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Another False Dawn in Metals?

Silver and gold coin

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We’re getting a nice pop in Gold and Silver today, but not so much in the miners. My concern is that Gold was neither extremely oversold or positively divergent ahead of this rally. We didn’t get a positively divergent lower low ahead of the rally in Silver either. These rallies could be just a wave B before heading lower again in wave C. At the same time, DXY is hovering above short-term support, but we didn’t get a negatively divergent higher high of note, like we did in March, prior to this drop, which means it could be a short-term correction before higher again. Now, an extreme RSI and/or divergence is not required for a peak or trough, but it certainly increases confidence in such turning points.


DXY Chart


Gold Chart

Key resistance in Gold is at $2,000. Until that is broken, the risk remains down, and even then, there’s no guarantee that the bottom is in until we take out $2,055 on a closing basis.


Silver Chart

Silver needs to close above ~$24.40 in order to increase the probability that the bottom is in. Whereas if we do drop down to a positively divergent lower low first, this would provide far greater confidence that we’re going to test the high of $26.23 next.

The fact that GDX and SILJ are not following suit is not too big of a concern because they can lag the metals initially in both rallies and reversals.

My concern remains that if the Bullion Banks want to draw in as many buyers as possible before dropping the hammer on the metals, this is precisely the way to do it. Create enthusiasm, fear of missing out, and then pull the proverbial rug from under them.

Then there is the FOMC and the ECB rate decisions coming next week. Will they follow the Bank of Canada and Australia and hike? Until we get that out of the way, there is little in the way of clarity in the short-term.

But, once again, whatever the low of these corrections turns out to be, it will be followed by a gargantuan rally imho, much like the bottom at $1,272 in Gold on May 2, 2019.


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About the Author

David Brady has worked for major banks and corporate multinationals in Europe and the U.S. He has close to thirty years of experience managing multi-billion dollar portfolios including foreign currency, cash, bonds, equities, and commodities. David is also a CFA charter holder since 2004.

Using his extensive experience, he developed his own process utilizing multiple tools such as fundamental analysis, inter-market analysis, positioning, Elliott Wave Theory, sentiment, classical technical analysis, and trends. This approach has improved his forecasting capability, especially when they all point in the same direction.

His track record in forecasting Gold and Silver prices since has made him one of the top analysts in the precious metals sector, widely followed on Twitter and a regular contributor to the Sprott Money Blog.

*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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