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Gold and Silver Ready to Rumble Higher?

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A sentiment shift that favors gold and silver over currency alternatives will trigger the next rally higher.

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I have been writing about the bottoming process of the gold bear cycle since December 4, 2013, and my most recent article on December 26 reiterated that the best time to accumulate gold/silver stocks was in the December and January window. Specifically, this is what I wrote:

"These types of indicators are coming to a pivot point where gold is testing the summer $1,181 lows and may go a bit lower to the $1,090 ranges. At the same time, we see bottoming fifth wave patterns combining with public sentiment, bullish percent indices, and five-year lows in gold stocks. This is how bottoms in bear cycles form, and you are witnessing the makings of a huge bottom between now and early February 2014 if I am right.

"I believe that now (and over the next four to five weeks) is the time to buy gold and gold stocks. In my opinion, this is the time to start accumulating quality gold miner stocks as well as the precious metals themselves as the bear cycle winds down and the spring comes back to gold and silver in 2014."

Since that article, a few of my favorite stocks rallied 40-50% just three weeks or so from the December time frame of my article. A recent pullback is pretty normal as we set up for gold to take out the $1,271 spot pricing area and run to the mid-$1,300s over the next several weeks. By that time, I predict you will be kicking yourself for not being long either the metals themselves or the higher beta stock plays.

A few suggestions that I have already written about I will reiterate here again. Aggressive investors can look at Credit Suisse AG (NASDAQ:UGLD), which is a three times long gold product that will give you upside leverage as gold moves into Elliott wave 3 up. Other more aggressive plays that I already recommend a lot lower include Global X Funds (NYSEARCA:GLDX) and Direxion Shares ETF Trust (NYSEARCA:JNUG) (NYSEARCA:NUGT). Picking individual stocks can be even better, and I have recommended a few to my company's subscribers that are already doing very well.

What will trigger this next rally up will be a sentiment shift to favor gold and silver over currency alternatives. The precious metals move on sentiment much more so than interest rates, GDP reports, or anything else, in my opinion. Sentiment remains neutral to bearish as evidenced by the larger brokerage houses running around in January telling everyone to sell gold, so I see that as a buy signal on top of my other indicators.

Elliott Wave Theory Analysis

I expect the mid-$1,500s by sometime this summer, but by then, your opportunity will be long in the rearview mirror.

Twitter: @activetrading

Editor's Note: David Banister is the chief investment strategist and co-founder of ActiveTradingPartners.com, a small-cap portfolio and market advisory service.

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No positions in stocks mentioned.

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