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Precious Metals Projections

A “Feeding Frenzy” in Commodities - Precious Metals Projections

Precious Metals Projections with Chris Vermeulen

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What a difference a month makes. As unforeseen geopolitical events roil the markets, gold and silver investors know these moves rarely stick. But in this edition of the Precious Metals Projections, host Craig Hemke and analyst Chris Vermeulen of the Technical Traders break down all the charts to show you why this time might be different.

This month, you’ll hear:

  • Why the stock market is on its “last legs”
  • The perfect storm brewing for commodities
  • Plus: what to watch in gold and silver

To view Chris’s full thoughts on this month’s gold and silver charts, watch here:

Craig: Welcome back to your monthly "Precious Metals Projections," brought to you by sprottmoney.com. I'm your host, Craig Hemke. It is March 2022. And joining us for this month's call is Chris Vermeulen of the Technical Traders. Chris, good to see you.

Chris: Yeah. Thanks for having me, Craig.

Craig: It's always fun, my friend. Hey, look, before we get started I wanna kind of put out my personal plea to everyone, really, but primarily to citizens of Canada after the month you've been through, okay? You know, like on my site, at TF Metals Report, we've talked about the war on cash for years, and how, if you just hold things in the bank, it's all digitized, and it can be taken away from you in an instant. And all of you in Canada just got a firsthand lesson in that. You might have thought that was crazy talk, right? But if you spoke out and held an opinion that your government didn't like, you were frozen out of your accounts.

So, forever, we've talked about holding physical metal in your own two hands, gold, and silver, as protection from a lot of things, but also wealth protection, your own sovereign wealth. All right, listen, Sprott Money should be your go-to source for that physical metal. Right there in Canada, they're based in Toronto. Founded and run by Eric Sprott and his family, this is where you should go. Anywhere in the world where you're listening to us, but particularly you Canadian citizens, like I said, you just got a lesson in how this might work going forward. And if you don't think this could happen to you anywhere else on planet earth, I'm afraid you've got your head in the sand.

So, sprottmoney.com is where you need to head right now. Check out the deals, there's always all kinds of good of deals. They will store it for you too if you don't wanna store it yourself, but, man, they'll just ship it right out to you. Whether you want coins, bars, maples, you know, generic rounds, whatever, they've got it. So, go sprottmoney.com, 888-861-0775, start your own physical stack, or if you're like me and you look at your stack, if you have to ask yourself, "Do I have enough?" Then you probably don't have enough. So, you can add to your stack as well. All right. Anyway, that's my personal plea here this month.

Chris, it is a crazy time to be alive. You know, a month ago when we met like this, we talked about how commodities were on the verge of breaking out. And we could never, though, have foreseen, not only the geopolitical events, but also just the insane moves. I mean, crude oil's over 110, the base metals are up 4% or 5% every day. Wheat this week been limit up every single day, and now it's at all-time highs. Copper breaking out to new all-time highs. Let's start with commodities in general, because I know you've got some thoughts on commodities, but also seasonality. What can you tell us?

Chris: Sure. Yeah. Well, let's just start off with some really basic market analysis in terms of what the stock market does during different cycles. Throughout the cycle, what sectors come to life? And this blue cycle here is the stock market cycle. The yellow cycle is the economic cycle, and how it works is generally the stock market moves and changes before the economy. Money tends to front-run what they see coming. So, the stock market will bottom and start to move up while the economy and everyone is still very bearish and scared, and same with the top. The stock market will start to sell off before the economy actually gets really weak.

So, everybody right now has started seeing the stock market fall, and really, businesses are still booming. I mean, you can't get labor if you tried. Everybody's doing exceptionally well when it comes to businesses, and the stock market's moving down. And what's interesting is we're in this phase now where we are in a commodity-rich environment. You and I have talked about these many times, but, you know, the topping phase of the stock market, typically, stocks are gonna start to top out, become volatile, and what becomes the market leaders are commodities, energy, precious metals being the two main ones. And as you just talked about, we are in that feeding frenzy with commodities, and we're seeing them rally across the board.

So, knowing that, you know, the stock market is kind of on its last legs, from what it looks like, and commodities are coming to life. I mean, we can look at these markets. And what's pretty interesting is if we go back in time here and take a look at the S&P 500 weekly chart at the top, this was the 2007 market high, and what happened when the stock market got into this topping phase, well, we saw commodities put in a huge rally. This is the crude oil ETF down below. Crude shot higher and commodities, in general, the commodity basket index moved up as well. And that's what happens. We see stocks start to trade sideways. I feel as though we are somewhere in this kind of area with the stock market right now, and we are in this full-on, you know, bubble bull mode in commodities with everything that's unfolding. And if we fast-forward of where we are today, we're kind of in that same scenario. Now, this ETF loses value over time.

So, if I was to just zoom in a bit, it kind of got crushed with the COVID oil price, but the reality is crude oil, the crude oil ETF is up huge. It's up 354%, a little bit skewed simply because of that negative rate that we had, but we've got hundreds of percentage gain in crude oil. The stock market is now just getting into what I think is a topping phase. It's starting to get very exhausted. And really, when we look at the other basket of commodities like DBC, we look at the overall commodity index as a whole. And we zoom way out here. Last time you and I talked, we talked about this kind of line in the sand. We are like right back in here. This is kind of a weekly chart, got this really critical pivot area. If I can get a line on here. Where we've got support, resistance, and a lot of volumes through here, and we had kind of creeped up to this level. And the market was either gonna get rejected in a big way, or it was gonna bust through it and take off, especially if we have war, and that's exactly what's happened.

So, now we're in this like huge, you know, this big phase here moving up. News-driven, but we're already in a commodity-rich environment. So, everything is firing on all cylinders when it comes to the commodity space. So, that kind of gives you the overall view, where I think we are. Stock market is on its kind of last legs. Commodities are doing really well. Energies are doing well. I think one of the last movers, which I find is almost always the case. Precious metals and miners around precious metals are the last ones to move and do really well. You and I talked about this last month, and they're just, I think, getting started, which is pretty exciting.

Craig: And you look at that chart, and again, now that it's above whatever that is there, 26 level, 25, I mean, what's that peak back there in 2011? That's up 32 or so? No, no, the next one down. Yeah.

Chris: Sorry. Yeah, 32. Yeah.

Craig: So, that would imply, I mean, there's at least another 10%, 20% there that that thing could move before it would run into that level. And then, oh, gosh, above there. You know, it's interesting, again, because so much of this is geopolitically-related, and we also know that, you know, most moves on geopolitics don't stick, but this is different. And if you could pull up, Chris, that ETF of the grains, remember looking at that one last month? I wanna...

Chris: DBA, which is the agricultural, this is the...

Craig: All right. So, let's talk about that one for a second because this ties back into the metals. You know, the fed is out there claiming that they're gonna start hiking the fed funds rate by 25 basis points a month. As if, one, if they get tightened too much, that's not just gonna lead to another pivot because they'll, you know, tighten liquidity and drain liquidity, and everything will start to collapse. But, two, what the hell good is 25 basis points gonna do when you're seeing this kind of base commodity inflation? I mean, energy goes into everything, right? So, there's an input cost. All the base metals, copper close to all-time highs. But let's talk about... I wanted everybody to see this just from a food standpoint. I mentioned wheat's gone up limit every single day. It's up to $12.50 a bushel. I mean, that's way past its old all-time highs. Corn is making new all-time highs.

Chris: Here's the wheat.

Craig: Soybean's very close to new all-time highs. So...

Chris: Look at the wheat.

Craig: What's that?

Chris: Look at the wheat ETF. This is the wheat ETF.

Craig: Oh. Look at that. Okay. So, here we are in a period where all of these grain inputs, you think, "You know, I can afford change of price of a loaf of bread." But corn not only is a livestock feed, think of how much high-fructose corn syrups, and everything, right? Soybean's a protein for everybody globally, right? So, your food costs as we go through this year, those have to be passed on to you. And so, your food inflation is gonna sore. So, this idea that the fed is somehow gonna hike rates above the inflation rate and drive real rates positive is just not gonna happen. And so, we'll get back to that in a second, what that means for gold and silver too. But that chart, show everybody where that is historically. Again, it's an ETF, so it gets wasted away over time, but historically, you can see where... There's a suggestion it could still go higher. And you look at these things as we head into the summertime. We just got news today, the Russians may be suspending fertilizer exports. How many farmers in the U.S. Midwest are gonna switch from corn to soybeans because it's so expensive with anhydrous ammonia, and potash, and everything else to plant corn? So, what's that gonna do when yields fall? So, anyway, it's another...

Chris: Yeah. It's scary, the inflation, that I think is still possibly ahead. I mean, just think, if people can't...

Craig: Right. Run with it. I'm sorry. That was my inflation speech of the day, Chris.

Chris: Exactly. I mean, just think, if people can't get fertilizer, I mean, the crops are gonna be half of what they normally are. Fertilizer's like critical. So, that's gonna even add more fuel to the fire. I mean, we're starting, what I think, is a major commodity super cycle. I think near-term, I think we're hitting kind of a little bit of a bubble news-driven phase, but I do think we're gonna see precious metals and commodities do very well for three, four, five years going forward. And it's scary because you look at the size of supply-demand issue, you look at... Ukraine is like the fourth largest resource provider for iron ore, and corn, and wheat, and all kinds of stuff. And I mean, obviously, they're not gonna be able to farm if they're under attack. That is gonna put a huge strain on the system. Fertilizer's gonna cut back on crop yields on top of that. I mean, it's the perfect storm for commodities, and it might be here to stay for a few more years than we actually want to.

Craig: Right. And if you look horizontally at a chart like we did the last one, what does that to begin to target, 30, maybe next? What's...

Chris: Yeah.

Craig: Yeah. Okay. We're at 22, so, what's that, 40%?

Chris: Yeah.

Craig: Thirty-some odd percent? So...

Chris: Yeah. And it can do that really quickly too. I mean, really, that's just a... This is a quarterly chart, so, this is over a few months. It could be very quick up there going forward.

Craig: So, heads up, everybody. This is the real-world stuff we're talking about. Okay. So, Chris, you mentioned, and you're right. I mean, a lot of this eventually trickles down to gold and silver, and then, you know, in the mining sector, it's like the producers' takeoff first, the GDX leads the GDXJ, which often leads to SILJ. If you would pull up a chart, you know, it's March 4th as we record this. So, we're still early in March. We are good four weeks away from the end of March and the end of the first quarter. But a lot of folks like to look at the quarterly chart to see kind of long-term trends and take out a lot of the daily noise. You know, are you in this kind of secular bull market? And where are we? So, Chris, there you have it, there's a quarterly chart. Again, we're four weeks away. Anything can happen in the next four weeks. But tell people what you see there, please.

Chris: Yeah. I mean, the quarterly chart really does clean everything up. It takes a lot of the noise out of the monthly, of the weekly. You really see where the body and the overall trends are. And, obviously, we are in a very strong uptrend. We've had this kind of hiccup here, this kind of test of break to new highs. And as you and I were talking, you were mentioning, you know, really, the quarterly chart, we are four weeks away, but we are at a level that's never been reached before on a quarterly basis, or we're holding at that level. If we can hold at this level, that will be a quarterly breakout. And quarterly charts are pretty strong wrong. I mean, that leads to usually a year, or two-year, or a longer rally. And I mean, that would take us up to 2,600 and beyond for gold based on this quarterly pattern.

So, I mean, we're in pretty exciting territory in terms of the precious metals market coming to life. And this is what I find really exciting, is a lot of other commodities have been doing well. Oil's been doing well, and now we're starting to see the gold and silver miners just starting to turn up, and make a series of higher highs and higher lows where everything else has already done that. And everything, to me, feels like it's starting to get a little overextended. You look at copper stocks, you look at base metal miners, I mean, they've all had very big runs and they're actually hitting major resistance levels. And so, that money's eventually gonna flow out of those minors, copper miners and base metals, and those people are gonna wanna go into where the next good miner play is, and that is gonna be precious metals. So, I think they're about to kick into high gear and lead this charge.

Craig: And, buddy, I remember talking either last month or the month before, that as painful as it's been for the last 18 months to watch this consolidation, the upside is that now it's pretty clear what the levels are, so, you know, for breakouts. And if we want the generalist, you know, the kind of macro asset manager, stuff like that, you know, to start noticing that quarterly chart will get their attention. And if you could break that down, can you punch the weekly as well? Because, I mean, we talk about levels you wanna break out and all that stuff. As you know, gold's been flagging, and you can see that flag. That looks like a breakout too. On the weekly chart, what are we gonna watch here?

Chris: Yeah. The weekly chart's great. We've broken two previous standout highs. So, this was a nice standout high. We've blasted through this one here...

Craig: Little double bottom too.

Chris: ...so far. And now we're testing this next level right across these highs, these spike highs. This is a really critical level. This, to me, if we break this level... You and I talked about these, you can see them a lot better, actually, on... The daily chart kind of just shows these spikes a little bit more if we zoom back here. You can see these very clear spikes which go right through the middle of this coil, this built-up energy, right? And so, we're right now at that level. If we break this, we could see gold in only a couple days pop right up to these highs around 2085. There's a lot of energy built here that if this level is broken, which is right around 1966, you know, 1970, somewhere right there, we could see a very strong pop in expansion move in precious metals. And I think that would be the spark that is gonna trigger, I think, gold miners to really become leaders because now we're gonna be, you know, right up to all-time highs in gold potentially in only a few days or a couple of weeks, and money is gonna very quickly wanna get back on the gold train, precious metal miners, because there's ridiculous upside potential in those when they start, so.

Craig: Starts pricing with a two at the front.

Chris: Yeah. No kidding.

Craig: And, Chris, we do a lot of technical analysis. And I know some people think, you know, it's just voodoo, and hocus-pocus, and, you know, crowd analysis, and things like that. And, okay, sometimes it's more clear using hindsight, you know, as we try to extrapolate and look forward, but look at that chart. I mean, all through last summer, we were talking about putting in a bottom and all these people were talking, "Oh, no, the fed's gonna hike, and it's all transitory," and all that kind of stuff. "And gold's gonna go to 1400." Look at the double bottom at 1680 in April and March. That washout in August came right back down to 1680. That was all then part of a double bottom there at 1720 in September and... See those two?

Chris: Yup.

Craig: And now we're turning up in this clear kind of bull breakout of, you know, the bull flag, and now there's a big new cup and handle that are forming. I mean, people are gonna look back, I don't know, six months from now and go, "Wow, we sure should have seen that coming."

Chris: Yeah. A lot people...I was actually talking to quite a few people over the last couple days, and how so many people are fundamental-driven and they don't know technicals. And it was interesting, I talked to quite a few people that are just fundamental and they don't get the technical side and they don't... A lot of people don't think, you know, it's real. It can be voodoo to a lot of people. But if you're a pretty active trader and you've got the charting platforms, you can see the market depth of where all the orders and the volume levels are sitting, you can physically see that it is a technical market. I could look at a previous high and be like, "Okay, wow, there's a lot of overhead resistance at that level if it breaks it." You know? Or it's gonna find resistance there, but if it breaks it, usually, the energy it has to break it continues to the upside and you get a big move. So, you can see these technical levels if you break down the data.

The charts, I'm very visual. It's super easy to show it on the charts. But if you wanted to, like, look at the level two, look at the time in sales windows, and see what's actually happening at these critical levels, they are acting as support and resistance. So, technical, you know, it's legit. It's very powerful for identifying turning points. But it doesn't matter if you're a technical or a fundamental trader. The real money is made in managing positions, knowing how to manage your risk, when to take partial profits, where to put targets in. And, unfortunately, a good part of that, you kind of almost, in my opinion, need technical analysis to know where you should be taking targets, and where you should be putting your protective stops so you don't get shaken out too early, or it's not too far down. So, there's a fine line there.

Craig: You got to follow that trader gold rule. You can't be afraid to let your profits run, cut your losses short. Too many people cut their profits short and let their losses run, you know, and get emotional.

Chris: It's easy to do. It's the way a human brain works. Nobody wants to take a loss, but they wanna lock in profits because they're scared of losing it. It's painful.

Craig: All right. Hey, one more chart before we go. Can you pull up a silver chart? You know, we talk about, you know, all these commodities, and the base metals, and copper's going to a new all-time high as we speak, and yet here's silver just kind of doing its thing, just finally back above its 200-day. It would seem to me it's important above 25 because that's kind of been the midpoint of the range between 22 and 28 over the last year and a half. Kind of, if you dial in on maybe a daily chart, Chris, as we go through next week, and the rest of the month, what do you wanna watch as silver tries to recover, and maybe eventually break out above 28. Are there some levels that you'll be saying, "Okay, now we're making some progress."

Chris: Yeah. This level right here around 2550 is pretty important for a couple of simple rules. I use kind of a rule of kind of momentum of previous highs. So, I like to see two previous standout highs. This high clearly stands out among other highs, so does this one. And so, I always wanna see an impulse move, which is a very strong push that can bust through two resistance levels, one and then two. And so, silver has done that. And the last time you and I spoke, I mean, we were way down over here. I'm like, "There's a lot of work to be done for silver." This is the threshold. And here we are a month later, busting through that threshold as of today. It's a Friday, so this will be a weekly close. If we can close up near these highs, that's gonna be a pretty strong signal for, you know, position traders, longer-term traders because weekly chart's very powerful. But if we break this, typically the way I look at it is the depth of this pattern is usually a good indicator of how much power there's gonna be going to the upside.

And you could look at this as a W or a double bottom formation. And usually, you take the lows to the high, and you can just move that to the upside. The upside potential is somewhere, you know, up here around 2950. Now, the way I like to look at it is if there's a major standout high below that, I'll usually always opt in for a target area down here, I won't try and stretch it beyond the norm. So, you know, we are looking somewhere 2800 all the way up to 2890, somewhere in there as...if this breakout holds, you know, this thing could fly up here in a week or two. I mean, we're in that type of environment now where of precious metals, commodities are all over the place. They're having huge moves. A lot of it's news-driven. So, big gains can be taken back very quickly, and we're still in a very... Just look at this chart. It is choppy. It's noisy. If you make really quick money on a trade and it gets to resistance area, I mean, there's no harm in locking in some gains because it could be pulled right back down to this range, and trade sideways for all we know, you know, several more quarters, right?

Craig: Right.

Chris: And when it breaks out of all these highs, that's when you wanna be back long, it's fine to pay a bit higher pricing when it's breaking out and starting a major trend like this, because it's gonna have a multi-month run or potentially, you know, a year-long run. But, really, we are in this giant range that is very gnarly, can do a lot of damage. If you get to the upper-end, taking some partial gains is great. If we bust to the upside with really strong candles, you can always jump back in, get in for your investment position because this is an investing trend here that should last months, quarters, potentially will even longer.

Craig: And that's a bull flag too, you know, pull that out on the weekly chart. You know, you got the big sideways for 6 or 7 years coming out of 2013.

Chris: Oh, yeah. Let me... Yeah.

Craig: And, Chris, you know this as well as I do, silver is that classic, does nothing for years, and then all of a sudden, you get all those years' gains in like three weeks. You know, that's what happened last year.

Chris: Yeah. The quarterly charge. Yeah. The quarterly charge shows it. It's kind of, you know, meandering around and then pop.

Craig: Yeah. I mean, look at that, in 1980, look at that again in 2011, it went from 18 to 48 in a period of what, 8 months?

Chris: Yeah. Just...it's wild.

Craig: You know? Or even in 2020, it went from 18 to 29 in 3 weeks. So, if you're a trader, you know, if you're interested in buying some silver, whatever, you need to be watching here because we start breaking out of that flag and trading with a three. Man, we could start tagging on some big numbers pretty quick.

Chris: Yeah. And, you know, I've been excited about precious metals for years, and I've been stacking it, you know, every year, I build on my stack. But finally, here we are, you know, eight-plus years later, finally, we're in that phase where the environment is primed for this type of commodity play, for this type of investment to go out. I mean, to me, this is the prime time, the perfect environment for precious metals, specifically. Commodities are doing well as a whole, but I mean, really, this is the most I've been excited about precious metals in years. So, I'm pretty excited about it.

Craig: Yeah. We might be very close to a very fun time. So, we'll see where we are next month. Chris, before we go, you mentioned, if you're trying to trade and stuff, the key is to have strategy. You have somebody, you know, looking over your shoulder telling you, "Okay. But watch this level, watch that level." That's a lot of what you do with thetechnicaltraders.com. Tell everybody about it.

Chris: Sure. Yeah. At the Technical Traders, I go over the charts just like you and I are. I do that every morning for about an 8-minute to 10-minute video, cover all the key asset classes, what's happening today, what happened to an overnight trading, what we're gonna be doing today, what to look for. So, I kind of teach technical analysis every morning as we walk through the markets live. And then when I have a trade, I'll put it on, I'll share the trade with everybody else through my trade alerts. And yeah, you pretty much learn and earn at the same time. And when I cover precious metals, miners, you name it, miners have just come to the top of our best-performing asset list. We're just waiting for the final trigger to get long, and they're on the cusp of becoming probably one of the best sectors, and could have a 50%, 60% gain on the ETF, which means hundreds of percent in individual stocks. So, we cover all this. and it's very educational, and it's a great way to follow the markets, and learn at the same time.

Craig: No doubt. And I should remind everybody, you and I met because Eric Sprott told me you were his favorite. So, you got that going for you.

Chris: All right.

Craig: He thinks you're awesome. And I know he still does. So, anyway, just a big thumbs up from Eric on what you do too.

Chris: Yeah. I appreciate it.

Craig: Hey, before we go, again, just a reminder, there it is, "Sprott Money," physical metal. You must have at least some, especially just in this environment. I mean, you might need just to barter for stuff at some point. So, Sprott Money should be your go-to source. And if anything, just remember that they sponsor all this stuff. If you get quality information, you feel like you're well-served by either this podcast, or "Ask the Expert," or the "Monthly Wrap Up," or any of the stuff that we do, at least thank Sprott Money by giving them a like, maybe subscribe to whatever channel you're watching this stuff on, sign up for their newsletter right there on the sprottmoney.com site because they will then notify you every single time there's new content like this. So, at least you can thank them that way. And, of course, if you want some metal and you wanna talk to just an actual person, get that all taken care of, find out what your options are, even in an IRA. What do you call those IRAs up there in Canada?

Chris: An RRSP, registered savings account...savings plan.

Craig: Right. Can't just call it an IRA, that'd be too simple. Anyway, you know, it's tax season two. The number for Sprott Money, 888-861-0775. Again, Chris Vermeulen of the Technical Trader. Thank you, my friend. I can't wait to see where we are in April.

Chris: No kidding. Yeah. We'll see you in four weeks. All right. Take care.

Craig: All right. From all of us here at Sprott Money News at sproutmoney.com, thanks for watching. We'll see you again next month.

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About the Author

Our Ask The Expert interviewer Craig Hemke began his career in financial services in 1990 but retired in 2008 to focus on family and entrepreneurial opportunities.

Since 2010, he has been the editor and publisher of the TF Metals Report found at TFMetalsReport.com, an online community for precious metal investors.

*The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.


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