Transcription
Has the intermediate term correction and gold and silver ended? Have we hit the low in both metals? Are they about to begin the next big leg higher and blastoff here in the coming weeks?
Well, answers to those questions and more coming right up. Stay tuned. I'm Jordan Roy, a chartered market technician and master of financial technical analysis. And first, let's cover the correction and if we've hit a bottom in gold and silver and we'll focus on gold here first.
So, looking at gold, here is our correction analog chart. And again, for those who are new, we take a look at the first significant correction in gold following all of its major breakout moves. Now, aside from the current correction, there's two in the past, and those are from 1973 and 2006. So those are plotted here on the scale of the current correction 2026. Okay. So here is where we are. Here's where we bottomed in '06 and here's where we bottomed in 1973. So from this chart, your guess is as good as mine. It's very possible we could continue to grind higher like that. Or maybe we get one more move like that. So if we're not at the low in price, we are damn close to it, people, because intraday we came down almost to 4,000. So I would say leaving room that maybe gold could test 3850 or 3900 down here. Aside from that, I would say that we have hit a bottom. Now the reality is whether this is the bottom or it's somewhere down here doesn't make a huge difference in the long term. So don't obsess over it.
Now moving on, let's take a look at the specific daily price action in gold and silver. And so here are the daily candles for gold. Here are the daily candles for silver. And one thing I want to mention here, I've sketched out how this potential bottom could play out. And so there's three potential scenarios here that I have sketched in. So look for gold and silver to make one of these bottoming patterns. So this covers, I think, the full spectrum of scenarios that we could have over the days and weeks ahead.
Now, the first type of bottom you could get is a double bottom where the market makes a low like it did a couple days ago. It has a rally, it comes back and it retests the low and right at the low then it explodes off of it. So this is a double bottom. Very common.
Now you also could see something like this which is less common and it's frustrating because you come down and hit a low like we did on Thursday and you have a bit of a rally and then you go sideways for a little while before grinding higher. So that is the more frustrating type of bottom and this action here actually serves as a retest.
Finally, you could see something like this. And this is actually how the stock market bottomed in 2009 here where you come down and you make a bottom. You have a rally, but then you have another leg lower and you break the bottom and make a lower low, but that actually turns out to be a false low. And then from that false low, you rocket higher like that. So pay attention over the next couple days, the next couple weeks, and see if the metals follow one of these patterns. And so even if the metals were to break lower like this, or you see silver fall below 67 here again, that to me would bring about a real final move in a final capitulation. And again, you would see something like this where you make a lower low and everybody panics out of it at exactly the wrong time.
Now, technically, gold came down here and put in a low just a little bit below this intraday low here, just above 4,000. And right around here, this is actually the 38% retracement, whether you're measuring from the 22 or 23 low, it's somewhere here around 4,000. So, you have that support, you have the fact that gold's been in a 5-month correction. It's declined almost 30%. So, it's getting very oversold. So again, either way, if this is not the bottom, it's damn close. And we're going to see it very soon after that. And I think the same goes for silver. Uh silver, I've mentioned you have this support at 60 here. It came down to 61. So this is actually a bit of a positive divergence for silver where it did not break this low, whereas gold did break the low. And you see that right here in the ratio. A little more strength for silver or from silver around this bottom. But again, I like to cover all my bases. So I don't want to rule out the chance that, you know, maybe we get a final plunge here to this support at 56. And again, that would align with gold probably losing the support and coming down here and bottoming at 3850 or 3900.
Okay, let's talk about fundamentals. Now, fundamentals are always important, but I think with respect to gold and silver and precious metals right now, they are of particular importance. And that's because for me the question is what is going to happen with real rates? What's going to happen with the yield curve and the increases we've seen in bond yields across the curve? And again, a rising or steepening yield curve, that is bullish for gold and precious metals. Falling or lower real interest rates like you see here, this is the real 10-year yield. That is bullish for gold. So again, during this correction, we've seen rising real yields right here, and we've seen a flattening yield curve. And that means the spread between the 10-year here and the 2-year yield tightens. It gets smaller and smaller. So they're moving closer together. And that, as we see here, is negative for gold and precious metals.
And so right now, the market is discounting 1.5 rate hikes from now until the middle of next year. So essentially 1.5 rate hikes in the next 12 months. Now I don't like to talk about politics but we know that the Fed chair is going to do what the president wants and the president wants rate cuts and more money printing. So I think ultimately it will take some time but we will see those 1.5 rate hikes get priced out of the market and that's when we'll see gold rebound and slowly move higher and grind back. And then the question is if the economy gets weak enough and the inflation readings in three or six months they start to come down, you know that the Fed's going to cut. And so when the market sniffs that out, that's when gold is going to break out and begin its next big leg higher. So that would be my quick fundamental take over the next 3 6 7 8 months or so.
Now the negative for precious metals and if gold were to struggle here for several months would be if the Fed actually gets a hike off and the market thinks they're going to be tight for beyond 3, six or nine months, that would be negative. I don't think that's going to happen. But that would be my negative case scenario. But ultimately, the Fed chair and the president, they do want rate cuts and I think and they will get them at some point. It's just a question of is it in 12 months, 6 months, 5 months, 9 months, you get my drift. And then the other thing I'd mention, the yield curve can also steepen if this yield moves much higher than the 2-year. So if this yield creeps up like that, but the 2-year kind of stays like this, that would steepen the curve. And so that would be bullish for gold as well. So that's another thing to keep in mind. So it really comes back to the 2-year yield.
Okay, I've modeled those different scenarios here in my gold best fit analog chart. And so let me explain this chart for you. In black here is the current market. And that's the second biggest breakout in gold's history. Now the light blue line here is actually a composite that's measuring 75% of the breakout in 1972, which was the greatest breakout of all time in the history of capital markets. and 25% is the 2005 breakout which is the third biggest breakout in gold's history. Now the current one is number two. There's only three big breakouts in gold's history. And so looking at that data what I realized is if you plot it forward by 6 and 1/2 months this is what you get here. Something that's very very close to the current market. You can see the six and a half months here where the data starts here. So it's very very close to the current market. This, you can see, is mostly the decline that we had in 73. And so that composite is in light blue here. And that touches $8,000 an ounce in, let's call it the end of the third or maybe the fourth quarter of 2027. So that's $8,000 an ounce.
Now the red is actually 50/50 where it's 50% 05 instead of 25%. 50% 72 instead of 75. So the 50/50 gets us pretty close. It's actually not quite there. So this is actually around 7500 something like that.
Now if we just look at gold by itself from that 2006 low. So you had the 2005 breakout. Then you had the 2006 correction and you add how gold performed from that low. This is the outcome right here. Okay. So this is a slower rebound. So, this is a slower rebound. It grinds higher, consolidates for a little while, and then it boom, and then it goes higher. And so, this comes out to $7,000 an ounce actually at the end of 2027. So, $7,000 in 18 months. That's not too shabby. So, I just want to cover all the potential scenarios with these lines. It's important to use history so we can model all these potential and possible outcomes moving forward. And one last thing, this chart does argue that the bottom is not in yet. Okay, so something to keep in mind.
And it gets back to my original point, people. Whether the bottom's at 3,900, whether it's in a month, one week, it happened yesterday, it's at 41,42, something like this is going to play out, okay? And so if this plays out, does it really matter if this is the bottom? If this is the bottom, if this is the bottom, no, it doesn't. So, don't get over obsessed with trying to nail the bottom on a particular day. Okay? That's not going to make you big money in the long term. But I digress.
Okay. And speaking of the long term, I want to look at a bird's eye view of gold with a couple charts here. And so, here we have gold here. Here's gold against the stock market. I've labeled CP as cyclical peaks, IP as intermediate term peaks because we know where we are. This is not a secular peak. This is definitely not a secular peak like 1980 or 2011. Okay, you can look at this chart and understand where we are in the very big picture. This is a severe intermediate term correction that we're seeing in gold and precious metals, but it's normal. I mean, we had something similar here actually in 70 or 71. Look at that. I think that's kind of similar. And so, I've already answered the question. We know it's not a secular peak. Is it a cyclical peak or an intermediate term peak? It's really an intermediate term peak. Okay? Because look at how high we were. Because look at these cyclical peaks and they require tons of capital moving away from stocks and into gold. You have all that before a cyclical peak. You have all this before a cyclical peak. Up to the cyclical peak, the ratio is up 715%. Up to the cyclical peak here was up 342%. Okay. To this point here, it's only up 106%. So people, this is an intermediate term correction, okay? Nothing more. It's a severe intermediate term correction and this tells us that there's big time room for gold to make a huge move over the coming years.
Now, here's another way to look at it. Same chart here, but we're looking at a bit differently. So, here's gold. This is a daily line chart. Here's gold against the S&P 500. Now, these boxes show the significant corrections in gold. Now, if we go back to the last bull market, this one here was sharp, but it was about 15%. 25% here, 30% here. This was a cyclical peak GFC decline right here. Okay. Now, in the 70s, you did have this 45%. But other than that, you had 20% here. You had 28% here, which is most like the current correction, by the way, and then this was 24% here. Now, again, you have to look at these in the context of gold against the S&P 500. Okay? Look at where we are now. The ratio made a breakout, but it turned into a false breakout. That's okay. That's fine. But it's all the way down here. Okay, if you look at these corrections, look at where gold against the S&P 500 was. Look at where it was in 2008 here. Okay, look at where it was in 2006. Right here, it was well off the low. We know this is not We know this move here pales in comparison. So, this tells us that the cyclical bull actually has plenty more room to run and that we've seen a good reset here with this intermediate term correction.
And to bolster those points, I talked about it in a past video. There's so little money in precious metals. You know, this is one of my favorite charts, the implied allocation to gold via ETFs. All the money in gold ETFs divided by all the money in ETFs, you get a ratio. Look at where we are. Back below 2%. Okay? Look at where we were in 2008. Okay, all the way up here at like 7%. The peak in 2011 was over 8%. Look at where we are here and now. We're even below these levels. And by the way, you can see this is actually in line with gold against the S&P. So, I'd like to see Callum Thomas actually change. This is gold against the 6040 and put gold against the S&P here in black. I think that would be more representative. But again, I digress. So there's just barely any money in gold and precious metals.
And more to it, let's look at family offices in this nugget from several weeks ago from gold we trust and Ronnie Sturley, the brilliant Ronnie Sturfley, JP Morgan global family office reports that many family offices. That is their net worth. 72% of those people no gold. They don't own any gold. the 28% who own it, less than 1% is invested in gold. So there's just not that much money in gold. And people, what happens when these people go to a 5% allocation in gold? Where does the price go? I'll tell you what, you can add another zero to it. That's a reality. So this is more of a near-term indicator, and this is where we are. So, I don't think there's that much more selling in gold and precious metals here. Just look at this statistic here and look at this chart and then consider the corrections that we've endured in this sector. It's an incredible opportunity and that's why I'm so excited about the Daily Gold Premium and the work we're doing.
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Okay, now moving on. Let's wrap things up with the stocks. So GDX came down and actually bottomed right here at this moving average that I talked about last week. This moving average actually uh provided support at the low at the end of 2024. Now you look at the breadth indicators. We were talking about it. The percentage above the 200 day moving average. Look, it held up here for so long that we needed that to plunge. Couple days ago it was at 9%. 0% with respect to the percentage above the 20-day and 50-day down here. I was thinking maybe we would see a gap down and something like that. We didn't get that. Now, this has had a good rebound the last two days. Now, there is some resistance here. So, listen, if this is the bottom here, I don't think this is going to explode like that. You could get a move up like this and then maybe it does that type of bottom where it consolidates like this and then pushes higher or you do come back like this and you get some kind of a low here or low here and that turns out to be the final bottom.
That's all for the video. Thank you so much for tuning in. Hope you had a good week. Hope you have an even better weekend and I'll talk to you guys again next week. I think we'll have an update with Professor Vince Lansancy.