Silver Is The Canary In The Gold Mine

Fundamentals

As we entered 2021, everyone expected the market to explode as a consequence of the Biden stimulus anticipated around $1.9 trillion. However, the market is not being stimulated. All the talk about money coming in has not pushed gold higher. Instead, we have trended down and tested lows. Most buyers from the beginning of the year are extremely frustrated. Our Variable Changing Price Momentum Indicator (VC PMI) is analyzing the action. The VC PMI is a contrarian indicator. At the start of the year when everyone was saying buy, the VC PMI on Jan. 6 said to sell. That was in the midst of all the talk of stimulus pouring into the market. Major financial institutions continue to short gold and silver, driving down the price, but now they are aware that small traders can combine their power, as Reddit showed, and leave them having to cover their shorts suddenly and at great cost. Even so, hedge funds and big investors are carrying historic high levels of short positions in silver, up to $38 billion in short positions.

They can still manipulate the price back around the annual average price of 1810.

Courtesy: Ticker Tocker

Gold does not trade on the fundamentals. Fundamentals say that it should have been going up since the pandemic hit. Gold trades on its own technicals. Hedge funds and big institutions can affect the price in the paper market by going short. That behavior keeps gold and silver prices lower than they would be absent such short selling. Silver did run up to $30.35 and should have gone further. It reached the weekly Sell 1 level of $29.61 and that was it. It put in a reversal top that activated testing the mean and the extreme below the mean. The fundamentals have already been factored into the market, which is why we have seen this recent reversal.

Gold came down to the daily Buy 1 level of $1815. It actually came down to the annual average price of $1810. We are now reverting from that Buy 1 level, and from $1810. It's activating a bullish annual price momentum and a daily Buy 1 trigger at $1815. There's a 90% chance of the market reverting from that Buy level back up to the mean. The target becomes $1825 to $1832. Use $1815 as a protective level. Gold is having a hard time coming down. Every time it comes down, buyers come in. We have come down to $1810, the annual average, several times, and every time buyers come in to buy the corrections.

A close above $1874, the monthly level, which would mark a major change. We rallied from $1810 to about $1860, but then supply came in and it reverted back down to where we are now around $1810. We do have a buy trigger activated in the annual VC PMI numbers. The bullish annual trend puts into play the $2164 target for the year running from September to September.

We have been in a trading range from the recent high of $1962 in January to this $1781 level, which represents the 2020 low. We came down again to test that low in February with a low of $1830, not quite making a new low. Now we are reverting from that low. We see a descending wedge back from August when we made a high. We have been in that pattern and now we are building a bottom for the next move up. If we get up above this descending trend line, then we will accelerate up past that $1874 level. The bottom of the wedge is around $1810. The cycles have aligned around $1810. Buy $1810 or lower and sell at $1874, since those levels represent the current trading range. We’ve been trading in this range since the beginning of the year for the most part. Once we are above $1825, we will move out of this range and bring the target of $1832 into play. $1805 and $1810 appear to be strong levels of support. The market may be getting ready for a turnaround, according to the VC PMI. The longer the price stays around this level, the more worried shorts will become and the more they will begin to cover their short positions. Then we will break out of this descending wedge and confirm that we have put in a bottom.