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.

GOLD

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:

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.

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

SILVER

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

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:

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.