The current precious metals correction, including silver's recent 16% decline, is a healthy necessity after an overbought market. Patience is key before the next major rally.
The recent surge in gold and silver prices has captured global attention, but a technical analysis expert argues that the current correction is a healthy and necessary phase before the metals embark on their next major leg higher. In a deep dive into market movements, an interview shared by CapitalCosm provided a professional perspective on navigating the current volatility.
The guest, a Chartered Market Technician (CMT) and Master of Financial Technical Analysis (MFTA), and author of the 2025 book, Gold and Silver: The Greatest Bull Market Has Begun, shared historical data and analysis suggesting that the precious metals sector is merely at the beginning of a long-term, or secular, bull market.
The technical analyst highlighted that gold has undergone a significant correction after a fantastic 18-month run and a major breakout of a 13-year-long cup and handle pattern. This spike, which saw prices hit the $4,000 log target, stretched the market too thin, particularly in the mining sector.
The historical precedent suggests that after a major breakout, gold often returns to its 200-day moving average to find a bottom. According to the guest, this level, which is currently in the upper $3,300s, serves as a crucial "barometer of what we can expect" for the conclusion of this correction.
Historical data, comparing the current price action to major breakouts in 1972, 1973, and 2006, suggests the correction could potentially bottom around $3,600 and last for about five months. The analyst noted that the price damage could happen "very quickly, like in the first month or two," followed by a period of sideways consolidation before the market moves up again.
"Other than buying right before a major breakout, your next best bet is to buy after the breakout when gold comes back to the 200-day moving average," the guest stated.
For silver, a separate analog chart was used, based on silver's performance after gold tested its 150-day moving average. The analyst favors the 2010 case as the "best comp" for current price action, which saw silver correct by 24% over two months before consolidating and then skyrocketing. Silver has already seen a 16% decline from its recent top.
The analysis shows that there is "not that much more downside in terms of price" for silver. He noted that historically, whenever silver breaks out to a new all-time high, it has doubled within 7 to 11 months after that breakout. This pattern suggests massive potential once the current correction is over and silver moves above the $50 resistance.
The guest strongly argues that fears of a secular peak are unfounded, pointing to key sentiment data. Institutional portfolios are structurally underowned in gold, with some Bank of America portfolios holding only a 0.4% allocation to the metal. Gold ETF assets, when divided by all ETF assets, are currently around 2%, far below the over 8% peak seen in 2010-2011.
"When you look at real hard sentiment data like this, we're actually closer to the beginning than the end," he stressed, estimating the secular bull market could run into the 2030s.
The core message from the analysis is one of patience and long-term vision. The analyst advises a measured approach for different types of buyers:
A compelling historical chart, which averages the 1972 and 2005 major gold breakouts, projects an astounding upside. The model suggests a gold value of $6,900 an ounce by February or March of 2027. Even the weakest historical comparison projects a price of $5,800 an ounce by that time.
The analyst concluded that the current market rhyme with history is "mind-blowing" and serves as a strong guide for future potential. The correction is not a time to "get washed out," but a "healthy" period that sets the stage for the next "huge leg higher that's going to leave people behind."
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