Many analysts and writers have described the pattern forming in the past couple of weeks in gold as a “bull Flag or Pennant” with some appearing to be “playing to the gallery” – i.e. telling their audience what they want to hear, which is that gold will continue to go up. I, on the other hand, decided that the triangle that had formed was not a continuation pattern, but a top, and said so about a week ago. So, as you will readily understand, I was not looking good when gold seemingly broke out upside on Thursday, and came in for considerable flak. However, on Friday there were some dramatic developments across the sector which look set to vindicate my stance.

When you buy a used car it is not enough to look at the clean shiny exterior and decide as many do, that the car is good – you have to know what its internal state is – the condition of the motor and the transmission etc. which means you have to poke around and dig deeper. In the same way it is not enough to look at the price pattern in something like gold and say “It’s looks like a bull Flag and therefore it is a bull Flag” – you have to know what’s going on beneath the surface – in the “internal plumbing” of the market so to speak, and we do this by using COT data and the volume pattern, and as we will see, the internal state of this market is not good at all and calls for a sharp drop soon that will take most by surprise. There are a number of compelling reasons to expect an intermediate correction in the Precious Metals sector imminently that could be severe, which we will now proceed to look at.

Starting with the 1-year chart for gold, we see that it has made a parabolic slingshot advance that has brought it to the trendline target shown, where the advance hit a wall. Many are expecting the choppy action of the past couple of weeks to be followed by another sharp upleg, but that looks highly unlikely for several reasons. In the 1st place, look at how steep the parabola has become – even if gold has started a new bullmarket, do you really expect it to just go up vertically, like a rocket, without any reactions or periods of consolidation?

….read more HERE

Here are today’s videos and charts (double click to enlarge):

US Stock Market Video Analysis

Gold & Silver Bullion Video Analysis

Precious Metal ETFs Video Analysis

Trader Time Swing Trades Video Analysis

Key Individual Precious Metal Stocks Video Analysis

Thanks,

Morris

Silver, at this current time of writing, remains below $15.00 per ounce; it is sitting at $14.76. This price is absurdly cheap given the current state of the global economy and the uncertainty that the world now faces.

One of the main reasons for silver being so depressed compared to the resilience that gold has shown is the incredible range of uses that silver has in the manufacturing of a vast number of products. This is a topic that we have covered here in the past that highlights why silver, with its dual purpose as both an industrial and monetary commodity, make it so desirable now and in the future.

With the global economy slowing down, so too has silver crashed, along with most other commodities. This has provided a unique opportunity for those of us who value silver as a monetary metal to accumulate it at insanely cheap prices given its current completely out-of-whack gold-to-silver ratio, a ratio that is screaming at the top of its lungs that silver is the steal of the century.

Resting at nearly 84:1, this is one of the highest gold-to-silver ratios that we have ever seen. Typically, throughout history, this ratio has rested at 16:1! What this is saying is that either gold is currently very overpriced, which is not the case – if anything, gold is still a relatively good price given the dangerous precipice we now find ourselves on – or silver is horribly under-priced and is destined to rocket higher in the future.

The latter of the previous two scenarios is the outcome that I am guessing will come to fruition. Silver mines are beginning to shut down due to low prices, which will inevitably lead to supply issues, given the massive physical demand that silver continues to see at these artificially depressed prices.

Mints around the globe have reported record silver sales and have even been forced to temporarily shut down sales multiple times over the past couple of years, indicating that 1) the price is too cheap, and 2) physical silver is in demand.

Another factor that barely anyone is talking about is how the silver mines that are still in production at these low prices have ramped up their mining operations to stay in business and to keep the cash flowing. They are selling their valuable asset for a fraction of its future value.

Yet this action is coming at a huge cost. As not only are they ramping up production, but in addition to this, they are mining their highest-grade product, ie, they are picking all of the low-hanging fruit to keep cost down and profitability up. This will come with a future cost that will force silver prices naturally higher.

Although it is incredibly hard to see at this time through all the gloom and doom surrounding the depressive silver markets, the future is inevitably bright. Silver will once again move higher when the time is right; all the fundamentals are backing this future rise in prices and it is only a matter of time before it takes place. Until then, take advantage of these low prices and keep stacking, my friends.

The views and opinions expressed in this material are those of the author as of the publication date, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.