Gary Savage: Gold, Silver Run Not Over, New Highs in Next Phase

Key Concepts

• Bull Market: A financial market characterized by rising prices.
• Parabolic Phase: A rapid, almost vertical, increase in price, often unsustainable.
• Correction: A temporary decline in price, typically 10% or more, within a bull market.
• Intermediate Degree Correction: A more significant correction lasting several weeks.
• Daily Cycle Correction: A short-term correction lasting days.
• Sentiment: The overall attitude of investors towards a particular security or market.
• Smart Money: Experienced, informed investors who often anticipate market movements.
• Secular Bull Market: A long-term bull market lasting years or decades.
• Cyclical Bear Market: A shorter-term bear market within a larger bull market trend.
• Gold/Silver Ratio: The number of ounces of silver required to purchase one ounce of gold, used as an indicator of relative value.
• Dow/Gold Ratio: The ratio between the Dow Jones Industrial Average and the price of gold, used as a valuation indicator.
• Leverage: Using borrowed capital to increase potential returns (and risks).

Gold and Silver Market Analysis: A Deep Dive with Gary Savage

Introduction

This discussion with Gary Savage, president of Smart Money Tracker, centers on the recent volatility in gold and silver prices, analyzing the causes of the recent surge, subsequent correction, and potential future trajectory. Savage provides a nuanced perspective, differing from common narratives, and emphasizes the importance of understanding market cycles and sentiment.

Recent Price Activity: Rise, Correction, and Recovery

The conversation begins with a review of gold’s recent price action – surpassing $2,500 per ounce, followed by a significant correction, and a subsequent attempt at recovery. Savage characterizes the current situation as a correction, acknowledging the possibility of either a minor daily cycle correction (potentially already completed) or a more substantial intermediate degree correction lasting several weeks. He believes most of the damage is likely done, even if a lower low is reached, and anticipates a continuation of the bull market with new highs once the correction concludes and sentiment clears. He notes that excessive bullish sentiment – “people were starting to make plans to buy their island” – often precedes corrections.

Causes of the Correction

Savage identifies two primary drivers of the correction: sentiment and smart money taking profits. He explains that at market tops, a narrative develops justifying continued price increases, eventually leading to a point where there are no remaining buyers. At this juncture, smart money begins to sell, initiating a correction. This selling pressure can trigger panic and stop-loss orders, exacerbating the decline. He specifically mentions ongoing shortages of silver as a fundamental factor, but emphasizes that sentiment can temporarily override fundamentals. He also points to potential coordinated intervention by banks to capitalize on the overbought conditions and exit short positions.

Parabolic Phase and Future Price Targets

Savage argues that the gold and silver bull market is currently in a parabolic phase, a characteristic of mature bull markets. While many analysts believe the bull market is just beginning, he contends it started in 2001 and is now accelerating. He believes the recent two months have provided “life-changing gains” for leveraged investors, but warns that complacency will be “washed out” during the correction.

He projects significant upside potential, particularly for silver. He suggests that after the correction, silver could move from $120 to $500, a substantial increase compared to the previous move from $50 to $120. He anticipates the next leg up will be “several times bigger” than the last. For gold, he forecasts a doubling of the price from its recent high of around $2,600, potentially reaching $10,000 - $12,000.

Market Cycles and the Role of Banks

Savage outlines a two-phase structure for commodity bull markets. The first phase ran from 2001 to 2011, followed by a cyclical bear market until 2015, marking the start of the second phase. He believes the current phase is maturing, noting that gold’s failure to remain suppressed at $2,000 signaled a shift in market character, driven by a short squeeze in the banking sector. He suggests banks attempted to exploit the recent overbought conditions to cover their short positions, contributing to the correction. He believes this intervention will be temporary and ultimately exacerbate the shortages, driving prices higher.

Silver Suppression and Potential End

Savage discusses the ongoing suppression of silver prices, noting it has persisted longer than in other markets. He believes the recent correction may be the “last gasp” of this suppression, as buyers have repeatedly countered attempts to push prices down. He anticipates that the resulting shortages will further fuel price increases.

Mining Stocks and Investment Strategy

Regarding gold and silver mining stocks, Savage notes they have already experienced a significant catch-up move, even while silver was suppressed. He believes silver will outperform in the next phase of the bull market. He advocates for a portfolio allocation of 80% physical metals and 20% leveraged trading, emphasizing caution and the use of long time horizons for options trades to mitigate risk during corrections.

Exit Strategy and Key Indicators

Savage’s exit strategy is based on ratios rather than specific price targets. He will consider selling 75% of his physical holdings when the gold/silver ratio reaches 25:1 (and potentially 15:1) and the Dow/Gold ratio falls to 3:1 or 4:1. He also emphasizes the importance of monitoring public sentiment – when individuals with limited knowledge begin to boast about profits, it signals a potential market top.

Looking Beyond Precious Metals: Bitcoin and the Stock Market

Savage suggests Bitcoin and the stock market as potential investment opportunities after the parabolic move in gold and silver concludes. He believes Bitcoin is in the declining phase of its four-year cycle and could present a buying opportunity later in 2024 or early 2025. He also anticipates another leg up in the stock market, driven by new technologies like AI and robotics, before a more significant correction.

Final Thoughts and Investor Advice

Savage concludes by advising investors to remain calm, recognize the correction as a normal market phenomenon, and prepare to re-enter the market. He stresses that any long entry in a bull market is likely to be profitable, even if it’s not perfectly timed. He encourages investors to “pull the trigger” and be patient, allowing the bull market to resume its upward trajectory.

Conclusion

Gary Savage presents a compelling, albeit contrarian, view of the gold and silver markets. He emphasizes the importance of understanding market cycles, sentiment, and the potential for parabolic moves. His analysis suggests significant upside potential remains, but cautions against complacency and highlights the need for a disciplined investment strategy based on key indicators and risk management. His perspective offers a valuable counterpoint to prevailing narratives and provides actionable insights for investors navigating this volatile market environment.