By The Gold Report
Technical analyst Clive Maund’s analysis of the charts is indicating that gold and silver are positioning for a big move upward.
We’ve had to wait 18 months for an opportunity as big as the one we saw late in 2015 to appear again in the Precious Metals sector. “Wait a minute”, I hear you say, “prices were generally lower back then at that low than they are now, so how can it be as big an opportunity, as leverage is reduced?”. Here are the reasons, one technical, the other fundamental. When prices rose out of the late 2015 low, which was the Head of the Head-and-Shoulders bottom shown to advantage on the 10-year chart for GDX (VanEck Vectors Gold Miners ETF) below, they were destined to retrace to mark out the Right Shoulder of the pattern, which is what now has most investors very negative towards the sector again.
This time they don’t have to—they can now rise out of this trough and proceed to break out upside from the entire pattern to embark on a mighty bull market. The fundamental reason is this: most investors have been taken in by the specious central bank talk about “normalizing interest rates” and scaling back their bloated balance sheets, but they haven’t got a cat in hell’s chance of doing this. Why? Because debt (and associated derivatives) has expanded to such gargantuan levels, that any attempt to bring it under control will send interest rates skyrocketing. Because of this stark reality, they are left with only one option—to inflate the debt away by monetizing it, which means inflation. Once investors grasp the inevitability of this—and that this process will soon get underway with a vengeance—gold and silver will soar. That is what the charts that we are going to look at today are telling us, and it means that we may never see the bargains in the Precious Metals sector that are now available ever again—or at least not for a very long time.
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The latest COTs are telling us that gold and silver have hit bottom, or are very close to having done so, and that the time to buy the sector is now. Before proceeding to look at them we will start by looking at the latest 10-year chart for GDX, a reliable PM stocks proxy, to see where we are on the market clock, where we are in the PM stock price cycle.
Our 10-year arithmetic chart for GDX shows a clear large Head-and-Shoulders bottom forming, with the price now in the process of completing the Right Shoulder trough of the pattern. Obviously, most would be investors in this sector either don’t know this pattern exists, or if they are aware of it, have written it off as a false H&S bottom, witness the rotten sentiment towards the sector, which is just what we want to see at this juncture. Indications that the pattern is genuine are provided by the strong volume on the rise out of the trough of the Head of the pattern, which we can expect to see again on the rise out of the Right Shoulder trough soon, and the outstandingly bullish COTs which we will soon look at.
It is worth mentioning the cryptocurrency market briefly, because it has been siphoning off money, some of which might have otherwise been destined for the Precious Metals. This grotesque bubble is blowing apart right now, which should help the Precious Metals, and you may recall that we warned to steer clear of Bitcoin in the article Due to Popular Demand Maund DOES NOT cover Bitcoin posted within a day of its final peak. Frankly, it is hard to understand how anyone could prefer virtual money, which has a tendency to suddenly disappear like a mirage, to real money such as gold and silver.
Clive Maund has been president of www.clivemaund.com, a successful resource sector website, since its inception in 2003. He has 30 years’ experience in technical analysis and has worked for banks, commodity brokers and stockbrokers in the City of London. He holds a Diploma in Technical Analysis from the UK Society of Technical Analysts.
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1) Statements and opinions expressed are the opinions of Clive Maund and not of Streetwise Reports or its officers. Clive Maund is wholly responsible for the validity of the statements. Streetwise Reports was not involved in the content preparation. Clive Maund was not paid by Streetwise Reports LLC for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
Charts courtesy of Clive Maund.