Five Tries and Out

COMEX Gold Price Rally: Could This Be the Breakout Above $2500?

After selling off early last week, the COMEX gold price held critical support and then began to rally. As the new week begins, it begs the question: Could this fifth attempt at a breakout above $2500 finally lead to a new surge higher in price?

We'll try to answer that question in a minute, but let's start this week where we left off last week. On August 5, almost all global markets were sharply lower as concerns over the Japanese yen carry trade unwind drove immediate liquidity demands. COMEX gold and silver were hit hard, and though prices had fallen almost precisely to the areas we were expecting, it was pretty hard to pull the trigger on any new buy orders. If you missed last week's post, I encourage you to read it now.

• https://www.sprottmoney.com/blog/be-right-sit-tight 

From that article, here's yours truly being a little too cautious for his own good:

But that moment has passed.

Gold Market Analysis: Key Support Levels and the Path to $2700

This week we must focus upon what has transpired since, because this is important. Namely, the price of COMEX gold fell to its 50-day moving average last Monday and then held that key technical level as support through Thursday, when it began to turn higher. By Friday, it had not only held the 50-day, it had also moved back above its short-term 20-day moving average. 

In my Friday podcast at TF Metals Report, I mentioned that this technical achievement likely foreshadowed another trip to the top of the current price range, and that's exactly what has occurred. Here's the chart from last Friday, the 9th:

And here's the current chart as I type on Monday, the 12th:

As you can see on the chart above, the price of Dec24 COMEX gold first tapped $2500 on April 12. It has since revisited that level in mid-May, mid-July, and most recently on August 5. That's four tries at a breakout from what is a clearly defined trading range. Could this current attempt be the one that finally brings the breakout? Perhaps. 

Some of this today is being driven by geopolitical concerns due to current fears of a region-wide war in the Middle East. However, this latest push back toward the top of the range is also being driven by lower interest rates, a falling dollar, and an expectation of multiple fed funds rate cuts before year end.

So what happens if/when COMEX gold does break out above $2525? This has been a frequent topic of discussion in my monthly videos with technical analyst Chris Vermeulen. Chris has repeatedly stated that the next price goal for COMEX gold is somewhere near $2700. He stated this again in the most recent video recorded last week. Here's a link so that you can watch for yourself:

• https://www.sprottmoney.com/blog/stock-market-dips-as-gold-nears-record-highs 

Silver Price Predictions: Will COMEX Silver Follow Gold's Breakout?

With COMEX gold poised to break out and move toward $2700, what might we expect to see from COMEX silver? Will it rally again, too, or will it stay near $27 and watch the gold-silver ratio explode to 100:1?

You may recall that we asked this same question earlier this year when gold broke out of an earlier range and headed toward $2300. Would silver remain near $23 with that ratio at 100:1? We figured that it wouldn't and that silver would eventually rush to catch up. By early April, the pressure in silver became too much and it rallied from $25 to $33, or about 30%, in seven weeks. When gold breaks out and rallies this time, another 30% move in silver would take it to $35 or so. That's still not a new all-time high, but it's getting closer.

In summary, the tone of this week's post is noticeably different from our previous note seven days ago. But that's OK. That's how markets operate. While I wish I'd had the courage to buy some gold near $2400 seven days ago, this current rally should leave all of us optimistic regarding higher prices to come. The key will be the timing of gold's breakout above $2500. Will the fifth attempt be the one that does it? We'll know soon enough.