What’s Next For Gold & Silver
Having alerted in my posts that a bottom was in for silver since it’s early September low, and gold was close but not having done so until this past week.(still possible but unlikely the paper price makes a lower low) There are two possible outlooks from here. Either, something big is looming on the immediate horizon and the informed money is aggressively buying in anticipation, in which case Friday’s explosion is just a taste of what is to come, or we have a more normal pullback to fill the gaps created. The pullback to fill the gaps could be just a few days or take until as long as year end. While the former has a lower percentage chance of being the scenario, the upside gains would be greater and faster, which is why I called the expected selloff generated by Powell’s press conference, to be the “last best buying opportunity”. While the latter scenario would be the one more expected and would provide another chance to get in, if and when the gaps are filled, I doubt the prices from Thursday’s lows get revisited. So while we wait to see what comes next, we can take comfort in something I read in this week’s “The Gold Update”. The author pointed out that Friday’s decline in the dollar was the largest one day drop since December 3rd 2015. That led me to do some research and I found that the drop back then was only one day after the dollar peaked and then had a period of weeks before it fell, bounced and finally rolled over beginning a sharp decline for four months. Gold back then, and silver with a slight lag(gold was the leader as oppossed to the current situation) took weeks to finish setting up for the big upside run it had in the first half of 2016. This time, it is clear that the dollar had already peaked, as I have pointed out in a number of posts and comments. So even if the dollar doesn’t begin a sharp extended decline right here, it is already further along in the topping process then back in early December 2015. That is why, whichever of the two above scenarios play out, the rally either continues from here or has a few weeks of backing and filling, before it explodes higher. Given the macroeconomic and geopolitical factors in place currently, compared to 7 years ago, gold and silver are further along in the accumulation process and aren’t going to stay available at these relatively low prices for as long as they did before that rally accelerated.
Wednesday, should be a very interesting day after the election results. I believe stocks would respond favorably if the GOP does indeed sweep to victory in both houses, even if only for one or two days. The metals could go either way? They could rocket with risk on or selloff one more time to fill the gaps.(in checking the charts there were more and bigger gaps in the silver miners than the golds)
CM, the concern I have right now is: buy the rumor, sell the news. It’s no secret the GOP has had a strong month. They’re expected to do well.
For stocks, I agree, that is why I said for a day or two at least. For gold and silver the election is irrelevant, they are going higher for longer no matter what happens with the election.