Strong Move for Metals to Open 2020
Price Prepping for New 7-Yr Highs?
Happy New Year! We are kicking off the New Year with stocks at all-time highs, oil prices spiking on Middle East tensions, and the precious metals complex following through nicely for our November/December videos. If you haven’t had a chance to watch those videos, they offer a helpful background on the technical setup for metals and the price action we are seeing today.
11-15-19 Gold Price Update (Video)
Gold finally broke out of a bull wedge in late December following a four month (healthy) consolidation I had labeled as wave 4 of 5 in a five wave Elliott Wave pattern. This pattern has been neatly contained within a rising channel from the $1180 low in summer of 2018 to the September high of $1565 (the 61.8% Fibonacci retracement from the all-time high in 2011). The breakout occurred at rising channel support, and unless this is a truncated fifth, the length of the rise should target a move to the 78.6% retracement at ~$1700. Gold has some work to do to get there, and will likely consolidate/pull back as it works through supply between $1560-$1580.
The move is supported by strong confirmation throughout the mining complex, the breakout in silver, the overbought levels in the RSI (strong indication that the bulls are in control), the outperformance of junior miners relative to the producers, and a falling gold:silver ratio. The dollar has also shown recent weakness, breaking down from a multi-month channel, and is coiling into a multi-year symmetrical triangle that is likely to break strongly up or down before year end.
I would also add that gold has been outperforming the S&P 500 since September of 2018. This is not well publicized, especially as equities continue to make all-time highs, but an important development, to be sure.
Lastly, I tweeted this chart of gold performance by months for the past 20 years. It is worth noting that January tends to be a very strong month for gold.
Silver has lagged gold for six years but is finally showing some signs of strength. The gold:silver ratio has fallen from a peak of 93 in July to a near term low of 79 in September, and has pulled back to 86 in recent week. However, the trend is now down, and the recent move is forming a bear flag that should take the ratio lower (good for the entire metals complex).
Silver has followed a similar pattern to gold, moving in a rising channel from the September ’18 low. A strong close above 18.78 would signal that a move towards the 38.2% Fibonacci retracement at 22 is the likely terminal move for Wave 5.
Platinum has underperformed the sector for years. Price has flirted with the psychologically significant $1000 level twice now since September. However, the key level for platinum is $10-40-$1050. A break above that level would set up a test of the 38.2% Fibonacci retracement at $1300.
Palladium has been the all star of the metals complex, even through the bearish six year trough for gold. Price skyrocketed to just under $2,000/ounce as it met with resistance at the 361.8% Fibonacci extension and multiple rising channel resistance. If Palladium can breakout here, the next price target is $2250.
I will not outline charts here of every mining stock I cover, but as a brief overview, see the charts below of GDX (Gold Miners ETF), PAAS (Pan American Silver), and Newmont Gold (NEM).
GDX has mirrored the technical pattern in gold. The key level is 31.50. A strong close above that level should usher in a swift move to 39.
Pan American has already broken out well above former resistance and seems poised for an eventual retest of all-time highs at 37, likely pausing at 29 along the way.
Newmont is just now breaking above the 43.30, but not definitively. A clean break above that level would set up a run to 51.
As always, I hope this is helpful, and I welcome any feedback or questions. Have a great weekend!