Gold Closes at $4015 & Silver $50 but Miners & Juniors Lag

Key Concepts

• Precious Metals Performance: Analysis of gold and silver price movements and their correlation with mining stocks.
• Resistance and Support Levels: Identification of historical price levels that may act as barriers to further price increases (resistance) or floors for price declines (support).
• Moving Averages: Technical indicators (20-day, 50-day, 200-day) used to identify trends and potential support/resistance.
• Negative Divergence: A technical signal where an asset's price makes a higher high while its related indicator or stock makes a lower high, suggesting a potential trend reversal.
• Rate of Change (ROC): A momentum indicator measuring the percentage change in price over a specified period, used to assess overbought/oversold conditions.
• Chart Patterns: Recognition of specific candlestick patterns (e.g., bearish hanging man, inverted hammer) that indicate potential trend reversals.
• Mining Stock Indices: GDX (VanEck Gold Miners ETF), GDXJ (VanEck Junior Gold Miners ETF), SIL (Global X Silver Miners ETF), SILJ (Global X Junior Miners ETF).
• Gold-Silver Ratio: The ratio of the price of gold to the price of silver, used to assess relative strength.
• Measured Upside Target: A technical projection of a potential price increase based on chart patterns.
• Consolidation: A period of sideways price movement after a significant trend, often seen as a pause before the next move.

Precious Metals Sector Performance and Outlook

The week saw strong gains in gold and silver, with both metals closing above $450. However, the performance of mining stocks (GDX and GDXJ) was notably weak, with GDX down and GDXJ barely above flat. Silver stocks also showed mixed results, with larger silver stocks flat to down and silver juniors gaining slightly. This discrepancy between the metals and their associated stocks is interpreted as a warning sign that the recent spectacular move in precious metals may be nearing an end, with weakness and consolidation expected in the coming weeks and months.

Market Overview: Metals vs. Mining Stocks

Daily candle charts over the last two months illustrate a clear divergence. While gold and silver have experienced strong upward momentum, the mining stock indices (GDX, GDXJ, SIL, SILJ) have shown weakness. Specifically, there was a significant down day in GDX and GDXJ, with only minor gains on Friday. SIL was down on Friday, and SILJ, the silver juniors, were the weakest.

A key observation is the negative divergence between silver and silver stocks. Silver made a higher high on Friday, while silver stocks made lower lows. Gold also showed a similar, though less pronounced, divergence, with its price closer to its recent high than the stocks. This divergence is considered a significant warning signal for the sector.

Technical Analysis: Gold and Silver Support Levels

Gold:

• Potential correction levels are being monitored, with the 200-day moving average identified as a key support.
• The 200-day moving average is accelerating and is projected to reach approximately $3600 by January.
• Support is also expected around the intersection of the 200-day moving average and historical price levels, potentially around $3500 by late November or early December.
• Initial support levels if a significant correction occurs could be around $3750 and $3600, the levels from which the market began its strong ascent.

Silver:

• A significant gap exists in the silver chart, and the $41 level is identified as strong support, particularly as the market accelerated from this point.
• The 200-day moving average for silver is projected to reach $40-$41 by the end of the year.
• The $41-$42 range is considered strong support.

These support levels are based on the assumption that gold and silver are nearing a peak or have already peaked.

Silver's Potential for a Final Push and Long-Term Outlook

Despite the expectation of a correction, silver may experience one last push higher.

• Silver against the stock market (S&P 500): Silver has broken out of a 4-year long bottoming pattern against the S&P 500. The measured upside target for this breakout is just below a significant resistance level, suggesting potential for further gains.
• Silver against the 60/40 index: This ratio has already broken out, indicating strength.
• Overbought/Extended Conditions: Crucially, silver is not as overbought or extended as it was at previous intermediate-term peaks in 2004, 2006, and 2011, when measured by the rate of change over the last 50 and 100 days. This suggests that silver has more room to run before a significant correction.
• Cup Pattern: Silver is forming a "beautiful cup" pattern, which, after a correction and consolidation, could lead to a significant upward move.
• Long-Term Target: The speaker reiterates a bullish outlook, projecting silver to reach $60-$70, and ultimately $100. Based on previous analysis, a move to $95 is possible within 12-18 months after breaking the $50 level.

Expected Correction and Consolidation for Silver

Following any potential final push, silver is expected to correct and consolidate for approximately two to five months. This period is viewed as building fuel for a subsequent "liftoff." During this consolidation phase, it is recommended to research silver companies, review their fundamentals, and identify those with the highest upside potential to lead the next leg higher when silver moves from $50 to $100.

Gold and Silver Mining Stocks: Big Picture and Recent Performance

Big Picture (Weekly Charts):

• GDX and XAU: Both have shown huge breakouts from 12-year long bases against the 60/40 index, indicating significant capital flowing into gold stocks.
• GDXJ and GEX: These junior indices have also broken out against the 60/40 index. While GDXJ has seen money pour in, the mid-tier and larger juniors (represented by GEX) are also showing positive breakouts.
• Outlook: Despite these strong breakouts, a pullback and correction are anticipated before the next leg higher.

Recent Performance (Weekly Candle Charts):

• SIL (Large Silver Stocks): The measured upside target was around $74. This week, SIL peaked near $75, suggesting it may have reached its target.
• SILJ (Silver Juniors): The measured upside target was around $26-$27. This week, SILJ peaked near $26.
• Bearish Candlesticks: The last two weeks of candles in silver stocks (SIL and SILJ) are described as "not bullish" and "bearish." SILJ, in particular, showed a bearish inverted hammer or hanging man pattern, a strong bearish reversal signal after an uptrend. The previous week's candle was also not particularly bullish.
• Gold Stocks (GDX, GOEX, GDXJ): Bearish reversal candles, including a bearish hanging man in GDX and GOEX, are also observed in gold miners.

Conclusion on Mining Stocks

The speaker concludes that gold and silver stocks have likely peaked for the time being, evidenced by the bearish candlestick patterns. While some stocks may have rebounded on Friday, the overall trend for the miners is seen as over for now. Subscribers have been advised to hold or trim positions, not to buy. A period of selling and lower prices is expected in the coming weeks, but this will present another buying opportunity soon.

Call to Action and Engagement

The speaker encourages viewers to subscribe to the Daily Gold Premium service for research into high-quality junior mining companies with significant upside potential (5x to 10x). Viewers are also invited to leave comments with their thoughts on whether the sector will correct and their downside target predictions.