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This is Why It's an Exciting Time for Gold, Copper, Etc.

Our Senior Metals Analyst: "Metals have blown up"

by Alexandra Lienhard
Updated: August 31, 2017

Tom Denham, the editor of our Metals Pro Service, discusses dramatic moves that we've seen across the metals markets over the last several days. Watch this new interview to get his latest outlook for gold, silver, copper and more.

 

Alexandra Lienhard: Today on ElliottWaveTV, I'm joined by Tom Denham, Elliott Wave International's Senior Metals Analyst and Editor of EWI's Metals Pro-Service. Hi, Tom. It's good to see you.

Tom Denham: Hi, Alex.

AL: Now, I know we talk often. But sometimes I just have to start by asking, what is going on with metals? They seem to be on fire as of late.

TD: Yes, they have blown up. And we've seen dramatic moves several days in a row. And it's been exciting.

AL: Now, let's dig deeper into gold. It's finally taken out previous peaks that have capped the upside all year. Now, in your view, is this a major break out or a major head fake?

TD: Well, it depends on what time frame you're in. If you're a long-term investor, I'm afraid it's a head fake. I do not think we've seen the high. I think price is going to push meaningfully higher from current levels. But I'm not looking for anything like what we saw in the run up to 2011. I see this as a leg up of a corrective move to the upside.

AL: And it's seemed as if gold has been dragging silver along for the ride. Is there a further upside here? And is the mit ratio telling you that gold or silver will outperform?

TD: Well, gold has certainly been outperforming for, I think it's been more than a year now. It's certainly been a multi-month situation with gold leading and silver coming along behind. When I look at that ratio on a monthly basis, it's still very firmly in the camp of gold being the strongest. But when I look down at the weekly and the daily levels, there is a hint that silver is working to take over that leadership role. And because gold has been leading as long as it has, there is the possibility that traders will get excited about silver in a way that they have not been and dramatically drive it higher in a catch-up mood. You see, the deal is that silver is a lower volume market than gold. And so excitement among the people who are trading in silver can really move prices in a big way. I'm not at a place where I'd say that's going to happen. But that certainly is part of the excitement that drives being involved in the silver market. When it moves, it can really pop.

AL: And Tom, are the Miners and Gold Bugs also following to the upside?

TD: They are. We're seeing good structure in terms of the pattern for gold stocks, both the Gold Miners ETF and the Amex Gold Bug index that I follow. They look like they're on a good path to continue meaningfully higher. In fact, one of the things that I'm looking at is that with gold and silver, there are several alternate possibilities for the pattern to develop that would not see price make it to a new high above what it achieved back in 2016. But with gold stocks, it would be a real failure if they did not make it to a new high above the one that was developed in 2016. And so I've got high hopes for those markets.

AL: And while it hasn't been making as many headlines, copper has been even more explosive. After a six to seven month range trade, it's been aggressive to the top side. So Tom, same question, break out or a limited upside from here?

TD: It, I just have to say, I've been bullish on copper for several months now and viewing the move as a correction to the upside. And now we've had, we've just had really two strong months in a row with copper just screaming. I still see this as the late stages of a corrective move. I haven't quite decided how far it would have to rise above current levels for me to give up the expectation that we're going to see a top form and price come down. But when I'm looking at the monthly charts and even the weekly charts, I'm still seeing this as a correction that is really on borrowed time. That doesn't mean I think anybody should bail out at the moment. But I would be very leery of saying, oh, this is doing well. Let me join. Because I think this is a late stage move.

AL: And the last time we spoke, you were still very bullish on aluminum. So do you still like the top side here as well?

TD: I do. It has not shown the same kind of excitement that copper has. But we've had steady movement to the upside. And the pattern that I'm tracking has a considerable distance to go to achieve its targets to, at higher levels. And so I think we're in a good place with aluminum.

AL: Well, Tom, thanks for taking a couple of minutes to talk and offer these insights. Appreciate it.

TD: All right. Thanks, Alex.

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