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Waiting on COMEX Silver - Craig Hemke (19/02/2020)

Sparkling three silver bars of 10000 g each

February 19, 2020

So far, it has been a great 2020 for COMEX Digital Gold, and this is playing out much as we forecast when the year began. However, as COMEX Digital Silver and the mining shares lag behind, frustration is building within the sector. So today, let's take a look at silver and identify again the levels to watch in the weeks ahead.

As we often do, let's first draw back to the most recent time we wrote about the current subject. For COMEX Digital Silver, this was back in early January. If you missed it then, please review our "2020 Macrocast" that was posted on January 7:

https://www.sprottmoney.com/Blog/gold-and-silver-2...

 

The year for COMEX gold has begun with a bang, and it is already progressing along the path we laid out in that post. The first major target for gold was a weekly close above $1550. We knew that this would represent a major breakout and, IF IT HELD, would set the stage for continued gains.

As of this writing, not only has price held above $1550, it has now extended too. This brings the first target of 2020 into view—$1650. Then, once this level is bested and a new perception equilibrium is reached, the next target becomes $1750-1800. Again, this was laid out in that "macrocast" from January 7:

OK, so that's great. Gold is already up more than 5% year-to-date. Terrific. But that's not the point of this post. As mentioned at the top, we've got to figure out what the heck is wrong with COMEX silver and why it's lagging. And this is important, because as we'll show, how silver performs has an outrageous impact upon the mining shares.

First, let's refer back to that January 7 forecast. What are we expecting in 2020? Do we expect a massive, 2011-style surge or just more gradual gains in the face of ongoing debt monetization and falling interest rates?

So, again, we're not asking for a lot out of silver this year. Just a move to $20 and then on to $22. That sounds reasonable enough, but for crying out loud, thus far COMEX silver hasn't even been able to maintain above $18! So what are the steps that silver will be taking, and what are the key levels that you need to monitor?

First, just like COMEX gold had $1550 to beat on a weekly closing basis, COMEX silver has an important target too. And what is that level? There's no doubt that it's $18.50. Until COMEX Digital Silver finally finishes a week above this key level, price isn't going anywhere. Don't believe me? See below:

What's fun is that there is finally some hope that will happen quite soon. On the daily chart below, note the clear emergence of a reverse head-and-shoulder chart pattern. Not only does this pattern reinforce the importance of $18.50, it also shows just how close we may be to breaking through to the other side.

Referring again to our January forecast, the $18.50 level is the key to $20, which in turn is the key to $22 and beyond.

Finally, what the heck is wrong with the mining shares thus far in 2020? As mentioned above, gold prices are up over 5% year-to-date, but many of the key gold mining indices and ETFs are down on the year thus far. What gives?

Well, whether by design or by fate of algorithm, the mining shares now closely track SILVER instead of gold. And, of course, this makes zero sense! Why would a basket of junior gold mining shares rise and fall with the price of silver? The most likely answer is that we have 21st century automation to blame. We all know that the vast majority of equity trading now falls to the pre-programmed HFT computers, and quite obviously, many of these machines take their cues to buy or sell mining shares from the directional trade of silver. Again, don't just take my word for it. See the charts below, where COMEX silver is displayed in candlesticks while the shares of the GDXJ appear as a blue line:

So, in summary, it appears we are right on track with our 2020 forecast from six weeks ago. Yes, the fears of a virus-related global economic slowdown are helping, but COMEX gold was/is headed higher regardless, as the global central banks desperately print cash to monetize debt and keep deflation at bay.

COMEX silver has lagged, but it will soon break higher—toward $20 and then $22. Once this happens, the mining shares will accelerate higher with the likelihood of outsized annual gains for this sector clearly in sight.

Thus we conclude with the old adage: Sit tight and be right. Watch those key, technical levels and allocate your assets accordingly.

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Head shot of Craig Hemke

About the Author

Our Ask The Expert interviewer Craig Hemke began his career in financial services in 1990 but retired in 2008 to focus on family and entrepreneurial opportunities.

Since 2010, he has been the editor and publisher of the TF Metals Report found at TFMetalsReport.com, an online community for precious metal investors.

*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.

Comments

john martin
February 19, 2020 at 1:23 PM
TA of rigged markets is useless......Fed is in complete control of gold and and silver and I am sure that the ESF is naked shorting mining shares too. Like Chris Powell of GATA says, the most we can hope for is a "managed retreat" by the Fed on gold. Silver is another story. Silver has the potential to bring down the banking system so the Fed will keep a VERY short leash on the silver price.
ken turkowski
February 20, 2020 at 3:40 PM
I agree john, did you at one time work for Kosowan?? is he still in Canada ?? Sprott I think I worked with you at some time hope all is well.!!
john martin
February 21, 2020 at 9:08 AM
Sorry...never worked in finance or in Canada for that matter. Must be some other person with similar name. How I wish I was wrong about gold & silver being manipulated but even Sprott has many times said gold and silver are both being totally manipulated and move in VERY counter-intuitive ways when major financial or geo-political events such as collapses or wars take place. When US invaded Iraq back in 2003 gold got slammed! Go figure that one out!