Silver remains a slow moving, frustrating long position for metals bulls who have remained steadfast over the past two years while watching base metals, energy, ags, and virtually all other commodities explode in price over the past 18 months. Since the price peak in August of 2020, Silver is down almost 20% while the DBC commodity tracking ETF is up 170%. Let’s take a look at the tape.
Silver has been flirting will long term support at 21.80 (tested 6 times since the breakout in 2020), and falling resistance from the 2011 high (which it has also tested six times). Within this long, two year price consolidation between long term support and long term resistance, action can be further broken down into response and activity around the 200 day moving average, where price found support in the spring and summer of 2021, broke in July and retested (and rejected) three times throughout the winter until finally breaking through in February. Last week’s sell-off pushed price right to the 200 DMA, where it found support and bounced hard.
Price is now forming a bull wedge, and a breakout of the wedge would likely precipitate a run to falling resistance in the $27 zone. With RSI sitting in the 40s, there is some potential energy in the system for a near term move.
Zooming out, silver looks good structurally. Price consolidation at long term support at 21.80 is clearly visible and forming a two-year ascending triangle. Big picture, the measured move on a breakout above $30 would create a price target right at $49 (at or around prior all-time highs). I view $30 as a key level, because it was the prior high in January 2021. A clean break above that level becomes very bullish.
Conversely, a breakdown below support at 21.80 would be bearish and likely precipitate a price waterfall back into the low teens.
As always, we appreciate your feedback!
It has been awhile since I posted an update on metals, largely because metals have been stuck in quiet consolidation mode until the past week or so. We have been watching falling trend channel resistance on gold for the past six months, and after the double bottom in March around the 61.8% Fibonacci retracement, gold has steadily climbed, recapturing the 200 day moving average for the first time since February 2nd and breaking out above falling resistance of the multi-month bull flag that commenced with the August ’20 peak. Price action looks exceedingly constructive here, with RSI now in overbought territory for the first time in nine months. Bulls want to see price hold the 200 DMA, or at least stay above 1840. There is blue sky to 1965 if it does.
Gold has been the laggard. Higher beta silver, as well as mining stocks, have led the way. Silver broke the 200 DMA in early April, and has once again hurdled the troublesome 25-27 area. Bulls need silver to hold 28.50 for a retest of 30, which it struck twice in the last nine months. A break of 30 should precipitate a swift move to the 161.8 Fibonacci extension at 35, which coincides with the October 2012 peak.
GDX, the Gold Miner ETF, broker falling resistance on the 4th test back on April 15th, successfully retested, and has pushed its way back to the 61.8 Fibonacci retracement from the August high. Constructively, price has never fallen into oversold territory from the entire move following the March 2020 low – even during this long consolidation period. We are likely to see some digestion of price at these levels, but a break of 40 should ignite a move to retest the August 2020 high at 45.85.
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Metals bulls have been frustrated with repeated attempts to break out of a multi-month bull flag/falling channel. At the turn of the new year, with the presidential election all but behind the country, and with calls for more money-printing and ongoing stimulus, it seemed a given that – like the base metals and energy – gold would break out and follow the inflation narrative to higher prices. And, for three days, that is just what happened, as gold pushed from a 2020 close of $1895 to $1960 in the first three days of the new year, only to sell off hard and fall back below falling trend line support. This was gold’s second pass at $1960, which was the 6.18% Fibonacci retracement from the August high to the November low. As the saying goes, from failed moves come fast moves, and the failed move precipitated a $160 sell-off in a week and a half ($140 of which occurred in the 3 days following the peak). It was a major head fake for bulls and stopped out many traders who bought the breakout. Price also lost the 200-day moving average, which was another warning sign for bulls.
On the positive side, price recently recovered the 200-day moving average, stochastics have turned up, and despite the rapid selloff earlier in the month, the daily RSI never hit oversold conditions. Instead price has been stuck in no man’s land between 1800-1900 per ounce. The next real move can’t begin until gold recovers $1890 to break falling resistance and hurdle the 38.2% Fib retracement.
Silver & Platinum
While gold has struggled, silver and platinum have remained surprisingly resilient. The higher beta cousins of the yellow metal tend to trend with gold, but more dramatically in percentage terms. It would seems both are being supported by the run-up in base metals, as each have industrial properties that are far broader than gold. In fact, on several occasions this month silver and platinum have traded up on days when gold has traded down. Silver remains stuck at long term support between $25-$26, nearly broke rising trend support with intraday dips into the $24 range, only to close above support. It’s now decision time as price is pinching between horizontal resistance and rising support. A key pivot point is $26.07, and a secular breakout occurs above $28.11.
For platinum, $1200 is the key level to watch. As platinum approaches $1200, I would expect to see some consolidation or a pullback as it builds the necessary power to break through long term resistance. This has been the key level since 2014. A break above $1200 opens up a move to $1300, above which would be extremely bullish.
The recent dollar rebound has been the major headwind for the metals. As I stated in a previous post, the trend remains down and all signs point to further weakness. One final thrust towards 91 seems plausible, but ultimately price seems destined for 88.
The inflation narrative and weakness in bonds have supported higher equity prices. The Nasdaq in particular is an unstoppable train. Equity markets across the globe have been breaking out, and risk appetite is growing. Whatever you may think about valuations and the weakness of underlying economic conditions, all signs point toward higher equity prices ahead. For the S&P 500, 4000 is an important psychological level, with my near term target pushing to 4150.
As always, we appreciate your feedback!
The month of November was a bit of a roller coaster for metals bulls, as price appeared to breakout, only to reverse on vaccine news and become extremely oversold by mid-December. All the more frustrating was the continued sell-off in the US dollar, which many expected to spark the next leg higher in metals prices, but new lows in the dollar coincided with multi-month bottoms in metals. Meanwhile, all attention has since returned to bitcoin, which broke out to all-time highs while metals remained in consolidation mode. So, where are we now?
The thesis that I outlined in my post on October 14th remains the same: Metals up, Equities Up, Dollar down. The expectation then, as now, is for the 2021 reflation/inflation trade. To be clear, this expectation is not based on any personal macro-opinion; it is based on how I see price reacting to this general market consensus. The market can be wrong, and if it is, and inflation expectations are overblown, the price will warn us.
Let’s start with the hot topic du jour: Bitcoin.
Bitcoin finally eclipsed its 2017 euphoric high last week and screamed to just north of $24,000/coin, which represents the 127.2 Fib Extension measured from the 2017 high to the March 2020 low. Fundamentals aside (are there any?) price looks poised to test $30,000 (the 161.8 Fib extension) on the next thrust. By any technical measure, bitcoin is in a major secular bull market, and the heights it may reach will likely shock many.
Silver broke out in a big way in overnight trading with a massive $1.40 move late Sunday, December 20th. After finally breaking through falling resistance of its bull wedge in early December, silver eclipsed the all-important $26 level, which has served as either support or resistance no less than 11 times since 2011, and most recently following the September blow off high. This breakthrough now sets up an initial retest of $30/ounce, with $37 beyond there.
Gold has quietly rallied $140 since the big sell-off in late November, and it is now knocking on falling resistance of its multi-month bull flag. As of this writing, price is on the cusp of a breakout at $1910, which sets up a quick retest of $1940 and $1960, above which should push price back north of $2100.
The Gold:Silver Ratio also continues to trend lower, which is an encouraging sign for bulls, as it implies stronger risk appetite in the space.
For the US Dollar, there is not much to add here. The trend is down, and 88 is a very key level, where we should expect to see some near term support. If price doesn’t hold there, the US dollar will likely fall into the 70s on the index.
As always, we appreciate your feedback. Have a Merry Christmas!
In my last post, I commented on the strong breakouts in metals out of bull wedge consolidations. These breakouts were ultimately short-lived and quickly reversed on vaccine news, washing out swing longs and once again pushing price lower to another test of falling resistance. The thesis from that post remains intact – metals continue to remain in strong uptrends with price likely to push to higher highs – but in the near term price continues to digest supply and needs more time.
Gold has a confluence of support coming in at 1832, 1828, and 1822. Below there, 1790 lingers as the key breakout level from the 7-year base. With stochastics oversold, the downside on this selloff looks limited. For those with a longer time horizon, the area between 1790-1830 is a strong area of support.
In Silver, I am watching 23.08 (retest of 161.8 Fibonacci extension) and 22.57 (the anchored VWAP from March low) as important levels. Like gold, silver is getting a little oversold on stochastics and I think the 22.57-23.08 is very likely to hold.
Gold has been highly correlated to 10-year notes, which have also been consolidating and are now coming into rising support from the October 2018 low. Long consolidations like this within strong uptrends are much more likely to resolve in the direction of the underlying trend, and if 10-year notes rally off support, we can expect gold to be not far behind.
As always, I would love to hear your feedback. And Happy Fibonacci Day: 11-23!
Today is November 6th, we still do not have a President-elect, and the legal fight over ballots and vote-counting seems destined to drag on for weeks, if not months. For those investors determined to allocate capital based upon the election outcome, the uncertainty can be paralyzing. We can expect a likelihood of a split government, but there is no certainty beyond that. My solution is to follow price.
In my last piece, I noted that precious metals were trending up, and the US Dollar was trending down. Yesterday’s price action confirmed that, following a multi-week consolidation period, these trends have resumed.
Big Gold Breakout
Using the March peak/trough in gold has been a reliable Fibonacci measure for extension levels. The pullback from the August high was nothing more than a rejection at the 261.8 Fibonacci extension and a retest of the breakout at the 161.8 extension. Yesterday’s bull wedge breakout on a monster $50 candle, while breaking out above the 50 day moving average, suggests that gold is setting up for another run to 261.8 extension. Note also that after getting extremely overbought at the August peak, gold never hit oversold conditions throughout the entire consolidation period, suggesting that bulls are still in control.
Silver Also Confirming
Silver made a statement with yesterday’s bullish move. I noted on election night that silver looked vulnerable and needed to breakout in order to avoid future trouble. Within 48 hours price exploded out of its bull wedge on a $1.60 single day move. The chart looks extremely constructive now. The anchored volume-weighted average price from the March low held throughout the consolidation period, and similar to gold, 161.8 Fibonacci extension from the March low held, the bull wedge broke to the upside, the 50 DMA was eclipsed, and price is now retesting prior support at $26. A move above $26 should push a retest of the 261.8 Fibonacci extension.
Gold/Silver Ratio – false breakout
Earlier this week, the Gold/Silver ratio appeared to be breaking out, which was concerning for bulls. Generally, a rising GSR is a risk-off signal for metals (gold outperforming silver). The big turnaround in yesterday’s price brought the ratio back below falling resistance. As the saying goes – “from failed moves come fast moves.” A weekly close below falling resistance increases the likelihood that the ratio will continue to fall.
GDX and GDXJ Breaking Out Also
The charts of GDX (Gold Miners ETF) and GDXJ (Gold Junior Miners ETF) look very similar. The chart below is that of GDXJ. After breaking out above long term resistance at $52, price has neatly consolidated for three months forming a multi-month bull flag which perfectly retested prior resistance (now support). Yesterday, price finally broke falling resistance of the bull flag. Like gold and silver, these junior miners never hit oversold conditions through the consolidation and appear poised for the next leg higher.
Equities also look constructive
The S&P 500 is up also 300 points from the election night low. The key 3230 level – which has acted as both resistance and support and has been tested four times since May – held. Price is now coming into falling resistance from the August high. 3530 is resistance to the upside. Bulls would like to see a big push through that level to confirm the next leg higher is underway, a run that should take price to ~4,000, which is the measured move from the June breakout and the upper bound of the 12-year rising channel. Like the metals, price never hit oversold conditions on the retest of support and bulls remain in control. On the downside, 3230 remains key support, with the 200 DMA and anchored VWAP from the March low sitting just below ~3115.
The Dollar shows little sign of strength
From a technical perspective, the trend in the dollar is down. This is a fact, not opinion. The dollar has a downward sloping 200 DMA, hit oversold conditions twice during the summer, never was overbought on the short term rally, and remains on the precipice of breaking support again at 92. This is not a chart anyone should be looking to buy. A break above 95 would change the technical outlook.
As always, I would love to hear your feedback!
The price coiling I highlighted in gold in my last post failed to the downside, which I mentioned was a possibility. There were two key levels, the 1865-1880 band, and then 1800, which would have retested the entire move. Buyers came in strong at 1865 and price held, right at the 100 day moving average. The breakdown from the pennant has created a bull wedge, and the RSI (relative strength index) never hit oversold levels, which implies to me that bulls remain in control. Gold is not completely out of the woods – a breakout of that bull wedge would confirm that 1865 was the interim low. I am looking for confirmation above 1935 and then 1950 for next sizable move. The price action in silver and the miners confirm this thesis.
Like gold, silver never got oversold on the 14-day RSI during the recent selloff, and price similarly bottom-ticked the 100 DMA. A break above the recent high of 24.57 should set up a retest of 26.
GDX – Gold Miners ETF
GDX appears to have successfully recovered support at 39. At the moment, the recent sell off looks like a false breakdown from horizontal support, and price has formed a bull flag during this recent consolidation. Like the metals, RSI never got oversold during the sell off. This looks to me like a 2-3 month healthy consolidation in order to digest the explosive gains from the March low. Bulls just need price to stay above 37.
GDXJ – Junior Gold Miners ETF
The junior gold miners look even better than the majors. The entire selloff has been a simple retest of the breakout from the 2016 high. Like GDX, price has just been consolidating for 2-3 months and has formed a bull flag into support. RSI never got oversold during the selloff. Bulls want price to stay above 52.
In a bull market, we want to see silver outperforming gold on a relative basis, which implies a lower ratio. In the chart below, we can see that the trend remains down, and the ratio is pushing up against falling resistance. A breakout in price should send the ratio falling back towards a retest of the 68 level. In this case, we notice that the RSI was “oversold”, meaning the downward fall became extreme, and the pullback never hit overbought levels, which implies that the downwards pressure is prevailing. These signs indicate silver outperformance, which is far more prevalent when prices are rising than when they are falling. A breakout of this ratio would imply a skew towards risk off, which would be less bullish generally.
As always, we would love to hear your feedback.
In a stark reversal from the collapse of nearly every market just six months ago, the winds of inflation have pushed the sails of those same markets back to new (or near) all-time highs. The rebound from Covid has been a V-shaped recovery, not an L-shaped, W-shaped, U-shaped, or some-other-letter shaped recovery. The move in asset prices should not be conflated with an underlying economic return to normalcy – far from it. The rebound is simply a commentary on price.
Let’s start with my favorite markets – precious metals: (more…)
The precious metals market is very clearly in a secular uptrend and prices look poised for further significant upside into the end of the year. My technical view is that in the short term prices have gotten a bit extended and that a pull back/consolidation is due (and healthy) to build the base for the next leg higher. (more…)
Precious metals prices broke out this morning above key resistance levels in the mining sector as well as the underlying futures market for the raw metal.
Silver has been a shining star in the metals complex since the March low of $11.60, outperforming all other metals on its run to $18.90/oz. The upside leadership was a welcome sign for precious metals bulls, as silver tends to be a bellwether for bullish appetite in the space.
It has been over a month since my last entry on the markets, and aside from a few Twitter posts, most of my analysis has been confined to my desktop. The impact of the coronavirus on the retail precious metals market has been historic, with dueling supply and demand shocks, and as president of Texas Precious Metals, my time has been consumed by day-to-day operations. I finally have a bit of a respite this afternoon to share a few thoughts on the metals markets.