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Gold Leads the Way Higher - David Brady (20/02/2020)

Neatly stacked rows of gold and silver bullion side by side.

February 20, 2020

Two weeks ago, I wrote “Decision Time for Metals and Miners Approaches”. Since then Gold has hit a new high and Silver and the miners have rallied to their highest levels in over a month. Now that we’re finally seeing some movement, it’s time to consider what could happen next and update the levels to watch…


Gold finally breaks out of its range for past two months to the upside. But it is extreme overbought and its new high was negatively divergent according to the daily RSI and MACDs. That said, the trend is clearly up based on a series of higher lows and higher highs. Unless we break the support zone between 1602-1605, I am looking up towards 1640.

Silver has underperformed Gold recently, but that just means it has more room to rally, imho. Aside from perhaps one more short-term pullback, I am still expecting north of 20 before our next major peak. Only a drop below the support zone between 17.30-40 would make me reassess Silver’s bullish prospects.

After a series of lower highs and lower lows until it bottomed out in November, GDX has been setting higher lows ever since. All we need now is a move above the September peak of 30.74 to signal that a far bigger rally is just getting under way. This assumes we don’t see a break of support at ~27.70.

Saving the best for last, SILJ appears ready to take off in a wave (iii) of iii, both on the daily and weekly chart. Only a sharp drop below 9.90 would make me reconsider.


Real yields continue to fall into negative territory and are now at their lowest levels since 2016. This should remain supportive of Gold prices unless we see a crash in stocks coupled with a sharp decline in inflation expectations. Even if such a spike in yields were to occur, it would be unlikely to last long as the Fed rides to the rescue again.

5-Year Real Yields - Courtesy of Quandl.com:


Speaking of a reversal in stocks, the latest FOMC minutes indicated that the Fed is planning to taper its liquidity injections into the repo market beginning in May. Expectations are that the Fed has the market’s back no matter what. Given extreme valuations and narrow leadership in just five stocks, a February 2018 reversal would not be a surprise should the Fed follow through on its taper. Again, a dump in stocks could weigh on metals and miners in the short-term.

POSITIONING & SENTIMENT remain at extremes in both metals, but especially in Gold. While this maintains the risk of a sharp reversal in prices at some point, in a bull market trending higher, it doesn’t matter until it does.


Absent a spike in real yields and / or a break of key support levels, I continue to look north in both metals and miners, with the possibility of significant rally to follow, especially in Silver and the miners.

Don’t miss a golden opportunity.

Now that you’ve gained a deeper understanding about gold, it’s time to browse our selection of gold bars, coins, or exclusive Sprott Gold wafers.

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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.