Steve Barton: Gold, Silver Price Drop — What Happened, What I'm Buying

Key Concepts

• Technical Analysis (TA): The study of price charts, patterns (e.g., head and shoulders, bear flags), and indicators (RSI, MACD, moving averages) to predict future price movements.
• Support and Resistance: Price levels where an asset tends to stop falling (support) or rising (resistance).
• Stink Bid: A limit order placed significantly below the current market price to capture value during a sharp, temporary dip.
• All-In Sustaining Costs (AISC): A metric used by mining companies to represent the total cost of producing an ounce of gold or silver.
• Arbitrage: Profiting from price differences between the spot market and term contracts.
• Shoulder Season: A period of lower demand for energy commodities (like coal) between peak heating and cooling seasons.
• Capitulation: A period of intense selling where investors give up, often marking a market bottom.

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1. Gold and Silver Market Outlook

Steve Barton notes that gold has recently pulled back toward the $4,100 support level. He assigns a 60% probability that this level will hold.

• Gold Strategy: Barton is not bullish in the short term until gold clears the 200-day moving average and breaks above the upper parallel channel (currently at $4,700). However, he remains long-term bullish, citing ongoing currency debasement and central bank gold accumulation.
• Gold Miners (GDX): He views the current price as a "golden opportunity" because miners are highly profitable with AISC north of $2,000/oz against a $4,100/oz gold price.
• Silver: Silver is currently testing support at $65. Barton identifies a long-term "floor" based on a 45-year resistance line that has now become support. He suggests buying silver miners (SIL, SILJ) at current levels, with limit orders set for deeper pullbacks.

2. Energy Commodities: Oil, Uranium, and Coal

• Oil (WTI): While the long-term fundamental case remains bullish due to geopolitical instability (Middle East/Iran), the short-term chart shows a breakdown from a triangle pattern, suggesting a move toward $80/barrel. Barton recommends maintaining a 15% portfolio allocation to oil.
• Uranium: Barton highlights an arbitrage opportunity where term contracts are priced at $94 while the spot price is $85. He recommends the Sprott Physical Uranium Trust (SRUUF), noting it is currently trading at a 10% discount to its net asset value. He views the current "head and shoulders" pattern as a potential washout that offers a buying opportunity.
• Coal: Barton views coal as a "second chance" buy. He distinguishes between thermal coal (power generation) and met coal (steel production). He suggests the COAL ETF as a way to gain exposure to both, noting that recent price drops are likely due to broader market liquidity issues rather than fundamental weakness.

3. Broader Stock Market and Portfolio Management

• Market Correction: Barton observes that the broader stock market is making "lower lows," indicating a likely continued downward trend. He expects little support from the 50-day moving average.
• Cash Position: Barton currently holds approximately 35% in cash, which he is actively deploying into gold, silver, and palladium miners as his pre-set limit orders are triggered.
• Palladium: Barton recently initiated a position in physical palladium (ticker: PALL). He notes that palladium has been halved in price since the start of the year and tends to follow silver’s price action. He advises against buying platinum currently, suggesting it has more downside risk.

4. Methodology and Framework

Barton emphasizes a disciplined, plan-based approach to trading:

• Limit Orders: He advocates for setting "stink bids" at key support levels and letting the market come to the investor.
• Technical Indicators: He uses red, yellow, and green lines to categorize entry points, with green lines representing the most attractive "buy" zones.
• Risk Management: He stresses that if a major support level (like the 45-year trend line for silver) is broken with significance, one must be willing to rethink the entire investment thesis.

5. Notable Quotes

• "At some point, it's cheap enough and you just got to throw your hat in the market." — Referring to the strategy of buying miners during pullbacks.
• "I don't think having a seat at the table is more risky than not." — Regarding maintaining exposure to volatile energy markets like oil.
• "We buy it when everyone hates it, we sell it when it's loved." — Summarizing his contrarian approach to commodities like uranium.

Synthesis

The overarching theme of the discussion is that while short-term market volatility and liquidity issues are driving prices lower, the fundamental case for hard assets—gold, silver, uranium, and coal—remains intact. Barton advocates for a disciplined, technical approach: identifying key support levels, utilizing limit orders to "buy the dip," and maintaining a long-term perspective despite short-term bearish chart patterns. He views current market pullbacks as necessary "capitulation" phases that provide optimal entry points for patient investors.