Market Veteran Spots Critical Floor for Precious Metals

The precious metals market is experiencing a masterclass in volatility, with gold pulling back from a peak near $4,400 an ounce after a powerful nine-week rally. Despite the recent drop, gold remains up more than 50% year to date, a performance that far outpaces most other asset classes. The dominant question for traders is one of strategy: is this a much-needed consolidation within a powerful bull market, or is it a warning that the trend is exhausted?

Wagner's expertise was on full display when he precisely called the top of the rally. Using a confluence of technical signals, he identified an exhaustion point before the reversal happened.

He detailed his analysis, noting: "It is the first occasion since 2013 that on a weekly chart you get nine consecutive candles and it is an exhaustion signal." This pattern, known as the "sequential nine," developed by legendary analyst Tom DeMark, signals potential bottoms and tops.

Wagner added, "On top of that, that red candle created a simple candlestick pattern called a dark cloud cover. And so the combination of both of those to me gave a high probability of possible selloff and corrections."

He views the sharp sell-off that followed as a validation of prior market indecision signaled by a Doji candlestick pattern, which preceded a massive drawdown. The nearly $1,000 rally from the bottom at $3,350 to the top near $4,400 was, in his words, "ridiculous" and "long overdue" for a correction.

In dissecting the aftermath, Wagner framed the correction within the context of Elliot Wave theory, suggesting the recent rally was "wave one," and the market is now in a "wave two scenario", a correction before the next major move higher.

The current correction has given back about 10-12% of the total gain, and Wagner sees a high possibility that it could go lower. He points to key Fibonacci retracement levels as critical support zones to watch for the market to find its new floor:

He emphasized that while volatility is expected during this correction, the long-term outlook remains profoundly bullish. Once this corrective "wave two" ends, the market will start a "primary third wave," which by definition is "never the shortest of the impulse waves." This means, Wagner predicts, "we will break 4,400 again and head to new areas that we have never seen before."

Turning to silver, which experienced a more severe pullback, Wagner attributes this to its inherent volatility, noting that silver tends to "outperform on the upside... and overperform on the downside during a correction." However, he remains equally bullish on silver's long-term prospects, labeling its rally and current correction also as primary waves one and two, respectively. He anticipates silver will take out its recent highs and continue to surge toward a target of $60 per ounce.

Regarding the broader market drivers, Wagner stressed that fundamentals, such as the looming Fed rate cut, US-China trade talks, and even the US government shutdown, are the core reasons a market moves. The charts, he explains, are an easier-to-read tool to gain a sense of possibility when fundamental news often contradicts itself.

He expects Fed Chair Powell to "walk a tight rope" at the FOMC meeting, announcing a likely rate cut while also expressing concerns about the economy. Although a dovish Fed is typically a tailwind for gold, the opposing narrative of geopolitical "de-risking" from a potential US-China trade deal is reducing short-term safe-haven demand. Ultimately, Wagner concluded, "I always believe fundamentals are the core reason a market moves, but analysis of charts combined with that, I believe, is probably the best way to analyze markets."