The Correction Is Not Over Yet
David Brady

FOMC Impact on Gold and Silver Markets

When it comes to the Fed, words speak louder than actions. As expected, the Fed cut rates by 25 basis points. However, Fed Chair Powell said that the number of rate cuts in 2025 would be just two, down from four in September. This is hawkish, obviously. The markets responded accordingly.

• The S&P 500 had its biggest one-day drop in years! The Dow dropped over 1000 points.
• The DXY hit its highest level since November 2022.
• The 10-Year yield rose to its highest since May.
• Gold briefly fell below $2600. Silver fell to critical support at $29.75, the low on Nov. 14, 2024. 

Silver Analysis: Bearish Trends and Key Support Levels

I have been increasingly bearish in Silver since its peak at $33.33 on Dec. 12. I bought SLV puts shortly thereafter. I have stated repeatedly that my targets on the downside are $28-$26. Now Silver is testing crucial support at $29.75. We could get a short-term bounce from there, especially given the extreme oversold readings on the momentum indicators. But once we break $29.75, $28-$26 is next.

If Silver goes below $25, run for the hills. We could have a much deeper dive if that occurs. Until then, I’m expecting at least a strong corrective bounce once we hit the $28-$26 range. At most, we head up to new highs. The line in the sand is between $26-$25.

Gold: Navigating Critical Levels

Gold Futures

Gold is in the same boat as Silver. It hit a lower low yesterday but managed to hold support at $2600. Now it’s rebounding somewhat. However, $29.75 is the line in the sand for Silver, and $2542 is the same for Gold. Below $2542, $2500 is next, where wave C down matches the size of wave A. Worst-case scenario is $2450. 

DXY and 10-Year Yield: Driving Forces Behind Precious Metals

U.S. Dollar Index

A quick word on the DXY. Since its low just above 100, it has gone more or less straight up, aided by the rally in bond yields.
Thanks to the Fed’s hawkishness, the DXY could continue to rally to 110-115 from here. In that case, this would put even further pressure on Gold and Silver, and the miners too.

DXY and 10-Year Yield: Driving Forces Behind Precious Metals

A quick word on the DXY. Since its low just above 100, it has gone more or less straight up, aided by the rally in bond yields.
Thanks to the Fed’s hawkishness, the DXY could continue to rally to 110-115 from here. In that case, this would put even further pressure on Gold and Silver, and the miners too.

10 YR Treasury Note Yield

GDX and Miners: Further Pressure Anticipated

Gold Miners ETF

As for the miners, a simple ABC correction where C = A in size would suggest a fall to $29, or worst-case, $23.50.

Conclusion: Prepare for the Next Rally

For all of the bullishness at $35.07 in Silver and $2802 in Gold—and a religious adherence to the upward trend—this is just another reminder that extremities in the marketplace always catch up to the metals and miners eventually. Now we just have to wait for the extremities on the downside to go long for the next rally. There is room to fall further before that happens. Remain patient.

Start your journey to secure your wealth. Buy gold and buy silver today.

 

David Brady has worked for major banks and corporate multinationals in Europe and the U.S. He has close to thirty years of experience managing multi-billion dollar portfolios including foreign currency, cash, bonds, equities, and commodities. David is also a CFA charter holder since 2004.

Using his extensive experience, he developed his own process utilizing multiple tools such as fundamental analysis, inter-market analysis, positioning, Elliott Wave Theory, sentiment, classical technical analysis, and trends. This approach has improved his forecasting capability, especially when they all point in the same direction.

His track record in forecasting Gold and Silver prices since has made him one of the top analysts in the precious metals sector, widely followed on Twitter and a regular contributor to the Sprott Money Blog.

 

www.sprottmoney.com