Forecast: Where Are Gold And Silver Headed In 2021?

Expert Gold & Silver Mining Stock Analyst
February 1, 2021

gold coins

January played out as I expected. With the incoming Biden Administration, the markets were in a wait and see mode, it was a month of very little volatility. Everything is still in a state of unknown. For instance, how will COVID impact the economy? How will the economy recover in 2021?

The economic numbers are still worthless, and there is no reason yet to analyze the macro numbers. For instance, do the employment, GDP, or PMI numbers mean anything yet? I don’t think so.

MMT is currently trumping everything at the moment. Investors are optimistic because the Fed can print whatever money we need. In fact, there doesn’t seem to be any fear that this is dangerous. Printing a trillion dollars in a single day is now considered normal economics. 

The craziness is unprecedented, and MMT is just the tip of the iceberg. This month we had a U.S. President who was kicked off social media while in office. We had brokerages halt the sale of stocks because social media millennials ganged up on short opportunities. What strangeness is coming next?

Market Correction Approaching

What we do know is that the stock market is likely to correct soon. Since March of last year, we have had a historic run with only one minor correction in September. This run has to correct at some point, and with earnings down, I would expect it sometime in the next few months. In fact, I think the correction could come as soon as February.

The S&P 500 chart is on the next page. You will see that the run from 2200 to 3800 is starting to get toppy. Some are expecting that it continues to 4000 and even 4500. We might go a bit higher, especially if we don’t correct until April or later, but an intermediate high about $30 is coming, IMO.

With this topping in the S&P 500, will come a significant selloff in everything except the dollar and bonds (if history repeats). This means that gold, silver, and the miners will all take a hit. My expectation is that the bottom for gold will be above $1700, and for silver, above $18.50.

Weekly Gold Chart

Ideally, I would like to see $1800 gold and $22 silver hold, but I don’t think we will get that lucky. So, prepare to buy the dip, which could be significant. Below is the weekly gold chart. It doesn’t show much support at $1700, and it wouldn’t be crazy to fall to $1600. But, worst case, I think $1700 will hold.  

Weekly Silver Chart

Below is the weekly silver chart. I’m confident $18.50 will hold. I don’t think we are going back into that 6-year channel that we just exited in July. It doesn’t feel like this silver bull market is going to end that quickly.

Significant Selloff Then Historic Bull Run

While I am bearish in the near term and expect a significant selloff, I am also expecting a historic run once it is over.

Let me explain how I expect this run to unfold. The key is the fear trade in gold resuming. Gold ran from $250 in 2001 when 9/11 occurred, to $1930 in 2011. The fear trade lasted ten years, and now has been dormant for ten years. That cycle is going to flip in 2021.

Silver will follow gold higher, and the GSR (gold-silver ratio) will shrink to less than 50. You don’t have to follow silver, just follow gold and know that silver will outperform because of the GSR shrinking. Why will it shrink? For the same reason, it shrank during the last bull-run, when the GSR went under 40. Investors ignore silver except during panics.

So, what’s going to re-ignite the fear trade in gold? We have lots of likely culprits, but usually it comes down to one thing: the stock market. When investors become afraid of holding stocks, they buy bonds and gold. Currently, investors are bullish stocks, and sentiment is very high. We are already beginning to see signs of that sentiment peaking.

MMT is a bogus economic theory that implies that debt doesn’t matter. Incredibly, nearly all economics seem to be on board with this fantasy theory. I have yet to see an economist come on the MSM and say this is insanity. Politicians have all bought into it and have lost all fear with regard to having enormous budget deficits.

Both the U.S. budget deficit and money supply have been exploding. We used to think that a $100 billion annual budget deficit was a problem. Now we have bailout bills that are in the trillions, and nobody blinks.

The U.S. is playing a dangerous economic game. By having the global reserve currency, they have had the luxury of printing huge amounts of money. The rest of the world needs dollars to use for international trade, and also dollars to make payments on debt denominated in dollars. This has become a Ponzi scheme, whereby the U.S. gets dollars from foreigners (new money) to keep the early investors (U.S.) paid.

The world is catching on to this Ponzi scheme and is starting to realize their investment will never be paid back. And they are right, they won’t. So, the U.S. is running a Ponzi scheme using a new economic theory (MMT) to keep everyone in the dark of what is really happening – the U.S. is going broke.

Under this scenario, do you really expect the S&P 500 to go much higher without correcting? And do you really think gold is going under $1700, or silver under $18.50? Me neither. Instead, I expect a breakout of historic proportions.

The last gold bull market went from $250 to $1930, which was 650%. This time, I don’t’ think we will see that kind of run, but it could get close. And silver, will likely do even better than 650%. If silver runs from $18.50 to $150, that will be 700%.

The next run that has me excited is silver reaching an ATH at $50. Once silver closes above $27, it will be very difficult for the banksters to stop it from running to $30. They will only have a few weeks to stop it. We closed over $27 on Friday (January 29th), but I expect the banksters to push it back down over the next two weeks.

Why can’t they stop it from running quickly from $27 to $30? Because the intermediate high was $29.80 in August. Thus, that is like a big magnet pulling the price to it. The only thing that stops these kind of magnets from working are resistance levels or fundamentals. So, if you lose your fundamentals (such as a strong stock market), the only thing you can rely on are resistance levels. Well, there are no resistance levels between $27 and $30.

The next magnet is $35, which is the final resistance point before $50. This has to scare the banksters into sleepless nights. Once we get over $30, we will run to $35 for one final pause. Then it will be off and running to $50 and an ATH. Get ready. It’s coming.

I repeat, silver follows gold! Silver will not make this run unless the fear trade is back in gold. So, when silver is making this run to $50, gold will also be running above $2000. Gold will be running from $2000 to $2500. Note that the GSR is 50 with $2500 gold and $50 silver. That’s my expectation. That is a BIG move for gold.

I don’t expect this to happen in Q1 because it feels too soon. This is why I have been calling for it in Q2. But this big run will take a few months and probably will occur over Q2 and Q3.

What is your strategy?

The hard part for investors begins when we reach $50/$2500. What do you do with your gold/silver miners when we reach those levels? Do you sell and take profits? How much do you let ride? Do you start trading? These will be difficult questions for all of you. I think you should start thinking about it now and plan a strategy.

Once we get to $50/$2500, you will need to decide how much more this bull market has left. The miners will have huge leverage at those levels. For every dollar increase in the metals, the miners will increase in value. Stocks will be rising at unprecedented rates. We will see 100% returns in days for some stocks, much like Gamestop this week. It will be a common occurrence with the miners.

Hedging will take on importance. When you are up big, you don’t want your entire portfolio to be unprotected. So, you need to think about hedging, which should be part of your strategy when we get to these levels.

I have written several times about my exit strategy in recent newsletters. Go back and read it if you have not.

The Coming Fear Trade

The last time the gold fear trade was in effect, bonds were still considered safe. From 2001 until 2011, the fear was mostly about the stock market. This time, the fear trade will be both for stocks and bonds. We are already seeing some evidence of the fear trade in real estate. Currently, investors are buying up homes. I think this is happening because investors are losing faith in the stock market.

The coming fear trade should be more pronounced than from 2001-2011. And if we are going to see $2500 gold, then yes, fear will be rampant. This pronounced fear will also spill over into bonds. Today, nearly half of global bonds have negative rates. How insane is it to hold bonds with negative rates that will never be paid back? How much longer can that trade last?

One final comment about the U.S. and global economy. It is my opinion that the near-term strength of the global economy will come from Southeast Asia. They used to call these countries the Asian Tigers. Well, these economies have all become mature, especially China. These countries are now taking over the global economy because they make everything.

This change of global economic dominance from the U.S. to Southeast Asia, will hurt the dollar and U.S. economy. That change begins in 2021, in my opinion. This is truly what creates the fear trade. It will cause uncertainty because the change will be in a flux for a few years as the U.S. relinquishes its power and influence. It will also relinquish the dollar as the global reserve currency and default on its debt, but more about that in future articles.

Don Durrett

Don is an expert gold and silver mining stock analyst, author, and founder/owner of GoldStockData.com – a website for gold and silver mining stock data. He is the author of How to Invest in Gold and Silver: A Complete Guide with a Focus on Mining Stocks. He is a contributing analyst on SeekingAlpha.com and a frequent guest on internet financial podcasts.

USA has the world’s largest holdings of gold: 8,134 - representing 77% of its Total Foreign Reserves.

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