As gold prices have seen dramatic rallies in recent weeks, the question on many investors' minds is: Have they missed the boat? In a recent in-depth interview on Sprott Money, seasoned technical trader Chris Vermeulen of Technical Traders offered his expert analysis on the precious metals market, alongside insights into the broader stock market volatility.
Gold's Allure: FOMO Fueling the Rally?
Craig Hemke, host of Sprott Money, kicked off the discussion by highlighting the significant volatility in gold prices, noting days with rallies exceeding $90 and drops nearing $100 within a short 20-day period. Vermeulen, with his extensive background in technical analysis, suggested that the current surge in gold might be driven by a classic case of FOMO – the fear of missing out.
"Everybody feels like they're missing out on gold if they're not in it and they're piling in and they're driving the markets up," Vermeulen stated. He believes this "crowded FOMO trade" has pushed gold into "extremely overbought" territory in the short term.
Short-Term Bullishness vs. Long-Term Caution
Despite his concerns about gold being overbought, Vermeulen acknowledged the short-term bullish momentum. "If you're a short-term trader, like focusing on the daily chart, it is still in a strong uptrend. You don't want to be trying to pick a top. You don't want to be betting against it," he advised. His technical analysis even points to a potential further rally, with targets around $3540 and then $3750.
However, Vermeulen cautioned investors with a longer-term perspective. "Longer term looking forward, I do believe we're going to see gold have a correction and it could it could pull back to you know 2,6 2400 maybe even 2200," he predicted, especially if a significant "financial reset" occurs. He referenced historical corrections, such as the 34% drop in 2000, as potential scenarios.
The conversation also turned to silver, which has notably lagged behind gold's impressive performance, leading to discussions about the high gold-silver ratio. Vermeulen was less optimistic about silver in the immediate term. "Silver right now, I think, carries a ton of volatility. It's the daily chart that shows it very clearly," he explained, pointing to sharp drops coinciding with fear in the stock market.
While he noted a potential upside target of around $38 an ounce for silver based on technical patterns, he cautioned that any rallies could be short-lived. "If it hits 38, I would expect it's probably going to come down very sharply. I think it'll be a very quick crowded trade move," Vermeulen warned.
Broader Market Context: The Bear Market Bounce
Vermeulen also provided his perspective on the US stock market, which has experienced significant volatility. He believes the recent upward movement is more of a "bare market bounce" following news-driven sell-offs. "Anything that happens in a news-driven movie, usually, that movie is given back. And of course, it has been given back and we're right back to where we were pre that news," he observed.
Chris Vermeulen's insights from the Sprott Money interview paint a complex picture for investors. While the allure of gold is strong and short-term gains appear possible, his technical analysis suggests that the market may be overheated. For silver, volatility remains a significant concern. Vermeulen's emphasis on price action and risk management serves as a crucial reminder for investors navigating these uncertain times.