Gold and Silver have been stores of value for thousands of years. I’m not going to go into an explanation of what purpose they may serve or why investors may be interested in them because I think our old friend Mr. Alan Greenspan explains it pretty well. This was an interview conducted many years ago (circa 2015 I believe). It begins with the interviewer asking Mr. Greenspan “do you think gold is currently a good investment, given what you’re saying about the potential for turmoil?”
I agree with him. Gold has always served as the ultimate currency in times of uncertainty. Also worth noting from Greenspan’s interview was when he asked, "Why do central banks put money into an asset that has no rate of return but with cost of storage and insurance and everything else like that, why are they doing that? If you look at the data, with very few exceptions, all of the developed countries have gold reserves.” That said, one should look no further than what Central banks have been doing lately…
As I said in Part 1 of this Substack series, people’s DNA and behaviors have not changed much over the millennia. Fear and greed always have and will always rule the markets. During times of crisis, when faith and confidence are lacking in the monetary system, I believe gold and silver may shine the brightest. There is no fever like gold fever (except for silver fever 😉). Precious metals are not really an inflation hedge. They are a confidence hedge. How much confidence will the public have left in the monetary system during a prolonged stagflationary depression? What will their reaction be when banks fail, when they or their friends lose their jobs, or when housing prices correct and equity is lost? I personally think that it will be that point in time of turmoil (or anticipation of turmoil) that gold and silver shine the most but let’s see what Mr. Elliott Wave thinks. This report would be incomplete without some analysis on precious metal miners as well. I also would like to share my longer term count for Platinum which is quite intriguing.
Gold
Let’s begin our analysis with the world’s oldest currency. Gold is the money of kings right? Lets find out. In my view Gold is in the very heart of Cycle III and is on the verge of beginning (or possibly already has begun its 5th and final wave of Primary Wave 3. I’m curious as to whether the bottom price trend will hold during Primary 4. For Cycle III to remain impulsive, Primary 4 would need to remain higher than the 2011 top just above $1919. In which case one could argue that it will be an excellent store of value considering the corrections we expect in other markets.
Silver
Now lets look at “poor man’s gold”. Gold’s sassy little sister called Silver (yes its a she and probably a redhead given the price volatility). Silver was demonetized in 1873 when President Ulysses S. Grant signed into law the Coinage Act. She remained present in US coinage up until 1965 in what’s referred to as junk silver (where 90% of the metal content is silver). Silver was eliminated altogether in 1947 from the British Pound Sterling coinage. The fact that her price currently trades 80 times less that that of gold yet only seven or so ounces of silver are produced for every single ounce of gold is very intriguing to me. In the long term chart we can clearly see a massive multi-decade cup and handle pattern. Silver broke out of the handle in a five wave impulsive structure which completed in February 2021 and has been correcting in an Intermediate wave (2) for nearly 2 years. The verdict is still out whether wave (2) has completed but once it has, something truly special is likely in store for investors of Silver. Please note, I’ve only shown standard Fibonacci extensions for waves (3) and (5). Long live the #Silversqueeze!
Platinum
Like Silver, Platinum is an industrial precious metal and is used in catalytic converters, laboratory equipment, electrical contacts and electrodes, platinum resistance thermometers, dentistry equipment, jewelry, and even the glass industry. Platinum also has an epic setup here in my Elliot wave view. It has broken out of a bullish 12 year long bullish ending diagonal and appears on the cusp of beginning a multiyear Intermediate wave (3) of Primary 5. How high will wave (5) of Primary 5 of Cycle III extend? Will Platinum rise to the upper channel at higher Fibonacci extensions or remain within the larger ending diagonal? Fun fact…There are over 225k members at the Reddit /Wallstreetsilver/ subreddit but less than 1k members on /r/Wallstreetplatinum. Did we just find the dark horse of precious metals?
Gold Miners, GDX
No let’s look at the gold miners. GDX is an ETF that seeks to replicate the price and yield performance of the NYSE Arca Gold Miners Index , which in turn is intended to track the overall performance of companies involved in the gold mining industry. The fund currently has 49 holding so it should be a decent indicator for the outlook for Gold miners. GDX appears to be working on a Primary wave 3 which is presenting itself as a diagonal in the intermediate degree. It had a very deep retrace from Intermediate wave (A) down to the bottom channel coinciding with the 76.4% support level. Gold miners set to rise here if (B) has completed. C waves typically present themselves as five waves that can at times be violent.
Silver Miners, SILJ
Now lets look at silver miners. The ETFMG Prime Junior Silver Miners ETF seeks to replicate the price and performance of the Prime Junior Silver Miners & Explorers Index. This index tracks public small-cap companies that are active in the silver mining exploration and production industry. I could have also tracked the SIL ETF but both charts have very similar structures. I personally would like to see how the juniors look. Here we see that a major breakout occurred in 2020 and price has been correcting in an Intermediate wave (2) for nearly 2 years. Positive divergence is building on multiple timescales and its just a matter of time until Silver miners sniff out the next move up in Silver. Silver can move up 3-5 times from its current price but silver miners could potentially double that performance before all is said and done.
Newmont Corporation, NEM
I would also like to look at a couple individual miners and leaders within the precious metals mining sector. Newmont Mining is the world’s largest producer of gold with mines in nine countries. It is also the largest weighting in the GDX ETF. We can see from its chart that its share price began a new bull market with five impulsive waves up in the Intermediate degree to complete Primary wave 1. Primary Wave 2 was a violent correction but positive divergence is building and Primary 3 seems just around the corner.
First Majestic Silver, AG
First Majestic Silver Corp. is a Canadian Silver-mining company that operates in Mexico and the United States. First Majestic also produces and sells its own bullion rounds and bars. They even have 100 oz Silver bar available at their bullion store that has a #TripleDigitSilver hashtag on it!1 (Full disclaimer: I ponied up for a few of those big boys - no shame at all). AG is a major holding in many Silver miner ETFs, and even the GDX. The company will also at times withhold metal from the the market when spot prices are lower than what they deem fair value.2 We need to chart this Silver mining market leader! I am of the opinion (and based on the Elliott wave structure) that AG is in a long term diagonal and is about to have a violent Intermediate (C) wave of Primary wave 3 that could send its share price 5-8 times higher based on the Fibonacci extensions for Primary wave 3. The top channel needs to prove itself. Overextensions could certainly happen but again we'll wait and see once it starts to move. Go Keith!
Summary and Observations
Elliott Wave counts for precious metals in the upcoming Stagflationary Depression look extremely bullish in my view. In Part 8 we saw how bullish the Energy sector looked but depending on how large the wave extensions are for precious metals, they may turn out to be the best performing asset we’ve looked at so far in this series. Yes there will be corrections on the way up to their price targets so risk tolerance and investment timeframe should always be considered. I’ve placed standard Fibonacci extension targets in the charts presented here but we truly don’t know how high the metals can go. We can certainly count on a corrective wave after blow-off wave five tops are reached. We’ll have to cross those bridges when we get to them. As I’ll show in Part 11 of this Substack series when I cover fiat currencies, the Dollar Index, or DXY, has the potential for a rally that is much more aggressive than the rise we have witnessed so far this year. In such an event precious metals may weaken again. One only needs to look back to see what happened to precious metals prices during the Great Financial Crisis in 2008. Silver violently corrected from $21 down to just under $9 within a few months. I could easily see that magnitude of a correction happen again as banking institutions fail (as discussed in Part 2 of this Substack series).
Scorecard:
For those keeping score (if not, don’t worry because I am)
Well that does it for this report. I hope you enjoyed it. Keep stacking that shiny stuff at these prices! Avoid the SLV ETF too because that fund is pure garbage, ask in the comments if you are curious why I say that). Physical is best. PSLV and physically backed crypto (such as Kinesis KAG) will work too.
As previously mentioned we will cover Fiat currencies in Part 11. My hunch is that one would only park funds in these for the deflationary periods of time during the Stagflationary Depression and only as a staging ground for redeployment of funds back into volatile energy, commodity, and precious metal sectors in anticipation of their respective consolidations/corrections (waves 2s and 4s). As always we will let the charts tell us their story.
Until Then,
Cheers and #EndTheFed
-Hypersonic78
https://store.firstmajestic.com/collections/silver-ingots-and-bars/products/100-oz-stacker-bar
https://firstmajestic.com/investors/news-releases/first-majestic-produces-a-record-73m-silver-eqv-oz-in-the-third-quarter-consisting-of-33m-oz-silver-and-54525-oz-gold-suspended-silver-sales-and-held-14m-oz-of-silver-in-inventory-at-quarter-end
Why SLV is garbage?