On the heels of Friday’s rally in the gold market, today James Turk told King World News that we are now witnessing a mini-rocket launch in London’s physical gold market. He is also expecting the same rocket launch in silver.
Important Breakout
June 3 (King World News) – James Turk: “We are finally getting the strength in gold and silver that everybody has been watching and waiting for, Eric. Both gold and silver are breaking out from their downtrends. We’ve had a couple of false starts because, until recently, $1,300 has been impenetrable. But that has changed…
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Gold has now blown through $1,300. Silver is still below critical overhead resistance at $15, so we need to watch that level. If silver hurdles $15, it will be important confirmation that both metals are turning higher.
Both gold and silver are acting well today in London’s market for physical metal – not paper, the real thing. The accumulation of physical metal is actually a continuation of a major trend. So the demand for physical metal has been strong. Buyers want a tangible asset. They know that paper gold only gives them exposure to the gold price.
So you get two things by owning physical metal – exposure to the gold price and safety. There is no counterparty risk when you own physical gold, which is of growing importance given all the shaky banks around the world.
Here is a current chart of gold’s spot price in London for physical metal. It’s been a mini-rocket launch.
Mini-Rocket Launch In London’s Physical Gold Market
There are two downtrend lines on the chart. It looked like gold was ready to hurdle higher earlier in the month when it broke the first downtrend line. Unfortunately, that was a false start, and gold then fell back. That happens. Anyone who knows markets and trading knows that false starts like this come with the territory.
The key point is that after gold fell back, it tested support and it held. That provided a base for gold to make another attempt to move higher, and it is looking good so far. The second downtrend line was broken Friday. It doesn’t look like another false start, which means that I think gold is finally ready to move higher in dramatic fashion.
Good News For Silver Bulls
There is also good news for silver as it has come to life too, Eric. Silver has been struggling, and recently the gold/silver ratio was over 89. It hadn’t been at that level since the early 1990s. So it demonstrates how undervalued silver is in comparison to gold, which itself is undervalued. But look at this chart. Silver is above its downtrend line.
Silver Surge Targeting 2nd Major Breakout Above $15
A couple of days action does not mean a trend reversal has occurred and the precious metals are headed higher. There is never any certainty when it comes to markets. But new uptrends have to start from somewhere, so we need to give silver every benefit of the doubt on what is happening.
A Mini-Rocket Launch In Silver
Actually, I’m expecting a mini-rocket launch in silver, just like we have seen in gold now that its downtrend line has been broken. Silver needs to catch up to gold.
So look for the gold/silver ratio to fall from its current heights, which is a bullish sign for the precious metals. Because silver is more sensitive to money flows into the sector, a falling ratio is a good omen.
So there are two things we need to be watching here, Eric. These will indicate that the next step confirming a new uptrend in the precious metals has begun.
Gold needs to follow through to the upside and continue climbing higher and away from $1300. And silver needs to hurdle $15.
If these two things happen, look for the precious metals and the shares of the companies that mine them to surprise a lot of people who are still watching from the sidelines and hoping for a pullback. It could be that the train has already left the station, meaning that last week’s bargain basement prices are history.
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