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Precious Metals Are About To Reset Like In 2008 – Gold Bugs, Buckle Up!

For years, many Gold Bugs (investors who’ve been advocating buying Gold and Silver at low prices as a hedge against future global economic risks) were shunned as conspiracy theorists and nuts. How could these people believe Gold and Silver were solid investments when the Global equities markets were rallying 5% a year consistently – what could go wrong?

Over the past two weeks, I have personally received multiple phone calls and emails from friends and associates asking how these people can suddenly ”buy physical metals”. In one case, this individual was purchasing Airline and Food Services stocks in late February thinking this move would be short-lived and telling me how the airlines would recover quickly after this is all over.  Now, that person wants to know my secret contacts for buying physical metals.

If you know any Gold Bugs, you know we’ve built relationships with suppliers, friends and other Gold Bugs throughout the year. Believe it or not, I can still buy physical metals from a few of my closest associates in the industry. Eric Sprott is a fan of my precious metals forecasts and talked about my work a few times publicly. Eric owns SprottMoney.com. the other source is SDBullion.com. Both of these are my most trusted sources for buying physical gold and silver, I have never had any issues with them and customer support is top-notch!

Yes, the prices have begun to skyrocket a bit – Silver especially.  But I can still buy physical metals because I have a deep resource of friends and suppliers.

What’s going to happen over the next few weeks is that more and more average people are suddenly going to realize they should have been buying metals as security against risk.  Paper metals are going to explode as well, but physical metals will demand a premium that is much higher than paper/spot price. Right now, one ounce of Silver is going for about $21 to $25 per ounce in physical form (depending on my sources).  The current SPOT price of silver is $14.50. That means the premium for physical Silver is between +45% to +75% right now in the open market.

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DAILY GOLD CHART

This Daily Gold chart highlights the upside Fibonacci price targets using our Adaptive Fibonacci Price Modeling system.  We believe the next upside price target for Gold is $1825. A higher upside price target is visible on this chart near $1950 and we believe Gold prices will reach this level eventually.  But we believe the current $1825 level is the immediate target.  This would represent an immediate +10 upside price advance and would establish NEW HIGH prices for the past 9 years.

SILVER DAILY CHART

This Silver Daily chart also highlights our Adaptive Fibonacci Price Modeling system and shows an upside price target of $17.25.  Remember, the current physical demand for Gold and Silver has skyrocketed over the past 2+ weeks. The Spot price is really not indicative of the open market price of physical at the moment.  If Spot Silver moves to $17.25 as we predict, that would be a +19% upside price advance.  If Silver advances to $18.25, that would be a +26% upside price advance.

You should also take a look at our silver chart from 1999 and what happened then, and should happen again now as well.

Silver Bugs are loving the setup right now because they know the pattern that sets up in the Metals market when a crisis hits.  First, Gold begins to rally faster than Silver and the Gold to Silver ratio spikes higher.  Then, once the shock-wave of the market crisis subsides, the metals begin a fairly usual price advance where both Gold and Silver advance – in unequal forms.  This is when the real fun for Gold & Silver Bugs begins.

GOLD TO SILVER WEEKLY RATIO CHART
THE SILVER LINING

Take a look at this Gold to Silver Weekly Ratio chart.  This chart measures how much one ounce Silver it takes to purchase one ounce of gold at current prices.  Notice that spike in the ratio back in 2008?  That was the spike in gold prices relative to Silver prices as the top formed in 2008 and the “shock wave” struck global investors.  What happened?  Everyone tried to pile into the Gold trade and ignored Silver for about 6+ weeks.

Then what happened to the Gold to Silver Ratio?  It COLLAPSED from levels near 85 to a bottom hear 31.  That means the price of Silver advance almost 3x faster than the price of Gold over that span.  In order for the ratio to fall from near 90 to levels near 30, that indicates a very expansive price increase in the price of Silver.

Now, take a look at what has happened just recently in the Gold to Silver Ratio…  another massive price spike.  This time, the spike reached levels near 120 (Yikes).  Can you guess why Gold and Silver Bugs are so excited right now? If another price advance takes place in precious metals which is similar to the 2008~2011 rally, Gold may see a 300% to 500% rally and Silver may see a 450% to 900% rally over the next 2 to 3 years.


View chart by TradingView.com

This is no joke.  Physical metals are why Gold and Silver Bugs believe the value of having it in your hands is much better than owning an IOU from a broker or bank.

Get ready for some incredible price moves in the metals markets and congrats to all the Gold and Silver bugs out there.  Our analysis says our patience and accumulation of physical metals will soon pay off in a big way.

As a technical analyst and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for short-term swing traders.

I hope you found this informative, and if you would like to get a pre-market video every day before the opening bell, along with my trade alerts visit my Active ETF Trading Newsletter. If you are a long-term investor with any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Long-Term Investing Signals which we issued a new signal this week!

Ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

Warning: Credit Delinquencies To Skyrocket In Q4

Farm delinquencies skyrocket +24% year over year as global trade issues and the ability to service credit continues to be a problem.  This is a tell-tale sign that the US Fed decreased the Prime Rate recently as a result of broader credit issues related to higher interest rates for corporate and other borrowers.  The last thing the Fed wants is another collapse on the lending markets similar to 2008-09.

(source: zerohedge.com)

Low growth continues to plague the global economy as this extended run in the US stock market continues to mature.  There are many questions all traders are asking – will it continue higher or have we reached a new peak in price activity?  Many economists believe we are ending an expansion period related to the revaluation of the global markets after the 2008-09 credit market collapse.  The typical price cycle of approximately 6~7 years has extended beyond traditional bounds and many analysts are wondering how it may end?

If an economic cycle has truly come to an end, we should expect to see some change in economic activity levels, consumer confidence and mortgage/housing activities.  The end of an economic cycle is usually aligned with some moderate level of economic contraction and a slowing of economic activity.  The one thing that may continue throughout this end of the mature economic cycle is the “capital shift” where capital rushes away from risk and into the US stock market as long as the reversion event stays at bay. (source: zerohedge.com)

Consumer Confidence levels have fallen recently to new lows.  This is a very clear sign that consumers expect the economy to contract a bit based on continued trade-related issues and the overall maturity of the economic cycle.

Most of the “rest of the world” has continued to binge on credit/debt since the 2008-09 credit crisis.  This is a very clear sign that the US Fed and global central banks have pumped trillions of dollars out into the consumer, corporate and global markets over the past 8+ years.  The question for all of us is when and if this debt becomes a liability – when does this credit become un-serviceable?

China and Asia were some of the biggest consumers of US credit/debt since 2008-09.  This graph highlights the incredible 10,667% increase in debt in China since the 2008-09 levels – from approx 300 million to 3.2 billion in 8-9 short years.  It appears the global economic rally was really the “binge on credit” rally.

US Mortgage debt has climbed to near all-time highs recently as well.  This is a sign that the US housing market has rallied to levels that are very close to the peak levels in 2007-08 – just before the crash.  It may also be a sign that cracks may soon start to appear in the housing markets across the US as delinquencies and foreclosures may continue to skyrocket.  People need to be able to service this debt/liability effectively in order to maintain their assets.

We believe the path of least resistance in the US stock market is higher – at least until price breaks below the current price trend channel.  The continued capital shift where foreign investors continue to pour capital into the US stock market will likely continue until some event shakes the confidence of these foreign investors.

You can see from our Monthly chart of the ES, below, we have highlighted the longer-term economic maturity trend which typically lasts about 6~7 years.  The rotation in 2015-16 was very mild as the US Fed continued a type of quantitative easing process by buying bonds and keeping interest rates historically low.  Because the US stock market actually failed to experience any real price rotation near this 2015~2016 cycle date – we believe the current cycle highs are extremely extended and related to the credit binge that has taken place over the past 8+ years.

Our cycle research suggests we may have already past a cycle peak event and may be operating on borrowed time right now.  This suggests that any further upside price activity in the US stock market may be a function of the overall strength of the US stock market compared to the weakening economic activity throughout the world.  In other words, the capital shift process is still feeding large amounts of capital into the US stock market as foreign investors flee risk and uncertainty.  If and when this ends, the US stock market will likely begin a price reversion process that may result in a very deep price correction.

This last Monthly ES chart provides a closer look at the technical indicator data that we believe highlights the overall weakness that is building up in the US stock market.  Even though we’ve recently pushed to new all-time highs, our technical indicators are suggesting that price is actually weakening in the upside price trend and could break lower at any moment.

The Direction Movement index, Momentum, and MACD of Momentum are all highlighting a weakening price trend that appears to be setting up for a broader downside price move eventually.  Traders need to be very aware of the risks in this extended upside price trend and to prepare for the potential of a new credit crisis event related to the current credit levels that are far more extended than in 2008-09.  If something breaks in the credit markets now, there appears to be nearly 5x to 10x the amount of credit extended throughout the global than there was 8 short years ago.

November will be the month of breakouts and breakdowns and should spark some trades. I feel the safe havens like bonds and metals will be turning a corner and starting to firm up and head higher but they may not start a big rally for several weeks or months.

October was a boring month for most major asset classes completing their consolidation phase. Natural gas was the big mover in October and subscribers and I took full advantage of the bottom and breakout for a 15-22% gain and its till on fire and trading higher by another 3% this week already.

If you like to catch assets starting new trends and trade 1x, 2x and 3x ETF’s the be sure to join my premium trade alert service called the Wealth Building Newsletter.

Happy Trading
Chris Vermeulen
www.TheTechnicalTraders.com