Sticking with the traditional order of things, as opposed to the caveat noted in NFTRH 918 that silver could bottom first and lead, the usual order is gold bottoming first, then silver and the miners afterward. Indeed, I cannot recall a time when a major low was made by silver first, followed by gold.
A couple other things from #918 that I want to revisit. First, let’s not automatically assume that it is going to take months for the sector to bottom, or even to turn back up again. Intervening bounces/rallies aside, I think the miners are going to have a tough time dealing with Q2’s numbers (ref. bearish Gold/Oil ratio), but that has no bearing on the metals.
Like GDX, Junior Miners ETF GDXJ and Silver Miners ETF SIL cracked hard to the next support levels. Indeed, GDXJ is under threat of losing that support as it ticks a lower low to the March 20th low.
SIL is right at the key level.
Gold and silver stocks tend to have a flair for the dramatic, to the upside and downside. Hence, I am not at all wishing to be long at the moment. They are bearish until proven otherwise.
But reviewing gold’s daily chart again, I want to be careful about bearish projections now that everybody and his brother knows the metal has been trending down. The time for bearishness on gold and silver prices was January, and we were well on that theme. Let’s dial in the chart from #918 to a closer view and a look at the support area.
Chart jockeys could get up in arms about the slide through the SMA 200, but that does not mean much. It could be driven down quickly for a test of that March 23rd pre-market low of 4098, but let’s be aware that such a move or something similar could be much closer to an ending move since we’ve already been managing the “multi-month correction” that we set out to manage, well, months ago.
Time-wise, the correction is likely much closer to its end than beginning.
As you know, I consider gold as close to forever-value as an asset can be. But I just want to check myself to make sure I am illustrating a well rounded picture, technically. I also want to clear up this wording from #918, which I think needs to be better than what I provided:
Gold (daily chart) should hold right here or else a lower low (to the March 23rd pre-market low of 4098) would be probable. If that were to happen more downside opens up, including very significant support at 3400.
It needs to hold right here… if we assume it will not spike down, test the low and quickly reverse upward. You know what they say about assumptions. So what I should have written was something like:
Gold should hold here to remain safely at support in the 4250-4300 range. If that does not happen it could plunge for a quick test of the low at a 38% Fib retrace, and reverse to the upside. But if it were to do that and then fail such a test, the 50% (3615) or even the less likely, but clear support at 3400 would come into view.
Corrections, especially in the precious metals, often end with drama. In markets there’s nothing so dramatic as a plunge and reversal.
Silver would be more than capable of drama as well. It is finally testing its rising SMA 200. Will it neatly hold there? I don’t know. Probably not. But big time support – and the table-pounding buying opportunity (low-mid 50s) we’ve had in mind – is not too far south now. Be prepared for anything from a hold of the SMA 200 and rally to a final plunge and buying opportunity.
As for the miners, if the metals were to bottom and turn up, the miners would like go with them. But I hold more suspicion about them due to the fundamental drag of Gold/Oil and the recent backdrop of widespread inflation fears. Hence, I’ll trade ’em only, as long as I don’t feel fundamentally good about them.
But when such time comes that gold and silver make major lows, it’ll only be a matter of time before the miners look beyond any near-term issues and make good lows as well.
Now I feel like I’ve provided something approaching the proper context.
