After the Recent Flushout, Here's the Gold & Silver Outlook...


Clive Maund Clive Maund

Clive Maund

December 12th, 2023 Comments

Precious metals investors have just been royally played – first they are encouraged to pile in on gold's breakout to new highs, which occurred when it was already very overbought, and now they are being pressured into barfing their holdings before the sector turns around and then goes on to break out for real.

1 Oz South African Gold Krugerrand Coin
1 Oz South African Gold Krugerrand Coin
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Here's how powerful forces set the trap – and this, incidentally, is why in this age of instant communications it takes them 3 days to report the latest Commitment of Traders (COT) data after they are in possession of it.

During the week before gold's dramatic but short-lived breakout a week ago and after the COT data cut off point at Tuesday's close, traders piled on massive short positions, especially in silver.

Then, after allowing gold to break out briefly overnight Sunday - Monday (December 3-4), they tanked the gold price in very thin trading, instantly destroying the bullish sentiment so that would-be investors pull their bids and the price plummets. They did the same with silver.

Now we come to the 2nd part of their game to wrong-foot the majority of investors in the sector and fleece them not just once but twice.

Traders force prices low enough so that the pain becomes unbearable and longs barf their holdings, and Big Money then happily scoops up at knockdown prices before the sector turns on a dime and goes roaring back up again.

HALF OUNCE Silver Coin (Design Our Choice)
HALF OUNCE Silver Coin (Design Our Choice)
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This is my take on it, and I may be wrong.

I believe that those who engineered these moves will cover their shorts with huge profits going into this week and reverse to the long side, and we will see prices stabilize before they recover.

But here's the thing – although gold made a failed breakout attempt, the breakouts by large and mid-cap gold stocks have not failed.

On the contrary, what we have seen so far is a normal post breakout reaction back to the support at the upper boundary of the base patterns that they broke out of, which means that this is a great place to buy them.

Here's an example – see the chart below for Agnico Eagle Mines. Does this look like a failed breakout to you? – it doesn't to me.

Agnico Eagle Mines (6 Month Chart)

Just look at it – persistent heavy volume on the clear breakout from a Head-and-Shoulders bottom late last month causing its Accumulation line to soar, followed by a normal reaction back to support at the upper boundary of the base pattern.

So while the media are trumpeting the failed breakout of “the barbarous relic” what I see here is a near-perfect buy spot for this stock, and many others.

It could drop back a little more in coming days, perhaps dipping into the top of the base pattern which will make it even more of a buy.

Want another example? – try this for size.

After its Accumulation line trended higher for months, mid-cap gold Minera Alamos' stock staged a spectacular breakout from a Double Bottom late last month on strong volume. It too has reacted back to the perfect buying area close to the top of its base pattern.

Minera Alamos (6 Month Chart)

There are many more examples, especially among the large and mid-caps, but you get the idea.

So don't let the mainstream financial media con you into turning over your holdings to Big Money here right before the sector turns around and goes marching higher again. The next time gold tries to break above the key $2,100 level, it's likely to succeed and usher in the major bullmarket that we continue to expect.

A lot of people were fooled with that false breakout. After the sector has recovered from this nasty Big Money contrived hiccup, this may be the last "golden opportunity" to buy the sector and add to positions.

Clive Maund

About the Author:

Clive P. Maund is a longtime trader who has provided professional chart analysis for over a decade, covering a wide range of markets with a special focus on the resource sector.  In addition to his decades of trading experience and financial research, Clive obtained a UK Society of Technical Analysts diploma.  His website is CliveMaund.com.