Precious Metals Near Key Turning Point
Precious Metals Near Key Turning Point by GoldFinger for CEO.ca
Yesterday afternoon O&M Partners asked me to give a short presentation (I didn’t realize quite how short until I had already constructed a longer presentation) on precious metals and junior mining stocks. Lengthy topics to say the least!
My goal was to start at the macro level (where gold and silver are on the longer term charts and where they might be going), and then hone in on how to potentially profit from a further rise in gold and silver through mining shares, in particular junior mining shares such as Great Bear Resources (TSX-V:GBR) and Westhaven Ventures (TSX-V:WHN).
Here are some of the key charts I used:
Silver (Daily – 4 Year)
During the most bullish phases in precious metals, silver has a tendency to “lead” gold. For example, in 2011 silver peak in late April at $49.85 per ounce while gold didn’t peak at over $1900 per ounce until nearly four months later. Silver has “golden crossed” (50-day SMA crossing above 200-day SMA) much like it did in Q1 2016. I am looking for a breakout on a weekly closing basis above the downtrend line drawn in purple on the above chart to confirm that silver is indeed in a new bullish cycle.
Such a breakout could speak volumes across the precious metals space.
The next chart is a longer term chart of gold illustrating how many times it has bumped its head on the resistance between $1360 and $1377 in the last 3 years:
Gold (Daily – 10 Year)
On the evening of April 14th, 2013 gold futures opened on Sunday evening with a gap lower and proceeded to tumble more than $200 per ounce in a complete free-fall over the next 18 hours. This “gap” in the chart is still open and in my estimation it will inevitably get filled in. The only question is, when?
A breakout above $1377 is likely to result in a much larger move higher, above $1400, and potentially all the way back to $1560.50 to fill the gap from April 2013. Famed technical analyst and market timer Tom DeMark has written that the strongest technical breakouts often occur by way of overnight (or over the weekend) gaps. I wonder if one Friday not too far from now gold might close the week in the $1360s and open the following Sunday night north of $1400 due to some unforeseen catalyst.