Healthy Reversal in Precious Metals and Miners Under Way


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While some may be worried by this turnaround, it is in fact really healthy for this booming market to continue. Absolutely nothing increases in a straight line. That said …

by David Brady by means of Sprott Cash

May 21, 2020

PHYSICAL GOLD & SILVER

We are seeing premiums continue to fall, not due to a decline in physical prices but the increase in paper costs. Stock levels in coins have improved a little, but bars of 10 oz. or higher remain virtually non-existent. Silver premiums remain substantially greater than those for Gold.

The minimum premiums based on numerous significant dealers around the world and their change from a week ago:

PAPER PRICES

GOLD

Throughout this whole rally in Gold given that January, momentum has actually been degrading according to RSI and because the peak in April on both MACDs.

A break of the May high of 1776 would negate any further downside, imho.

SILVER

Silver has actually had a fantastic run off its low in March (up 56%), however as I shared the other day on Twitter, there were multiple signals that a healthy pullback was past due:

And here we are today …

Main targets on the downside are provided in the tweet above at ~17 and16 While this is a lower likelihood for me right now, a 38.2% reversal of that rally would target ~15

I’ll be seeing the MACD Line and its signal on the day-to-day chart.

The bottom line is that the overbought and bullish conditions in Gold and particularly Silver requirement to loosen up rather to set us up for what I believe will be a truly spectacular rally to follow to new highs in both metals.

SILJ

I’ll end up with possibly the most unpredictable of the major miner ETFs and my favorite for the rally ahead, SILJ, the junior Silver miners ETF. I shared this yesterday on Twitter:

In less than 24 hours, we have fallen nearly a dollar to11 SILJ will follow Silver with a beta of 2 to 3, which suggests that if Silver falls 10%, SILJ is most likely to fall 20-30%.

On a final note, while some may be worried by this turnaround, it is actually extremely healthy for this bull market to continue. Absolutely nothing goes up in a straight line. That stated, I am not selling any metals or miners, just waiting to buy the dip. When the Fed chooses to cap bond yields, most significantly the 10- Year Treasury, that will signal the bottom remains in for metals and miners, imho.

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