Gold And Silver Collapse: 1979 Repeats, Parallel On Silver Nailed The Drop, Here Is The Buy Levels

Here's a detailed summary of the YouTube video transcript:

Key Concepts

• Gold and Silver Correction: The video discusses a significant recent drop in gold and silver prices.
• 1979 Gold Analogy: A comparison is drawn between the current gold chart pattern and the 1979 rally and subsequent correction.
• Key Differences (1979 vs. Present): Factors like interest rates, debt-to-GDP ratio, and de-dollarization efforts are highlighted as reasons why the current situation differs from 1979.
• Silver Price Targets: Specific price levels are identified as potential buying opportunities for silver.
• Fibonacci Retracement: A technical analysis tool used to identify potential support levels.
• GDX and Mining Stocks: The video also touches upon the performance of gold mining stocks (GDX) and individual mining companies like Newmont Mining.
• Human Emotion in Trading: The core argument that charts reflect human emotions (greed and fear) is emphasized.
• Long-Term Bullish Outlook: Despite short-term corrections, the speaker maintains a long-term bullish stance on precious metals.

Gold and Silver Market Drop

Gareth Soloway, Chief Market Strategist at Verified Investing.com, discusses the recent significant decline in gold and silver prices. Silver has fallen over 10% from its recent highs, and gold has experienced a 5% drop, which is noted as an infrequent occurrence. Soloway had previously predicted a sell-off in silver, identifying specific levels.

Gold Chart Analysis: 1979 vs. Present

Similarities to 1979

Soloway draws a striking parallel between the current gold chart and the action observed in 1979.

• Nine Consecutive Up Weeks: In 1979, gold experienced nine consecutive weeks of gains followed by a substantial correction.
• Current Pattern: The gold chart currently exhibits a similar pattern of an upward move, sideways consolidation, and then nine consecutive weeks of gains on the weekly timeframe. This is followed by the beginning of a correction.

Projected Correction for Gold

While acknowledging the similarity, Soloway does not anticipate a correction of the same magnitude as in 1979, at least not within a single week. However, he believes gold could ultimately correct down to the $3500 to $3600 range.

Key Differences from 1979

Soloway argues that despite the chart similarities, the underlying fundamentals make this period different from 1979, suggesting the current correction will not lead to a long-term top.

• Interest Rates:
  • 1979-1980: Paul Volcker was aggressively raising interest rates, reaching 15-17% for the Fed Funds rate.
  • Present: Interest rates are falling, with the Fed expected to cut rates by another 25 basis points soon. Current rates are significantly lower than the levels seen in the early 1980s.
• Debt-to-GDP Ratio:
  • 1979-1980: The debt-to-GDP ratio was approximately 32%.
  • Present: The debt-to-GDP ratio is around 130%. This higher level of debt suggests a different economic backdrop.
• De-Dollarization:
  • Present: There is a significant global trend of de-dollarization, with countries like China and other central banks massively buying gold. This is driven by a desire to reduce reliance on the US dollar and is expected to continue, especially with weak monetary policy and high US debt.
• Time to New Highs:
  • 1979: After the correction, it took decades for gold to make new all-time highs.
  • Present: Soloway believes that within a year or so, gold is likely to make new all-time highs, contrasting with the prolonged period after 1979.

Conclusion on Gold: Soloway believes the current pullback in gold, while predicted, will ultimately present a buying opportunity leading to further upside and new all-time highs in the not-too-distant future.

Silver Chart Analysis and Buying Opportunities

Recent Performance and Prediction

Soloway highlights the dramatic drop in silver, noting that it's down over 10% from recent highs. He reiterates his prediction from a few days prior, where he stated silver could correct by 15% to 20%. The current drop of 10% is already a significant portion of that target.

Technical Analysis and Price Targets for Silver

• October 2008 Parallel: Soloway points to a parallel drawn from the October 2008 financial crisis lows to the COVID lows, which has accurately predicted the recent top and subsequent correction.
• Current Drop Measurement: The peak-to-trough drop on silver has reached approximately 12%, coming very close to his predicted low end of 15%.
• Worst-Case Scenario Target:
  • Trend Line Support: Using a classic upward-sloping trend line connecting lows from April and subsequent lows, a potential support level is identified just below $43 per ounce.
  • Fibonacci Retracement: Applying a Fibonacci tool, Soloway identifies the 38.2% (0.382) retracement level as a key area. He expects this level to inch up and potentially coincide with the 0.5 (50%) retracement. This zone, between the 38.2% and 0.5% retracement, is where he plans to start "nibbling" or buying.

Trading Strategy for Silver

Soloway emphasizes a cautious approach to buying:

• No All-In: He will not invest all his capital at the first identified buying level due to the probabilistic nature of trading.
• Maneuverability: He will leave room to buy at even lower prices if silver continues to decline, as charts can break established levels.
• Long-Term Thesis: His buying strategy is contingent on his long-term bullish thesis for precious metals remaining intact, supported by de-dollarization, debt-to-GDP, and Fed rate cuts.

Retail Sentiment and "Weak Hands"

Soloway notes that in some regions like Australia, gold and silver are sold out. He interprets this as a "bearish signal" for the short term, indicating that retail investors are overly optimistic ("drinking the Kool-Aid") and represent "weak hands" that need to be flushed out during corrections.

Gold Mining Stocks (GDX) and Newmont Mining

GDX Analysis

• Beautiful Down Move: Soloway observes a significant downward move in the GDX (VanEck Gold Miners ETF), which he describes as a "beautiful parallel" from the COVID low to recent highs.
• Correction: GDX has experienced a substantial drop, down 10% on the day of the video.
• Potential Target: He suggests GDX could retrace to the $59 to $60 range. He might start buying around $68 and then dollar-cost average down. The longer-term lower parallel is expected to act as strong support.

Newmont Mining (NEM) Analysis

• Trend Line Break: The longer-term trend line for Newmont Mining is breaking, though not yet confirmed.
• Projected Retracement: Soloway anticipates a retracement for Newmont Mining.
• Buying Zone: He would look to start "nibbling" in the $75 down to $68 range, which likely coincides with GDX support levels. This zone is identified by taking Fibonacci retracements from the beginning of the bull move.

The Power of Charts and Human Emotion

Soloway strongly advocates for the efficacy of technical analysis, stating, "It's no BS, just charts." He emphasizes the importance of shutting down personal emotions and focusing on what the charts indicate.

• Probability Game: He acknowledges that charts are not perfect and trading is a "probability game," aiming for a 75% success rate.
• Human Emotion as the Driver: The core argument is that charts work because they reflect human emotions: greed and fear. These emotions have remained constant throughout history, making chart patterns reliable indicators of market behavior.
• Greed and Fear are Timeless: He states, "Greed a 100 years ago was greed. Fear 100 years ago was fear. It doesn't change." This timeless nature of human emotion is why charts are effective.

Conclusion and Long-Term Outlook

Despite the short-term corrections observed in gold, silver, and mining stocks, Soloway maintains a strong long-term bullish outlook for precious metals. He reiterates that the fundamental case for gold, silver, platinum, and palladium remains intact, driven by factors like de-dollarization and monetary policy. The current corrections, while painful in the short term, were predictable based on chart patterns and present significant buying opportunities for those who understand the underlying long-term thesis. He encourages viewers to share the video if they find it beneficial.