Thanksgiving is fast approaching, coronavirus cases are surging and investor excitement around new vaccines is waning as it will take well into 2021 to administer them. The precious metals just don’t have enough steam to keep rolling into December without declining further. Not even slight upswings in the stock market or declines in the U.S. Dollar Index are enough to boost the PMs.
Today’s analysis is going to be very brief, since during yesterday’s session we simply saw a repeat of the same bearish indications, on which I had already commented a few times. Practically everything that I have written yesterday (Nov 19th) remains up-to-date.
Despite its early gains, the U.S. Dollar Index ended yesterday’s session slightly lower. If gold wanted to rally from here, it would have done exactly that. What did it do? It declined, and the same went for silver and mining stocks.
The miners could have rallied based on the small daily upswing in the general stock market, but they didn’t.
The above, plus multiple other reasons that I outlined throughout the week suggest that the precious metals sector is about to slide. All it takes is a bearish spark. And based on the broad bottom in the USD Index (and the fact that the sentiment for it is extremely bearish right now), it seems that the PMs are going to get it sooner or later.
Based on the analysis of the current seasonal tendencies, it seems that we won’t have to wait for long either. Gold tends to slide around Thanksgiving, and while a decline usually takes place shortly thereafter, we can’t rule one out beforehand.
If we were to pick one specific scenario, we’d say that the big slide will start immediately after or shortly after Thanksgiving, but given the likely prospect of that happening earlier, we don’t suggest adjusting the current short positions anyway.
As always, we’ll keep our subscribers updated.
Letters to the Editor
Q: In your summary of your Gold alert you state that when the price of Gold falls below $1700 it will rebound. It’s not clear to me if that should be the final bottom or after a rebound the final bottom will follow in 1-6 weeks?
Also, do you see an approximate bottom for silver?
A: It seems most likely that this would be the final bottom. I wouldn’t rule out a bigger slide, say to $1,600 or even $1,500 during the volatile decline (remember, gold just declined about $100 on Nov 9, so it’s definitely capable of moving in a volatile manner), but I think that once this bottom is in, a new powerful bull market will start.
Again, it is not the price level per se that will be most important. The key thing will be to see gold being able to recover (and perhaps rally) despite a continuation of the rally in the USD Index – just like what we saw during the March 2020 bottom.
As far as silver is concerned, the downside target is even less clear. It could bottom between $11 and $19, which is an extremely wide target area. If the general stock market plunges, the $15 and below becomes likely. If the general stock market holds up strongly, the $19 and its proximity become the more likely target. Either way, once miners show strength relative to gold and gold shows strength relative to the USD Index, we’ll likely have a tremendous buying opportunity in gold, silver, and mining stocks, regardless of where silver is going to trade. For now, we see exactly the opposite, and – in my opinion – the great trading opportunity is on the short side.
The price targets for silver should become clearer once we move closer to them and we’ll keep our subscribers updated.
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Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager