by Craig Hemke, Sprott Money:
With our initial price goals for 2019 having been achieved, COMEX gold and silver are now in their first pullback phase of the year. How long will it last and what are the next upside price targets?
If you’ve been following along every week, then you’ll recall that we were quite adamant regarding a year-end 2018 and Q1 2019 price rally for both gold and silver. From the November lows, we projected a rally in COMEX gold to $1310-1330 and a rally in COMEX silver to $16.35. Both peaked on January 31, with COMEX gold hitting $1331 and COMEX silver reaching $16.20. If you’d like a refresher of what was projected, please see these links:
And now, with our initial price goals met, it should come as no surprise that a small pullback is underway, sparked by a rallying dollar that has almost inexplicably risen every day since the January FOMC concluded two weeks ago.
Before we address Stage Two of what will be a terrific year for precious metals investors and traders, let’s first attempt to discern where price support will be found and what levels might present the best risk/reward opportunities.
In COMEX gold, the technical picture remains strong, with a solid uptrend in place backed by the positioning of the moving averages, which will become nearly ideal once the 100-day bullishly crosses the 200-day later this month. These factors will combine to keep a consistent bid for COMEX gold exposure on any price drop, thus blunting any possible nefarious intent on the part of The Banks. As you can see below, the area near $1300 should provide significant support, both technically and psychologically. However, any drop below this level will also find stout support near the rising 50-day moving average, currently found near $1285.
COMEX silver has a similar technical picture; it’s just unfolding at a slower rate than COMEX gold. Note that the 50-day moving average will soon bullishly (golden) cross the 200-day. This development alone will serve to set the algos on COMEX to “buy-the-dip” mode, thus providing a consistent, underlying bid here as well. Until then, any drop to near $15.50 would seem to be a striking opportunity on a risk/reward basis.
OK, but that’s just the short-term and the inevitable two-steps-back that always follow three-steps-forward on the COMEX precious metals “markets”. If you saw our 2019 roadmap back in January, then you know that we expect 2019 to post the best gains for precious metals since 2010. If you missed the link a few weeks ago, here it is again:
Accordingly, the final part of this post is intended to give you an idea of what to expect next, when COMEX gold and silver resume their uptrends and enter Phase Two of their 2019-2020 rallies.
From a short-term low of $1300 or even $1290, COMEX gold will begin moving higher later this month, in anticipation of the March 19-20 FOMC meeting. This next stage will eventually take price to $1350-1360. Unfortunately, that level will be closely watched and it will NO DOUBT spark HEAVY resistance from The Banks. As this rally unfolds, look for The Banks to consistently dilute the number of COMEX contracts from the current 480,000 to as many as 550,000 or even more. All of this is an attempt to satiate Spec demand and contain price. Because of this, The Banks will very likely be successful in halting gold’s first attempt at this crucial breakout.
Regardless of whether or not The Banks hold the line on this first attempt, price WILL eventually break resistance and continue higher. Your key level to watch is a WEEKLY CLOSE north of $1360. This is something that has not occurred since March of 2014 and would thus signal a key breakout.
For COMEX silver, the key level remains the 200-week moving average and the overtly Bank-enforced trendline near there. You MUST expect stout resistance again the next time price approaches this level. However, the upside of having The Banks paint such a dramatic technical picture is that it will give us a clear signal WHEN price finally breaks free.