As we kickoff another trading week starting overseas, gold has now broken above its downtrend line, plus a look at silver’s explosive chart.

October 16 (King World News) – James Turk:  The big jump in the precious metals on Friday was a wake-up call for many, Eric, and rightfully so. It’s a message from Mr. Market aimed at investor psychology, which tries to keep you invested in bear markets and on the sidelines in bull markets – the exact opposite of what investors should be doing.

In bear markets, a big jump in prices gives the stubborn but misguided bull the forlorn and misplaced hope that the trend is turning upward and will take prices to new bull market highs. In bull markets, Mr. Market preys on investor psychology differently, and gold and silver are in bull markets.

Their bull markets began in 1913 when the Federal Reserve was founded. Back then 20.67 paper dollars/coins were redeemable for one ounce of gold, and silver dollar coins circulated freely throughout the country…

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In bull markets big price jumps often cause investors to wait for pullbacks to buy, instead of considering the possibility that recent prices will not be seen again for a long time, or in the case of the precious metals, ever again. Who really expects to ever again be able to buy gold below $35, $100, or even the December 2015 low of $1046 per ounce? 

And here’s my point, Eric, which is really for now an unanswerable question. Years from now will we look back at October 2023 and see that it marked the last time we were able to buy gold under $1900 per ounce?

Only time will tell of course, but look at the world around us. Then consider that gold and silver have been money for thousands of years and have survived every inflation, deflation, wars big and small, as well as every broken promise of politicians and their servants in central banks who fund the never-ending mountain of fiat currency debt. 

When measured in terms of preserving purchasing power, it’s an impressive record by the precious metals. And the charts of both gold and silver are looking good.

Looking first at the short-term chart of gold’s daily closing price, we can see that Friday’s close breached the downtrend channel beginning at May’s high price. 

Gold Has Broken Above Red Downtrend Line

Gold is now bumping up against its 200-day moving average, which many view a key indicator. Gold remains below $1950, which I’ve mentioned for nearly a year now is an important resistance point.

We’ll see soon enough whether gold hurdles these resistance points. If it does, expect a tidal wave of fiat currency to pour into the gold market. I still think there is at least a 50% probability that gold will hit a record high this year when measured in US dollars, joining the records or near records it has already achieved in other fiat currencies.

Here’s my long-term silver chart of weekly closing prices, which will be familiar to KWN readers.

Silver’s Massive Reverse Head & Shoulders Formation

Friday’s big price jump makes this month’s brief dip below $22 look like a head-fake, and it probably is one – just like the two brief dips below $22 in the left shoulder of silver’s chart pattern. Silver’s next hurdle is $24, which has been the key resistance point I have been watching since last year.

So far the dollar remains strong compared to other fiat currencies. It’s because of interest rate differentials to other countries, with last week’s jump in the dollar a knee-jerk reaction to geopolitical events. 

These price movements in the precious metals and the dollar show that there is a lot of fiat currency liquidity sloshing around nervously in a wobbly banking system while it looks for a safe home. Sooner or later that purchasing power will exit fiat currencies, Eric, and it will end up in the safest home, which is physical gold and physical silver, not their paper representations.

Audio interview has now been released!
Costa Discusses This Week’s Rally In Gold & Silver!
To listen to Tavi Costa discuss the rally in gold and silver as well as what to expect next for the metals markets and global stock and bond markets CLICK HERE OR ON THE IMAGE BELOW.

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