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Wave 3 in Gold and Silver Is Underway

gold in 2024

Data vs. Trend in Gold and Silver Prices

When a strong trend in precious metals develops after a long period of suppression, data can be thrown out the window temporarily, up to several months.

Signals remain extreme overbought, bullish, long— yet the price continues to rise with few brief pullbacks.

We saw this in 2010-2011, when Gold went almost straight up to $1923 in 2011, despite extremes in the data that called for a reversal months earlier: extreme overbought on the technical indicators such as the RSI and MACDs; extreme bullishness in sentiment; and the Banks and Commercials were extreme short and the dumb-money Funds were record long. Yet Gold ignored these signals the whole way up until the blow-off top at $1923.

gold chart

While there were pullbacks along the way, the series of higher lows and higher highs continued unbated until it finally peaked in September 2011. The upward trend dominated the price action and ignored the extremes in the data for months on end. The trend superseded the data.

The same thing happened in the opposite direction in 2018 when the U.S.-China trade war was underway.

gold chart

The data was extreme bearish as early as March 2018, which tends to signal an imminent bottom ahead. Yet the price continued to fall until it hit the bottom months later in August. The trend of lower highs and lower lows ignored the data for several months. The trend superseded the data.

Fast forward to today and we have a very similar set-up in Gold and Silver. 

gold chart

The data is extreme bearish, based on technical indicators such as the RSI and MACDs being extreme overbought; sentiment is extreme bullish, which is counterintuitively bearish; and the Banks are their most short since March 2022 when Gold began its decline from $2079 to $1618.

Once again, we’re seeing higher lows and higher highs despite the data screaming for an imminent and sizeable pullback. The trend is dominating the data. Further evidence of this is the fact that Gold and Silver are clearly ignoring the recent rallies in DXY and the 10Y yield. Typically, the two biggest markets on earth dictate what happens in the relatively tiny markets of Gold and Silver, but not this time. This does not negate the risk of pullbacks. Quite the contrary, we should expect them just as in the 2010-2011 rally, but the trend is clearly up until proven otherwise.

I believe we’re going to get a pullback at some point very soon, but it is impossible to say with any certainty when and how much it will fall given that the trend is in control. As the saying goes, the trend is your friend until it isn’t, and the trend is clearly up. Even if we get a pullback, given the strong upward trend, any reversal is likely to bottom at a higher low and then Gold will continue to ascend again to even higher highs.

With all of that said, should a pullback occur here in the short-term, my minimum targets on the downside are $2,260-50 in Gold, $26.50-40 in Silver, and $31 in GDX, based on Fibonacci retracement levels. If this plays out, grab this gift with both hands imho, it may be last opportunity to get on board for what happens next, assuming we don’t get stock market crash, which would be an even greater gift if 2020 and 2008 are anything to go by.

The time to buy ‘some’ metal is now.

Don’t miss a golden opportunity.

Now that you’ve gained a deeper understanding about gold, it’s time to browse our selection of gold bars, coins, or exclusive Sprott Gold wafers.

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About the Author

David Brady has worked for major banks and corporate multinationals in Europe and the U.S. He has close to thirty years of experience managing multi-billion dollar portfolios including foreign currency, cash, bonds, equities, and commodities. David is also a CFA charter holder since 2004.

Using his extensive experience, he developed his own process utilizing multiple tools such as fundamental analysis, inter-market analysis, positioning, Elliott Wave Theory, sentiment, classical technical analysis, and trends. This approach has improved his forecasting capability, especially when they all point in the same direction.

His track record in forecasting Gold and Silver prices since has made him one of the top analysts in the precious metals sector, widely followed on Twitter and a regular contributor to the Sprott Money Blog.

*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.


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