Pullback to a Higher Low or Lower Low, Then Launch
Last week, on October 5, I wrote that all the conditions were in place for a massive move higher in Gold and Silver, and I provided a list of reasons why. That day turned out to be the low for metals and miners. Since then, Gold, Silver, and GDX have risen 4%, 7%, and 11% respectively. However, we are not out of the woods just yet.
No material resistance has been broken to confirm the bottom is in for the entire sector. All rallies begin with a higher high, followed by a higher low, then a breakout of the previous peak. What we have so far is a healthy bounce off the lows to “suggest” the rally to new record highs has begun.
Below are the parameters I am watching.
As I type, Gold is testing resistance at 1900. Following a nice rally over the past week, I wouldn’t be surprised to see a pullback from here.
If we do break 1900, next we have to contend with the 200-day MA at 1937 currently and then the downtrend line at 1950. Above those levels would suggest the bottom is in, but it would take a break of 1970, the prior high, to confirm it. Until 1970 is broken, nothing is certain, imho, and the risk of a lower low remains. Support is at the low of 1824.
Remember, we are going to get a pullback at some point. The question is whether it will be a higher low above 1824 or a lower low. Either way, the next low will signal the rally we have all been waiting for has begun.
Like Gold at 1824, it looks like the Silver low is in at 20.85 and is now support. But we need a break and close above the prior peak of 24.05 for confirmation. Ahead of that is the prior low of 22.55, now resistance. Then the 200-day MA at 23.50 and the green trendline resistance at 23.60 on a closing basis.
Again, we will get a pullback following this rally off the low of 20.85. It’s only a question of whether it will be a higher low or a lower one. Either sets us up for a massive rally beyond 24 towards 30 next.
The same parameters apply to the miners. The low of 25.62 is now support. Trendline resistance is at 29.20. But it is resistance at the prior high of 30.13, in conjunction with the 200-day moving average, that needs to be broken to set up a test of 36 next. Ahead of that breakout, I expect a pullback to a higher or lower low, then blastoff.
Conclusion on Precious Metals Prices
The balance of data signaled a major rally was coming. It looks like it has already begun. But until we break resistance and make a higher high, followed by a higher low, we don’t have confirmation the bottom is in ‘yet’. From my perspective, the rally to new highs is inevitable. It’s just a question of when.
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