The Critical Shift in Precious Metals That Analysts Are Missing
The outlook in this sector for 2013 filters down from this important discovery.
Silver is in a much larger and slower consolidation. It will take longer to evolve but eventually build stronger momentum than gold. The initial upside target is obviously $35. Assuming gold breaks past $1800-$1900 then silver should break past $35 and at least test $44, the August 2011 high. It is very encouraging to see the silver stocks outperforming silver (bottom row).
Turning to the shares, I love the clarity from the monthly candle chart. It details just how important the key levels are. Note the strength of support at $40. In addition, we see that while the market has been weak, it has failed to close below $45 in each of the past three months. If Market Vectors Gold Miners ETF (NYSEARCA:GDX) is able to close at or above $46 this month then we believe the secondary bottom is in. In that case, look for GDX to test $52 (extremely important pivot point). As we've written in recent updates, the $52-$55 area for GDX stands between the current market and an impulsive advance that could last a few years.
Over the short-term it appears that the gold stocks are forming rounding bottoms. These are slow bottoms that take time to form. At the same time, the action in gold and silver is looking more and more constructive. Generally speaking, we see precious metals starting the year well and potentially finishing the year very well. However, do realize that while this could be the low for 2013, it could be many months before precious metals experience their next breakout. Conventional investments still have momentum and it will take some time for that relationship to shift. The bad news is, you are going to have to continue to be patient. The good news is I see this being the most explosive breakout since 2005 and you have plenty of time to try and identify the mining stocks poised to be big winners when this cyclical bull begins in earnest.
Editor's Note: See more from Jordan Roy-Byrne at The Daily Gold.
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