Industry News

It has been over a month since my last entry on the markets, and aside from a few Twitter posts, most of my analysis has been confined to my desktop. The impact of the coronavirus on the retail precious metals market has been historic, with dueling supply and demand shocks, and as president of Texas Precious Metals, my time has been consumed by day-to-day operations. I finally have a bit of a respite this afternoon to share a few thoughts on the metals markets.

GOLD

Back in November, I identified a 5-wave pattern setting up with two bull wedges that created a series of highly favorable long setups (see chart above). The big sell-off with the COVID debacle was concerning, but as we can see from the chart, horizontal support held and the bounce higher was strong and swift. It is possible (as some suggest) that Wave 5 is now completed, but I continue to think gold is pushing for all-time-highs based on price action and consolidation.
Also encouraging is the fact that gold is sitting right at the anchored VWAP (volume weighted average price) from the March 31st lows. (I used TrendSpider for this chart.)

Zooming out to the monthly chart, the big selloff in March produced a long-legged doji that retraced the move to the 50% Fib retracement level (1450). Since that time, gold has rallied higher and seems to be pushing for a test of all time highs of $1910 (monthly close of $1830).

SILVER

Silver is also coiling for a move, sitting at both horizontal support and rising channel support. From a risk/reward standpoint, a long entry here with a stop below 14.60 is favorable. The upside should target ~18.80.

S&P500

Lastly, just a quick comment on the S&P 500. The bearish case is that we have witnessed the beginning of 5 waves down, with wave 1 culminating in March and an A-B-C correction into April and early May. There is a head and shoulders top just below the 61.8% fibonacci retracement and a break of rising channel support would target 2620. The bulls would gain the upper hand if channel support holds and we break above 2940-2950 to the upside. A big rally to 3300 would likely ensue.

As always, we look forward to your feedback. Be safe out there!

(Kitco News) By Neils Christensen - The physical gold market has been dealing with significant supply issues and the crunch is going to get bigger as the U.S. Mint announced that it is shutting down gold and silver bullion production at its West Point Facility.

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By Elena Mazneva on Bloomberg.com

When people are worried about the future they turn to gold to protect their savings. That’s rarely been more true than today.
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Dear TPM Clients,

As you all know, the effects of coronavirus (COVID-19) have accelerated what is now a precipitous decline in equities. Access to liquidity in the markets has become an issue, and all asset classes are being affected - including precious metals. This historic turn of events has created a demand shock in the physical precious metals industry. Following years of slow to moderate sales following the Greek crisis in 2015, the entire industry has been cautious to build large inventories. This includes the United States Mint, which experienced a terrible production decline of Silver American Eagles, down to only 14.9M ounces minted in 2019.

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The sell off in markets accelerated by coronavirus and the global reaction to curtail the pandemic has left no prisoners, as nearly all asset classes are selling off in a flight to liquidity. As large institutions face margin calls, they are forced to close positions or raise cash by selling anything and everything that is liquid. Gold and silver - the “safe haven” assets - are no exception. I would remind readers that in the global financial crisis gold fell 27% and silver fell 55% in nominal terms. Gold outperformed equities on a relative basis, but silver actually underperformed.

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Fear or Greed?

The last two weeks have been extremely volatile in the markets, and for the first time in a long time my friends and family have called to inquire about “what is going on in the markets?” Coronavirus contagion fears, coinciding with all-time highs in the markets, has been the scapegoat for a rapid, deflationary decline across nearly all markets except bonds, which resiliently continued to fetch a bid. Even the US Dollar, traditionally a safe haven in deflationary swoons, declined.

Here is how I see the markets:

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Trend Remains Strong and Intact

Price action in gold has traded in a narrow window over the past few weeks, winding into a tight coil as it begins to consolidate for another leg higher. The wave counts suggests that gold is in the early stages of a Wave 5. In the chart above, the key near term level to watch to the downside is $1540. This level served as resistance in September 2019, and has been support for the last month. This level also roughly coincides with rising support from the uptrend channel that commenced in August 2018.

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Gold Breaks Out; Silver Gearing Up for a Move

Gold bugs should be pleased with the monthly performance of gold in January. The definitive monthly break of the $1520 level, which had acted as strong monthly support six times between 2011-2013, before serving as resistance during this recent consolidation period between August and December, has sent a bullish longer term signal to the market.

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Bullish Tailwinds in US Housing

In this video, I review key technicals in the US housing market, specifically the real estate ETF REZ, home construction ETF ITB, mortgage rates and lumber. I also explore some key demographic trends that could help fuel the rise in the US housing market.

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Silver Testing Key Level

In this video I take a look at the prevailing long and short term trends in the price of silver. While the decade-long trend remains down, the one year trend remains up. Yesterday’s .60 drop in price now has silver testing rising channel support from the bottom in May 2019. Bulls will want to see this price hold for another leg higher. If price breaks down from this rising support, the key levels are 16.90 and 16.20. Bulls especially need silver to remain above 16.20 for the longer term bullish picture to remain in play.

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