Gold's Supercycle to the Upside - Precious Metals Projections

Craig: Hello again from Sprott Money News at sprottmoney.com. It is now the month of May, 2023. I don't know about you but I'm ready to move out of late winter and finally get into spring, for crying out loud. I'm sure Chris Vermeulen feels the same way. It's time for our monthly "Precious Metals Projections." Chris, happy spring, I hope.

Chris: Yeah. Thanks for having me, Craig. I know. It's been a week and a half of rain here. It is depressing. I just want spring and heat, blue sky.

Craig: Right? We're not asking much. It's May, for crying out loud. It's winter, late winter, and then I guess right into summer this year. Now I'm just thinking of segues, you know, there's probably a spring sale coming at Sprott Money. How's that? You like that? Sprott Money, obviously the sponsor of all of this great content, every single month. This is just the start of the month, where we do the "Precious Metals Projections," but gosh, there's all kinds of stuff. Great writers like David Brady. Maybe the "Ask the Expert." You can go back, actually, to last week, I was able to record a video with Eric Sprott himself. So, you can find that on the Sprott Money side as well, on top of all kinds of great deals for bullion and storage.

Sprottmoney.com, or, as you see on that screen, you can call them at (888) 861-0775. All right, Chris. Well, here we are. A month ago, gold was moving sharply higher. It was up around $2040, $2060, and then we got a reversal, a big, massive reversal candle, right in the middle of the month, on about the 14th. That kind of knocked the wind out of its sails for a little while. But now, with people anticipating a pause and pivot for the Fed, all of this regional banking crisis we have in the U.S., massive yield curve inversions, gold's moving higher again. How's the chart look, as we begin May?

Chris: Yeah. I mean, last time you and I talked, we talked about the big monthly chart and how there's a potential triple top coming into play. You know, you look here, we see gold put in this high back over in 2022. We came back up, we tagged it, we pulled back a little bit, and then boom, we've got, you know, another banking crisis, recession talks are getting even heavier, and we're right back up, I think poking past that high, up into this $2080. $2089 is kind of, I think, the high on the continuous contract chart, so we are not far from making some all-time highs in gold. But again, we're gonna have to see how this plays out. We looked at the monthly chart, which, if I pull up real quick, we can see this triple top here.

If we look at the market here, we got a triple top in gold. These long upper wicks, each time got followed by some big selling, and we're still pushing up at that level, and when we look at the price action, last month, we pushed right up, sold back down, but now we got another piece of, a couple pieces of news that are really bullish for gold and pushing it back up. So, it is gonna be interesting to see if this month we close above $2089. That could, on a monthly basis, spark the start of the next major leg up in the precious metals space, but I do feel like it's a little bit of a news-driven move. You know, the miners are kind of underperforming, and, compared to what gold has been doing, so I'm not fully sold on it yet, although it's pretty exciting to see gold, silver, and miners, you know, pushing and testing their recent highs.

Craig: Let me ask you a technical question. I'm familiar with double tops. That's usually kind of handy in the short term. Triple top's a new one. Is that, I instead might see your old bull flag type of pattern that you like to talk about.

Chris: It could be. I mean, we could use Fibonacci extension with this bull flag potential. We could go with a conservative low over here, and using Fibonacci we can measure the highs and these lows and it'll give us the momentum of the gold market, showing us that the next upside potential is around $2547. We could actually go with the full low of gold, way back over here, and that points us to a lot higher level, which, about $2700, which, you know, using that analysis, it hasn't changed in a long time. And, you know, if we do get a confirmed breakout here, like a monthly close, this supercycle to the upside, I mean, the next stop could very easily be $2500 to $2700, and it could happen pretty quickly. We could see a lot of things fall apart, maybe more banks.

More news is probably gonna continue to feed gold. If that's the breakout, I think we're gonna see lots more news and things kind of be a catalyst to help spur it higher. But yeah, you could argue here there's either a triple top in play, or it is, you know, simply a big bull flag, kind of just flagging out here, which is known as the halfway point, and then, you know, you're gonna finish that second move, up there. So, the big picture, the long-term picture of gold is very, very bullish, and if you go back to the whole kind of supercycle timeframe, we go way back here to the last supercycle, back in 2001, you know, along the way, we have these multi-year, big consolidations in the market, and all they are are big pauses along the way to the full kind of supercycle to the upside.

Now, we started over here with a new major supercycle. Actually, Eric Sprott talks about, or used to talk about this, an article that I posted, talking about how gold was starting the next major supercycle, and you made him, you know, pick up some more metals. But, you know, we're really just, this is the first big pullback within, I think, the major move to the upside. The big question here is are we gonna see a pullback with the stock market if we get a big recession selloff, a financial reset, which might bring gold back down into this lower range of the $1800 or so level, but as soon as the big panic selling wave comes to an end, we're probably gonna see gold, silver, miners be the first to rally and take off. So, what we're in right here is really just one of these, along the way, on a 10-year kind of supercycle to the upside. So, we're still in the infancy stage. The question is, are we breaking out literally, like, this month or next month, or are we breaking out maybe later this year or early next year? It's hard to tell. The market has a great way of dragging things out way longer than we ever anticipate, but that's the scenario that we're in. We are in a fresh, a fairly fresh supercycle, and, you know, the next stop is gonna be $2500, $2700, and then it's gonna be up in the $3000s after that potential move.

Craig: As a technical analyst, Chris, I mean, we're a long ways from the end of the month, today being the fourth, so we've got four weeks. Monthly breakout, obviously, be important. Do you look for couple of weekly closes above a certain level, a daily close above a certain level? What would be most important to you to get you thinking it's, we're finally breaking out of that flag?

Chris: Yeah, a weekly chart is definitely...this is the weekly chart here. So, a weekly chart would be stronger, but given the size of this pattern going, it's dragging out over many years...

Craig: Three.

Chris: ...I don't... To me, a weekly close is almost just like a daily close. You can't fully trust it with the size of this pattern. It needs time. It needs to wiggle. So, to me, the monthly chart, before I jump in and buy, say, some more physical metals, if we get a monthly breakout, I will be looking to buy physical metals. To me, that'll be, like, confirmation that it's heading higher. But a weekly or a daily close, I mean, to me it doesn't get me excited yet. I'd much rather wait, and buy it at a higher price, when I think it's confirmed, and it is, you know, money's flowing heavily into that sector, and it's breaking out for long-term investors, versus, you know, jumping in on something shorter. I mean, if you're an active trader, trading stocks and stuff, the weekly chart is pretty powerful. It's very powerful. But I think for the scale of this multi, kind of, supercycle in gold, a weekly chart is really a drop in the bucket in terms of I think the value of a monthly chart close.

Craig: A similar pattern like that, with a rally and a flag, is silver. And where gold is busting up right against the top of that range, silver's not quite there yet. It's getting there, north of $26. You've got it pulled up. What do you see?

Chris: Yeah. I mean, silver's performing pretty well. I mean, it's playing catch-up. It's got mixed signals. It's got a series of kind of lower highs. It really just started to break one out here a couple weeks ago. So, it's starting a short-term move up. This is a very significant level for I think silver to break. You know, we've seen a lot of selling in here. You know, if we zoom back in the timeframe, gold is definitely, when you compare where gold is, gold is equivalent to silver trading up here, kind of like at, you know, these previous highs. And silver's definitely underperforming. I like it. I think there will be a time where silver will play catch-up, and rocket higher and, you know, catch up and probably bypass gold.

We've seen that happen over here, where it can lag a few weeks or potentially even a few months, and then suddenly, you know, silver just goes into that rocket ship mode and takes off. So, I like silver, but again, if we're gonna go into some type of bigger pullback or a pause here, I don't really wanna hold silver just yet, because we could still see a fairly decent pullback. From where it is here, we could easily see a 20% pullback just to these recent lows, 25% pullback, if the stock market, you know, has a recession and a financial reset. And eventually, silver will base and then start that next major run. But I do think we're gonna see silver hit $48, $50 an ounce in due time, but you might have to suffer quite a bit of pain if this market stalls out and starts to roll over here for another few months.

Craig: So, one of the things that I've certainly noticed at my site and on Twitter is the lament that the mining shares are not keeping up with the metals prices. Now, some of that is the economics of getting it outta the ground. I mean, some of these major producers are up $1600, $1700 an ounce just to get it outta the ground, and as energy prices go, it just squeezes their margins. Nonetheless, there is a lag. So, let's start, well, let's start wherever you wanna start, with maybe the GDXJ, the SIL. Why don't we do silver next. Let's do the gold miners first.

Chris: Yeah. So, let's take a look at, so, the candlestick chart here is gold, and the blue line, which maybe I'll just quickly change that color a little bit, a little hard to see here. We'll make it gold-colored, thicken it up a bit.

Craig: There you go.

Chris: So, the candlestick is the price of gold, and we got gold putting in a triple top. And we've got the orange here, which is the gold, the miners. And although it's a pretty noisy chart, the key here is gold is trading up at these, you know, near all-time highs, where gold miners are far off. They're still way down here. They're down, like, 40% from the highs where gold is. And we can really see, if we zoom back a little bit, you can see that they're lagging here on the weekly chart, dramatically down from the highs. So, usually we wanna see gold perform a lot better, gold miners. We wanna see this orange line rocketing way higher than gold.

Typically, gold miners are leading the way, they're performing by leaps and bounds above what gold is doing, yet here's gold at, you know, almost all-time highs, and the miners are still down about 35%, 40% from those highs. So, this is a little bit of divergence still that has got me worried that, you know, we're gonna, this top in gold, this triple potential top, could be a top for now, and we could see it pull back. So that's kinda my take, and silver miners are kind of doing the same thing. I mean, they're way off the highs that we saw previously, and they're just not following suit. And maybe that's because a lot of money went to the crypto space, and it kind of evaporated, and it's not coming back to the miner space maybe so much. But we'll have to see, because I'm just not seeing any real commitment. I mean, we're seeing gold miners and silver miners move up, but they're not, you know, outperforming gold, which is a little bit kind of a nerve-wracking thing. So, there's a lot of mixed signals with gold. It's exciting looking at the, close to the breakout, but until it breaks out on the monthly chart, I'm not, you know, getting excited.

Craig: Yeah. I wonder if the shares are a little bit of a show me kind of thing. You know, people have been burned often enough with those things that, just a lack of enthusiasm until it does finally break out. Chris, one of the things for which you are famous, I've made you famous now, is your idea of best asset now, where you have this list of asset classes that you adjust on a daily basis. As we sit here in early May, I would assume the regional bank shares are probably the worst asset now. What are you showing up and telling your subscribers at The Technical Traders is currently the best asset now?

Chris: Right. So, the best assets right now have been our gold miners, the biotech sector, this is just in the near term, silver miners, home builders, they're holding up, you know, the best compared to the rest of the market. And if we scroll right to the bottom of the list, which is the worst assets, we've got the regional banks, which, obviously, they had a big breakdown, and they're kind of in a waterfall selloff. Looks like maybe a little bit of a capitulation, and over, kind of, over movement to the downside. Maybe it's gonna have a little bit of a bounce, but, I mean, this is a terrible-looking chart, and it's just doing so much weight, pulling the markets, the indexes sharply lower, with just the bank stocks just getting hammered. I mean, it's a bloodbath. And I really think it's just beginning. I mean, we don't even have a recession here, and banks are blowing up already. I mean, it's pretty wild what things could be a few months from now if things start to actually turn really sour and head lower.

Craig: You know, and one of the things that you've taught me over the years, if you extend that chart, make that a weekly chart, would you, of that KRE, and we were just talking about, in an upward move, you get these consolidations, that look like a flag on the chart. That KRE on the weekly chart, plunging down and then a little flag, and now plunging again.

Chris: Oh, yeah. This is a high-momentum move. I mean, if we use a Fibonacci, we can figure out, you know, where this high-momentum move is going to potentially play out to the downside, and it's ugly. I mean, we're looking at KRE going all the way down to $22. I mean, I don't think a lot of people are expecting that, and it's gonna potentially break these lows that we saw back in 2020, and if, as it breaks these lows, there's gonna be a lot of stop orders probably set in here, that if it breaks this level around $33.40, somewhere in there, there's gonna be a lot of stops. We're gonna probably see a huge flush down, and then every time it breaks, when it, like this low or this low, I mean, it's gonna just create a huge, sharp potential drop. So, I mean, this sector's just starting to break down, and I think there's a lot more potential to the downside. So it is definitely got that high-momentum play.

This little blue line here, it's a five-period moving average. On the daily chart, I like to follow it. The weekly chart, it works very well also. Typically, if you're in a very high-momentum move, price will pull or pause, maybe pierce through it just for a day or one bar or so, and then continue, and you can see it. During strong runs, it pretty much holds that bar for almost every bar. It might buck it for one close against it or not, but it generally recoups it, and that's where we're in now. We're in this potential waterfall selloff, and you notice, the markets are like the yin and yang, right?

You can have this super-strong killer rally, and then it'll put in, like, a topping phase, and then it'll have a super-strong, killer crash. I mean, you win, you lose. It's all about balancing and managing that risk, and being able to identify, you know, when something's breaking down, either play the downside or get the hell out of it, because it'll just take your money. There's no point in riding something down, and this is what drives me nuts. I have people tell me all the time, "Well, I'm getting good dividends from my stocks and some bank stocks." I'm like, "Wait, you're gonna take, like, a 40% loss to get a 3.5% percent dividend?" Like, it doesn't make any sense. Just buy it back later. But people get sucked into wanting income, and, you know, I'd much rather pass on some income and keep, you know, 30% of my capital and then hold onto it.

So, the banking sector is catching a lot of people off guard because a lot of people are holding banking stocks because they pay dividends, and they're in that belief that, you know, "Just gimme big blue chips, gimme big banking stocks, they pay my income, supplement my retirement," but they don't realize they're just, you know, undercutting their portfolio, their retirements, by holding onto them for a cheap little dividend, which, I mean, literally, you know, these stocks are falling 3%, 5% a day. It's not worth it for a 3% to 5% dividend for the entire year.

Craig: Precisely. And again, for people that are actively trading, this is extraordinary valuable information, and Chris' site, thetechnicaltraders.com, can really be a big help. He shares information with you every day about what he's seeing, what sectors look good and what don't, adjustments of that best asset now, worst asset now. Well, what's really wonderful is Chris shares this information publicly, not only through these updates every month, but Chris, tell us a little something about something special you got coming up in a couple weeks.

Chris: Sure. Yeah. So, in a couple weeks, which happens to be my birthday, May 15th, I've got, I'm coming out with the second edition of my book, "Technical Trading Mastery," which is a complete revamp. Literally, it's half the book in terms of pages. It went from 200 and change down to about 130 pages. But I really did a huge revamp, really just wanting to get rid of any fluff, and just put in stuff that is going to take a beginner or even advanced trader, it's gonna let them see the markets from a few different angles, all the key stuff you really need to know. To me, this is, like, the foundational book of building on any trading strategy. I share two of my foundation trading strategies. One of them is a momentum trading strategy in here. The other one is my more so position swing trading strategy.

I give you the foundations, the indicators, the values I use, what generates the triggers, so you can follow those trades. I talk about all kinds of different aspects in the market that wasn't in the first book. This one actually provides the details, the juicy details that you can implement literally the same day or the next day, which I'm really excited about, because the first book, I mean, I did that back in 2013. It feels like forever ago, and the book just, it wasn't quite the same. This book is, like, actually provides a lot of really good value that'll get, you know, you into the right mindset going forward. So, I'm really excited to bring this out on May 15th. It should be live on Amazon. And on top of that, I'm also publishing another book called "Asset Revesting," which is, more or less, it's a different style, a different way to invest.

There's buy-and-hold and diversification strategies, but then there's asset revesting, which I'm kind of calling the strategy, because it's completely different. It doesn't believe in diversification, it doesn't believe in buying and holding. It's focusing on just holding assets that are rising in value, and we can profit from things that are falling. And of course it allows us to just build our wealth no matter what's going on in the markets, and it completely bucks the trend of the investment industry. So, this is a whole new style of trading, investing, which I've already been doing for, like, 20 years. All I'm doing is putting a name on it and trying to show everybody how you can attack the markets from an investor standpoint in a very different way, without this whole rollercoaster ride of worrying about if bank stocks are crashing, if the blue chips are falling, if there's a bear market coming.

I mean, it really doesn't matter when you use a strategy like this. Just like you and I looked at that KRE chart, if you understand, if it's in a stage two bull market or if it's in a stage three topping phase, or at full-on bear market, we can take advantage of those. Different strategies for different market conditions, and this book kind of just shows you how you can get away from that volatile buy and hold, that risks, especially going into this scenario we're going into, with a potential stage four decline. If we go into this, the last two times we had a stage four decline, which is, like, a financial reset, was after the tech bubble, was after the 2008 financial crisis. Those are the last two. In 2008, 2009, there was, like, 8500-plus reported suicides directly related to equity prices falling in 2008, 2009.

I mean, what we're potentially going into is life-changing, is life-threatening to those who have a lot of capital who are close to retirement, in retirement. There's nothing worse than just getting to that level you want to be financially, Murphy's Law comes in and then takes it all away from you. So, this is a strategy that it's all about protecting your capital as your number one solution, and then generating returns, finding lower-risk assets that are rising, and sometimes we sit in cash, because sometimes it is the best position. There aren't safe places at times. So, I'm really excited about these two books coming out, and they'll be both available on Amazon on May 15th, so...

Craig: Awesome. Well, we will make sure to check in on that again next month and see how sales are going, and give everybody a reminder they need to check those books out on Amazon. I'll also be curious by the time we get to early June to see where the month of May ended up. Maybe we will get that breakout that we're talking about on the monthly chart. Either way, between now and then, please be sure to check out Chris Vermeulen at thetechnicaltraders.com. Chris, thanks so much for your time.

Chris: Hey, thanks for having me, Craig. Take care.

Craig: And from everybody here at Sprott Money News and sprottmoney.com, thank you for watching. Please give us a like or a subscribe on whichever channel you're watching on your way out, and then please be sure to keep an eye on that channel as we go through the month of May, for more thrilling and exciting content as we try to stay on top of the situation in the metals. Thanks for watching, everyone.