Everything You Need to Know About Silver & Gold in July

Key Concepts

• Positive Divergence: A technical signal where an asset (e.g., gold) makes a new low, but related assets (e.g., mining stocks like GDX/GDXJ) do not, suggesting a potential short-term bottom.
• Secular vs. Cyclical vs. Intermediate Peaks: Classifications of market cycles; secular peaks represent long-term multi-year trends, while intermediate peaks are shorter-term corrections within a larger bull market.
• Real Interest Rates & Yield Curve: Fundamental drivers where rising real rates and a flattening yield curve (narrowing spread between 2-year and 10-year Treasury yields) act as headwinds for gold.
• Bullish Hammer: A technical candlestick pattern indicating that a market is oversold and potentially reversing to the upside.
• Breadth Indicators: Metrics measuring the percentage of stocks within an index (like GDXJ) trading above specific moving averages (50-day, 200-day) to gauge market health.

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1. Market Analysis: Is There a Bottom?

Jordan Roy identifies a short-term bottom based on a "significant positive divergence." While gold and silver prices hit new lows, mining stocks (GDX, GDXJ, SIL, SILJ) did not, indicating that selling pressure in the equities sector is exhausting itself.

• Technical Evidence: Gold and silver mining stocks showed higher lows or double bottoms while the underlying commodities hit lower lows.
• The "Big Picture": Roy classifies the current decline as being between an intermediate-term correction and a cyclical bear market. He argues it is not a cyclical peak (like 1974 or 2008) because the preceding move in gold relative to the S&P 500 was not sufficiently overextended (only up 106% vs. 350%–750% in previous cyclical peaks).

2. Fundamental Drivers

The primary "bugaboo" for gold currently is the macroeconomic environment:

• Yield Curve Dynamics: A flattening yield curve is historically bullish for stocks but bearish for gold.
• The 2-Year Yield: Roy emphasizes that gold typically bottoms before the 2-year Treasury yield peaks. Once the 2-year yield begins to decline—often signaling anticipated Fed rate cuts—gold is expected to gain significant upward momentum.
• Treasury Intervention: Roy references theories regarding Treasury market manipulation that may be suppressing gold prices in the short term.

3. Technical Outlook & Price Targets

• Gold: The weekly chart shows a "bullish hammer" candle, suggesting a potential rebound. Stiff resistance is expected at the $4,400–$4,500 and $4,600–$4,800 levels. If the current bottom fails, a secondary support level is identified near $3,700.
• Silver: Silver is currently in a "cyclical bear" phase. It faces resistance at $60 and $70. Major support is established at $50, supported by the 82-week and 100-week exponential moving averages.
• Breadth Indicators: GDXJ breadth indicators (percentage of stocks above the 200-day moving average) dropped into single digits, a level that historically precedes a rebound. However, Roy cautions that while this signals a bounce, further consolidation may be required before a sustained, unabated advance.

4. Sentiment and Long-Term Thesis

Roy presents data indicating that the precious metals sector is severely under-owned:

• Institutional Positioning: 72% of global family offices surveyed by JP Morgan own no gold, and those who do hold less than 1%.
• ETF Flows: Significant capital has exited GLD, marking an extreme in sentiment.
• The Catalyst: The ultimate bull market catalyst will be the end of the current secular bull market in U.S. equities. Roy predicts that when this shift occurs, capital will rotate into precious metals, potentially driving gold to $7,000–$10,000 per ounce by the end of the decade.

5. Synthesis and Conclusion

The worst of the decline in precious metals is likely over, and the current environment offers an accumulation opportunity. While a short-term oversold bounce is underway, investors should be prepared for potential volatility throughout the summer and fall. Roy advises that the key to success in the coming years is stock selection—focusing on high-quality junior mining companies that are currently undervalued. He concludes that the sector is in the early stages of a long-term secular bull market that will likely dwarf the gains seen in recent years.