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AG Thorson
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Gold

Red Flag or Shakeout?

Some gold miners recently dipped below their June lows. Was that a red flag or a manufactured shakeout? Below are key levels I will be watching. If it was just a shakeout, then miners may be on the verge of a significant rally.

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GDX DAILY: Thursday’s sharp down day in miners was either a red flag or a shakeout. A shakeout occurs as prices form a new uptrend – when bulls remain skittish. It forces weak longs to sell (puke-up) their positions just before the next rally. A close above $35.00 next week would support the shakeout theory. However, a close above $36.75 is needed to suggest a more meaningful advance.

To support a more bearish outcome, GDX needs to close progressively below $33.00 and then below $30.00.

Note- Our metals portfolios recently bought gold miners and will continue to accumulate precious metal assets moving forward.

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Gold Price Scenarios and Projections

GOLD MONTHLY VALUE: With the fundamental backdrop of endless budget deficits and record-setting monetary policy. I believe there is a 70% bullish case for gold (scenarios A & B) to continue higher into 2023 and 2024. I see a 20% neutral (scenario C), suggesting gold stays below $2000 a bit longer. Lastly, I see a 10% bearish outlook (scenario D) that could allow gold to dip back to $1175.

Probabilities Below:

A) Gold bottomed in March 2021 at $1673.30. The renewed uptrend supports a $3000 price target by Q2 2023. I assign a 40% probability.

B) The correction in gold extends back to the $1575 level a forms a lasting bottom. Closing above $2000 would report a $3000 target by Q2 2024. I assign a 30% probability.

C) A monthly close below $1575 would recommend a deeper correction to the bull market breakout area surrounding $1375. In this scenario, I’d expect a retest of $2000 by 2024. I assign a 20% probability.

D) Gold fails to hold $1375, and prices fall all the way back to $1175 by Q4 2024. I assign a 10% probability.

In closing, with the price of just about every commodity on the planet near new highs and trending higher, I believe it is just a matter of time before precious metals resume their bull market trends.

The only way I see gold dropping back to $1000 or lower (as some are expecting) would require a massive deflationary shock. If that occurs, then everything will collapse in value, including an 80% decline in global stock markets. Either way, it may be wise to have some physical gold for deflation and some investment gold and miners for an inflationary shock wave.

AG Thorson is a registered CMT and expert in technical analysis. He believes we are in the final stages of a global debt super-cycle. For regular updates, please visit here.

 

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