by Alexandra Lienhard
Updated: October 13, 2017
Tom Denham, the editor of our Metals Pro Service, discusses opportunities in platinum, palladium, gold and more. Watch this new interview to get Tom's latest analysis of the metal markets.
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[Editor's note: The text version of the video is below.]
Alexandra Lienhard: Today on ElliottWaveTV, I'm talking with Tom Denham, who edits Elliot Wave International's Metals Pro Service. Hi, Tom, it's nice to see you.
Tom Denham: Hi, Alex! Good to be with you again.
AL: So to start off with, what currently piques your interest in the metals markets?
TD: You know, the thing that is really catching my attention is platinum and palladium. When I first became a metals analyst, many years ago, platinum was trading hundreds and hundreds of dollars above palladium. And they have shifted gears, and right now palladium is about $50 an ounce more expensive than platinum. And not only that, palladium is in a strong uptrend, and platinum is in a strong downtrend. That doesn't make good sense to me, but it's the reality of what is happening in the markets right now.
AL: Well, that's interesting, Tom, because your calls on platinum and palladium have been dead on. So one of the things I also noticed about your work is that base metals seem to be split right now. For example, there looks like there's further upside in lead, tin, and zinc, but not for copper and nickel. Is that a fair assessment of your work? And is this difference in direction an exception or more of a common occurrence?
TD: You know, I wish it was an exception. Life would be much simpler if all the base metals would go in one direction. Unfortunately, they have refused to do that, or at least they refuse to travel together all the time. And so what happens is when I'm looking at a pattern in the market, and it's bullish, well, I'll take a bullish stance. And when I see a pattern that tells me nope, it's time to be bearish, I'll take that bearish stance. And sometimes, I don't understand the fundamentals of why one market is weak and another one is strong, but I just try to go with whatever the patterns are telling me. And you're right. It is not something that we would expect, but it is the reality of how metals sometimes trade.
AL: And, Tom, big picture, gold has been in a choppy range for 18 months now. Is this range likely to break out into a trend this year? Or is that something you're looking for in 2018?
TD: It's funny how we think about a trend being either up or down. We think of just those two choices, but in reality, there are at least three choices for a trend. We've got up and down and sideways. And the gold trend, as you noted, has been largely sideways for more than the past year. And my expectation is, is that sideways trend is going to continue throughout 2017. I don't expect a breakout from the sideways movement until sometime in 2018. And then I expect it to be a big move. But for the coming months, there'll be some up, there'll be some down, but I don't think it's going to break out of the range we've been in lately.
AL: And, Tom, despite the chop in gold, one of the things I gathered from your work is your very bullish call on gold bugs. Tell me about that.
TD: I wish I could moderate that. The problem is when I'm looking at the pattern, the simplest explanation of what's going on is that we are going to resolve to the upside in a corrective move that has quite a bit further to go to the upside before a really lasting top forms. I can, by working really hard, develop an immediately bearish outlook for gold stocks. But I'm not as convinced by that bearish analysis. I'm more convinced by the bullish analysis. If I could find one that was a little less bullish than the one I have, I would be happy. But the patterns are not laying out where I can do anything less than look for a re-test of the high that was achieved back in 2016. And so that's where I'm pointing right now. My confidence level is not as big as I'd like it to be, but I have to follow the patterns. They keep me out of trouble, and I do certainly expect gold stocks to run higher over the next several months. But whether they're going to get to the 2016 highs or not, we're just going to have to let gold stocks prove themselves in their performance.
AL: And now bugs one way, gold choppy. That's not a problem?
TD: It is. That's another issue. I would like to see gold stocks and gold following the same path, but so far, that's not how it's laying out. Maybe there'll be a development in gold stocks that will allow me to shift into a similar outlook, but right now, I just don't see it.
AL: Well, Tom, it sounds like there's many interesting junctures across metals. Thanks for talking today.
TD: Thank you, Alex.