Gold And Silver In Long-Term Consolidations
Gold and silver remain in long-term consolidations. At some point, I believe prices will break sharply higher. To me, it’s a matter of when – not if. So what do we do in the meantime? I believe it’s a good time to accumulate long-term physical holdings. Demand is suppressed, supply is sufficient, and premiums are low.
Below are my top three physical precious metal picks
1) Certified (MS 61 – MS 62) Pre-1933 US gold coins. They cost about the same as newly minted, ungraded bullion.
2) US Silver Eagle Coins. I think investment demand bottomed in 2018 at 15,700,000 coins. That is sharply lower than the 47,000,000 coins produced in 2015. Collectors may consider buying an unopened “green monster” box of 2018 coins and holding it long-term.
IMPORTANT- DO NOT BREAK THE MINT SEAL. The box must remain unopened. If 2018 turns out to be the demand low, as I suspect, an unopened box could fetch quite a premium. An extreme example is this unopened “green monster” box of 1996 silver eagles pictured below. Asking price is $79,995 ($145 above spot). In 1996 silver demand bottomed and the mint produced just 3,603,386 coins.
3) Platinum coins or bars. At some point, platinum will begin to play catch up to the other metals. Supply is minimal – when demand increases, platinum will begin to soar. Government coins or bars are fine. Premiums are better on 10oz bars.
What about gold and silver miners? While I’m comfortable holding physical bullion long-term, I don’t feel the same way about miners. Gold and silver miners are leveraged to the price of bullion. When gold is going up – miners do great. When gold is going down or sideways – miners perform horribly. I will continue to look for short to medium-term trading opportunities, but I’m not interested in long-term positions until gold breaks above $1380 -$1400.
US DOLLAR
The dollar has been consolidating between 94.60 – 97.60 since November. It needs to break either way for direction.
GOLD WEEKLY
Gold has been consolidating since 2016. The pattern resembles a large triangle. I expect gold to break above $1380 and start a new bull market; it’s just a matter of when.
Gold has met critical resistance between $1320-$1370 over the last few years. The bears have defended that area well, but with each attack, they are becoming more vulnerable. Gold is approaching that level once again. If prices breakout above $1380, then we are off to the races. Failing to breakout above $1380 in the coming weeks would support the potential for one more decline and buying opportunity in November.
SILVER WEEKLY
Silver prices are forming a massive base that should lead to a bull market breakout in 2019 or 2020. It looks like we have a solid floor at $14.00. Any rally above $18.00 would be considered a breakout.
I monitor silver eagle bullion sales to gauge demand. These figures paint a picture of silver investment demand. In 2011, the US mint produced over 40 million silver coins. Production exceeded 40 million coins every year for 5-years, peaking at 47 million in 2015.
Sales plummeted from 47 million in 2015 to 15.7 million in 2018. I believe 2018 was the demand and subsequent price low for silver. In 2019 silver eagle sales are already at 7,025,000. I suspect 2019 should easily exceed the 2018 production numbers.
GDX
Here are the levels for GDX. To establish a breakout, miners would have to break above $25.50 decisively. Until then, the trend will likely remain volatile and challenging. To the downside, initial support arrives between $20.60 and $20.90. Breaking below $20.00 would support another drop to $17.20 – $18.20.
I will continue to look for an occasional swing trades, but I’m not interested in holding miners long-term until there is a defined uptrend.
SPY
We have several mixed signals in the stock market. Some economic data remains strong, while others have decayed sharply. Consumer sentiment plummeted following the government shutdown, but has since recovered. The dovish about-face from the Fed may support stocks. The SPY would have to descend below the December 2018 low to confirm a bear market and subsequent recession.
GOLD
HOLD – NEUTRAL
SILVER
HOLD – NEUTRAL
SENIOR MINERS
HOLD – NEUTRAL
JUNIOR MINERS
HOLD – NEUTRAL
Disclosure: None.