Joe Mazumdar: Copper Stock Sweet Spots I’m Watching Now

The gold price took a hit this week, dropping below the US$4,000 per ounce level.

Silver fared much the same, slipping under US$60 per ounce.

Both precious metals were under pressure as conflict in the Middle East ramped up, reigniting worries about higher prices and interest rate hikes from the US Federal Reserve.

The rise in inflation concerns comes after cooler-than-expected US consumer (CPI) and producer price index numbers. However, any optimism was quickly quashed by new Fed Chair Kevin Warsh, who said in his first Congressional testimony that there’s still “plenty of work to do.”

Taking a step back from day-to-day price action, I’ve just returned from the Rule Symposium and want to highlight a few of my key takeaways about the outlook for gold and silver.

Starting with prices, many of the experts I heard from were clear that gold and silver can still potentially go lower than where they are now, at least to some degree.

The broad consensus was that gold isn’t likely to go below US$3,400 to US$3,500, while US$50 is probably the floor for silver — although its volatility means that’s not guaranteed.

Here’s Dana Samuelson of American Gold Exchange explaining the downside for gold:

“Gold went from US$3,400 to US$3,950 very quickly last spring into the summer, if I remember correctly — or in the fall. It moved really fast, and then we moved all the way to US$5,400. On the way down we’ve backfilled a lot of the space between US$5,400 and now US$4,000, but there’s an air gap between US$3,950 and US$3,400.

“If we break US$3,950, we could trade in the US$3,400, US$3,450 to US$3,950 range and backfill that. That is where I think the potential liability is for gold right now.”

In terms of silver, Tavi Costa of Azuria Capital said the US$50 level may or may not hold:

“I think everybody that has a chart on their screen will see that there is a very important support at US$50. I would say, with a lot of experience looking at this market, I think that the metal does not like to respect these things very much. I’ve seen it break it or not go there many times.”

Costa also touched on another prominent theme at the Rule Symposium, which was that finding a price bottom is a process, not necessarily a single moment:

“People come up and say, ‘I’m not touching silver until it hits US$50.’ And that’s not how you should approach it, because it’s not true that it’s going to reach US$50 and then find a bottom. That’s not true at all. It could go to US$45 — I don’t know.

“The only way you do it, in my view, is that bottoms are a process. You hold some cash, and you keep deploying gradually until you — if you think that we’re going to go to US$120, US$130, US$150, who cares if you bought it at US$50 or at US$60. But you will care if you missed it, and you didn’t buy enough, because it didn’t hit US$50, and it bottomed at US$60 or US$55.”

Rich Checkan of Asset Strategies International emphasized that idea as well, suggesting that it makes more sense to dollar cost…