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In this article, I want to discuss a key factor that I see as being a REAL - that is, a very convincing - signal that we are in a solid bull market in gold…one that is likely to continue for some time and to see the price of gold going much higher.
The market signal that I’m going to talk about is a bit unusual, a bit off the beaten path, so to speak. It isn’t the kind of indicator that you see discussed frequently by market analysts.
I hope I’ve aroused your curiosity sufficiently to garner your attention for the next few minutes here. Let’s take a brief technical analysis overview of the current state of the gold market, and then examine my mystery market indicator’s bullish forecast for gold and silver.
Here’s a quick technical analysis overview of gold prices - over different timeframes, and with just a single, basic technical indicator – a 50-period simple moving average (SMA).
We’re going to be looking at gold price charts here, but silver has followed a similar path of price action.
First, very long-term. Below is an historical price chart for gold, going back 100 years. It’s easy to see that, over the course of the past century, gold has only experienced one extended bear market: the roughly 20-year period from 1980 to 2000. Other than that, the price of gold has enjoyed a series of fairly sharp increases ever since gold began trading freely in the early 1970s. Even the one extended bear market was just a partial retracement after the price had shot up by more than 1,000%.
Let’s narrow the window a bit and look at gold prices since precious metals turned the corner around the turn of the century, changing track from an overall downtrend to an overall uptrend. That overall uptrend remains in place, with gold having just recently posted yet another new all-time high.
Gold rallied sharply in the first decade of the 2000s, going up more than 600% from a 1999 low around $250 to a 2011 high near $1,850. Over the next four years, gold did almost a perfect 50% retracement – drawing down to around $1,050 an ounce in 2015. Since then, the price of gold has again moved sharply higher. The previous all-time high set in 2011 was first surpassed in 2020. The market then did another approximate 50% retracement - this one of the move up that occurred between 2015 and 2020 - before resuming an overall controlling uptrend that eventually saw multiple new all-time highs for gold made in 2023.
The weekly chart below shows that – other than the brief down-and-right-back-up dip in October – gold has held solidly above its 50-period SMA (red line on chart) since the beginning of 2023.
Even with the rather dramatic dip the market took in October, gold finished 2023 with more than a 10% gain, opening the year around $1,800 an ounce and closing it near $2,050.
All right, so, what’s the “mystery” indicator that I see as a definitive sign of a bull market in gold?
It’s something very simple. So simple that, once I tell you what it is, I expect that traders will have one of two reactions to my “revelation”:
Enough already! – What’s the indicator?!
The strong indicator that I see of a solid bull market in gold – one likely to last a considerable length of time and to propel gold prices substantially higher – is this:
It’s the fact that nobody is worried about the price of gold going down.
I got a stark reminder of this circumstance in the precious metals market just this past week. On Tuesday, February 13th, the price of gold plunged sharply to the downside, falling from around $2,030 to about $1,990 per ounce. Silver likewise took a hit, dropping about 5% from roughly $23 to $22 an ounce.
But here’s the thing: Among the rather extensive network of precious metals traders I’m acquainted with…no one was worried. Everyone casually dismissed the downdraft as nothing more than a “blip”, a momentary corrective retracement. All were still quite confident of a strong, overall uptrend, with gold headed for more all-time highs. No one I spoke with or listened to expressed any serious concern that gold prices might plummet down to $1,500 or $1,000 an ounce, or that silver might drop below $20 an ounce.
In short, the conversation about future gold prices seems to have shifted from –
“Is gold going higher or lower?”
to –
“Is gold going to $3,000 an ounce, or $5,000 an ounce?”
I’m sure there are some traders who are long-term bearish on gold and silver. What I’m saying is that the number of those traders appears to have decreased to a very low level – evidenced by the fact that, in the past couple of weeks, I haven’t encountered even one.
That may not seem like much, but it represents a sea change in trader sentiment from just six months ago. Back in late September/early October of 2023, when gold took a sharp dive from around $1,950 down to $1,820, and silver dropped like a rock from $25 to $21 – there were plenty of precious metals traders and market analysts who were very worried. There was talk everywhere about the possibility of the price of gold falling back to $1,000-$1,500 per ounce. Some analysts even suggested that it might test the $800-$900 level.
The silver market was also home to doom and gloom forecasters, with mournful predictions that silver might tumble down to the $10-$12 an ounce price level – and become stuck there for years before managing to claw its way back up to $20.
The overall sentiment among traders now is completely different. The reactions to price drops in gold and silver are totally different now from what they were last year. I’m not seeing hardly anyone wringing their hands in worry.
Instead, the market chatter I’m hearing now consistently dismisses moves to the downside as, “…just a temporary pullback – it’ll be back up in a few days”. THAT is the major shift I see that indicates a strong bull market in gold and silver.
Such a high level of confidence among traders that gold is going to continue pushing to more all-time highs makes strong price support in the market almost a self-fulfilling prophecy. Whenever gold prices dip a bit, the many traders who are confident that it’s going higher rush in to buy at what they perceive to be bargain prices.
Increased confidence that precious metals prices are likely to go significantly higher make it harder for bears to scare bulls into abandoning their investments. On the flip side, it will be easier for gold bulls to create short squeeze conditions in the market, forcing bears to abandon their short positions.
Gold has made several new all-time highs since the turn of the century.
And here’s the thing about a financial security making new all-time highs: It tends to propel the price substantially higher. Think of a financial asset making a new all-time high being like a runner or a receiver in football getting past the last defender on the field. Once he clears that last defender, there’s nothing but wide-open spaces in front of him. Does he just run another yard or two and then stop? – No, he runs waaaaay on down the field, often picking up speed.
It tends to be the same way with traded securities. Once a security has cleared every known level of resistance, price action typically sees price surging substantially higher as the market probes ahead, searching for the next, as-yet-undiscovered, price resistance level.
Traders who’ve been buyers are profitable and feeling more confident. They’re not easily spooked into closing out their long positions. They’re more likely to be afflicted with greed that will keep them hanging on and buying more. In contrast, traders holding short positions will be looking at their mounting losses and seriously consider abandoning ship before the losses become catastrophic.
Gold making new all-time highs also benefits by attracting new buyers, investors who didn’t jump on the bandwagon earlier, who are now driven by the “fear of missing out”. They see gold continuing to make new highs, and they want to be in on an historic bull market. They sure don’t want to see gold going to $10,000 an ounce without them!
All of those market forces combined are likely to continue generating significantly more upside buying pressure in the market, while evaporating selling pressure.
Traders and analysts can point to several indicators of a bull market in gold. Even a cursory technical analysis of the precious metals market shows long-term buyers of gold and silver faring considerably better than short sellers as we sail into 2024. And I see a relatively new bullish indicator – one that’s only appeared on the scene within the past six months. This new bull market signal is a major shift in trader sentiment. Overall, traders appear to have moved from being worried about potential price drops to being confident of continued price increases. Worries are more about the possibility of missing out on a big bull market in gold.
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The statements made on this website are opinions and past performance is no indication of future performance or returns. Precious metals, like all investments, carry risk. Gold, silver and platinum coins and bars may appreciate, depreciate or stay the same depending on a variety of factors. True Gold Republic cannot guarantee, and makes no representation that any metals purchased will appreciate at all or appreciate sufficiently to make customers a profit. The decision to purchase or sell precious metals, and which precious metals to purchase or sell are the customer’s decision alone, and purchases and sales should be made subject to the customer’s own research, prudence and judgement. True Gold Republic does not provide investment, legal, retirement planning, or tax advice. Individuals should consult with their investment, legal or tax professionals for such services.
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