Gold and Silver Price Predictions for February 2024
In this dynamic discussion, Craig Hemke and Chris Vermeulen delve into the world of market projections for February 2024. From dissecting the resilience of equity markets to exploring the nuances of gold's price action amidst shifting rate cut expectations, they offer valuable insights and predictions.
Watch the full video below:
Craig: Welcome to February 2024, from sprottmoney.com. As the month of February begins, we say goodbye to January, and we begin to look ahead, and one of the things we do here at Sprott Money every month is a video we call our "Precious Metals Projections," with the renowned and esteemed technical analyst, Chris Vermeulen. I'm your host, Craig Hemke. It's time for another one of those programs, Chris. Good, to see you.
Chris: Hey, good to see you, Craig. It's always a pleasure. And these are always interesting talks, have one month...it's great to be, like, one month apart. It's amazing to watch the markets just chug away and unfold.
Craig: It's remarkable how things can change in the course of a month, too. It's just amazing. It'll be interesting to see what happens over the course of February as well. One thing, though, that won't be changing over the course of February is a very special offering from Sprott Money, the sponsors of these podcasts. Through leap day, February 29th, you can buy for yourself a 1000-ounce silver bar. Fact, about $1000 cheaper than it was the last time we talked, Chris. That's a lot of money.
Cragi: But anyway, if you always wanted a thousand-ounce silver bar, to work out with, or to use as a doorstop, well, Sprott Money has the deal for you. Not only do they have great pricing, but, you don't have to turn it into a doorstop right away. They will store it for you, and they will do it for 90 days, free of charge. So, all you gotta do is go to sprottmoney.com. You can see that. Chris is clicking around on there right now. Or, of course, you can call them. The phone number's right there at the top of the page, too: 888-861-0775. Hey, thank them for putting out all this great content every month.
Chris, here we are. We're already one 12th of the way through the year. It's one way to look at it. We've had a tumultuous month. It's astonishing to me that we could begin January with what was a 100% chance of a rate cut in May, and now that is plummeting down to about 60%. The likelihood in March went from about 83% to 15%. In the face of that, most markets have held up pretty well. Let's get started, though, by talking about the equity markets, because, as you and I know, there are a lot of folks out there that are thinking "Oh, double top in the S&P, higher-for-longer interest rates [inaudible 00:02:35]" But yet, it just kind of keeps plowing along. What are your thoughts on equities in general?
Chris: Yeah, yeah. Well, just to go back to the thousand-ounce bar real quick. So, I ended up...I think everybody should have a thousand-ounce bar. I think, it's like, it was on my bucket list, and I bought one for my wife, one for myself, many years ago. And I remember my daughter trying to hold it up. You and I talked about this, actually, last month, but a story of my father-in-law used to be an airline pilot, and they had this wooden box holding one of the doors open in the, I guess, in the Toronto airport, forever, where all the pilots were. It was, like, literally like a lead weight, and it was there for, like, 15 years, and finally, somebody slammed the door or stepped on it hard enough that the wood crate opened up, and there was a big gold bar in there.
Craig: No way.
Chris: So, total fluke that had got lost in traveling somewhere, and somebody ended up just using it as a doorstop, and everybody walked by it for years. It just, it's amazing what could be literally, like, right in front of people forever. Like... Anyway, let's jump into the charts here.
Craig: It's remarkable.
Chris: All right. If we take a look at the charts, man, there's a lot going on when we look at the overall markets in terms of sentiment. So, as you mentioned, we got a lot of people betting against the market. I actually did a blog post last week, because we had a subscriber who, unfortunately, kept buying and loading up on inverse 3X ETFs on the S&P 500 and on the NASDAQ. And he ended up getting completely crushed on it. And he closed out the position finally, took, you know, bit the bullet and got out. But it's pretty crazy. And I've created this indicator, here, on the right hand side of this chart, that is color-coded, and what's really, really powerful about this is these red spots, when we're in an uptrend, are very, very critical. So, when we get red bars, and, on the chart here, this is when people are really nervous. It's when people are selling their stocks. This is not the masses. This is, like, the general public, the aggressive traders, the emotional traders, more or less, who are trying to pick a top, and what they're doing at these red times, this is telling us, people are selling their shares, they're buying downside leverage, and they're betting on the markets falling. And whenever we get these red bars, the stock market tends to go the opposite direction, usually fairly strong.
And we just had that last week. We had a sharp pullback, people panicked, people bailed out. A lot of people buying put options. A lot of people buying triple leveraged ETFs, expecting the markets to fall, and this is a perfect example of why you can't trade off your emotions, because the market climbs a wall of worry. And what all these red bars are, these are, like, kind of a maximum, like, inflection point of the last of the few people bailing out and betting against the market, and then it pushes higher. And of course, the stock market, when we look at it from a long-term standpoint, this is the weekly chart of the S&P 500. And if we look at the all-time high, I mean, we're trading at new all-time highs. We are in a bullish phase. So, I like to look at the stock market like the ocean tide. You got a rising tide, which is a bullish phase. And then we've got a bearish, a falling phase, and we are back into a bullish phase. And so we're in a bull market. Even though I do think this market's fragile, I do feel like we will eventually go into a major top here, we are hitting new all-time highs. There is no reason somebody should be betting against the market here. This market could continue to go, who knows? Could go years to the upside, so as much as, you know, we're bearish, or I'm bearish, we are long the markets, and, you know, we're riding this up for everything it's worth, but you can't trade off emotions.
And for all we know, this market... I mean, every time we have a crisis, something happens at the Fed, and the government's put in place to juice the markets higher. So, somebody said this on one of my YouTube video comments the other day, was, as long as we keep having, like, crisis to crisis to crisis, we're gonna see the markets keep going higher and higher and higher. And I can't argue with that, because that's exactly what we've seen. And this is why people need to trade the technicals, trade the trend, not try to bet against it, or trade, you know...you know, the news is terrible, it's all tough. Everybody's saying, you know, "There's no way these markets should be going up." I mean, you just have to just go with it. You can't fight this monster. It will always win, so, that's kind of my high-level view of, short-term traders are trying to pick a top, and last week was another inflection point, which means stocks are probably gonna keep pushing higher, until they break the next wave of shorts who need to cover. And then they'll just rinse and repeat, until eventually, one of these pullbacks we have will be one that starts a new downtrend, but that might not be for months.
Craig: Yeah. On my site, we've been discussing that reverse repo balance, and how it peaked out about $2.5 trillion in 2022, and now it's down to $500 billion and falling, and I'm like, "Well, as long as there's cash coming out of that thing," and we assume a lot of it goes into fixed income, but that's still cash that helps float everything.
Chris: Yeah. Totally.
Craig: And as you said, look at that. There's a great chart of the seasonality that we're in, too.
Chris: Yeah. You and I talked about this last year. So, if we look at last year's price action, just the one year, we saw this rally, we saw it top out in June, July, we saw the pullback into October, and then we had the really strong end-of-year rally. Well, January was a choppy month. The market went sideways. And it ran up into the close. Here we are in February. February's, you know, gonna be another kind of choppy month, and then we could see a big run into May. And this is what the shorts are definitely not wanting. They do not want a multi-month run. And as the saying goes, you know, sell in May and go away. Well, that could happen again this year. This market could drag out, and keep moving up for a few more months. There could be quite a bit of upside potential still. And, you know, this is, not that I trade off the seasonality, but mentally, you need to be prepared that this might happen, and there's no point in betting against the trend. Not only is the trend up, but seasonality-wise, you're fighting what happens naturally every year.
So, there's definitely that kind of chaos in the market. The one way to show, Craig, is to show some of these shorter-term traders, and kind of what they're doing, I'm just gonna clean up these charts a bit, is the Russell 2000 is a good example. For example, the stock market, the Russell is selling down quite a bit. If we look at the Russell, the Russell is down, from the highs a couple weeks ago, it's down about 6%, 7%. And, you know, they're struggling a little bit, whereas if we go to the S&P 500, that same timeframe, it just keeps going up and to the right. And so, the Russell 2000 is a really good gauge of what the general public, the aggressive traders, are doing. And my analysis shows they are panicking. They're selling their positions. They're betting on falling prices. And of course, that is seen in the Russell. The Russell is going down because that's what the majority of shares are doing. Most sectors are in a major downtrend. It's just the indexes, that are led by the tech powerhouses, just keep going up and up and up, to the right. And so, you know, the short, the small-cap stocks, in short, are showing us that the average aggressive trader is dumping all of their small, aggressive stocks, and, because they think the market's going lower. And of course, they keep shorting the indexes, but the indexes keep going up, so there's definitely a big confusion between a lot of people of trying to pick a top versus just, you know, ride the trend.
Craig: Well, and one of those stocks is driving that index. You know it's six or seven of them. But with the artificial intelligence boom, NVIDIA has just been crazy. So, let's just pick out that stock, just for fun, because I know you can do technical analysis on individual stocks. What do you see?
Chris: I mean, it's a rocket ship. I mean, it just keeps going up. AI, I swear, AI is in absolutely everything now. I've never seen... Long story short, I used to be into importing business, and bringing in products, and you'd find a new product that's in Europe, or, you know, online from China, and then it would be, like, mainstream two or three years later, or longer. Now, an idea comes out, and within months, there's people copying it, it's already in production, and AI is one of the fastest things. Like, we went, in a one-year window, it went from, "ChatGPT, what?" to everything has "AI" after it. I don't care what it is, a watch, a belt. Like, I swear, it's in everything. And of course, I think it's here to stay, and it's gonna keep demand on processors like NVIDIA, what they do. And if we look at the technicals, depending where we grab a low... We can use Fibonacci extension... Let me just get a look at the longer-term view here. So, there's, man, like, what a rally. Holy geez.
So, if we wanna go with the extreme look, which is the extreme momentum, we could take this low, we could use the high of this consolidation, and then bring this down. And typically, the way this works is, I use the 0.618 extension, right here, and then I use the 100% extension. These are the only two that I use, and I find, if the 0.618 level is hit, and there is a pause or a pullback, we almost always go up and hit that 100% measured move. And it is exactly what has happened here. If we just zoom in on this chart, we literally had a tight little bull flag here, and we're already breaking out. And if we were to break that down even more... Let's grab another little Fibonacci tool. We take the low, we go to the high, we go down to this low right here, and it pretty much puts us right back up into the sweet spot of a 100% measured move. So, both the short-term pattern and the major, major pattern here are pointing to still higher pricing, which means the stock market is most likely gonna go higher, because if you take a look at, for example, let's take a look at our hot list here. If we look at SMH, it is... I don't have it showing on here right now, but it's, like, the only sector really positive today. It is moving up, and every sector is down pretty sharply, believe it or not.
So, if NVIDIA and the semiconductors are gonna keep going up, the stock market is just gonna keep getting dragged up with it, and we're just gonna keep seeing waves of shorts getting squeezed, where they can't take the pain anymore, and then we're gonna have another big pop in the market. So, yeah. I mean, those are definitely some interesting plays. And before you and I were on camera, we talked about the ARKK ETF. It's, like, the complete opposite. We zoom way out here, and it fell out of bed, it died, and it is trying to find a base, but this is actually a giant bear flag, that is actually pointing to, like, $16 a share, when all hell breaks loose and we, you know, eventually, I think, see a recession, and the stock market, a bear market, kick in, this will go much, much lower.
But this is what the majority of sectors, and most aggressive traders, trading accounts, kind of look like, because they hold through these, they hold on to losers, because they're waiting for it to come back, and they generally don't take much profit, if any, because they think it's gonna keep going higher. So the stock market is the perfect trap to suck in people who don't have rules and things to stay in place to not get caught holding on to plays like this. So, that's kind of the big-picture view right now, is, aggressive traders are trying to pick a top. And it's interesting. The headline news last week, I shared it with members. There was a bunch of headline news that were talking about how active traders are gone, and active investors, they're now all going back into, it's the biggest inflow to, like, advisors, to passive investing strategy, the buy and hold. And that's because most people have gone through this with their account. This ARKK-style ETF, and bonds have been beat up. And they're like, "I can't do it. I just need to go back to just plop it in the market, and just pay somebody to watch it while they do nothing with it."
And that is a bad sign. That means all the traders are giving up. They're going back to what they think is more stable and secure than them actively trading, and then the market's gonna fall off a cliff, and they're gonna lose their shirts. And then they're gonna be like, "Why the heck did I do that? I just went back to the old way, and we hit a multi-year bear market." And I see this all the time. This is the complacency move, where people are giving up on trying to make money in the markets. They're just plopping it in, because it's making new all-time highs. I've been talking about this for months, saying these are some of the signs we need to see. And there was a couple other headline news that confirmed on the same day, different angles of the market that I've been talking about. So, we are getting very, very close, I think, to a major top. But we need to let all the rest of the active investors and traders give up on trying to make money, betting against the market, and once they're all back into the buy-and-hold, the market's gonna collapse, with all their money sitting in there. I mean, we've seen this over and over again, but yeah, it's gonna be a very interesting 2024.
Craig: Yeah. And what you said is, the two things are not mutually exclusive, I mean, we can have an extension of this rally, you know, with everybody piling into the magnificent seven, and just sitting back, and "Ah, we'll just let this ride," and go higher. That doesn't mean it goes higher indefinitely. And then we ultimately, maybe the piper gets paid. It really is a fascinating year, with, already, we're only 30 some-odd days in, maybe 10% of the year is done, and already it's just been remarkable to watch. Let's wrap up with gold, Chris. You know, it's been a very interesting month, in that, I mentioned those rate cut expectations that got way out in front of the market, back at the end of December. And gold, god, what, finished up the year about, on the February contract, about $2070? We've gone to this total reversal, to now, where, from almost a certainty we're gonna get a cut in March, now everybody's convinced there won't be a cut in March.
Craig: But yet, gold's only down, eh, $30 or $40 now, as we move to the April contract. What do you think? How do you think gold's hanging in there, and what level should people be watching?
Chris: Yeah. Well, the whole rate cut, I think... I think, take a quick look at TLT. TLT really shows a good picture of everybody expecting the Fed to cut rates, and then they say they're gonna slow down a bit, and we've seen a big drop, like, 4%, 5% drop, in bonds, just in the last, like, two trading sessions alone. And the Fed came out saying, over the weekend, that they're worried they're gonna cut too soon, so, like, people are dumping their bonds. It's gonna be very interesting, but when we go and take a look at the gold chart, gold is holding up really well. I think it's just holding up well because it is one of those true, one of the best defensive plays. I think, believe or not, gold is a very good defensive play, and the U.S. dollar. Now, a lot of times, they go in opposite directions, but gold is fairly slow-moving compared to the stock market. It's also pretty slow-moving compared to the bond market over the past couple years. And the U.S. dollar is also very slow. But the dollar can move up when we go into a bear market, and gold can hold its value really well. It doesn't completely crash big percentages, like most other assets.
So, I think, naturally, people gravitate towards gold, and they hold it. A lot of people, you know, you don't really actively trade... I mean, if you're somebody who buys physical, you kind of buy it and hold it. But if we take a look at the monthly chart of gold, it's a very bullish-looking chart. Let's just zoom in here. Actually, you know, we can...look at the weekly, maybe. Let's take a look at the weekly chart here.
Craig: Monthly is pretty good too.
Chris: Yeah, the monthly's really good, but I wanna just kind of show this, kind of, one pattern, which is, if we take these wick highs, and we take some of these lows, actually, I think it was the monthly chart, but overall, there was, prices kind of ping-ponging around between these open and close bars and the wick highs. And so, it's got this tight little bull flag, and it is pointing to higher pricing. I mean, this bull flag on gold right now is actually pointing to, roughly, it's pointing to $2330, which is gonna, you know, spark a pretty big move. That means we should see silver, we should see miners push up in that regard. And if we go back to what happened the last time we had this very similar setup in the stock market, we saw gold rally up fairly substantially, just before we went into the stage four decline, a bear market in equities. And so, we are already holding up, and we could see gold rally up to that level, over the next couple of months, going into May, and the stock market starts to top out, and then it might pull back a bit and take a breather before its next major run-up into the $3000 mark or beyond.
So, I really like gold. The short-term chart is bullish, the long-term chart is bullish, and it is coming into that favorable time where the stock market, I think, is on its last legs, and typically, when it's on its last legs, that's when gold, silver, and miners come into favor for a few months. You just have to be aware, when the bear market comes, it will pull all of those back down to some regard. Question is how much, and I wouldn't be surprised if, even if gold does make it up to $2300 and change, it could easily pull back down into this $2000 mark as a support level, before rocketing to, you know, $3500, whatever, after that, because I do feel like, after this pullback, it'll be this type of move, a multi-year rally, and it's gonna go ballistic, and that's gonna be the sweet spot for gold miners, silver miners, and anything precious metals, really.
Craig: Yeah. And you could see a fundamental rationale for that too. You know, we get into some type of financial crisis again. And of course, the Fed's, for 15 years now, the Fed has been reactionary, in printing money and starting QE whenever we get into something like that. And that's what drove gold in 2009 to 2011. That's what drove gold in 2019 into 2020. And we could be very well, I would expect them to do something like that again. So, it all matches up with what your projections are, Chris. As we wrap up, I mean, obviously, you cover all these different markets. So, please, tell everybody again where they can find your work, and how they sign up, and what you do there.
Chris: Sure. Yeah. If anyone likes what I do, you can come to my website, thetechnicaltraders.com, and more or less kind of what you and I did, but on a much more granular level, every morning, I do a morning update, cover what happened over the last couple of days in pre-market, and really, I share everything that I'm doing with my trading account. I trade sectors, indexes, currencies. We cover the precious metals space every morning, and really keep you in the loop with the markets. And I only trade ETFs. I focus on sectors, or commodities, or indexes, things like that, simply because you can put more money to work, and it's not quite as volatile. I'm about trying to just, you know, have a bunch of first, second-base hit moves. I'm not looking to swing for the fences. This is about protecting our capital, and growing it consistently. In fact, our CGS strategy that we offer here on our website, we keep hitting new all-time highs. Pretty much, you know, every couple months, we're hitting new all-time highs, and we're really doing exceptionally well this year, and it's pretty exciting to do a strategy that we only have 5 to 12 trades a year. We're just catching big waves that roll through the stock and the bond and the currency markets. And yeah, it's just a strategy for protecting first, and then growing, I think, the capital after we focus on protecting it.
Crazy part is, because we protect from losses, our gains are actually much higher, two to three times that of the buy-and-hold strategy, with very little volatility. Our biggest drawdown is less than 6%, whereas the buy-and-hold is about 40%. So, it is a pretty dramatic passive way. We even have auto-trading. If you don't wanna learn or follow anything, you can just have it hooked into your brokerage account, and the broker automatically executes these ETF trades with portfolio management, all that, in place. So, that's where people can find me.
Craig: Great stuff, Chris. And it's always so valuable to hear from you as these months begin. I've joked a couple times about how we're already 10% done with 2024, which, as we leave this particular version of "Precious Metals Projections," that reminds me, it's tax season. Oh, geez. I think we all probably feel the same way, right? However, there are some tax advantages to be had out there, with your RRSP account in Canada, or your IRA down in the U.S., and Sprott Money can help you with that. You can actually own physical precious metal in your IRA. So please go to sprottmoney.com. The details are all there on the website, and of course, everything's safe, secure, fully audited, fully allocated in your name. Sprott Money, one of the most trusted names in precious metals. You can find them at 888-861-0775. And thank them for all of this great content they put out every month. Chris, it's always fun. Should be interesting to see where we are in March. I guess we'll talk to you then.
Chris: Sounds good, Craig. All right. Take care, everybody. Bye-bye.
Craig: And from all of us at Sprott Money News, sprottmoney.com, thanks for watching, but keep an eye on this channel. We'll have more content coming at you all through the month of February.
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