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Fighting an Uphill Battle - Precious Metals Projections, September 2021

Precious Metals Projections with Chris Vermeulen

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As September kicks off in earnest, gold and silver investors prepare for a volatile month. Will it be a good time to add physical metal to your portfolio? Host Craig Hemke and analyst Chris Vermeulen of the Technical Traders break down all the gold and silver charts you need to be ready for what lies ahead.

In this edition of the Precious Metals Projections, you’ll hear:

  • What is the value of technical analysis if markets are manipulated?
  • Which metal looks stronger than gold
  • Plus: Surprising moves in the uranium market

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

Craig: Well, welcome back to the monthly precious metals projections. It's a free service from Sprott Money, "Sprott Money News". I'm your host, Craig Hemke, and joining us, as usual, is Chris Vermuelen of the Technical Traders. Chris, good to see you again.

Chris: Yeah. Thanks for having me, Craig.

Craig: It's always fun to get your insights. Here as we begin September, we certainly get into a volatile period in the precious metals. That, of course, can always lead to some dips that maybe you can buy and add some physical. So if you wanna add some physical metal, of course, always remember that Sprott Money is the sponsor of these broadcasts. You go to sprottmoney.com, great deals on physical, precious metal, but also storing that precious metal if you need to. Again, please remember Sprott Money, give us a like, maybe a subscribe on whatever channel you're listening to, and help us spread the word.

Chris it, as we record this, it's September the 7th, back on the 3rd of September on Friday, man, we were looking good. Lousy jobs report, precious metals rallied higher, and as did the mining shares, and now here on the 7th, the dollar index is now completely reversed and actually higher versus Friday. Interest rates have continued to rise and the precious metals have been completely shoved backward. Let's just kind of start with a kind of a 37,000-foot view of where we are with gold because again, we've got a pretty crummy-looking daily chart, another big red candle. What levels are you watching and is all of this, you know, to be expected almost?

Chris: Yeah. Well, let's take a look at the chart. If we want the high-level view, let's really step back and just take a look at the monthly chart so we all know kind of the pattern that we're playing in here. Now, obviously, the run we've seen since 2019 has been a beautiful rally. We're in this bull flag phase and the big question where we are right now is, is it a bull flag like this, a bull flag like this, or is it a bull flag like this? Either way, we're not gonna know until it unfolds, but right now we've got this beautiful rally up, we've got this beautiful consolidation. We had this huge week low which we'll see on the daily chart in a minute. Very major support level there and really what we're waiting for is for this gold market to eventually start to break some previous highs on the chart and then that could, you know, tip the scales to another very big rally, which is roughly $2,600 on gold.

So the 38,000-foot view here is a major bull flag pointing to a very big run looking forward probably over the next one to three years. You never know how long this stuff is gonna take to play out, but let's jump down to the daily chart and take a look. Friday was a really positive day for gold and miners in silver. And really we saw this huge pop, which was a pretty nice move. You see this nice rally up, trades sideways in a tight, little bull flag. We have second half of that move measured out. But as you and I talked about just before we started recording here, it's a pretty major resistance level on this chart. And I was telling subscribers on Friday when that came out in pre-market, I said, "Listen, guys, as exciting as this is, this is a move based on news, and it's running it up into a major resistance that each time it's got here, we've seen a big reversal in the market to the downside."

And so, really, pretty clear that level on this chart, even over here, it consolidated through here. So I'm not surprised to see a news-based pop-into resistance get sold off today and maybe we're gonna actually go a little bit lower. And last time you and I talked, we were referring to this, the spike low that we had just seen on the charts and we said over the next month or so, we could start to see gold come back down and test this level much like it did over here when it flushed out, it bounced for a while, came back to retest that, we could very easily see gold work itself back down. Maybe it's not gonna go all the way down to 1,680. Maybe it's gonna come down to the 1,700 mark or somewhere down over here, but definitely, the charts have reversed and we're still kind of in this downtrend across the board for precious metals that we could see this work itself lower over the next little bit. So that's kind of my view on gold here.

Craig: Chris, I might take this opportunity to answer one of the questions that came in this week because I get a lot of my TF Metals Report site. And that is what is the value of technical analysis if the markets are manipulated? Well, we'll let the listener or the whoever is sending that message answer to themselves, whether the markets are manipulated or not. That's one of the things I've based my work on at TF Metals Report, we call it manipulation analysis. I'll let you answer this in a second, but you just showed how gold went up to 1,836. That's a key level for making now a kind of a higher high and that's precisely where price stopped on Friday. The 50-day moving average in December gold on Friday was 2,494. That's precisely where the silver rally stopped on Friday. So if you think the markets are manipulated, you ask yourself, "Well by whom?" If you think there's selling that comes in at certain points, you ask yourself, "By whom?" And then maybe technical analysis can actually be helpful if you can anticipate where those sellers might try to cap price. Anyway, that's my long answer. What's your answer? I'll just let you give your answer.

Chris: Yeah. I think almost everything in this world is manipulated. It could be from ice skating judges to, you know, UFC fighting where, you know, we watch these games where clearly one guy won but he was the underdog. He looked like he had the upper advantage but the guy with the big brand name, because he was so close, gets the win. I mean, everything's manipulated. We all know, I think, that financial markets are manipulated even more just because it has to do with money. If people can make more money by lying and cheating and trying to play games in the markets, I mean, it's gonna happen, but it's always been there. We're not really... Technical analysis, you know, it doesn't fail just because there's manipulation. I think manipulation is really what creates technical analysis probably to be as good as it is because it's playing off emotions, extreme emotions of traders and investors and it's taking advantage of them and it's pushing prices to the extreme, whether it's a news-based pop like on Friday, right up into resistance and then it reverses and gets crushed today. That, to me, is kind of almost like manipulation. But it creates these opportunities. It creates these standout highs, these standout lows, these reversal points.

So, I mean, there's no way to really gauge manipulation when it's gonna happen, but the charts over the long run sometimes, you know, you might get manipulated out of a trade, but I think the markets, in general, are manipulating everyone, even a technical analysts are manipulating. You just have to follow the price and stick with, you know, proven kind of strategies and analysis to get a feel of what is the underlying trend? You wanna always be in line with that, right? So if it's down for precious metals right now, you don't really wanna be fighting it just yet. When it does turn around, it's gonna be exciting. But until then, you're fighting an uphill battle, so.

Craig: And, you know, sometimes it can help in that... And what I mean by that is you got that smash that you just mentioned back on Sunday night, August the 8th and it bounced and concluded right at that 1,680 level, which is exactly that double bottom from back in March. Well, now we know, given because of that smash, which really didn't affect anything, as long as you weren't selling your physical metal that Sunday night, now we know how important 1,680 is, right? So that can give us a signpost going forward if that, you know, fails to hold if we go back down there or whatever. Now you also know how important something like 1,836, 1,837 is as well. So it gives us at least some signposts, you know, that are pretty clear now that we can watch.

Chris: Yeah.

Craig: So, Chris, let's move on. I mentioned silver. You know, a lot of folks were waiting for... You know, we've been kind of flagging on that monthly chart now for better part of a year. I think I mentioned this to you before. Let me start you with this then you can get into the daily. You know, silver, as you can see on Chris's chart, spent the better part of at least six years between '14 and '18. You go back even further and maybe call it seven years between '14 and '20, then you get this pop over a period of about 3 weeks last year that now establishes new range between 22 and 28, how, I guess with hindsight, how unsurprising is that given the duration of the range that preceded the pop?

Chris: Yeah. I mean, you look at this range from the high down to this low. I mean, silver's obviously been very range-bound, obviously, the odd little peak through there, but it's trading in this nice base. If we were to... It'd be interesting to see if this kind of range is roughly the same. Usually whatever the pattern is, the breakout, usually the next one is roughly the same. So you can see from the high to the low, the range was very similar in the pre kind of pop to a bull market rally. So, I mean, everything here to me is fairly weighted. I mean, in terms of a bull flag pattern, we definitely should see silver start to move up sooner than later. It's starting to get a little long. But, overall, I mean, this is a very strong pattern. I would argue it's stronger than gold simply because it hasn't been flagging down.

It's actually been kind of trading in a sideways base. And I think eventually when it breaks, it's gonna have a huge move probably much more than a measured move just because it has so much speculative traders in there, it's a fast mover. It always seems to overshoot and run its targets. So I really like silver lot. It's holding up very well, a lot better than gold and when it does pop and run, it's gonna have a pretty big move. But I mean, we just have to wait for that. We've seen a couple of fake-outs and really, it's just range-bound, the same as gold in that kind of regard.

Craig: Twenty-two looked like a rather important support level. I mean, that was the double bottom from September and November of last year and then we kind of got near there, not all the way down there, back on August the 8th. Does that look like a pretty important level?

Chris: Yeah. These, I think, are really... This is a pretty clean line on the chart of if that level is broken, things could get pretty ugly. Like silver's, you know, very clearly in a downtrend over the last several months here, stuck under the 50-day moving average. Each time we've hit that 50-day, you can see...

Craig: Like Friday.

Chris: It sold down, sold off, sold off. Here was another big pop and it's selling off again. Hopefully, we see a bottom get put in the metals market, but again, I think we could see them potentially drift down, maybe come back down to this 23 area which would be perfectly fine. Eventually, this is gonna build a base. We're gonna see gold and silver and miners start to move higher. But right now they're kind of in this early stage of trying to create a bottom. Are they gonna come back down for a test or another test? We're not sure yet, but I think the low has been put in for them and now it's just a matter of time of letting them really just play out, what are they gonna do before they start to, to hook to the upside and break out?

Craig: Well, it'd be interesting to see where this month plays out. You know, Friday was all about a lousy jobs report and made people think that any taper plan from the fed is off the table. Just a reminder, that next FOMC meeting begins two weeks from today as we record this on whatever that is, the 22nd? Today's the 8th, I think, 7th? I can't keep track. It's 7th, I guess, 21st. So anyway, two weeks, Tuesday and Wednesday, 21st and 22nd will be the next step FOMC and we'll see what kind of action we get out of the metals between now and then. Let's look quickly at the shares, Chris. They're tracking again a lot like silver. Down, can't seem to get out of their own way. Pinned below the 50-day moving average. That 31 to 31.25 level sure seems to be pretty important on the GDX. What are your thoughts on the shares in general?

Chris: Sure. Yeah. I feel as though, again, the precious metals market's trying to carve out a bottom. I feel like this type of low is very similar to this. This rebound up is kind of this rebound up and I think we're gonna see the market try and trade sideways here. I think most of the downside for gold is over. I think it's just a matter of putting in some time and then it's gonna start to kick into an uptrend and move forward. What's interesting is you and I are talking today, but, you know, we see bonds are down sharply. We're seeing precious metals and miners down, so there's definitely money moving away from the defensive plays and it'll be interesting to see if money starts piling into the stock market or not going forward. And maybe these are gonna be a little bit more dormant for a bit before they actually rally, but I mean, obviously, the gold miners have hit a significant support level just like gold and silver. So we just need to see all of them form a base over the next couple of weeks potentially over the next month or two and then when they start to break from that pattern, whether they break down or break to the upside, then we're gonna get a gauge of, you know, how it needs to be attacked and traded. But right now it's, they're in a downtrend near support and we just need to see if they're gonna start to reverse and go higher. Or if this downtrend continues to kind of bleed out and go lower or not.

Craig: You know, the GDX, it has looked to me like, again, you got those moving averages that needs to eclipse. Man, anything above 35 would certainly seem to get a lot of people's attention, wouldn't it?

Chris: Yeah. I think that would be a pretty strong move. When you look at the charts, 35 would obviously it would break this high or this internal high and all of these highs over here and that would definitely be a nice impulse wave, and then potentially it flags down for a bit and then you get that second measured move up to the 40, you break 40, I mean, it's off to the races after that. So there's a lot of work to be done, but I mean, it's gonna have to do one of these where it's gonna rally up, pull back, and then it's gonna have like its first real big impulse wave where it has to break either kind of like an internal standout high and an external. Once it's broke, broken two highs, it doesn't matter if it's two here or two back here, once it's broken two of those, I consider that like an impulse move to the upside. And that didn't happen on GDX.

We broke here. Really, once we start to break above, we broke kind of these two highs were the same, but you broke this one and you could argue both of these are kind of the same. Once we had this move up and broke through two different highs, the first pause or pullback can be bought, and then you can usually get the second half of that move. So we really do need to see like gold miners have a big push to the upside. They need to break this high. Along the way up, we might have like an internal high where it comes down and then rallies and that'll be one high, two highs that it's broken. And once you've broken two previous highs, I consider that the momentum has shifted. It's just busting through resistance levels. You're good to go. But if you've only broken one resistance area, it might stall out on the second one. The momentum probably hasn't fully shifted yet.

Craig: Yep. Yep. But, again, you know, like we always say, Chris, you know, no trend goes to zero on the downside, nothing goes to infinity on the upside. They can continue a lot longer than you'd like and certainly end up pulling your hair out, but eventually, these trends will change. Let's conclude with something we don't usually discuss but I thought it might be of interest to several people that watch. The uranium market has been just going like crazy lately. You know, it was dead money for about 10 years after Fukushima. It's hard to you... You certainly can't trade it. It's a hard thing to even find prices on because it's kind of these negotiated prices at spot. However, you can see price changes reflected in uranium mining stocks and things like that. Sprott Inc. has made a really big move in their uranium mark, and that's probably part of, and that's been driving it in as of late, buying a uranium trust and taking some dollars and actually putting into physical uranium because they're such big believers. And, again, that's Sprott Inc. that is doing that. But as led now, I've just seen even just the last few days, all kinds of people who probably can't even spell uranium talking about how excited they are. You know, this would be fun to talk about, Chris, but I suspect it probably comes with a little bit of a warning as well. Let's finish with uranium. What do you think?

Chris: Sure. Well, as, you know, commodities, some commodities can go dormant for a decade, right? I mean, precious metals market was dormant for almost that. And this could be one of those really exciting cases where it does go out of favor and nobody cares about it, nobody thinks about it, and finally just completely falls off the radar and then out of nowhere, it starts to come back to life. If we were to zoom in a little bit, you can kind of see where there's this kind of blue line across this chart. We had a real standout high over here. You could argue we had another standout high over here, plus it kind of acted as a bit of a support level and you can see all prices. Now, finally, years later, coming back to life, it's pushed up through those levels, it's had a pullback, and now it's, you know, it's really starting to take off. From this monthly chart perspective, really it could just be starting some crazy new supercycle to the upside. So I mean, who knows where the upside potential is? But when you look at it, you know, from a more granular level, we drop down to the daily chart, it could be a little bit overstretched. And the way I like to look at a price action like this, this is kind of a signature pattern of like a bubble, everyone's chasing it at the same time, media's getting in.

And the way I see that on the chart is when price starts to rally and then you get a gap and a rally, another gap, rally, and the gaps get bigger, the rallies get bigger, and volume starts to skyrocket because now it's like headline media news, everyone's talking about it just like you said, this is kind of the crowded trade move right here. And who knows, maybe it's gonna blow off real quick up to 27 or higher. Like you never know where a top is in a parabolic kind of bubble phase, but all of the signatures are here now that it could rally, and then when it reverses, it's gonna give back most of that in fizzle out. Not saying this supercycle rallies over, I'm just saying this short-term move has got everyone chasing it, they're overdriving the price up, and then any pause or pullback, to me, could be a very good opportunity. Obviously, this down here would have been amazing based on the big pattern we looked at. Let me just rescale this. Huge run, it pulls back, and then it starts to break out, breaks a high, breaks a high. And so that's where right where it got its key momentum and now it's just like surging and breaking to all-time highs. I mean, it's just starting what looks to be a multi-year potential supercycle in this little pocket of stock. So I think you might be able to get a better price and maybe not roll a rollercoaster and it might come down and fade for a week or two or maybe just a few days, but I think it's like nosebleed section short term just because the volume typically when something goes straight up on massive volume, it's gonna come straight back down and then take a little bit to digest. So that's from the granular level. I'd be very cautious here over the next few days.

Craig: Yeah. And tends to exhaust itself after, you know, in the short-term. So, you know, if anything, you know, stockbroker in me kind of looks at that and goes, "Okay. If I believe the longer term, you know, the green energy idea, you know, getting uranium back in favor and that long-term monthly charter of yours, certainly looks like it. You know, what you do? You average. You know, you don't on a Tuesday morning because you saw something on Twitter, an article someplace just go plunging in. You look for dips, you know, and you look for ways to average and maybe that's what that short-term picture is all about too.

Chris: Yeah. Exactly. I mean, this looks like pretty major pattern starting to break out. So I think it's definitely a speculative play, but the thing is it's been out favor since what, 20...well, really it's been out of favor since 2011, at least, just the CTF. And no one ever really talks about it. So if it starts to come back to life even more, it's gonna get more attention and it just could be...it could be one of the hottest pockets, really. They're so thinly-traded, they can run and move so fast, and then suddenly it's gonna kind of be like the marijuana stocks, I think. Everyone, I think, wanted to get into them because who doesn't wanna, you know, make money selling drugs? It seems like it's easy money. Everybody's like, "I wanna get into the whole drug side." Which kind of didn't work out for a lot of people, but I think the same thing's gonna happen with uranium potentially that people would be like, "Whoa, uranium. Like we haven't heard of that forever." Right? And they're gonna be like, "You know what? I'm gonna buy some of those. It sounds cool." It's just one of those things that sounds so out left field. It sounds cool, interesting, it's got potential for hundreds, if not, you know, thousand-plus percent of return on some of these stocks. I mean, it's naturally gonna gravitate and people are gonna chase it higher, so it looks interesting.

Craig: Yeah. What's that symbol we're looking at there, Chris?

Chris: URA.

Craig: URA. Awesome. You know, and I just relate this back to precious metals because I'm sure everybody looks at that chart and they see silver in that chart too, right. Crashing down, going sideways, and dormant forever and just getting rolling, which is what we just started doing last year, you know, and you begin to project forward. And, again, money gets hot and people start jumping on the momentum train, but you got to get some breakouts first. And I mean, yet to break out of that consolidation yet, but you can sure see similarities and how quickly silver can move as well once it gets going.

Chris: Yeah. For sure. We're in a commodity bull market. I mean, they've been so undervalued compared to real estate and stocks. It's their time to shine. And they are there. They've got the patterns, it's just a matter of time. These are big multi-year patterns. So it's pretty exciting. If you've got precious metals, especially physicals, I mean, that to me is like kind of the ultimate safe-haven play. Who knows what the currencies are gonna do? Who knows how big metals are gonna pop, but anything related to commodities, commodity stocks, so uranium, gold miners, silver metals miners, there's a lot of potential once it does turn this corner.

Craig: Yeah. And, again, if you want some physical metal, contact Sprott Money. They're the ones that bring you all of this great information, whether it's the ask the experts, the weekly wrap-ups, the monthly wrap-ups, or these technical analysis videos with the great Christopher Vermuelen. Thank Sprott Money by giving them either a subscribe or a like on whichever channel that you're watching. That helps us spread the word, but also, I mean, stop by Sprott Money any time you're in the market, compare prices. Look, if you're looking for a place to store metal as well, international storage available too. So again, sprottmoney.com or 888-861-0775. Chris, it's gonna be a crazy month with this FOMC meeting that's pending and everybody back to work and we start turning the corner toward the fourth quarter. I look forward to visiting with you again next month. I'd be curious to see how the charts look then.

Chris: Yeah. Sounds great, Craig. Looking forward to it.

Thanks for everything, Chris. And from all of us at "Sprott Money News" and sprottmoney.com, thanks for watching. We'll see you again in October.

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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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