Transcription
This is not the gold and silver crash that everyone thinks it is. This is just an intermediate term correction in gold and the gold stocks and probably a little bit more in silver. I'll talk about it and tell you why precious metals are extremely close to a short-term rebound in this video. Let's get to it.
Now, let's talk about fundamentals a little bit. Now, not always my favorite subject because technicals lead fundamentals, but they are both very, very important with respect to my own personal investing. I'm huge on fundamental analysis when it comes to companies. And when you're looking at macro, it can be difficult. But here's the reality why gold and silver in the stocks are getting hit. It's all about oil driving up inflation expectations in the expectation that central banks have to hike.
So, in this chart here, here I have gold. Here you can see the two-year yield which the Fed follows. It's a good proxy for the Fed funds rate. Then you have the 10-year yield here which is a proxy for long-term interest rates. And then you have the yield curve here as well. Now the yield curve when you see that declining like this that's typically negative for precious metals. But when it's rising or steepening that's bullish for precious metals. And so what we have seen in recent weeks is the yield curve is rolling over. It's declining. But what is more simple, I should say, is right here, the two-year yield, the proxy for the Fed funds rate that has moved up quite a bit in the last month. And we can see here uh the second uh the lower high in gold from about 3 weeks ago or so that aligns with the start of the move up here in the 2-year yield. So quite simply, fundamentally, precious metals could be under pressure until the 2-year yield peaks and rolls over.
Now, what is causing the 2-year yield to rise? I already mentioned it. The rise in oil, the rise in energy prices. We all know that's going to drive inflation higher. Now, fundamentally, when are we going to see a return to gold and precious metals? Well, that will be when the concern for policy makers turns from inflation to recession. So when we get to the point when oil and the inflation, it starts to inflict damage on the economy and growth starts rolling over. That is when the Fed will have to shift course and start cutting. So that is what you should be following in terms of the fundamentals with respect to the macro.
Okay. Now let's talk about the technicals and where we are. Okay. So big picture. This is for those of you who are new and haven't seen this chart before. So in this chart I show you three lines here. The blue is the 1972 breakout in gold on the current scale. So, I aligned it to the scale of the current breakout which began 25 months ago in February of 2024. Now, the third biggest breakout, I didn't put it on here because it's a little weak. That is was the breakout in 2005 and I combined that with the 1972 in this average line right here, which has been a good proxy for the breakout that we had 25 months ago. You can see here in black. But the problem and I mentioned this to subscribers at the beginning of the year that at some point this year we would need to see a 20% correction in gold. Well, that is happening. Okay? Because if you look at the 72 to 74 move in gold, very similar to the last 24 months we just had. So, excuse me, that was a 71 to 73 move. On the current scale, that move never corrected more than 12%. Reached all the way up to 6,000. Then it corrected 28%. What happened after that correction made a huge move higher and and eventually ended up reaching over $9,000 an ounce on the current scale. But what we see here and now is that gold is following this correction. It didn't quite peak all the way up at 6,000, but it came fairly close and it was so overbought at a point where based on history it was going to have to correct over 20%. So, it is doing that correction now and when that ends it's going to rebound and start moving up again. And so, that's the question. When will it start moving up again?
Well, let's get to the correction analog chart which evaluates the two post major breakout corrections and that was the one I just showed you in 1973. And then within the '05 to08 move, you had a correction at 2006. Gold got really overbought in the middle of 2006, you might remember. Then it corrected 25%. So I've put these two corrections on the scale of the current correction which you can see here 2026 and then I made an average of those two and look where we are here and now. We are right down here and this is literally right at the point of the first bottom in that 73 correction. Now the bottom in the 06 correction was right here a little bit before. So gold is coming down. Maybe it has a sell-off for one more day and then it puts in a low.
Now, what happens after you get the initial low in these corrections? Okay, you can see here the initial low here at 06. Here's 73. They rebound. You can see they rebound here. Here's the other rebound at 73. But after that oversold bounce, they tend to chop. They grind lower for a couple more months and then they make a low right around here, which is not that much of a lower low. Okay, the 2006 low was here and was not a lower low. The 73 low was a lower low. Now, if you look at the average, the average was a slightly lower low depending on where we bought them in the next day or two. That might be the low in terms of price. Remember price and time as far as corrections. So, the price element, we have done the majority of the damage or even the vast majority of the damage. We will know in a couple days depending on how low gold bottoms. So that's what we're setting up for is a low in the next couple days. Then you're going to get a rebound, then a chop in a grind lower to a retest and final low. Then you're going to move a lot higher like that. So it's still going to take some time and I don't see the end of the correction in terms of time until sometime in May, maybe early June, something like that.
Okay. Now let's look at a daily candle chart for gold and silver. And here we can see the various support levels for gold right around 4,300 4250 or so I believe 4250 or 4260. That's about a 25% correction. Gold closed at 4494. And as you can see here, here is a strong support these two lines. So you probably have another day, maybe a second day where you get a bullish reversal in the bottom and at some point it will test the 200 day moving average. That I think will be most likely in May or early June somewhere around here when you get the retest of the low.
Now with respect to silver, silver obviously technically looks a lot worse. It's lost support at $70. And the next strong support really is the retest of the breakout at 55. And you also have the 200 day moving average here which is at 56 or 57. So this strong support should come into play at some point for silver. You could get some panic selling here in silver where it really plunges to some kind of a bottom here over the next week or so.
Now let's look at the weekly candle charts for gold and silver. And we can see here gold we mentioned 4,800 last week. It just blew through that and it even lost this support here around uh 4550ish fell below that. So on the weekly chart here the next strong support 4250. That should be really good support. And here's the weekly chart for silver. It lost the weekly support in the low70s. So now it has nothing until as I mentioned the 200 day moving average. This is the equivalent line here. and then about $55 the retest of the breakout from that uh epic 45-year long base.
Okay, moving on. So, I mentioned this in past videos and we can see here this is a weekly chart of gold with the equivalent 200 day moving average. And here's the 71 to 73 period where gold got super overbought. Then it corrected 28%. It finally tested its 200 day moving average during that correction and this is where we are here and now. So I think that is going to repeat testing the 200 day moving average. Historically this is what has happened during gold breakouts. You get a big breakout in gold, you get the big move higher and then when it has its first significant correction, it tests the 200 day moving average and usually bottoms there. So that's what we're looking for.
Now, it all sounds negative for gold, but the reality is, and don't forget this, gold against the stock market. Yes, it's correcting as we said it would, but I would expect this to hold these levels here. Okay, this is this was the former resistance new support from this 12-ear long base here. So, in real terms, in the big picture, gold is very bullish against the stock market. But, as we pointed out in a couple past videos, look at this move. This had gone way too far. It needed a correction. It's correcting now.
So, before we get to the stocks, I would like to tell you about the Daily Gold Premium, our premium newsletter service. Thank you to all of you who have subscribed. I appreciate you and your business. And in this service, I cover and analyze the stocks I am personally investing in. I am looking for the juniors that have 5x upside over the next two or three years. And every Sunday night, I put out a significant update. I have tables with information on lots of companies. companies I own, the ones I'm following, the ones I'm interested in that I don't own yet. And one thing I'm going to do this weekend is, and this is something I do periodically, I'm going to look at the upside potential of these companies over the next two or three years, evaluate their value, factor in the higher costs that are coming because of inflation, and then assess how much upside these companies have at various gold prices. And this is important because when you compare stocks against each other, you can understand which ones are the better values and which ones might be high risk. So if you own juniors and miners and you want a little expertise and guidance and some assistance with your stock picking and company selection, head on over to the daily.com/premium and we'd love to help you out.
Okay, let's wrap this thing up talking about the stocks. And so here are the weekly candle charts for the miners. GDX here, GDXJ here, SILJ. And I did not change these lines. I put these lines in last week. And we can see here that these support lines, the lower ones specifically, that is where the miners closed this week. So nasty week of the miners, but they're right down here to significant support levels.
Now, moving on. Something else I want to mention. I covered this last week, breadth indicators. Now, a lot of you are familiar with BPGdm, uh, which I believe is down at 0% or 3%. That is a breadth indicator for GDX. It's a really good one. I also have my custom breadth indicators where I look at new highs in GDX and GDXJ and also the percentage of the stocks that are above the 20-day, 50-day, and 200 day moving average. Well, now if you look at the percentage of the stocks in GDXJ that are above the 20-day right here in the 50-day moving average, these are at zero. So 0% none of GDXJ stocks close above the 20-day and 50-day. Now people, every time that has happened, you get some kind of a rally. It doesn't necessarily happen immediately, but it does happen within a couple days. So, we can see down here where GDXJ closed at 104.77. Now, my initial bottom target, which I wrote about a week ago for subscribers, was 112. I put out a flash update yesterday and I said looks like 104 could be the low. Now, maybe this could go a little bit lower. You have the 200 day moving average here, but either way, you're coming into an area of really strong support. Breadth indicators are at zero. This is setting up for a good rally. you're going to rebound and probably see this thing back at 120 125 uh maybe in 2 or 3 weeks.
Okay. And by the way, one other thing I'd like to mention as far as that final bottom in two or three months when you get a retest of the low. One indicator for that is looking at the stocks and the percentage that have closed above the 200 day moving average. Now that is down to 75% for GDX. I just checked it. I don't have my GDXJ data yet, but that's down to 75%. So over time when so over the next couple months that could come down to 50% or even lower and that is going to signal again two or three months or so you could have a very significant intermediate term bottom here in precious metals. So that's what we're looking at. We have an initial bottom here coming in the next day or two. It'll probably rally for at least two or three weeks and then two and then over the following weeks after that it's probably going to grind sideways to lower into some kind of a final bottom in late spring. And that late spring perhaps that's the time when the Fed and other central banks realize, the economy is rolling over. It's going in the toilet now. We got to start cutting rates. So keep all that in mind. Thank you so much for tuning in. Leave a comment. Let me know what you think and I'll talk to you guys again next.