A Good Week for Precious Metals Heralds a Strong 2021 - Weekly Wrap Up

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Craig: Happy Friday from Sprott Money News at sprottmoney.com. It's Friday, December the 18th, 2020, and it's time for your weekly wrap-up. I'm your host, Craig Hemke, and joining us this week is Chris Vermeulen, of thetechnicaltraders.com, Chris now a frequent guest of the "Weekly Wrap-Up." Chris, thank you so much for spending some time with me today.

Chris: Hey, thanks for having me on the show, Craig.

Craig: I know many of you were expecting Eric today. I was as well. I last spoke with Eric earlier this week, and as many of you know, he's been dealing with some pretty significant health issues within his family. He thought he was gonna be back this week, but has unfortunately had to decline and focus on, obviously, more important things again this week. We wish Eric's family all the best. We hope he can join us again very soon. And we are, though, very fortunate to have Chris join us.

This will probably be the last Weekly Wrap-Up of the year, in that next Friday is Christmas, and the Friday after that is New Year's Day. So this may be our last one. Maybe by the first Friday in January, Eric will be back, but it's great to have Chris sit in. And again, pointing out that it is almost Christmas, if you've been saving and waiting all year for the right time to buy, well now, with just two weeks left in the year, it is the perfect time to visit sprottmoney.com for our end of year sale. We have iced the price on a number of top products until December 31st, so check out our special prices at sprottmoney.com, or of course, just give us a call, at 888-861-0775.

Chris, I've been really looking forward to speaking with you this week, because, as most folks know, it's been a very good week for the precious metals, and we look like we're finishing it strong here today. Let's start with gold. It has crawled back above its 50 day moving average. It's a good solid, at least $100 off the lows from a couple of weeks ago. We're heading into what has been typically a pretty strong seasonality trade in the end of December and then into January. How do you feel about gold at this point?

Chris: Yeah. I mean, I really like gold. The price action we've seen, where it hit $1800 and kind of washed out, more or less where price broke out back last July, so that $1750 area, there was a little consolidation back in July before gold just started that massive run, from, you know, from $1750 all the way to almost $2100. And so, that's where price dipped all the way back down. It got down to that $1800-$1750 area which, believe it or not, was a Fibonacci measured move from the August highs, and I talked about this mid-August, after we saw the knee-jerk reaction bounce from that initial drop in gold. The momentum was saying we should get down to around that $1800 mark, give or take, that should find a very significant bottom, if it gets there, don't really start to panic, because that is actually a really critical breakout point on the chart. It's also a measured move, where sentiment and momentum should carry price. And it was great, because we saw that hit a few weeks ago, and everyone was panicking, which is what creates a market bottom, when everyone gives up on it, panics out. That's when we see those shares exchange hands, to new people who are ready to hold gold for a longer time. And that's what we've seen, a strong rally the last couple weeks in gold.

And now gold, it's not in a new uptrend yet. We really need to see a break around $1920, to me, on the charts, for it to break out of this giant multi-month bull play. But overall, gold is looking primed and ready to start another major leg up, which could carry us to roughly the $2200-$2300 mark going forward, and January's typically a really good month for gold, in terms of the U.S. dollar to gold value there.

Craig: That's for sure. It's been about, actually, the last I saw, seven Januarys in a row have finished in the green, anywhere from 2% to 6%. Maybe we can make it eight in a row. You know, one thing that's got my interest is silver. Because, you know, it seemed like for most of this year, especially after QE to infinity began in March, Chris, it was gold that was rolling higher and silver was kind of dragging it's feet and languishing, and then finally rushed to catch up in the summertime. It's kind of flip-flopped here. Silver seems to be progressing a little quicker than gold. Do you see it that way?

Chris: For sure. There's no doubt. When you use, like, a relative strength strategy, which is comparing, you know, one asset to that of other assets, silver is definitely outperforming gold. It's taken the lead, and it's got a really strong chart pattern. I mean, it didn't break to lower...it didn't break the October, or the September low. It actually held its ground. Silver is now making a series of higher lows. As of yesterday, it's making a higher high as well. And we've broken a falling trend line, in a giant multi-month bull flag, which gold is still pretty far from breaking. Gold needs to get above $1920 to break that. Well, silver's busted through it, clear as day. It's trading its third day above that level, and it's above the November highs. So, silver's looking really good. It seems to be that money continues to have confidence in silver over gold. So there's a lot of people piling into the silver sector, and trying to find leverage on this play to try and make the most on the next upside leg. So, silver to me is breaking out, it's broken out, and it's been the top kind of performing metal over the last few weeks here.

Craig: Yeah, do you think, Chris, because it's kind of an industrial metal at this point, you know, when you're seeing copper is what, at eight or nine year highs, and silver has been falling relative to copper, at least it was back earlier, in November, is silver now kind of rushing to catch up in that, with the dollar selling off as much as it has, so, you know, all of a sudden, commodities in general are moving higher?

Chris: Yeah, I think so. I mean, we're obviously, people are very confident in the future, the economy, the economic future, because people are moving into, obviously, copper is a sign that people are confident there's going to be more industry, there's gonna be all kinds of growth. So we typically see copper move up, and it has been on fire. The Dow Jones Industrial Average is really picking up speed. The small cap stocks are outperforming. So, people are definitely investing in the future is going to be brighter. And silver, being pretty industrial, obviously, it should help silver, and that could be a big part of it. And I know really, right now, I know a lot of people in terms of more focused on precious metals, silver's the one that's got the most upside potential out of all these plays. And so, we're definitely seeing the aggressive investors moving into silver as well, because if silver breaks out and runs, we're gonna have a very big run that's gonna dwarf the move in gold.

So, there's definitely a few things at play. It's the better metal for gains. It also has a little bit of an industrial aspect to it, but I still see it more of a precious metal than industrial.

Craig: Yeah. All right, so then that leads us to some of these shares, because, you know, Eric and I always like to discuss the individual shares, and we'll save some of the individual names for him. But you know, it's kind of that rising tide lifts all boats, and if the shares in general are getting a bid, then your specific company's probably gonna benefit from that, whichever one you're a big fan of.

I've been following the silver miners pretty closely. In fact, on my side, I update everybody on what my puny little trades are, and I've been long some calls on this SILJ, which is an ETF of Junior Silver Miners. It sure looks interesting to me. What do you see when you look across the mining shares, the ETFs, and is there a potential they're kind of foreshadowing some of these gains in silver?

Chris: For sure. I love SILJ, because, well, first of all, I'm long it with subscribers. It, to me, is the absolute best upside potential going forward here. So, I use a strategy called BAN, Best Asset Now. It's a relative strength strategy. And going back to early November, silver miners, the SILJ, became one of the best sectors. It was showing all the signs to becoming a leader. Now, obviously, the vaccine news came out right after it broke out, and took the wind out of the sails, but SILJ, the Silver Miner Juniors, continued to hold up. It's making a series of higher lows, and just yesterday, it's making higher highs, and it's threatening to break the November highs. It's got a very strong chart. In fact, SILJ, I think two or three times this week alone, we've seen it being the best-performing sector out of all the different sectors and small industries out there. It just is absolutely killing it. And so, I really like it. It's got about 60% upside from where it is right now. If this breakout actually confirms and has the legs behind it, there's gonna be a huge run going into probably the end of January for silver miners. So it's a really good pattern going forward.

When you look at it, obviously a lot of people move into the leveraged plays around a commodity, so if we think silver is gonna go up, why would we want to get into silver that's gonna rally 25% when we can get into the leveraged play, like the miners, that are gonna go up 60% or more. So that's where the excitement comes in, and seeing these become the leaders is telling me, hey, big money is moving in. They're expecting metals... Typically, metals follow the shares. Not always, but more often than not, they do. So, if miners are outperforming, it means we're probably going to see silver outperform as well, and take off, and so that's the really exciting part here, is we keep seeing it displayed, over the last month and a half, repeatedly, that huge money keeps moving into silver miners, they're supporting the price, and the volume's really big. So there's definitely some big players moving into this sector, expecting upside.

Craig: Are you noticing that in other sectors within the mining share arena, if you will, Chris? I mean, I recorded a podcast on my site a couple days ago, and I kind of laid out, I thought the SILJ looked the best, and then the GDXJ after that, and then the GDX just still looks like bleh. Are you noticing that too? Are you noticing kind of [crosstalk 00:11:06] ?

Chris: Yeah. Yeah, they're not that exciting. I mean, there's the SGDM, which is the Sprott Gold Miner ETF. It's very similar to the other ones, and they're all in a downtrend. There's nothing really exciting about them at this point. They're not really breaking out. And that's what's exciting about the silver miners is they're leading the way.

I mean, if you go back, there's all kinds of reports that talk about relative strength strategies, all the way to the 1920s. And the results across the board, with all these different firms that have done their research is if you buy into a leading sector or a leading stock, 70% of the time, it's going to continue to outperform the rest of the broad market going forward for the next 12 months. Even if that sector falls out of favor, it's still actually still going to outperform the average.

So, that's what I like about the silver miners, is they're outperforming. You really want to be in those leaders at this point, because they're gonna continue to go up, and even if silver falls out of favor a little bit, they're still gonna outperform the S&P 500 on average. They're gonna outperform gold and silver on average. So, you just kinda gotta stick with these leaders. Gold miners just aren't quite in favor yet. They will play catch up, I have no doubt, but you really want to stick, I think, with the silver at this point, because that is where the money's going. The charts are all pointing to much higher prices.

Craig: Yeah. Yeah, I agree with you. Hey, let's look at kind of one broad picture topic before we go, and I'm referring to the dollar. It's been, the dollar index, which is always kind of this specious thing in a sense, because you're just simply measuring the dollar versus these other fiat, that are all kind of devaluing at the same rate, you know?

But regardless, we've watched the dollar just really collapse, especially since March. I'm curious to get your thoughts. We were watching at my site, the couple of weeks in a row we closed below 91, I thought, really opened the possibility to fall into the 80s, and now here we are this week. From a big picture, as we turn the corner into next year, it would probably benefit us if the dollar remained weak. It'd be some wind in our sails. Do you follow the dollar much, and what do you see?

Chris: Yeah, I do, and I talk about it quite often. When you look at the dollar index chart, like the monthly chart, and you go all the way back to the early 2000s, I mean, I feel like we're having a big breakdown like we saw in 2002, where more or less equities are kind of in this exhaustion phase, or this excess phase. Everybody's just piling into stocks. Everybody wants stocks, stocks, stocks, and real estate, and they all become overpriced. And we know all these stocks are overpriced. The PE ratios are ridiculous.

Commodities are, the commodity index, like the Bloomberg index is, you know, we're way down there at, like, decade lows or 100-year lows. It's crazy, some of these...the valuations are so out of skew, and I think we could be going into a massive dollar devaluation. I think we could see 85. I think we could see 80, and obviously, that is going to send metals through the roof, to the upside. It should, anyway. So, I'm really bearish on the dollar. I think it's gonna just continue to grind its way lower, and that's gonna definitely help the precious metals sector, and the miners, going forward.

Craig: So, as you go with best asset now, we've talked about silver and the silver miners, but I know you're looking everywhere. I mean, you look across all markets. Before we wrap up, anything else that's kind of on your mind, catching your eye?

Chris: I mean, obviously, Bitcoin's got everyone's attention. It broke the $20,000 mark. It exploded to the upside. You know, it's interesting, because Bitcoin put in this big rally over the last couple months. It came up and hit its head on that $20,000 level that it hit back in 2018, and it had this really sharp pullback in price. It was like a one day drop, and the next day, it reversed and went the opposite direction even more to the upside. But it created this topping kind of phase, this range. And I was talking with subscribers earlier this week, saying, hey, here's this top range. More or less, it was, like, $20,000 down to, like, $16,800. I said, "If you were to take that and draw a box on the chart, and then take that box and just move it up on the chart and stack it on the highs that we saw in November, on top of $20,000, the top of that box is gonna be the next key resistance area, just based on this volatility of this kind of reversal pullback that happened.

And it's interesting, because we hit that level yesterday. We hit 24,000, was about that level, and we hit that yesterday, and today, the market's pulling back, Bitcoin to $22,600, which, if you use Fibonacci extensions from the September lows to the November highs, it's hit its 0.618 target. And I use Fibonacci extension all the time. I use the 0.618 as the first resistance level, if something starts to rally, and then I use the 100% measured move. And so, this week alone, we've seen two targets, from a technical standpoint, get hit by Bitcoin, which is the $22,000 and the $24,000. And typically, what happens, if price consolidates at the 0.618 percentage level, then we almost always go up to the 100% measured move, which is $26,600 for Bitcoin. So there's still a lot of upside potential in Bitcoin. But, here's the thing. It's in new territory. It's going parabolic, meaning there's huge volume. Everyone's talking about it. It feels like everyone's chasing it again, and it could definitely spike up to $26,000. It actually could go a lot higher. We don't know how high it's going to go. There is no resistance up here. We're up in space now, so it could be an amazing ride to the upside, but the type of price action we have, it could drop 15% or 20% in a heartbeat, when you wake up in the morning.

Craig: Right. Right.

Chris: So, you just have to understand, like, I mean, it's in a raging bull market. It has no overhead resistance. It's in an uptrend. The odds are it's still gonna go higher, but just know, it is gonna be an absolute wild ride. Dumping large amounts of money, of your account, into this at this point is you are flipping a coin that one day you could lose 15% or 20%, and it could be putting in a top, and it could take years to get back, just like we saw the last time it did this in 2018. So, you gotta be really cautious trading it. If you're aggressive, this is kind of like going to the casino. It's a lot of fun. You can put an edge in your favor, but you gotta be good with your position and risk management.

Craig: Yeah. No doubt about that. Tell everybody a little bit about The Technical Traders, would you please?

Chris: Sure, yeah. So, with The Technical Traders, I provide a premarket video every day, before the opening bell, and I walk through all of these charts, gold, silver, miners, the indexes, bonds, Bitcoin. I walk through all of them and I recap on what happened yesterday, what's happening in premarket that current day, and how we expect prices to move through it that session, and then everyone can figure out how to manage any positions we have, if we think targets are gonna get hit or whatever. And then if there's any new trades, some new best asset now that we want to get positioned in, then you can go ahead and get into those. And, I mean, we're having a pretty fun time watching these best assets take off, like TAN, PBW, HAIL, which is electric EV market, I mean, all of these are up hundreds of percentage from the March lows. I mean, these best assets just continue to just go higher and higher, and it's amazing when you focus on these strategies that have been proven for about 100 years already. It feels like you're buying near the top, but these markets just keep going. Money chases momentum, and when they're a market leader, they just keep going and going, and it's a pretty exciting strategy using, following the best assets.

Craig: It is, no doubt about it, and very interesting to see those precious metals, after this consolidation phase, a lot like last year, becoming maybe those best assets again on people's radar. Maybe we'll have some fun in January.

Chris, thank you so much. Really appreciate you, on short notice, being able to sit in for Eric. It's always very valuable to speak with you. It's just been great. I want to wish you and your whole team a great holiday season.

Chris: Yeah, well thanks very much. Always a pleasure to be on the show, and have a great holiday yourself.

Craig: And from all of us at Sprott Money News and sprottmoney.com, we want to wish you all a great holiday season as well. It has been a very interesting 2020, no doubt about it, and we very much appreciate your patronage, your support, and we look forward to a great 2021.

Again, there's still time to do some holiday shopping at sprottmoney.com, and if you have any questions at all about bullion purchasing or bullion storage, just give us a call at (888) 861-0775. Thank you all for listening. Thank you Chris Vermeulen for sitting in, and we'll be with you again, first Friday in January for your next edition of the Sprott Money News "Weekly Wrap-Up." Have a great weekend, everyone.