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Anatomy Of Precious Metals Bull

By Monica KingsleyCommoditiesFeb 05, 2021 12:10PM ET
www.investing.com/analysis/anatomy-of-precious-metals-bull-200558879
Anatomy Of Precious Metals Bull
By Monica Kingsley   |  Feb 05, 2021 12:10PM ET
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The pause by gold gave way to selling pressure yesterday, spurred to a degree by the post-Monday‘s trading action. As both metals declined by around 2.5%, this move probably appears overdone to more than a few. I called it a knee-jerk reaction before yesterday‘s close. In today‘s analysis, I‘ll demonstrate why precious metals investors shouldn‘t be afraid of a trend change – none is happening.

Let‘s dive into the charts (all courtesy of www.stockcharts.com).

Gold In Spotlight

The yellow metal is attempting to stage a recovery – a modest one thus far as it has been rejected at $1,810 earlier. How disappointing is that?

We‘ll see at the closing bell (my assumption is that the bulls will prevail today comfortably), but the implications of the moves thus far doesn‘t change my thesis of a break higher from the five-month long consolidation in the least. The technical (not to mention fundamental) factors propelling it higher are still in place.

Gold Daily Chart.
Gold Daily Chart.

The caption says it all – we‘re in the closing stages of the prolonged consolidation. Prices will rebound next, as so many preceding sizable red candles had trouble attracting follow through selling. And yesterday‘s candle is in a technically more difficult position to achieve that. The moving averages aren‘t seriously declining, and I look for the death cross (50-day moving average puncturing the 200-day one) to fail relatively shortly.

Gold Daily Chart.
Gold Daily Chart.

The Force index in gold agrees that we aren‘t seeing a really serious push to the downside here. Look at the start of 2021. How deep it went back then – we‘ll carve out a nice bullish divergence as I look for gold to get serious about turning up. Yes, the Force index won‘t decline as low as in early January.

Silver Daily Chart.
Silver Daily Chart.

Silver didn‘t yield all that much ground as the short squeeze got squeezed. The chart is still bullish, and I stand by the calls mentioned in the caption here: There's a great future ahead for the white metal in 1H 2021 and beyond.

Ratios and Miners

Gold-Silver Ratio.
Gold-Silver Ratio.

The gold to silver ratio also continues favoring the white metal, which retreated this week (post-Monday). It didn‘t affect the downward trending values in the least.

HUI-Gold Ratio.
HUI-Gold Ratio.

The miners-to-gold ratio continues supporting my call of breakdown invalidation leading to a new precious metals upleg. I made the calls along these lines both on Tuesday and prior Monday, when I featured my 2021 prognotications on stocks, gold, the dollar and Bitcoin.

Gold Miners Daily Chart.
Gold Miners Daily Chart.

Senior gold miners (VanEck Vectors Gold Miners ETF (NYSE:GDX)) are taking a back seat to juniors (VanEck Vectors Junior Gold Miners ETF (NYSE:GDXJ)), and that‘s a hallmark of bullish spirits returning – first below the surface, then very apparently. While we have to wait for the latter, its preconditions are here.

Summary

It‘s time for the gold and silver bulls to reappear after yesterday‘s outsized setback. Crucially, it hasn‘t flipped the short- and medium-term outlook bearish as the factors powering the precious metals bull run are in place.

Anatomy Of Precious Metals Bull
 

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Anatomy Of Precious Metals Bull

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Comments (21)
Robert Flores
Robert Flores Feb 10, 2021 9:30PM ET
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I feel today we started the last or second to last leg lower on that half year consolidation- I wouldnt be surprised if it reaches 1750 seing that platinum and bitcoin are stealing the shine as safe haven(for the moment) -
Jerry Zhang
Jerry Zhang Feb 09, 2021 12:04AM ET
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Just want to say thank you! please keep up the good work!
Edward Chong
Edward Chong Feb 08, 2021 9:28AM ET
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bingo u got it right this round . cheers monica !
Monica Kingsley
Monica Kingsley Feb 08, 2021 9:28AM ET
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Good for you!
Randall Wagner
Randall Wagner Feb 07, 2021 6:32PM ET
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Very happy you are back! I know when someone knows what they are doing!
Monica Kingsley
Monica Kingsley Feb 07, 2021 6:32PM ET
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Dear Randall, I am so happy that you've found me too, after all those months... I've returned as fast as I could. I remember so vividly your comments how you were happy about the articles and interactions - if you would like to endorse my work now that I am truly independent and on my very own, I would be grateful if you visited my site and dropped a few lines - now, in times of my acute need... Entirely up to you. I'm posting daily stock market and precious metals analysis, and stay tuned for tomorrow's views on oil too, by popular demand... Thanks for being back so much!!
Robert Milling
Rob1287 Feb 07, 2021 10:17AM ET
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To continue from below. The fed in November 2019 could not imagine a virus pulling forward about ten years of debt growth into a one year time frame. Back in early 2011 the commodity boom came to an end when Janet Yellen made a speech that any current inflation in commodity prices would be "transient". Today she is making the same claims and so is fed chair powell. The difference today is back in during the banking crisis I seem to remember getting a check for a couple hundred dollars as "stimulus". Back in 2011 little money ended up on "main street" with most going to companies that bought back stock.  Nothing more. Today we are now up to $3200 per american plus loans to hundreds of thousands of businesses that dont have to be paid back.  I think starting later this year the inflation outlook will be much different and not so "transient" as the spring of 2011.
Monica Kingsley
Monica Kingsley Feb 07, 2021 10:17AM ET
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Good points. There are also the infrastructure projects worth $2T, commodities and Treasury yields screaming inflation already. Back in 1H 2020, I wrote an article "Reaping the Early Benefits of Inflation in Stocks". You're also echoing my point on the money no longer sitting now on the banks' balance sheets. Astute observations overall !!
Robert Milling
Rob1287 Feb 07, 2021 10:07AM ET
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The dollar is on the precipice. Look to see if the recent rally breaks as its not so much retail investors getting back into the dollar but foreign central banks trying to slow the appreciation of their currency vs. the dollar. For years and years many of these countries enjoyed weak currency status against the dollar as america shipped manufacturing overseas to pay for trade imbalances. The U.S cannot repay some 30 trillion (with the recent passed 1.9 trillion stimulus) without having the dollar continue to deflate. It cannot repay the debt. It cannot default on the debt. It cant renegotiate (market would take that as default). All the U.S can do is repay the debt with devalued dollars. The fed in an academic paper warned of the size of the debt and deficits and what that would do to the dollar back in November 2019. It said the U.S had about ten years to get things in order before the debt became a problem for the dollar.
Robert Flores
Robert Flores Feb 07, 2021 10:07AM ET
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Great observations! Lets hope and pray that policy will bring about meaningful growth to offset some of that inflation- otherwise stagflation will be with us for some years to come and that will be painful
Shawn Stacey
Shawn Stacey Feb 06, 2021 8:02PM ET
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I cannot find a more secure postion the Silver the White Metal. I will look back at this wuote in 12 months and smile with “All In on Silver”....
Monica Kingsley
Monica Kingsley Feb 06, 2021 8:02PM ET
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While the financial sector (XLF) will do better now with rising yields, the white metal is uniquely positioned to benefit from the recovery, and do better thank banks (hello Mehdi, the comment just  below)
Robert Flores
Robert Flores Feb 06, 2021 8:02PM ET
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Platinum might be the better bet as there is a supply shortage on the industrial side and historically it has been morw expensive than gold
Mehdi Captain Music
Mehdi Captain Music Feb 06, 2021 6:55PM ET
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Tnx for a clear explanation. Add, Bull's attention about banks of China and the USA.
Forex Harbingers
Forex Harbingers Feb 06, 2021 11:40AM ET
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Be patient traders on bull calls. Seasonality projections and typical stimulus cycle evidenced by 2008 show Feb being mostly bearish with a fake bounce in the beginning of Feb. Early to mid March accumulation until about March 21st for yearly rocket. Why the 21st you say? Because in researching stocks and product releases, I've noticed a common them of most companies releasing new products, parents, researches, etc. Liquidity flow is king, no matter what the fundamentals say.
Forex Harbingers
Forex Harbingers Feb 06, 2021 11:40AM ET
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*on the week of the 21st.
Monica Kingsley
Monica Kingsley Feb 06, 2021 11:40AM ET
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Hi again friend! You mean now gold seasonality, or stock seasonality? I see the stock bulls as having their gear well oil, and in gold, we're now at the deciding point whether we have seen the local, climactic low before stabilizing for quite a few sessions and going higher next, or whether we would get one more push lower a la Thursday from these levels, which means around $40 down, and that's it.
simon king
simon king Feb 06, 2021 9:47AM ET
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Thank you very much Monica! It was an Excellent and Articulate article! Please keep posting your Insight.
Söyle bakalım Alican
Söyle bakalım Alican Feb 06, 2021 8:29AM ET
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Thanks Monica. So why don't those selling large quantities of silver see this? Silver shines for everyone like the sun
Söyle bakalım Alican
Söyle bakalım Alican Feb 06, 2021 8:29AM ET
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The margin rate was increased the previous Monday night. and the sale has arrived. they could sell it for a higher price. Did they want to stop the real silver sale?
Monica Kingsley
Monica Kingsley Feb 06, 2021 8:29AM ET
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Söyle bakalım Alican Higher volatility, great gap on Monday, and on the weekend before, everyone was kind of afraid how large a gap would the retail investors force in silver. Silver looks like cooling down a bit here before outperforming gold again - that's my very short-term view. Medium- and longer-term, silver leads gold higher.
Söyle bakalım Alican
Söyle bakalım Alican Feb 06, 2021 8:29AM ET
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I understand. Thanks for your answer.
Monica Kingsley
Monica Kingsley Feb 06, 2021 8:29AM ET
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Söyle bakalım Alican Okay, have a good day!
Bruce Ona
Bruce Ona Feb 06, 2021 8:12AM ET
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Gold is a long term investment designed to “preserve wealth”. Gold has been considered money for 5000 years which may be longer than any other form of money. It appears to have a good future so I put about 30% of my retirement in silver and gold. It’s funny how some “experts” say silver is done for and will not continue rising, I think some are just upset that retail investors can make a difference in markets today.
Monica Kingsley
Monica Kingsley Feb 06, 2021 8:12AM ET
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The metals have a great future indeed, and silver isn't done in the least - it'll outperform gold in 2021 in my view.
Edward Chong
Edward Chong Feb 06, 2021 1:50AM ET
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yes yesterday movement is very weird. but i hope u are right this round.
Monica Kingsley
Monica Kingsley Feb 06, 2021 1:50AM ET
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Hi again Edward, please note that the gold bulls did "the bare minimum" on Friday. They better do more, or we'll have to wait a bit longer for the gold rally, which I however still see unfolding come spring.
Samir Guliyev
Samir Guliyev Feb 05, 2021 11:04PM ET
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A good technical analysis. Thank you Monica. Many articles I read here are mixture of news, politics or opinions... not as crystal clear of a technical analysis as this one. ;)
Monica Kingsley
Monica Kingsley Feb 05, 2021 11:04PM ET
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Thank you very much, I am glad you're enjoying it!
Paul Barron
Paul Barron Feb 05, 2021 4:54PM ET
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I Bought 25% more. Lets see.
Alan West
Alan West Feb 05, 2021 3:59PM ET
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Gold stages a big rally every few years. In 1980, 2011 and 2020. The next one is probably years away.
Anthony Ewers
Anthony Ewers Feb 05, 2021 3:59PM ET
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So the gold rally from 1999 to 2011 didn't happen? 🙄
Monica Kingsley
Monica Kingsley Feb 05, 2021 3:59PM ET
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Anthony Ewers We're in a decade where precious metals and commodities will do especially well. Roaring 2020s for the top wealth holders (0.1-10%) , if you will.
Mehmet Dutlu
Mehmet Dutlu Feb 05, 2021 3:55PM ET
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what about the death cross of gdx? Miners often precede futures
Monica Kingsley
Monica Kingsley Feb 05, 2021 3:55PM ET
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I made the case why miners are actually stronger than underlying metal futures now - and the juniors too. That's bullish & also death or golden crosses here haven't proven the most profitable trading technique. I take them with a pinch of salt.
Francesco Lucchesi
Francesco Lucchesi Feb 05, 2021 3:10PM ET
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i agree totally. I think the market expected a 500k job report. it will take years to see those numbers if ever
Monica Kingsley
Monica Kingsley Feb 05, 2021 3:10PM ET
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Thank you Francesco and Paul: exactly, it would take years give the current pace of job recovery, not to mention where participation rate is...
Paul Barron
Paul Barron Feb 05, 2021 3:09PM ET
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Nice
Shafiq Rahman
Shafiq Rahman Feb 05, 2021 12:20PM ET
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Richard Clinton
Richard Clinton Feb 05, 2021 12:14PM ET
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Thanks Monica!
Monica Kingsley
Monica Kingsley Feb 05, 2021 12:14PM ET
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Welcome dear Richard! That was for precious metals, there is one for stocks too - I am doing both markets daily. Enjoy your weekend!
 
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