Gold In Indian Rupees, The USD And The Many Non- USD Currencies

Gold has a special place in the Indian history and culture, India is the second biggest “consumer” of gold (right after China). USA’s gold consumption is third biggest in the world, but it’s less than one fourth of the Indian gold consumption. This means that to a considerable extent, the Indian gold buyers can influence gold’s fundamental situation.

Moreover, India is the second-largest English-speaking country (US comes in first with 268 million English speakers, while about 125 million people speak English in India). Since we’re writing in English and about gold, it’s only natural to discuss the Indian side of the gold market. And by that, we mean taking a closer look at gold’s price in the Indian rupee.

In the recent years the value of the Indian currency has declined compared to the value of the U.S. dollar, and so did gold. This mean that if you live in India, you have yet another reason to be holding gold and one less reason to worry that gold is going to decline profoundly. Yet, the situation is not that simple. After all, the huge value increases in the USD Index translated into declines in gold that were even bigger. This means that from the non-USD point of view, for instance from the Indian point of view, gold price still declined. Where does that lead us to?

It leads us to checking what really happened with the price of gold in terms of Indian rupees during two situations that appear most similar to the current situation with regard to the USD Index movement (the 80s and mid-90s). In particular, the less distant from these situations – the mid-90s – is outstanding in terms of similarity, and looking at what happened to gold form the Indian perspective at that time should give us invaluable insight into what may be lurking just around the corner.

First things first – why should you care about some two situations from a rather distant past? We wrote about it, but it was already some time ago, so it seems appropriate to go over it once again.

Let’s start with the fact that the USD Index is holding up extremely well. It’s not plunging and it’s moving in a rising trend channel despite Trump’s – U.S. President’s – numerous calls for lower USD values, the major shift in Fed’s policy (moving from monetary tightening to loosening). If it happens for a day, or a week, or even a month, it could be accidental. But it’s been taking place for many months. And it’s not a coincidence either.

The USD Index is after an epic breakout and a huge verification thereof.

The Big Picture View of the USD Index

The 2014-2015 rally caused the USD Index to break above the declining very-long-term resistance line, which was verified as support three times. This is a textbook example of a breakout and we can’t stress enough how important it is.

The most notable verification was the final one that we saw in 2018. Since the 2018 bottom, the USD Index is moving higher and the consolidation that it’s been in for about a year now is just a pause after the very initial part of the likely massive rally that’s coming.

If even the Fed and the U.S. President can’t make the USD Index decline for long, just imagine how powerful the bulls really are here. The rally is likely to be huge and the short-term (here: several-month long) consolidation may already be over.

There are two cases on the above chart when the USD Index was just starting its massive rallies: in the early 1980s and in mid-90s. What happened in gold at that time?

Gold Performance When the USD Index Rises

These were the starting points of gold’s most important declines of the past decades. The second example is much more in tune with the current situation as that’s when gold was after years of prolonged consolidation. The early 1980s better compare to what happened after the 2011 top.

Please note that just as what we saw earlier this year, gold initially showed some strength – in February 1996 – by rallying a bit above the previous highs. The USD Index bottomed in April 1995, so there was almost a yearly delay in gold’s reaction. But in the end, the USD – gold relationship worked as expected anyway.

The USD’s most recent long-term bottom formed in February 2018 and gold seems to have topped right now. This time, it’s a bit more than a year of delay, but it’s unreasonable to expect just one situation to be repeated to the letter given different economic and geopolitical environments. The situations are not likely to be identical, but they are likely to be similar – and they indeed are.

What happened after the February 1995 top? Gold declined and kept on declining until reaching the final bottom. Only after this bottom was reached, a new powerful bull market started.

Please note that the pace at which gold declined initially after the top – in the first few months – was nothing to call home about. However, after the initial few months, one could report gold’s decline as really fast.

Let’s compare the sizes of the rallies in the USDX and declines in gold. In the early 80s, the USDX has almost doubled in value, while gold’s value was divided by the factor of 3. In the mid-90s, the USDX rallied by about 50% from its lows, while gold’s value was divided by almost 1.7. Gold magnified what happened in the USD Index in both cases, if we take into account the starting and ending points of the price moves.

However, one can’t forget that the price moves in USD and in gold started at different times – especially in the mid-90s! The USDX bottomed sooner, which means that when gold was topping, the USDX was already after a part of its rally. Consequently, when gold actually declined, it declined based on only part of the slide in the USDX.

So, in order to estimate the real leverage, it would be more appropriate to calculate it in the following way:

• Gold’s weekly close at the first week of February 1996: $417.70
• USDX’s weekly close at the first week of February 1996: 86.97

• Gold’s weekly close at the third week of July 1999: $254.50
• USDX’s weekly close at the third week of July 1999: 103.88

The USD Index gained 19.44%
Gold lost 39.07% (which means that it would need to gain 64.13% to get back to the $417.70).

Depending on how one looks at it, gold actually multiplied USD’s moves 2-3 times during the mid-90 decline.

And in the early 1980s?

• Gold’s weekly close at the third week of January 1980: $845
• USDX’s weekly close at the third week of January 1980: 85.45

• Gold’s weekly close at the third week of June 1982: $308.50
• USDX’s weekly close at the third week of June 1982: 119.01

The USD Index gained 39.27%
Gold lost 63.49% (which means that it would need to gain 173.91% to get back to $845).

Depending on how one looks at it, gold actually multiplied USD’s moves by 1.6 – 4.4 times during the early-80 decline.

This means that just because one is not using U.S. dollars as their primary currency, it doesn’t result in being safe from gold’s declines that are accompanied by USD’s big upswings.

Let’s get back to the topic of gold price in Indian rupees. If gold’s trading in 2020 is going to resemble its mid-90s performance, then it would be a good idea to check what happened with gold in terms of Indian rupee at that time.

Gold from the Indian Perspective

Gold price in terms of the Indian rupee declined about 30% from its 1996 top before forming the final bottom. That’s not a small move – that’s a move that could erase a large part of the buy-and-hold investors capital and it would take many months to just get back to the initial level. If one managed to get out close to the top, or even profit thanks to adjusting one’s positions to the ones that profit from gold’s decline, it would be entirely different and much more pleasant.

The highest weekly closing price of 2019 is 109151 per oz. A 30% decline from this high would imply a move to about 76400. Based on the nearby technical support levels, this would imply either a decline back to the late-2016 bottom, or the 2015 bottom. If we see a particularly bearish market news, gold could decline even below the 2015 bottom. Of course, we can’t guarantee that this will indeed happen, but it seems that gold could decline quite a lot before the final bottom forms.

If it seems like it can’t happen, because the price rallied so high so soon, please note that the times after sharp upswings were exactly the times when gold was starting the declines – especially in 2013 and 2016.

All the above might seem quite complex, so let’s discuss it once again, this time using a brief Q&A:

Gold is likely to decline in the following months, also in terms of the Indian rupee.

– But why? It’s been rallying so nicely in the recent years…

There are numerous reasons, but one of the key ones is the epic breakout in the USD Index that was more than confirmed. Big USD Index rallies follow such breakouts, and they sooner or later trigger big declines in gold.

– So what? If I live in India, why should I be concerned with the U.S. dollar? I’m not using it and I’m buying gold with rupees.

The big USD Index rallies trigger declines in gold that much bigger than the said rallies. This means that even if you never bought anything using U.S. dollars, the big increase in its value can still affect you, if you’re investing or considering investing in gold.

– Really? Did it happen in this way when the USD was previously gaining value quickly?

It did. Back then – in mid-90s – gold priced in the Indian rupee declined by about 30%. It doesn’t have to happen again, and nobody can guarantee any outcome, but that’s exactly what happened.

– Ouch… So, is a decline in gold really likely in 2020?

Again, we can’t guarantee anything with regard to performance, market movement, or individual stock picks, but in our view it’s very likely that we’ll see much lower gold values before we see much higher prices. A decline below $1000 in terms of the USD is likely in our view. Gold price in terms of the Indian rupee could move to its late-2016 bottom, the 2015 bottom or even below it. The $890 target in the USD terms seems to be the most precise one and it appears to be a good idea to monitor gold price movement and make gold price forecasts based on the USD perspective in order to determine the optimal entry point for big long positions and perhaps to exit the positions that would be aimed to profit from lower gold prices.

The full version of this analysis isn’t just about gold in Indian rupee terms though. By the way, such a view is beneficial to the many non-U.S. currencies too. This analysis’ full version discusses yesterday’s strength in mining stocks and the key factors at play and the targets of our promising short position. We encourage you to join our subscribers and reap the rewards. Subscribe today!

The above article is a small sample of what our subscribers enjoy on a daily basis. Check more of our free articles on our website, including this one – just drop by and have a look. We encourage you to sign up for our daily newsletter, too – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. You’ll also get 7 days of free access to our premium daily Gold & Silver Trading Alerts to get a taste of all our care. Sign up for the free newsletter today!

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Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager
Sunshine Profits – Effective Investments through Diligence and Care

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All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Gold, USD and the Euro: the Signs Ahead

Gold didn’t react decisively in the short run overall, but the European currencies: the euro, and the pound rallied. In the first part of today’s analysis, we’ll focus on what happened in the euro and how the forex situation fits the other gold price predictions.

Let’s start with the long-term chart featuring gold prices in terms of the euro.

Gold in the Eyes of the Europeans

The most important thing about gold’s performance is it’s 2019 attempt to break above the 2011 highs. It succeeded but only for a short while. The breakout was invalidated almost instantly as it was clear that gold is not able to withstand the selling pressure. Invalidations of breakouts tend to be very bearish developments and this time was no exception. And just like that – gold declined.

It’s been a few months since gold topped and gold – looking from the long-term perspective – is now only a little lower. Some may say that it’s proof that gold is just correcting after a big rally and that another big upswing is just around the corner. But that’s not what the chart facts support.

The fact is that gold failed to break above the previous high, which is bearish. Looking at the short-term performance, it might be both: correction or the early part of the decline, but so far nothing happened that would justify the bullish interpretation.

In particular, please note that back in 2012, when gold also tried to break above the previous high (and it actually succeeded in terms of the monthly highs), and failed, it also declined at a relatively slow pace initially. That didn’t prevent gold from declining very rapidly in the following months.

This means that if you’re using euro for your day-to-day transactions (for instance, because you live in Western Europe), then you shouldn’t count on the continuation in gold’s rally in the following months. In fact, something exactly the opposite could take place.

If you’re using U.S. dollars for your day-to-day purchases, the above is also very important to you. In this case, the above chart implies that the value of gold is likely to decline relative to what the EUR/USD currency pair will be doing.

And the EUR/USD pair.

The Euro and the Dollar

The Euro Index – proxy for the above – is at its medium-term resistance. Being at an important resistance without breaking above it means that the price is likely to move down. That’s how resistances work.

Moreover, please note that the entire September – today decline is one big prolonged shoulder of the bearish head-and-shoulders pattern (the early-2019 rally being the head). This means that once the Euro breaks significantly lower (perhaps triggered by one of the market news scheduled for this week) – below the previous 2019 lows, it’s likely to fall particularly hard. The size of the decline that follows the breakdown below the head-and-shoulders pattern is likely to be similar to the size of the head, which in this case means a move below the 2017 low. Of course, this would have major repercussions for many other markets, including gold.

If the euro declines that significantly, breaking below its 2017 low, and at the same time – based on the previous chart – gold declines more than the euro, gold would likely truly plunge in terms of the USD. Of course that’s not the only factor that points to this outcome, but it’s something that confirms other, even more important factors.

The full version of this analysis isn’t just about gold in euro terms though. There, we cover the immediate action in gold, silver and the miners in light of the USD Index twists and turns. Plus, we feature a little known sign that gold’s low volume just flashed, and show you its reliability. And of course, you’ll also find there the key factors at play and the targets of our promising short position. We encourage you to join our subscribers and reap the rewards. Subscribe today!

The above article is a small sample of what our subscribers enjoy on a daily basis. Check more of our free articles on our website, including this one – just drop by and have a look. We encourage you to sign up for our daily newsletter, too – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. You’ll also get 7 days of free access to our premium daily Gold & Silver Trading Alerts to get a taste of all our care. Sign up for the free newsletter today!

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Przemyslaw Radomski, CFA

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Sunshine Profits – Effective Investments through Diligence and Care

The Cue from USDX That Gold Didn’t Take

The new steps in the Brexit saga and the U.S.-China agreement continue to support intraday volatility. It’s relatively normal and once the dust settles a bit, the markets are likely to return to their previous trends. In case of the gold market, this means a move lower. The short-term decline might not last long before we see another corrective upswing, though.

The reasons are most clear in case of silver.

The Thorough Examination of Silver

First of all, silver broke below the rising support line that’s based on 4 lows – the May low and three November lows. The white metal didn’t manage to break back above this line, which means that the decline is likely to continue.

Having said that, let’s focus on the three characteristics of a decline: its starting point, its ending point, and its shape.

The starting point is likely to take place early this week, perhaps even today. How do we know that it’s likely? Because of the triangle-vertex-based turning point that’s just around the corner. This technique proved to be useful many times in many parts of the precious metals market, also in silver when it reversed earlier this month. So, the next silver slide is likely just around the corner.

The ending point could be marked by the second triangle-vertex-based reversal happening right before Christmas that we see on the chart. These reversals could work on a near-to basis, so let’s say that the next week or the final week of the year are likely to include the next major reversal. That’s in tune with reversals on other charts, including gold’s long-term chart.

This doesn’t leave much time for the decline to take place, but… that’s where point number 3 comes in. The shape of the decline. Silver is known for (at least it should be known for) its fake breakouts and volatile declines. The latter means that seeing a quick decline shortly would not only not be odd – it would actually be in tune with the way silver declined previously. The September decline, the November decline, even the early-December decline – they all happened fast. Silver dropped decisively and quickly. As history tends to rhyme, it seems that we might see yet another show of silver’s bearish volatility shortly.

Do other parts of the precious metals market confirm this outlook? Let’s check.

The Short-Term Across PMs

Gold hasn’t done anything to invalidate the previously bearish outlook. In terms of the closing prices, gold topped on December 3, which is when we took profits from our previous long position. It hasn’t closed higher ever since, even though it had a very good reason to. Namely, the USD Index declined profoundly since that time.

The context is always the king and this time, the action in the USD Index completely changes the implications of gold’s sideways trading. If the USDX was rallying and gold was refusing to decline, it would have been bullish. But that’s not what has been taking place. Gold has been reported to consistently refuse to soar despite sliding USD. That’s profoundly bearish for the short term.

The mining stocks provide us with yet another confirmation.

This confirmation comes from the volume. It was extremely low. In general, whenever something rises on very low volume, it’s actually a bearish sign, because it shows that the market doesn’t really support this kind of move, and is rather forced to react in a given way. In case of mining stocks, it was probably a reaction to a sharp slide in the USD Index and a new high in the general stock market.

We haven’t seen volume this low in months. The last time when the GDX moved higher on a similarly low volume, was in late July. And what happened immediately thereafter? Miners plunged. Yes, they came back shortly thereafter, but the immediate reaction was very negative. This perfectly fits the implications of gold and silver charts.

The dynamics of other precious metals’ sectors are far from the only defining element in gold price development. USD Index moves are another important piece of the puzzle. This is what the full version of the analysis covers – just as it features the key factors at play and the targets of our promising short position. We encourage you to join our subscribers and reap the rewards. Subscribe today!

The above article is a small sample of what our subscribers enjoy on a daily basis. Check more of our free articles on our website, including this one – just drop by and have a look. We encourage you to sign up for our daily newsletter, too – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. You’ll also get 7 days of free access to our premium daily Gold & Silver Trading Alerts to get a taste of all our care. Sign up for the free newsletter today!

Thank you.
Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager
Sunshine Profits – Effective Investments through Diligence and Care

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All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Silver Miners Pinpoint the Precious Metals’ Outlook

To be clear, we’re not going to discuss the silver mining stock selection, as that’s something our proprietary algorithms do on a daily basis. And yes, during the recent long trade, the gain on the individual gold and silver miners was bigger than the one from the GDX ETF.

Instead, we’re going to take a look at this sector’s performance and compare it to one very similar case from the past. Yes, just one, which may not looks like an appropriate base for drawing conclusions, but the level of similarity makes it definitely relevant to the current situation. So, without further ado, let’s take a closer look at the SIL ETF – the proxy for silver miners.

Silver Miners in the Spotlight

Ever since the SIL ETF started trading (in 2010), we saw three significant rallies in gold and silver. The first rally took place right at the beginning of this chart, leading to the 2011 tops. The second rally started in early 2016 and it was significant in case of both metals. The third notable rally started in the second half of 2018 and it ended in August 2019. It was much bigger in the case of gold than it was in silver and mining stocks, but it’s clear that overall it was something major.

The first takeaway from the above chart is based on the sizes of these three moves. The most recent upswing in the silver stocks was tiny. Even though gold and silver moved higher in a visible manner, silver miners are barely up. To be clear, the rally is visible, but it’s orders of magnitude smaller than what we saw in 2016. We copied the sizes of the previous rallies to the current situation (blue and green dashed lines). It’s clear how tiny the recent upswing was compared to them.

The mining stocks are the part of the precious metals market that tends to show strength at the beginning of a major move up. We saw exactly the opposite. Silver miners were weak compared to what the underlying metal did. Consequently, the odds are that what we saw last and this year was not the start of a long-term bull market in the precious metals market. We will most likely get there eventually, but we are not there just yet.

The thing that we just discovered is that we see not only the similarity in terms of prices, but also in terms of volume movement. The recent move higher was not very similar to the previous upswings in terms of price, but the way volume increased and then declined is very similar to what happened during previous big rallies in gold and silver. In particular, it’s reminiscent of what we saw in 2010 and 2011. Because of both the shape of volume, and of the way silver stocks outperformed silver (barely). The latter is what differentiates the recent upswing and what we saw in 2016 – back then, silver miners strongly outperformed silver.

The final parts of the rallies were accompanied by huge volume levels, but once the top was in, the volume levels notably decreased. That’s what happened in mid-2011 and that’s what happened recently. We marked it with red rectangles. Within the 2011 red rectangle, we saw a few separate volume spikes, and something similar accompanied the recent action too. Back in 2011, the volume spiked during the topping process. It marked the final top in gold, the second top in silver, and also the second top in the silver miners.

Higher gold prices were never seen since that time.

Higher silver prices were never seen since that time.

Neither higher silver stock prices were ever seen since that time.

The silver stock volume spiked last week in a way that was very similar to what we saw in mid-2011. Moreover, last week’s session was a clear shooting star reversal candlestick. These candlesticks are powerful bearish signals if they are accompanied by big volume. And that’s exactly what we saw. When we exited our long positions and entered short ones close to last week’s high, the outlook was already bearish, but seeing this kind of powerful confirmation of the reversal in silver stocks makes this change even more justified.

All in all, the recent performance of silver stocks serves as a perfect confirmation of what we previously wrote about gold, silver, and gold miners. Namely, the short-, and medium-term outlook for the precious metals sector remains bearish.

Our profitable long precious metals position has been closed last week, and we’ve entered another trade immediately. This time, on the short side of the market, and it’s going profitable again. The full version of this analysis features all the details and targets of the already-profitable short, digging into the factors supporting this move and the bearish outlook. Join us and profit along!

The above article is a small sample of what our subscribers enjoy on a daily basis. Check more of our free articles on our website, including this one – just drop by and have a look. We encourage you to sign up for our daily newsletter, too – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. You’ll also get 7 days of free access to our premium daily Gold & Silver Trading Alerts to get a taste of all our care. Sign up for the free newsletter today!

Thank you.
Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager
Sunshine Profits – Effective Investments through Diligence and Care

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Is a Local Top in Gold At Hand?

In yesterday’s analysis on gold price in December 2019, we wrote that while the outlook for the yellow metal for the following months was bearish, it was bullish for the short term. And indeed – gold, silver, and mining stocks rallied. In fact, the rally continues in today’s pre-market session. As it’s happening even without a decline in the USD Index, many investors might think that something more than a short-term rally is actually taking place. But is that really the case?

The key detail in the current gold-USD dynamics is its shape and strength during the final part of the moves in both USD and gold. Long story short, gold tends to react much more to the final moves in the USD Index than to the ones that we see initially or in the middle of the USD movement.

USD Index Done Pulling Back?

What do we see right now in the USD Index? Most likely, it’s the final part of the its pullback that we predicted when the USDX was topping in mid-November. The size of the decline is in tune with previous similar cases, and so is the time factor.

We marked the similar cases with green rectangles. All the setups are similar in terms of shape, and half (two) of them are similar in terms of the price action that preceded the consolidation (sharp rallies). In all four previous cases, the USD Index moved back and forth. Twice (July and October) it created two distinct bottoms, and twice (April and September) it moved quickly up and down, creating multiple intraday tops and bottoms.

In all cases, it took about two weeks before the USD Index started to rally. Moreover, in cases that were preceded by a sharp rally – just like the early-November upswing – the USDX corrected less than half of the upswing. It also declined until moving to the previous local extreme. In case of the April correction, it was the mid-Feb top, and in case of the July correction, it was the early-June bottom.

Right now, we have a situation when the USD Index has been correcting for about 2 weeks, it corrected a bit less than half of the preceding upswing and it appears to be bottoming (second distinct bottom) close to the previous local extreme (late-October top). The history seems to be rhyming.

What does it mean to gold? The same thing it meant previously. If you look at the lower part of the chart and focus on what happened when the green rectangles were drawing to their ends, you’ll see that gold rallied relatively strongly at that time after being more or less muted previously. That’s exactly what we see this week.

What does it mean? It means that gold is most likely in the final part of its rally and that we should expect to see a local top any day now.

Apart from summarizing the outlook of our long position opened right after the November 12 reversal, the full version of this analysis features the comprehensive short-term precious metals analysis, and the valuable sign from yesterday’s action in silver. Bottom line, these are superb tools in planning when and where to profitably switch market sides – just as our preceding success with the earlier short position. Profit along with us.

The above article is a small sample of what our subscribers enjoy on a daily basis. Check more of our free articles on our website, including this one – just drop by and have a look. We encourage you to sign up for our daily newsletter, too – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. You’ll also get 7 days of free access to our premium daily Gold & Silver Trading Alerts to get a taste of all our care. Sign up for the free newsletter today!

Thank you.

Przemyslaw Radomski, CFA

Editor-in-chief, Gold & Silver Fund Manager

Sunshine Profits – Effective Investments through Diligence and Care

How Far Will Gold Reach Before the Upcoming Reversal?

That was actually the second weekly reversal that we saw recently. Why is this important? Because of what happened shortly after we saw the opposite of it not so long ago.

The Anatomy of Gold Reversals

The August and early-September reversals were followed by sizable short-term declines and the combined reversals themselves have most likely created the 2019 top.

The opposite of what created the major top, should create a major bottom now, right? Not so fast. The double reversal is indeed bullish, but there’s one more detail to pay attention to before calling a major bottom in gold. Gold’s volume.

The volume that accompanied the August and September reversals was big, and the volume that we saw recently – especially last week – was small. Sure, it was the long Thanksgiving weekend, which means that fewer traders were making transactions, which explains why the volume was low. Still, knowing what’s below the low volume’s surface doesn’t change the fact that low volume means that the candlestick formations (like the weekly reversal) should not be taken at face value. They give some hints, but they are not as reliable as if they took place on huge volume.

The recent situation is more similar to what we saw in early March. There was a clear weekly reversal, but it was accompanied by low volume. And what happened shortly thereafter? Gold rallied, but not significantly so. At least not within the next several weeks. This tells us that the recent reversals – while bullish – are not too bullish and not beyond the next week or a few of them. Perhaps not even beyond the next several days.

What would one use to forecast a top in gold prices within this week?

The Case for the Upcoming Gold Top

Because of the looming triangle-vertex based turning point. The recent turning points for gold, silver and mining stocks worked perfectly by pinpointing the early November top, and they also correctly estimated the most recent reversals – the local bottoms after which gold, silver and miners moved higher.

The early November top is clearest in case of silver (middle of the above chart), while the recent local bottoms are most clearly visible in case of gold miners (lower part of the chart).

The next triangle reversal is due this week, which makes it likely that we’ll see some kind of turnaround shortly. The important details about this turnaround is that it’s confirmed by not one but two markets – silver and miners, which increases the odds that the reversal will indeed take place. The early-November top, for instance, was indicated by all three parts of the PM market at once.

Let’s keep in mind that it’s not the only factor pointing to this outcome. The True Seasonality for gold confirms the above.

On average, gold price has been spiking around late November and early December. Please note that while on average gold performs best in late November, the accuracy reading actually rises strongly in the next several days. This means that while the biggest price moves usually happened sooner, some of them arrive a bit late. When gold soared sooner, it didn’t decline immediately. The take-away here is that even if the above is not 100% correct, and price spike doesn’t happen right away, it means that it’s still likely to arrive shortly.

Based on the weekly candlestick reversals in gold, the looming triangle reversals, gold’s True Seasonality, and other factors, it seems that gold is going to rally and top shortly.

Apart from outlining the take-profit targets of our long position opened right after the November 12 reversal, the full version of this analysis features a valuable sign from yesterday’s action in mining stocks, and the analysis of gold’s upcoming very short-term moves and targets. Bottom line, these are invaluable tools in planning when and where to profitably switch market sides – just as our preceding success with the earlier short position. Please note that you can still subscribe to these Alerts at very promotional terms – it takes just $9 to read the details right away, and then receive follow-ups for the next three weeks. Profit along with us.

The above article is a small sample of what our subscribers enjoy on a daily basis. Check more of our free articles on our website, including this one – just drop by and have a look. We encourage you to sign up for our daily newsletter, too – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. You’ll also get 7 days of free access to our premium daily Gold & Silver Trading Alerts to get a taste of all our care. Sign up for the free newsletter today!

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Przemyslaw Radomski, CFA

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Sunshine Profits – Effective Investments through Diligence and Care

Another Precious Metals’ Reversal Coming Right Up!

Silver’s strength is important because it indicates that we are already in the second half of the short-term upswing in the precious metals market. If there only was a tool that would provide us with a more precise time prediction… Oh wait, there is one. And it just worked perfectly yesterday.

Precious Metals’ Upcoming Reversal

The technique is called the triangle-vertex-based reversal, but let’s just call it triangle reversals. When the rising support line crosses the declining resistance line, we have a vertex of a triangle. This vertex marks a moment when we are likely to see some kind of reversal. Sometimes it’s relatively clear in advance what sort of reversal we are likely to see, and at times it becomes clear only right before the reversal.

It wasn’t 100% clear recently, but after prices declined on Monday, we wrote that the turnaround is very likely. It was confirmed by the pre-market price action as well. However, what happened during the session made it even more obvious that we saw the start of yet another quick upswing. What’s not to like about such a bullish set of circumstances?

What we saw yesterday was not the only triangle reversal on the horizon. In fact, there’s one today and one early next week. Since this is the Thanksgiving weekend, the odds are that the particularly significant market action will be pushed off until the next week. But, once we’re there, things could get very hot very soon.

The True Seasonality of gold confirms the above.

On average, gold price has been spiking around late November and early December. November 26 is marked right on the gold chart. That’s the last pause before the final spike high in gold that is then followed by a decline to mid-December. This seasonality perfectly confirms what we can see based on the triangle reversals and what we can infer from silver’s relative strength.

Please note that while on average gold performs best in late November, the accuracy reading actually rises strongly in the next several days. This means that while the biggest price moves usually happened sooner, some of them were a bit late. In case of the times when gold soared sooner, it didn’t decline immediately. The take-away here is that even if the above forecast for gold is not 100% correct, and price spike doesn’t happen right away, it means that it’s still likely to arrive shortly.

Based on the triangle reversals, gold’s True Seasonality, and other factors, the following week is likely to include an important top in gold, silver, and mining stocks.

Apart from outlining the take-profit targets of our long position opened right after the November 12 reversal, the full version of this analysis features a helpful hint from yesterday’s action in mining stocks, and the analysis of both forthcoming precious metals’ triangle turning points, and silver Q4 2019 seasonality. Bottom line, these are invaluable tools in planning when and where to profitably switch market sides – just as our preceding success with the earlier short position. Please note that you can still subscribe to these Alerts at very promotional terms – it takes just $9 to read the details right away, and then receive follow-ups for the next three weeks. Profit along with us.

The above article is a small sample of what our subscribers enjoy on a daily basis. Check more of our free articles on our website, including this one – just drop by and have a look. We encourage you to sign up for our daily newsletter, too – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. You’ll also get 7 days of free access to our premium daily Gold & Silver Trading Alerts to get a taste of all our care. Sign up for the free newsletter today!

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Przemyslaw Radomski, CFA

Editor-in-chief, Gold & Silver Fund Manager

Sunshine Profits – Effective Investments through Diligence and Care

The Prospects of Gold’s Next Upswing

USD Index Bounces Higher

Namely, gold futures ended Friday’s session exactly where they had closed on Thursday. There was no daily change in gold, even though it – theoretically – should have declined given USD’s upswing. What does it mean? Gold’s resilience means that gold has probably not finished its short-term upswing yet.

The general rule for any market is that if it doesn’t move in the way it “should” move given what’s going on in the world, it means that – for whatever reason – it’s not the direction in which the market is going to move next. This trading technique doesn’t specify what is the reason for a given market’s strength. The point is to detect and acknowledge this strength, and then to combine this information with other trading signals.

One of the biggest benefits of this approach is its widespread application. Knowing what is likely to move a given market and what kind of reaction would be normal, means that it can be applied – regardless of what the market is. It also applies to various terms, if one takes into consideration the likely time in which the effect of a given development “should” be in place.

For instance, in case of long-term investment, one should pay attention to how the market reacts to the factors that matter in this time horizon, for instance demographics and shifts in supply & demand picture. In case of day trading, it’s a matter of checking if a given individual piece of news (or price action from a key influencing market) causes a price move that seems natural. The bigger the divergence from what would be viewed as normal, the stronger the bullish or bearish signal becomes.

Moving back to the USD-gold picture, we previously wrote that the USD Index is quite likely to consolidate before rallying strongly and it seems that this consolidation is still taking place. The USDX didn’t break to new November highs and Friday’s rally is in tune with how the U.S. currency performed in case of previous consolidations that we marked in green.

Back and forth movement was common, and sometimes it took form of a day-to-day swings, and sometimes (such as in July and October), it meant two bottoms. There are no indications that would make Friday’s upswing look any different than what we saw in October and July and thus it seems that we could easily see yet another downswing (perhaps to the recent lows) before the rally really picks up.

And what would gold be likely to do in such an environment? It would likely rally more visibly than it rallied recently – similarly to how it performed in the final parts of previous USDX consolidations. Despite today’s few-dollar pre-market downswing, it seems that the top is not yet in and that gold will move higher shortly.

But what about the short-term, what else can we say about our long position opened right after the November 12 reversal? Apart from outlining the take-profit targets, the full version of this analysis dives into the lessons from the short-term precious metals’ moves. It’s an invaluable tool in planning when and where to profitably switch market sides – similar to what we have successfully done with the preceding short position. Please note that you can still subscribe to these Alerts at very promotional terms – it takes just $9 to read the details right away, and then receive follow-ups for the next three weeks. Profit along with us.

The above article is a small sample of what our subscribers enjoy on a daily basis. Check more of our free articles on our website, including this one – just drop by and have a look. We encourage you to sign up for our daily newsletter, too – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. You’ll also get 7 days of free access to our premium daily Gold & Silver Trading Alerts to get a taste of all our care. Sign up for the free newsletter today!

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Przemyslaw Radomski, CFA

Editor-in-chief, Gold & Silver Fund Manager

Sunshine Profits – Effective Investments through Diligence and Care

Both the Gold Decline and the Gold Rally Continue

Therefore, balance requires an overview of what’s really going on in case of the medium-term trends. Instead of introducing you to quite a few relevant trees, let’s take a look at the whole forest.

Gold Long-Term

The big picture shows one crucial thing. Gold has most likely formed a key 2019 top in August. The confirmation comes from the shape of the preceding upswing and the volume of the final monthly rally. Record-breaking volume shows that the investors’ emotions got to the red-hot status and yet they were overwhelmed by the sellers.

There were only two cases when the monthly volume that we saw after a sizable upswing was similarly big, and it was at the 2011 and 2018 tops. Both were followed by substantial declines (in case of the former top, the above is an understatement), and since history tends to repeat itself, gold is likely to decline in the following weeks once again.

Please note that it’s not just the similarity to the two above-mentioned cases that makes the medium-term outlook bearish. It’s the way the volume works and it literally speaks volumes. It’s not an out-of-the-blue analogy – investors’ emotions are supposed to get red-hot at the major tops and the volume confirmed that this has indeed happened.

When people wonder how do I buy gold, they often end up buying something else than gold, but with – seemingly – analogous potential. Gold stocks. After all, the latter are less bulky to purchase and the transaction is often just several clicks away. Gold needs to be stored in a safe place, and so on.

Don’t get us wrong – we think that physical gold ownership has many merits, but we want to emphasize that many people choose to ignore them and go with the easier way of being in the precious metals market, as its – well – easier.

Consequently, when discussing gold’s big picture, it’s a great idea to supplement the yellow metal’s analysis with the one of the mining stocks. In case of the long-term point of view, it’s particularly interesting to see how mining stocks perform relative to other stocks. Thanks to this approach, we can isolate the moves in gold stocks that don’t depend on the entire general stocks market.

That’s valuable, because in this way we can avoid falling into the “tide lifts all boats” analytical trap. The factors that cause all stocks (including mining stocks) to move higher or lower will be taken out of the picture once we look at mining stocks through their ratio to other stocks. Consequently, let’s take a look at the HUI to S&P 500 ratio.

As gold topped in August, the ratio topped as well, but while gold’s top formed close to the late-2011 and mid-2012 lows (in terms of the weekly and monthly closing prices), the ratio formed at a level that’s much more important from the long-term point of view. The ratio topped at its 1999 top.

That’s a major top not only because of how clear it is. It’s so important, because it was the final top before the previous multi-year bear market in the precious metals ended. The PMs then declined for about a year and the final bottom that formed, started a multi-year rally.

Just because the ratio is moving lower from the same level doesn’t mean that it absolutely has to move in the same way, but there are multiple indications that point to this outcome anyway, so the above serves as a good confirmation. Besides, that’s not the only bearish thing about the above chart.

The interesting thing about the 1999 top is that it already worked as support two times. It stopped (for a while, but still) the decline in late 2014 and it triggered a rebound in late 2015. The decline in the ratio resumed only after the ratio moved below the 1999 top. This year’s top was actually the first time when this level served as resistance. This suggests that a bigger move lower is indeed likely just around the corner.

Speaking of resistances that have been useful and triggered a decline recently, there’s also the 50-month moving average. It served as resistance in 2001, as support in 2005, 2006, and 2007. It served as resistance in 2012 and 2016. And it served as resistance this year as the ratio turned lower after attempting to confirm the breakout above it.

Moreover, please note what the ratio did when the new bull market started – after the 2000 bottom it soared and then it continued to show strength for the next few years. In fact, the biggest part of the rally in the ratio took place in the first few years of the 2000 – 2011 upswing. And what did the ratio do recently?

It was barely up even though gold rallied visibly, and it failed to take out the above-mentioned resistance levels. What’s even more striking is that the recent rally in the ratio was much smaller than the ratio that we saw in 2016. The strength that we saw in the gold miners to other stocks ratio at the beginning of the previous bull market was definitely not present this year. Consequently, it’s very unlikely that we saw a start of a new powerful, long-term rally in the ratio and in the rest of the precious metals sector.

Based on the above, the odds are that the decline will now continue, and since this ratio moves in tune with gold over the long run, it supports the bearish outlook for gold in the medium term. Consequently, while gold’s rally continues in the short run, it’s decline continues in the medium term.

We took profits from our previous short position and entered a long position right after the November 12 reversal. In the full version of this analysis, we outline the prices at which we are going to take profits from the long position and likely enter another short position. We’re also discussing when that’s (approximately) likely to take place. We encourage you to join our subscribers and profit right along with us.

The above article is a small sample of what our subscribers enjoy on a daily basis. Check more of our free articles on our website, including this one – just drop by and have a look. We encourage you to sign up for our daily newsletter, too – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. You’ll also get 7 days of free access to our premium daily Gold & Silver Trading Alerts to get a taste of all our care. Sign up for the free newsletter today!

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Przemyslaw Radomski, CFA

Editor-in-chief, Gold & Silver Fund Manager

Sunshine Profits – Effective Investments through Diligence and Care

The Case for a Silver Rally

Gold, and mining stocks could move higher as well, and we’ll move to that shortly. For now, let’s talk silver.

In particular, we’re going to discuss the SLV ETF. This ETF has one big advantage over silver futures chart that we feature regularly. It puts emphasis on price gaps and shows only that trading which took place when the U.S. market was open. This distinction can be helpful in determining support and resistance levels as price gaps tend to provide such. In fact, the late-September bottom formed once silver touched the upper border of its price gap.

The SLV was attempting to break below the lower border of the gap and it has failed to do so three times. This serves as an indication that the white metal is not yet ready to break lower. The price gap on its own would not be strong enough to make the short-term silver outlook bullish all by itself, but that’s not the only thing that’s pointing to higher silver prices in the near term.

The RSI indicator (upper part of the chart) is close to 30, and that’s when silver’s short-term rallies used to start.

More interestingly, the Stochastic indicator just moved to levels that are low enough to indicate a short-term buying opportunity on their own. This simple technique worked very well in the previous 12 months. Almost exactly 1 year ago it confirmed a medium-term bottom, in early March it indicated a short-term buying opportunity, and in mid-May it was very close to pinpointing the exact bottom before the mid-year rally. We saw Stochastic close to the buy line also at the end of September, which doesn’t really count as a true bullish signal, but silver moved higher nonetheless. So, we have three out of three efficiency with a little bonus confirmation from about 1.5 months ago. While this doesn’t make a short-term rally inevitable, it does make it quite likely.

And now for the final silver sign – the time. Silver tends to move in a very specific way. It moves very fast for a few days, only to act very calm in the next several days. Some might say that it’s similar to how spiders move in terms of seconds. Personally, we find the silver view much more appealing… What does this have to do with the chance for a short-term upswing in silver? Quite a lot.

Silver already lost its downward momentum as its been calm for a few days now. This characteristic pattern is what we saw also when silver completed a broad top (just as it did recently) earlier this year. In early March, the fourth day of the calm after the storm, was actually a local bottom that was followed by a rally to the 50% Fibonacci retracement. Not a ground-breaking rally, but definitely something one would prefer to ride on the long side of the market rather than being short.

Just as one swallow doesn’t make a summer, one analogy to the previous decline isn’t necessary meaningful. But that was not the only case. Silver declined in a very similar manner after the 2016 rally.

(click on the chart to enlarge it)

As you can see, silver losing its downward momentum after a volatile decline was how practically all bottoms of the late-2016 decline formed. We saw the same thing in case of the first two important bottoms of 2017.

The silver seasonality also suggests that the short-term decline in the white metal might be over or close to being over as local bottoms tend to form close to the middle of November.

What does it all come to? It means that – as far as the next week or two are concerned – the outlook for silver just became bullish. In fact, we just wrote to our subscribers that we’re taking profits off the table in case of the short positions and in today’s Gold & Silver Trading Alert, we clearly outlined the details of making money on the upcoming upswing. These details cover positions in gold, silver, UGLD, USLV, GDX, NUGT, and JNUG. And they can all be yours as soon as you sign up for our free mailing list – the 7-day full access to our Gold & Silver Trading Alert comes as an added bonus. Yes, it’s all free. Sign up now.

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Przemyslaw Radomski, CFA

Editor-in-chief, Gold & Silver Fund Manager

Sunshine Profits – Effective Investments through Diligence and Care

Gold Breaks Down, Waving Good-bye to the 2019 Rally

The decline in gold, silver, and miners is developing just as we’ve been expecting it to. Most importantly, gold has just confirmed its breakdown and everything that we reported on gold’s outlook and price targets just got a huge confirmation.

Let’s take a look at what gold, silver, and mining stocks did in the last couple of days.

The Recent Days in PMs

Gold broke below the lowest closing price of September and it just verified this breakdown by closing below it for three consecutive trading days, and that includes the weekly close too. That’s a clear way for gold to say that a relatively broad top has been formed and that lower prices are going to follow.

Silver broke not only below its September low, but also below its rising red support line and the 50% Fibonacci retracement level. Technically, silver’s breakdown was even more important than the one in gold. The fact that the white metal managed to close the week below the combination of three support levels is bearish, but it will become much more so only after it’s verified.

  • So, isn’t it best to wait for the breakdown in silver to be confirmed, before aiming to profit on the decline?

That’s one way to do it, and if anyone wants to take this route – sure, it’s their capital. We think that having a position open right now is better from the risk to reward point of view because of the confirmed breakdown in gold, and because of multiple signs that we have covered in our previous analyses, and that we can’t discuss on each day – there’s simply not enough space and time to again go through all the bearish factors that remain in place right now.

It is usually the case that three consecutive closes below a certain level are necessary for the market to verify the breakdown, but given how strongly correlated gold and silver are, the odds are that a slide in gold will trigger a powerful slide in silver as well. And gold’s plunge could start any day, hour, or minute.

  • Ok, but what about the miners’ strength? They just moved higher yesterday, even though gold didn’t.

That’s true, but it’s also true that they did the very same thing just several days ago, during the previous pause. On November 5th and 6th, miners moved higher on an intraday basis even though gold rallied only once in intraday terms. Moreover, November 5th – the first of the small, two-day, corrective upswing – was the day when the HUI opened lower but then moved up during the day. That’s exactly what happened on Friday – the first day of the current, two-day, corrective upswing.

Given the above similarity and the very bearish follow-up that we saw on November 7th (big plunge across the precious metals’ board), it’s hard to view miners’ performance as bullish. Besides, if the miners are really showing strength here and the decline in gold and silver continues today, then the former will easily repeat their supposedly bullish signal, indicating a local bottom. At this time, such a scenario seems doubtful.

The gold market has been declining just as we expected it to and it’s likely to decline some more before we see a bigger turnaround. Knowing when to exit a short position and when to enter a long one is the essential part of making money on this move. They say that the universe does not reward one for what they know, but for what they do with it. The clear price targets and profit-take details for gold, silver, and miners included in the full version of today’s analysis – our Gold & Silver Trading Alert – are the actionable part that savvy traders really should take into account right now.

The above article is a small sample of what our subscribers enjoy on a daily basis. Check more of our free articles on our website, including this one – just drop by and have a look. We encourage you to sign up for our daily newsletter, too – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. You’ll also get 7 days of free access to our premium daily Gold & Silver Trading Alerts to get a taste of all our care. Sign up for the free newsletter today!

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Przemyslaw Radomski, CFA

Editor-in-chief, Gold & Silver Fund Manager

Sunshine Profits – Effective Investments through Diligence and Care

Wait… Was That a Bullish Silver Reversal?

Silver plunged on Tuesday, just as it was likely to after the triple reversal that we’ve been writing about, and it was declining strongly during Wednesday’s pre-market trading. And then it all changed.

We doubt that and the below chart shows why.

About That Silver Reversal

We doubt the significance of yesterday’s reversal in silver, because daily corrections after the big daily declines are not something that indicate a reversal. Conversely, it’s something normal.

For instance, the intraday reversal that we saw in early February should have been – theoretically – followed by higher prices. It wasn’t. It was simply a breather that silver took before continuing to decline. These daily pauses don’t always take the same form. In late February, silver corrected by simply rallying a bit without an intraday reversal. And in late September, silver’s pause took form of a significant slowdown in the pace at which silver was declining.

In all above-mentioned cases silver resumed its decline shortly. So, is this time really any different? That’s unlikely.

Besides, silver had a good reason not to decline without looking back. The rising support line that’s based on the previous lows in terms of closing prices (May and July lows) was just reached in intraday terms. Since the line is based on daily closing prices, and we didn’t see a daily close below it yesterday, we don’t view yesterday’s price action as invalidation of the breakdown. The support held for now, but that’s not enough to make the outlook bullish.

Moreover, let’s keep in mind what we wrote in yesterday’s Gold & Silver Trading Alert about the size of silver’s decline so far:

Silver declined profoundly and it seems to be just starting its decline. Silver has recently outperformed on a very short-term basis after having formed a shooting star reversal. It doesn’t seem that just a one-day decline or something only a little bigger than that is enough to really be a reasonable response to multiple strong sell signs. Similar signals in the past used to be followed by multi-dollar declines.

The move that we’ve seen so far, is too small even compared to the lesser silver declines. And if we compare it to silver’s bigger declines, it’s almost nonexistent.

Even if we consider yesterday’s pre-market downswing to be a part of the decline, the entire move is still tiny compared to even the smaller of the previous declines. Taking this comparison into account it’s even more likely that yesterday’s reversal was not the end of the decline in silver but rather a pause within it.

All in all, predicting higher silver prices here based on yesterday’s small reversal is not justified – at least not yet.

Today’s article is a small sample of what our subscribers enjoy on a daily basis. For instance today, we have shared the analysis of yesterday’s price movement in gold and mining stocks, discussed their volume levels and relative sizes of the price moves. The extra detail that most investors will probably miss comes from the Stochastic Oscillator applied do the GDX ETF. As it turns out, the very recent top is much more important than it appears at first sight… Check more of our free articles on our website, including this one – just drop by and have a look. We encourage you to sign up for our daily newsletter, too – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. You’ll also get 7 days of free access to our premium daily Gold & Silver Trading Alerts to get a taste of all that our subscribers enjoy regularly. Sign up for the free newsletter today!

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Sunshine Profits – Effective Investments through Diligence and Care


All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Gold Juniors Decline While Senior Miners Rally – What Gives?

The miners rallied? Oh, you mean the senior mining stocks (HUI, GDX…) – then yes, they moved a bit higher. But the junior miners (Toronto Stock Exchange Venture Index) just declined after confirming breakdown below the very important rising support line, which has profound implications for the next months. Truth be told, what’s happening in the senior miners can be used to indicate the next short-term moves as well, but we’ll start today’s analysis with the big picture.

The Mining Index That Is Breaking Down

On October 25, we wrote the following about juniors’ outlook:

What’s going on in this proxy for junior miners?

It’s declining – that’s what’s happening. In particular, it declined below the rising medium-term support line that’s based on two profound and clear bottoms: the 2016 and 2018 lows. And it’s not something that happened just yesterday. It happened about 3 weeks ago and unless the TSX Venture Index rallies today, this week’s close will mark the third consecutive weekly close below this line. That’s important, because this means that the breakdown – even though it’s tiny – was just confirmed. And confirmed breakdowns are likely to be followed by further declines.

Now, the more significant the support that was broken, the bigger decline one can expect, and the line that was just broken is definitely significant.

This means that the confirmed breakdown in the TSX Venture sends a huge warning to the gold, silver, and mining stock bulls. It’s not an immediate-term or even a short-term sign (we have plenty of them coming from other places), but it is a powerful sign pointing to sector-wide decline in the following months. We have been warned by yet another market. Those who refuse to listen will have to face the costly consequences.

The decline’s continuation means that everything that we wrote above is more than up-to-date. It was just confirmed by juniors’ price action. If the breakdown was not a big deal, the junior miners could have rallied, just like the senior miners did. But that’s not what happened. The previously broken support has now turned into resistance, and it makes the possible short-term upside very limited. The downside, however, is huge.

The nearest strong support is the 2018 low, but we doubt that it will hold, given that the recent breakdown took place so close to it. The price had already taken a breather and it’s ready to slide further. This means that the next likely target is the early-2016 bottom. That’s far from the current price, so the move is likely to significant. And, since the medium-term moves are more or less aligned between the major parts of the precious metals sector and the Toronto Stock Exchange Venture Index, it seems that gold, silver, and senior mining stocks have much further to drop in the following months too.

Speaking of senior mining stocks, let’s see how they performed compared to the price of gold and compared to other stocks.

Examination of Senior Miners

The HUI to gold ratio is a good way to measure gold stocks’ relative performance to gold. And this ratio is once again in the decline mode after a rather sharp counter-trend move. Why was the recent upswing a counter-trend move and not the start of a beginning of a new trend? Because the attempt to break above the declining resistance line failed miserably. The current small move lower in the ratio is the very early part of the price move right after the breakout was invalidated.

Invalidations are strong bearish signs in general. The line that was broken was based on two major (2011 and 2016) tops, therefore it’s important – and so is the invalidation of the breakdown above it. Focusing on what one saw in the previous several days is tempting, especially for beginning gold traders, but keeping the context in mind is absolutely critical if one wants to make serious gains in this – or, in fact, any other – market.

Moreover, let’s remember that the 2019 top in the ratio made the RSI indicator move above 70 and there were only two similar cases in the past 15 years. That was the late-2012 top and the 2016 top. Both were followed by substantial declines in the ratio, in gold stocks, and in gold itself. The implications here are clearly bearish for the following months and weeks. The above chart doesn’t signal anything for gold in the next several days, though. Given how rich this week is in terms of news, things could get quite volatile, especially given the looming reversal turning point, but we’ll get to that in the following text.

Today’s article is a small sample of what our subscribers enjoy on a daily basis. For instance today, we’ve also carried on with the gold stocks examination and shared the short-term PMs picture. Finally, we’ve also included a helpful summary of the gold move’s determinants at play. Check more of our free articles on our website, including this one – just drop by and have a look. We encourage you to sign up for our daily newsletter, too – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. You’ll also get 7 days of free access to our premium daily Gold & Silver Trading Alerts to get a taste of all our care. Sign up for the free newsletter today!

Thank you.

Przemyslaw Radomski, CFA

Editor-in-chief, Gold & Silver Fund Manager

Sunshine Profits – Effective Investments through Diligence and Care


All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Powerful Lessons of Silver’s Daily Reversals

The way mining stocks behaved, and how gold closed relative to its previous tops also have important implications, but let’s start today’s analysis with the former.

Silver, the less valuable (at least so far) of the most popular precious metals and many small investors’ metal of choice, reversed in a particularly meaningful way.

Friday’s PMs Reversals

All three parts of the precious metals sector: gold, silver, and mining stocks (HUI is a proxy for gold stocks) moved to or above their respective 50% Fibonacci retracements based on the September – October declines, but only silver closed visibly below the 38.2% retracement. That’s one of the reasons why silver’s reversal was so important. Silver simply moved up and down the most. That’s far from it all, though. The big deal about this reversal is how similar it is to what silver has done in the previous years after similar reversals.

You see, silver is known to rally very high and outperform gold and mining stocks right before or while forming a top (often creating a fake breakout a.k.a. fakeout), but it doesn’t necessarily happen on one day. Silver might rally for a day or a few days, when gold and miners are not doing much, or simply visibly less than silver. At times, the above and the subsequent slide take place during the same trading day, but it is not very common. This means that such sessions are relatively easy to find among other days simply because they stand out.

We won’t be able to provide you with a complete list of silver’s profound daily reversals, but we will feature some of them that should make you think at least twice before viewing the initial “strength” in the white metal as being anything close to bullish.

Let’s start the silver time machine and set it back to about three years ago. Whoosh!

Silver’s Timeless Reversals

We’re now in the second half of 2016. Precisely, at the beginning of July. Silver just soared several dollars, but it reversed some of its daily gains. All silver analysts are cheering as silver ended the session higher than the previous one, and the white metal gained a bit more on the following day. That was true, but the perceived – bullish – implications were entirely off. Silver had just reversed and that intraday high turned out to be the yearly high.

Before declining in the most profound way (in October), silver flashed the daily reversal once again, at the end of September. One could say that the mid-August session was also a daily reversal, which also had bearish implications for the following days and weeks.

Based on what happened in 2016, it seems that silver’s daily reversals should at least raise an eyebrow.

Let’s get back to the time machine. This time, we’re setting it to 2013. Whoosh!

It’s mid-June 2013, and silver is after a steady decline. It just moved almost a full dollar higher during just one day, but it gave away most of these gains before the session was over. The following session opened a bit higher, but silver closed the day lower. And it declined on the next day. And the next one too. And then silver plunged almost $2 in just one day, only to decline some more in the following days. And it all started with the daily reversal.

The take-away is that silver’s daily reversals might be worth more than just a raised eyebrow.

The time machine still has some fuel left. Let’s get back one additional year. Whoosh!

It’s the first day of October 2012 and silver just rallied to new highs, after rising about $12 in less than 2 months. Silver didn’t manage to hold these intraday gains, and closed the day only a bit higher. The outlook seemed quite optimistic. But in reality, it was very, very, very far from that. The daily reversal marked the end of the volatile counter-trend rally, and started the decline that continued for years (in fact, the odds are that this medium-term downswing continues up to this day). In other words, since the first day of October 2012, we haven’t seen silver prices at higher levels.

All in all, silver’s daily reversals should do much more than just raise both of one’s eyebrows, especially when they take place in October. They should make investors prepare for much lower silver prices – if not immediately, then relatively shortly. And we have just seen a profound daily silver reversal on Friday.

Today’s article is a small sample of what our subscribers enjoy on a daily basis. For instance today, we’ve also covered the silver time machine lessons. Then, we discussed the outlook for gold and miners in more detail, and also gold performance from European currencies’ point of view. Finally, we’ve also included a helpful summary of the gold move’s determinants at play. Check more of our free articles on our website, including this one – just drop by and have a look. We encourage you to sign up for our daily newsletter, too – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. You’ll also get 7 days of free access to our premium daily Gold & Silver Trading Alerts to get a taste of all our care. Sign up for the free newsletter today!

Thank you.

Przemyslaw Radomski, CFA

Editor-in-chief, Gold & Silver Fund Manager

Sunshine Profits – Effective Investments through Diligence and Care


All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

This Sliding Index is About to Send GDXJ and Other Gold Mining ETFs Down

Before moving to the chart, a few words why this index is a proxy for juniors, and why it’s not as perfect. It can be used as a proxy for juniors because literally hundreds of junior mining companies are listed on this exchange. It’s not a perfect proxy, because there are also other companies listed there that are not even close to the mining business such as tech stocks.

So… What’s going on in this proxy for junior miners?

It’s declining – that’s what’s happening. In particular, it declined below the rising medium-term support line that’s based on two profound and clear bottoms: the 2016 and 2018 lows. And it’s not something that happened just yesterday. It happened about 3 weeks ago and unless the TSX Venture Index rallies today, this week’s close will mark the third consecutive weekly close below this line. That’s important because this means that the breakdown – even though it’s tiny – was just confirmed. And confirmed breakdowns are likely to be followed by further declines.

Now, the more significant the support that was broken, the bigger decline one can expect, and the line that was just broken is definitely significant.

But maybe the tech stocks just underperformed?

Fat chance – the Nasdaq is very close to its all-time highs, so the odds are that it was not the technology sector that dragged the index lower.

Please note how closely did the TSX Venture Index follow precious metals sector (lower part of the chart includes gold, silver, and HUI – proxy for gold stocks) higher in 2016 and how the subsequent decline happened at the same time. The 2018 decline was also more or less in tune. The sizes of the moves were different, but overall, prices moved in the same direction on average in the medium term.

This means that the confirmed breakdown in the TSX Venture sends a huge warning to the gold, silver, and mining stock bulls. It’s not an immediate-term or even a short-term sign (we have plenty of them coming from other places), but it is a powerful sign pointing to sector-wide decline in the following months. We have been warned by yet another market. Those who refuse to listen will have to face the costly consequences.

We hope you enjoyed reading the above free analysis, and we encourage you to read today’s Gold & Silver Trading Alert – this analysis’ full version. There, we discuss gold outlook in more detail, recent platinum developments or the very short-term PMs situation. Finally, we’ve also included a helpful summary of the gold move’s determinants at play. Taken together, these paint a coherent picture of what’s likely to come in the following months. The full Alert includes detailed price targets for gold, silver, and the GDX ETF as well as related leveraged ETNs. There’s no risk in subscribing right away, because there’s a 30-day money back guarantee for all our products, so we encourage you to subscribe today.

Thank you.

Przemyslaw Radomski, CFA

Editor-in-chief, Gold & Silver Fund Manager

Sunshine Profits – Effective Investments through Diligence and Care


All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’

Why It Makes Sense to Pay Attention to Platinum Now

“What? Why platinum?” – you’d probably ask back. And correctly so, this shiny metal has been declining in the previous years and only recently did it show some decent strength. And this may not sound important at all if you’re only considering investing in gold, silver, or mining stocks (like most precious metals investors) or are already holding them, but it actually is.

In the interconnected and globalized economy there are very few (if any) assets that can move totally on their own. In particular, we can see similarities in movement of assets from the same sector. Like gold and silver. And – in some cases – platinum.

This means that at times, looking at platinum can tell us something not only about the little silver (that’s what platina actually means), but about the rest of the precious metals sector. This appears to be the case right now.

What does the platinum chart say in general?

It’s emphasizing how strongly platinum rallied in previous months… After being so weak in the previous years. The long-term trend remains down as platinum didn’t break above the rising red resistance lines – the attempt to move above the lower one was invalidated. On a short-term basis, the rally was noticeable to say the least. What does it suggest?

It doesn’t suggest anything per se, but once we combine it with two details, it becomes important.

The first detail is that any market that is generally weak, but then acts strong at a certain time, might simply be rallying just because everything is rallying as the investment public (that enters the market last and buys close to the top) is buying everything without looking at its potential. And in particular if something looks cheaper than something else (e.g. because it was declining previously or precisely because it has unfavorable fundamentals). This means that just by looking at the performance of the weak parts of a given market one can detect the moment, when the investment public is entering the fray, and thus that the top is being formed.

The second detail is that platinum is currently the weakest part of the precious metals sector and this perfectly fits the above-mentioned type of reaction. The size of the platinum market is also relatively small. The fundamental situation for platinum is rather grim as it’s being used as a catalyst for diesel car engines that are no longer as often produced as in the past. Gasoline engines are growing in popularity relative to the former and in their case, palladium is used. Both could be hit when electric cars start to take over the market, but that’s something that will take many years. The fundamental outlook is one source of information and the technical situation is another one.

The technicals perfectly confirm the fundamentals. Platinum has been continuously underperforming gold despite local rallies. There were attempts to break above the declining long-term resistance line, but they all failed. The value of the ROC indicator in the upper part of the chart just reached its resistance line, which suggests that another downturn is likely. Simply put, the outlook for the platinum to gold ratio and platinum itself looks very unfavorable.

This, plus the simple fact that platinum seems cheap compared to gold makes it perfectly fit the situation described previously. Platinum is the weakest part of the precious metals sector and it had recently rallied.

This means that the precious metals investment public has likely entered the market in August – when platinum outperformed and topped. And what does it signal for gold and the rest of the PMs? This means that the major top was most likely formed not just in platinum, but in the entire precious metals market, as that’s the market most closely related to platinum.

All in all, even if you’re not interested in investing in platinum (and likely rightfully so), it’s worth paying attention to what this white metal is doing. It recently suggested that a medium-term top formed and that lower prices across the precious metals board are to be expected. This is yet another warning sign for the precious metals bulls. Surely, there will most likely be times when gold and silver are trading well above their 2011 highs, but it’s unlikely to take place before we see a big decline first.

Today’s article is a small sample of what our subscribers enjoy on a daily basis.For instance today, we’ve also covered silver outlook in detail, or the very short-term PMs situation. Finally, we’ve also included a helpful summary of the gold move’s determinants at play. Check more of our free articles on our website, including this one – just drop by and have a look. We encourage you to sign up for our daily newsletter, too – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. You’ll also get 7 days of free access to our premium daily Gold & Silver Trading Alerts to get a taste of all our care. Sign up for the free newsletter today!

Thank you.

Przemyslaw Radomski, CFA

Editor-in-chief, Gold & Silver Fund Manager

Sunshine Profits – Effective Investments through Diligence and Care


All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Where Next for Oil After Its Double Reversal?

In yesterday’s Alert, we wrote the following:

Crude oil moved higher last week, especially on Thursday and Friday. This rally was in tune with the clear buy signals from the CCI and Stochastic indicators. While crude oil pulled back in today’s pre-market upswing, it’s unlikely that the rally is completely over at this time. Why? Because of two factors: one that we covered previously, and one that we didn’t cover so far.

The thing that we already discussed is the upside target based on the 38.2% Fibonacci retracement. It was not reached yet. Consequently, the price most likely has further to run.

The thing that we didn’t mention previously is the fact that crude oil just invalidated the breakdown below the rising dashed support line that’s based on the December 2018 and the August 2019 lows. Invalidations of breakdowns are bullish on their own. That’s yet another reason to expect the profits on the current crude oil long position to increase further.

The above generally remains up-to-date. The price of crude oil declined today and then rose back up and at the moment, our long positions are about $1.50 in the black. The question is whether we run for the hills because of this week’s decline, or do we wait for the price target to be reached.

The latter still appears to be the better idea. Applying the Fibonacci retracements to the October rally shows that today’s low formed almost exactly at the 61.8% Fibonacci retracement level. That’s the classic way for any asset to correct its preceding move and then to resume the trend. The short-term trend remains up, which means that the odds are that our target area will be reached.

One concerning matter is the situation in the USD Index. In the very recent past – the last several days – the USD Index and crude oil moved in the opposite ways. Thursday’s and Friday’s upswing in crude oil corresponded to declining USD. And the USD Index seems to be bottoming.

Then again, the relationship may be very short-lived and crude oil might be able to rally despite USD’s rally for a few days, anyway. After all, the USD Index is up at the moment of writing these words, and crude oil is almost done correcting its initial downswing.

Consequently, in our view, the current long position is justified from the risk-reward point of view.

If you enjoyed the above analysis and would like to receive daily premium follow-ups, we encourage you to sign up for our Oil Trading Alerts to also benefit from the trading action we describe – the moment it happens. Check more of our free articles on our website – just drop by and have a look. We encourage you to sign up for our daily newsletter, too – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Gold & Silver Trading Alerts. Sign up for the free newsletter today!

Thank you.

Przemyslaw Radomski, CFA

Editor-in-chief, Gold & Silver Fund Manager

Sunshine Profits – Effective Investments through Diligence and Care


All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

The Many Aligning Signals in Gold

Let’s start this week with a bigger update on multiple gold charts. There are so many reasons due to which gold is likely to decline in the following months – we’ll start with last week’s closing day analysis.

PMs on Friday

Gold, silver, and mining stocks declined, and the way in which they did, was very informative. Gold closed both the day and the week below the $1,500 level and the volume increased as gold declined. In fact, Friday’s volume was the highest one that we saw so far this month.

And gold stocks’ strength that we saw on Thursday? Gone and invalidated. Friday’s decline in the HUI Index erased almost the entire October upswing. Neither in silver nor in gold have we seen the same kind of weakness. The miners’ underperformance is huge and it serves as a major bearish confirmation.

Of course, that’s just the tip of the signal iceberg.

Let’s consider what gold did in the previous cases when it topped while forming a few lower tops.

The Message of Gold’s Lower Highs

The similar cases are characterized by the declining green lines and the thing that we would like you to focus on is the price of gold compared to the green lines and the 50-day moving average. The latter can be useful for many things, and in this case it’s helpful in determining whether gold declined significantly enough for the move to be the start of a bigger downswing.

There was practically only one case when gold moved above one of its previous highs and it was in 2018. Back then, gold moved to a new high before starting the decline. But where did gold decline before this move? Only slightly below the 50-day moving average and the MA was far from the declining green resistance line.

In 2016 and earlier in 2019 when the declining resistance line moved to the 50-day moving average, and gold declined below the latter, there was no new high and gold’s decline continued. In early 2019, it continued only for some time, but in 2016, it was followed by a major and sharp slide. The latter happened in October, by the way. All in all, it seems more likely than not that the counter-trend upswing is already over. And if it isn’t, then it’s very likely that gold won’t rally to new highs before declining significantly.

We had written that gold has likely topped in August as it moved up on huge volume. It was hard to believe, due to the same thing that caused the volume to be high in the first place – the extraordinary, emotional bullishness. The same thing accompanied the 2011 high and the 2018 high. Gold declined in September, but it’s unlikely that the decline is over. Both above-mentioned highs were followed by $200+ declines in gold and it doesn’t seem that this time is any different.

To be clear, it is different, but not in a way that would prevent gold from declining at least $200 from the recent high.

The move to which gold’s top and the current decline are particularly similar are the 1996 top and the subsequent slide to the final lows.

Gold’s Analogies

We wrote about it in mid-August, but it’s worth bringing up the most interesting chart from that analysis:

The shape of the decline and the subsequent upswing is very similar to what we saw in previous years. However, that’s not even the most important detail that makes the decline so likely. It’s the USD Index and gold’s link to it.

The 2014-2015 rally caused the USD Index to break above the declining very-long-term resistance line, which was verified as support three times. This is a textbook example of a breakout and we can’t stress enough how important it is.

The most notable verification was the final one that we saw in 2018. Since the 2018 bottom, the USD Index is moving higher and the consolidation that it’s been in for about a year now is just a pause after the very initial part of the likely massive rally that’s coming.

If even the Fed and the U.S. President can’t make the USD Index decline for long, just imagine how powerful the bulls really are here. The rally is likely to be huge and the short-term (here: several-month long) consolidation may already be over.

There are two cases on the above chart when the USD Index was just starting its massive rallies: in the early 1980s and in 1995. What happened in gold at that time?

These were the starting points of gold’s most important declines of the past decades. The second example is much more in tune with the current situation as that’s when gold was after years of prolonged consolidation. The early 1980s better compare to what happened after the 2011 top.

Please note that just as what we see right now, gold initially showed some strength – in February 1996 – by rallying a bit above the previous highs. The USD Index bottomed in April 1995, so there was almost a yearly delay in gold’s reaction. But in the end, the USD – gold relationship worked as expected anyway.

The USD’s most recent long-term bottom formed in February 2018 and gold [topped in August]. This time, it’s a bit more than a year of delay, but it’s unreasonable to expect just one situation to be repeated to the letter given different economic and geopolitical environments. The situations are not likely to be identical, but they are likely to be similar – and they are.

What happened after the February 1995 top? Gold declined and kept on declining until reaching the final bottom. Only after this bottom was reached, a new powerful bull market started. 

  • But gold just rallied so significantly in the last several months!

… And that’s most likely what people were saying in early 1995, while they were buying at the top.

It’s easy to get carried away by momentum and emotions that it generates. We’re here for you to analyze the market as objectively and with as much cold logic as possible. And the key points in gold’s supposedly bullish story simply don’t add up.

Gold topped on extreme volume in August, just as it did in early 1996. The view from other currencies apart from the U.S. dollar confirms how bearish the outlook really is for the following months. Let’s see the summary for full details.

Summary

Summing up, it seems that the corrective upswing in gold is over or almost over and that the big decline in gold is already underway (and that it had started in August as we had written previously). The invalidation of breakouts above the 2011 high in case of gold priced in the euro and the British pound confirm how bearish the outlook really is for the following months. Gold is likely starting to decline hundreds of dollars. If it rallies a few or even $20 dollars right now, it doesn’t matter much given the above. The profits from the short position in gold, silver and mining stocks are likely to be legendary, but the difficult part is not to miss the decline. That’s why we were so quick to get back to the short position in Friday. It was much better to do so than to risk missing out of this epic move.

Today’s article is a small sample of what our subscribers enjoy on a daily basis. For instance today, we’ve covered the chart takeouts of gold priced in the euro and in the British pound price for the yellow metal. We’ve also delved some more into silver and miners. Finally, we’ve also included a helpful summary of the gold move’s determinants at play. Check more of our free articles on our website, including this one – just drop by and have a look. We encourage you to sign up for our daily newsletter, too – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. You’ll also get 7 days of free access to our premium daily Gold & Silver Trading Alerts to get a taste of all our care. Sign up for the free newsletter today!

Thank you.

Przemyslaw Radomski, CFA

Editor-in-chief, Gold & Silver Fund Manager

Sunshine Profits – Effective Investments through Diligence and Care


All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Did Gold and Silver Just Invalidate Their Short-Term Breakdown?

Gold, silver and miners all closed higher, so this question naturally follows – what can we make of their upswing? Let’s explore how the short- and long-term are affected exactly.

Let’s start with the update on the short-term moves. The timely question is just how much did the latest upswing change.

Gold, Silver and Miners on Friday

The timely reply is that even though gold moved visibly higher on Friday, it didn’t really change anything. Since the support line that gold broke previously is a rising line, it is now higher than it was during the breakdown. Friday’s upswing didn’t take gold above the line, which means that the breakdown wasn’t invalidated. This in turn means that nothing really changed from the short-term point of view in gold.

The same was the case with regard to silver. The white metal moved up just a little on Friday and it definitely didn’t invalidate the previous breakdown on that day. Silver moved visibly higher in today’s pre-market trading, but it didn’t rally above the rising support line – only moved back to it. This means that both:

  1. The breakdown is being verified.
  2. The white metal is outperforming gold on a very short-term basis.

Both are bearish, not bullish, factors.

The gold stocks (HUI Index) closed relatively high, but still very far from their previously broken uptrend.

Please note that the current moves in gold and the HUI Index are relatively similar to what happened in the first half of August. Gold is moving back and forth at similar levels and so is the HUI Index. The miners’ very short-term moves are bigger but the volume is lower this time, though. While the implications are not yet clear, the odds are that the current back and forth movement (a slight rally) is actually the right shoulder of the bearish head and shoulders formation. The volume should be relatively small during the right shoulder, and this has been the case recently. The implications are not clear yet, because the formation is not yet completed. Once gold confirms its breakdown below $1,490 and the HUI confirms its breakdown below (approximately) 200, the next big slide will follow. Given what is happening in the USD Index, the start of this slide is likely just around the corner.

The USD Index Reversal

What our Friday’s comments as well as the ones from Tuesday remain up-to-date (and if you haven’t read Tuesday’s analysis yet, we strongly encourage you to do so today for the long-term details):

It was yet another higher low. The ultimate low this year formed in early January. Then, we saw a higher low in late January. Then a higher low in March, then a higher low in June, then a higher low in mid-July, then two higher lows in August and finally the higher low that we saw this week. Higher lows mean uptrend. Trendlines are useful to detect the turnarounds and Fibonacci retracements tell us if the move in the opposite direction is significant enough to be viewed as a trend change. However, the underlying rule is simple. If the price is on average moving up, then the market is an uptrend. Looking at the relative placement of lows and highs tells us the same thing. By the way, the highs in the USD Index have also been increasing this year.

While the rising black support line was already broken, it didn’t cause the USDX to decline below the previous local low. It didn’t decline below the red line that’s based on the August lows either. And that’s despite Trump calling for zero percent rate policy or even negative interest rate policy.

In the previous Alerts we wrote that the market will be viewing the U.S. President’s tweets and comments as less and less important, given how often Trump changes his mind (remember how quickly North Korean “fire and fury” threats turned into a handshake?). The higher USDX lows confirm that. It didn’t matter that Trump demanded radically lower interest rates. The currency traders didn’t care much.

What did all the above result in? We have the USD Index above 98, close to the yearly highs. It mostly doesn’t react to bearish news and it comes back stronger after each of such news is presented.

The outlook for the USD Index remains bullish.

There’s one more detail about the USD Index chart that we would like to discuss. It’s the vertex of the triangle that’s based on the rising green resistance line and the rising black resistance line. The vertex is on Monday. That’s notable, because each line is based on three price extremes, which means that they both already proved to be important support / resistance lines. The vertexes of triangles tend to mark reversal dates, which means that the USD Index is likely to reverse its course on Monday or around it (perhaps even today).

Now, if the general trend is up, then the above is likely to mean a bottom in the USDX and then a rally. However, in order for the bottom to form, the price would have to come down. This means that the U.S. dollar could temporarily decline here, even despite all the bullish indications that we have right now.

This in turn means that gold, silver, and mining stocks could still move a bit higher before plunging. The emphasis goes on “could” and “a bit”. In the last few weeks, gold and silver managed to decline on their own – so even if the USD declines, it’s not a sure thing that the PMs will rally. And even if they do, they are unlikely to rally far. Still, it seems useful to know that such a possibility exists – so that a temporary upswing doesn’t make one question all the bearish factors that remain in place. Speaking of the bearish factors, here they are. The links below include the analyses with discussions of these main points.

The USD Index moved lower on Friday and then reversed before the end of the session. Given the proximity of the triangle vertex reversal, it could be the case that this was the final bottom before the next upswing. Alternatively, it could be the case that the USDX bottoms today or tomorrow. Either way, the start of the next rally is most likely very close.

What about the long-term point of view? Let’s check the current status.

The Long-Term Perspective in Precious Metals

Gold moved higher last week, but it didn’t entirely erase previous week’s decline. The volume was relatively low. The last time that we saw relatively low volume during a weekly upswing was in mid-August, and that week’s closing price was the top – most likely ending gold’s 2019 rally (in terms of the weekly closes, that is). Just because gold formed the major top, it doesn’t mean that it will now decline in a straight line. Conversely, please note that even the 2012-2013 decline had periodical 1-3-week-long corrections.

The RSI above 70 confirms gold’s very overbought status and the need to decline in the following weeks. The sell signal from the Stochastic indicator remains intact as well, pointing to lower gold prices in the following weeks.

Silver did very little last week so everything that we wrote previously on the above chart remains up-to-date. Silver invalidated its temporary breakout above the 61.8% Fibonacci retracement level based on the 2016 – 2018 declines. It additionally formed a huge reversal candlestick and it took place on enormous volume. This is a very strong bearish combination for the following weeks and months.

The RSI moved below 70 after being extremely overbought. Since 2007, all but one (the 2010 rally) case when it happened were followed huge declines. The 2008 top, the 2011 top, the late-2012 top, and the 2016 top were all preceded by this development. Sure, silver’s recent rally may appear bullish at first sight, but the history tends to rhyme. This time is unlikely to be different, and silver is likely to do what it’s almost always done in these circumstances: decline heavily.

Key Factors to Keep in Mind

Critical factors:

  • The USD Index broke above the very long-term resistance line and verified the breakout above it. Its huge upswing is already underway.
  • The USD’s long-term upswing is an extremely important and bearish factor for gold. There were only two similar cases in the past few decades, when USD Index was starting profound, long-term bull markets, and they were both accompanied by huge declines in gold and the rest of the precious metals market
  • Out of these two similar cases, only one is very similar – the case when gold topped in February 1996. The similarity extends beyond gold’s about a yearly delay in reaction to the USD’s rally. Also the shape of gold price moves prior to the 1996 high and what we saw in the last couple of years is very similar, which confirm the analysis of the gold-USD link and the above-mentioned implications of USD Index’s long-term breakout.
  • The similarity between now and 1996 extends to silver and mining stocks – in other words, it goes beyond USD, gold-USD link, and gold itself. The white metal and its miners appear to be in a similar position as well, and the implications are particularly bearish for the miners. After their 1996 top, they erased more than 2/3rds of their prices.
  • Many investors got excited by the gold-is-soaring theme in the last few months, but looking beyond the short-term moves, reveals that most of the precious metals sector didn’t show substantial strength that would be really visible from the long-term perspective. Gold doesn’t appear to be starting a new bull market here, but rather to be an exception from the rule.
  • Gold’s True Seasonality around the US Labor Day points to a big decline shortly.

Very important, but not as critical factors:

  • Long-term technical signs for silver, i.a. the analogy in terms of price to what we saw in 2008, shows that silver could slide even below $10.
  • Silver’s very long-term cycles point to a major reversal taking place right now and since the most recent move was up, the implications are bearish (this is also silver’s technical sign, but it’s so important that it deserves its own point)
  • Long-term technical signs for gold stocks point to this not being a new gold bull market beginning. Among others, it’s their long-term underperformance relative to gold that hint this is rather a corrective upswing within a bear market that is not over yet.
  • Record-breaking weekly volume in gold is a strong sign pointing to lower gold prices

Important factors:

  • Extreme volume reading in the SIL ETF (proxy for silver stocks) is an effective indication that lower values of silver miners are to be expected
  • Silver’s short-term outperformance of gold, and gold stocks’ short-term underperformance of gold both confirm that the precious metals sector is topping here
  • Gold topped almost right at its cyclical turning point, which makes the trend reversal more likely
  • Copper broke below its head-and-shoulders pattern and confirmed the breakdown. The last time we saw something similar was in April 2013, when the entire precious metals sector was on the verge of plunging lower.

Moreover, please note that while there may be a recession threat, it doesn’t mean that gold has to rally immediately. Both: recession and gold’s multi-year rally could be many months away – comparing what happened to bond yields in the 90s confirms that.

Copper moved above the neck level of its head-and-shoulders pattern that’s based on the intraday lows, but it didn’t invalidate the analogous level based on the weekly closing prices, so we don’t think it’s justified to say that this bearish formation was invalidated at this time.

Summary

Summing up, the big decline in the precious metals sector appears to be finally underway, and the temporary USD-reversal-caused rally in gold and silver is likely coming to an end. Let’s keep in mind that once the USDX takes off, it will likely serve as fuel to the fire-like decline in the PMs that’s already underway. The similarity to mid-90s continues to support much lower gold prices in the following months. All in all, it seems that what we see right now is the beginning of the final stage of the prolonged decline in the precious metals sector that started in 2011. On a short-term basis, it seems that we might get some temporary strength once gold moves to about $1,330 – perhaps within the next several weeks.

Thank you.

Przemyslaw Radomski, CFA

Editor-in-chief, Gold & Silver Fund Manager

Sunshine Profits – Effective Investments through Diligence and Care


All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Rising Miners, Gold and Countdown to the Fed

It is usually the case on Fed days (and around them) that we see increased intraday volatility that doesn’t necessarily mean anything. Does it describe today’s situation also?

The explanation is quite straightforward. Overall, the investors and traders are not sure what will happen, but some of them are trying to bet on a more hawkish and some on a more dovish outcome. Large transactions trigger initial moves and other investors quickly jump in as they fear missing out on the trade that is “just unfolding”.

In reality, rarely any trade is really unfolding just before the news is released – the very short-term and volatile moves are just like people that run around because they can’t sit in place while waiting for something or someone. This running around doesn’t indicate a start of a journey, and the very short-term up- and downswings right before the major news is released can be just as informative – barely so. Unless the markets are significantly surprised, the preceding trends are likely to be continued after the interest rate decision is made and the dust settles. And the preceding trend in the precious metals market remains down. Let’s keep in mind that even though gold moved significantly up in the last couple of months, silver and gold stocks and silver stocks moved just a little higher from the long-term point of view. In other words, most of the precious metals sector didn’t rally significantly in recent months.

Let’s take a few questions and answer them looking at the charts.

Precious Metals, Miners and Yesterday’s Session

But maybe yesterday’s upswing changed anything in gold or silver?

It didn’t. Just as gold and silver were trading below their respective rising support lines on Monday, the same happened yesterday. Silver is down in overnight trading, which makes it clear that the breakdown was confirmed instead of being invalidated.

Of course, both metals – especially silver – could move higher once again today, but such a move would likely not last for more than a day or a couple of them. The few hours before and after the interest rate announcement and the following press conference could be particularly volatile. Please keep the above in mind if gold and silver move higher during this time – it will almost certainly be a fake move. In particular, silver is known for false breakouts, so it could be the case that it moves even above $18.50 today only to fall hard in the following days and weeks.

Of course, just because it is possible, it doesn’t mean that it’s likely. It’s best to be positioned in tune with the trend. However, it’s also good to be aware of the possibility that some chaotic movement might be seen on particular day, so that one doesn’t unnecessarily panic over a move that is unlikely to be meaningful or lasting.

Ok, but what about miners’ upswing? Doesn’t their strength indicate a rally is just around the corner?

Not really. Let’s keep in mind the following:

  1. The gold miners were first to break below their rising support line and they continued to underperform for days.
  2. Miners moved to the 38.2% Fibonacci retracement level based on the most recent upswing, which means that some kind of very short-term rebound was relatively likely
  3. It’s just one day of strong performance relative to gold and one swallow doesn’t make a summer.

Yesterday’s upswing falls into the “normal” category of the things that we might expect a market to do after decline that’s already quite sizable. Especially that the Fed’s interest rate announcement is today and some kind of increased short-term volatility is likely.

If miners continue to show strength while gold and silver invalidate their breakdowns, it might mean that we’ll see another short-term upswing before the decline resumes. At this time though, the odds continue to favor decline’s continuation without a meaningful move higher beforehand.

Besides, yesterday’s upswing in the gold stocks was barely visible from the long-term point of view. The HUI Index invalidated the small breakout above the 61.8% Fibonacci retracement and has been declining almost relentlessly ever since. Yesterday’s upswing is a barely noticeable breather in this decline.

Let’s recap the facts to pay attention to.

Key Factors to Keep in Mind

Critical factors:

  • The USD Index broke above the very long-term resistance line and verified the breakout above it. Its huge upswing is already underway.
  • The USD’s long-term upswing is an extremely important and bearish factor for gold. There were only two similar cases in the past few decades, when USD Index was starting profound, long-term bull markets, and they were both accompanied by huge declines in gold and the rest of the precious metals market
  • Out of these two similar cases, only one is very similar – the case when gold topped in February 1996. The similarity extends beyond gold’s about a yearly delay in reaction to the USD’s rally. Also the shape of gold price moves prior to the 1996 high and what we saw in the last couple of years is very similar, which confirm the analysis of the gold-USD link and the above-mentioned implications of USD Index’s long-term breakout.
  • The similarity between now and 1996 extends to silver and mining stocks – in other words, it goes beyond USD, gold-USD link, and gold itself. The white metal and its miners appear to be in a similar position as well, and the implications are particularly bearish for the miners. After their 1996 top, they erased more than 2/3rds of their prices.
  • Many investors got excited by the gold-is-soaring theme in the last few months, but looking beyond the short-term moves, reveals that most of the precious metals sector didn’t show substantial strength that would be really visible from the long-term perspective. Gold doesn’t appear to be starting a new bull market here, but rather to be an exception from the rule.
  • Gold’s True Seasonality around the US Labor Day points to a big decline shortly.

Very important, but not as critical factors:

  • Long-term technical signs for silver, i.a. the analogy in terms of price to what we saw in 2008, shows that silver could slide even below $10.
  • Silver’s very long-term cycles point to a major reversal taking place right now and since the most recent move was up, the implications are bearish (this is also silver’s technical sign, but it’s so important that it deserves its own point)
  • Long-term technical signs for gold stocks point to this not being a new gold bull market beginning. Among others, it’s their long-term underperformance relative to gold that hint this is rather a corrective upswing within a bear market that is not over yet.
  • Record-breaking weekly volume in gold is a strong sign pointing to lower gold prices

Important factors:

  • Extreme volume reading in the SIL ETF (proxy for silver stocks) is an effective indication that lower values of silver miners are to be expected
  • Silver’s short-term outperformance of gold, and gold stocks’ short-term underperformance of gold both confirm that the precious metals sector is topping here
  • Gold topped almost right at its cyclical turning point, which makes the trend reversal more likely
  • Copper broke below its head-and-shoulders pattern and confirmed the breakdown. The last time we saw something similar was in April 2013, when the entire precious metals sector was on the verge of plunging lower.

Moreover, please note that while there may be a recession threat, it doesn’t mean that gold has to rally immediately. Both: recession and gold’s multi-year rally could be many months away – comparing what happened to bond yields in the 90s confirms that.

Copper moved above the neck level of its head-and-shoulders pattern that’s based on the intraday lows, but it didn’t invalidate the analogous level based on the weekly closing prices, so we don’t think it’s justified to say that this bearish formation was invalidated at this time.

Summary

Summing up, the big decline in the precious metals sector appears to be finally underway as gold and silver are plunging even without a rallying USD Index. And the PMs’ decline started right after the U.S. Labor Day, as we have described. Once the USDX takes off, it will likely serve as fuel to the fire-like decline that’s already underway. The similarity to mid-90s continues to support much lower gold prices in the following months. All in all, it seems that what we see right now is the beginning of the final stage of the prolonged decline in the precious metals sector that started in 2011. On a short-term basis, it seems that we might get some temporary strength once gold moves to about $1,330 – perhaps within the next few weeks.

Thank you.

Przemyslaw Radomski, CFA

Editor-in-chief, Gold & Silver Fund Manager

Sunshine Profits – Effective Investments through Diligence and Care


All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.