Silver Bells Ring - Are Investors In Tune?

Will the precious metals stage another rally in the Chinese New Year “traditional buying season” of January-February?

The charts suggest that is very likely.

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daily gold chart

A potential inverse H&S pattern is in play, with a target price of at least $1966…and arguably as high as $2024!

The right shoulder of the pattern may be under construction right now. That suggests a January breakout to the upside is imminent.

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important weekly chart

I’ve urged investors to take note of the 14,5,5 full Stochastics series oscillator whenever gold (or any major asset) arrives at a key support zone.

A buy signal is now in play for that oscillator and it is occurring after gold has traded at my key $1788 support price.

The 5,15 moving average series has flattened out. There’s no buy signal yet, but it is a confirming indicator.

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The US dollar continues to ooze lower against the safe-haven yen.

It’s debatable whether the yen is really a safe haven, but the big bank FOREX traders view it as such, and their liquidity flows are most important to price discovery.

The pathetic action of the dollar against the yen is likely indicating that there is significant fundamental strength in the gold market.

What about gold stocks? Well, to view some important technical action...

GDX advance/decline chart

The bottom line is this: I see green shoots!

Although most mining stocks aren’t as strong as gold or silver right now, this “lagging action” often happens at the start of intermediate trend rallies.

A rally to about $1920 for gold should see the miners begin to outperform bullion again.

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bank stocks ETF chart

While millions of Americans grovel in unemployment lines for a $600 government handout, the banks have another green light to buy their own stocks with impunity.

Most gold bugs don’t like the banks, and rightly so, but this could be a case of, “If you can’t beat them, join them.”

For investors who didn’t buy bank stocks at my key Dow 18,300 mark, I would suggest waiting until the first couple of weeks in January before placing new money into this market.

The KBE bank stocks ETF needs to trade above $50 for at least a month of time before another important buy signal is generated.

If inflation appears, bank stocks could do well, but silver bullion and silver miners are the most important sector to own in an inflationary environment!

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interesting silver chart

After forming a rough double bottom pattern, silver has rallied to the $26-$26.50 resistance zone.

A pause now is expected and normal; the Christmas & New Year holidays are upon us, but any resistance zone deserves to be respected even when there is no holiday in play. Regardless, silver is likely to outshine gold in 2021.