Gold Shows Signs of Life, but We’re Not in the Clear Yet - Weekly Wrap Up

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Craig: Greetings once again to everybody at Sprott Money News and sprottmoney.com. It's Friday, April the 16th. It's time for your "Weekly Wrap Up". We hope to have Eric back soon, but in his place, you know, we've been having a number of guests, hosts stop by to help me out with these weekly summaries. And this week we're bringing in Chris Vermeulen. People know he's one of Eric's favorite technical analysts. He runs a company called TheTechnicalTraders.com. You can find all of his services there. He also helps us out here at Sprott Money with our new series, "Precious Metals Projections" that we usually record the first of the month or so. If you go to the Sprott Money website, you look for analysis, you'll find that amongst the links there to what we recorded a couple of weeks ago. It's turned out to be rather prescient stuff. So, it's great to have Chris join me today for the "Weekly Wrap Up." Chris, thank you so much for your time.

Chris: No problem. Thanks for having me.

Craig: And again, as usual, your questions for the "Weekly Wrap Up" or "Ask The Expert," or even "Precious Metals Projections," you can always send them into us at the email address submissions@sprottmoney.com. We try to get to as many as we can. I've got three or four we'll answer today toward the end of this call, but also don't forget sprottmoney.com should be one of your first choices anytime you're in the market for physical precious metal. We've got some 2021 Gold Maples, we've got some one-ounce Royal Canadian and gold bars available in good quantities right now, plus a lot of other silver and platinum products. You just go online and buy them, that's for sure, at sprottmoney.com. But you want to talk to a human being, I don't blame you. Pick up the phone, 888-861-0775. Chris, let's just dive right in. When we recorded that "Precious Metals Projections" podcast two weeks ago, we were both looking at the chart thinking, okay, things are looking better here. The dollar was overbought and pulling back. The bond market was oversold and beginning to rally. That trend has persisted. And now, it looks like gold is maybe, just maybe, finally starting to break out of the seven-month-long consolidation bull flag pattern. What do you see as we look to wrap up the week here on this fine Friday?

Chris: Yeah. So, there's a lot going on. I mean, gold, I wouldn't say it's in a major bull flag. I wouldn't say it's breaking out yet. There's a lot of excitement. I'm getting really excited about the miner sector because you know, gold broke out in 2019. It's having its first real significant pullback, and this type of pullback is going to be probably one of the best and last opportunities to get in, I think, at a really good time. So, I like gold here. It's got this big bull flag pattern that's been forming, but it really hasn't broken out yet. It's broken above the 50-day moving average, which is a good sign, but it still has quite a bit of work to do, I think, before the trend fully changes. I'd like to see it above $1,800 and potentially rally quite a bit higher, $1,850 or so. And then, any pause or pullback from there once it reverses to the upside, I think is going to be kind of that confirmation that, okay, this trend has now put in a bottom, it's making a higher high, it's got a higher low, it completed a bull flag formation. So, I'm not really looking to jump in at the moment for gold. I think the gold miners are actually more of a prime opportunity at this point than gold. I think gold is still a few weeks away from potentially confirming an uptrend. But I like it. And it's showing signs of life, but we're not out of the clear yet.

Craig: Let's back up for a second because that was one of the questions we had this week about what are those levels that will get more people excited and start generating momentum? Yeah, the train may be still in the station, but it's starting to lurch forward. How's that? You like that little metaphor?

Chris: Yeah.

Craig: So, there's still time to run alongside and maybe jump on if you want. However, as you get past technical levels, like you mentioned the 50-day moving average, we moved above there yesterday for the first time in two months, what are the next set of levels for people to watch where you think, okay, once we're past there, you know, the engineer opens the throttle a little more and the train starts moving faster?

Chris: Yeah. Well, gold's got a little bit of work to go. I think it needs to get above $1,815, which would be more or less a Fibonacci-measured move that's based on the rally we saw a couple of weeks ago. And then this little pause we saw last week, and this week we're starting to extend out of it. One thousand eight hundred fifteen dollars is kind of that upside measured move where this momentum should carry us. Right now, gold's at $1,779. So, it's still got some room to run here. When it breaks that $1,815 level, that is going to break a previous high on the chart in February, near the end of February. And I would consider this an impulse wave, meaning the trend I think has reversed and it's broken two previous pivot highs, one from the March high and then one from the late-February high. And when you've broken two previous highs and the chart can hold above that level, that means that momentum has shifted from always being in a downward bias to now it's actually making an uptrend, which is higher lows, higher highs, and it's broken two levels of resistance. So, $1,815 is a really critical level on the gold chart, I think. And that's when I think it could start to trade sideways from that level for potentially a few months or so. There's a lot of work to be done for it to get out of this bull flag still. The more it trades sideways, the more bullish it becomes, but the $1,815 is going to be the first kind of line in the sand that, hey, if it can hold above that on a weekly basis, then I think we're off to the races I think for gold picking up more speed. Now, the gold miners should give us some leading, some insight. Typically, the miners are gonna move ahead of this. They should be outperforming gold. And if are, then we can definitely be more excited that gold is put in a bottom.

Craig: Let's talk about that because, yeah, gold just got through its 50-day yesterday, but the GDX and the GDXJ both moved above their 50-day moving averages last week or the week before. So, is that a good sign? Of course, we are approaching earnings season for most of the major miners as well. And you know, there's one fundamental factor there. A lot of the earnings of these producing gold miners are gonna look pretty favorable on a year over year basis because the first-quarter average selling price last year was $1,480 amongst these gold producers. This year it's going to be closer to $1,700. That's a pretty significant amount. So, we might get some fundamental boost too. What do you see when you look at let's just pick maybe GDX or GDXJ or even the SILJ?

Chris: Yeah. Yeah. So, the gold miners are a little different than the silver miners. So, if we look at GDX or GDXJ, both of them really have more or less the same chart. They're both making a series of some higher highs, higher lows. They've broken the 50-day moving average. The GDX to me is actually kind of the stronger-looking chart. It has got kind of the best pattern. It has broken more previous highs on the chart. Seems big money has been flowing into the stock market, in general, into the mega large caps. We've seen a lot of money flowing into just the big, big companies, whether they're huge tech like Microsoft and semiconductors and Apple and stuff. We've been seeing those do really well. And, of course, it has actually bled through into the big, large-cap gold miners. There's just, I guess, a comfort level there with a certain amount of people. So, people are going there. I like them. I wouldn't say they've really fully broken out. GDX has more or less broken out as of yesterday. And you could argue here is two days into a new leg higher, which is pretty exciting. When we look over at the GDXJ, let me just...the GDXJ still has a bit more room to run. In order to break out, it needs to really get above like 53, which is quite a ways up from where we are. It's just more volatile, right? So, it naturally needs to move more in order to break out of the bigger range that it's chopping around in. So, I like the larger caps at this point. But the small caps are, you know, once this train leaves the station, the small and the mid and, you know, the microcap stocks are gonna go probably absolutely ballistic.

Craig: Yeah. Yeah. We get price back up nearing $2,000 again, you know, and people start believing that what happened last year wasn't just a fake-out. We could get a rush of cash. What about that SILJ, the Junior Silver Miner ETF? It's an interesting chart, obviously, because silver has a different chart from gold. Man, does it have a hard time getting over $1,600 on a daily or even weekly basis? What do you see there?

Chris: Yeah. It's a really noisy chart. I mean, it's got really clean cycles. It's been oscillating up and down, up and down, you know, since August of last year. Overall, it's at the upper end of its range. It's at resistance. Cycle-wise, I mean, it's probably going to walk into a little bit of pressure. It's still making lower lows and it hasn't made a higher high just yet. We're very close today. There was so much excitement in the precious metals market yesterday, on Thursday that you know, you can see SILJ opened higher and then sold off with some pretty decent volume. A lot of gold miners actually did. A lot of the big...you know, it's just everyone's getting too excited, even though the masses are not in this sector yet. You look at the Robinhood trader top 100 account, there's not a single gold stock in there, which is awesome. That means there's lots of room for this to mature, but overall, you know, the bias short-term, just everyone got so excited yesterday and most miners opened up higher this morning and then, you know, the big players kind of sold into that. And so I think we're going to see them actually pause and pull back a little bit. When everyone is frothing at their mouth like they are right now, like yesterday and today, everyone wants to talk about gold miners, it's usually, actually kind of done for a few days until that optimism wears off and price pulls back a bit. But I like silver. Silver has definitely held up a lot better, silver miners I mean, than gold miners.

Instead of fading lower and lower, I mean, we still continue to see higher lows on silver. And it's trying to break to the upside. If it can, you know, stay above $1,600 on a weekly close, it'd be a good starting point. But really I think we gotta get up and really hold kind of, you know, above $1,700, $1,750 for at least a couple of days or on a weekly close. And that'll be like a pretty strong signal that, "Hey, this has broken free. We're starting another leg to the upside in SILJ." And I mean, there's quite a bit of upside on that ETF alone if we were to just look at the upside based on this chart pattern. From where it is today, it can move 55%. And what's really crazy is actually the Gold Miner Juniors, the GDXJ, based on his chart pattern, it says it should run 86%. So, you know, it's funny because silver got so much attention there back in February with the short squeeze and everyone piling in. If you look at Google trends, everyone searched how to buy silver and silver stocks. I mean, it was through the roof. It dwarfed everything else. And so everybody is paying attention to silver, but the charts are actually saying that gold miners actually have more upside potential, which is why I'm getting really excited about gold miners. I've thrown them in my watch list. I'm starting to sort and look at them because I think we are, you know, on the cusp of another major cycle kind of like we saw in 2001, we saw in 2009. This is like another cycle that we are just about to start, I think. And a lot of money can be made in these little golden rockets.

Craig: You bet. And I might add too. It is the third Friday of the month. That means it is equity option expiration day here in the U.S. So, you talk about the shares, jumping higher at the open, and then being sold by big money or perhaps even market makers. So, keep that in mind as we go through the day. That might kind of restrain things a little bit. You never know. I want to add though we have several questions about silver, what your upside target might be from here in the next move in silver as well. And then Chris, what are you watching? I saw and we were talking on my side about what looked like kind of a false breakdown and a stop run below the 200-day moving average a couple of weeks ago to kind of washout whatever speck money was left to be washed out because we quickly recovered, found quite a bit of support at the 200-day. And now we're making a move on the 50-day. Is that how you see it? Or what do you see there?

Chris: Yeah. Silver, it's a pretty ugly chart. I mean, it doesn't have a whole lot of pattern to it other than just chaos and a couple of big red bars here and a couple of big green bars there. It's kind of, you know, still trading in a very big range. I mean, I could argue here that I'm really not all that excited to add to my silver or get involved in silver stocks until it breaks out of this range that it's in, which is really the $22.50 range all the way up to $29.50. So, I mean, it's starting to break out on a short-term basis, but if we're talking long-term big trends here you know, that $29 level is going to be really critical. When it breaks that, then, you know, it is really going to take off. And the next stop is $40. So, it'll be a quick 33% move. Short-term basis looking at silver, again, it's got much of the same pattern like gold and gold miners do. It has pretty much had its run. I think it can only go a few percent higher here, $26.70 or somewhere in there. And then I think it's going to pause and pull back and take a little bit of a breather because it's hitting its first resistance level. It has hit a Fibonacci-measured move, which is simply the momentum from the previous pattern is saying it should carry over this far and we should run out of steam. So, when we run into resistance at 100% Fibonacci-measured move, you know, there are two pretty important reasons why it's likely to stall out or at least pause and trade sideways.

And it's just because it has run out of steam and there's a bunch of overhead supply of people who bought there before, they rode the rollercoaster down and they get back to breakeven, and they say, "Uh, just me out of this. That was scary." So, once we eat through that...like if we look at...let's take a look at SLV, I guess, we'll use some pricing on SLV. I mean, I'd like to see it get back above $24.65. That would be you know, a higher high, that would be a Fibonacci-measured move. And I think that could start to kick the trend to the upside. And, of course, if silver miners are outperforming, which is what they're already starting to do, then we can be a lot more confident that silver is probably put in a bottom. It's probably going to chop around a little bit more and the silver miners are probably going to keep muscling their way up.

Craig: Yeah. You know, you mentioned chopping around and going sideways, which it is kind of effectively doing, but I'll remind everybody because a lot of people have short memories. A year ago at this time, gold was moving higher and silver was going sideways all the way into July while gold was breaking out. And I know on my side, people were getting angry and frustrated, and then bang, silver went from $18 to $27 in a month. That's a 50% move. So, when Chris mentions a 30% move, I mean, we have history of doing more than that. Chris, one last question that came in, we don't talk about this too often. But Sprott Money does sell platinum if you want to get your hands on some. Do you follow platinum? And if so, what do you see on that chart?

Chris: Yeah. Platinum is great. I mean, platinum broke into a bull market in December, so it's pretty fresh. It's been consolidating in a sideways pattern and it's got, you know, what looks to be a bull flag pattern. It should resolve to the upside. I like it. I mean, it's the freshest bull market out of everything. Gold broke into one in 2019, silver in 2020, and platinum in, you know, really January this year is when it was really confirmed. So, it's the freshest, it has got a lot of upside potential. I'm not too excited on it in the short-term right now. I do think it could have one more little leg down and test that $1,100 mark, maybe even the $1,050. If it does do that, it's going to be, I think, a real screaming buy at $1,050 because that's the breakout level where the bull market started. And a lot of times when price comes back down and tests those bull market levels, it's kind of like a kiss goodbye, it comes down and touches it and then takes off. That is a really key point to get into. And we're seeing that with, you know, the gold miners. I really like gold miners more than anything else just because they had a big breakout in 2020. They've come all the way back with a mega bull flag. And they're testing that breakout level. They put a double bottom in in the last month and a half and they're just to turn up. So, I like platinum. It's definitely fresh. I think it has got a little bit, you know, $1,050 is the key level. Gold miners are already ahead of that. They just kissed with the double bottom, that breakout level and they're starting to go higher. So, they're a little bit ahead of the curve versus platinum.

Craig: And Chris, if people would like to have you and your analysis on a daily basis, where do they find your work?

Chris: Sure. Yeah. Go to thetechnicaltraders.com. And I got a blog on there every day. We post some interesting content on the markets and I focus on trying to find the best asset now to get into. Precious metals, those sectors are just starting to work themselves up our best asset list, showing signs of strength. So, really excited for this market going forward. And I share my morning analysis every day. I share my charts and then whenever we've got a trade, I send it off to subscribers as well and we all trade our way to wealth more or less.

Craig: Pretty valuable stuff if you ask me. And again, Chris, you and I will probably visit again about two weeks for the "Precious Metals Projections" for May. I look forward to talking to you then.

Chris: Sounds great.

Craig: And again, if you enjoy today's podcast or the "Precious Metals Projections" or the "Ask The Expert" segment, please be sure to subscribe, share, maybe even give us a like, that will help us to reach a wider audience. And then lastly, and as always, if you're in the market for physical precious metal, go to sprottmoney.com. We've got all the bestsellers in good quantities right now. Gold, silver, platinum, all of those that you can choose from. Go online, sprottmoney.com. Once again, that number 888-861-0775. Many thanks to Chris Vermeulen. Chris, have a great weekend.

Chris: Hey, same to you, Craig. Take care.

Craig: And from all of us here at Sprott Money News and sprottmoney.com, have a great weekend. We'll talk to you next week.