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Today’s article will be brief. We’re still in no man’s land in Gold and Silver. However, we do have some significant levels to watch for to signal which direction they choose to go next.
We fell from a peak of 2089 in August to 1673 in March, a decline of 20%. Then we rallied to 1920 in June, a rise of 15%. This was followed by a sharp drop of 9% from 1920 to 1750 just 4 weeks later. Now, we’ve rallied to the 50-day and 200-day moving averages at 1836 and 1829 respectively.
At the risk of stating the obvious, Gold will have to break 1920, the high on June 1, and hold 1750 on any renewed downside. A break of 1920 would signal a new uptrend has begun. A break of 1750 would signal further downside, perhaps a freefall, but we’ll get to that in a moment.
Short-term, a break of 1880, the 76.4% retracement of the fall from 1920 to 1750, would be a strong bullish signal, followed by a reversal to ~1800 support, a 61.8% decline of 1880 to 1750. Then a break of 1920 to signal a test of ~2000. Through there and new record highs will likely follow.
The turn up in the MACD Line from a higher low relative to its lowest level since March 2013 is certainly encouraging, but not definitive from a bullish perspective.
There is also a clear inverse head & shoulders pattern on the chart, which is typically bullish, but based on my experience, seeing is believing with regard to those formations. A break of the neckline at 1900 (green line above), followed by a break of 1920 would confirm that this inverse H&S is in play.
1815-20 was resistance for the first half of July and is now support. A break back below 1810-1800 would signal further downside ahead. 1673, the low in March, is critical. A break of that low opens up a move down to 1600, the 1500s, and even 1400 worst-case before we bottom out in wave 2. ~1400 would represent a 76.4% retracement of the entire rally from 1167 in August 2018 to 2089 in August 2020.
In summary, there is a wall of worry to climb on the upside with multiple resistances to surpass. At the same time, we don’t want to break 1800 or 1750, but support at 1673 is critical to avoid a deeper dive.
Starting with the weekly chart for Silver, we can see it is perilously close to breaking its support trendline since July 2020. The double low in June at 25.60 is key to avoiding a drop to at least 25, and perhaps a whole lot further.
Switching to the daily chart, we can clearly see that Silver is trapped between the 100-day and 200-day moving averages.
Below 25.60, the next support level is at 23.74, the low in March. Through there and the double bottom at ~22 in September and November 2020 loom large. If we take out 22, then the absolute worst-case scenario is playing out and we’re looking at a test of ~19. With that, let’s look at the Bull case.
As long as we hold 22, a move up to 29-33 is possible. A break of the July 6th high at 26.91 would be the first bullish signal, then the 50-day moving average comes next. Above there and trendline resistance is the final hurdle at 27.80 before testing 29. Above 29, and all else is gravy before the next reversal.
While the ignorant and the trolls will say, “So it could go up or down, that’s great advice, thanks for stating the obvious”, the reality is that we have clear levels to monitor that will signal the next direction for Gold and Silver. It’s the same as coming to a crossroads in the countryside and seeing signs pointing in different directions telling you each pathway to an ultimate destination.
Ultimately, regardless of where we head in the next few months, Gold and Silver will inevitably resolve to the upside, imho. The only question is from where? Have we already bottomed or do we have a rendezvous with lower levels? Follow the signs.