Silver May Explode Higher
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Approximately 12 years ago, I wrote my first public market prognostication and it was focused on gold. At the time, gold was enjoying a parabolic rally, and the discussion amongst the general public was how far past the $2,000 mark gold was going to strike during that rally.
So, on Aug. 11, 2011, I concluded my first gold article as follows:
Needless to say, my first market prognostication was not met with tremendous support. These are a sample of the comments I received from readers when I was calling for a metals market top:
Yet, as we now know, gold struck a top within $6 of the top for which I was calling.
What many may have seen as either ignorance or hubris, I even provided my downside target even before gold topped, wherein I explained my expectation for gold to drop back down to the $1,000 region.
And the comments regarding my views were basically the same as above, so I will just note one of the more «reasonable» comments:
As you can see, it was quite clear at the time that the «fundamentals» were keeping most metals bulls looking to the long side. And amazingly, those same fundamentals kept the metals bulls looking to the long side of the market during the entire decline.
Precious Metals Fundamentals
But what was truly amazing was that as gold was approaching its long-term low struck at the end of 2015, almost the entire market turned bearish and was again «certain» that it would continue in its downside trajectory (just as strongly as they were certain we would eclipse $2,000 in 2011), with most now turning from bullish to predicting a drop below $1,000.
Well, just like everyone was uber-bullish at the highs when we expected a major top, we turned bullish when everyone turned uber-bearish. On Dec. 30, 2015, I urged investors to be moving back into the metals complex as we were looking for a long-term bottom to be struck imminently due to the significant bearishness evident in the market:
In fact, back in September 2015, when the metals mining companies were absolutely hated by the investor community, I rolled out a service specifically to focus on the mining industry. We began urging our clients to buy mining stocks during the last quarter of 2015. In fact, I bought stocks such as Newmont Mining (NYSE:NEM) in the $15-17 region at the time. And NEM has been my largest holding in the complex since that time.
Now, fast forward to 2022, and gold has been stuck in a correction since a local top was struck back in August 2020. Yet, there were pockets within the market that still rallied into 2022.
An example of such outperformance in 2022 included NEM, which went on to strike higher highs in April of 2022. Yet, when NEM struck the 84-85 region, I outlined that, for the first time since I bought NEM in 2015, I was selling almost my entire holdings in the company. You see, I set a target of 82-89 when NEM was hovering in the 28 regions. And when we moved into my target region, I stuck with my plan and sold my largest holding in the complex. Since that time, NEM dropped 57% off its highs.
So, back in January, I provided you with my latest assessment of the gold market, with an expectation for gold to rally to the $2,428 region in this current move off the early November low. I also noted that we can certainly even blow through that, depending upon the extensions we see in the upcoming rally, but that target was a solid one for now. Clearly, I will re-assess the target once the next bullish phase begins in earnest.
And, then in April, I outlined my expectation for the metals market to begin its next rally to the $2,200+ region. My expectation was that a break-out through $2,075 would trigger that next bigger move. Yet, while the market spiked to $2,085 in early May, I warned that the structure of that move did not look like it was starting that rally to $2,200 just yet, and I expected more of a pullback. So, while the market did spike through $2,075, it clearly was not able to sustain that rally, as we expected, and it immediately spiked back down below.
At this time, I am still expecting a fast and strong rally to $2,200+ in the coming months. And, a break out over $2,085 will likely now be the trigger. But silver is providing a relatively low-risk buying opportunity, as it is set up to see a very strong upside follow-through when this pullback completes.
To keep it very simple, we have been outlining our expectations for the pullback we are now seeing in silver, and it is now striking our general target region for this expected pullback. As long as silver holds over $22.50, I am expecting this pullback to complete over the coming week or two and set us up for a strong rally which should be pointing us north of $27 rather quickly.
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