Precious Metals Soar From Oversold Levels
Precious metals and miners are now back on track following their brief but sharp pullback in October.
In my last several updates, I speculated on when the pullback in precious metals and mining stocks would end. I highlighted the oversold condition within a confirmed uptrend as a strong indication that a rebound was near, based on the methodology outlined in this tutorial. Sure enough, today the entire precious metals complex surged in a broad relief rally, with gold jumping 2.8% and silver rising 4.5%, erasing a significant portion of the mid-October pullback.
While the move was largely technical in nature, the official explanation being circulated is that it stems from the likely upcoming resolution of the U.S. federal government shutdown. This would allow economic data to be published again, giving the Federal Reserve a clearer picture of the economy and potentially supporting the continuation of its rate cut cycle. Let’s dig in and assess where metals and miners currently stand.
Let’s start with gold. As I’ve been highlighting, gold had been in an oversold condition for two weeks, as shown by the Williams %R indicator below the price chart, while still holding a strong uptrend confirmed by the upward slope of the 200-day moving average. This indicated that the pullback was likely temporary and that a rebound was imminent, and that is exactly what we saw today. This unfolded in a textbook manner and serves as a valuable reminder.
During the pullback, I saw a noticeable number of unsubscribes and received a flood of panicky emails, but my message remained consistent: stay calm. Gold is in a confirmed bull market, and these pullbacks are both normal and healthy.
In my last market update on November 5th, I pointed out what appeared to be a bullish double-bottom pattern forming on gold’s 2-hour intraday chart. I noted that it needed confirmation through a decisive close above the neckline resistance at $4,060 on COMEX gold futures. That confirmation came today, as gold broke out above that level, validating the pattern and signaling that the pullback is officially over. I love it when a plan comes together!
So there’s a lesson here for those who are interested in my methodology of using oversold periods in confirmed uptrends to buy dips or dollar-cost average, which is to zoom into the intraday chart, for example the 2-hour chart, and see what is happening under the hood.
If there is a consolidation or chart pattern that could break either way, first wait to see if it breaks to the upside. That indicates the pullback is likely over and increases your odds of a good entry. It also helps you avoid catching a falling knife if a slightly oversold condition leads to an even more extreme oversold condition before finally bouncing and resuming the uptrend.
Now that gold’s pullback has run its course, I want to share my projection for what it is likely to do next. Please note that this is my working theory, not a firm prediction. Momentum is currently to the upside in the short term, so there is a good chance it will aim for its mid-October high of $4,400, followed by a slight pullback.
From there, I expect it to bounce around between $4,400 and $4,000, which I believe is now the new floor. Given the strong rally earlier in the fall, I see gold continuing to consolidate for a bit longer in a sideways range as it builds energy for its next move, with a likely target of at least $5,000 in 2026.
That $5,000 target is also shared by major institutions including Goldman Sachs, Bank of America, HSBC, and Société Générale. In addition, JPMorgan CEO Jamie Dimon, who is not much of a precious metals fan, recently said that gold “could easily go to $5,000 or $10,000 in environments like this.”
What really supports the bullish case for gold and why this bull market is still in the early stages is that American investors have been slow to participate, even despite the strong price increase. This can clearly be seen in the holdings of the popular GLD ETF, which have increased by only a modest 16% since gold’s bottom in October 2022, while gold has surged 155% over the same period.