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Metals And Miners May Have Started A New Longer-Term Bullish Trend – Part II

By Chris VermeulenCommoditiesApr 19, 2021 03:27AM ET
Metals And Miners May Have Started A New Longer-Term Bullish Trend – Part II
By Chris Vermeulen   |  Apr 19, 2021 03:27AM ET
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This second part of our research article related to the new Bullish price phase in Precious Metals and Miners will continue to explore the potential range and targets for higher price trends.

In the first part of this article, I discussed how precious metals have started moving higher in somewhat of a stealth mode—not really drawing a lot of attention from traders. While other commodities and market sectors continue to rally, gold and silver have recently been setting up a new momentum base over the past few weeks. If our research is correct, we may soon see a stronger bullish price rally in precious metals which may drive miners 3x to 5x higher as Miners have greater Alpha than precious metals.

Are The Stars Aligning For A Big Market Shift Focusing On Gold And Silver?

Another key factor is that we’ve recently shifted away from an appreciation cycle phase and into a depreciation cycle phase. This new Depreciation cycle phase suggests the US dollar may enter a decidedly downward overall trend while the US stock market may continue to move higher with increased volatility and extended price rotation ranges. Additionally, this new Depreciation cycle phase clearly suggests precious metals will begin an upward price trend that may last well into 2027~2028 or longer.

The following Monthly Gold chart highlights the broad Appreciation/Depreciation cycle phases (with the GREEN: Appreciation and RED: Depreciation sloping lines) and also shows two Fibonacci Price Extension ranges (or Measured Moves).

Interestingly, the 100% measured move ranges of both Fibonacci anchor points highlight a $2700 target level. Beyond that level, we see $3250 and $3550 as substantial upside target levels. This suggests gold may rally over 50% from current levels to reach the first target level near $2700 (or higher) over the next 5+ years.

Gold Futures Monthly Chart
Gold Futures Monthly Chart

In the shorter term, we need to watch metals, miners, and the US Dollar for signs that this pending longer-term trend is confirming. Currently, gold and silver are starting to break a downward/sideways price channel and appear to be starting a new upside price trend.

We need to watch for technical confirmation of this breakout as it will likely start a new, broader, price trend based on our cycle research. Keeping that in mind, let’s take a look at some current Daily charts that show why any breakout price trend in metals may present an explosive opportunity for traders.

Junior Silver Miners Need To Breakout Above $16.50~$17.00 For Bigger Rally

You can see from the Silver Junior Miners ETF (NYSE:SILJ) chart price has recently broken above the downward sloping price channel shown as a CYAN line. This upside price breakout is important, yet we need to see SILJ move above $16.50~$17.00 to really start a broader bullish price trend.

Once this level has been breached, which may be very soon, we believe an explosive upside price trend may quickly take SILJ well above $18.50 and beyond.

Junior Silver Miners Daily Chart
Junior Silver Miners Daily Chart

Silver and silver miners share one key facet that makes them extremely opportunistic for traders. Typically, when these types of cycle phase trends take hold, gold will rally substantially higher over time. Yet, silver, which is often overlooked as a metals hedge instrument, begins to rally faster than gold in a percentage term.

For example, from the bottom in 2015 to the current highs, gold rallied a little over 101%—whereas silver rallied over 124%. This happened near the end of the previous Appreciation cycle phase. When and if our expectations become true, gold will rally 50% to 75% (or more) from current levels and silver may rally 85% to 175% or more.

Miners May See An Incredible Breakout Rally If Metals Begin A Big Bullish Cycle

The following Daily Coeur Mining Chart (NYSE:CDE) highlights the similarities between the price activity of SILJ and CDE. On the CDE chart, you can see a more defined Pennant/Flag formation that is nearing an Apex. You can also see the bullish breakout event starting to set up on the right side of this chart.

If silver breaks into a bullish trend, pulling SILJ higher as well, CDE will likely break above the $10.50 level and begin to move towards the previous high price level near $12.00 to $12.50 (or higher). This represents a solid 20% to 35% upside price advance for CDE—possibly much higher over time.

Coeur Mining Inc Daily Chart
Coeur Mining Inc Daily Chart

In closing, there are two key elements we want readers to focus on. First, the transition into a Depreciation cycle phase, which usually prompts a stronger precious metals price rally and ending in a parabolic price advance. Second, the current setup of gold and silver, which have already been moving higher since 2015.

This combination suggests the excess phase rally in the US stock market over the past 5+ years has already prompted a move into hedging instruments (gold and silver). This is very similar to what happened in 2000 to 2005—after the DOT COM bubble burst.

The real rally in precious metals didn’t start until after 2005~2006, when gold rallied over 365% from the $400 price level. Silver rallied over 600% during that same span of time.

It is very likely that many precious metals mining stocks have set up in similar patterns recently; mostly flagging sideways into Apex formations with some already starting to break out into an upward price trend.

We are watching for gold and silver to confirm this new upside price trend by attempting to move substantially higher to break previous price peaks. If we can see gold and silver continue to move higher while breaking through historical resistance levels (past price peaks), then we would expect this to indicate a broader market trend is setting up and momentum for this move in building.

Remember, this is a 6-to-7+ year cycle related to the new Depreciation cycle phase. Eventually, as the markets transition into this new phase, gold and silver will begin a broad rally mode while the US stock market may enter a period of excessive volatility and rotation. The last Depreciation cycle phase took place from 2001 to 2010 (roughly). We are certain many of you remember how the stock market reacted during that market phase?

As a trader/investor, this means bigger trends, bigger price rotation and volatility, and the potential for an incredibly successful phase of market rotation is likely to take place over the next 7+ years—even longer. 

Metals And Miners May Have Started A New Longer-Term Bullish Trend – Part II

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Metals And Miners May Have Started A New Longer-Term Bullish Trend – Part II

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