May 31, 2019
Silver bottomed at 14.27 on Tuesday, May 28, imho. All we need for confirmation is a break of 14.63, the high on May 23.
Gold has to take out 1304 to confirm that the downtrend is done and we’re heading higher now. Until then, the risk of move down to test the 200-day and 200-week moving averages remains.
Miners will follow the metals. Silver miners in particular may have already seen their lows.
Last week, I said the following:
- Another crash in stocks followed by a Fed reversal to rate cuts and QE will likely signal the peak and fall in the dollar and the bottom in Gold (and Silver).
- As long as we remain above 1167 in Gold, I am only looking up.
- The risk / reward at the current levels in Gold (and Silver) is heavily skewed to the upside.
- We are heading down to a major low from which we will see a massive rally to new highs in Gold above $1400.
It certainly looks like the third and final leg of the stock market crash that began in October is well under way. Interest rate futures are already pricing in three interest rate cuts by the end of 2020, regardless of what the Fed says, and this is likely conservative.
This is a contrarian view given the extreme bullish sentiment and positioning in the dollar, but I expect the dollar to peak shortly and then dump. I have repeatedly said that I expect a Fed reversal in policy to interest rate cuts and ultimately QE will reduce the spread between US rates and those of the rest of the world. QE will end the dollar shortage too, removing another leg of the stool supporting the dollar. USD/JPY in particular looks weak. A break of 109 could signal a drop to 100 or below.
All of which is extremely bullish for the metals and miners.
I also stated last week what my ideal scenarios for the bottom in Gold (and Silver):
- Daily RSI down to ~30 or below
- Daily MACD Line down to August levels around -15
- Spot DSI in the teens or lower
- 21-day moving average DSI in the twenties, maintaining the overall uptrend
- Funds are short, Banks are long
Such conditions would signal an extremely high probability that the low was in place and the subsequent rally was ready to begin, but they weren’t necessary for such a trough.
Gold’s 21-day moving average DSI is going to reach the twenties in the next few days. We won’t know until later today whether the Funds are short and the Banks are long, but it’s likely to be close. Hence, why I am little more conservative in calling the bottom for Gold than I am in Silver. A break of 1304 would go a long way to changing that.
However, Gold had a fake breakout of its bull flag to the upside on May 13 and such failed bullish signals are typically extremely bearish. Yet, Gold fell to a higher low instead at 1269 on May 21, and has broken back up through resistance. This time it looks like it is for real. The 200-day moving average has turned up also.
Silver, by contrast to Gold, hit pretty much all of the ideal conditions for a major low on May 28, and then some:
- RSI reached an extreme oversold 30 on May 17.
- The subsequent lower low in price on May 28 was positively divergent from an RSI perspective: the RSI was higher at 35.
- Both the MACD Histogram and MACD Line were also positively divergent on May 28.
- The spot DSI reached the teens in Silver, hitting a low of 16 on May 28.
- The 21-day moving average DSI reached the twenties also. It is currently 29 and will fall a little further over the coming days before it turns up, maintaining the overall bullish trend of higher lows.
"Funds are short, Banks are long". We won’t know definitively until later today but given that Funds had raced to one of their biggest short positions ever at 29k contracts on May 21 and the price has fallen further since, it is a safe bet that they were even shorter on May 28.
- The Banks also held one of their largest long positions at 13k and are likely even longer now.
Again, confirmation that the low is in place requires a break and close above 14.70, but given the balance of
information in hand, Silver appears to have already bottomed and begun itsrally to new highs.
Gold may have too, and if it hasn’t, it won’t be far behind. The miners also.
This is the last chance to buy for the rally to follow to new highs above those in 2016, imho. In fact, the train may have already left the station, especially in the case of Silver. Miners are overdue an explosive move to the upside too.
For those of you interested in "investing" in Gold and Silver for at least a year, I highly recommend you buy the physical metals. I use ETFs solely for trading and hedging purposes. I buy all of my precious metals at Sprott Money.