Transcription
If you're worried about gold and silver, watch this now because I'm going to reassure you that aside from the next month or two, there's absolutely nothing to worry about. Beyond that, I have no worry about gold and silver. They're in a secular bull market and they're going to move much, much higher over the next couple of years, 5 years, and 7 to 10 years as well.
In this video, I'll take a quick look at the short term and also reassure you about the medium-term and beyond. I'm Jordan Roy, a chartered market technician and master of financial technical analysis. And so, let's take a look at the short term and where we are here and now.
And so, we can see gold is trying to put in a bottom right here, just right around $4,000 an ounce. Now, yesterday it did close below 4,000, but other than that, it has not closed below 4,000. It's closing the week above 4,000. So, again, it's trying to build a bottom right here. Now, I don't know and nobody knows for certain if the next move is going to be more like that, a rally or like this.
Now, if we think about the downside potential, because I like to be conservative, gold does have really strong support down here in this area, 3600, 3,700. Now, if it were to break down from this price action, which I thought it was doing yesterday, you have a potential measured downside target of about 3,700. Now, depending on how you measure the recent move over the last two two and a half years, if you're using intraday or closing prices, if you take the 2023 low or the 2022 low, you get about 3620 or 3720. That's the 50% retracement.
Now this is really significant because the 2016 low in the market was around the 50% retracement from 2001 to 2011. That entire move and also after the move from 2018 to 2020 the 2022 low was also at the 50% retracement. So this is a very important level in technical analysis when you're retracing or correcting big moves.
Now moving on to silver. We know that silver is weaker. We can see gold double bottom or slight higher low to silver where this is a lower low. And this is typically what you see in corrections in weak markets in precious metals. Gold is the strongest part. Silver and the shares tend to be the weakest.
And this is a gold silver ratio here. So gold divided by silver. And we can see that it is breaking out here or has broken out from a base that goes back to February. So that's about five six month long base here. And this is breaking out. So, this closed just below 72 today and this could continue higher up to 80 and maybe even higher than that. And so, in in that scenario, it's hard to get too bullish too soon on precious metals.
And back to silver, it's been stabilizing, trying to hold here in the mid50s. We do know that 50 is the We do know that 50 is major support, but looking at this price action here, I also sketch in $48. So, that's where we are for gold to silver in the short term. And last thing I'll say is if we do get a breakdown like this in this market, I think that's going to lead to a major bottom in the sector. And so, aside from that, you really should have no worries about this sector.
Next, I want to go over some updated sentiment data, which we can see here. But first, I can't recall if I posted this chart. I know I talked about the gold optics data from Sentiment Trader last week that they tweeted about where if you're looking at their GLD optics indicator in the 50day moving average of that data because it has to be smooth because it's very volatile dayto day. It was at a level that's only been seen down here eight times in the past 20 years or so. And so I have marked here with vertical lines the eight times when that data has reached a similar low point. Okay. And we can see here 2022 bottom the 2018 bottom here. This was a bottom at the end of 2016. Then we have the bottom here at the end of 2015 early 2016. And here this was a couple of months before the 2008 bottom which was a major bottom.
So the conclusion from this data would be we're either at a bottom right now or it's going to take a couple more months. This took a couple more months. This took a couple more months here and then this here in 2022 took a couple more months. So I know it's painful now, but if you zoom out big picture, does it matter if the bottom's now or if it's 3,700 around Labor Day? It really doesn't in the big picture unless you're using leverage trading options and day trading, which I really don't advise.
And so here is the updated data from the Bank of America monthly fund manager survey. So every month they survey global fund managers and they give their opinions. They give their opinions. They also share some data based on their positioning. And so this data tells us the net percentage of fund managers that think gold is overvalued. And several months ago it was all the way up here. A net 40% or so thought it was overvalued. But look where we are now down here. This is a net 5% think gold is actually undervalued. And so this is actually the lowest since 2023. This is actually at close to a three and a half year low down here.
And so let's go back and look at the last time we were in a secular bull market as we are now. And so you can see down here the global financial crisis. This was right before the bottom. You had this reading right here. which looked to be at a similar level. Maybe this was September 2008 and this was October 2008. So given that gold is in a secular bull market, this data is really encouraging.
And so in that scenario, potentially if we look at the gold correction analog chart here, potentially if we bottom over in this area in terms of price and time, it's going to end up being a lot like 2008. So I filled in 2008 here. Now the evolution of the 2008 move is far far different but the end of this correction or decline or draw down or whatever you want to use. If it ends up over here again it's going to look very similar to 2008 in terms of price and time.
Now the data I want to mention I will have to read to you because I was going to post it over here but I forgot about that. So I'll read you the data. So this is something I've thought about. So if you look at 2001 to 2008, gold gained 315%. If you look at 2018 to 2026, gold gained 388%. So more but not that dissimilar. Now in 2008, that 2008 decline, gold retraced 45% of that gain. Now, if gold were to make the same retracement and retrace 45% of the gain over the last eight years, that would put gold at about 3620, 3,620. And based on daily closing prices on this scale, the 2008 decline bottomed at 38.40. So, a daily So, a daily low close of 38.40, that could mean an intraday low of 3770 or 3750.
So let's take that perspective and now let's talk about fundamentals. Now technicals do turn before fundamentals because the market is a discounting mechanism. But that being said, the near-term, the medium-term fundamentals for gold right now, they're not bullish yet. And so to go over it, we can see here in this chart, this is the real 10-year yield. And we can see this is what's happened. Real yields are rising. Gold's falling and correcting the yield curve. the difference between the 10-year yield and the 2-year yield that we can see down here is flattening. It's declining. And so when it's doing this, that is negative for gold. And so that just means the spread between long and short-term rates is getting tighter.
And so ultimately, what's bullish for gold? It's one of two things. It's the 10-year yield rising and rising faster than the 2-year yield. Or it's the 2-year yield peaks and the market could start to sniff that rate cuts are coming and then the 2-year yield falls faster than the 10-year yield. And so you can see here the great big move that we had in the last couple years. And so ultimately, as I've said in other videos, the key, I think, is when does the 2-year yield peak and when does it start turning lower? Because the market knows the Fed is definitely not hiking or is done hiking if they hike in September, let's say. And then the next move would be a cut. They're currently not bullish for gold, but this is temporary, people. And we've already discounted probably most of the bad fundamentals for gold. they're going to turn less bearish and ultimately bullish as we get to later in the year and next year I think.
Okay, now moving on. Let me remind you of the big picture. And that's why I love using this chart here where we have gold here. You have gold against the stock market. And so people, the idea that this right here and this is a 2011 1980 peak is totally ridiculous. Okay, this can be completely debunked by one point and that's that when you get to these points right here, these are secular peaks because they're preceded by huge outperformance against the stock market. And by the way, 1982 secular bottom in the stock market. 2009 2011 secular bottom in the stock market. Where are we right now? We're approaching a secular peak in the stock market.
And so ultimately what is going to happen and again I don't know if it's going to be in six months, 16 months or two years, three years or one year, you get the point, is the secular bull market in stocks is going to end. The AI bubble is going to crash and that is going to lead to massive capital flowing out of stocks and tech stocks and into gold. you're going to see a move like that. Okay? When you're at this level here and here and here and here, the capital is overinvested in gold and precious metals and hard assets. Okay? It's the complete opposite right now. We are more like in a situation like this where we were here. Okay? And you can look at this decline here. To me, it looks very similar to this right here.
And last thing I want to mention here and here these were the bare markets in the stock market that facilitated huge moves in precious metals and during these periods precious metals diverged from the stock market. Okay, you had a bare market in the stock market. people got out of their stocks and they moved into gold and other hard assets and gold and hard assets and precious metals they went higher during these periods. So we are going to see the same thing again where stock market where the stock market has a 50% 40 or 50% bare market and precious metals are going to move higher at that time. This is not 2008, okay? Because any secular bull market in gold, you have to have these types of moves. Like logistically, it's not possible to have a secular bull market in gold without these moves when you have that bare market in stocks and that capital rotates away from stocks and into gold and hard assets. So that's what is going to take place over the next two or three years and into the end of this decade where you're going to see a move like that in gold when that happens.
And here's another chart to keep the very big picture in mind. Okay, this is based on this is based on our gold reserves in the US and the monetary base. What gold price is necessary to back the entire monetary base? And this line here you can see is 100% backing. This is 40% backing which down around here I think in 1913 with the Federal Reserve legally on the gold standard we had to be at 40% backing. Now here and now we are only at 19% backing. This 2008 excuse me this 2008 peak here we were at I think about 27% backing. So, we're only at 19% here. And look where we were in 1974 at that peak. Way over 40%. Now, at this peak at the beginning of the year, gold was at 25 1.5% backing. Whereas, I believe right here it was 27 or 28%. And so, if you think about, we haven't even had that rotation of capital yet. If you consider that, you consider the interest on the debt, everything, the secular bullish fundamentals, this tells you where things are going. And this is, I believe, $21,000 an ounce. And if you look here in 1980, we actually went way above it. Can't tell because it's a log chart, but this was way above 100%. So, gold still has tons of room to run, and it will run. and silver will follow. And so we know that the secular bull market isn't even close to being over.
We know that even highquality companies are down 30, 40, even 50% in some cases. And it's not me saying that Rick Rule, who's the most successful speculator in juniors of all time, has even said that. And so that's an incredible opportunity for investors to strengthen their portfolios. And so in my service, the Daily Gold Premium, I cover what I'm investing in and buying personally. And so after over 20 years of investing in this sector, what I've learned is buy good companies at good values and good prices and then hold throughout the bull market and trim when things get really extended. And so people on the company side, what I am looking for is a combination of quality but also upside potential. And so quality means quality people, quality projects and quality assets. And then I marry that with upside potential. And you can hold these companies through sharp corrections and declines because you understand their value and you understand their upside potential over the next couple years. So if we could find companies that could double or triple your money at current margins and metals prices, then when the bull market resumes, those two and three baggers can become five, six, seven, and even 10 baggggers. And these are quality companies, people. These are not penny juniors or companies with marginal projects that are almost entirely reliant on much higher metals prices. So, if you're someone who owns individual juniors, individual miners, and you're looking for some assistance and expertise and guidance with your stock selection, this is a service for you. Head on over to dailygold.com/premium. We'd love to have you. And to those who have subscribed, I thank you for your business. I appreciate you.
Now, let's wrap things up with a chart on GDX and the gold stocks. And so what I am looking at in this chart is the percentage that closed above their 200 day moving average. And yesterday this was only two. So only 2% of gold stocks closed above their 200 day moving average. Now I've also smoothed this data with a 20-day moving average of that data. So that comes in at about 14%. And so this line down here is at 14%. And so I have sketched in some other points that align with the current data. And so you can see they're similar points here. 2002. This is 2004. This line should actually be a little bit over. This was the global financial crisis. This was a 2012 bottom. This was a 2018 bottom. This, I believe, is a 2021 bottom. And I could have marked this one down here, which would be right around here.
So, the reality with the gold stocks, again, we know that we're setting up for a really big rebound, and I showed you that in the analog chart last week. It's just the question, is this rebound about to begin now or are we going to see gold stocks decline another 10 or 15% because gold's going to decline to 3,700? That's a possibility. But to get back to what I just said, you know, big picture, if you own quality companies like I do, like we do in the daily gold premium, that doesn't bother me because I know where they're going 12, 24, 36 months from now. I know that these companies can add good value over the next couple of years at the current margins and metals prices. And when the bull market resumes, those types of companies are going to be headed much, much higher.
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.