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Is the short term weakness in silver a cause for concern for PM investors?

Cory댊
July 23, 2021

Craig Hemke, Founder of TF Metals Report joins us for a look into the silver sector and the recent weakness in the metal. After holding up much better than gold for the last 11 months, silver has started to breakdown. We talk big picture and short term chart level to watch.

Click here to visit Craig’s site – TF Metals Report.

Discussion
55 Comments
    Jul 23, 2021 23:15 AM

    Silver is at risk (note the RSI breakout on the following chart) but I wouldn’t bet against it in any way unless achieves at least one daily close below 24.79, Wednesday’s low.
    https://stockcharts.com/h-sc/ui?s=%24SILVER&p=W&yr=5&mn=9&dy=0&id=p65971886637&a=426943004

      Jul 23, 2021 23:59 AM

      I do not like that GSR made a higher high above the march highs but it is still only retesting this support/resistance from Aug last year. BTW it looks like we have a shooting star on the weekly GSR.

      Jul 23, 2021 23:10 PM

      Thanks for that chart Matthew. Yes, it would be most constructive for that trendline support along the recent lows to hold steady.

      So far so good for today on Friday, but I still am prepared that if the low from this week breaks next week, that we could still see waterfall decline down to either $23.75 or $22 support in short order.

      (obviously, for the sake of my holdings in 2 dozen silver miners, it would be much nicer to see silver hold this range here in the high $24s – low $25s that it has been in and then start the next leg higher from here as support – as Craig eluded to in this editorial today).

        Jul 23, 2021 23:24 PM

        I bet it won’t go more than a few cents below 24.50 if it does drop on Monday.

          Jul 23, 2021 23:32 PM

          That is good to hear.

          Jul 23, 2021 23:29 PM

          Yeah, but what about Tuesday, Wednesday, Thursday etc.

          Jul 24, 2021 24:28 AM

          Is there an inverse relationship of Miners/Xi Jinping hit list stocks?

      Jul 23, 2021 23:33 PM

      You won’t have a chance to get out. If they drop it below $24.79 it is going to be a waterfall decline in all likelihood.

        Jul 23, 2021 23:50 PM

        There is no good reason to assume that.

          Jul 23, 2021 23:04 PM

          yes there is, since it is a widely observed stop that many traders are using for their long positions. It’s easy pickings. Silver will likely shock drop lower than anyone here dreams.

            Jul 23, 2021 23:18 PM

            I’ve seen such “easy pickings” fail too many times to count. You asserted what WILL happen, not what might happen. That’s dangerous in this business.

            Now, maybe you can explain why Monday’s bearish breakout has given everyone all week to get out and even do so at a better price. There are always other factors in play than the ones that are obvious to the average price watcher. See the supports on my chart at the top of the page for a couple of examples.

            Why no instant plunge?
            https://stockcharts.com/h-sc/ui?s=%24SILVER&p=D&yr=1&mn=0&dy=0&id=p31811513183&a=996958401

            Jul 23, 2021 23:47 PM

            I guess you give up. So, this chart might explain why no plunge (yet):
            https://stockcharts.com/h-sc/ui?s=%24SILVER&p=D&yr=1&mn=0&dy=0&id=p18297772137&a=996960173

            Jul 23, 2021 23:31 PM

            Done with your usual condescension Mathew. You are sooo superior to the ‘average price watcher’.

            Jul 23, 2021 23:32 PM

            Cool, Blaze BS. I’m long done with your stupidity.

            Jul 23, 2021 23:39 PM

            FYI: The average price watcher ignores everything but price (like momentum/strength, sentiment, volume, technical divergences, other sectors, all cycles, AND even well established alternative price-based tools that they SHOULD be using). THAT is what was meant by my comment. Many do just fine with their chosen blindness as long as they manage risk with discipline.

    Jul 23, 2021 23:41 AM

    Always liked Hemke but the gold to $5k round of podcasts is tired and old.

      Jul 23, 2021 23:52 PM

      Craig didn’t say gold to $5k in this podcast, or any recent ones. He focused more on the range Silver has been in from $22 up to $28 most of the year, and how it would be bad to break $22, but that if it can get up above $28 to pierce the $29-$30 resistance that he sees potential for it get up into the mid $30’s in short order.

    Jul 23, 2021 23:21 PM

    AXU will have 8 red weekly candles in row. You won’t see that often in any stock or index. Can we make it 9 in a row next week? Only in the miners….

      Jul 23, 2021 23:24 PM

      That’s an interesting observation Magnus, and as an AXU shareholder, it’s been a bit of a bummer lately, but longer term I’m still very bullish on their operational and exploration upside at Keno Hill. After this many weekly smashdowns, maybe I should throw a little bit more at that position, as this too shall pass.

        Jul 23, 2021 23:43 PM

        The bad news is that AXU probably has farther to fall; the good news is there is a significant gap in early June at about $3.15 that will need to be filled—-I’ll be adding to my already significant position in the near future.

          Jul 23, 2021 23:01 PM

          At this point it won’t surprise me at all if AXU quickly drops to 1.85 which is the low from June 2020. It will probably bounce there to establish a right shoulder of a large H&S. From there, the first target is the 200 WMA at 1.78 and after that who knows where it stops.

          Jul 23, 2021 23:21 PM

          Thanks for the AXU breakdown Doc. If it heads lower I’ll add some more, but it will be just fine whenever it decides to head up to that $3.15 level.

    Jul 23, 2021 23:09 PM

    the HUI is now lower vs the S&P than at the bottom of the covid crash. Talk about opportunity cost.

    What exactly is it going to take to get miners to perform? I constantly hear that “once so and so level in gold is broken to the upside, the miners will play catch up.” That hasn’t worked out in 25 years.

    On a risk adjusted basis, the miners have been beyond terrible investments. They are going down against everything else, including gold.

    Jul 23, 2021 23:13 PM

    The bottom line is the powers that be know that they can’t allow gold and miners to outperform US stocks and so it will never happen.

      Jul 23, 2021 23:30 PM

      Well, never is a long time…

      The miners have definitely had a bad year in 2021 as an overall general statement, but that is on the back of a very good 2019 and 2020 for the PMs. Other commodity miners like the Uranium, Lithium, Palladium/Platinum, Copper stocks still had nice rallies that continued into 2021, and many stocks had 3x-10x moves.

      Personally my trading account, mostly concentrated on resource stocks, was up about 4x from the March 2020 pandemic crash to June 1st of this year, ratcheting up to it’s all time high just 2 months ago. Any sector where one can make those kinds of gains in 15 months isn’t exactly terrible, but it does need to be actively managed.

      In contrast, my returns were not anywhere close to that in my passive retirement account mostly concentrated in the US market mutual funds. I’m sure I could have actively traded the tech stocks and done much better, but still, I’m not sure the gains would have compared to what were made in the resources stocks over same time period.

    Jul 23, 2021 23:25 PM

    Most silver miners are below where they were 5 years ago. The S&P has doubled since then. The Fed’s balance sheet has been headed for infinity the entire time.

    On a risk adjusted basis that is just incredible underperformance.

      Jul 23, 2021 23:38 PM

      If one looks at where the Silver miners are since their major bottom in mid January of 2016, then most are still up handsomely, so it depends on where people got invested. Sure, if you measure from the very top of the huge surge that ended in the summer of 2016, then many are sideways to down, but most wise investors were selling and trimming into those overbought conditions, not starting all their positions up there.

      There have also been plenty of tradable rallies in the Q1 runs of 2017 and 2018 and 2019, and the run from late summer in 2019, and the run from the pandemic crash of March 2020 through Jan 2021 to make some cake in the gold and silver miners. It comes down to entries and exits, and whether folks bought the dips and sold some into the rips.

        Jul 23, 2021 23:44 PM

        For example, Alexco (AXU) was mentioned up above in this thread.

        Well 5 1/2 years ago at the major bottom in the PM sector it’s low in January of 2016 was $0.22 and it closed this afternoon at $2.07. AXU also reached a high of $3.50 last summer.

        https://schrts.co/TnwqzDdw

      Jul 23, 2021 23:49 PM

      That’s the sentiment that marks significant bottoms 😉

      But that’s true nasdaq, big tech driving S&P are in a bubble, growth/value trade is topping. I do not think you can value PM in relation to those broad market indexes – it is like comparing it to bitcoin. It would make more sense to value PMs in comparison to traditional inflation protection stocks – like big oil.

        Jul 23, 2021 23:06 PM

        Good comments Darius PL. It is natural for investors to compare different sectors to one another like the PMs to the stock market, or the PMs to Bitcoin, but it comes down to what time period people want to use to compare assets classes as to the conclusion they can draw.

        For example, coming out of the Great Financial Crisis from 2008-early 2009, then the PM stocks actually recovered much quicker and had much better gains the next 2 1/2 years going into mid 2011 where the PMs topped out. It was the same last year coming out of the pandemic crash in March of 2020.

        However, if one positions things to look at the last decade of performance in the PMs, I guess implying that everyone bought at the sector highs in 2011 and held and did nothing for 10 years (which is clearly NOT most investors), then as a whole one could say the general stock markets greatly outperformed the PMs. It would be the same by doing just a 5 year look back, as was mentioned above which times out to the exact summer highs of the huge surge in 2016, implying that folks bought the very highs, and held and did nothing for the last 5 years like a bump on a log. However, it is a totally different scenario completely if one moves the measuring stick back to the end of the PM bear market in December of 2015 or to when the PM miners put in their major bottom in January of 2016, and then miners have still had a nice run. Again, all of that implies that nobody was doing any trading for 5-10 years at a time which is not real life, so as mentioned above, it all comes down to everyone’s unique entry and exits in each stock or ETF in their portfolio, and painting with a broad brush and cherry picking timelines can be problematic for many reasons.

        It would be the exact thing to compare PMs to Bitcoin, because at different periods both asset classes had big rallies and corrections, and depending on the time frames compared, there could be wildly different conclusions drawn.

        As you pointed out it would be interesting to compare the gold & silver senior producers to the oil producers, or the smaller exploration companies in both sectors, since they are both extractive commodity businesses and both factor into the inflation discussion. Cheers and keep the good ideas coming!

          Jul 23, 2021 23:45 PM

          That’s true I can also see value in such comparisons. IMHO we have 80% chances of stagflation scenario playing out in the next few years and therefore PMs and inflation protection sectors outperforming the broad markets. Relative valuations between those sectors could help us in trading/investing for years to come. The question is what will be a favourite inflation trade among big asset managers (except PMs)? Big oil maybe a little passe due to investing limits and “green new world”. Maybe thats the question for one of your quests Ex 🙂

            Jul 23, 2021 23:55 PM

            DariusPL – Good comments on the stagflation to inflation hedges, and yes we have asked many of our generalist in interviews what the preferred safe haven will be, and lately, it has clearly been bonds and the US Dollar. However, there were some guests we brought on recently (Sean Brodrick, Jesse Felder, Ed Moya, Joel Econonin, John Rubino, Brien Lundin, etc…) that were still constructive on Gold and the Energy sector as inflation hedges. As you suggest though, we’ll keep getting different thought leaders perspectives on where believe the money flows will head during more turbulent periods. In the recent past the money flows have mostly continue to pile into the general indexes and ETFs concentrated in a few dozen names.

            To your point about the “green new world” stay tuned for Matt Geiger’s comments on the energy metals on this weekend’s show, as we get into that topic a bit. Cheers!

            Jul 23, 2021 23:05 PM

            Personally, I still see Oil & Gas as having robust markets for some time, despite the new battery and electric powered increases in market share for cars, ebuses, ebikes, etc… but there are many that see how the Battery Metal or Energy Metal commodities like Copper, Nickel, Silver, Lithium, Uranium, Graphite, Rare Earths, etc… are still in a growing segment of the energy market.

        Jul 23, 2021 23:42 PM

        As I have said, I expect some sort of bounce in the near term. Maybe all the way back to the now declining 50 WMAs across the sector. But last year’s highs probably won’t be breached for years IMO–at least 2023.

          Jul 23, 2021 23:58 PM

          Agreed a short-term bounce is in order for a relief rally, but as to what kind of legs is may have remains to be seen. You are not alone in doubting last year’s highs will take a while to eclipse, and Jordan had mentioned that same thing earlier in the week, and Doc postma will have some thoughts along a similar line of reasoning on the weekend show.

      Jul 23, 2021 23:24 PM

      Thanks, Keith is always a good listen.

      Jul 24, 2021 24:47 AM

      KN: The problem is for mining producers is that they are not allowed to determine the price for the product they produce.
      Two Solutions according to KN:
      1. Regulators take control and get bullion banks out of the price determination process and let the producers determine price through a market system. Or more likely:
      2. Producers withhold product and force a system where producers determine price. This is also difficult as silver normally a by-product of some other mining effort and producers have different motivations than the price of silver.
      The Issue: why do the markets act in a counter intuitive fashion. Simple answer is “market manipulation” by individuals who are not involved in the production process. Followed by lack of Regulation by authorities eho are charged with overseeing market fairness.

    Jul 23, 2021 23:02 PM

    IPT was devastated over the last two weeks. Looking at Ichimoku clouds on the longer time frames, I don’t see how it recovers for years. At best it will be range bound out to 2023 and it could trade back down in the range it was stuck in between 2017 and 2020. Other silver miners are at various stages of following IPT into hell IMO.

    For me, there would be no way IPT would get crushed like this if silver wasn’t going to be dead money for years as well. It makes no sense at all in light of what the Fed is perpetrating. Very sad.

      Jul 23, 2021 23:13 PM

      Very Sad…… indeed…….. the FRAUD FED….. just continuing the same pattern….
      with the help of the politicians…. TOTAL JOKE….

      Jul 23, 2021 23:18 PM

      I have a large holding of IPT and have watched great profits disappear. I’m a terrible trader. However, won’t sell. When we boil it all down, nobody knows what’s going to happen or when? Was that Bob’s line? Anyway, it’s Friday. Have a beer and get it off your mind. It will get better!

        Jul 23, 2021 23:56 PM

        The only thing that could salvage IPT at this point is an absolutely epic sling shot move like January 2016. How likely is that to happen though? I would put the odds at 1 in a million.

        And of course it could bounce very soon. But I think it could be stuck around its 200 week moving average for a long time.

        Jul 23, 2021 23:52 PM

        I bought more IPT, KTN and BBB today, in that order. I bought a lot more on Monday. If they go lower, I will still buy more. Yes, it will get better.

      Jul 23, 2021 23:19 PM

      Magnus – I’ve only seen you start posting here recently, but I gotta ask – are you Spanky?

      The Ichimoku cloud comment and silver miners heading into hell comments really remind me of Spanky. 😉

      Regardless, yes, IPT has really corrected down hard, but that is par for the course with Impact Silver, as it is highly leveraged to the upside breakouts and the downside corrections, outperforming it’s peer group in both directions. It is not uncommon for it to dredge gut-wrenching troughs, and then turn around on exploration success or metals price action and then go rocketing up to eye-popping gains. It tends to overdo it in both directions, and this recent PM correction is no different in that regard.

      I personally don’t draw the same conclusion from the recent move in IPT that it should imply that Silver will be dead money for years, but that’s what makes a market. As discussed with Craig in today’s editorial above, it is amazing that after Silver had been stuck in a range of $14-$18 for nearly 6-7 years, that when now has finally broken decisively higher and held the $22-$28 range over the last year, that ironically folks seem more pessimistic and sentiment seems more sour now than at the lower levels.

      For years, we discussed how great it would be when Silver finally got up above $20 because all the producers would be making money, and all the development projects would be quite attractive. Now Silver is around $25 and so many folks are throwing in the towel.

      Even if Silver dove down to $22 that is still exponentially better for all the silver stocks, including Impact Silver, as their costs are around $17-$18 per ounce and they still have a healthy margin even at lower prices, just like the rest of the producers.

      Its the same thing with Gold… for so many years people dreamed of finally breaking above $1050-$1350 range, and getting up to the $1500’s and $1600’s in pricing so that the producers would finally be cash-flowing once again. At $1500-$16000 Gold shelved development projects would also come back onto investors radars. Now at $1800 gold people are acting more depressed than when gold was hundreds of dollars less. You gotta love how quickly sentiment can shift in the spite of fairly good fundamentals, but again… that’s what makes a market.

        Jul 23, 2021 23:25 PM

        Remember when some folks thought Silver would never get back above $18 in their lifetime? 🙂

          Jul 23, 2021 23:23 PM

          It’s Spanky alright. I’m glad he showed up to confirm that we are at or very near the low.
          Right before the miners blasted off in 2019:

          On May 8, 2019 at 12:49 pm,
          spanky says:
          All of the work done off of last year’s low is going to have to be rebuilt now, which is going to chew up even more time. The only thing that could change my mind would an explosive V-shaped move. I just don’t see it happening.

            Jul 24, 2021 24:20 AM

            Yes, sure seems like it. Spanky always liked to take jabs at the silver miners in every other post, and would rip on them technically without ever posting charts. Then he’d typically insinuate that all traders bought at the top of the 2016 surge in the miners and rode them down, which was a silly notion, but the total worse case scenario imaginable. He also felt Silver would never get over $18 in our lifetime, and magically got quiet the closer Silver and Gold got to breaking out about 2 years back.

            Now we have an extended correction in the metals and miners and bad sentiment in the miners, and someone shows up talking technicals, that is into the more obscure ichimoku clouds, likes to diss on Silver stocks, likes to be dramatic (remember he’d say they were going down the drain, silver stocks were “whipped”, they were headed for disaster, and now the silver miners are going to “follow IPT into hell…”

            Not a surprise that he picked now to return…

        BDC
        Jul 23, 2021 23:29 PM

        Or Darla?

      Jul 23, 2021 23:20 PM

      Dang, Magnus. I thought I was the most negative on PMs in the lately. The monthly chart does indicate a downturn for several months. I doubt it will be ‘years’. At least I hope it’s not years..
      Meanwhile, there’s always the currency and futures markets. Getting short with the futures seems to be the way to go. Beats watching the gold and silver paint dry..

    Jul 23, 2021 23:35 PM

    Junior Capitulation Begins While Deal-Flow Remains Strong

    David Erfle – Friday July 23rd, 2021

    “With the gold price enduring above key support at $1800 per ounce for the past two weeks, resource stock speculators began to capitulate on select juniors late last Friday. Although Comex Gold Futures closed well above $1800 at 1:30pm PST, relative junior gold stock weakness increased into the close of the stock market as indiscriminate selling began to take place in the junior sector.”

    “Although strong selling in precious metal’s stocks increased to begin this week, the gold price has stubbornly held the $1800 level, as junior speculators are throwing in the towel after a year-long downtrend in the gold complex. With stock market strength remaining resilient, it appears as though junior gold stock tax-loss selling has come early with “fishing lines” showing up in many charts towards long-term support levels.”

    “Resource stock speculators continuing to see snap-back rallies in the stock market after equities appear to be rolling over, which has them growing weary of holding juniors that have underperformed a down-trending gold price in a “risk-on” environment. Therefore, they have been selling losing positions in down-trending higher-risk juniors to rotate the proceeds into up-trending sectors.”

    “However, as “Summer Doldrums” selling continues in the junior space with price/volume action showing the bloodletting having little to do with fundamentals, the sector deal-flow has remained robust.”

    https://mailchi.mp/8d8cf8d45299/david-erfle-weekly-gold-miner-sector-op-ed-1599930?e=3ac1473fe4

    Jul 23, 2021 23:07 PM

    For me, I dont like the fact that silver has broken its 50 week ma along with the uptrend since the June breakout last year. Without accounting for other technicals, these two simultaneous breakdowns foretell a mid-term weakness in silver I believe. I sincerely hope that we dont see the $22 handle as discussed by others.

    Jul 24, 2021 24:09 AM

    Dead Horse Report:
    Alternating days for generally a wash. Thurs was -$1000. Friday was +$500. Except for Emerita that resumed its climb.