Gary Savage: Gold's Parabolic Rise to $10,000, Why $500 Silver is 'likely' & How This Bull Run Ends

Key Concepts

Four-Year Cycle Low: A recurring low point in the stock market, often preceding significant central bank intervention.
Secular Bull Market: A long-term upward trend in asset prices, characterized by multiple cyclical bull and bear markets within it.
Parabolic Stage: A phase in a bull market where prices rise extremely rapidly, often driven by speculative fervor.
Wall of Worry: A market condition where prices continue to rise despite prevailing negative sentiment or concerns.
ABC Correction: A three-wave pattern in price movements, typically consisting of a decline (A), a bounce (B), and a further decline (C).
200-Day Moving Average: A technical indicator used to identify the average price of an asset over the past 200 days, often used as a support or resistance level.
Gold-Silver Ratio: The ratio of the price of gold to the price of silver, used as an indicator of relative value and potential market tops.
Dow Gold Ratio: The ratio of the Dow Jones Industrial Average to the price of gold, another indicator of relative value.
Currency Debasement: The reduction in the value of a currency, often through inflation or increased money supply.
Central Bank Buying: The act of central banks purchasing assets, such as gold, to diversify reserves or influence markets.
Contrarian Investing: An investment strategy that involves going against prevailing market sentiment.
War Cycle: A recurring pattern of geopolitical conflicts, potentially linked to economic cycles.
Global Liquidity: The availability of money and credit in the global financial system.
Commodity Super Cycle: A prolonged period of rising prices for a broad range of commodities.
Intermediate Cycles: Shorter-term cyclical patterns within longer-term trends.
Leverage: The use of borrowed funds to increase the potential return (and risk) of an investment.

Gold and Precious Metals Market Analysis

Current Position in the Gold Bull Market

Gary Savage, founder of the Smart Money Tracker newsletter, believes the gold market is in the second phase of a long-term secular bull market, which began in late fall 2015 after a cyclical bear market ended. He estimates this phase to be approximately 10-11 years old and is observing gold starting to move somewhat parabolically.

The "Wall of Worry" and Market Corrections

Savage emphasizes the importance of the "wall of worry" for the longevity of a bull market. He suggests that if the market stops experiencing normal corrections and the general public starts showing significant interest, it could signal the final parabolic stage, with a potential top within 1-1.5 years.

He expresses a preference for a more "ABC type correction" rather than a sideways consolidation. This would involve a first leg down, a bounce, and then a second leg down, ideally pushing prices closer to the 200-day moving average. This type of correction would keep the "wall of worry" alive, potentially extending the bull market by two to four years.

Currently, Savage notes that the market is stretched far above the 200-day moving average and that a correction is underway. He is nervous about the widespread bullish sentiment, suggesting a potential "C-wave down" into the new year. He advises against leveraged positions during this period, as prices are either expected to move sideways or make a lower low.

Potential Price Targets for Gold

Savage reiterates his long-standing prediction that $10,000 gold is achievable, though the path will be volatile. However, if the "wall of worry" can be maintained for longer, he believes prices could reach $15,000 or even $20,000 before the bull market concludes.

General Public and "Mom and Pop" Investor Involvement

Savage observes that the "mom and pop" investors, those who typically follow trends, began showing interest when gold surpassed $4,000. He cites a personal anecdote of a friend with no investment knowledge calling about gold at this level as a "bell ringer" indicating a potential correction. He believes that significant public participation, especially in bullion shops, suggests a mature phase of the market.

Sentiment and Contrarianism

Savage prefers to see negative sentiment in the gold bug community, as it aligns with his contrarian approach. He finds the current bullish sentiment on platforms like YouTube, with talk of "silver shortages" and "silver to the moon," to be a cause for concern. He believes an ABC correction would generate the desired negative sentiment.

Drivers of the Gold Bull Market

While acknowledging currency debasement and central bank buying as drivers, Savage cautions against getting too caught up in these narratives. He states that bull markets often end when fundamentals appear most compelling, and there might be underlying issues not visible to the average investor. He uses the 2000 tech stock bubble as an example, where the narrative of future growth masked underlying rot.

Identifying a Market Top

Savage outlines key indicators for a potential top in precious metals:

Neighbors buying gold and silver and bragging about profits.
Prices stretched obscenely far above long-term moving averages.
Universally bullish sentiment, with any bearish views ridiculed.
Gold-Silver Ratio falling to between 20:1 and 30:1.
Dow Gold Ratio falling to 3:1 or 3.5:1.

He warns that parabolic moves go "straight up" and "straight down."

Investment Strategy: Physical vs. Leveraged

Savage's firm splits its portfolio:

80% in physical gold and silver: This is considered "insurance" and is not traded to avoid corrections.
20% in leveraged positions: This portion is used to play the advancing phase of intermediate cycles, particularly after breakouts like the gold market's move above $2,000. He emphasizes taking profits when rallies mature and become dangerous to avoid being caught in intermediate declines.

He notes that last year was very good for his portfolio, with gains between 100-200%, and this year has been even better, with some investors up 150-500%. He anticipates next year to be as good or better but more volatile.

Silver Market Outlook

Savage is enthusiastic about silver's potential, believing it has significant catching up to do.

Price Targets: He projects $100 silver by 2026, potentially as early as late spring/early summer of that year, but at least by year-end. He believes $250 is very likely, and $500 is possible, especially if the "wall of worry" persists for another year or two.
Gold-Silver Ratio Impact: He highlights that at a $10,000 gold price and a 30:1 ratio, silver would reach $333.
Short-Term Caution: Despite the bullish outlook, he is cautious about leveraged positions in the metal sector until he determines whether gold will move sideways or experience a "sneaky C-wave decline."
Correction Impact: He acknowledges that if gold experiences a C-wave down below $3,900, silver will also likely correct, though it might hold the $50 breakout level.

Suppression in the Silver Market

Savage believes that while there may have been short-term manipulation, serious, significant suppression in the gold market has ended. He points to the gold market's inability to be driven below $2,000, leading to a massive short squeeze. He also believes suppression in the silver market broke at $33, leading to subsequent rallies. He states that the entities involved have lost too much money to continue significant suppression.

Gold and Silver Miners

Savage was bullish on miners in 2022. He believes silver will likely outperform gold and miners in the short term because gold and miners broke their suppression earlier and have already made significant gains. He advises waiting for the current intermediate correction in gold to conclude before trading miners, as they are unlikely to decouple from gold. He suggests that while miners offer leveraged upside, using leverage on ETFs like GLD could provide greater outperformance than unleveraged miners, unless a junior miner experiences exceptional growth.

Platinum

Savage does not diversify into markets like platinum, finding them too small and unfamiliar. He believes silver will massively outperform platinum in the long run and sees no reason to choose platinum over silver for trading a white metal.

Equities Market Outlook

S&P 500 Long-Term Cycle

Savage believes the S&P 500 is still in a secular bull market, which began in 2009 and has lasted approximately 16-17 years. He notes that this bull market has seen the S&P 500 rise about nine to ten times, compared to previous secular bull markets that lasted over 20 years and saw 20-fold increases. He sees potential for further upside due to technological advancements like robotics and AI, which are in their "early adolescence."

Short-Term Stock Market Concerns

However, Savage is not interested in stocks right now due to being three years into a four-year cycle. He anticipates a declining phase of the four-year cycle and believes the market is too stretched above its long-term mean, offering limited upside potential. He would become interested in stocks again if the Dow Gold Ratio reached 3 or 3.5, indicating a potential shift from gold to equities.

Recession Risk and Capital Rotation

Savage generally associates recessions with spikes in inflation, particularly oil prices. He notes that oil is currently in a bear market, so he doesn't foresee this as a recession trigger. However, he acknowledges that an acceleration of the "war cycle" could lead to a recession. He anticipates the upcoming four-year cycle low in the stock market to be a normal profit-taking event driven by prices getting too far above the mean.

Geopolitical and Economic Cycles

War Cycle and Inflation

Savage predicts the "war cycle" and "inflation cycle" are likely to continue and potentially worsen. He believes politicians tend to double down on failed policies rather than admit mistakes. He argues that the only way to truly lower prices is through a hard recession, which politicians avoid. This leads to continued printing of money, exacerbating inflation. When economies suffer and politicians cannot fix the problems, they often resort to starting wars to deflect blame. He notes the existence of ongoing wars and suspects this trend will continue.

Oil Market

Savage believes oil is in a bear market, with prices below the declining 200-week moving average. He is not yet convinced it has turned the corner, unlike some fundamentalists who see value. He would consider buying oil or energy stocks when he is ready to sell gold and silver, or when he observes a long period of choppy market action (6 months to 1.5 years) followed by a significant breakout move.

Global Liquidity and Commodities

Savage agrees with the prediction of a potential spike in global liquidity due to central banks cutting rates and engaging in quantitative easing, as well as government debt refinancing. He believes this liquidity will seek an outlet, potentially driving hard assets and commodities. He views commodities as being in a long-term secular bull market that bottomed in 2020. He anticipates that central banks will "print like crazy again" around the four-year cycle low in the stock market, which would ignite both stocks and commodities.

Commodity Super Cycle Dynamics

Savage views the commodity super cycle as a "peloton race" where different commodities lead at different times. He notes that oil led the initial phase of the current commodity bull market, and now gold is leading. He believes that at some point, oil will lead again during the latter part of the commodity bull market.

Smart Money Tracker Newsletter

Savage has reopened yearly subscriptions for his Smart Money Tracker (SMT) newsletter. The newsletter focuses solely on metals due to the breakout of the cup and handle pattern and the breaking of suppression across the sector. The strategy involves playing the advancing phase of intermediate cycles with leverage, while long-term positions are held in physical gold and silver. He emphasizes patience and waiting for the right setups rather than jumping between markets. He reports a "massive record-breaking year" and anticipates next year to be even better, albeit more volatile. He believes there is significant potential in the metals market for at least another 1-1.5 years, and potentially 3-4 years or more if the "wall of worry" is maintained. He can be found on X as @GarySavage1.