Surf Report 9.1: The "Endless Summer" in Precious Metals and Miners

Silver and Gold Miners: Junior Explorers, Developers, and Producers

I know its been a while since I’ve posted a Surf Report. Time obligations to my family, Navy Reserve duty, and civilian job have taken priority for me the past few months. Something had to give in my very loaded schedule. These Surf Reports do take quite a bit of time and preparation. I’ve received more than a few messages from some subscribers asking me when they would see another one of these reports. I’m glad you enjoy these reports and I now intend to get back to writing them more regularly. We have a lot to catch up on. I think its best report back on a particular swell I believe will deliver some exhilarating waves you can ride if you choose during what I’ll refer as the upcoming Endless Summer of Precious Metals and miners.

60 years ago The Endless Summer surfing documentary made history. I believe, based on Elliott’s Waves that this emerging bull market in Precious Metals will also make its own history. We first scouted this potential for Precious Metals in the Upcoming 21st Century Stagflationary Depression Series Part 10, we further dove into the sector and reviewed how some of the initial sets that were taking shape in GDX, SIL, GDXJ, and SILJ in their respective Surf Reports published in late 2022 and early 2023. As we find ourselves approaching the summer of 2024, plenty of time has passed now between these prior analyses and the present to reveal additional wave structure. Although we’ve seen many silver miners invalidate their initial setups and break to new lows, they have also had strong moves off lower supports. Further, those lows did not invalidate the larger degree bull market as you’ll soon see. It just reset the intermediate degree or in some cases the Primary degree starting points. Gold has made a major breakout to new all-time highs and silver is on the cusp of breaking out above very key resistance. Will the miners follow?

We will now revisit all those charts in our search for the the perfect wave during this new series of Surf Reports. For this first report, we’ll begin with updates Gold, Silver, each index ETF, and a couple well known precious metals indices on their own before we dive into individual companies within these ETFs. Time to paddle out.

Gold

Gold had a major breakout to new all-time highs just a couple months ago and is in the heart of a Minor degree wave 3 of Intermediate (5). I’m now counting a wave (iv) of 3 as possibly being complete and I am looking for one more move higher to complete Minor degree wave 3. After Wave 3 completes we should expect another larger degree Minor wave 4 consolidation before the final move higher is expected to complete Intermediate wave (5) of a 5 wave Intermediate structure which began all the way back in 2015.

Silver

Silver has quite the bullish setup and is in a set of nested 1s and 2s. Its formed a massive 3 year inverted head and shoulders pattern and has broken through the downtrend which began in 2011. We had a heck of a week in silver didn’t we? Surfing silver can be quite exciting once the waves find their power. Spot silver rallied over 6% on Friday and is breaking through minor degree resistance. This is an extremely bullish chart! Long live the #Silversqueeze waves!

Gold-to-Silver Ratio

The Gold-to-Silver ratio serves as a barometer of the relative valuations of gold and silver. Traders and investors like to use this ratio to help them identify when its a good time to sell gold for silver or vice versa. The ratio made a historic high during March 2020 at around 124. The current ratio as of this report is 76 and is set to break down much lower. This is very bearish setup here which implies that silver is ready to outperform gold going forward. I see at least a large ABC structure with the potential for a larger degree 5 downward count in yellow which I see as an alternate. Wow, silver is going to see some very powerful waves, given that our count for gold is still looking higher.

GDX

GDX, which is full of senior gold miners made 5 waves up from a the September 2022 low. It then had a year long Minor degree 2 consolidation and appears to be trying to complete an impulsive 5 wave rally from the February 2024 low. We should expect to see some sort of wave (ii) pullback before it enters the heart of wave 3. Recall back in February one of the most successful hedge fund managers Stanley Drukenmiller, took stakes in two large gold miners, Newmont Mining and Barrick Gold, which are both holdings within the GDX. It seems his timing was on point. Is Stanley surfing Elliott’s waves?

GDXJ

Now let’s look at the Junior Gold Miners ETF. An important low was made September 2022 with support holding near the 61.8% Fib retracement level thereafter during Minor degree 2. Unlike gold it hasn’t broken out just yet in the minor degree but it looks like its certainly trying! Should be an interesting week or two ahead for this wave!

SIL

SIL is actually a little bit ahead of GDXJ. Its broken out from the Minor degree 1-2 and appears to be in the heart of a wave 3. I think we should consider two possibilities for the upcoming rally in SIL given the larger degree wave structure. The first to consider would be a 5 wave Intermediate degree impulse shown in light blue. The other is a larger degree Primary ABC diagonal in yellow. If this count plays out then we can expect this rally to top in an Intermediate (A) wave with another consolidation into a (B) wave. this would then be followed by a 5 wave (C) of Primary C. I guess we’ll have to wait and “see”. 😉 I have a hunch that downtrend line which started from the 2011 high could be important.

SILJ

SILJ is lagging behind SIL and GDX a bit and is only finishing its first wave up in the Minor degree within either a Intermediate (3) or (C) wave if this is following the larger degree ABC diagonal. Whatever way we count it, things are looking up for SILJ and the junior silver mining sector. I see that wave 2 that’s coming as an absolute gift to add more power if surfing this wave.

HUI

For this report I’ve includes chart of the HUI which is NYSE Arca Gold BUGS Index. This index is a modified equal dollar weighted index of companies involved in gold mining. BUGS stands for Basket of Unhedged Gold Stocks. The HUI Index and Philadelphia Gold and Silver Index (XAU) are the two most watched gold indices on the market. The main difference between them is that the HUI Index takes into account only gold producer stocks whereas the XAU Index includes both gold and silver producers. The HUI is similar in performance to GDX but has far less components tracked versus GDX. In the HUI I’m seeing a very large diagonal which can count as an ABC or overlapping 5 wave structure. The yellow larger degree ABC could turn out to be quite bullish if this is truly filling out a 5 Intermediate wave structure within a Primary C. Regardless of the count this is set up to go higher but similar to SILJ we should expect a wave (ii) pullback after its first wave up from the February low completes.

XAU

If I’m going to include the HUI I should also give XAU index the same treatment. Not to be confused with the ISO 4217 currency standard to denote one troy ounce of gold, XAU is an index of thirty precious metal mining companies that is traded on the Philadelphia Stock Exchange. The top 26 holdings can be found here. As for the chart we can see more large diagonals taking shape and it seems to be following the channel quite well. I can see this playing out with either the ABC or 1-5 Primary degree count which is why I’m showing both. Price is now breaking through the 0.618-0.786 Fibonacci resistance zone in impulsive fashion so we may have a wave 1 of (3) instead of an A of (C) as I’ve shown here.

Summary

As you can see the charts for precious metals remain very bullish when one zooms out to the larger degree. Gold has broken out to new all time highs and still has a lot to fill out before we can consider any major top being formed. Silver is now breaking out and only needs confirmation before it can begin its run to new all time highs as standard Fibonacci extension targets point to highs above those achieved in 1980 and 2011. The Gold-to-Silver ratio is also breaking down which implies silver is finally ready to play major catch-up to gold. This should bode well for gold and silver miners as we can see in the charts for GDX, SIL, GDXJ, and SILJ which all have bullish 1-2 wave setups. The junior silver miners represented by SILJ are still lagging a bit but will also play huge catch up with elevated metals prices. This makes sense given what legendary junior resource stock investor Rick Rule has said about how a bull market moves like a “circus masters whip”…

https://twitter.com/hypersonic78/status/1778739261803577391

The commodity has moved and now the rest of the precious metals mining sector is beginning to move as well. Let’s now see which miners will have the best waves for us to catch a ride on during what will feel like an “Endless Summer” in the Precious Metals sector! But of course all summers eventually come to an end so we also need to identify potential wave extension targets and track wave structure completeness so we know when to “bail out” so we don’t end up being fish food on a larger degree wave 2 after the waves get topped out. Surfs up!!

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Disclaimer: None of this is financial advice! Please do your own diligence. The views expressed here and other Surf Reports are my own. Only risk what you can afford to lose in these crazy markets. Know your timeframes, parameters, and personal risk tolerance.

Position Disclosure: I remain long physical silver and gold (mostly silver) and am long a handful of individual precious metals mining shares.

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A Few Notes on Future Surf Reporting…

As I’ve previously stated, each of these reports take lot of time and effort so if I’m going to make them more regular I will need to change a couple things going forward. Each Surf Report will still review a new batch of charts provided for all subscribers as before. However what will change is that an optional premium subscriber service will be introduced for those who wish to dig deeper and follow the development of charts more closely. Premium subscribers will get a few extra charts and detailed updates for previously posted charts in prior Surf Reports. We may even start a queue for individual chart requests for premium subscribers if there is interest and if I have the bandwidth. I think that this will be a good balance going forward for both premium and regular subscribers. It will also reward my time which has become more and more stretched and add motivation for me to keep providing these reports on a more regular basis if there is interest.

Going forward I intend to cover the Precious Metals sector with thorough multiple reports over the next couple moths. I will also interleave updates on the Energy complex which will include Uranium and the Oil and gas sectors. Then we’ll do a deep dive / update into other sectors which were covered when I first stated writing on Substack for the Upcoming 21st Century Stagflationary Depression Series. I hope you’ll join me on this new venture of mine and hope my perspectives can be useful to your own Elliott Wave surfing.