Gold to Reach New Highs

Craig: Welcome back, everyone. It's a new month. It is now April 2023, officially springtime in the Northern Hemisphere. And it's time for another call with Chris Vermeulen of The Technical Traders. I'm Craig Hemke, and this is your monthly precious metals projections from Sprott Money. Chris, nice to see you, and welcome to spring.

Chris: Yeah, thanks for having me back, Craig. Spring is in the air. It feels great.

Craig: That it is. That it is. There's always a springtime sale at Sprott Money, by the way. I'm gonna first send everybody to that website. Sprott Money, of course, should be one of those dealers you always check when you're in the market for physical precious metal or a place to store it. You can go to sprottmoney.com, as Chris has right there on his screen. You can see what it looks like. And then right there at the top is the phone number you can call, 888-⁠861-⁠0775 to talk to a human being. Great service, great prices. What more can you ask for in a bullion dealer, sprottmoney.com, the sponsor of all this great content?

Chris, what a month we've had, man. Geez, Louise. We usually record these early in the month. And if we go back to early March, we were talking about higher for longer. And Fed Funds futures were pricing in as much as a 50 basis point rate hike at the FOMC that was pending in a couple of weeks. And, boy, oh, boy, did things change? Big rally in the bond market, rate hike expectations have flattened out, and the markets have responded accordingly. Through all of that, I'm sure you've tracked all your different sectors, and you've got that process that you follow called best asset now. So, here five weeks since the last time we spoke. What's currently the best asset now, my friend?

Chris: Yeah, well, let's jump. Obviously, gold is a shining star. But if we go and take a look at the best asset now, the hot list is what I call it, it's ranked from the best sectors and works its way down to more or less the worst assets now at the bottom of the list. And this chart kind of breaks it down. This table tells us if people are piling into it as a risk on trade, if the short-term trend is up, if it's in, like, a bull market phase. And top of the list is GDX, SILJ. I only use these two on here, but pretty much any gold miner or silver miner ETF would be equivalent. So, we're seeing them lead the way. And today, as we're talking, they're up almost 3%, 2.5%, muscling their way up. And look, last time you and I spoke, they were right down over here. And now they have just ripped to the upside as the best asset now. And, I mean, it's a volatile market. We're in this type of market condition where we keep seeing... We saw gold and silver miners become the best asset now up here. Then they actually sell off very hard, and they became one of the worst assets for a little while, and then they picked back up and they're just muscling their way higher. And, of course, they've been in this phase here for a long time, at the top of the list, really outperforming the rest of the market.

So, it's pretty exciting. I don't know how much legs these have behind them before we see some market correction that might pull them back, but they're in an uptrend and they're a high-momentum move. And I was talking to subscribers this morning that, I have this light blue line on the chart here. It's this thin baby blue line. It's a five-day moving average. And I consider that the momentum kind of play. Usually, if something is in a strong momentum, it will rally intake pauses or pull back to that five day, and it'll just keep working itself up. And yesterday, I talked about, here we are, gold, silver miners testing that five-day moving average, and then boom, we got a 3% rally for the next... This is a little bolt-flag pattern. It's pointing to higher prices for another session or so. So, another maybe 2%, 3% to the upside from where we are today already. It's like this for... Look at silver miners, similar type of move. We've got a strong move, rallying up. And if we zoom back a little bit, silver hasn't broken this previous high just yet. It's definitely getting into a little bit of volatility, but they're performing very well and it is exciting to see.

Craig: Well, since we started there, let me just ask you, what levels will you be watching on something like the GDX going forward? Are there some old resistance points that might flare up again or maybe the price could best and get some more momentum?

Chris: Yeah, I do feel like it's getting close to a little bit more of a pullback. I feel like it's starting to become a little bit of a crowded play. But until there's a type of reversal, I mean, you really got to focus that it's got more upside potential. So, the next key levels on this chart, I think, will be somewhere right through this whole consolidation phase. So, if we were to look at this chart, we've kind of got a little bit of weird price action in here where it pushed up and sold down and then ping-ponged around a bit, became support, and then ping-pong through this area. And so that's right where we see more or less price just starting to get up to. So, this is gonna be the next level where there was a lot of volume that traded through here. So, anyone who bought it back at those levels, it's finally come back from the dead and they're like, "I just want my money back." And so that creates that overhead resistance of people who have been in a losing position all this time, saying, "I'm finally back. I'm ready to take some profits off or get my money back, more or less." And so that'll be the next kind of resistance area. So, we're really close, I think, to that.

The silver miners are equivalent to trading right into this kind of previous high. And so they're already right at resistance as well. So, it's an exciting push and rally. I think there might be a little bit more upside on gold and silver miners, but then I think they're gonna have a pause or pullback. But it might just be to that five-day moving average, which really, in the grand scheme of things, will keep moving up with it. So, I'm not expecting any sharp pullback at this point. Maybe just a consolidation that lasts a couple of days. Maybe it'll consolidate a little bit longer, but that's kind of the next key level. If it can break above that $36, this $36 upper band, I mean, it can really pick up speed very quickly and go back up to this $40 range. So, there's some pretty good upside potential for precious metals. I mean, they're fast movers, as you know, when they're on fire, they're on fire. When they're not, you don't wanna be holding them.

Craig: That's a lot of green candles, no doubt about that. And it has been a remarkable change in so many ways in the last five weeks. What else is on your radar?

Chris: Well, let's just take a look at the hot list. There's a big disconnect. Actually, let me just pull up the... We'll pull up the NASDAQ here, the QQQ, and I'm gonna go to the daily chart real quick. And where there's a big disconnect that I find really interesting is if we look at what the big tech and even healthcare have done, we had the banking crisis. And with Silicon Valley Bank, they held supposedly, this is just what I read in an article, they had like something like 50% of the tech companies. They were holding some of the tech companies' money, and they were a large percentage of the healthcare companies. Well, there was the obvious, the blip with Silicon Valley, and then they got more or less Silicon Valley's clients got bailed out. And, of course, we've seen money pile into technology, into growth stocks because it's a big startup bank as well. A lot of startups are in there.

And so money has piled into the QQQ, which is a good sign. We wanna see the growth stocks doing really well, leading the way. But the disconnect here is we're seeing strength in the NASDAQ, which is good, but when we look at the Russell 2000, it's the complete opposite. We've seen it sell off, and it's really just kind of flagging in a bearish pattern pointing to lower prices. And the problem here is I look at the Russell 2000 as much more of a leading indicator and when we zoom back on the chart and look at the Russell 2000, it kind of put in... Sorry about that, hold on. Put in this kind of topping phase right through here and then it broke down and now it's kind of trading in this next range through here. And it's got a bearish pattern. Technology, the NASDAQ is equivalent to trading up here with a bull flag and small caps are doing the exact opposite. So, there's a big disconnect.

I think the banking issue and the immediate bailout of all the clients has created this kind of news-driven move into technology and some growth stocks. Small caps, I usually look at as growth stocks and they're floundering. So, there's that really interesting play here. And if the small caps start to break down, that to me is gonna be a major warning sign that the stock market is definitely weakening. I mean, the majority of stocks are still in a downtrend, overall. When you look at thousands of stocks, it really is the big large caps doing all the heavy lifting. And the Russell 2000 is a good view of that. It's really just testing support where the big tech companies are kind of actually breaking out and have a bullish pattern. So that is my concern with this big disconnect that's been based around the whole banking system. And everybody is wondering what the Fed is gonna do with rates. I mean, everybody's swinging back and forth from one idea to the next. And it's been tough to gauge for sure.

Craig: You gave us something to watch there. I wonder if the Russell 2000 as a more broader gauge of smaller companies isn't telling us something about the recession that's coming and earnings and other issues that most companies might have in that environment. It looks like, gosh, a breakdown through that 160 level would certainly be eye-opening, wouldn't it?

Chris: It would. I mean, we could just kind of take a rough Fibonacci level off these, take some average prices. And the Russell 2000 has potential to fall roughly 25% just based on this past kind of sell-off in consolidation and the current volatility. So, that's a pretty big drop. That is enough for a lot of people to be startled, do a lot of damage to accounts. And the large caps will sell off in a big way as well.

Craig: Yeah. well, okay, so then I turn that to the metals and I think, okay, if that's a possible recession indicator, there's so many others out there, obviously. And if the market is...all these moves in the last five weeks are based off potential Fed easing and the thought that how many times the Fed might be cutting before the end of the year, well, gold and silver have responded handsomely. So, let's just focus on those two with the remainder of our time. Do you wanna start with gold or do you want to start with silver?

Chris: Sure. Well, yeah, let's pull up gold here. Let's take a look at the monthly chart real quick. And when we look at the monthly chart, we've got these wicks up here where it rallied up very substantially and then pulled back. We had another kind of topping wick or topping candle. And here we are. It's still early. I mean, this is the 11th of April, so we still have a good chunk of the month for price to potentially run up, maybe even poke to nominal new highs and see where it closes. I find the monthly chart is a very strong tool for figuring out if price is gonna go higher or lower. It's kind of a long-term investor's point of view where big money will move in when there's a confirmation on the monthly chart. The next kind of category of investors is a weekly close, which is a strong... I find there's big surges of money when there's a weekly breakout. And then the daily chart is short-term traders and they can pop and fizzle out by the end of the week. So, as you go down in time frame from the monthly, it gets less accurate. So, I really wanna see what this wick, this candle looks like the first day of May and see where it's at. Is it a topping candle, or is it holding up strong and breaking out? Because there's definitely the big disconnect between gold miners. If we were to just compare and throw GDX in here... And take a look at these two charts.

Craig: And we all know that. That's for sure. Anybody in the miners is like going, "Yep."

Chris: Yeah, it's tough. I mean, here we've got gold flirting up above the 2011-2012 highs. Gold miners are just floundering. They are down probably 45% or 47%. So, you know, they're really dragging their feet. You'd think if this was a full-on, legitimate huge breakout, these things would be rocketing higher. And yes, they've rocketed higher over the past month, but when you look at the grand picture, it's really not. It's no rocket ship. It's just grinding its way higher versus being up here and blasting off. So that is a big disconnect that I find might not make this breakout in gold legitimate. I think this is a little bit news driven. Just like whenever we have some other... We have war, we have some type of news event, we see gold surge and then pull back. And this to me is still a little bit of that of a news-driven push. We're seeing the same thing with Bitcoin. If you can't keep your money in the bank and you're not safe, where else do you go? Well, physical gold is a top choice. People are moving to the cryptos because it's not in the banking system. So, it's definitely news driven by this whole bank event, I think. And the question is, is it gonna get traction and just keep on running higher or are we gonna see this news kind of fizzle out a bit and people see the metals pull back?

Craig: Well, Chris, you've led me directly to my follow-up question. Back on that gold chart, it looks like a big cup, handle, or a flag, a consolidation over the last two and a half years. In your mind, as a technical analyst, what price would constitute a breakout to the upside?

Chris: Well, I think a monthly chart close, really, probably above any of these opens or closes through here. So, usually, I like to look if there's an open or close as a significant level, and I wanna see other bars going through that. So, if they can close, like, even where it is right now, that's starting to be a breakout. A real full-on breakout will obviously be clearing the ultimate high over here. So, it's got to get up. Twenty-one hundred would be like, okay, it is clearly closed and broken above those highs, it's off to the races. So, it's flirting right now in a zone where you could argue, right now it's broken out based on a previous open or close. And so 2100 to me is gonna be kind of the final big line in the sand. If it clears out and closes above it, you can't help it. It's broken out. It's in a bull market phase. Cup and handle patterns are...you know, based on John Murphy's book, they're one of the strongest chart patterns you can get, the depth of the cup. So, for example, the depth of the cup here, he states that price can rally two to five times the depth of that cup. So, I mean, we could go really old school and see if we just stack these on here, right? We can just kind of go one and see if I can actually paste another one. I mean, this is just so barbaric charting.

Craig: We're just winging it here.

Chris: Yeah, we're just totally winging it. But we're looking... You know, $2700, $2800 is the next measured move based on Fibonacci, and it happens to be right where this one ends. And then you go up again and the next measured... Even using Fibonacci brings you up to these levels. So, once gold starts to run, I think it's off to the races. And if gold does really take off, I think gold miners are gonna follow suit and they could buck the bear market trend. The question is, if we do get into a bear market in the equities space like the indexes, gold miners will most likely pause or pull back at that point. But maybe they'll have already started a big run, and it'll just be a hiccup along the way. And that's what gold did last time. For example, if we just go back and look at 2008, well, we had a bear market, and gold was already in a super cycle. But within these mega supercycles, you can still have these minor bear markets. And so we could see gold, silver miners rally up and then have a quick pullback potentially down to this breakout point that could last six, eight months as the stock market goes into a bigger correction and then just pick up speed and just keep on going up to 27, 34, all those numbers. So, it is definitely exciting for any gold bug. I mean, we're up near the highs, miners are starting to come back to life, and gold is on the verge of a breakout, and it's in a super cycle. So, even if it does have a big pullback, it's not gonna be crazy significant. And in due time, I think it'll be worth thousands of dollars more. So, it's a great long-term investment, which is why I own a lot of physical myself.

Craig: Well, we'll keep an eye on that $2090 to $2100 level in the weeks and months to come. Let's wrap with silver. Silver is higher than it was back in January, late January, early February. But as you mentioned, the SILJ and the silver miners are not. And it's also still not above those highs, as you can see on this chart that we saw back in August of 2020, and again in February of 2021, and again maybe March of 2022. So, what do you see there? I mean, the same kind of consolidation flag? A little cup and handle? Or is that just part of a bigger cup and handle going back to those highs of 2011?

Chris: Yeah, I would like to think precious metals, they've put in their base, and now this is just kind of, like, they've broken out of this lower base pattern. They've popped up. They've had that momentum kind of trend shift from a sideways market to an upward market. I think it's bullish. It's definitely far off the highs. It's doing the same. But that's because I think... I look at silver and miners, in general, as a speculative play. Gold to me is the global reserve currency. So, everyone gets into, not everyone, but most people get into silver and the miners for the leverage to get explosive gains if they think gold and silver is going higher. But gold itself, I think, it's trading up near these highs and starting to break out because I think there's a lot of concern globally. And a lot of countries and individuals all over the world, they naturally think gold. A lot of people don't go to silver.

I find the more basic of an investor, they think stocks, bonds, and they'll be like, "Well, maybe I'll throw some gold in." They don't really go into silver. It's more the aggressive investors wanna get into silver and miners. I think there's a lot of global concern about all kinds of stuff, and that's why gold continues to hold up and trading near the highs because we got the whole world just trickling and buying a little bit here and there versus the speculative plays that have been beat up, they've done a lot of damage to people for about a decade. And there's a little bit of hatred and there's a little bit of nervousness to get back in, and potentially relive another big correction. So, that's why I think we see gold and the miners underperforming. There will be a time when they shine and blow the performance out of the water compared to gold. But I like silver. And if we zoom in on the price action here a little bit, it still has a series of lower highs, like one, two, three, four. It's had a nice run-up, a nice pullback based on Fibonacci extension on the monthly chart. Based on the momentum we've seen, the next push will be right up to this previous high. So, we could see it go up to around $27.40 and that'll be a previous high and that'll be a resistance area. It'll probably have some pause or pullback and then try to muscle its way through all these other highs over here. So, it has a lot of work to do, but it is... You know, in an uptrend, it's broken this high. The next stop is $27.40 based on the chart here.

Craig: I don't think anybody would argue with that. And again, it would, at least just to break that string, Chris, I would think of lower highs and lower lows would be significant, wouldn't it?

Chris: It would. It's the start of a new trend because it's gonna have higher lows, and now it'll actually have higher highs, right? This chart's a little messy, but if I clean it up and it rallies up to break this high right here, I mean, now we've got one high, we're gonna have a higher high. We got a low and a higher low. That is an upward channel. That's the definition of an uptrend. So, this will be the first point, getting above $27.40, where we're like, "Okay, the trend is technically shifted to an uptrend, which is pretty exciting."

Craig: Well, Chris, you've done your job. You've given us some numbers to watch. Up near $2100 for Comeaux gold and maybe 27.40 in Comeaux silver. We'll keep an eye on those over the next month, and we'll visit again in early May. In the meantime, just take a second. Would you please remind everybody what you do at thetechnicaltraders.com?

Chris: Sure, yeah. If you go to thetechnicaltraders.com, I focus on providing analysis for investment capital to trade ETFs. So, we focus on a strategy that really only holds assets rising in value. We sit in cash quite a bit. If the market is not favorable, we're waiting in cash on the sidelines. We'll move into stocks, or bonds, or currencies and take advantage of the markets. And the nice thing is we can avoid the chaos. When things aren't favorable, we can sit on the sidelines and let the volatility just chop around and shake people up while we can just kind of focus on navigating these markets. And I'm all about actively managing my own portfolio. I use this strategy with my own capital. And my plan is to trade the least amount but make the highest returns. And to do it without multi-year drawdowns, without big losses, and just kind of work our way higher with our account, that's my core focus.

Craig: The prudent man, they would call you, right? I mean, that's a smart way to do it.

Chris: Yeah, it makes sense. I mean, it's great. We've got a lot of great investors that just have seen the light. They realize the value of sometimes just sitting on the sidelines. And it's interesting because one of the most painful things for a trader or an active investor is sitting on the sidelines watching the market move without them. Literally, I've done surveys, I've spoken with thousands of different investors over the past 25 years. And traders, they would literally be active in trades and taking losses than sitting on the sidelines watching...sitting on the sidelines safely while the market is chopping around. And they just feel they need to be in trades, they need the action. And so the people who finally have experienced what it's like to step aside, watch the market fall apart, news go all wild, and we still continue to hold our wealth level while everything else is crumbling or potentially watch it climb as we move into the dollar ETF or something else, they're like, "Why doesn't everybody do this?" They're like, "This is unbelievable." It is so amazing to sit on the sidelines and know my capital is safe and we're just waiting for another high opportunity, high probability with low downside risk. So, that's my focus.

Craig: Great stuff, my friend. Thank you so much for your time. It's always so insightful every month to visit with you. And like I said, I look forward to talking to you again in early May.

Chris: Yeah, should be interesting. Sell in May and go away.

Craig: Maybe.

Chris: The timing could be dead on. Who knows?

Craig: Maybe. And for everybody watching, again, thank you for watching. And if anything, check out sprottmoney.com after you leave this site, or just give us a subscribe or a like on whichever channel you've been enjoying this content. That helps Sprott Money cast a wider net, and it helps everybody get the message out regarding sound money and physical precious metal. Chris, thank you so much for joining me. We'll see you again next month.

Chris: Thanks, Craig. Take care. Bye-bye.

Craig: And for all of us, it's Sprott Money News, sprottmoney.com. Thanks for watching. And we'll see you again next month as well.