Transcription
Silver and gold's next move is going to fool 90% of investors. And let me tell you why. The metals are setting up to make false new lows. That is going to suck in bearish players even more. And with the technicals already stretched and now some sentiment indicators looking extremely bearish, the metals could be ripe for an explosive move. But they have to put in some more selling first. And so we might see some capitulation over the days and weeks ahead that will eventually lead to that big summer rebound.
I'm Jordan Roy, a chartered market technician and a master of financial technical analysis. Oh, and by the way, how about that great victory from Team USA? Two to zero. Oh, I mean 2. But I digress. Let's get back to Gold and Silver.
And first, let's talk about the fundamentals because this is the problem right now for gold and silver. This is what's driving a bit more selling in gold and silver. And that's as I have said in recent videos, the fundamentals are still bearish. We have real interest rates here. They are still rising. We have the yield curve here which is flattening. So when the yield curve is declining, they call that flattening. That is bearish for gold and silver. And so it's doing that because we see the 2-year yield, which the Fed follows, is stronger than the 10-year yield. Now, what gold needs is the 2-year yield to peak and roll over or the 10-year yield to move up like this and rise faster than the two-year yield. So, that's the bugaboo for gold right now, a lot more so than sentiment and technicals.
But moving on, just another quick comment on fundamentals here. And I want to show, and I'll talk about this more in another video in the future, but I want to show the 2-year and the Fed funds rate here and how gold has reacted recently to when they start hiking rates. Now, we can go back here and now these vertical lines here mark the start of hiking regimes. So the last one here was at 2022 and that's exactly when or right about when gold peaked and then had a 20% decline. Now if we go back farther than that, you had this in beginning of 2016 or maybe it was December 2015 where they just did one hike and then they waited for another year before resuming hikes. But what's interesting is both these points essentially mark bottoms. And it's the same thing here in 2004. They started a new cycle and this actually marked a bottom. Also similarly 1999 they started hiking it marked a bottom. So the key right now for gold with respect to the Fed if they're going to hike or if they're not and that is if they hike but the gold price is down way off its highs like it is now that could actually mark a bottom. Okay. But if gold rallies back like this then they decide to hike then gold would come down like that as it did in 2022. So again, we'll get more on that in another video, but that's your fundamental story for now. It's not yet bullish for gold, but the reality is gold and silver can bottom and rebound before the fundamentals really turn bullish. When they turn bullish, that's what takes the rebound from a fledgling rebound to the point where gold can rally back to the high and eventually break to a new high.
Okay, now let's get to technicals. Here is our gold correction analog chart. Now we plot the 1973 and 2006 corrections in gold on the same scale as the current correction. Why do we do that? Well, these corrections were the first big correction after a major breakout in gold. Three major breakouts in gold. Three major corrections. And what do you know? The black here is the current correction. Look at how well it's followed the other two the last two or three months. They've come down like this. In 1973, this was the bottom about 39.50. Now, the bottom in 2006 was right about here, call it 4150 or so. So, based on this analog, this move down like this, I think could be setting up a final bottom. Okay? So, look for that over the coming weeks.
And speaking about how the market could bottom, if you watch my video last week, I talked about it here to look for one of these types of patterns with respect to how gold could bottom over the coming weeks. Now, I think we can rule this one out where you have a hard move down, you have a rally, and then it goes sideways before the rebound gains traction. I think we can rule that out now. I don't think we're going to see that type of move like that. So, to me, it looks like it's going to be one of these two. This or this.
Now, because the fundamentals are bearish right now, and one point I want to make, a good percentage of that has been discounted already. This move down in gold has actually already discounted one rate hike in my opinion. But I digress. So, moving back to how gold could bottom. These are the options where you get a double bottom like this where it comes down like that. Or you see something like this where it's a false new low. Okay, it comes down like that and then you get a move like that. It's a false new low. So, I think we have to be on guard for something like this, a false new low. And so, support for that. You do have great support here at the recent low at 4050. That's also the 38% retracement or around there for the 22 and 23 lows. It could also come down here I think to 3900 3850 something like that. So that's a level to keep in mind for a final low in gold.
And so where would that put silver at this point? This is a gold silver ratio here. It is starting to turn up. So if we see more selling in both gold and silver, we'll probably see gold outperform silver. And so given that scenario, I would expect silver to come down here to 55 or 56. Okay, so that's the technical update.
Now let's get to sentiment because sentiment is a very very important part of technical analysis people. Now when you look at Twitter and you look at YouTube and you see videos and you see charts and people drawing lines and all of that that doesn't take into account sentiment which is extremely important because sentiment revolves around money. Where the money has moved, how much the money has moved, how much buying power or selling power is left in the market. And so when you get a big correction like we've had, that's where sentiment becomes really useful. It tells us how much more selling pressure is left in the market. And so this data here is based on the Bank of America Global Fund Manager Survey. So this chart shows the net percentage of fund managers who think gold is overvalued. Now when it's down here, it's negative. They think gold's undervalued. So this is where we are right now. I think it's a net 2% who actually think gold is overvalued. Now we go back here 3 4 months ago. Look how high it was. And so, by the way, this I think was probably January or February, a month or two before gold broke out of its 13-year long cup and handle pattern. And now, this is almost at a 2 and 1/2 year low. So, this is the lowest since gold broke out of the 13-year cup and handle pattern. We can go back and look when gold was in a secular bull. There's not a ton of history, but it was in a secular bull until you could call it the end of 2012, but you can go back here, I believe, late 2008, early 2009. So these types of readings, they correspond with significant lows in a secular bull market. So that's where we're headed to in the next month or so.
Okay, let's look at more sentiment indicators. And these are new, by the way. The net fund flow into So are investors putting their money into GLD or are they selling GLD and taking it out? And so that data is actually smoothed by a 100-day moving average down here. So this is a 100 day moving average of fund flows. Look at where this has come just in the last month or two. I mean this is plunged. Okay, this is down here at this mark here at the 2022 low right there. Down here at the end of 2020 that was also a low. So this is very encouraging for gold with respect to sentiment.
Here's another one here. This is the GLD six-month put call skew. And so the skew actually measures the cost of betting that the market is going to go down or buying a hedge because you're worried that the market is going to go down. And so when this reading is up here, that's evidence of more bearish sentiment. And look at where we are. This is at basically a 9 or 10 year high. You have to understand people, the sentiment indicators are telling us gold is getting really, really close to being all sold out. Okay? There's not tons of people left that have to panic out of the market. That's already happened. So sentiment is telling us there's not that much more downside in gold. Okay?
And I posted this last week, but I just want to reiterate in the big picture, there's still a very low allocation to gold despite the huge move that gold and precious metals have had the last two years. One of my bread and butter indicators, the implied allocation to gold. All the money in gold ETFs bed all the money in all ETFs. This is where it is for gold. I mean, look, this thing has not broken out yet. It's not moved like that. It's down here below 2%. Again, 2008, 7%. The peak in 2011 over 8%. It's below 2% now. And then consider this again. The JP Morgan Global Family Office Report covers 333 family offices from 30 countries. The average net worth 1.6 billion% don't own any gold. Okay. The average allocation of the 28% who do 0.9%.
People, when you look at these things, I'm telling you, when gold makes its next move and the stock market has its next bare market, you're going to see gold go to 10,000 during that move and eventually much higher after that. And so, we have to understand what we're coming to. This is a significant low in the gold market, the silver market as well, and also for the stocks. And it's going to be an incredible buying opportunity. And these types of buying opportunities, that's how you can make 5x or 10x your money in the next two or three years. It's not when things are going up and everybody feels really good. It's when you buy pessimism. It's when you buy stocks that have great value when they're down 30%. And you do that in a secular bull market and you buy the right companies. That is how you can make big returns over the next two or three years.
And so in the Daily Gold Premium, our premium service, I cover the companies that I am personally buying and investing in and also the ones that I'm interested in buying and investing in in the future. And I'm looking for a combination of quality companies with quality assets and quality people as well as upside potential. I look at companies, I evaluate them and their potential at current metals prices or slightly higher metals prices. Cuz when you find something that's really undervalued at current prices, $60 silver or $4,000 gold, and you think that could double or triple in a year or two, when the bull market resumes, something like that is going to 4x, 5x, 6x. That is how you can make big returns in a bull market. You buy weakness, you buy during corrections, you buy value, you buy good companies.
To those of you who have subscribed, thank you so much. I appreciate you and your business. And if you own individual juniors and individual miners or looking for some more expertise and assistance with your stock picking, head on over to the daily.com/premium. We'd love to have you aboard. We can definitely help you.
And speaking of miners and juniors, let's wrap this up talking about GDXJ in the near-term outlook. And in recent weeks and months, I was telling you about how we needed the percentage of GDXJ stocks above the 200 day moving average, as you can see here, to come down to 10% or lower. Now, down here, this got to 8%. Now, sometimes these breadth indicators, they may not mark a bottom that day. It may take a week or a couple weeks, even some cases, maybe a month. And so if you think about how the bottom in gold could potentially play out, maybe we see something similar with GDXJ. Maybe this comes down here and makes a double bottom. Maybe it comes down here to 90 and makes that false new low. But at the same time, as it comes down here, we will be watching these indicators to see when they come back down here and get close to zero or 10% again because that is going to help us spot the bottom and spot the excellent buying opportunity.
So that's all for this video. Thank you so much for tuning in. Hope you had a great week. Hope you have an even better weekend ahead.