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Precious Metals Projections

Gold Trading Near All-time Highs

Craig and Chris on Precious Metals Projections Banner

In today’s episode, Craig Hemke and Chris Vermeulen discuss historical market patterns and how the U.S. election year might influence market dynamics. They also cover the following topics:

  • Are there levels in the SPY, as a proxy for the S&P, that Chris will be watching and be cautious about?
  • Why does Chris emphasize the S&P 500 reaching levels where we might see a much larger market correction?
  • How far will the market go, how quickly, and how precipitous might the fall be? 

And much more! Watch the full video below:

Craig: Hello again from Sprott Money News at sprottmoney.com. Oh, my goodness. We are in the second half of the year 2024 now. It is July. And it is time for your monthly "Precious Metals Projections." I'm your host, Craig Hemke. Joining us as usual this month, Chris Vermeulen of thetechnicaltraders.com. It's time to take a look at the metals. Chris, how are you today?

Chris: I'm good, Craig. How are you?

Craig: I'm just hanging in there. It is, like I said, it's July. Please don't forget about the precious metals. It might be holiday time. It might be, you know, time to take a vacation, I don't know. But it is never time to stop stacking. In fact, Sprott Money makes it very easy this month to save a massive amount of money on your next order. Just simply refer a friend, as you can see on the screen here. Current program, refer a friend, save up to 500 big ones on your next order. That's almost tube of Eagles. Pretty close. So, refer a friend. Save some money. Again, sprottmoney.com, or you can call them at 888-861-0775.

Okay, Chris. Here we go. As we wrapped up the month of June, the last bit of podcast and video we had, I had the "Monthly Wrap Up" with Michael Oliver, who I'm sure you know. I know many here have watched that video, or maybe they're just hearing about it the first time and I want you to go watch it. We covered three markets that he said are gonna have some significant moves here in the third quarter. So, let's start... I don't know, let's start with the stock market. Because he was pretty emphatic. I spoke to him on my TF Metals Report site too. He was pretty emphatic that the third quarter, not the fourth quarter, the third quarter is gonna see a rollover in the S&P. You know, maybe not a crash, but certainly a significant pullback. What are you seeing for stocks in general, my friend?

Chris: Yeah, I think you and I are on the same wavelength when we talk about the markets. I believe if you kind of look at the long-term chart, this is the weekly chart of the SPY, which is the S&P 500. You know, I think we're getting up into this nosebleed section where we're gonna see the markets have a much larger correction. You and I talked about this last month in our, in this same update, where a lot of things are coming together. We've got gold trading near all-time highs, energy stocks near all-time highs. We're seeing industrials. They're doing very well. And all those things tend to come together when the stock market gets frothy and overbought. And we're starting to see unemployment pick up speed. So, there's a lot of things coming together that are telling us, hey, the music is about to stop. Other than the big tech and the AI camouflaging what's actually happening in the stock market, I believe the technology is dragging the markets higher, and because we're seeing, you know, the Dow and the S&P 500 and the NASDAQ at all-time highs, people think, you know, this market is really strong. And yes, it is moving up.

But when you look at, for example, small cap stocks, like the Russell 2000... I'll just flip to the monthly chart, so we can kind of see the view here. The Russell 2000 is, has been nowhere near the highs. It's struggling. I believe it's gonna go off a cliff. Equal-weighted S&P 500 is really just flirting with all-time highs. When you look at the micro cap sector, they have a very bearish pattern, like the Russell. Same with even the Toronto Venture Capital Stock Exchange Index, in Canada, is very bearish as well. So, you know, other than big techs making the masses think this market is strong, really there's only, like, five, seven stocks holding the whole market up. And once that bubble kind of implodes, it's gonna be a pretty big correction.

So, I do think... This is the monthly chart. I do think fourth quarter this year, I don't know when exactly the market's gonna top out, but I do think by the end of this year, the markets will have topped out. And then the question is, is, how far does the market go, and how quickly, how precipitous is that fall? Is it gonna be like a 2008, like, an eight-month, like, waterfall sell-off, and then sharp rebound, or is it gonna be like a 2000 tech bubble, that takes three years of constant selling, dragged out over more time, and take a lot longer to recover? So, I do think equities markets are on that last leg. We're still long the markets. We continue to ride them higher, but knowing the end is coming definitely is a, it's good to know mentally, and be mentally prepared to, like, exit those positions with stops, or targets, or move our stops up as things continue to mature.

Craig: For people that are kind of on the edge of their seat, if, you know, like you said, you're long, but you're kind of cautiously long, are there levels in that SPY, as a proxy for the S&P, that you'll be watching, that you're like, okay, we gotta start getting cautious here?

Chris: Yeah, we've got, like, when we look at our strategy, we've got a few levels here. We've hit a target already. We've got another target somewhere up near the 600 mark, that we could continue to see the S&P 500 move a little bit higher. So, you know, the markets are still showing us some good strength. And I do think, you know, sometimes, as you know, Craig, some of the biggest moves happen right at the end of a trend.

Craig: Right.

Chris: You either have, like, a capitulation rally, and everybody jumps in, and you see a quick vertical spike, or you see a wash-out low, where everybody bails out, and stops get hit at the same time, and it goes straight down. We could still see a very strong pop and rally in the S&P 500, in the NASDAQ. I do think if it happens, it will be very short-lived, and generally, if we see that, you know, what goes straight up usually comes straight back down, those emotional moves, and it can put quite a bit of damage to the chart, in terms of it might consolidate, but then start a much bigger washout. So, we've been waiting. You and I talked about this even last year. I'm like, I'd love to see the S&P 500 hit new highs. I'd love to see waves of distribution selling start to happen, and we have seen many days where big volume selling hits the markets. They're not frequent, but they're there, and we're, the whole market's driving higher, really, on a handful of stocks, telling us the market is not a broad market rally. It's just drifting higher. So, it's very weak. This is a, you know, to me, it's like a false rally, but we're still taking part of it, because higher pricing is an opportunity still, so...

Craig: Before we get to gold and silver, I'm gonna throw you a little bit of a curveball, have you take a look at the GDX, because, yeah, like, well, a lot of different things going on in the mining shares, obviously. But keep that monthly chart up, if you will. I, on my side, I like to call it the mother of all pennants. If you draw a line from that peak back in 2011, and go all the way back to 2000, draw it down through that peak in '16. All right. Now draw one up from the lows.

Chris: In '16? Down here?

Craig: I'm sorry, no, the peak in 2020, I think is what that is.

Chris: Okay.

Craig: Yeah.

Chris: Sorry.

Craig: All right. Let's put that line on there. And then go back to the lows in early 2016, and draw a line up, catching most of those lows. Maybe not that... Yeah. In there somewhere. Yeah. What do you make of that?

Chris: Yeah, I, definitely, it's... If I can just pull this up here.

Craig: It's trying.

Chris: Yeah, yeah. It's definitely squeezing in there. I mean, I would say, you know, this, we had a huge correction here. I would say this is kind of like a basing or rounding bottoming formation, which it had broken out of, and of course this range. Now, it's just really kind of flirting through this level, trying to find that consolidation, so you could say that this is maybe, like, a cup, and a really big, big sloppy handle.

Craig: Yeah.

Chris: But it is definitely... You know, the series here, we got a rally, pause, rally, pause. To me, this is, it's stair-stepping its way up. Again, this is the monthly chart, as you said. Like, look how many, like, these are years across the bottom, not months. So, this could still unfold, but it is very close to wanting to break out and run. And I think there is upside for GDX to go back up to $40, maybe $44, get up to these highs. There is that upside. I do think, you know, if we have big selling later this year, it's gonna struggle and pull back. But once we have that big pullback and that reset, I think gold miners are gonna be an awesome play again. So, right now, they are just, to me, they're just a trade. If they pop and break out of here, which, like, if we go to the daily chart, the daily chart's not the sexiest-looking chart. You could argue here it's trying to make a little, maybe a bit of a head and shoulders pattern.

Craig: Yeah. Yeah.

Chris: When we look at it here, we've got a shoulder, we've got a head, and potentially a shoulder, and a sloping-up neckline. So, if this does start to break the neckline, it's gonna start to, like, have multiple waves, a pretty good reset in price. But, with that said, the reality is it's a nice move up. It's more or less kind of consolidating. And I would like to, like, you know, overlay that with the gold chart. When we look at gold, it's a very similar pattern, right?

Craig: Let's go there.

Chris: So, I believe it's doing the same thing as gold. It's just, stocks and silver are more volatile, so they usually have a bit messier of a chart. But I believe it's a bull flag, you know, at heart, behind the noise.

Craig: Well, yeah. Let's go to the metals, as we wrap up for this month. Gold is, it, to me, it looks like it's consolidating, after it... You know, you could say, "Well, that was a double top," but it hasn't broken down through $2300 either. So, it almost looks like it's in kind of a bull flag, kind of square range. What do you think?

Chris: Yeah. I mean, I think gold has got a beautiful chart pattern. I was actually really hoping, over here, about a week and a half ago, I was hoping we were actually gonna see gold move down a bit. I wanted to see it break these lows and this low...

Craig: Yeah.

Chris: ...just because it was gonna run anybody who's got a tight stop...

Craig: Right.

Chris: ...it was gonna flush them out of the market, create a little bit of a shake-out, or a fake-out, and then go and take off and run higher. And it still might do that. We could still see it consolidate and chop around. The market, you know, if it doesn't shake you out, which it did not do here, it will wait you out, and take way longer than you ever anticipate. And then sometimes it'll do both, and you can get burned twice through the whole process. But we are in this pause. Silver's doing the same. I believe gold miners are doing the same. I do think it'll resolve to the upside. So, it's just a matter of time at this point. This is a very strong chart pattern. The only thing I don't like about it is it is crystal clear, and everybody's looking at it...

Craig: Yeah.

Chris: ...which is not a good sign, because then everybody's long and just waiting.

Craig: Yeah.

Chris: And that means if they're long, there aren't that many buyers ready, which is why I kind of wanted the shake-out here, to...because then you'd say, okay, well, we have a series of lower highs, we have a series of lower lows, we broke this low. That'll scare people, and we'd probably see a big spike in volume. And then as they all spook out of it, then it takes off and wants to go higher without them.

Craig: Yep.

Chris: So, the market still might wanna do that. And that's actually a good thing. It'll reset the hands, the shares into strong, or ounces into strong holders, for higher pricing, so...

Craig: If you would take a second, too, and look at the monthly chart. Because I, this, I was just talking about this in my Friday podcast on my site, and I remember, I think it was two months ago, maybe three, where you did some Fibonacci extensions, because we're in this area of, I mean, it's unprecedented, right? COMEX gold futures never been up here at $2300, $2400. So, how do you look...? If you do break out to the upside, I don't know, later this summer, this fall or whatever, what kind of targets come into focus next? Could you go through that, again, please?

Chris: Yeah, sure. So, we could look at it a few different angles. So, we could look at just this last rally here, in this tight bull flag. So, if we were to go from the recent low, to the high, and down to the low here, that brings us up to roughly $2760, $2750 area, which you and I have talked about for a while. I've had that target for some time. We can go back to a, kind of a bigger picture here, a bigger trend. We can go from here to here, and then have this pullback. We can carry that forward. This was the first run. So, this is where we saw the first rally, the first consolidation. It came up to the 0.618, and my theory has always been if it hits 0.618 and pulls back and pauses, we almost always go up to 100% measured move, which we've done.

Craig: Yeah. [crosstalk 00:12:41]

Chris: So, that was the first one that unfolded. This next chart pattern is saying, hey, we should go to $2580, and then $2760. And if we were to look at the kind of bigger picture even... Let's just... Whoops. I'm getting messy here. We could go all the way from the lows back over here to this bull flag top, and down. This carries us forward to about $2660. And this is the range that I have been talking about, and I believe is gonna get hit here over the next, potentially, two or three months. I believe this is the sweet spot, $2650 to $2750, and from where gold is right now as you and I are talking, that's roughly 12% to, you know, 16% to the upside. So, there's some very good upside potential, and it's based on this short-term pattern. I know it's kind of tough to see on here, but this really explosive move right here, that did that in, technically, three bars, or two bars, that whole move. So, we are potentially two to three bars away from hitting $2750, which is, you know, two to three months, which falls in line with seasonality of the markets, of how everything, to me, is unfolding for stocks and other things, so I'm very excited short-term for gold. The caveat here is I think when we do see late, the stock market starts to struggle later this year, we could see gold unwind and come back down into this range again, just because of pure selling pressure, margin calls, and things like that.

Craig: Yeah.

Chris: But I do believe, you know, we are in this super cycle to the upside for gold, that, over the long run, when we look at the big picture here, it is going to obviously have pullbacks along the way. The last, this pullback I'm talking about right now, Craig, is gonna be equivalent to something like this.

Craig: Yeah.

Chris: This was the 2008 stage 4. This is gonna be the 2025 stage 4.

Craig: Yeah.

Chris: So, that's kind of what I see happening. And of course, then, it's gonna go up into the $3000, $5000 range. Who knows where that is? Depending on this correction and pullback will allow us to use Fibonacci to target the next major super cycle leg up.

Craig: Let's remember, as we get into next month, because it'll be August, to talk about that seasonality. You shared that the last couple of years, the seasonality of gold, when we get into August and September. Let's wrap up, though, this month, in July, with a look at the silver chart. Very strong rally to end the week last week, really, the first week of July, you know, silver, and I'm sure you know this, Chris, but maybe this was lost on some folks, had its highest quarterly close back on June 28th, highest quarterly close since the end of December of 2012. Which is remarkable. And, you know, I think you'll recall, and folks will probably recall, gold finally broke out of its three-and-a-half-year trading range at the end of December, and then took a couple months to go sideways, consolidating that, and then, boom. You know, that caught everybody's attention on the long-term charts. Silver, now, as of the end of June, has done kind of the same thing. So, anyway, with that as a lead-in, what do you see on the silver chart?

Chris: Yeah, I mean, silver, very similar to gold. Looking at this chart pattern, we've had this rally out of the COVID low. It pulled back. Using Fibonacci extension, it's saying hey, here's the 0.618 level, which happens to be this previous high. We more or less ran up and pulled back, and now we're just starting to try to break out of that, which is a good sign, and we do want it to pull back and take a pause here, and a 100% measured move says, hey, we should hit $36 on silver, which brings us right up into these candle wick highs, which is the next major significant high. So, there's still a lot of upside potential here for, you know, 20% or so upside for silver, over the next, as you can see here, one, two, or three bars. So, you know, it's a great trade. I do think when it gets up to those levels, the stock market will be starting to really free-fall, and I think silver will pull back, maybe to where it is now, maybe a little bit lower. To me, that's gonna be, like, the ultimate last opportunity to pick up on physicals. Because I think once the next major leg starts after this, you know, recession and correction in the markets, you know, silver I believe is gonna go $50, $80, who knows, after that. I think it'll be very explosive going forward, so, short-term, very bullish on silver, 20% upside potential. Long-term, intermediate term, it could be back at this price, you know, six months, eight months from now. A year or two years from now, this could be 50, 80 bucks, or higher, right?

Craig: Yeah.

Chris: So, depending on your outlook and your style, that's, you need to look at it, different views, expectations.

Craig: Yeah. I'm kind of connecting the dots, fundamentally. I think it's pretty clear from things like the Bloomberg Economic Surprise Index that the U.S. economy is demonstrably slowing. And there were articles this past weekend about the Fed maybe even cutting in the July meeting, not wanting to wait till September. You know, and I just wonder if the economy rolls over, the Fed begins to cut, everybody gets all excited about free money again, stock market pops, gold pops, silver pops, and then runs out of gas, is what you're projecting...

Chris: Right.

Craig: ...as the economy continues to worsen. It'll be interesting, [inaudible 00:18:06] you could sure see the connections of all these things. That's for sure. Chris, you make these connections on a daily basis. Tell everybody about how they can find out more about thetechnicaltraders.com.

Chris: Yeah, sure. They can go to thetechnicaltraders.com. And I share videos just like you and I are doing. I cover all these different sectors, indexes, bonds, currencies, all those different things in the markets, and more or less, we just follow along with the trends. Everything I do with my strategy, my CGS strategy, I invest with my own money, I only trade ETFs, and you pretty much copy what I can do, what I do in my account. You can have it auto-traded for you if you don't wanna learn or follow anything. But the key is to understand when these waves are in the market, when we need to be defensive and move into something else, and get back into the markets. And I cover precious metals and miners, all of those things, and there will be a time when we get very heavy into the miner space, but it's probably not till next year at the earliest. But other than that, yeah, you can follow along and learn from my daily videos, and copy my trades.

Craig: And other people have noticed, my friend Chris is beginning to make appearances on mainstream financial media. So, if you're watching Fox Business or CNBC, or wherever, BNN up in Canada, you may see Chris's friendly visage show up on your television monitor before too long.

Chris: Yeah.

Craig: Chris, thank you, and again, I want everybody to keep Sprott Money in mind, adding that physical. My favorite hashtag is #NeverStopStacking, because we're getting into some pretty choppy waters here, geopolitically and politically. sprottmoney.com should be your choice every time you're in the market. Call them up, 888-861-0775, and we'll have all kinds of content still coming at you this month, so be sure to like or subscribe to the Sprott Money channel on whatever media you are watching this stuff, so that you're notified as soon as it comes out. Chris, we'll talk to you again in August. I look forward to seeing where we are then.

Chris: Sounds great. See you later, Craig. Bye-bye.

Craig: And from all of us at Sprott Money, sprottmoney.com, thanks for watching. And again, we'll have more content for you as we head into, deeper into July.

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About the Author

Our Ask The Expert interviewer Craig Hemke began his career in financial services in 1990 but retired in 2008 to focus on family and entrepreneurial opportunities.

Since 2010, he has been the editor and publisher of the TF Metals Report found at TFMetalsReport.com, an online community for precious metal investors.

*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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