Gold & Silver Price Projections

Craig: Hello again from Sprott Money, sprottmoney.com. We are now into the month of June. The year is almost halfway over already. And with the new month brings a new month full of content. We're gonna start with your "Precious Metals Projections," something we do every month. I'm your host, Craig Hemke, and joining us, as he always does, is Chris Vermeulen of thetechnicaltraders.com. Chris, good to see you, my friend.

Chris: You too, Craig. Always a pleasure.

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Chris, let's pick up where we left off last month. We've had a heck of a run in the metals, even though the economy has been firm. We've all wondered what will happen next if the economy begins to weaken. As we record this, here on the 4th of June, we're all waiting for the next jobs report to come out here in the U.S. That will probably impact the markets. I know you've got some thoughts on the macro and on that jobs report. What can you share with us?

Chris: Yeah, I think there's a lot going on. I mean, you and I have been talking about a big shift. I believe we're in this major kind of topping phase in the equities market, which takes a long time to unfold. And of course, the Fed and government systems and plans always kick the can down the road. But things are starting to develop. If we take a look at the unemployment rate, when it crosses above the 24-day, or 24-month moving average, which is the red line on these charts, almost every time it does this, we go into some type of major recession, or stage 4 decline, or some type of reset. Something bad happens. We generally don't know what to call it until after it's done. But we've had that happen. And, you know, we're starting to see unemployment start to rise, and we're seeing financial, factory orders, everything starting to slow down from the manufacturing side. So, that is another sign. Obviously, people starting to get laid off.

And if we take a look over at, more or less, savings, from people's accounts, if we take a look at excess savings that people had before COVID, everyone seemed to make a lot of money, or saved a lot of money. They had huge money in savings. And finally, here we are, years later, people have finally burned through their capital, all of their savings that they've had, and the earnings they had, because businesses were booming through that timeframe. And more or less, we are now down into a deficit, and it's talking about how credit card debt is now starting to rise over the past couple of months, because people have burned through their savings. So, unemployment, factory sales are slowing down, or manufacturing. People have burned through their savings. All these things are telling us there's a big, slow shift happening. And of course, late stages of a stock market is typically when we see commodities start to come to life, precious metals, like gold specifically, tend to perform the best, which it has been. So, there's all kinds of things, you know, painting to this huge macro picture of momentum is slowing, from a strong bullish and strong economy and stock market, to things are starting to slow, and run out of steam. But these are huge wheels. They take a long time to slow down and reverse direction. But, you know, everything is kind of pointing in that direction, that it's slowing down.

Craig: It would be very interesting to see what that jobs report is on Friday here in the U.S., and then obviously, the impact on the bond market, the dollar index, and then down to gold and silver and the rest of the commodities. But you're right. I've seen some very scary data, something that the Fed put out couple of weeks ago, that showed 52% of Americans don't even have $2000 in savings. So, the spending cash, the cash to service existing debt, all of that stuff's gonna have to come from somewhere. I'm sure it augurs eventually for the next massive stimulus and QE program, which will probably be good for all the markets. But in the meantime, there's kind of a lag here, of a declining economy, which seems to be impacting the commodities. Hasn't really hit the broader equities market yet, but I know you've been talking...we spoke last month about little more of a rally before it tops out. Few weeks have passed since we last spoke, Chris. What do you see now?

Chris: Yeah. I mean, when we look at the market, actually, if we step back and look at the big picture. So, this is the weekly chart of the S&P500, and, as I've mentioned before, I love to look at the stock market like the ocean. The tide is either going up or going down. If the tide is going up, in a bullish phase, we wanna own equities, naturally. When it's going down, we really wanna be very defensive, and we don't really wanna be holding equities, and right now, we are in a rising tide. And when we look at this market, it's had a very nice rally over the past couple of months, and we are flagging in a tight pattern. This is actually a fairly bullish pattern, that is still pointing to about a 5% to 7% upside move in the S&P500. Same with the NASDAQ. So, I think we could still have another push higher. Now, there seems to be a wave of lots of negative news, things slowing down, yet the market actually has a bullish pattern, and we've seen some selling over the past few days, but it's really just, I think, news-driven.

The momentum is still to the upside in the grand scheme of things, and the stock market loves to climb a wall of worry. The more people get worried, the higher the market seems to go, and people get left behind, and people keep trying to pick a top, and they just get run over, and have these massive losing positions within inverse ETFs. So, you know, I think we've got a leg higher. In fact, if we look at the S&P500, typically, we see the stock market top out in June or July. Last year, we saw the stock market top out right at the beginning of July, and then it goes and fades down into more or less late October. That's the typical kind of price action. So, I believe we still have another four or six bars, on that weekly chart, to the upside, and I think the stock market will top out probably, hopefully in a few weeks later this summer, because the market is still strong, we are still long the markets, and, you know, I think there's room for another squeeze higher. People think it's topping with this recent news, and usually that means the market wants to go higher, if everybody seems to be flipping bearish. And we saw a big wave of fear. The VIX spiked last week. We saw a washout low on the charts, of the equities markets. If we look at the S&P500, and we zoom into the price action, we saw a huge flush down in the S&P500, and a big rally back. That is, like, a reversal type of bar, where it flushes down.

The NASDAQ did the same type of thing. It...pull it up over here. The NASDAQ pulled a huge, huge type of reversal bar, where it flushed all the way down, almost got to the 50-day moving average, and then clawed its way back. And these are usually signs of major, major bottoms, standout lows. This is a reversal candle, that usually points to upward momentum. We had one over here as well, when it had some volatility, had a flush-down, and then took off for a leg higher. And that's what we're looking for, is another leg higher. So, I mean, all the signs are there for the big picture, for the music to end, and it's gonna be, like, a retirement reset, is kind of what I'm calling it. Anybody who doesn't know what they're doing, doesn't understand how to protect their capital, the next financial crisis is gonna be a reset of their retirement. It's gonna wipe people out, unfortunately. So, it's important to understand this stuff, and make sure you got an action plan, and know...the buy and hold is a great way to get slaughtered over the next four or five years, I think.

Craig: Yeah. Not time to be complacent. Time to be paying attention. There's a lot going on in the world, no doubt about that.

Chris: Yeah.

Craig: Let's turn this, then, to the precious metals. I would imagine you've got a seasonality chart for gold as well, because when you pulled up for the S&P, it reminded me of the, we've discussed... I don't know, Chris. We've been doing this for a couple years now, so I remember these charts, and there you go. I knew you had one.

Chris: Yeah, yeah. Yeah. So, yeah. If we look at seasonality, gold naturally wants to top out just, near the end of May, which it pretty much has done. And then it literally fades down and pulls back into September. And this is a perfect reason why you need to understand the money flows in the market, because if you understand the stock market is naturally going down, it pulls most assets down with it. And so, we do see gold fade down during the same kind of time frame. And just before the stock market falls off a cliff and really sells off in October, that's when gold actually becomes a defensive play, and bucks the trend, and rallies ahead of that. But we, you know, we've recently been long SILJ. We just closed out a position, locked in gains, and now we've got the markets, you know, we're gonna see precious metals most likely struggle a little bit. And I don't think they're gonna pull back hard, by any means, if we actually look at the chart. I really think it's just gonna be a consolidation. Like, we saw gold have this first bull flag pattern, it had the second half, and it hit its 100% measured move. So, now it's just channeling through here. It might actually, you know, pull back a little bit more, and maybe break this low, to create a, it's called a complex correction, an A-B-C. So, a three-wave correction, and when it breaks this low, that's where people are gonna say, "Well, if it breaks that low, I'm getting out. It's breaking down." But that's what the market loves to do. It loves to pierce that. We'll usually see a volume spike, because everybody's stops get run, and then it'll spike down, usually intraday, or for a day or two, and then it'll take off without all those players.

So, I think there's a little bit more weakness potentially, but overall, this is a very big pattern, pointing to still $2650 for gold, over the next several months. I still am very bullish on it. It's just, it's got a big bull flag pattern, and it takes a, probably a few more weeks to digest, and work itself out.

Craig: And we discussed, for anybody that wants to know those longer-term projections, Chris went into great detail last month. It was terrific. So, look on the Sprott Money page, or wherever else you watch this content, go back and watch last month, because I thought that was terrific, Chris, how you laid out future targets, because, again, we're in uncharted territory for gold, at these all-time highs, and it's kind of hard to, you know, project how far things might go. And I thought you did a great job, and for now, again, a consolidation pattern, a bull flag, however you wanna put it, seems to be continuing. I want to roll that over to silver, though, because there's so many interesting layers to the silver chart. Big picture, it broke out of about a four-year trading range, and blasted almost 10% higher, as things often do. You break out, you get a bunch of momentum, you add 10%. The momentum fades. And then, Chris, I mean, you know this, I know this. What was resistance often becomes support, you break out, you gotta pull back, and test that level. Is that what we're seeing now in silver?

Chris: Yeah. I think, I mean, it's having a series of measured moves. I love Fibonacci extension. I find it works very well for identifying tops and our next upside target. So, if, long story short, if we do the first Fibonacci target, that is showing us that from this rally to this peak, and this pullback, based on that momentum, it should rally up to hit this green line, which is the 1, the 100% measured move, which it did. And then it's had another correction. So, then we can, once it tops out and pulls back, we can figure out where that next upside target is. And if we go from the same low, but to the new high, and down to this low, carry it forward, you can see right now it is at this 0.618 level. And generally, if it pauses at the 0.618, we almost always see it go up to the 100% measured move. So, this is simply just a pause, a consolidation. It is shaking things out, just like I mentioned in gold, that kind of A-B-C correction. It has had a little bit of a pullback, a little bit of a bounce, and now it's starting to flush down and break this low, and I think we're seeing people start to panic out of silver. But to me, that's a good thing. We're really just seeing this flag flag down, and it's gonna work itself out, and I do think we're gonna go back up to see a $34 or $36, which, if we go back on the charts, we can see where that meets up with some previous price highs. Let me rescale this.

Craig: Sure does. Back there in 2012 and '13.

Chris: Yeah. This brings us right back up into these highs, this high right over here, and then this high, which is about $35. So, it definitely brings us into a major level, where there's, it's gonna run out of steam, just based on the chart pattern, from Fibonacci, from momentum. And also, there's gonna be lots of overhead supply there, where a lot of people got in here, and now have been suffering for, you know, a decade, trying to get their money back. So they're gonna hit the sell button when they get breakeven. That's the way it typically works. There's enough pain, when they get to breakeven, they're like, "You know what? I'm done with that. I'm getting out of it." And of course, they get out of it, you know, when it's starting something major, and they miss out on the next big move.

But that's just the way the average market participant, unfortunately, navigates the market. So, I think there's more upside potential. As I mentioned, right now, precious metals is usually a bit of a, in a doldrum right now. But overall, I still think we're gonna see gold at, what is it, $2650. I think we're gonna see silver at $34, $35. It just might take a few more months to kind of get there. Or it'll be later this year, but overall, still very bullish charts. They're making higher highs, higher lows, bullish chart patterns. So, overall, it's still a very, very good... I think it's still one of the best kind of pockets to be in for the equities, or, not the equities market, but an asset class right now.

Craig: And let's, as, before we wrap up, let's kind of look at a big picture. Because we've talked about equities and the stock market. We're talking about now commodities. This has been this kind of rotation that has been going on now, really, maybe all year, sort of. The chart you have there, I think is instructive. It's something I know Ronnie Stoeferle has been talking about a lot, and his most recent "In Gold we Trust" report discussed this chart. What do you see there, and can you kind of relate it to what we've been discussing?

Chris: Yeah. And you and I have touched on this quite a bit over the last several months, of, you know, I feel like this whole big rally in the stock market, it, for some reason it has a feel and a look a lot like the tech bubble. And the tech bubble was back here, you know, early 2000, and that was the last time we saw commodities, you know, the most undervalued compared to equities. And here we are, like, pretty much all-time lows. Commodities are the, like, most undervalued they've ever been. And so this is setting up for, you know, a massive rally, when the momentum of all these trends shift direction. So, I feel like we're gonna eventually see... Gold's already started its way up, and I think it's just on the infancy stage. I think there will be a little bit of a pullback along the way, but overall, you know, we're gonna see the commodity space do, I think, very well. Actually, this is kind of deceiving. It doesn't mean commodities are going to specifically rally huge. All it means is commodities, in relative strength to, more or less the equities market. Because if the equities market falls dramatically, this chart will shoot up even if commodities don't rally.

Craig: Right, right.

Chris: Precious metals, I think, are gonna be the sweet spot, in terms of where a lot of money can be made. That's where they do very well, is coming out of a scenario, a financial crisis like this, people naturally wanna go to a physical asset. So, what this is telling me is the stock market is primed for a very big correction. It'll probably pull precious metals down a little bit with it, but they won't fall as much, and that'll start to move this line up a bit, and then eventually, we're gonna see the precious metals space start to get traction, and eventually we'll see crude oil put in a bottom, because investors will start to see, hey, most of this recession is coming to an end, and then we'll see those commodities take off, this line will shoot up, and we'll see that space take off. So, this is telling us there's gonna be big weakness in equities, and eventually we're gonna see a big rally in commodities.

Craig: And I think most precious metals enthusiasts, we look at that chart and go, "Oh, yeah, boy. I should have, be sure to get out of my stuff at all those peaks," right?

Chris: Yeah.

Craig: But everybody wants to overlook those bottoms, right? I mean, just as much as things are gonna pull back from peaks like that, invariably, you're gonna come off those lows too, and as you said, the important thing to understand here is it's a ratio. Commodities to equity ratio. So, as equities fall, that thing's gonna start moving up, as you said.

Chris: Yeah.

Craig: Then equities stabilized, and then commodities go up, and then that's when you get back up to the top. And that's all part of, to use a technical term, it's like a supercycle, right, wouldn't you say?

Chris: Yeah, yeah. Yeah. And, you and I... And the nice thing is is we cover these kind of trends every month, so the nice thing is we can...this'll unfold over time. The problem with these lows is everybody is, like, complacent. They're, you know, when the markets are low like this, equities, and real estate, everything is at all-time highs, so everybody's sitting there, you know, rich and happy. And they're like, "I've done really well over the last long time, and everything's valued..." So, they don't think that this extreme low is...they don't even really pick up on this stuff. But they're complacent. And they don't realize they need to be protecting their capital. Typically, when everything is really good, that's usually when things are about to get really bad, right? And so, when you're not worried about anything, and that, unfortunately, a lot of, most average investors, who are just, like, buy-and-hold investors, they just think, you know, they're just gonna hold on, they don't really think anything bad is around the corner, they don't realize it, and they're the ones who eventually suffer the most, but, I mean, when we look at this, we're, you know, if we look at the overall... Like, I believe we're in a topping phase, everything is leaning towards a stage 3 topping phase, you know, but we are in this cycle here, where precious metals are leading the way, energy stocks are leading the way, industrial capital goods, the industrial sector, is, like, at all-time highs. It is screaming higher.

And, you know, typically, when these happen, it means we're at the top of this blue cycle, which is a stock market top is here. And the capital goods, actually, we have, you and I I don't think have ever touched on this. The reason this is important to watch is because a bunch of factories who just had the COVID bubble, everybody thinks they have a solid business, they're upgrading their assembly lines, their factories, their equipment, their warehousing. This is a huge lead time. They invest millions of dollars. They get it all installed, like, as of right now, thinking they're gonna keep growing, not realizing that their business growth goes in full-on cycles. And so, they've been spending all this money. Industrial companies are making huge profits. And if we look at the economic cycle, which is the yellow line, this is the general public. They're all ambitious. They all think their businesses are doing good. They think everything's expanding, they're upgrading their factories. Yet we're already, we already know the stock market is in this topping phase. Small caps have been crushed. They're already breaking down. So, this is, like, confirmation that the CEOs and factory managers, they're blindly thinking that this market is... They're super ambitious. They still think they're gonna have the booming business. Meanwhile, you know, a year from now they're gonna be kicking themselves, probably going, "Why did we sell our old assembly line? It was paid for. And our supply, our demand's way down, and now we got this huge factory line, with massive financing for it."

And this is what, this is the whole cycle of a recession. Companies go bankrupt, and, I mean, it's just this vicious cycle that is just slowly unfolding, and once you know all this stuff... And I provide this free PDF. Anybody can get it. I break the markets down in all kinds of views. When you know this stuff, you don't panic. There's, all we see is opportunity. If you know something's coming, there's a way to protect yourself, and a way to take advantage of it, and it removes, to me, almost all the real major stress of investing, is because... And this stuff moves slow, so it's not like you need to be active to follow it. It's just to know that things are shifting, and then you reposition your portfolio, and the whole precious metals space is gonna fit in here very, very nicely over the next several years, as the markets sell off, that we hit a recession, and then eventually metals are generally the first to bottom, and then they're off to the races, for one of those big parabolic spikes on that chart we just looked at, where stocks fall, and commodities become massive leaders, and miners are gonna be one of the best plays again, so...

Craig: Well, great stuff as usual, Chris. This is one of my favorite things we do all month, because it's always such a wide-ranging discussion. And I just, I encourage everybody. You don't wanna miss any of this stuff. Besides these episodes with Chris, which we usually record early in the month, there's all types of other content, podcasts and articles, and you want to make sure you catch all of it. So, be sure you subscribe to whatever channel you've been watching this on. Make sure you take the Sprott Money page and make it one of your favorites, so that you'll be sure to check it all the time. It is going to be volatile, but it is going to be very important that you stay on top of things, especially as we go deeper into this year. A subscription and membership at thetechnicaltraders.com will help you as well. And so, Chris, as we wrap up, tell everybody again what you do, what your day job is, and how people can find out more.

Chris: Yeah, sure. Yeah. So, if anybody wants to follow along on the analysis that Craig and I touch on, at thetechnicaltraders.com, I share my ETF strategy. This is the strategy I've been using since 2001, and continue to evolve it. We have 1 or 2 ETF positions open at a time, we have 5 to 12 trades a year, and we really are just moving in and out of the stock market, and it's all about protecting our capital. It's all about managing our positions. And we just rotate to whatever asset class is moving up, and meets our risk criteria. And it's, I call it, the consistent growth strategy, which, if we take a look, you can see we've got, this thick blue line. This is the strategy that I do. It's consistently just inching its way up. It's very slow, if you're an active trader. If you're a passive investor, the buy-and-hold, it'll feel like it has a little bit of action to it, but we outperform the buy-and-hold, the S&P500, the NASDAQ. It's a really solid strategy, and we just catch those 5 to 12 waves that roll through the stock market every year, and I share exactly the positions I'm putting on, allocation, all the profit targets and stops, and you just pretty much copy what I do. And we even have auto-trading. If you don't wanna do it, it just links into your account, and it can automatically manage your 401(k), whatever you want, your trading account. So, pretty straightforward.

Craig: Great stuff, Chris. And again, I just said going forward, watching these videos every month is gonna be very, very valuable. So make sure you keep all of this on your radar. We'll be back next month, with another "Precious Metals Projection," but be sure to keep it on the channel. We'll have our "Ask the Expert" interview later this month. We'll do a "Month in Review" as we get later on here in the month of June, all sorts of great articles along the way. David Brady does a great job analyzing the market as well. He writes something every week. You can find that on the Insights tab at sprottmoney.com as well. So, be sure to thank Sprott Money for all they do in putting this on, and be sure to check out thetechnicaltraders.com as well. Chris, always great to visit with you. Be curious to see where we are in July. That's for sure.

Chris: Yep. Sounds good, Craig. Take care.

Craig: And from all of us at Sprott money and sprottmoney.com, thanks for watching. Be sure to keep an eye on this channel as we go through the month of June.