Loading ...The Bears Are Wrong
Yesterday, I posted about the two remaining hurdles before gold and silver would be ready to resume their upward move to new highs. This naturally brought out a couple of the usual bears who continue to look for declines and who doubt we are even in a bull market. They couldn’t be more wrong. I was going to give a few reasons why, some of which I have discussed before and some which are more recent. Today, I just read this, taken from a post from Steven Saville’s “The Speculative Investor” “The average credit spread is the most reliable indicator of economic confidence. When economic confidence is high or in a rising trend, credit spreads will be narrow or in a narrowing trend. And when economic confidence is low or in a declining trend, credit spreads will be wide or in a widening trend. It therefore isn’t surprising that over the past 25 years there was a pronounced rise in US credit spreads prior to the start of every period of substantial weakness in the US economy and every substantial gold rally. This is as it should be.” His interpretation is that the spreads are close to their lows, and they are. My interpretation is that they are where they were in Oct. 2018 and Jan 2020 and they can’t get any narrower.(last week’s FED jawboning brought them back to their lows) Both those times marked periods where gold and silver began sharp up legs. This info, that I wasn’t even thinking about, just confirms my bullishness. The charts and actual price action are what I am going on. The two bears who commented yesterday keep relying on history and cycles and things like how far above a particular mvg. average one metal or the other may be. Though interesting, they sometimes provide context for where a market is, but are not the determining factors for what actually happens next. Price, chart patterns and lead stocks acting as tells, are much more important. All three say that after next weeks end of month, quarter and first half, gold and silver are going higher. Silver, particularly so!
I hope you are right, as I am just as tired of waiting as the next guy. Most of the silver miners are near or below their 2016 highs after all.
You have to temper your expectations in this space. The bottom line is we haven’t yet gotten a major rally in the mining stocks without a massive, painful headfake lower first–it happened in 2016, 2018 and 2020–each of those massive rallies was preceded by a ridiculous shakeout (in percentage terms). I’m hoping that can be avoided this time, but that’s all it is–hope.
And even if such a massive shakeout is avoided this time, the empirical data we have says it’s too early for a sustainable breakout to occur.
As I have said ad nauseum, I hope you are right, but not tempering your expectations in this space is a recipe for misery if not outright suicidal thoughts.
I don’t follow narratives of any kind to formulate my trading outlook, just math.
I’m on your team CM but the charts are setting up for another plunge right now, bear flags galore across the sector in silver gold and the miners. Gold target would be 1600.
I could always be wrong but not only don’t I see gold going down to 1600, I don’t see it breaking below the recent double bottom made back in March just below 1680. If it breaks the double bottom, remind me and I will consider 1600. Until then I am not concerned.
I agree with you that we really shouldn’t see a break of $1680. But that doesn’t mean we will be off to the races any time soon. I am a megabull and have been for 20 years. If gold manages to take off here–hurray. But at least understand why there is the possibility of continued sideways grind.