In a recent in-depth interview with Natural Resource Stocks, renowned market technician Patrick Karim of Northstar Bad Charts laid out his compelling vision for the future of precious metals, emphasizing that the "greatest gains" in gold, silver, and mining stocks are likely to materialize only after a crucial shift in market dynamics: gold decisively breaking out against the S&P 500.
Karim, known for his astute technical analysis and humble demeanor, as highlighted by "Natural Resource Stocks" host Andy, provided a detailed breakdown of current trends in gold, silver, and the broader equities market. While acknowledging the ongoing bull market in gold and recent breakouts in silver and miners, Karim cautioned investors against expecting exponential gains until this pivotal ratio shift occurs.
Gold's Bull Run Faces "Stretched" Conditions
Karim began by dissecting the impressive upward trajectory of gold. "Yeah, it's like, yeah, gold's been on a tear," he noted, presenting a chart illustrating its consistent climb above the 12-month moving average, a key indicator of the current bull market. However, he tempered this bullish outlook with a warning about current price levels.
"Look how stretched we are, Andy, from that 36-month moving average," Karim pointed out. He emphasized that the significant distance between the current price and this longer-term moving average suggests that gold is in an overbought condition. Historically, such stretches have been followed by periods of consolidation or even correction, making current entry points less favorable for traders.
While those already holding gold can continue to ride the wave, Karim advised those on the sidelines to exercise patience. "If you're on the sideline and you miss that entry back here, I wouldn't touch gold. It just… it just doesn't make sense," he stated. He recommended waiting for a consolidation phase that would offer a lower-risk entry opportunity closer to the moving averages.
The core of Karim's analysis revolved around the often-overlooked gold-to-S&P 500 ratio. He argued that while gold's individual price performance is important, its strength relative to the broader equity market will signal the true beginning of a precious metals "bull era" and trigger the "crazy moves" he anticipates in silver and mining stocks.
"For gold to be in a bull era, it needs to be outperforming S&P," Karim explained. He referenced historical periods, such as the 2000s, where gold saw significant outperformance against equities. He presented charts illustrating how sustained upward trends in this ratio coincided with substantial gains in precious metals.
According to Karim, while gold is showing nascent signs of strength against the S&P 500, a decisive and sustained breakout is still pending. He believes a more significant downturn or period of underperformance in the equity markets is the likely catalyst for this shift. "The missing piece right now is S&P just falling apart," he suggested.
Once gold decisively breaks out and trends upwards against the S&P 500, Karim predicts a significant influx of capital into the precious metals sector. "As soon as SPX tags, as long as gold holds its ground or doesn't go down as much as SPX, the gold-to-SPX ratio is going to rocket upwards, break out, break out, break out, and that's a precious metals bull era," he asserted.
Silver and Miners Primed for Explosive Gains Post-Breakout
Karim expressed particular optimism for silver and gold mining stocks in the wake of a gold-to-S&P 500 breakout. He highlighted the historical correlation between silver's dramatic price surges and periods where gold significantly outperforms equities, often occurring after equity market bottoms.
"That ratio going up has a high correlation with silver," Karim noted, showing how silver's performance tends to mirror the trend of gold strengthening against the S&P 500. He explained that silver, often seen as a more volatile asset, tends to experience its most substantial gains after the initial capital flows into gold during a risk-off environment, followed by a broader recovery phase. "Those crazy targets, they'll happen after that," he stated, referring to potential moves towards $100 or even higher for silver.
Similarly, gold mining stocks, according to Karim's analysis, closely track the gold-to-S&P 500 ratio. "Look at the miners, how they track the gold-to-SPX ratio almost to perfection in the 70s," he illustrated. This suggests that a strong and sustained uptrend in this ratio would provide a powerful tailwind for the profitability and stock prices of mining companies.
While acknowledging that miners are currently in a bull market, Karim reiterated that the most explosive gains are likely contingent on the gold-to-S&P 500 breakout. "The greatest gains in the shortest amount of time will happen after gold breaks out versus SPX," he emphasized.
Patrick Karim's analysis provides a valuable roadmap for investors navigating the precious metals market. His emphasis on the gold-to-S&P 500 ratio offers a sophisticated lens through which to understand potential future price movements. While the current bullish sentiment surrounding gold is understandable, Karim's technical perspective underscores the importance of strategic patience.
His insights suggest that while opportunities exist within the precious metals sector, the truly significant, "crazy" gains in silver and mining stocks are likely tied to a broader market shift where gold demonstrably outperforms the S&P 500. Investors would be wise to monitor this crucial ratio and consider Karim's advice to await lower-risk entry points, particularly in gold, before positioning for the potentially explosive moves he anticipates.
Patrick Karim's interview on "Natural Resource Stocks" delivers a clear message: while the precious metals bull market is underway, the most substantial returns are likely on the horizon, contingent on gold's performance relative to the broader equity market. By focusing on the gold-to-S&P 500 ratio, investors can gain a crucial understanding of potential capital flows and position themselves strategically for the "big moves" Karim anticipates in gold, silver, and mining stocks once this key market dynamic shifts. For those seeking outsized returns, the message is clear: watch the ratio and be ready for the potential fireworks to come.
Watch the full interview:
Don't miss out on the opportunity to invest in Gold & Silver. Check out our featured companies today: (Ad)
"Best Overall" by Money Magazine, Award-Winning for 6 Years, Thousands of 5-Star Rankings
Expand Details
Renowned for its exceptional customer service and commitment to transparency, Augusta Precious Metals has garnered numerous accolades, including "Best Overall" from Money magazine and "Most Transparent" from Investopedia. The company's dedication to educating and supporting its clients has earned it top ratings from organizations such as A+ from BBB and AAA from BCA.
Industry leader with over $2 Billion in gold and silver. Top rated precious metals company with buy back guarantee
Expand Details
From precious metals iras to direct purchases of gold and silver, goldco have helped thousands of americans place over $2 billion in gold and silver. Top-rated precious metals company rated A+ by the better business bureau rated triple a by business consumer alliance earned over 6,000+ 5-star customer ratings Money.Com 2024 best customer service 2024 inc. 5000 regionals: pacific ranked #17 2024 gold stevie award, fastest growing company inc. 5000 award recipient, 8+ years
American Hartford Gold, ranked #1 Gold Company on Inc. 5000, boasts thousands of A+ BBB ratings and 5-star reviews, endorsed by Bill O'Reilly and Rick Harrison..
Expand Details
With over $2 billion in precious metals sold, American Hartford Gold helps individuals and families diversify and protect their wealth. Their expert team provides investors with the latest market insights and a historical perspective, ensuring informed decisions. Trusted by public figures and praised for exceptional customer service, the company offers competitive pricing on top-tier gold and silver coins, backed by a 100% customer satisfaction guarantee
