The Silver & Gold Pullback Just Got More Serious

Key Concepts

• Intermediate-Term Correction: A temporary decline within a larger secular bull market.
• Secular Bull Market: A long-term trend (years to decades) of rising prices.
• 30-Year Bond Yield: A key macroeconomic indicator; rising yields typically exert downward pressure on non-yielding assets like gold.
• Analog Charting: A technical analysis method comparing current market price action to historical patterns (e.g., 1972, 2005, 2006) to forecast future trends.
• Breadth Indicators: Metrics (e.g., percentage of stocks above moving averages) used to measure the internal health and momentum of a market sector.
• GDXJ: The VanEck Junior Gold Miners ETF, used as a benchmark for junior mining stocks.

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1. Market Analysis: The Impact of Bond Yields

The primary driver of the current correction in precious metals is the breakout in the 30-year bond yield, which recently hit its highest level in nearly two decades.

• Correlation: Historically, rising yields correlate with declines in gold. While gold initially decoupled from this trend, the current breakout is now exerting significant pressure.
• Technical Context: Gold was identified as "extremely overbought" earlier in the year, with analysts projecting a 20% correction. The current price action is consistent with this forecast.

2. Analog Frameworks and Projections

Jordan Roy-Byrne utilizes historical "analog charts" to guide expectations for the current correction:

• Gold Analog (1972/2005): By mapping the current correction against the first significant pullbacks following major historical breakouts, the data suggests a "grind lower" through June or potentially July.
• Long-Term Outlook: Despite the current correction, the long-term outlook remains bullish. By weighting the 1972 and 2005 breakouts, the model suggests that once the current correction concludes, gold could see significant appreciation, with potential targets reaching $8,000+ per ounce by late 2027.
• Gold vs. S&P 500: The ratio of gold to the S&P 500 indicates that we are currently in an "intermediate-term" peak rather than a "cyclical" peak. A true cyclical peak would require a massive, sustained shift of capital from equities into gold, which has not yet occurred.

3. Technical Support Levels

• Gold: Current support is being tested. If the immediate support fails, the next levels are $4,250 and $4,350. The 200-day moving average is a critical watch point; while a break below it can be bearish, it often precedes a significant, durable bottom.
• Silver: After failing near $90, silver has seen a sharp decline. Key support levels are identified at $70, $66–$67, and the 200-day moving average at $64.
• GDXJ (Junior Miners): Strong support levels are identified at $101 and $96.

4. Investment Strategy and Methodology

• Stock Selection: The focus is on quality junior companies with 3x to 5x upside potential over 2–3 years. The strategy prioritizes companies with strong current margins to provide a "downside buffer," reducing reliance on extreme spikes in metal prices.
• Risk Management: Roy-Byrne explicitly advises against the use of margin, leaps, or call options, advocating for a "keep it simple" approach to avoid unnecessary leverage-related risks.

5. Breadth Indicators for Market Timing

To identify the "buy signal" for miners, the following custom breadth indicators are monitored:

• Moving Average Breadth: Tracking the percentage of GDXJ stocks closing above their 20-day, 50-day, and 200-day moving averages.
• The "Bottom" Signal: A high-conviction buy signal typically occurs when the percentage of stocks above the 200-day moving average drops below 30%, while the 20-day and 50-day metrics approach zero.

6. Notable Quotes

• "Major breakouts in markets, major multi-decade breakouts, they act similarly."
• "I'm looking for stocks that can add significant value and make us money without needing to rely on metals prices shooting much higher. Because that protects our downside."

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Synthesis/Conclusion

The precious metals sector is currently undergoing a necessary intermediate-term correction, exacerbated by rising 30-year bond yields. While the short-term outlook involves a "grind lower" through the early summer, the long-term secular bull market remains intact. Investors are advised to monitor the 200-day moving averages and specific breadth indicators to time their entry. The ultimate goal is to accumulate quality junior miners that offer significant upside potential without the need for speculative leverage, positioning for a major leg higher in the coming 18–24 months.