Last week, I showed you that Gold/Euro had recently completed an historic measured move that was 20-years in the making. This week, we'll return to gold and silver in dollars but continue to analyze the recent blowoff moves and why a retrace/consolidation is to be expected before the next major leg higher.
We'll start with gold, which I have defined as a 53-year bull channel. The last couple of years has seen an impulsive quarterly advance and even a candle wick above the upper rail of the channel before being repelled from what is naturally expected to be very stiff resistance. Gold is prone to 20%-30% pullbacks during even the most aggressive bull cycles, so one of that magnitude certainly would not surprise here. A short-term move toward $4,000 and even below cannot be ruled out. It would certainly reset sentiment and would actually be quite healthy behavior if we expect gold to move significantly higher from here. However, the fascinating thing about this chart is we can also see price forming a Pole-Flag-Pole set-up where the Flag is a possible halfway move consolidation. Should we see this symmetry eventually play out, gold would also likely make an impulsive move out of the channel that is equal to the impulsive move it made into the channel a half-century ago (something that would not surprise you based on last week's analysis). So while $4,000 could be in our future, so too could follow $12,000 and beyond.
Moving on to silver and its long term Cup & Handle pattern, we can see just how vertical price moved over the past couple of years. We will now likely require a very steep retracement that will be sure to shake the confidence of every precious metals investor. That's right — $48 is the Cup & Handle neckline that I believe is in play. Should that neckline hold though, it would further validate the Cup & Handle pattern, and then $100 and very far beyond would look very reasonable.
This analysis is not meant to scare you, but to prepare you. While these dramatic pullbacks may not happen, but they should certainly be on your radar as a possibility. Knowing this will enable you to keep your cool should they occur and perhaps even enable you to capitalize by buying these dips when everyone else is panic-selling. If we see silver below $50 again, it well could be the last time ever.
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The information contained in this article is for information purposes only and does not constitute investment advice or a recommendation to buy or sell.
