Gold, Silver & Military Fades

JC Parets
July 30, 2019

Do you see how stocks and gold can make new highs at the same time? Who said they couldn't? Why does it have to be one or the other? The current market environment is a great reminder of this. Don't forget it.

So? Should we expect Gold and Silver to keep going? 

Let me just reiterate that I am not one of these people making up conspiracy theories about gold on the blogs and tv the past 8 years. There are times to own metals and there are times not to, just like anything else. We've liked Gold all year for a number of reasons, mostly price related ;)

When we look at the charts of Gold and Silver, they've had quite a run. More recently we've seen a bit of a consolidation. Some would call this a high and tight flag. We used to joke and say, "High and tight like a military fade!". 

These are the types of patterns seen in some of the strongest trends of all-time. Go back and see for yourself.

If this is indeed one of those "High and tight flags" then the resolution should be higher and the target is approximately 12.5% higher, or 160 Dollars higher in Gold, depending on who you ask.

Here is Silver. This is one we've liked for a while and it is acting similar to Gold after a solid run. It's digesting gains. Perfectly normal:

You can calculate a similar measured move like we did for Gold. You take the length of the "Flagpole" and add it to the point of consolidation. That will take you north of $16.50 towards $17 in this Silver $ETF above. You can calculate the equivalent for Futures, if you'd like.

My point is not to suggest that this is absolutely a high and tight flag that will resolve higher and meet these objectives I just laid out. What I like to do is identify what the current environment is doing and create a plan around that to minimize risk and maximize rewards. My interpretation of what's going on may not be right. But we're not here to be right, we're only here to make money.

What do these patterns mean to you? Are you short metals? If we're below 1400 I could see a case for that, I suppose. But if we're not, I think we need to continue to err on the long side. It's been working. More importantly, it's been working without the US Dollar falling. And it's been working for a while. This isn't anything new.

Ping me if you think I'm crazy.

JC

 

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