A Technical Analyst's Outlook for Gold and Precious Metals Stocks

Technical Analyst & Author
July 29, 2021

Despite the looming threat of massive inflation, or at least stagflation in the event that markets collapse, many appear to have given up on gold at the worst possible time, perhaps due to the mistaken belief that it will be perpetually suppressed by market manipulators.

The key point to grasp with gold, which has always been the same, is that since it is "real money" with intrinsic value it will always retain its value, and this has never been more the case than in situations where a currency is rapidly losing its purchasing power, as is set to happen with the dollar—and is already happening—and with almost all currencies around the world. With the purchasing power of fiat money everywhere set to be vaporized by inflation/hyperinflation, gold's (and silver's) appeal as a store of value has never been greater.

It is crucial to understand that even if markets crash, and take gold and silver prices down with them, their prices should drop at a lower rate than most other assets, and thus they should retain or increases their purchasing power so you will be able to buy more—just ask the people of Venezuela what they would prefer to have owned before their country was destroyed by hyperinflation, their local currency or gold—by end of it gold would buy wagonloads of the currency. So, at a time like this, there are no asset better for retain value than gold and silver.

Whilst it is obviously ideal to have at least a portion of one's precious metal holdings in physical gold and silver, all gold and silver based assets should do well going forward, such as futures of course but also ETFs and the better precious metal stocks.

The reason that many investors have lost interest in gold is because it has been a dull market for a long time, having drifted lower for many months from its peak in August of last year. On the 18-month chart we can see that gold's reactive downtrend ended when it arrived at strong support in March, since which time it has made a clear breakout from this downtrend before backing off again to support at the top of the downtrend channel. What appears to be going on is that gold is floundering around marking out a large base pattern that will lead to renewed advance. It looks like a potential Head-and-Shoulders base pattern has been completing and if so gold is at a good buy spot here close to the Right Shoulder low of the suspected pattern. The strong Accumulation line supports this interpretation.

On the long-term 13-year we can see that it is perfectly reasonable for gold to have reacted back as it has since last August, given the magnitude of the advance following its breakout from a giant Saucer base in the middle of 2019. This chart suggests that after reacting back, gold is readying for renewed advance in another major upleg.

As for precious metal stocks, we see that although the 6-month chart for GDX looks rather grim, with a weak accumulation line and bearishly aligned moving averages, the long-term 13-year chart shows that it has reacted back close to strong support at the top of the giant base pattern that it broke out of last year. This therefore looks like a very good time to accumulate the better stocks across the sector.


Clive Maund

Clive P. Maund’s interest in markets started when, as an aimless youth searching for direction in his mid-20’s, he inherited some money. Unfortunately it was not enough to live a utopian lifestyle as a playboy or retire very young. Therefore on the advice of his brother, he bought a load of British Petroleum stock, which promptly went up 20% in the space of a few weeks. Clive sold them at the top…which really fired his imagination. The prospect of being able to buy securities and sell them later at a higher price, and make money for doing little or no work was most attractive – and so the quest began, especially as he had been further stoked up by watching from the sidelines with a mixture of fascination and envy as fortunes were made in the roaring gold and silver bull market of the late 70’s.

Clive furthered his education in Technical Analysis or charting by ordering various good books from the US and by applying what he learned at work on an everyday basis. He also obtained the UK Society of Technical Analysts’ Diploma.

The years following 2005 saw the boom phase of the Gold and Silver bull market, until they peaked in late 2011. While there is ongoing debate about whether that was the final high, it is not believed to be because of the continuing global debasement of fiat currency. The bear market since 2011 is viewed as being very similar to the 2-year reaction in the mid-70’s, which was preceded by a powerful advance and was followed by a gigantic parabolic price ramp. Moreover, Precious Metals should come back into their own when the various asset bubbles elsewhere burst, which looks set to happen anytime soon.

Visit Clive at his website: CliveMaund.com

The total world's holdings of gold could be transported by a single solitary oil tanker.
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