Steve Strazza of The Chart Report discusses five crucial factors that should determine if gold’s recent breakout is truly the beginning of a new bull market. He examines the historical patterns of the gold/silver ratio, points out the relative strength of gold stocks versus the actual metal, and considers a specific trade on a gold miner ETF to play the thesis, in this interview with Justine Underhill. Filmed on July 18, 2019. Watch more Real Vision™ videos:
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The Start of a New Gold Bull Market? (w/ Steve Strazza)
Transcript:
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STEVE STRAZZA: That's one of-- I'm going to share like five characteristics today that I think you want to pay attention to and make sure are in place. And if they are, I believe that we're in the beginning of a new secular bull market in not just gold but precious metals.
JUSTINE UNDERHILL: OK, so starting out with the first out of those five things that you're going to talk about, what do you see going on with the dollar?
STEVE STRAZZA: So we want to see the dollar roll over here, stay below that critical 0.98 level, which has been key resistance for more than a year and a half now. It failed to break out twice earlier in the year a few months ago. And then it recently broke its downtrend line going back to early 2018. And now it's back and retesting that key 0.98 level again.
We want to see it roll over and fail here. That would be very bullish for gold and commodities more broadly.
JUSTINE UNDERHILL: OK. And so then, moving on from that, in terms of other precious metals, what are you looking at there?
STEVE STRAZZA: So when we look at gold breaking out, we want to look at the entire precious metals complex and make sure everything's clicking, that we're hitting on all cylinders in order for this to be a true new long-term breakout. So when you look at gold, you see a lot of very bullish price action. But silver's been lagging, and that's been a concern. Palladium's been doing very well for multiple years now. So that's been the leader in the space. Platinum is finally looking like it's picking up. So what I brought with me is a custom index of equally weighted precious metals. So that's all of them, platinum, palladium, gold, and silver. The one we're most concerned about is silver. We'll often also look at a ratio of gold to silver to gauge that outperformance or underperformance from silver. And the reason that we do this is, I'll liken it to last time I was on, I said frontier markets are to developed markets as micro-caps are to large cap stocks. They're the riskier. They're like the ugly stepchild. That's what silver is. Gold bulls or gold bugs can get pretty crazy and pretty bullish on metals during bull market periods. But silver bugs are really where the true crazies hang out. So if we see silver working and moving to the upside, that's just a risk-on signal for the entire space that all metals should really be working in that environment.
JUSTINE UNDERHILL: And we haven't really seen as big of a breakout in silver right now. So what do you see going forward here?
STEVE STRAZZA: So we finally just got a breakout of a multiple-year downtrend line in silver. So that's something, nothing like gold. Gold is at new six-year highs. Silver is still facing overhead resistance, even from their year to date highs, I think, which are around the $16 level.
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