Gold $2025: Buyers Now Can Thrive
Stewart Thomson | Jun 06, 2023 03:42PM ET
There are many reasons to own lots of gold and silver (and mining stocks). De-dollarization, stagflation, empire transition, rampant debt, etc. The list is substantial. These are fundamental drivers of the gold price for the long term…meaning not just for years or decades but for hundreds of years.
Unfortunately, reasons to hold gold are not quite the same as reasons to buy it at the present time.
As a rough rule of thumb, gold should be sporting a $100/oz to $300/oz price sale before investors buy. That’s in play now. Gold has dipped from about $2080 to about $2032…roughly a $150/oz price sale.
Oscillators like RSI and Stochastics are also important. On a price sale, RSI should move down to at least 50, and preferably lower. Stochastics (the 14,5,5 series on the weekly chart) should be closer to the 20 zones, although on rare occasions a dip to 50 is enough.
The sentiment is also important. A look at it basis of the BPGDM. Another rule of thumb is that ETFs like GDX (NYSE:GDX) and VanEck Junior Gold Miners ETF (NYSE:GDXJ)(and their individual component stocks) are in a sentiment buy zone when the BPGDM is about 30 or lower, and they are in a sell zone when the BPGDM is 70 or higher.
The BPGDM sentiment index is not a standalone item; I use it in conjunction with oscillators and a measurable price sale. Also, gold usually begins its rallies from a price that is very close to, or at, a key support zone. Currently, that support zone is $1960 ($1950 on a line chart).
A look at the short-term gold price action in this zone. An interesting double-headed inverse H&S pattern is in play. The neckline of the pattern is at about $1985, and the target is $2025.
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What about the dollar and interest rates? A look at the dollar. In the short term, the dollar looks vulnerable and that’s good news for gold and for its potential surge to $2025.
A look at US interest rates. Interest rates also look vulnerable here, and that too is good for gold.
While the Friday jobs report showed a big surge in new US jobs, it also showed a rise in the unemployment rate. Yesterday’s ISM services report came in “worse than expected,” and many analysts believe that with the mixed jobs report, the Fed will officially pause its rate hikes next Wednesday.
Investor tactics? Well, my gold $2025 target looks increasingly likely to happen. All metal bugs should be cheering for much higher prices.
As far as actual buying goes, a lot of gold stocks show high potential rewards and low real-risk entry opportunities right now. Basis GDX, a price just below the late May low of $30.11 offers a fabulous place for aggressive players to buy now and place a stop loss there. More gold stock can also be bought as close to that $30.11 price as possible. The 14,7,7 Stochastics oscillator looks fantastic; there’s a crossover buy signal and the lead line has moved above the 20 zone.
What about the silver miners? While there’s an industrial component to silver and growth is slowing in the West, a rate hike pause would likely turn the bears into bulls.
The enticing (SIL) silver stocks ETF chart: while conservative investors may wish to wait for a future opportunity where weekly chart oscillators are oversold and BPGDM sentiment is closer to 30, aggressive players should consider buying right here and now!
Partial SIL profits can be booked at $29, $31, and $33. A Fed pause could create a sharp sell-off in the dollar and a significant bond market rally. Gold and silver would surge, and what rhymes with SIL could suddenly be… a very high-priced mining stock thrill!
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