Transcription
This is everything you need to know about silver and gold into July. I'm Jordan Roy, a chartered market technician and master of financial technical analysis. Thank you for joining me.
And we do have a bottom. So the big question is, do we have a bottom or is it the bottom? Well, that remains to be seen. But I do think we have a bottom. And let me quickly tell you why. We know that precious metals have been very oversold. They've been declining for five months. We're seeing huge declines in percentage terms across the board. But look what happened just in the last couple days. We have a significant positive divergence. The mining stocks did not make a new low and gold and silver did. So this is a bullish as far as the very short term a very bullish short-term positive divergence. Let me quickly explain. We can see here GDX did not make a new low. GDXJ made a slightly higher low here, but look at gold. Look, gold made a lower low. That's a positive divergence. And it wasn't just gold. It happened in the silver space as well. Here's SIL. You can see slightly higher low. SILJ, call it a double bottom. And look at silver. That's a significant lower low in silver. So silver here went from the low 60s down into the 50s. And even though that happened, the silver stocks did not make a new low. So the same thing happened with the gold stocks. So in a short-term sense, in a daily chart sense, we have seen a bottom. Whether it's the big bottom for precious metals remains to be seen and we'll get into that analysis in the rest of the video.
So moving on from that, let me discuss the big picture as I like to do. And I've been saying that this correction is an intermediate term correction in precious metals. And I want to amend that a bit because I think it's probably somewhere in between an intermediate term correction and a cyclical bear. Probably closer to intermediate, but it is kind of between the two. Now let me refresh your memory. You have secular peaks which is here and here. Here and here. Those are secular peaks. And then you have cyclical peaks which you got here and here in 2008. We can see down here cyclical peak that's the cyclical peak in 1974. And so the other peaks that are less severe than cyclical peaks those are intermediate term peaks. Okay. And so yes this has been a nasty decline in gold about 30% from intraday high to intraday low. It's been nasty in terms of gold against the S&P. Look at that big decline here. Okay, but this is not a cyclical peak. I could do a whole video on why it's more likely to be an intermediate term peak than a cyclical peak. But in short, we can see here at this cyclical peak here, look how much gold against the S&P had moved almost 350% up to that point. This peak in 1974, okay, when gold went down 45%. We are not at a peak similar to 1974. Okay, the market has not gone up enough. is not overstretched enough to get to that point for it to be at that point at this point in time. And again, look at this huge move here. Gold against the S&P was up 750% almost eightfold into this cyclical peak. And so, as I have said in past videos, you need this huge move in gold against the S&P. You need a huge you need a huge rotation of capital away from stock, away from the S&P, and into gold because that's what usually leads to a cyclical peak. And you can see here the same thing happened here. Cyclical peak here. Now this is what we've had so far in gold against the S&P. Okay, from this low here it was only up 106%. So what we've seen so far, this is not a cyclical peak in gold. But I'd be willing to entertain that it's somewhere in between cyclical and intermediate, but closer to intermediate.
And so, as I've been saying for the last couple videos, the bugaboo for gold right now is actually fundamentals. Gold's down 30%. And people say, "Well, the fundamentals haven't changed." Well, in a secular sense, of course, the fundamentals have not changed. Gold's in a secular bull. It's going to move way higher over the next 5 to 10 years, probably the next two or three years as well. But you get this kind of decline in a market. The short-term fundamentals have changed. Okay. Why is that? Real interest rates. This is the increase in real interest rates. Also, the yield curve, it's flattening. It's narrowing the spread between the 2-year, which the Fed follows for the Fed funds rate, and the 10-year yield here, the spread between, it's narrowing. It's flattening. So, when you get this flattening move like that, it's typically bullish for stocks, but bearish for gold. And if you want more fundamental analysis, you can check out my last video. But ultimately, I think what it comes down to for gold is the two-year yield. Now, typically, when the two-year yield is rising, that hurts gold. But gold usually makes a bottom before you see this peak. And gold starts moving by the time the two-year peaks and it starts turning around and going like that. That's a significant fundamental signal to look for. And the yield curve, you want to see this steepening or moving like that. That's bullish for gold. And so, what do you need for that? Well, you need the 10-year to be moving up faster than the 2-year or the 2-year falling faster than the 10ear. So, when it's falling faster, that's usually rate cuts. Now, you guys know I'm not big on manipulation intervention, but there's another great video on YouTube. I apologize. I forgot who posted it. Someone can mention in the comments. And this video is talking about how the Treasury, they're manipulating this market. Okay? They're preventing it from going up like that. So, that is hurting gold in the short term.
But moving on, I just want to lay out uh more fundamental analysis and I'm doing it with text to make it easier so you can follow along. So, this is one scenario how fundamentals could play out over the next few years and how gold could react. So, as I noted, gold typically bottoms before the 2-year yield peaks. Okay? And of course, this is easy to spot in hindsight. And of course, this is easy to spot in hindsight, but at the time, very difficult to pinpoint exactly when it's peaking. We know that they can't really hike rates. We know the market has already discounted one hike and maybe more. That's why gold went down 30% and silver went down 60%. But this is the first thing to look for. Then when you see the two-year yield start to decline and when this happens, gold's rebound will gain significant traction. And ultimately then you have the Fed start it starts to signal to the market that it's going to cut. And then at that point, gold has a chance where it can rally back to the highs. And then when the market knows the Fed's going to cut again, that's when gold will make a new high. So I think these are things that we can look for over the next, call it 6, nine, or maybe even 12 months. And the last thing here, and I'll talk about this in another video, when we get the next bare market in the stock market, this is what is going to propel gold to 7 8 9 $10,000 an ounce in the next three years or four years until the end of the decade. There's not going to be a 2008 repeat in gold and precious metals. You know why? Because we just had one actually. That's what we've had. Gold and silver have declined as much as they did in 2008. And so when you look at sentiment indicators, all the money right now is in equities. There's barely any in gold and precious metals. A lot has come out, but I digress. That's a topic for another video. But this is what is going to propel gold and precious metals much, much higher over the next 2, three, four years. So that's the longer term catalyst. This stuff is more in the next 12 months. Okay.
So moving on from that, let's get back to charts. And here's our correction analog comparing the corrections in gold. the first significant post major breakout corrections. These are the three major breakouts in gold. And what do you know? This is where we are. I mean, it's almost exactly like the one we had in 1973. Now, is gold going to recover like that like it did in 1973? I don't think so. It's a possibility, but I think something like this is probably more likely than the vertical rebound like that. But at this point, that's just an opinion. And look, either way, big picture, what does this tell us down here? This tells us that we've had a significant correction. The worst is probably over and it's a good time to be accumulating and buying.
Now, with respect to silver, I was saying in the last couple months, we're in intermediate term correction. Silver is having an intermediate term correction. Well, unfortunately, this move right here and this decline below 70, this has busted that. So, you may recall the chart that I showed a couple months ago where by the end of the summer, it was moving like that. So, the intermediate term scenario for silver is really out the window. So, it's fair to say silver is probably in a cyclical bear because we know that it's now going to lag gold. And although silver's downside is probably very limited from here, it's unlikely we're going to see it move much higher than 70 in the next couple months. And so on this chart, I removed all the comparisons that don't make any sense like the '04 and the '06 and also the 1980. Those don't make any sense. But we do have here 1974 where this was the bottom in 1974 and it rallied and then it did a bullish consolidation. It took three or four years, but it did a bullish consolidation before exploding in 197879 I believe. So that's one scenario. You also have 2008 here. Okay. when this is actually a major bottom when silver bottomed here. So on this scale the 2008 low would be at 50 $50. So it took about a month or two or a month and a half to bottom and then it rebounded. Gold pulled it higher and I think that's what will happen ultimately is gold will pull silver higher and silver will not outperform gold until you probably see gold go above 5200 again.
Now here's the short-term look for gold and silver. So silver did come down here to 56 that support level and it is bouncing. So it does have resistance at 60 and then you have I believe this is around call it 64 or so with respect to gold. So gold is put in a low right here. And if this is a bottom and not the bottom then you could see a rally up like this. And so if you tell me Jordan gold's going to go lower, this isn't the bottom. I would say it'll probably be in this area around 3,700. This is a 50% retracement basically from the huge move that we had in the last two two and a half years or so. This is taken from the 22 or 23 lows and you get these numbers right here. And so this low here actually comes to 3959. So bigger picture, even if this is not the bottom, we've still seen the majority of the damage. Okay.
Now, let's look at the weekly candles because I think these are more instructive here. And starting with gold, this is a bullish hammer. It's interesting because three weeks ago, it it tried to form a bullish hammer. It wasn't quite one. Then last week, it made an inverted hammer. And so, when you see an inverted hammer candle like this, when it comes at the top of a market like this, it's actually bearish. But when you see a market declining and you see this candle, that tells you the market is really oversold. It tried to rebound, but it failed. So it wasn't quite strong enough yet to make that bottom. Now you have the bullish hammer here. So it came down here, rallied off this support here. So for the time being, this is a low here and we should see a bit of a rally. Now this is going to be stiff resistance on the way back up. Okay, right here 4,400 4500. You also will have more resistance from 46 to 4,800. So if this is just an oversold bounce, it could move another three or from here.
Now moving on to silver. Silver did not quite make a bullish hammer. You do have that bullish divergence that I noted with respect to the silver stocks against silver, but this is not a bullish hammer. So what I would like to see, I don't know if it'll happen, but you what I'd like to see is it declines next week and actually makes a candle like this a bullish hammer because right around here, this is going to be major support. this moving average. I'll get to it in another chart, but this is a significant moving average here. So, this is coming in. We know around $50 is going to be significant support now. And maybe silver needs to tag 50 before it can make more of a rebound because this is going to be initial resistance here right at 65. This is going to be really stiff resistance right around 70. And so, here are the moving averages that I'm talking about for silver. You have the 82- week, which is similar to the 400 day simple moving average. In blue is the 100week exponential moving average. You can see here in blue this provides significant support in a bull market. Look at all the arrows. Look at the blue arrows here. It was resistance down here. You can actually look at the 1970s and you can plug in this moving average and it actually held support for the majority of the entire decade for silver. But anyway, we know about the support here, the major support around 50 and these moving averages are coming in at 5351. So again, not quite a bullish hammer here, but if in the next couple of weeks, if you get that type of candle that tags 50 51, then silver from there would be in position, I think, for a good rebound.
Now, people don't forget sentiment indicators, which I've been talking about on the last few videos. So, I put four of them all here on one slide and you can see this is a great big picture one. Uh the all the assets and gold ETFs against the assets in all ETFs. Again, this is from a month ago. So, I'm eager to see what this looks like in the next couple weeks. Probably come down here actually. And here you can look and see the net percentage of fund managers surveyed by the Bank of America surveyed by Bank of America who think gold is overvalued. That's at the lowest level in nearly two and a half years. This is a great chart here showing the net fund flow of GLD. A lot of money has come out of GLD. So this is at an extreme down here. And then of course this is great big picture data where looking at global family offices surveyed by JP Morgan 72% don't own any gold. 28% who own gold own less than 1%. So people this is very important to understand. We are still in the early stages of a new secular bull market that began two two and a half years ago. And we have undergone a significant intermediate term correction. You know, probably a cyclical bear in terms of silver. And again, probably something more than an intermediate term correction with respect to gold and gold shares. And there still could be a bit more selling to come after we have an oversold rebounder bounce. But the reality is gold, silver, and the gold stocks are going much, much higher over the next 2, three, four years into the end of the decade. What we could see in the next three or four years could dwarf what we've seen in the last couple years. There is so little money in this sector. And when the secular bull in the US stock market ends, and it will in the next year or so, maybe sooner, that is going to be a massive catalyst for all this money to pile into precious metals. So, I know the draw down has been painful, but the worst is over and we're near the end and we might even be at the end at this point.
But for all those reasons, I am so excited about the work we are doing in the Daily Gold Premium, our premium newsletter service. And in this service, I write about the companies that I'm personally investing in. And having invested in this sector for a couple of decades and learning and applying my skills and my expertise, the key is to buy quality and then merge that with upside potential. So, I'm looking for quality companies at great prices that have significant upside potential over the next 2, three, or even four years. And this is important because when the sector will recover and make the next big move higher, the money initially is going to go into the high quality juniors and those types of companies. So the key to make big money in the next few years is stock selection. Look, the market has done a lot of work for us. Everything is much cheaper now compared to 3 6 n months ago. There's another opportunity. But you have to get the stock selection right and then you let the bull market do the work for you. You hold on and you trim when things get overextended. That's how you can make big money during a bull market. And so if you own individual companies and you're looking for more expertise in your stock selection, this is a service for you. Head on over to the daily.com/premium. We'd love to have you aboard. Those of you who have subscribed, thank you. I appreciate your business.
Now, let's wrap things up and look at GDXJ here. Now, in this chart, I'm showing my custom breadth indicators. You can see here the percentage of of GDXJ stocks above the 50, 20-day here, and 200 day moving average. In past videos, I noted that we needed to see the percentage above the 200 day come down significantly before we got to the end of the correction. Well, we're down here single digits a couple days ago. These were also in single digits. And so, whenever this happens, it tends to set up a good rebound. And you did have this rebound right here. And the question is, will this lead to a more sustainable rebound? It might. But one thing I want to mention and I've mentioned this to premium subscribers in the last week or two in the last couple weeks. Now when you see the percentage above the 200 day moving average fall below 20 and I guess to 10 or 5% or so or 9% like it is now you do get a good rebound in the sector but usually more time is needed unless you're in a 2008 or COVID low type situation. More time is needed before the sector really begins that unabated advance and it just rebounds and it keeps going and going. So, long story short, this is setting up a good rebound here, but odds are we could see another good buying opportunity later in the summer or into the fall.
That's all for the video. Thank you for tuning in. Hope you had a good week and hope you have an even better weekend ahead.