to just continue to accumulate.
Uh, so if it gets down to the lower end of the channel now remember on a technical basis, what you see before you hear this is a bullish channel, right? Why w why is it a bullish channel? Because if you zoom out on your chart, This was a long move up. And then this is what we call consolidation and again, and bullish consolidation at that.
So as long as this pattern holds, be a buyer, uh, if it were to break below the channel, that would be concerning to me. Um, but again, as long as you're in this upper range, and even if you got down to the lower range, I'd be a buyer until proven otherwise. Well, that channel seems to be on a while, seemed to have been on a downward trend since August.
How much lower, how much longer can this downtrend continue? Gareth? My, my guess is that the low is already in. So if you go back to late November, my guess is that was the low. Um, I know it's down, you know, Boulder's down big today, but, but I wouldn't let a 3% decline after it went up from, you know, one 65 all the way to almost one 85, where you too much, again.
If you just want to think about the macro issues going on in the economy, uh, the printing of money that is not going away. Remember the fed can't raise rates. The rates rates are gonna go up on the tenure. We've already seen 1.1, 2% today just after breaking 1%, but the fed doesn't want that it's going to hurt the economy.
We know the fed. Push interest rates down, which flooded the market with, with money going in the long side. So you saw asset prices like stocks go up precipitously. Um, eventually that will unwind. And I think again, the dollar is going to go down. You got, you got just too many downward pressures on the dollar.
Long-term I should say. I said that was a final question. I guess that's not true. Cause I have my question for you. It's all right. I, I need to ask you about the yield curve. This is something that kind of escaped the press and the media for, for a while. Since the COVID pandemic took over before COVID, everyone was talking about the yield curve.
It is a leading indicator where has been in the past about predicting recession. So it has historically. Precipitated recessions now ever since basically 2020, it's actually been sloping up and it's now near 2017 levels. Um, I mean that, that, what, what does that tell you? Well, I think there's two things that tells us.
Number one is that over the next couple years, you probably do see a resurgence in economic activity because you're going to have people that have been locked in their houses, essentially looking to take vacations and spend money. The savings rate has gone up. We know that. So. That's put a lot of money that, that is, you know, kind of burning a hole in people's wallets that they want to spend.
So I think you're seeing that resurgence in the economy, that's partially telling you about the yield curve. The other concern that I would have is if it continues to widen more and more, you have to ask yourself is people that are buying us debt. Uh, they say, okay, well, in the short term, you know, we know things are going to be okay because of the resurgence in the economy.
So we'll, we will ask for a high interest rate. Over the next 20 or 30 years when you're talking about the 20 or 30 year yields, you know, what are the odds of the U S actually paying back? All my debt. And so do I ask for a higher interest rate because of that? And that's my, that's the one thing that's, you know, making me a little nervous about the yield curve is that I think short term.
Yes. But what's going on longer term with those 30 years. And, and I think, I think keep an eye on that. If it continues to kind of advance as it could be something that, you know, again, is that something we need to worry about in the next year or two? No, but over the longer term, absolutely. Our Garrett.
Thanks very much for your update. Hey, thank you so much, David. You have a wonderful day. Yeah, you too. We'll speak again. Soon. David Lind reporting for Kitco news. Stay tuned for more. .