While the gold and silver prices have broken out higher, precious metals investors are wondering if the rally will continue throughout the rest of the summer. Since the beginning of June, gold has gone up $250 while silver has increased $3. Gold is now trading above $1,500 for the first time since 2013 and silver has finally penetrated a key resistance level held for the past six years.
So, we do the precious metals prices go from here?? Good question. Even though fundamentals are the key underlying driver of price, the market pays attention to key technical levels as I explained in my previous video, Silver Price 2019: Key Levels For Continued Breakout. In this new video update, I cover both the gold and silver price action and my analysis of the key levels moving forward.
Precious metals investors need to understand that while the fundamentals do indeed impact the price, certain key technical levels act as a HUGE SPOTLIGHT for traders, investors, hedge funds, and institutions. Thus, when gold and silver break through these key levels, it seems as if everyone wants to JOIN THE PARTY. For years, I disregarded technical analysis, but I have found that it provides clues to where the price will head in the future.
Yes, this doesn’t change the fact that the Falling EROI of oil will still destroy the value of most stocks, bonds, and real estate going forward. But, in the meanwhile, technical analysis will take away some of the mystery and frustration as the precious metals prices head up much higher in the future.
In my newest video update, GOLD & SILVER: Continued Summer Rally Or Correction, I provide charts showing the key levels for the precious metals over the next few months. For example, the gold chart below shows how gold enjoyed a BREAKOUT above $1,440 in the daily chart. Thus, we see breakouts occur in the longer-term monthly charts, as well as the shorter-term daily charts (and even intraday as I showed for the silver trading action on Tuesday & Wednesday last week):
Not only do I explain what is going on in this chart, but there are also an additional 20 charts that I discuss in the video. However, one chart that I would have liked to include is this one below on the Amount of Negative Yielding Bonds versus the gold price. I have not only received this chart sent by followers in my INBOX, but I have also seen it on several websites. This chart shows an interesting parallel trend between the gold price and the amount of negative yielded debt:
While the interest rate has indeed impacted the gold price, it is not the only fundamental factor. This chart only goes back to 2014, and doesn’t show that there wasn’t any negative-yielding debt before 2013 (just a very small amount). And as you can see in this chart, the gold price fell from $1,300 in 2015 to a low of $1,050 at the end of the year, while the amount of negative-yielding debt remained quite flat.
The fundamental factor that was impacting the gold price in 2015, was the crashing oil price that fell from $100+ a barrel in 2014 to $25 at the beginning of 2016. This chart does not show that dynamic. So, we just can’t use one metric to determine the future price of gold, even though interest rates are a significant factor… it’s just not the only one.
Furthermore, I discuss the INSANITY in the markets by the way certain stock prices are behaving currently. I chose Beyond Meat (ticker BYND) and compared it to some other competitors such as Hormel and Tyson. Of course, Hormel and Tyson are huge companies versus Beyond Meat, but if we look at their stock prices, you can clearly see the GRAND STOCK MARKET CASINO at work:
Beyond Meat’s total, TTM revenues for the past year were $165 million, but the company lost $33 million selling FAKE MEAT. Don’t get me wrong, there is nothing wrong with providing a vegetarian meat substitute, but if your losses are nearly 20% of revenues, the company is starting off on the wrong foot. Yes, I realize the supposed new Wall Street business model is that a company has to lose money for 3-5 years before making a profit, but that is downright silly. Who would ever consider opening up a company or store in the past with the understanding that they would lose money from the GETGO??
I gather with the tremendous leverage and debt in the system; it is now the NEW NORMAL to lose money for years before becoming profitable. Again, how stupid. Regardless, how does Beyond Meat post a market cap of $9.9 billion and the share price of $164.37 ($166 today) with a lousy $165 million in revenues and 261 employees versus Hormel’s stock price of $41 and Tyson at $88? You can look at all the other data, but Beyond Meat is just another version of the Tech Stocks during the 1990s. All PRICE and no SUBSTANCE.
I used Beyond Meat as an example of what precious metals investors are up against. If Beyond Meat’s stock price can jump from $25 to $240 at its peak in July, in just three months, why would investors pay any attention to gold or silver?? This is the most important factor here. Investors have become even more insane than they were during the Tech Boom during the 1990s that ended in tears.
However, we are finally seeing some GOOD INTEREST now taking place in the precious metals, and I believe that will continue over the next several years as the global economic and financial system continue to disintegrate under the strain of excessive leverage, debt and yes, negative interest rates.
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Silver Shorts Running for Cover
This morning we have an overall open interest in silver of 238,794 contracts.
That is down 4,997 contracts as the shorts begin to cover in earnest.
Almost 5,000 less shorts in the blink of an eye!
Now its silver’s turn. It will catch up to gold and eventually pass it.
Ok, thanks for making me laugh. I was good until you said it was going to catch up to gold. I would be ECSTATIC if it hit $100+ I can’t see it going past $40 without a major black swan/recession. Would LOVE to be wrong though, $1000 silver would put me in a new lake house and a few acres and a cute house cleaner 😀 EDIT: AND NEVER WORK AGAIN NATCH!
I’m thinking he meant percentage increase rather than actual price.
Percentage increase is exactly what he meant. And notice he didn’t give a time framework; just same pattern that has happened in the past
We’ve turned the corner, Long Suffering Metal Believers. There are so many factors favoring gold and silver now. OILPRICE.COM makes some good points about de-dollarization:
https://oilprice.com/Energy/Energy-General/Why-Gold-Prices-Are-About-To-Skyrocket-Even-Higher.html#
Nice bounce overnight in Asia 8/13/19.
I hope this happens over several years as stated, but if memory serves me right the last time around (2007-2008) the bubbles where smaller and the carnage happened very quickly.
dave –
Nothing runs in a straight line. It has taken many years to get to where we are now with precious metals. However I think you are on the right path that the carnage could happen very quickly. There just too many extenuating circumstances, stress points and conflicts to ignore.
eg: (to name just a few)
Argentina, China, Italy, Brexit, Hong Kong, South China Sea, Iran, North Korea, Kashmir, Venezuela, Turkey, etc. There are many more.
Meanwhile the algo in charge markets keep running insanely. This mornings action being no different.
Silver Shorts Covering Now A Stampede
The overall open interest in silver continues to fall now at 233,043 contracts.
Which shows that 5,751 short contracts have exited overnight.
With the manipulated silver price sharp pull back this morning, most probably to give further shorts an opportunity to exit, watch for this action to heat up. As strong longs continue to force shorts out and as a consequence support higher silver prices. Its game on!
OutLookingIn,
Thanks for that update. Would you mind providing the link where you see the decline in daily open interest as well as the reduction in short contracts?
Steve
Steve –
Info from J. Johnson’s most excellent site:
http://www.steemit.com
OutlookingIn,
Thanks for the info. But, do you have a direct link? Not, just to steemit?
steve
Steve –
Sorry, that site can be hard to navigate. Check out Jim Sinclair’s site JSMineSet where J. Johnson provides a daily piece, with included link to his articles. Hope this helps.
“The price of gold continues to hold up under the enormous selling in the paper derivatives markets on the Comex and LBMA. This morning’s price attack is a good example….
For the better part of the last 18 years, when this type of “market” action occurs, gold is down for the count.
… it would appear that the dollar-based valuation of gold is starting to break the “shackles” of official intervention and is beginning to reflect the underlying fundamentals.
http://investmentresearchdynamics.com/the-remarkable-resiliency-of-gold-and-silver/
This gold/silver paper derivatives price attack, is providing a door through which the shorts can exit. Or I should say – escape! lol
The massive shorts took the Silver price down – less than I expected. The massive short contracts have to be unraveled. I was encouraged that with all the “dumping” of silver, the price per ounce was only a blip on the radar – unless silver investors with short contracts make a massive silver buy/dump by the shorts. BTW, I am in silver for the long haul (Hi Steve).I believe silver is still on the way up. Just understand the price swings of silver right now – the downswing is based on many factors in our country and (globally). Bottom line,… Read more »
On a conversation via Skype yesterday, I asked Bix Weir “Will The Precious Metals Rally Continue Throughout The Summer?”. He laughed and said: “No way, dude. If that happens, I will run naked across Grand Canyon.”
Bukharin,
It pains me to say this, but I used to be more like Bix back 7-8 years ago. However, as an individual expands their research and analysis to be more SOPHISTICATED, it is important to move away from presenting analysis while playing a guitar and singing, to focusing on the data and information.
Poor Bix reminds me of the traveling Hair tonic salesmen during the early 1900’s. While Bix is quite entertaining, I don’t believe he realizes the damage he is doing to his followers.
steve
Re short covering. Turd Ferguson yesterday was speculating that the short covering was actually the commercials and it may not be a good thing as they are just “reloading” for the next smash.
Craig Hemke is a sharp dude; of course the commercials want to win, for their own profit and their customers, some of which are government or related to government [central banks, etc.]
“Since the beginning of June, gold has gone up $250 while silver has increased $3.”
When you read that one might think Gold is doing better than Silver, but when you take into account that the ratio was initially 94:1 and that 250/3 = 84, Silver is already slightly outperforming Gold.
If Gold were to increase by $500, Gold Silver would only have to increase by $7 to beat Gold in percentage term gains.
Your analysis is spot on. I recently calculated my actual silver holdings (my cost vs had I invested the same amount in gold). My records shows overwhelmingly that as an investor I had more to gain in silver (given my total investment in physical silver vs ozs. of gold I could have purchased for the same amount). For me, I get the most out of my silver investments – MUCH more than the same dollars would have brought me had I invested in gold instead of silver. I stopped playing the paper precious metals after the silver price basically went… Read more »
The silver overall open interest has increased.
The count is now 234,432 short contracts.
An increase of 1,389 from yesterday.
Thats what it cost the commercial shorts in their silver price attack yesterday.
Don’t get to excited 😊 I happen to agree with Harry on this; Harvard Trained Economist: Gold Fails Bullish Breakout, Stocks More Likely To Breakout Instead. https://economyandmarkets.com/markets/gold/gold-fails-bullish-breakout-stocks-likely-to-breakout-instead/
My long term charts tell me this is (so far ) just short term noise. The DOW Jones could be headed to 38,000 IMO. 🙄
GrahamB,
I understand about technical analysis, but Harry’s Gold Chart, showing the bubble starting in 2004 at $450, is PURE RUBBISH. Harry Dent pays no attention to the COST OF PRODUCTION FOR GOLD. Gosh, I need to start writing some articles on this. In 2004, the Cost of Production was $425. Today, the Cost of Production is $1,200. if gold goes down to $700, then 50+% of the gold mining industry goes under.
steve
We will see. Harvard trained economists as a whole are “ivory tower” academic economists; many work for the Fed, Goldman, and other relatively clueless organizations about the real world economy. A consolodation, a pullback, and continued price attacts with paper or contract derivitives in PM’s is probable. But gold failing to pass a breakout test? I don’t think so.
More evidence, or coincidence? Bullion Star operates one of the worlds premier, secure bullion storage vaults based in Singapore. They have just announced that they are now offering the same service, at a second location in Wellington, New Zealand. It is well known that high net individuals, have been been putting together safety “bolt holes” for years. New Zealand happens to be high on the list of such locations. Could Bullion Star’s new vaulting decision, rest on demand from these high net worth individuals? So as to keep their wealth close? I don’t happen to believe in coincidences. This is… Read more »
No coincidence. I can’t fathom the wealth of some people and how they think, but it perplexes me that those people would trust a [so-called allocated] PM storage facility to stay safe in a major economic upheaval. If I was rich & owned land, I’d bury the gold and have heavy equipment place a large landscaping rock over it. Or plant a tree over it. In either case it couldn’t be raided in a short period of time. Guards for such a facility may be screened, bonded, etc. But if the word got out that a building has several hundred… Read more »
If I can’t hold it, I don’t own it, PERIOD!!!
Personally, I see silver taking 2 steps forward and one step back – as we ride the coattails of Gold on the way up. Nothing to be overly concerned about. JMHO.
JR