Blue Skies Ahead for Precious Metals - Precious Metals Projections, June 2021

Craig: Welcome back to the June edition of ''The Precious Metals Projections'' podcast brought to you by Sprott Money and Sprott Money News. I'm your host, Craig Hemke, and in this series, we always welcome Chris Vermeulen of thetechnicaltraders.com. Chris, one of Eric Sprott's favorite technical analysts and so is it always a pleasure to get the chance to visit with him and see what he's seeing every month. Chris, thanks for sitting in again this month.

Chris: Yeah, thanks for having me, Craig.

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Chris, it is time to just dive right in and get after it. I know we've been watching a couple of larger trends these last couple of months, gold coming off of what was a clear double bottom opportunity in March. Gosh, we've rallied almost $100 in April, another $100 in May. As we wrap up May, man, some of the long-term charts look pretty good. Why don't we start there and you can tell everybody what you're seeing?

Chris: Sure. Sounds good. Well, let me jump onto the charts here and we'll just recap over the monthly charts because they really paint a really good picture. So, this is the monthly chart of gold going back to roughly 2000 in time. And obviously, the monthly chart is what we're really focusing on in this video is the monthly outlook, what we're expecting throughout the month and what kind of signals. And really this month or actually May was a very good close for gold. It's also today as we'll touch on in a few minutes is really good for gold miners.

But when we look at this monthly chart, if we take a look at gold, there's a lot of really good things going on here. Now, if we were to just take a look at the overall pattern that we've seen in the last couple of years, we've seen a very strong rally in gold, it's formed this beautiful bull flag pattern, which as we know, a bull flag pattern is usually a halfway point meaning it's going to continue higher for a pretty extended move to the upside. And if we were to just zoom in on this monthly chart, if we just draw a trend line across these highs, you can see just across these highs here, there's nice A, B, C, a three-wave correction, which is what cleanses the market, typically resets it.

Well, May we closed above this trend line. So that is a huge turning point potentially for gold. So, this month, you know, technically we are kind of back into an uptrend, a bull phase for gold, and we could potentially see this go a lot higher. Now, if we were to zoom out and just compare this to where we are on previous times in gold, this type of kind of a pullback we've seen over and over again, eventually we saw gold breakout and create a little bit of a pullback here and then it kind of flags sideways. A little bit of a cup and handle pattern you could argue. And then it had a huge run to the upside.

And so, where we are right here is very similar to this scenario right here. Now, after it had another run, a little bit of a pullback and a bull flag, again, we are right here in this kind of infancy stage. We're equivalent to this type of stage. We're equivalent to this. And technically, we are equivalent to this. We can't rule out that it could potentially fall over. I mean, as optimistic as we are and we want it to go higher, there is potential it breaks, you know, it's broken and falling trend line, just like over here. There is potential at stalls and rolls over, and that's where position management comes into place. But we are in these type of scenarios where it is just starting to break out on the monthly chart, a big pattern, and is pointing to dramatically higher prices for gold. So, that's what's really exciting is we've got a monthly breakout, a new trend to the upside in gold.

Craig: Hey, Chris, I wanna point out something to you too as I look at that. We made a new all-time high last summer, right?

Chris: Yep.

Craig: And then this seven-month consolidation in that ABC pattern that you said, hold on, don't go too far, go back to show where we were. I want to draw your attention and everybody else's attention to the period around the great financial crisis of 2008 and 2009. Because in early 2008, price had broken out to a new all-time high and gotten briefly above $1,000 an ounce. That sure looks to me like the same kind of flag ABC down, and then an explosion higher. That, I mean, isn't that almost identical?

Chris: It is. I mean, and really, we did have a...it wasn't a financial crisis, but it was a global crisis. A crisis is a crisis. When the stock market crashes, it crashes. Every time there's a bear market or crash, it's for some different reason generally. We never know what it is, but you're right. I mean, I never really thought of it. It really is exactly that type of scenario. We went into a crisis both times, we're coming out the other side of it. And I mean, if that's the case, let's just draw on this chart real quick, this gold chart, where is the upside target here.

Based on this monthly chart, we've got a low, we've got this high, and then we've got this low over here. And again, you know, nothing has changed from our last prediction because this is a monthly chart, but we're looking for 2,600, you know, over the next one to two years in gold. And who knows how quickly you can get there? Maybe it's gonna take its sweet time, who knows? But, you know, nothing's changed. To me, we're a lot closer now to heading towards that hitting all-time highs and gold than we were, you know, a month or two ago, because we were still in this very strong downtrend. So, this is really exciting. It was a big turning month May. And, you know, it looks like blue skies ahead, which is really exciting.

Craig: How does silver look to you?

Chris: Sure. Yeah, let's pull that up. Take a look at the silver chart. The silver is in a similar scenario. I'll just quickly sketch it on the chart here. So it's got this big bull flag consolidation after being in a big pullback and more or less there's a pretty critical line across here, which acted as support. And then we're under it and we're stuck under it as resistance now, but we are in this kind of launchpad phase where it can explode and very easily go back up into the mid-40s.

The scenario that we're at right now is actually very similar to this type of scenario, just like we saw in gold. It has a pullback, goes into a little bit of a bear market, kind of takes a while flags out and then pops. Pulls back, goes neutral, creates a bull flag, and then pops. Pulls back, bull flag, and then pops. This one was obviously an explosion to the upside, but that's the type of scenario we're at right now.

Again, we've got a falling trend line across over here. There was a breakout which ended up being a false breakout. But I think the scenario is a little different back then. I think we are coming fresh into a new scenario something more like one of these, not so much a full-blown mature cycle that, you know, has already had a blow-off top. I think we're at the infancy stage of precious metals going a lot higher here. So, I really like silver. Obviously, we're at a really clean resistance area through this $30 area more or less $28, $30 area. But upside potential is pretty explosive from where we are.

Craig: Hey, Chris, one of the questions we had this month, and again, you can send any question you'd like to the email address of the word submissions, submissions@sprottmoney.com. One of the questions we got this month was about seasonality and how the precious metals seem to typically trade higher during certain months and lower during certain months. Maybe some of that has to do with, you know, Indian wedding season, that sort of thing. How much do you factor seasonality in your analysis?

Chris: So, yeah, I don't take seasonality at all into the factors. Maybe if I'm like doing some short-term swing trading or something more active, you might look into it, but really it still comes down to technicals. I need to see moving in favor. I'm not trying to pick a bottom hoping, you know, the second week in June is really strong. I'm just pulling that out of a hat, but I don't really use it for trading. It is interesting to know what times or what portions of each month or what month, in general, are strong or weak for gold. It just gives you a little more confidence in what to expect going forward. But other than that, that's about it. It's just interesting information. It doesn't affect the trading that I do.

Craig: Okay. Hey, two other charts like to have you take a look at Chris. It's gonna be a really busy month with the FOMC, right? Boy, big news before we meet again in July. So one of the things I'm watching on a daily basis obviously is the dollar index because so many computers that trade gold and silver are obviously programmed to follow in virtually moves and the dollar index. It's been a really sharp move down from being really overbought. At the end of March and a trend line has contained it now for two full months, but you know not all trends go...trend never go on forever I should say. What do you see just short-term in the dollar as we approach at FOMC meeting because that might impact how the metals trade over the next couple of weeks?

Chris: Yeah. Well, I've been talking with the subscribers for a couple of weeks here saying the dollar's reached a level where it's at a long-term support zone. It's overextended, it's starting to show signs of volatility, where we're having big updates. It's really hard to see this chart, but there's big updates and big down days, it's chopping around. That's usually the sign that it's exhausted selling off. It's usually gonna have some type of pop and bounce.

Where we are right now, May, June, it feels very similar to like December of last year. And then somewhere over here in August of last year, it just feels like we're into this choppy stage. It's becoming unstable. I think we're gonna get a pop and a bounce in the dollar. And I've been talking about it with subscribers saying, listen, I think we're gonna get a bounce in the dollar. We're seeing gold come up and test some short-term resistance areas on the daily chart.

I think we could see gold, maybe squeeze a little bit higher, but overall I think we're gonna see precious metals actually have a little bit of a pullback or pause still from here before they go a whole lot higher. And I think that pause could last a month or two, believe it or not, before that happens because a dollar typically is going to have some type of multi-balance, kind of balance and rally. And that'll just put a little bit of pressure on metals, but who knows? We have seen gold and the dollar move up together a lot more than we used to. So, I mean, there is still a lot of fear, people are worried about what's going on. So it'll be interesting, but I do feel like the dollar is trying to put in a bottom here.

Craig: Okay, Chris, hey, just one more thing I wanted to ask you about. We've had a tremendous run, not only in the silver miners but in the gold miners too. In fact, it almost seems as if they've been leading the metals higher a little bit for launch. The GDX as a proxy for, I guess, the major producing gold miners has a rather interesting look on its daily chart. You know, it's come down quite a bit from the highest last summer, but it bounced off the support and it actually looks a lot like that cup and handle you showed us on the monthly chart of gold. What do you see in the GDX and what maybe do you project going forward?

Chris: Yeah. Well, definitely GDX, this is a big turning point, I think for the precious metal sector, gold breaking out on the monthly chart to a new kind of bull market, a new breakout. And when we look at GDX the large caps, we've got two moving averages on here. We've got the 50-day, which is the blue line, and we've got the 200-day. And as we know, I'll just load a bit more data here. The key here is that when price is below the 50-day and the 200-day and the 200-day is below, sorry, the 50-day is below the 200-day, this puts us in kind of bear market downtrend territory. And once we start to see that turn back up, we get a bearish cross over here.

Now, we've got gold in a bullish cross over here. And when that happens as the 50-day crossing above the 200-day, plus the price of the asset is above both of those, that means we are back in a bull market phase. And when you look at the price action, obviously, metal miners have been down for several months, but now they're above all those. They're making a series of higher lows, higher highs, and it's flagging out in this really strong bullish pattern here, which is pointing to a dramatic move higher that could happen really in the next one or two weeks. It's primed and ready to have a strong bounce. If we can just map this out, it's a high momentum play that could bring us all the way up to $44 a share, which happens to be right up to these previous highs before it put in a top.

So that is the next potential run for GDX and it's primed and ready. It can explode any day right now. It has been holding up and doing very well. It's kind of starting to pick up and become a leader, and that's the next upside target. So I really like it. It's as of today, it's crossed into bull market territory, and it's got a bull flag, a breakout here should bring it up to $44 a share.

Craig: And how about that weekly chart? How does that look to you?

Chris: Yeah, let's take a look. Oops. Weekly chart. Here we go. So, the weekly chart, obviously a little bit noisy. On the weekly chart, it looks like we're a little overextended to the upside. It looks like we've definitely had a strong run. It has paused here for two weeks. But again, weekly charts, I mean, this can just continue to muscle all the way back up. And then when it gets to this level, that's gonna be really critical of how it reacts up there.

Is it gonna get rejected and come back down and trade, you know, potentially back down into this area? Is it gonna form a tight bull flag pattern up here or flag down a little bit and then, and then muscles its way and break out to go to new highs? We'll just have to see how it reacts when it hits that level. Because where we're coming to is gonna be something similar to this where we had a previous standout high, eventually when it got close to there, sellers stepped back in, eventually, it gapped above it and then just got crushed. And that's the same type of thing we'll get up here.

The big question is when it gets up there, does it get crushed and come back down or is it gonna hold its ground? And everyone keeps piling into the precious metal sector and drives these stocks higher. And I do think they're gonna perform very well. They typically come to life when the stock market, in general, I think is kind of on that last kind of run higher, which is where I feel the stock market is. So this is kind of the perfect scenario for miners.

I mean, the weekly chart doesn't give a whole lot of insight. The daily chart definitely does. And the monthly chart is similar to gold in that it's breaking out of...sorry, let me go to the monthly chart here. The monthly chart is breaking out of this bull flag. It's had a very strong kind of run to the upside. And in the grand scheme of things on the monthly chart, this thing looks like it could go much higher. In fact, we can quickly draw on the monthly chart where this could go. It's showing $60 a share based on the monthly chart pattern. And that brings us back up to those highs we saw in 2011, 2012. So, the weekly chart is kind of stuck in the middle, the daily showing bullish short-term, the monthly showing bullish long-term. And with two of them, you know, in favor, it definitely paints a good picture for higher prices.

Craig: Well, you know, and if the shares are gonna break out to the upside, you can only imagine what the metals might be doing at the same time. It's gonna be a really volatile month obviously, Chris. What do you...anything else on your mind, I guess, is what I wanted to ask you? Are you watching the bond market or what's your best asset now?

Chris: Yeah, so the best asset now really, I think is still the energy, the oil energy sector. We're seeing crude oil break to new highs or multi-year highs anyway. The energy sector stocks have been doing very well. They were leading, you know, late last year, early this year, they were under some pressure, but, overall, with crude oil starting to break out coming into the summer season, I think we're to continue to see kind of upward pressure on oil, which is great for the energy sector. Those are definitely ones that are gonna be performing well.

The precious metals sector has gone from the bottom of the best asset now list and it's almost into the top 10 sectors, which is what I focus on or just the top 10. So it's pretty exciting to see SILJ, GDX, GDXJ getting up there in that power zone where they're just gonna kind of take over and really kind of rocket higher. So that's really about it. I mean, at this point, we just gotta let this market continue to mature. Right now, we're sitting in cash, waiting for the stock market to tell us what it's gonna do next. We've got mixed signals across the board. So we're just primed and ready when we get a new buy signal, it could be miners, it could be energy. I mean, we invest in the top three sectors. So, whatever they are at that time will be the three that we move into and we'll just take it down to one bar at a time.

Craig: And your ongoing analysis can be found at thetechnicaltraders.com?

Chris: Yes.

Craig: What else do people find there, Chris?

Chris: Sure. Yeah, every morning subscribers get a morning video. I walk them through kind of what you and I did, but I cover a whole bunch of different sectors and assets, bonds, and utilities, things like that. And they can just follow along. And anytime I put on a trade and using the band strategy, I send out an alert, we all trade them together and we just kind of watch and trade this market together, pretty straightforward.

Craig: Great stuff, Chris. We really appreciate your insights. And again, everybody, if you appreciate Chris's insights, make sure you check out thetechnicaltraders.com. And if you appreciate this information, give us a like, maybe a subscribe to whatever channel you follow us on. And again, always remember when you're in the market for physical precious metal or storing that metal, sprottmoney.com needs to get your consideration. You go to the website and you'll see all the products and all the details there, but you can always pick up the phone, 888-861-0775. Christopher Vermeulen, thank you so much. This is always something I look forward to every month. And I'm sure looking forward to seeing where we are by next month when we do this again.

Chris: No kidding. Yeah. Well, thanks for having me, Craig. Take care.

Craig: And from all of us at Sprott Money News and sprottmoney.com, thanks for watching. We'll have another one of these Precious Metals Projections for your next month.