Craig: Welcome back to the "Sprott Money News," precious metals projection show. This is for December 2021. I'm your host, Craig Hemke. And joining us again this month is Chris Vermeulen of the technicaltraders.com. Chris, thanks for spending some time with me again. Good to see you.
Chris: Yeah. Thanks for having me, Craig. Always a pleasure.
Craig: And this is always great fun. Again, this is just part of the content that you get from Sprott Money for free on a regular basis. We've got this show, we've got the weekly and monthly wrap-ups, we've got the Ask the Experts segment. And so I just wanna remind everybody, this does come to you from Sprott Money. So, please, thank them by keeping them in mind anytime you're in the market for physical precious metal or perhaps even precious metal storage. There's a website for it, very easy to go to, just sprottmoney.com. There's even their holiday gift guide, if you're looking to maybe start some children or grandchildren on the process of owning sound money. If you're a Canadian citizen, you can still access the holiday gift guide through Thursday, the 15th of December. But there are still other great deals at Sprott Money. Again, you can store metal there too. And while you're there, sign up for the Sprott Money newsletter so that you never miss any of the content. And there's some content coming later this week that you wanna make sure you do not miss. If you get my drift, we'll have something new for you on Friday as well.
But again, this is the show that we do every month with Chris. We take a technical look at the markets. I can tell you, Chris is Eric's Sprott favorite technical analyst and mentions him highly all the time. And so it's always great to get his opinion. Chris, as we dive right in, it has been a funky month. Gold and silver bull shot up on inflation data here in the U.S. Gold rally $100, silver rally 10%. And then they both just fell backward and now a month later, they haven't moved at all. So, I thought maybe what would be fun is let's talk, you know, here at the end of the year about the longer-term charts, you know, begin to wrap up and put this year behind us, but then look ahead and see what the longer-term charts are telling you. I see you've got a monthly chart of gold pulled up there. I'll let you take it away and tell me what you see.
Chris: Sure, yeah. Well, when we look at the whole year, we look back on the year, you know, for precious metal traders, a lot of people I think are feeling a little beat up, really, they've been trading kind of sideways and lower all year. It doesn't matter what metals you're in or minor, they're just been struggling. But the grand scheme of things, when we look at this big chart, we're gonna look at it from a few different angles here. If we were to just take a look at recent rallies from the '70s where it topped out here, and then gold went into this multi-year basing formation. This is extremely long-basing formation, which commodities can do. Commodities tend to have some of the longest basing formations that happen. But eventually, we saw a run-up and we saw gold hit a new high. It broke this high over here. And then we went into a kind of what you could argue here as a cup and handle formation or this is a big bull flag pattern. And we have the 2008 crisis right here.
Well, after that, that is known as a bull flag pattern. That is...it should resolve to the upside, and it did. It ended up rallying all the way up to the 2011 highs at which point it finally stalled out and we have seen it correct from there. Now, what we're seeing here recently since 2011 is we've seen a multi-year basing formation. It finally broke out. We broke into new highs breaking this previous high, very similar to what we did back over here. And now we've got the COVID crisis. And we've got a bull flag pattern. So, this is a very strong pattern. This is a bull flag pattern that points to dramatically higher prices. So, while this year felt like the last year of precious metals and it should have gone through the roof, really it's building up energy for what I think is gonna be a very powerful leg to the upside.
So, when you look at it from a chart pattern standpoint, this is a really strong pattern pointing to higher prices. And we can use some technical analysis like Fibonacci retracement, Fibonacci extensions to figure out exactly where, you know, gold should go next. For example, if we were to measure where these lows are here in gold before it started the massive bull market, it rallied all the way up to the highs and we can carry it over. And gold or anything usually retraces back 0.38% or generally around 50% of the rally that it had. So, it rally from the lows up and it pulled back into this kind of sweet spot. I consider this the sweet spot between 50 and 38. If it goes down to 61, I tend to get a little squirmy because it's kind of lost a lot of its upward momentum. So, this was a very strong or a healthy pullback, I guess I would say. And now it's rallied up and we've got this new kind of bull flag going forward. So, if we were to just kind of remove that and look at two different projections of where gold is going.
Craig: Let's do it.
Chris: The first point here we can go from these lows down here using Fibonacci extension. This tells us the momentum, the power behind these rallies and pullbacks. And so we use the low to the high to the low. This is gonna project forward how much upward momentum there is, which is around $2,700 for gold. Now, we can also take another one to get an idea of how accurate that might be. We take the more recent low, this rally up, and we'll grab these lows right here. And so this tells us where the next 100% measured move is. So, both of these patterns point to $2,700. So, to me...
Craig: How about that?
Chris: ...I have a feeling 2022 could be a really good year for gold based on the size of this pattern and things, I think it should all unfold in the next 12 months, and $2,700 should be where gold at least reaches and tags at some point this coming year.
Craig: I'm curious too. I mean, from that end of that breakout flag in 2009, where we came back down at the financial crisis to what, 750 or whatever that low is.
Craig: From there to that peak, two years later, whatever that is. How much of a move is that? What's that? Twelve hundred dollars, something like that?
Chris: Yeah. It's pretty big. I mean, we can actually zoom in on that.
Craig: Yeah, let's do it.
Chris: We can use a Fibonacci extension and we can just zoom in on that chart. So, if we take these lows...
Craig: Yeah, there you go.
Chris: ...rally up to here and then down to these lows, you can see we blew past that. And this is typically what happens at the end of any major cycle. So, it doesn't matter if it's a cycle high or a cycle low, you get usually a capitulation exhaustion move where it'll blow through targets and shoot straight up where everyone wants it. This is when you are hocking all your jewelry on the radio and on TV ads. And so you're usually gonna blow through these levels and that's usually the sign that, you know, that phase is done. If you blow through a level, in a way, it's a little bit of a red flag that it's not measuring and stepping its way up. It's actually blasting through it and there might be too much sentiment going forward. So, we blew through that. And then it went into a topping phase. And that was the big question was, which way was gold gonna, you know, break out of this? And it ended up breaking down, but...
Craig: If it blows, could it... What would that target... I mean, is there a place that we can target again on this current flag? I mean, because, again, yeah, that long-term cup and handle pullback flag that ended in 2009, and then you had that huge move. If we did something like that again. Again, long-term company handle pullback flag, and then breakout. I mean, we've done two things at target $2700. Would there be another one based off the flag and the move out of, you know, that $1050 low and that sort of thing?
Chris: I think we measured that one in here. We went from this low to this high to this low.
Craig: And there you go with that flag. Hey, that's... Look, if, obviously, technical analysis can't be conclusive, what is? That's a pretty straightforward stuff right there. And I'm sure there's not anybody out there that wouldn't take $2,700 gold as a target right now.
Chris: Yeah. I mean, it's probably a pretty good play on, like, a leap option, right? I mean, you could do a long-term play. You could do covered calls. I mean, you could buy GLD and do covered calls, you know, for the next year. I mean, there's all kinds of ways to play this. If this plays out, you got about a year for it to hit $2,700. And anyone who's stacking metals, obviously, that'll be a pretty nice return. I wonder what the premiums will be on metals when it spikes up there. It could be [crosstalk 00:08:53]
Craig: Yeah, exactly. All right. I'm gonna take you a little bit out of order. I thought we'd go to silver next, but since we're talking cup and handles and extensions and that sort of thing, same pattern is there on the GDX, Chris. Maybe you can pull that one up. I mean, when it broke down in 2013, the level around $31, which you can see there, it was kind of a resistance from '13 through all the way through last year. Yeah, that line right across there.
Craig: And you can make almost a symmetrical cup. And with that being the top of the cup and then the bottom, then you got the breakout and now we've been, obviously, flagging here. I mean, that looks familiar after what we just talked about. So, what do you see in there? Because again, obviously, if we're talking $2700 gold, the mining shares are probably gonna go a little higher too.
Chris: Yeah, yeah. I mean, we saw the metals in the market come down to a bottom and we had a really nice impulse wave and then it just fizzled out, and then we have an impulse wave and it's fizzling out. This is the sign that, you know, the momentum is up. It's stair-stepping its way higher. These are just series of bull flags. These are very slow. This the monthly chart. Remember we're looking here. So, these fizzles out... This is a one, two, three-year kind of fizzle. And here we are right now where we're over a year of it in this next one. But I think we're gonna continue to see this ratchet its way up. GDX, I mean, I wouldn't be surprised if it's right back up at these highs. And I don't know why it's not higher than that, but, I mean, it's got, to me, a lot potential to go much higher than those levels. But we'll definitely have a series of higher lows, you got a series of higher highs. These are very bullish kind of triangles or bull flag patterns. And I think, you know, we're gonna be pointing to higher prices going forward.
Craig: [crosstalk 00:10:40]
Chris: GDXJ is the same. Silver miners are fairly similar. Silver miners actually look a little more bullish. They've held their ground really well.
Craig: Can you measure that one out too, tick the blue lines off and put your Fibonacci numbers on there?
Chris: Sure, yeah.
Craig: I'm curious to see how that stacks up because you can eyeball that thing and say, "Yeah. [crosstalk 00:11:03]
Chris: Yeah. So, we can go from the lows down here and we can go to this most recent, this real...the breakout high. I mean, I would negate the COVID spike down.
Craig: Yeah. Yeah. Yeah.
Chris: Generally something based on news like that, I usually kind of scratch out those wicks. But if you look here, yeah. So, it is showing us right back up to the highs based off the low to this most recent breakout. And, of course... So, we've got this breakout line. This is a pretty good move. I mean, we got this nice rally. We got this first major pullback within a new bull market. And the second run is up there. And I don't know what that is percentage-wise. That is not too shabby of a return, so you can't complain.
Craig: We were talking about the producing miners here. And if we're in an inflationary environment, you know, their margins are a little tough to maintain even with price going up. And so this is probably the least performing sector if gold does in fact surge. I mean, a lot of us hold exploration companies, you know, which are almost sometimes like call options on the gold price. And so, again, we're not trying to pump sunshine here, but the charts are least certainly lined up to indicate that, you know, we've paid our dues maybe this year and...
Chris: For sure. Yeah. I mean, people should have been accumulating metals over the last several years as it's been out of favor. And no one wants it. It's not interested. It's flatlining. I mean, that's a plateau before it's generally gonna go higher. Right? And now we're on the upswing. I think the next move, if you don't have metals, yet, I mean, it's kind of the time to do it because we are, any month here, metals and miners could rock it higher. And we got Russia, you know, trying to do things, you know, if there's any type of war or something happens. I mean, it's generally really good for metals as well. Everything really is aligning for metals. I think a lot of people are wondering why it hasn't moved, but as I just showed you, you and I look at this monthly chart, you go back 10, 20, 30-plus years, these are big patterns. They don't happen just because, you know, we think the timing is right and it should happen right now. These are patterns that take months, quarters, years in some cases to unfold. And I think we've just put in that year that we needed before this next slide higher. So, things to me are really starting to align. 2022 is probably the year for precious metals.
Craig: And just a quick aside, you know, on the Sprott Money. There's what we call... There's the Insights tab where I write something every week, David Brady writes something every week. David has been... Yeah, thanks for going there. If you look at Sprott Money Writers, click on that tab real quick, David's been on the story like crazy. He's been waiting for a pullback. He didn't think we were there yet. That's the... Yeah. There's my stuff. As you also go there, David Brady's been kind of echoing some of the stuff that we're discussing here that, one, you know, after this final pullback is done, he thinks prices could really take off next year too. Hey, I'm gonna send you to the silver chart now, Chris.
Chris: Sure. Yeah.
Craig: And you talk about all the geopolitical factors and all the unknown unknowns as we head into 2022 election year here in the U.S., I mean, all kinds of stuff. But inflation is still hanging over everything. And what that does to real interest rates and the like, I mean, we're still waiting for that to be realized. But silver has always historically been thought of as particularly sensitive to inflation. So, on the silver chart, if inflation is not going away, what do you see there? I again, I'm just looking at another pattern, you know, with a big long-term base, a breakout, a flag that's more horizontal than it is, you know, a triangle or a pennant or a wedge. And that's me. What do you see?
Chris: Yeah. I see the same thing. We've got, you know, a huge decline. It's been really trying to kind of carve out a bottom here. It's been coming up. And now we've kind of got this big flag or handle pattern. You could argue where the kind of base is. You could say it's across here or potentially right through this noise. It's not a very straight line. I can use a tool here. But if we go across here, so it's got a very similar pattern. We've done the multi-year base. It's had the pop. It's back to an uptrend. It's just fizzling out of favor for a little while. It's kind of trying to get everyone bored because what happens is if the market doesn't shake you out, it'll wait you out. And so people are not patient. I mean, I deal with traders all the time. They wanna trade, trade, trade, trade. It's not about how many trades you do. It's about being efficient and just trying to, you know, put trades on when they're in favor and not being involved in something when it's not favorable. And so the market is gonna wait people out. They give up on things so fast. And that's what's happening, people are just giving up. And that's why price fades and slowly, usually, drops to the right. And eventually, once that's kind of worked itself out, you know, it'll take off and everyone will miss it again, the people who were not patient, right?
And that's the nice thing about these monthly reviews that we do is we do look at the monthly chart pretty much all the time because it really is a big picture. We're looking at... We're kind of focusing on people stacking physical metals. It's not something you're gonna flip in two months. It's something you're accumulating and hoping and praying it'll be a nice solid asset worth a lot more down the road going forward. And so this chart is pointing to higher prices as well. We can use a Fibonacci extension and get a quick view of where this one is headed as well.
This one... I mean, the low is the COVID low. We could really kind of go off these lows. We got three different lows and we'll go off this high around here and this low. So, it's showing, you know, $37, $38 an ounce for silver, which, I mean, isn't probably as big as a lot of other people are expecting. It's still a 69% rally to the upside. But silver has this funny way of, you know, blasting through levels at a ridiculous rate. We saw that over here. It can just skyrocket and take off. And I feel like that's what's gonna happen with gold. And when they get to these targets, I got a feeling there's gonna be so much mass media coverage, it's gonna be... Everybody's been talking about it for the last 10 years. And they're like, "I told you. I told you." And everyone's gonna be crowding it and piling in and driving that price up and it's probably gonna go, you know, 50 and beyond. I can see it definitely breaking the previous highs, but from a technical standpoint, you know, 69% gain of a 38% or $38 per ounce level is kind of the next measured move to the upside that can happen pretty quickly.
Craig: Nobody can complain about that, Chris. That would be fine.
Chris: Yeah. Yeah, it'd be good.
Craig: I mean, we want more, but still...
Craig: All right. And again, that's... Is silver always kind of like crude oil, maybe other commodities like copper. There's so many things are kind of considered inflation hedges long-term, you know, or maybe hedge isn't the right term, just correlated with inflation. So, as we wrap this up, I wanna ask you what else you've seen, you know, this inflation story. And I would say gold has been impacted by this year because, you know, Powell, Yellen, and the rest have been pounding the table with that transitory word. And it's as if traders have believed it because nobody has any patients, like you said. "Well, I'll wait this out. I'm gonna put my... I'm gonna trade Tesla, the S&P, or something like that while gold goes nowhere because they're telling me it's transitory and so real rates are transitory and everything else." Well, now, finally, obviously, in the news, you know, in this last week, not only Powell, but Yellen too have said, "You know, we're gonna have to retire that word." So, underlying inflation, you know, as wage inflation that sort of thing, but so is commodity inflation. What else, in commodities, in general, supporting that inflationary argument, has caught your eye?
Chris: Yeah. We were looking at hard commodities, looking at metals, but one that's really kind of caught my eye again is lumber. In the last... This is the weekly chart of lumber. In the last month and a half we're seeing lumber come back to price. It's starting to skyrocket. So, this is the opposite of gold. This is a soft commodity. And we continue to see that rally up. And what's interesting is we can actually look at the lumber companies, the lumber ETF. It's called WOOD. WOOD is the symbol. And you can see here, it has run up and it's flagging out in a very tight bull flag pattern. And if this bull flag pattern plays out, I mean, it's gonna be a huge run. We can use Fibonacci extension on here. I'm gonna negate that COVID spike. I'm gonna go down to this low right here, go up to this high. I mean, we're looking at a pretty powerful explosive move in the lumber industry.
I mean, we're looking at it another for lumber. That's another 54% move up in this sector based on this type-bull flag pattern. It hasn't broken out yet, but what's interesting is just like in the precious metal sector when we see gold miners tend to rally first and then we see physical gold, well, I would look at lumber in this WOOD ETF as being the physical. And what would be the leverage play on this would be the home builders like XHB. So, the home builders are the leveraged play. And they've done the same thing. They've rallied up. They traded sideways for about a month and a half. And they've already started to break and run. And so they're leading the way higher. So, lumber, I mean, could be a really good play. The WOOD, homebuilders. It's kind of the opposite of gold in terms of kind of the type of commodity is, but, I mean, it's probably a pretty good kind of hedge in play. It's an interesting move.
So, we're definitely seeing, you know, real estate, homebuilding things, all those come to life. And I think a good chunk of why we've seen homebuilders do well over the last...this is the monthly chart over the last month or so, is because I think people are getting pretty nervous. We've seen the VIX elevated. We've seen the put-call ratio really start to pick up. We saw the highest level on the put-call ratio that we've seen since almost COVID. It was over one the other day, and that's telling us that the majority of people are buying put options expecting the market to fall. And I was telling subscribers just a couple of days ago, I said, "Listen, this is at a level where everyone is panicking. They're buying leverage to the downside." When the masses are all doing that, it's usually a major market bottom. And then we've seen this massive rally in the last two or three trading sessions in the market." And it caught everyone offside and that's how the markets tend to move.
But when people are nervous and they don't wanna go in stocks anymore, they fall back to what they're comfortable in, and that is real estate. Real estate is like one of the best long-term investments. We saw the real estate ETF move up. We're seeing homebuilders do well because people just wanna invest in their biggest nest egg, which is their home, right, in most cases. And so that's why I think we're seeing that move up as well. Not only is lumber going up, but people are nervous and they're falling back to the roots. They're comfortable with real estate. It makes sense. The thing is, most people are bored with real estate because it's so slow, but, you know, some of the most boring investments are the best ones you can make. If it's boring, it means it's trustworthy, you don't have to stress about it. It's not volatile. But that's just the way it is. Everyone picks their poison. If you're not patient, you're gonna be riding a roller coaster, for sure.
Craig: Well, I guess one more chart to wrap up with then, Chris. I mean, you're kind of painting a picture of them. The lumber and homebuilders are telling you, "Yeah, it's in transitory stuff." That ain't happening. And the notion, "Oh, yeah, the Fed might hike 25 basis points by June." But even the Fed always admits. It takes six to nine months for that sort of thing to have any impact. So, it's looking like a very inflationary year next year. We've laid out gold and silver and mining shares and now you see something like this. Let me give you one more. I wrote this week in my column of Sprott Money about food inflation. This is actually particularly troubling. Can we get really significant food inflation? That's a recipe for civil unrest and a lot of strife. Yeah, thank you for pulling that up. That's the DBA. That is the agricultural commodity ETF. You wanna talk about a long-term trend and breakout. What do you see there?
Chris: No kidding. I mean, that's pretty amazing. I mean, just the rally in that since the 2020 lows, I mean, it's a... Who would have thought agricultural... This is usually a pretty boring ETF. It's been going down forever. But it's up 54%. You look at our foods, everything. Oh, my gosh, inflation is ridiculously high. And I don't think it's slowing down. I mean, if this next wave of COVID starts to slow things down even more in terms of production and stuff, I mean, this inflation could keep on ramping up and I think it's gonna take a few years for it to actually work itself out. And I hope some of these prices come back down. I sure hope we don't lock prices up when we have these lofty prices because it's making living really expensive especially for people on fixed income. I mean, it's pretty much gone up 50%, 100% in a lot of people's cases, their living expenses.
Craig: And you can think of how this ripples through. I mean, soybeans are a protein source for you and I, but they're... I mean, a major source of feed for agriculture, right, where it's hogs or chickens or cattle. Then you think of corn. Not only is that a source of feed for protein, you know, again, hogs and cattle in particular, but how about corn sweeteners like high fructose corn syrup and everything that goes in all the processed food that everybody eats now? Wheat, everybody eats bread. That's a global staple. And so, again, is this... If you look at something like this and that breakout, is that just simply foreshadowing even more significant price inflation to come next year? And with the Fed reluctant to hike interest rates and, you know, anything they do actually hike, taking months and quarters to ripple through, it just makes you wonder if, yeah, 2022 might maybe work... Like I said, we paid our dues this year and we're gonna get the payback next year.
Chris: Yeah. Yeah. It's been a pretty wild year and a half year, but I think 2022 It could be even more wild when it comes to the financial markets. I think we're gonna see some pretty big volatility later in the year with stocks. I think precious metals and commodities could do very well. This is generally what we see. When you look at the big long-term, bull market, bear market cycle within the economy when the stock market commodities come to life near the end of the stock market when it comes to a top and they continue to move up for a little ways after, and that's, I think, 2022. So, this is the year... This coming year is the year of the commodity and it's gonna be a rough ride, I think, for equities at least in the second-half of the year is my understanding.
Craig: All right. As we wrap up, I mean, I think we've set the table that there is reason to be, not only concerned but optimistic in terms of gold and silver going into next year. Look, that just means you just gotta have all the help you can get and one of the best sources you can get... Even if you're just not even a trader, just in the markets, in general, is to get someone that you can trust on your side. Chris, tell everybody a little bit about your day job at the technicaltraders.com.
Chris: Sure, yeah. Well, at the technical traders, we've got a service called TEP, which is the Total ETF Portfolio. That's what I focus on or ETFs. And more or less, we provide the total solution. If you're a long-term investor with an IRA retirement account of any kind, we provide the signals when to be in the indexes like the S&P 500, the NASDAQ during bull markets, when to step aside during bear markets so you can completely, you know, wash your hands-free, when we're in a falling market, you're kind of out. And we also follow the markets trading the indexes and bonds on a shorter kind of position trading. So, we trade those. And we're doing exceptionally well this year with those trades as well.
And then we've got a sector trading. So, we'll trade the hottest sectors. Whichever sectors are coming to life and leading the way, we move into those, we actively trade them when the stock market is favorable, so when it's trending up. And when we look at the precious metal miners, they're still near the bottom of the list, but they're definitely working their way up. They're starting to come to life. In probably another month or so from now, they could be near the top of the list and I think they're gonna be a top-performing sector early 2022. And there's a lot of upside potential in the miner, especially if you break off into the individual stocks. So, we kind of have everything covered there. Every morning I go over a video just like what you and I are doing, but on a shorter-term timeframe, talk about what happened yesterday, what to expect today, current levels of our trades. And it's pretty educational. And I share all the trades that I do with the subscribers. So, it's a pretty good little service.
Craig: Well, and I would never have met you if it weren't for Eric Sprott. And so I don't know what better endorsement I can give than you've had and tell everybody else that Eric certainly admires your work too. So, anyway, Chris, thank you. Merry Christmas, Happy Holidays, Happy New Year, all that kind of stuff. Let's get a little downtime and some family time over the next few weeks, and then let's do this again early in January.
Chris: Yeah, sounds great. Appreciate it.
Craig: And from all of us, it's "Sprott Money News," sprottmoney.com. Thank you for watching. Again, sign up for that sprottmoney.com newsletters so you're notified anytime there's new content that's posted and maybe keep an eye out for some new content even later this week on Friday and some more stuff next week too. Again, thanks for watching. Happy holidays to everybody out there. We'll see you again in January.