A November Rally for Gold and Silver? - Precious Metals Projections

Craig: Well, welcome back to the Sprott Money News Precious Metals Projections for the month of November 2021. I'm your host, Craig Hemke. And joining us, as usual, is Chris Vermeulen of thetechnicaltraders.com. Chris, good to see you.

Chris: Yeah, good to see you too, Craig.

Craig: Hey, everybody, before we get started, Chris and I are recording this on Wednesday, November the 3rd, just after noon Eastern. All right? So keep that in mind as we go through this, because Chairman Powell is about an hour and a half away from sharing his what I call his Fed lines, where they're gonna announce their taper schedule, you know, and everybody's gonna look at the dot plot and all that other jazz. Then they'll have a press conference this afternoon, too. So we're gonna look at this through the prism of where we are here, you know, an hour, hour-and-a-half before all that happens, and maybe, you know, project, give you some levels to watch now as we go through the rest of the week.

Before we get started, just a reminder, this information is brought to you by Sprott money. They're the ones you want to thank for this. You can do so either by giving them a like or a subscribe on whatever channel you're watching. Or, of course, just utilize their services the next time you're in the market to buy some metal or store some metal. Always have great deals. And you can just go to their website, sprottmoney.com, or give them a call at 888-861-0775. The friendly staff there will be happy to help you out. Chris, I guess from a 33,000-foot view, we've had an interesting month of October, a couple of attempts for gold to break out. The miners have got above their 50-day moving average and were looking good. And now, you know, into this meeting, we've had a pullback. Before we get to some of the specifics, just, what's on your mind? What are you looking at?

Chris: Yeah, I mean, it's been obviously a rough go for precious metals in the last year. And a lot of it, I think, is hinging around the dollar. The dollar has been kind of just running its way higher. And the dollar, from, you know, a weekly standpoint, which we'll look at the chart in a little bit, it's on the verge of actually having a pretty big run. It'll be interesting to see how things react with the Fed over the next couple of weeks here. But, you know, the dollar has just been working its way higher, and metals have been kind of working their way lower. And we're just hoping that that big, this one-year-long flag in the metals and miners here is gonna be a bull flag and we're gonna finally see a breakout sometime soon. I still think it'll be a little bit later. I still think maybe the bottom's in, but I don't think we're gonna see a big run until potentially January, February. I think they're gonna be a little later than people think, but I think it's coming. So, it's just a wait-and-see and we just gotta let these kinds of trends work themselves out.

Craig: Yeah. We've waited this long, for crying out loud. Man, at my site, TF Metals Report, I've been doing this, coming up on my 11-year anniversary. You know, and so, my memory is long. And gosh, I think this year's have been even harder than some of the years, you know, where we were wandering in the desert, you know, from '14 through '18. Because at least there were a few months in there where, you know, there was hope, you know, and things were trending higher. But man, I gotta tell you, it seems like 12 months is a long time to maintain a downtrend. Doesn't it feel that way?

Chris: It does. But when you look at the long-term picture, I mean, it's still a healthy-sized bull flag. It's starting to get a little long in the teeth. It really should start to run here soon. But, I mean, you know, 2019, the big breakout in the run, that all gave us that taste of a new bull market in precious metals and miners. And then it quickly fizzled out, and waiting a year for that next move up does feel a little painful, a little long. But the big picture is still showing. I mean, we're still looking at $2,600 gold potentially next year, which next year is not that far away. So...

Craig: Yeah. Right. Right. And we certainly take that. Play a little catch-up with real interest rates and everything else. In the short term, though, you and I know, I mean, the machines that trade the futures contracts take so many cues off of the Dollar Index, on an intraday basis. You know, it's never really, you know, maybe a tick-for-tick thing, but the rising Dollar Index often is kind of a headwind for the metals, and a falling Dollar Index is kind of a tailwind. The dollar has been rallying now pretty consistently, ever since the June FOMC, which is now, geez, four and a half months ago. That was the meeting where the Fed began paying five basis points on excess reserves. And that started soaking up some of the dollar liquidity that's out there. What's it? That reverse repo facility is now up to $1.3 or $1.4 trillion overnight, every night, as cash is just looking for any kind of yield at all. So anyway, the dollar's been in an uptrend ever since. We need that trend, hopefully, to break to the downside, to get that tailwind. You know, I would imagine you look at that chart, you probably got some concerns it might break to the upside. So, what do you see?

Chris: Yeah, well, if we pull up the... This is the daily chart, looking back six months on the U.S. Dollar Index. And more or less, you can see here, it's channeling higher. And of course, that has been a good chunk of the headwind for gold and silver. And it really is pretty much in the middle of this whole channel. So, you know, at this point, it could go either way. It does feel like it's on the upswing. I feel like it actually wants to push, and maybe run higher towards the end of this channel. This previous high, and really, around 94.66, is actually a pretty significant level on the dollar. If the dollar gets rejected up here and starts to break down, I think that's gonna be the start of a major next leg up in precious metals. And to give you a better feel for it, if we look at a two-year weekly chart of, or a two-year chart of the dollar index, you can see it's really come down. We've had this previous pivot low over here. We had a breakdown. We had a standout high here. We had it pretty much tested again just about a month ago, and it's pulled back.

And so, we got this giant double bottom formation, that if this level is broken, this 94 and change, we could see a very strong run in the dollar. That could also mean maybe the stock market puts in a top. Maybe it sells off in a bigger way, because we tend to see the stock market rally. When there's fear in the market, when we saw COVID hit, we saw the U.S, dollar explode. It was the only real asset that kind of held up. Bonds were short-lived. They had a nice move, but... So we're really at this tipping point for the dollar. Is it gonna break out? Is it gonna roll over and break down? I think a lot of that's gonna really control the direction of gold and silver and miners going forward.

Craig: That low back there in February, I think, of last year, that pivot low you talked about? Last year, back in 2020, right before... Yeah, that low. What do you got? That's about 94.65 or something like that, isn't it?

Chris: Yeah, 94.66, right in there. Yeah.

Craig: Okay. And if you, again, that line, and it almost connects perfectly to that peak back there in late September of last year. That's about 94.65 as well. I mean, it's a perfectly horizontal line.

Chris: Yeah, it's a pretty clear line on the chart. It's gonna be a big breakout or a rejection, I think,

Craig: Would a daily close above that level be important, or would it be more important to get a weekly close above that level?

Chris: Generally, for a big trend like this, I'd be looking more so on the weekly chart. Generally, a one-day close, I mean, we see it all the time. You get, like, a one-day wonder, right? It's a nice fake-out or a shakeout. It pops up and holds nice into the close. But then the next day, it gaps way higher, because everyone gets excited, and it just reverses and sells off for days or weeks after that. So you gotta be careful with those one-day closes. A weekly close above there is definitely a more strong signal for, hey, this trend is fully shifted. It held a weekly close, not just a one-day type of thing, so...

Craig: So, in reaction to Powell, his Fed lines, his press conference on Wednesday, as we go through the rest of this weekend and the next, I'd say that's a key level to watch. And you mentioned that turnaround, that fake-out. We just saw that in silver at the end of September. Everybody's been watching $22 Silver forever. And you had one day where the stops got run, and silver broke down, below $22, the end of September, then immediately reversed.

Chris: Yep, that was [crosstalk 00:08:22]

Craig: So now you got that chart up. Let's start there. What do you see? I mean, we got above the 50-day moving average, even kind of brushed the 200-day. And then, now, all of a sudden, as we record today, we're back down below everything. What are some levels to watch in silver this week and into the rest of the month?

Chris: Yeah, well, silver looks like it... I think, though, the precious metals market is trying to put in a bottom. I think the bottom is in. We've had a nice kind of impulse move to the upside, a nice strong rally in silver, to get above all the key moving averages, which is the 50, the 20-day, the blue and the pink line. And now we're seeing it kind of just pull back, a little A, B, C correction, a little three-wave move here. Hopefully, it will find some traction and push to the upside. When we take a look, just to get an idea of where that upside target is here, we can take a look at these lows that we saw back in September, this high, and today's current low, and you can see it's bringing us to roughly $26.50, $26.60 an ounce for silver going forward. So, hopefully it can break that, but there's still a lot of work to be done.

We've got this line across the chart, you got these highs right across here. These are very significant pivot areas on the chart, through here and here. So, obviously, it has acted as resistance in the last couple of weeks, and is getting rejected. But this does feel and look like a bull flag, that it could come up, and potentially start to break through there and start a pretty big run. So we really need to see this kind of level hold across here. This is kind of going to be the next key support level, pretty much were it pushed down to today. There's a lot of consolidation right through here. There's these lows over here. And so, we've gone up above that, and we're settling into there. So hopefully silver will get some traction and start to move higher going forward.

Craig: Almost a little reverse or inverse head and shoulders there, with the shoulders at $23 and the head down there at $22.

Chris: Yep. And you got a really clean neckline right across here. And so, yeah, there's good upside. Generally, when it's an inverse head and shoulders, I take the distance from the neckline to the top of the head, and that's the upside potential, if that was a bottoming pattern. So you can see it would bring us right back up to these previous highs, as a strong move. It usually overshoots a Fibonacci extension. Reversal patterns have a lot more momentum to them than just a typical one-off, like, bull flag pattern. So there's a lot of upside potential in silver if it can get some traction. That's $28.50 right into these highs, if it can start to run and break here. So, it's looking good, but, I mean, it hasn't shifted its trend yet. It's still making a series of overall lower highs, lower lows, and trying to put in a bottom.

Craig: Yeah. Yeah. And again, what we just talked about with the dollar is gonna play an important part as to whether it can get some escape velocity there. Let's turn our attention to gold. It's had such a really intriguing year. That's a nice way to put it, I suppose. Everything fundamentally that you'd want to have happen has happened. Real interest rates, in the current period, you know, just at the moment, are something like negative 4% versus, you know, inflation versus the 10-year note yield. Inflation expectations are some of the highest we've had in decades. And yet gold continues to decline in this series of lower highs. It kind of just keeps it deflated, and people don't find it interesting at all. If we're gonna turn that around as we head into the end of the year, what should we be looking for? Looked like we almost had it a couple of weeks ago, and now today, as we record, we're getting drilled backward again. So, Chris, on the upside, what would you watch if we can get rolling, but then what on the downside, if the reaction is negative to Powell, what levels would concern you that you think we need to hold?

Chris: Yeah, I mean, it's a pretty ugly chart. This whole year, from January all the way through, I mean, it's been a pretty gnarly chart. I like silver, actually, a lot better. Looking at the shorter-term price action for gold, I mean, I think there's gonna be a key support zone somewhere right down around this level here, around $1720, where we had this previous low. We also had two candle wicks through here. If we're gonna go back on the chart, it'll probably trigger through some other key points there as well. So it's definitely gonna act... You can see huge consolidation through here. And then, of course, we've got, like, a pretty clear pivot level right through here, which was the highs and then lows, and then lows and lows.

So these are the real kind of lines on the chart that if these are broken, things are gonna get really gnarly. And if it was to close more than one day, if you look at these lows, this bottom line, from a long time ago, there was one of those one-day close below with a fakeout, and then it took off. One day closed below, it took off. One day below it, pierced it intraday, reversed. So these are really strong levels on the chart. So if we have, like, a weekly close below here, that is gonna be kind of lights out. We could see a bigger downdraft in silver, and that could...or, sorry, in gold, I mean here. We could actually see it move much lower, somewhere down to $1600, potentially even $1500. It could really unwind to the downside. Hopefully, we don't see that.

And when we look to the upside, where do we think this could go? I mean, we obviously need to break this previous high. That would be the first sign. And then, this $1836, somewhere in this area, is gonna be a very significant level that... I like to see two previous highs broken on a chart to create a new uptrend. So, when you have a standout high, like this now is kind of a standout high... So, this is, like, an internal high, and then this would really count as, like, pretty much three highs. So when we can see price move up and break this high, and then move higher and break these highs over here, we've now broken through two really critical pivot high areas, and so that momentum should have shifted. It's gone from now being bearish to bullish. It could have a strong move, and then potentially, you know, take this run and move a whole lot higher. So you could argue gold's got this really ugly-looking head and shoulders pattern. It's got this neckline right across here. Of course, there's a lot of upside potential. If this is a bottoming pattern, it will be very similar to silver. There's gonna be a very strong pop and reversal back up to $2000. And it could happen super quick. Within a month or so, we could see that kind of price break and run, so you never know. You just gotta be prepared to jump on board when it does change gears here.

Craig: So that's one of those where, you know, that technical analysis sometimes kind of feeds on itself, because everybody sees the same thing. Everybody's waiting for the same thing, right? Look, "Boy, we get above $1836, oh, boy." You know?

Chris: Yeah. For sure. And that's why a lot of these pivot lows here, these really clean lines on the charts, that's why you get some of these fakeouts, because everyone sees it. And it's just, even today, like, looking at the NASDAQ, I was looking at it for, like, a day trade. And the chart came up, formed a perfect bull flag, I'm like, this is way too crisp and clean. I'm like, everyone would wanna jump on this. I'm like, it's gonna break down and sell off. And of course, it did. And so that's the same scenario you get with these. It's just such a clean break. It's so obvious that anyone who gets sucked into it is quickly gonna get, like, reversed and shaken out of it. So you gotta be aware of these really clean lines. A one-day pop could just be enough to suck you in and spit you back out again.

Craig: Yeah. Well, I tell you, the other thing I see on that chart, I've counted this on my site a few times, is just the abundance of massive red candles this year. I think we're up, with today, today's either number 29 or number 30 of about a $30, $25 to $30 big red candle.

Chris: Right. [crosstalk 00:16:15]

Craig: Certainly outnumbering the green ones. And that's all been, that all keeps sentiment in the toilet, that's for sure. But we'll watch what? As we go into the...maybe stay above $1760 through the rest of the week on the downside, to help us feel positive? Because otherwise, we're looking at $1720, and if you can turn back higher, we gotta start picking off that $1815 or so from two weeks ago before we can make a run at $1835. Does that sound about right?

Chris: Yep, yep. I say we'll be ping-ponging between $1750 and this $1735. Whichever way it breaks from there will probably be the start of something a little bigger and better, or uglier, whichever way it breaks. But, you know, I like to look at the gold miners for a little bit of insight as to what they're doing. And when you look at the gold miners chart, obviously they've been just beaten up as well. But they have definitely had a nice rally, and they're having a really nice pullback. Today was a gap down with GDXJ, which are the juniors. And considering gold and silver are down pretty big today, we're actually seeing them claw back, and they're actually positive on the day. And it's pretty interesting because, when you look at the rest of the indexes, the stock market, they were pretty much negative this morning, other than the Russell 2000, and even the mid-cap stocks. And we're just starting to see money pile back into the markets there, in terms of risk-on. Before I go to those charts, real quick, let me just show you here, with the GDXJ, I mean we've got this really nice kind of potential reversal here, that we could see... Sorry, I'm tongue-tied here...

Craig: GDXJ.

Chris: Yeah. It's been a long week. I just got data back this morning, or yesterday. I lost my data on the data feed. I've been running off of just refreshing web pages, which drives me nuts. But anyways, GDXJ has got about 16% upside if this bull flag plays out. It's already had a really nice run and break to the upside. And I think there's potential here that we are starting to see shimmers of hope that the gold miner sector, and small-cap stocks in general, and individual sectors, are about to come to life. And the Russell 2000 is a really good way to see this. If we go back to look at the Russell 2000, just today, it has broken out to new highs. It has been dormant all year. All of the leading sectors of last year have been trading lower and sideways. The Russell's a good visual of what most sectors have been doing, and they're just starting to break out.

And what's really cool is, about a week and a half ago, we saw the mid-cap stocks break out as well. They did the same thing. And so, they're obviously a little bit larger stocks. So they broke first. Now the small caps are breaking, and that means we got pretty much everyone onboard. We got the SP-500, the big blue chips, the NASDAQ's been making new highs. We got the mid-caps now breaking out, and now the small caps. And when the small caps break, that's when we see a lot of money become risky, to jump into the market, they're willing to go into these gold miners and buy them up, even though gold and silver are tanking. And that's a good sign that risk is back on, people are dumping into these very small micro-cap stocks, highly leveraged little plays, expecting the markets to go higher, and this could be a big year-end kind of Santa Claus rally across the board. And maybe gold miners and silver miners actually do really well, even if physical metals just kind of flounder for a while. So...

Craig: Yeah. Well, you know, and the GDXJ, really, from last year, kind of led everything lower. The GDXJ just kept making lower lows, even while the GDX was maybe trying to hang in there and the metals were hanging in there. So, maybe the GDXJ kind of signaling the way back up, and leading things higher. It definitely looks better than the GDX.

Chris: Yeah. Yeah. Yeah, for sure. It's got a lot more power to it. And it just feels like that energy's coming back to the markets, which it's been a long time coming. So, it's still early stages. I mean, this is really just one little shimmer of hope today, just because the Russell broke, and the junior gold miners are rallying on a day when metals are kind of crashing. But that is a good sign.

Craig: Yeah, and in the very short term, as we record this today, you mentioned the gap down the GDXJ did. It's now turned green. Maybe if, a positive reaction to Powell, get, like, an engulfing reversal, daily candle maybe.

Chris: Yeah.

Craig: And then, from there, if this is something that could help establish some momentum and lead us out of the wilderness here, what level would you watch in the GDXJ going forward this week and next, to make you feel like, "Okay, here, we're picking up steam again?"

Chris: Yeah. I think it's actually, you know, turned a corner. I'm expecting it's going to rally here. It really has shifted to the upside. It's at support. If anything, I'd be more inclined to... If you're in it, if you're in miners, I'd be probably looking to get out somewhere probably around $40, maybe even a little lower down here, around $39, $40, or somewhere down here. Give it a little more room to shake around a bit. But overall, I mean, it's already had this nice impulse move. It's pulled back. If it can start to fill this gap, if it could start moving above $43.90 or so, that would probably be a good indication maybe to hop back in. If this trend has actually changed, it will have broken the highs from four days ago, which is kind of a technical trigger. And that could really send things higher going forward. So, if it can have a reversal here, and close above that $43.90, that would be, like, a really short, speculative type of play to get in, and see if it can actually have this run, because there's quite a bit of upside potential here. So, I like it.

Craig: Well, that would imply... I mean, yeah, you risk on, you know, looking into the smaller cap mining shares, as well as all the other small caps, but also imply higher metal prices. It's probably not gonna happen unless the metals are moving higher. So, that would be a good sign. Chris, before we wrap up for this month, and there's a lot going on in the world, oh my gosh, and we've seen, over the course the past month the base metals, I mean, gosh, zinc, things like that, have gone crazy. Copper rallied up to its all-time highs again. And there was a story about how there wasn't any metal at the LME, shortages everywhere, crude oil going like mad, natural gas going like crazy, though has since pulled back. Any other charts on your mind, things we might wanna keep an eye on?

Chris: You know, I think a lot of the excitement really is that money has started to flow into the mid-caps. Now the small caps are breaking out. That, to me, is like the big kind of green flag, that risk is coming back into this market. And we just have to get through this week's kind of Fed news, and see how things kinda shake up. The stock market's had a very strong run over the last month and change. So even if we get some news today that causes a 2%, 3% pullback in the stock market, it's actually, we've been overdue for a pullback. And any pullback on news that goes against the trend is typically short-lived. So, really, in a way, I'm like, "Okay, well, if we get news today and we see the stock market pull back 2% or 3%, it's actually gonna cleanse the market, it's gonna give us that reset that we needed. And then I think the markets could go a whole lot higher.

And with the Russell breaking out, the small caps, I think we're gonna start to see sectors come back to life. They have been very dormant all year. The GDXJ is an early warning sign that, hey, this might be coming back to life. You look at some of the ARK ETFs, which really kind of cater to the very aggressive traders, very risk-on people, who chase the markets up, and they wanna be in high-momentum stocks, they're all coming back to life. They're showing signs of new buy signals, new trends. And so, when those ARK funds are moving up, that's telling us that the risk money is moving back in, and we could see a pretty strong rally. So, I'm really just looking for where the next hot sectors are, how far these markets are gonna run, and just kind of ride this out, because we're long the markets here, and I think they're gonna keep going.

Craig: Let's close with that chart you've got pulled up there. That looks like copper.

Chris: Yeah.

Craig: You know, a lot of folks follow copper, and it's Dr. Copper. And, you know, it's related to silver, in a way. And I was thinking, you know, when we got to $4.80 or $4.90 copper a couple weeks ago, I thought, hey, if it breaks out, starts running to $6 or $7, has a move like iron ore, you know, or aluminum, or you know, [inaudible 00:24:50] or the rest, you would think silver would follow along. And that's still in play. So let's wrap up with that. What do you see in copper? What is it telling you?

Chris: Yeah, I mean, copper has put in a big base. It looks like it's kind of, it's had a huge consolidation. I think it's on the upswing. I mean, it's had a pretty good pullback in the last couple of weeks here, but it is settling to support. Hopefully, this isn't a little bit of a bear flag and we see a breakdown and go lower. We really do wanna find a corner here and start to turn up. The copper miners, like the COPX, C-O-P-X, ETF has had a very similar move to the gold miners, where it's had a very nice breakout. It's broken through some resistance levels. It's had a nice pullback, and very similar to what copper has done. It's kind of broken up two previous pivot highs. It's pulled back. And hopefully, we're gonna find some traction here. Maybe the dollar is about to pull back and sell back to the lower end of that range, that channel we looked at, and that'll probably send some of these commodities higher.

I think the miner sector... I mean, when we look at, for example, my BAN hotlist, which is sorting the stocks, the sectors from the strongest sectors down to the weakest, gold and silver miners are starting a recovery phase. They just turned into a recovery phase, which means they've been in a downtrend, in a bear market, based on my technical analysis, and now they're in a recovery stage. So, one of our members has done a lot of analysis on just our major trend changes. And typically when something moves from a bearish phase, which is a bear market, to a recovery phase, they can have some huge moves, massive runs. So, hopefully, you know, these two sectors go from the bottom of the pile, and they're gonna start dancing their way up this list and become shiners, you know, by early-mid next year, and be leaders going, "Wow, look at those things go." So, you know, what's out of favor eventually will come into favor, and they're just starting to turn a corner from a technical standpoint.

Craig: Yep. Chris, just great stuff. It always is. I always look forward to visiting with you at the beginning of every month in these programs. Tell everybody though, if they wanna keep watching you through the rest of the month, tell them how to find you at thetechnicaltraders.com, and what they get by being a member there.

Chris: Yeah, sure. Thanks. So, you can follow me at thetechnicaltraders.com. And every morning, I share a video, kind of like what you and I are doing, just really focused on dancing through all the key indexes, commodities, looking at the daily, weekly charts, looking at intraday analysis of what to expect today, tomorrow. And we just trade ETFs and commodities around that. And it's very educational, so you learn while you actually start to trade ETFs. And it just is a really well-rounded strategy. I provide investing signals, position trading, and sector trading, which is what I just showed you there a minute ago, is how you can rotate into the leading sectors when the market becomes favorable, just like it's turned now. So, we're getting into some exciting times here. And you can follow me at thetechnicaltraders.com.

Craig: That website right over your right shoulder there, in the light. Looks great. All right. Well, thank you, my friend. I look forward to seeing where we are by the time we do this again next month. And again, just a reminder to everybody on your way out. Give Sprott Money an attaboy and a thanks for sponsoring this kind of material. I think, obviously, just like me, you've learned a lot over the last 20 minutes or so. So, like, subscribe. That helps build a wider net for us to distribute this information. And as simple as it sounds, it really does help. But also, I mean, jeez Louise, silver is still down here at $23. Get your hands on some, because premiums right now are a lot lower than they were earlier this year. Go to sprottmoney.com. They've got great deals, always have great deals, and if you need a place to store it, they can help you with that as well. Call them as well, at 888-861-0775, and somebody will be happy to help you, and we'll be happy to help you with another one of these monthly precious metals projections videos next month. Until then, Chris, thanks for everything.

Chris: Yeah, thanks, Craig. Take care. See you.

Craig: From all of us here at Sprott Money News and sprottmoney.com, thanks for watching. We'll see you again in December.