The Precious metals rally as the carnage in the global markets moves into high gear. As forecasted, the gold and silver prices have disconnected from the broader markets, IN A BIG WAY TODAY. While the Dow Jones Index was down more than 500 points, the gold price surged $30 higher and silver surpassed $17.
Are Gold and Silver finally in a new BULL MARKET? Well, certain indicators are giving them the green light. However, nothing goes up in a straight line, so we should be prepared for healthy corrections along with way. But, it’s nice to finally see that fundamentals do matter to traders as the precious metals are some of the best-performing assets in the market today.
As I was watching the silver price action during Asian trading last night, I knew something quite interesting was about to take place. A key level for silver is the 200 Month Moving Average, now at $16.82:
I mentioned this in my newest Youtube video, SILVER PRICE 2019: Key Levels For Continued Breakout. If you have not yet seen it, I highly recommend you do. So, for silver to continue on a new bullish trend, it would have to break through its 200 Month Moving Average (MMA) of $16.82, shown in the red line.
IMPORTANT NOTE: The chart above is by Stockcharts. They do not show intraday price moves for gold and silver. Stockcharts updates its commodity prices after the market has closed. This chart does not show the 50+ cent move in silver today.
During Asian trading last night, silver touched the $16.82 level, and then corrected lower. There is no coincidence that silver bounced off this level, the 200 MMA, last night:
When I checked the markets this morning, I saw that silver had finally broken through that critical $16.82 level. And when it did, silver experienced another mini-BREAKOUT:
As I have mentioned many times, when stocks and commodities break through certain key levels, we get a confluence of TRADERS, HEDGE FUNDS, INVESTORS, and INSTITUTIONS all coming in to drive the price higher or lower. In silver’s example above, it was higher.
So, we have BREAKOUTS occurring during the intraday markets as well as longer-term setups in the Monthly charts.
That being said, gold and silver have gone up considerably in the past weeks and could experience a correction before heading higher. And, if we consider that the COT Report structure shows extremely high levels of Commercial Net Short Positions in both metals, usually a correction will occur.
BUT… what if this time is a bit different?? Could we see the silver price head even higher, while the Commercials liquidate their short positions?? Possibly, but we will have to wait and see how the market plays out over the next few weeks.
However, I knew at some point that gold and especially silver were going to disconnect from the broader markets in a big way due to the fundamental and technical setup in these charts below:
I explained this chart in my video linked above, showing how much higher the broader markets and Amazon were above their 200 MMA’s compared to gold and silver. At the time of this chart, silver was below the 200 MA, but now it is finally above it. Regardless, you don’t have to be a SAVVY TRADER to understand that the broader markets and tech stocks are seriously over-valued, if we measure them by the 200 MMA. However, gold and silver are closer to their 200 MMA and are considerably undervalued.
Furthermore, I also stated in past articles and interviews that the precious metals would also BREAK away from the cost of production fundamental. We are seeing that today as the oil price is down more than $2. The oil price has been the primary driver of the gold and silver prices for decades. But, that will change going forward as the falling U.S. and global oil production will destroy the massive amount of debt, derivatives, and leverage in the system.
I will be doing an update on the silver price action in a new video shortly.
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Only $33 more and we’ll get to where silver was in 1980…and 2011. Let’s hope this move up surpasses those levels and doesn’t get crushed back like the last two times. I don’t have enough time left. Got to get to $24 just to get back to even.
Crayfish
Crayfish –
Not to worry.
You were right and are sitting tight.
Those who are sitting on paper have to worry!
No “hope” needed. It will happen.
Exciting times Steve! We could witness a silver commercial signal failure. Open interest as of yesterday in silver keeps going higher, as 618 more contracts were added, quite a bit less than has been the case. (fear of getting caught short?) This brought the total OI in silver to 238,508 contracts as of yesterdays count. This massive overhang of shorts is beginning to crack and they have begun to cover and exit. Which adds further upward pressure on the silver price. We will see a commercial signal failure, in the event of a mass movement by the shorts to exit,… Read more »
The open interest in silver has widened out to 239,938 contracts.
As a further 1,430 short contracts were added to prevent a $17.00 handle.
Eventually this massive amount of silver short contracts (one contracts is 5,000 ounces) will be forced to cover or exit.
Those resolute silver longs are still standing their ground and insisting on satisfaction by way of physical delivery.
Will not surprise me if silver reaches $19.00 be end of next week.
Great coverage as usual! But I think it’s time to take some profits, so I’m glad you put “What if” this time it’s different. 😉 Charles Nenner was on USA watchdog, and he said they are selling their gold positions since its topped for now. I think they will find a way to smack gold down in the next few days. Gold / Silver shares have gone up too quickly for the big guys not to take advantage. I would imagine Trump will roll out some kind of bullish tweet to rally the market and hammer gold bellow $1500. But… Read more »
silver,
Remember, gold and silver don’t have to fall because of a SMACK DOWN. They can fall because that is normal trading action. So, I wouldn’t be surprised to see a HEALTHY CORRECTION before moving higher.
But, we are entering UNCHARTERED TERRITORY. So, we could see the precious metals move even higher. However, I am in it for the LONG RUN.
steve
Not much resistance from $1500 to $1600. Gold should get there quickly. Maybe a week or two.
james r,
Indeed. When Gold broke above that $1,360 level, and then above the $1,400 level, it’s been nothing but UPWARD and ONWARD. Of course, a correction is likely, but I do believe we are now in a NEW GOLD BULL MARKET.
steve
Silver almost ALWAYS lags gold, but then catches up and rockets higher.
Gold has left the launching pad. Silver is moving into position to launch.
Any downward movement will be a back filling correction.
Not so sure about that. 1520 was major support back in ’11-’12 and is likely going to acta as major resistance on the way back up. We’ve just scratched the 1500 / 17 handles and seem to be running into a wall (for now…). Psychological (and thus arbitrary) lines in the sand that will be breached for good, eventually…
Indeed! I’m also in it for the long run too. But if you like to play the paper game you can play the run up and corrections.
Anyhow, I think you’ve been one of the more honest analysts on the internet. You give a great long term case for physical, but give good info for playing the paper game in miners. (Your not just perm bullish regardless of short term texhnicals/fundamentals)
Well stated Steve. Uncharted Territory. We will see a correction (we will see corrections), but where the hell will they be? This is a vital question for traders. Incorrect reading of the short term technicals can gut you like a fish. Investors, on the other hand, need not be concerned. Stay the course.
Very risky to be selling in a bull market. You may end up having to chase and buy at a higher price from where you sold.
Just add to your positions and hold on !
I’m long metals and related stock, I’m planning on opening a put position on one of the royalty companies that I have a long position in. If the stock pulls back I can make money on my put and use the proceeds to buy more PM related investments. I am not a trader, but I am suggesting you can stay long and still play the pullbacks.
Thanks, Steve. All of your latest articles (and video) on silver have been very informative. I know the price levels to keep an eye on now. This morning we saw the action this forum knew would come sooner or later: Literally everything was tanking except precious metals. Of course, a word from the FED saved the day for the stock market.
Seneca Cliff dead ahead. Thank you Steve. Would have made a good neighbor.
As of the time of this post today, the DOW is up about 312 points.
This is an arm wrestling match.
Failure to deliver 2022