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Imminent Risk of Reversal in Gold and Silver


Yesterday we got slightly lower than expected CPI data and much worse than expected retail sales numbers which—if adjusted for inflation—were all negative, signaling recession is already under way.

Although the inflation numbers were lower, the CPI rose 0.3% in the month of April and 3.4% year-over-year. This does not mean that inflation fell; it merely slowed the rate of price increases. Simply put, inflation rose again but at a slower pace.

Coupled with negative retail sales numbers, that signals stagflation: falling economic activity while prices continue to rise. The same thing happened in the 1970s, and we all know how that worked out for Gold and Silver. It was therefore no surprise that the metals rose yesterday and the dollar fell again.

While bad news for the economy, this is good news for precious metals—but only over the medium and long term. I believe the rally in the metals is becoming exhausted in the short term and is due a reversal.


price chart

We finally tagged my target for a peak in Gold at $2400 overnight. Something I forecast publicly almost two months ago on X/Twitter, on March 26:

price chart

From here, it looks like an A-B-C correction has already begun, which could fall to $2330-$2340, worst-case $2250, before turning up again towards higher highs above $2400.

price chart

Note the slide in momentum in the RSI at a double top in Gold on a closing basis.


The same goes for Silver. I forecast a peak at ~$30, and that is exactly where it has run into a resistance.

price chart

The risk now is a drop to the prior low of $28.20 in an A-B-C wave pattern. It could go even lower to $27.25, the previous low. Worst case is $26, the peak on Dec. 1, 2023, before it dumped the following Monday.

The daily chart shows it best:

price chart

Note the negative divergence here in the RSI. Another signal that Silver is rolling over.

Conclusion on Precious Metals 

This is still a raging bull market in precious metals. But the rally from 2008 to 2011 to record highs had over 25 reversals, excluding minor pullbacks, and it still marched higher to a record high of $1923. We will get pullbacks all the way up in Gold and Silver this time also, and this is just one of them. That said, we have a long way to go on the upside before this bull market is done.

For those still in cash or wanting to add to their positions, I consider this a welcome buying opportunity—especially in physical Gold and/or Silver—as we head to even higher highs following this correction.

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.


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