If gold has bottomed, we may have already bottomed in silver…
by David Brady via Sprott Money
GOLD
Positioning
Funds (Money Managers / Large Specs) have their biggest net short position since November 2018.
Small Specs have their lowest net long position since December 2018.
Banks / Swaps lowest short position since May 2019.
Commercials have their lowest net short position since July 2019.
Open interest is hanging around mid-2019 levels too.
Sentiment
Worst levels since August 2018 when Gold bottomed at 1167.
Technicals
Daily: Coming off an extreme oversold RSI of 26 and positively divergent across all indicators.
Extreme deviation from the 200-DMA, most since 2013.
Needs to break 1700, 1740, 1824, and the 200-DMA. Target 2300+.
Weekly: Oversold RSI of 32, a positively divergent double bottom also.
MACD Line is at its most oversold since 2013.
Monthly: RSI back to August 2018 low.
EWT
Completing wave 4 off the low in December 2015 with wave 5 to new record highs next. Just waiting for the bottom here.
Inter-Market Analysis
10Y real yield just hit its highest level since April 2010, 12 years ago. The risk-reward is down from here.
Nominal bond yields just hit an extreme overbought 4%, prices were extreme oversold and bearish. The risk-reward is lower yields, imho. My target on the downside is 1.50% 10Y.
DXY at its highest level since May 2002, over 20 years ago. Monthly RSI is at 81 for only the second time in the past 30 years. Beyond extreme overbought! Sentiment is extreme bullish, which is bearish. Banks are also short the dollar. Risk-reward is increasingly to the downside, especially when the Fed pivots.
SILVER
May have already bottomed at 17.41 three weeks ago… GSR peak ~100 and now falling would explain why it bottomed ahead of Gold (if it has bottomed).
Positioning
Funds (Money Managers / Large Specs) are net short for the first time since mid-2019.
Small Specs have their lowest net long position since September 2017, five years ago.
On September 6, Commercials turned net short for only the second time in history, the last time being September 2018.
Banks / Swaps just hit their biggest net long position since mid-2018.
Open Interest hit its lowest level since January 2014, over eight years ago (2018 Palladium anyone?).
Sentiment
May have already bottomed, coming off its lowest levels since March 2020 and August 2018.
Technicals
Daily: Silver has bounced off a second positively divergent lower low. But it hasn’t broken the series of lower highs and lower lows yet. First is a break of 20, then the August high of 20.87, and most importantly, the 200-DMA around 22. My target thereafter is 35-40. Until then, the risk remains down.
Weekly: Silver is rising off a positively divergent lower low on all indicators and its lowest MACD Line since 2013. But it still has to take out the resistance levels outlined on the daily chart to confirm the bottom is in.
Monthly MACD Histogram lowest since 2013.
Fundamentals
It’s all about the FED and a possible PIVOT.
Possible Triggers (or combination thereof):
Sharp drop in inflation: recession, strong dollar and lower import prices, bullwhip effect and massive discounts, consumer confidence collapsing, housing too, consumer spending dumping as they become tapped out in terms of savings and credit card balances.
Junk bonds: defaults soaring. BBB investment grade spreads blowing out too.
Official recession is confirmed by sharp drop in GDP and/or jump in unemployment rates.
Major bank collapse anywhere in the world, e.g., Deutsche, Bear Stearns of 2008.
Emerging market collapse due to event like LTCM in 1998.
Major Sovereign debt default anywhere in the world.
China invasion of Taiwan, i.e., war.
China announces how much Gold they really have, 20k tonnes or more.
BRICS announcing new global reserve currency backed by commodities.
Russia begins new physical exchange for Gold, joins forces with Shanghai exchange, repudiates paper price in London and New York.
Following today’s surprise announcement of a reversal to QE due to a collapse in UK sovereign bonds, don’t be surprised if other central banks, including the Fed, follow suit.
WAIT FOR A BREAK OF RESISTANCE followed by a higher low and a higher high, i.e., trend has turned UP!
Resistance in Gold is 1700 and 20 in Silver.
