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Gold, silver hit the top? Ugly reversal in stocks foreshadowing a bigger drop?

Commentaries & Views

I wrote on Wednesday morning: “It seems to me that the secondary target of $24.20 in silver would manifest if gold bulls can get over $1905 for the extra $25 up to $1930.”

Shortly thereafter, gold bulls pushed through $1905, and silver immediately made the run to $24.20 (of course, it overshot by 10 cents to $24.30). The 3-hour silver chart below shows prices are sitting at the $24.20 resistance level as I write.

Again, traders have a chance to make a profit. With Powell on deck this morning, volatility should be expected (everywhere), and a quick move to $23.75 would not surprise.

I still think a prudent way to press the trade may be to flip longs into gold. Below is a weekly chart of the gold-to-silver ratio. If it does bounce strongly off support, chances are silver’s recent gains will be subject to more violent correction than gold. However, if the ratio breaks down toward the 70 level, the metals will move higher, so a foot in the door via a gold long could be the way to play it.

Of course, gold didn’t reach the $1930 target I suggested, falling about $5 short. The 3-hour chart shows momentum reset with price in consolidation for another leg up. On the other side - the risk is that selling pushes the price to $1905 in what could be whipsaw price action.

Stocks printed an intraday reversal yesterday, which could be significant as the reversal was also a failed breakout over the descending trendline in place since the S&P’s high at 4500. Any follow-through today and the downside gap I have been indicating for some time will probably be filled in the very near future.

Thanks, and good luck.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.