Four-Stage Market Analysis
Markets move through four stages. Stage 1 is a base, where the 150-day moving average and price trade sideways and cross through each other. They then slope up into a bull market. Stage 4 is a decline: price and the shorter-term moving averages fall below the green 150-day moving average, and that 150-day line slopes down. A stage 4 decline is a bear market.
Gold is in stage 4 now. Its 150-day trend has rolled over. The chart points to about $3,600, with a second downside target near $3,100 over the next 3 to 6 months. That would be a very big financial reset for gold.
Gold: Conviction Versus Timing
Gold ran an amazing bull market over the last several years. I treated it as a long-term holding, rode it up to about $5,000, and exited near the peak early this year. The entry came on the 2019 breakout that started the new bull market. I still believe gold breaks $10,000 someday and silver tops $200 and $300 someday. But metals can stay dormant for years, and most people do not grasp how long capital can get stuck in an asset.
History shows the delay. After a past peak, gold and silver did not hold true gains for 13 years. The story is always strongest right at the top. Most people pile in at the last moment, which creates the euphoric move. The fundamental story for metals is the strongest it has ever been and gets stronger every year, so people believe "this time is different" and gold goes to the moon. The market does not always do what the fundamentals point to.
My plan: accumulate some gold if it hits $3,600 and build a bigger position near $3,100 for the next super cycle. Gold at $4,000 or less is a good long-term buy, but there is a chance to get it lower if you are patient and avoid the fear of missing out. If I am wrong and a new bull market starts, I move back in and ride the next leg, which targets about $8,600 to the upside. The goal is to avoid getting stuck in a multi-year pause. If yields keep spiking, the US dollar most likely keeps climbing, a major headwind that keeps metals muted.
Silver: Volatile and Vulnerable
Silver shows the same picture: the long-term moving average is down, price and the other moving averages sit below it, and there is a series of lower highs and lower lows. That is a downtrend. Silver has slid back toward $60.
Measuring the recent drop and the counter-trend bounce, the chart points to $36 on the downside. Other target levels are $39, $40, and $36. If silver reaches those, "back the truck up" and buy. It could drop very sharp and fast and might last only a couple of days at most. That is an extreme target but it is what the charts show.
From today's price, that is another 35 to 40% drop. From the peak it is about a 70% decline. After the 2011 peak, silver corrected 72%. This is how silver moves. Either you lock in profits or you ride the roller coaster.
Not Holding Physical Metal
I sold a big part of my position around $110 and sold the rest slightly after. I hold almost no physical metal beyond a few rounds given as gifts. I feel exposed without metals, and if you do not trust the system you feel naked. But I will not invest based on fear or FOMO. Seeing something move without you is proven to hurt more than losing your retirement account, and I deal with that FOMO across thousands of traders every week. I do not fall victim to it.
A systemic event could happen any day, as it could since the world began. It might be tomorrow or 10 years out. I will not bet my life savings to sit dormant for 5 to 10 years over an unknowable event. I can buy metal back with one click at any time, so I do not feel it is missing. If silver opened at $200 overnight, maybe I miss it, but I will not stay trapped to avoid that.
The rule is simple. If the trend is up, you want to own it. If it is dropping and money is flowing out, you should not hold it. I own metals when it is favorable, sell when it is short-term overpriced in an emotional feeding frenzy, and do not hold during a downtrend. The downtrend is clearly in place for gold and silver. I do not give money back or write down a position just because I like it. My philosophy, written in my book "Asset Reinvesting," is to move money into whatever asset class is rising or holding value and never hold falling things. That is very different from being all in on the emotional and fundamental side. I respect the hard work that built my wealth and will not let an asset take it away just because I like it.
Yields: The Signal to Watch
Yields are the elephant in the room, spiking and able to go much higher. Short term, yields have made a Fibonacci measured move to the upside. Over the next one to three weeks they could pull back. If yields pull back, the US dollar likely pulls back too, which would help precious metals and miners bounce and help the stock market move higher. A temporary yield pullback can create the false impression that the metals trend has already reversed. A bounce is relief, not a reversal. Watch the sequence, not one green day.
Stock Market and the AI Catalyst
Short term I am bullish on stocks. The market has traded sideways for four months and gone nowhere. Consumer confidence has dropped to a very low level, yet the market held up. Those mixed signals make it weak and volatile, and set up a big pop. Fibonacci analysis off the big rally and the pullback into July points to the NASDAQ and QQQ running about 15% higher. The setup is primed. I expect all-time highs in the S&P 500 and NASDAQ any day.
AI is the tailwind. Trump more or less cancelled the security issues for AI, so the space stays open and can breathe and take off after sitting in the backseat for months. Security rules that might have capped AI are now off the table. Semiconductors and the Magnificent 7 are primed to do the heavy lifting and drag the NASDAQ and S&P 500 up. The S&P 500 is roughly 50% exposed to AI and technology, so if that space runs, the index runs. A breakout to all-time highs would trigger FOMO, with media declaring a new rally, driving one big push higher. It could be quick, over the next one to two months.
Real Estate and the Macro Fault Line
I have been bearish on real estate for a couple of years. If yield rates keep climbing, expect a big drop and a big reset. The real estate ETF IYR, a REIT fund, has already sold off about 11% as people move away from real estate while yields rise, and it does not even pay a big yield.
This is how a financial crisis unfolds. Equities crash, the upper class gets hit hard, then layoffs and bankruptcies follow. Homeowners watch their biggest nest egg lose value. Many are overleveraged in houses they can barely afford, and if they lose their jobs they usually have to sell. People are supposed to keep six months of cash in reserve, but about 70% of the US and 70% of Canada live paycheck to paycheck. As layoffs start, homes go up for sale and foreclosures pick up. We are potentially walking into a real bloodbath where everyone gets hurt unless you step aside.
Sidestepping means moving to cash, a currency, or the dollar, or betting on falling markets through inverse ETFs. We are coming to a tipping point that will be life-changing for better or worse, depending on whether you are prepared.
