Gold Price: REAL Implications of Yen’s Strength

The “Real” Move on the Horizon

Junior miners declined yesterday, and they moved to a new monthly low. However, I bet that you are now most interested in what happened in today’s pre-market trading, why it happened, and what it implies.

Gold moved higher, as did silver.

Chart courtesy o goldpriceforecast.com

At the same time, the USD Index declined.

Looking at the above chart, we can see that these quick price movements are fairly normal, as most breakouts/breakdowns are followed by a correction – a confirmation of the breakout/breakdown. Consequently, the fact that we’re seeing it in the USD Index is currently quite normal. After all, it just broke above its declining resistance line a couple of days ago.

And since the precious metals sector is very strongly negatively correlated with the USD Index, the above means that today’s quick move higher in gold and silver is likely to end soon as well, and the “real” (= medium-term) move is likely to resume. In the case of the precious metals sector, this trend is down.

You know, one of the things that can tell us what’s real and what’s fake on the precious metals market is the performance of mining stocks. At the moment of writing these words, the markets are still closed in the U.S., so let’s take a look at what the GDXJ (a proxy for junior mining stocks) is doing in today’s London trading so far.

And there’s the thing.

It’s not doing anything (crude oil is more or less silent, too).

Ok, to be precise, the GDXJ did move a bit higher, but it’s a move higher by less than 1%, and it’s barely visible given the sizes of the recent price swings.

This further strengthens the above-mentioned scenario, in which the precious metals sector is simply verifying its breakdown yesterday.

But Why?

As always, it’s impossible to tell with 100% confidence what made a given market move, but today it seems clearer than on most days.

The Bank of Japan hinted at a hawkish twist in their approach, and the markets reacted, assuming that it was a major shift.

The currency moves that we have seen so far today appear to confirm that this is what the markets are focusing on right now.

Chart courtesy of silverpriceforecast.com

The EUR/USD currency pair is moving sideways, while the USD/JPY pair truly plunged. What does it tell us? It tells us that whatever is happening on the currency market is not about the dollar per se – it’s about the yen.

This is more important than it seems at first glance. If the U.S. dollar’s weakness was the driving force behind the USD Index’s move lower, one could say that it’s really a bearish factor for gold. The USD, being viewed as a safe haven (whether we want to believe it or not, a large part of the world views the U.S. dollar as a safe/solid currency), would be losing appeal, and gold – being another safe haven – would be gaining it as an alternative.

However, it is not about the U.S. dollar’s weakness – it’s about the yen’s strength.

So, What is the Real Implication for Gold?

It’s easier to understand the implication based on a counter-example. Remember when all the monetary authorities around the world were getting more and more dovish and they kept printing more and more money? That was bullish for gold, right?

Ok, so, now what we see is the opposite. The monetary authorities around the world are getting more and more hawkish, and the Bank of Japan appears to be finally joining the hawkish party, and that’s bearish for gold.

This remains true despite any short-term price movements caused by individual currency exchange rate changes. So, even if the yen continues to strengthen relative to the dollar for some time, gold might not be willing to react to it for much longer.

Why? Because in the short-term markets are particularly emotional. “OMG, USDX fell, let’s buy gold!” can dominate traders’ way of feeling/thinking (on a side note, “feenking” could be a new verb to describe the situation when one thinks that they are thinking about something, but actually they are just rationalizing their feelings).

Then, as the traders have some time to think about what’s really happening, they could sell gold as it becomes less and less appealing, given that fiat money can (at least for now…) provide more interest payments.

As you can see on the above chart, gold priced in the Japanese yen has been in a rather steady long-term uptrend for years. It’s close to the support line, though.

Based on the hawkish indications from the Bank of Japan, it seems that we might finally see a breakdown below this line, and when we do, the decline that could follow could be huge.

Please note that the price levels were rather steady throughout the year, even though gold fell substantially from a USD point of view. Consequently, it seems that the demand from the yen holders was quite strong, and if it now subsides… Things could get very unpleasant for gold permabulls. Also, for those who think that I’m always writing about lower gold prices, I would like to emphasize that so far this year, I have written about precisely 4 trades in junior mining stocks – two long and two short, and all of them were profitable. One position is still open (in my view, and it has the biggest potential).

Before summarizing, I have great news for you. If you’d like to get a LIVE follow-up on the above analysis (with the possibility to ask me questions) and see me talking about the top 3 gold trading techniques that I found to be working over and over again, then you’ll have a chance to get the above free of charge LIVE on Wednesday, Dec. 21 at 10 AM EST (4 PM CET) on our Youtube channel. I hope to see you very soon 🙂 And the easiest way to sign up is right here.

To summarize, despite today’s pre-market upswing in gold and silver, the outlook for the following weeks doesn’t look bullish at all. Conversely, as monetary authorities around the world get more hawkish, gold, silver, and mining stocks are likely to move lower.

Thank you.

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Sunshine Profits: Effective Investment through Diligence & 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 subject to change without notice. Opinions and analyses are 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 deemed 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.

Why Gold And Oil Falling In Value Are A Bad Sign For 2023

In the past two weeks, stocks have struggled to break through resistance and extend the holiday rally. I wrote about it in the post Stock Indexes Rejected At Resistance Signal Another Correction. But what is a more bearish sign is seeing commodity prices starting to fall. There are a couple of reasons this is a warning signal for traders and investors, and I will show you exactly what they are.

Reason #1: Equity and Economic Cycles Signal Market Top and Recession

In the diagram below, you will see two cycles. The blue/green cycle is the stock market. Stocks typically lead the economy as savvy investors can see when businesses, in general, are expanding or contracting, thus telling them when they should buy more shares or start selling.

As you can see, energy and precious metals are the last assets to do well before the stock market tops. Both topped many months ago. Having said that, precious metals have had a decent rally in the past couple of months, but that rally should not be trusted.

In this post, I will talk about energy and precious metals. In a future post, I will cover the next two sectors, which have been doing exceptionally well this year and are holding up the best – Health Care and Utilities.

Assets Peak In A Predictable Order

While falling commodity prices signal potential easing in inflation, it’s not necessarily a good sign. That’s because assets peak in a predictable order: bonds, stocks, and then commodities.

Without turning this post into a rant, I should mention that what I share here is investing 101. If you invested your money into stocks and bonds using the buy-and-hold strategy, please know that 2022 – 2025 could be VERY difficult times. I believe that what is about to happen next will delay or destroy your retirement if you don’t have a plan to preserve capital.

Crude Oil Prices Continue To Plunge

Crude Oil has fallen to the lowest level in over a year, suffering a weekly loss of -10%. Oil has given back all of its gains for the year and is taking a toll on energy sector stocks.

As investors see businesses slowing and a recession in the near future, the price of oil begins to fall. A recession often means less traveling, slower sales, a decline in shipping, and less product demand. Oil falling means savvy investors see tough times ahead.

Gold Miners Weekly Chart

Gold stocks have been out of favor for a long time despite the recent rally, which has spark a lot of interest recently.

The most important thing to understand about investing is that the only way we make money is when the price of an asset moves in our favor. No news or fundamental data will protect you from falling prices. Moving to cash and revesting capital into assets that are rising in value is the best way to secure consistent growth.

Reason #2: Commodity Index ETF – Weekly Chart

Commodities tend to rally in the late stages of a stock bull market. This is because stock evaluations become high and are no longer a fair value. Thus, investors turn to alternative assets, and physical commodities happen to be the asset of choice.

As you can see in the chart below, commodities topped in June 2022, five months after the stock market topped in January 2022. The DBC commodity index is clearly in a Stage 3 market phase and on the verge of breaking down into a Stage 4 decline (bear market).

Concluding Thoughts

In short, investors no longer want to own stocks, and they don’t want commodities. Going forward, investors will start liquidating positions, possibly for many months, in all asset classes until a new level of equilibrium has been found. This is a perilous time to own stocks and commodities if your capital is being invested with the buy-and-hope strategy. Should this be the case, I feel for you because if you are 50+, your retirement is about to be threatened at the worst possible time in your life.

2022 has been an excellent year for those investing with the Consistent Growth Strategy alongside me as we actively use my ETF asset hierarchy allocation.

Chris Vermeulen
www.TheTechnicalTraders.com

If the Correction is Over, It Can Mean One Thing for the Gold Price

Magical 38.2%

In particular, the situation appears very interesting in the latter, so I’ll start with it.

We just saw a small attempt to break above the 38.2% Fibonacci retracement, and I doubt that this breakout will be confirmed. The “why” behind it is currently the most interesting analogy that we see on this market.

Please take a look at the areas marked with red rectangles. In all those cases, the S&P 500 index rallied on big volume at first, and then the volume declined over the course of a few weeks. And as that happened, the price approached its top.

All three previous important tops that we saw this year were accompanied by this indication.

We also see it right now.

Even more interestingly, the volume levels that have just been seen are similar to the ones that accompanied previous tops.

Consequently, it seems that the end of the rally is near. This is likely to have very bearish implications for junior mining stocks.

Let’s check what’s up with gold.

The yellow metal corrected 38.2% of its previous medium-term decline, and it declined once again. The moves that are smaller than 38.2% of the preceding move are generally viewed as “weak corrections,” indicating a market where the previous trend is very strong.

Gold Price Forecast – What’s Next?

As the correction appears to be over, the medium-term downtrend is now likely to resume. The RSI indicator clearly supports this outcome, as it just moved back below 70. When we previously saw similar signals, gold price usually plunged.

There’s one more thing that makes me predict that the gold price top is already in.

It’s gold’s link with the USD Index.

As you can see above, the USD Index just moved very close to its recent bottom. However, at the same time, gold and silver prices didn’t move back to their previous highs.

This kind of weak reaction to a factor that “should” move the market, indicates that the market really wants to move in the opposite direction.

In the current case, this indicates that gold wants to move lower.

Combining the above with the extremely negative correlation between gold and the USD Index (currently the 30-trading-day linear correlation coefficient is at -0.95, while -1 is the most negative that it could go), this indicates that when the USD Index rallies, gold would be likely to truly plunge – magnifying the U.S. dollar’s moves, but in the opposite direction.

All in all, the technical outlook for the precious metals sector appears to be very bearish for the coming weeks.

Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Sunshine Profits: Effective Investment through Diligence & 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 subject to change without notice. Opinions and analyses are 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 deemed 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.

Could Bitcoin’s Movements Indicate the Fall of Junior Gold Stocks?

Those of you who have been following my analyses for a while may be expecting me to write that it is based on the stock market’s rally and thus only temporary, as miners will follow gold sooner rather than later. That’s their ultimate source of revenue (current or expected). While that’s true, right now there is another huge factor that’s likely contributing to the situation.

It’s most likely the unfolding crypto-drama.

Commodity Markets Correlation with Cryptocurrencies

Remember when I previously commented on the link between juniors and cryptocurrencies? What I wrote back then was particularly important with regard to the less known (obscure?) ones with a shady background. In fact, some even call them “shitcoins.”

I wrote that for many individual investors, cryptocurrencies became the “new precious metals market.”

Alternative payment system? Just like gold, right?

There’s a flagship asset (gold, Bitcoin).

There’s a less expensive but obviously more useful asset (silver, Ethereum).

There are a number of little-known assets that are risky but have the potential to provide massive returns (high-quality mining stocks, low-quality mining stocks, especially low-quality junior mining stocks, altcoins, “shitcoins”).While gold was not doing much, the wild rallies in cryptos got much more attention. That was finally exciting!

So, individual investors flocked from the precious metals market to cryptos. Not all investors, of course, but many.

While cryptos were on the rise and the overall sentiment was positive, investors dropped their PM holdings to buy cryptos as they forecasted that the latter would continue to rally “to the moon.” And while it didn’t matter that much for gold, as the yellow metal has powerful buyers and sellers that are not interested in cryptos, it mattered a lot to the junior mining stock sector as the buying power waned.

Fast-forward to the current situation, every other day we hear or read about yet another crypto scandal, while prices of cryptocurrencies are declining sharply.

This means that the above-mentioned effect could have been reversed. The investors who moved out of the junior mining stock sector in order to get into cryptos (in particular altcoins) could now be aiming to get out of that market (people tend to sell on declines, in fact, that’s why declines happen in the first place) and get back to what they “had liked” before – junior miners.

This specific phenomenon can be seen from a broader point of view when one compares the prices of gold and bitcoin.

As I wrote, the link is likely stronger in the case of altcoins and juniors, but gold and bitcoin have price data that’s more comparable, so that’s what I’m going to analyze.

Even though both gold and bitcoin moved higher between 2014 and now, they quite often moved in opposite directions in the short run. Short-term bottoms in gold, in particular, were usually followed by (larger or smaller) declines in bitcoin.

Interestingly, I originally featured the above chart many months ago, and please note that this tendency worked like a charm recently.

Gold formed a short-term bottom, rallied, and now Bitcoin slides. Why? Probably because people were fed up with Bitcoin’s inability to hold its ground, while gold soared. So they flocked to gold, silver, and – probably most intensely so – to junior mining stocks.

All right, so does this mean that as Bitcoin slides into the abyss, junior miners are now going to soar?

No.

No market moves up or down in a straight line, right? Well, neither does Bitcoin. How low is too low, then? That’s where technicals come in.

Remember when I wrote that Bitcoin was topping at about $50,000? Well, it did move a bit above that, but it didn’t trade there for long.

The flagship crypto fell like a stone in water, and it did so in tune with the technical principles. Bitcoin formed a bearish head and shoulders top pattern, and after breaking below the neck level earlier this year, it then corrected a bit, and then it plunged below $20,000.

All this is a textbook-example of how a head and shoulders pattern should work.

Now, the size of the decline based on this pattern is likely to be equal to the size of its head. I marked that with dashed lines.

Guess what – Bitcoin just moved to this target level (marked with green) recently. That is a strong indication that the bottom has been reached.The second indication comes from the huge volume that just accompanied the decline and the fact that the decline was quite sharp. The ROC (rate of change) indicator at the top of the above chart is close to -25 and when this happened and bitcoin was after a huge-volume decline, it then rallied.

What is even more interesting is that those were also the times when gold declined.

Sentiment Analysis and Bitcoin Bottom

The sentiment itself is the final indicator that a short-term (!) bottom for bitcoin is in or near. Just go to any news website and look at what is being written about Bitcoin – it’s all scary and bearish. Or at least the majority of news/articles. That’s what happens when prices fall to their lowest point. Remember what was written on those same pages when bitcoin was trading above $50,000? It was all sunshine and rainbows. All this time, I warned about the incoming slide. Very few listened then, just as very few want to hear about the upcoming slide in junior mining stocks.

Anyway, here’s how frequently people search for “crypto scam” on Google (chart courtesy of Google Trends).

The other distinctive peaks in those searches were in May 2021 (a major top and major decline in Bitcoin), early November 2021 (a major top in Bitcoin), and the end of January 2022 (a major bottom in Bitcoin).

The interest was this high only when there were major turnarounds in Bitcoin. And since it’s crystal clear that the previous move in Bitcoin was to the downside, it can’t be a top. Therefore, it’s likely that there’s a major bottom in Bitcoin.

Not necessarily the final one, but a major one for some time. A bottom that’s big enough to trigger a sizable rally in Bitcoin… And a sizable decline in the precious metals sector!

It’s easy to follow the herd. “Miners good, Bitcoin bad” is the current word out there. It’s also easy to repeat this mantra. But what’s easy and what’s profitable are rarely the same thing, which is why many tend to lose money over time. I’m not saying that each and every price move can be predicted – it can’t. However, as time goes on, following logical analysis and paying attention not to follow the herd often pays huge dividends.

My responsibility is to keep you up to date on my market views, which I strive base on logical analyses free of bias. Whether it’s possible for a human to achieve this kind of objectivity is another question, but, as much as I can, I aim to deliver analysis that’s as objective as possible. Right now, the way I see it, Bitcoin appears to have formed a short-term bottom, and mining stocks have either formed a short-term top or are about to do so soon.

Of course, I can’t make any guarantees, but in my view, the next move lower in the precious metals sector – especially in the junior mining stocks – is likely to be something epic.

Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Sunshine Profits: Effective Investment through Diligence & 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 subject to change without notice. Opinions and analyses are 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 deemed 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.

Can a Rally in Gold Stocks Really Be Bearish?

Are Gold Miners Repeating Their 2008 Price Patterns?

Why do I think that gold miners are repeating their 2008 price patterns? Please take a look at the below chart.

The only times when gold stocks declined similarly sharply as they did this year were in 2013 and in 2008.

Given that the situation in stocks appears to be similar to what we saw in 2008 (due to rising interest rates, for example), it seems that focusing on this analogy is particularly important right now.

All right, let’s zoom in and see how mining stocks declined in 2008.

Back then, the GDXJ ETF was not yet trading, so I’m using the GDX ETF as a short-term proxy here.

The decline took about 3 months, and it erased about 70% of the miners’ value. The biggest part of the decline happened in the final month, though.

However, the most intriguing aspect of that decline – which may also be very useful this time – is that there were five very short-term declines that took the GDX down by about 30%.

I marked those declines with red rectangles. After that, a corrective upswing started. During those corrective upswings, the GDX rallied by 14.8-41.6%. The biggest corrective upswing (where GDX rallied by 41.6%) was triggered by a huge rally in gold, and since I don’t expect to see anything similar this year, it could be the case that this correction size is an outlier. Not paying attention to the outlier, we get corrections of between 14.8% and 25.1%.

Gold Miners Today

Fast forward to the current situation. Let’s take a look at the GDXJ ETF.

The junior mining stocks moved sharply higher recently, and this move took place on huge volume (I spoke about it on Nov. 7). The only similarly big volume that we saw recently was at the early-March top and the January top. As history has shown, the massive attention that junior miners have received is a bearish indicator (not only for miners but also for related parts of the precious metals market, including gold and silver prices too).

Back in 2008, the biggest corrective upswing (the 41.6% rally) was the thing that preceded the biggest part of the medium-term decline.

This time, the volatility is not as big, but the size of the corrective upswing (assuming that it started in September) that we just saw is also greater than what we’ve seen before. Consequently, it could be the case that what happened recently is what “had to” happen given the way history decided to rhyme. Please note that we can estimate what is likely to happen based on historical analogies, but we can never be 100% certain that a given analogy will work and some others won’t.

In this case, it seems that the correction happened, even though it didn’t “have to” happen based on many other techniques. Either way, the medium-term trend remains down, so the current corrective upswing is likely to be a “thing of the past of little meaning” sooner rather than later.

Speaking of analogies, I previously wrote that the current rally is a mirror image (it’s not a crystal-clear mirror, though) of the corrective decline that we saw in late March 2020. As it turned out, due to the most recent part of the upswing, the size of both moves became even more aligned.

And yes, this means that another decline could take the GDXJ all the way down to its 2020 low, or very close to it.

Elliot Wave Analysis

On the below chart, I marked just how perfectly the recent price moves played out according to the Elliott Wave Theory.

Of course, EWT is not the only tool that one could use, and I find other technical tools more useful, but still, this kind of pattern-following is uncanny.

The classic EWT pattern is three waves down (I marked those with orange rectangles) and then a correction consisting of two smaller waves.

That’s exactly what we have seen in recent months. The September–now pattern appears to be the above-mentioned correction. It didn’t only consist of two smaller waves higher – they were actually almost identical in terms of size and sharpness. This created a classic ABC correction (flag) pattern.

Gold Miners Price Forecast

Now, since this pattern is complete, another huge 3-stage move lower can – and is likely – to unfold. This is very bearish for junior mining stocks (as well as for gold, silver, and probably other commodities), and the fact that juniors are already showing weakness relative to gold (on Wednesday, the latter was almost flat while miners declined) serves as a bearish confirmation. As always, I can’t guarantee anything, but in my view, the profits that can be reaped on this upcoming slide in mining stocks can be enormous.

Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Sunshine Profits: Effective Investment through Diligence & 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 subject to change without notice. Opinions and analyses are 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 deemed 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.

 

Trading With Silver: Different Ways To Get In On The Action

When I look at the charts for gold and silver, I see similar periods of consolidation with multiple tests of support. But even more interesting is the recent upturn in price and moving averages with some new higher highs. That makes me interested but tentatively bullish on the metals.

There are many ways to participate in this sector. There is, of course, physical metal – bullion or numismatics. I’ve always liked the idea of having some physical metal that I can put my hands on. And there are many secure storage options as well.

The metals sector has several popular ETFs – GLD, GDX, GDXJ, SLV, SILJ, etc. One approach would be to simply buy shares in one or more of these ETFs. That’s as easy as buying shares of stock. But, like owning stock, gains may be slow to come as we participate in the price action tick for tick.

Gold Daily Chart

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Silver Daily Chart

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As an options trader, I like to give myself a little room to be wrong on price and reduce my cost basis by selling option premiums. There are two basic ways to do that. I can buy shares and sell “covered calls” against those shares. Or I can sell puts, essentially committing to buy shares at the strike price in return for receiving an option premium. The profit and loss graph for selling a put is the same as for selling a covered call.

I prefer the “selling puts” strategy for its simplicity and relative ease of rolling out in time and up in strike price when there is an uptrend in the underlying shares. I don’t own any shares with this strategy. I’m just committing to buy shares at a certain price for a certain time period and getting paid to do that. So, it’s important to only sell puts for the number of shares I’m willing to own at the strike price sold.

Selling Puts

While the option selling strategies presented here can work on any stock or ETF that has options, they work best with relatively lower-priced products that are under about $25. A commodity ETF such as SLV – currently trading around $20 a share — is a good candidate. SILJ at around $10.50 a share also looks good.

If we sell puts, we may have shares “put” to us at some point and will then own the shares at the strike price we sold minus the premiums collected. Having shares put to us at a reduced cost basis is part of the plan. When we sell an out-of-the-money (OTM) put, we’re methodically nudging the statistics in our favor by “buying low” when there is a pull-back in the underlying. We can alternately think of selling a put as a standing limit order to buy shares with the limit price equal to the strike price we sold.

If we have shares “put” to us, we can then sell calls against the shares we now own. And the cost basis of the shares we purchased will have been reduced by the cumulative option premium collected by selling puts.

Trade Management

Writing puts and covered calls are relatively low-maintenance strategies that don’t have to be watched continuously. Once we write options, we do have to be patient and let time decay in the options we sold work for us.

If the options we sold expire worthless, we can sell new options for some future expiration cycle and collect more premium.

If our sold options are in-the-money (ITM) as expiration approaches, we can defer an assignment by rolling out for additional credit. In that case, we would buy back the option close to expiration and sell another one further out in time. We can usually do this for an additional credit because we are selling more time value.

Upside and Downside Risks

As with any strategy, it’s important to ask and understand “What could possibly go wrong?” before getting involved. Selling puts and writing covered calls are neutral to bullish strategies. There can be sustained down trends, price shocks, and changes in volatility that can affect strategy performance.

There’s always a tradeoff when selling options. In exchange for collecting option premium, profit is limited to the amount of premium collected plus any appreciation in shares up to the strike price in the case of covered calls. We may not have a great opportunity to sell option premium in every possible cycle.

Keeping probability in our favor and letting time decay work for us are benefits of selling a put or covered call. As option sellers, we don’t need large up moves to make a profit. We have the statistical odds in our favor and option time decay working for us. The underlying share price can go up, sideways, or even down a bit and we can still profit.

What To Learn More About Options Trading?

Every day on Options Trading Signals, we do defined risk trades that protect us from black swan events 24/7. Many may think that is what stop losses are for. Well, remember the markets are only open about 1/3 of the hours in a day. Therefore, a stop loss only protects you for 1/3 of each day. Stocks can gap up or down. With options, you are always protected because we do defined risk in a spread. We cover with multiple legs, which are always on once you own.

If you are new to trading or have been trading stock but are interested in options, you can find more information at The Technical Traders – Options Trading Signals Service. Brian, who has been trading options for almost 20 years, sends out real live trade alerts on actual trades, such as TSLA and NVDA, with real money. If ready to subscribe, click here:  TheTechnicalTraders.com.

Enjoy your day!

Brian Benson
Co-Author: Chris Vermeulen
Chief Options Strategist
TheTechnicalTraders.com

Disclaimer: This article and any information contained herein should not be considered investment advice. Technical Traders Ltd. and its staff are not registered investment advisors. Under no circumstances should any content from websites, articles, videos, seminars, books or emails from Technical Traders Ltd. or its affiliates be used or interpreted as a recommendation to buy or sell any security or commodity contract. Our advice is not tailored to the needs of any subscriber so talk with your investment advisor before making trading decisions. Invest at your own risk. I may or may not have positions in any security mentioned at any time and maybe buy sell or hold said security at any time.

What Did the Dollar Have to Do With Gold’s Nov. 7 Rally?

Very little happened in the precious metals market yesterday, and what I wrote and said yesterday remains up-to-date.

I got a request to comment on the USD Index (and its link with gold), and I’ll be happy to deliver.

The Flag Pattern

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In short, the USD Index remains in its flag pattern that started in September. A flag pattern is a continuation pattern where the price trades sideways (but slightly against the trend) and it continues… until it doesn’t. Quite often, the pattern ends after two or three bottoms. We already had two, and it seems that the third one is about to be formed or it has already formed.

The RSI is slightly below 50 and the USDX itself is a bit below its 50-day moving average (blue line). In the previous months, this combination of factors meant that another sizable rally was just around the corner. As history tends to rhyme, the implications are bullish.

Since March, gold has been moving in the opposite direction to the USD Index, so the implications of the above are bearish for gold and the rest of the precious metals sector.

Why wasn’t gold moving against the USD Index in February? Because of the fear and uncertainty related to the Russian invasion of Ukraine. Please note that the war in Ukraine is still in place, and yet, gold is hundreds of dollars below its 2022 high. This serves as a strong confirmation of gold’s current weakness.

Looking at gold’s short-term picture, we see that its short-term top might already be in.

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The last two times it broke slightly above its declining medium-term resistance line, it then stayed above it for a couple of days, and then it started $100+ declines.

Given today’s pre-market decline, and given the overall self-similarity to how gold performed in 2013, it seems that not only the short-term top is in, but it’s likely the case that another huge decline is about to be seen.

A Word About Silver

Moreover, let’s keep in mind the silver price signal.

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As I explained in my yesterday’s video, silver’s short-term outperformance is an important sell signal.

We saw this indication many times before, and it’s been one of the most reliable indications that the next big move lower is at hand. Remember the spike at the 2021 top, when silver soared relative to gold? Many people thought that silver was taking off and heading straight to the moon, but I warned that this was likely a fake move. And indeed, that was the top.

There were times to be long this year (for example, I went long miners on May 12 and on July 11 – very close to local bottoms). However, in my opinion, right now is not a good time to do so. Instead, it seems to me that profits from short positions are likely to grow substantially in the following weeks.

Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks.

If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Sunshine Profits: Effective Investment through Diligence & 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 subject to change without notice. Opinions and analyses are 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 deemed 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 Prediction – Gold Prices Stabilize Over Growing Nuclear Threat

  • Metals and miners continue to build momentum off their recent lows, supporting our outlook for a September bottom.
  • The S&P 500 is tracing out an eerily similar structure to the 2008 bear market, suggesting the worst of the bear market may still be ahead.
  • The threat of nuclear weapons and rising geopolitical tension may help put a floor under precious metals.

Bear Market Analog  

Source: https://thefelderreport.com/2022/10/05/why-the-bear-market-in-stocks-may-only-be-halfway-through/

Below is a chart from Jesse Felder spotlighting the current bear market in stocks compared to others. His research suggests we may be at the halfway point of a more profound decline. If correct, then stocks will likely continue their downward trajectory into the first half of 2023.

The 2008 Bear Market

Below are the benchmarks struck during the 2008 bear market. Study the chart and compare it to the current situation. The similarities are scary, in my opinion.

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The 2022 Bear Market

The 2022 bear market is on a parallel course to 2008. The first three benchmarks have turned green, and we are in the process of fulfilling number 4 (blue).

I’ll be monitoring the charts closely for additional confirmation. If the analog continues with the above checklist – stocks may crater into Q1 2023, followed by even lower lows mid-year.

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The Gold Cycle Indicator finished at 2 and has begun to rise. The cycle likely bottomed in September.

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Gold Price Chart

Gold quickly recaptured the $1680 breakdown supporting an important low. To establish a new uptrend, prices must break decisively above the dashed downtrend line.

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Silver Price Chart

I believe silver bottomed before gold at $17.40 and formed a divergent low. To support a new uptrend, prices must recapture the $22.00 region and 200-day MA.

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Gold Miners Chart (GDX)

Miners held the 50-day EMA during the recent pullback supporting our outlook for an important low. Upside follow-through above $26.11 would be near-term bullish.

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Bottom Line

I think gold is in the process of forming a critical bottom. I expect new highs in 2023 and a continuation into the first half of 2024. Our work supports a $2800 to $3200 target within the next 24-months.

AG Thorson is a registered CMT and expert in technical analysis. He believes we are in the final stages of a global debt super-cycle. For more charts and regular updates, please visit here.

Gold Forecast – Price Action Supporting Major Bottom

Last week I noted the potential for an approaching low in gold and a repeat of the 2018 bottom.

Gold miners finished last week with decisive bullish engulfing candles promoting that outlook.

With gold futures back above the September breakdown ($1680), the odds for a significant bottom are growing.

Gold Weekly Chart

After gold peaked at $1377.50 in 2016, prices consolidated in a sideways ABC correction for 25 months before finally bottoming in 2018.

I see the potential for a repeat of the 2018 bottom. It’s been 25 months since the August 2020 peak at $2089. Gold traced out an expanded ABC correction, and prices could be bottoming as we speak.

A bottom here would reinforce the potential for a vigorous advance into the next 4-year cycle peak due by mid-2024.

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Gold Daily Chart

We have four drops from the March top, similar to the 2020/2021 correction. Gold undercut the $1680 support level, and the last few bulls capitulated. Progressive closes back above the $1680 breakdown level will strongly support a bottom.

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Technical Non-Confirmation: Silver and Platinum never confirmed the September breakdown in gold thus supporting a bottom.

Silver Chart

Silver has been building a positive MACD divergence since May, and prices never confirmed the September breakdown in gold. We have a swing low, and a robust close above $20.00 would support a bottom.

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Platinum Chart

Platinum also stayed above its early September low and never confirmed the breakdown in gold below $1680. Prices need progressive closes above the 200-day MA ($953) to confirm a bottom.

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GDX Weekly Chart

Miners (GDX, GDXJ, and SILJ) formed large weekly bullish engulfing candles supporting a potential bottom.

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Bottom Line

I see multiple factors supporting a repeat of the 2018 bottom. If gold recaptures and stays above $1680 in October, it might be off to the races. Welcome news for gold bugs.

AG Thorson is a registered CMT and expert in technical analysis. He believes we are in the final stages of a global debt super-cycle. For regular updates, please visit here.

Gold Starting Stage 4 Decline and What It Means for Investors

Passive Buy and Hold Investors in General are Starting to Panic: XLU, Dividends, Bonds

It has been an interesting year with stocks down nearly 25% and the bond ETF TLT down over 40% since the 2020 highs. The passive buy and hold investor is becoming panicked and we can see this in the stock market through the mass selling of utility stocks dividend stocks and bonds.

When the masses become fearful they liquidate nearly all assets in their portfolios which is why we see the Big Blue chip stocks selling off along with precious metals. As investors liquidate around the world they focus on where their money can be preserved. With most currency falling in value there is a flood towards the U.S. dollar index as the safety play.

Gold Video Analysis

Here you can watch my detailed analysis along with both my short-term expectations and long-term supercycle outlook.

Global Currency Trends – Monthly Charts

As the US dollar index rises we tend to see precious metals fall. As you can see from the charts below almost all currencies are falling in value helping to send the US dollar index sharply higher this is a headwind for precious metals until it finds resistance in tops.

Gold Monthly Chart Comparing 2008 Bear Market and 2022

Let’s take a look at the monthly chart of gold. I believe gold entered a new bullish supercycle in 2019, which is very similar to the Super cycle that started in 2001.

I believe the bear market in equities we have started can be compared to the 2008 bear market. Technical analysis shows that gold could correct another 16% lower and match the same 34% correction we saw in 2008.

The price of gold is threatening the 1674 support level. If price is broken on the monthly chart it will signal a large sell off to roughly the $1300 to $1400 level for gold.

While the circumstances and economy are very different from 2008 the price charts are painting a very similar picture. I believe there’s still a long way to go for gold to find support and it may take another 8 to 12 months to unfold. I also believe that the precious metal sector will be one of the first assets to bottom and then start a multiyear rally very similar to what happened during the 2009 to 2011 rally.

While the 34% correction starting to take place may look very large it is in line with what we’ve seen in the past. While price charts don’t repeat they do tend to rhyme so I’m expecting a similar type of scenario though I’m sure it will unfold a little differently and take a different length of time to mature.

Price Stage Analysis – Gold Starting Stage 4 Decline

The price of gold is on the verge of breaking down from a stage three topping phase. Once the breakdown is confirmed it will then be in a stage 4 decline which is known as a bear market. It’s important to note that we can have bear markets within supercycles.

Just like when gold started at new super cycle in 2001 which lasted to 2013 there can be large corrections and smaller bear markets within the bullish Super cycle.

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Dollar Index Rockets Higher and Has More Room to Run

The US dollar Index has been one of the hottest assets to own this year. I believe the rising value of the dollar index has been putting downward pressure on the metals sector all year. As you can see from the quarterly chart below, The US dollar index still has more room to run to match the high set in 2001.

Keep in mind I still think there’s another three to five more bars before the dollar forms a top and reverses direction. Each bar on the chart is 3 months because this is the quarterly chart so we still have potentially a year of sideways or lower gold pricing ahead of us.

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Gold Miners Will Be Under Pressure If Gold Falls

If gold breaks down and the bear market in equities continues, we will see gold mining stocks continue to sell off. The large cap gold stocks ETF GDX shows a potential of 44% decline in price over the next year. While this may sound bad it will become an extraordinary opportunity in do time.

I believe silver and silver mining stocks will follow that of gold stocks as well.

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Concluding Thoughts

In short, I’m very excited for what is unfolding in the precious metals sector. And while it may still be early I’m keeping my eye on the sector for the start of a new super cycle rally in 2023 which could be life changing for investors.

TheTechnicalTraders created the Consistent Growth Strategy that can be manually followed or autotraded in a self-directed retirement account for people who do not want to spend their valuable time in front of a computer. Save time to do what you love and lower stress to enjoy every moment of today.

Chris Vermeulen
Founder & Chief Investment Officer
www.TheTechnicalTraders.com

Disclaimer: This article and any information contained herein should not be considered investment advice. Technical Traders Ltd. and its staff are not registered investment advisors. Under no circumstances should any content from websites, articles, videos, seminars, books or emails from Technical Traders Ltd. or its affiliates be used or interpreted as a recommendation to buy or sell any security or commodity contract. Our advice is not tailored to the needs of any subscriber so talk with your investment advisor before making trading decisions. Invest at your own risk. I may or may not have positions in any security mentioned at any time and maybe buy sell or hold said security at any time.

The USD Fell on Ukraine’s Success News. How Did Gold React?

Looking at an individual tree (daily session) is exciting. Especially if the tree (profits on a trade) is growing day by day. However, it is looking at what the forest (the broad perspective, general trends) does that makes one’s portfolio grow over time.

Two Keys

While I provided a lot of context in Friday’s flagship analysis, in today’s analysis, I will focus on two key long-term developments that are extremely important but that don’t get enough emphasis.

The first one is in gold stocks, and the second is in the USD Index.

Starting with the latter, the key thing is that the USD Index is after a breakout above the previous highs, and while it just invalidated the short-term breakout, it continues to trade in a mirror-like pattern to what happened in 2002 and 2003.

Back then, the corrective pause took quite a while before the movement continued. Due to sharply rising interest rates, it doesn’t have to be the case this time . However, even if the USD Index once again moves to the 104-105 area, the medium-term outlook will still remain very bullish.

Is it likely to happen?

Not necessarily.

From the short-term point of view, the USD Index declined substantially today (likely the safe-haven demand decline based on the counter-offensive in Ukraine, which suggests that the war might be close to its end, and Russia could be on the losing side thereof), and it’s about to reach its rising support line.

This line kept the declines in check for months, so it’s quite likely that it will stop the declining prices also this time.

While the USD Index declined substantially in today’s pre-market trading (about 1.2%), did gold’s price rally substantially?

No. It’s up by just 0.38% so far today. (And silver’s price is up by over 1.6%, which means that it’s outperforming gold on an immediate-term basis – something that we often see right before bigger declines.)

So, we have a situation where gold doesn’t really want to rally based on the USD’s decline, and that’s bearish for gold, especially since the support for the USD Index appears to be just around the corner.

Also, regardless of the immediate-term effects on forex prices, please consider the following. If the situation in Ukraine stabilizes and things get back to the way they were before, at least in terms of borders (or Ukraine claims Crimea back), it means undoing a lot of what happened based on those changes in the past, right? And gold rallied in response to both events – the invasion of Crimea and the invasion of the rest of Ukraine. So, it could decline as things stabilize – mainly because the safe-haven demand wanes.

The second big thing that I want to feature today is the situation in the HUI Index. I like to analyze this index as it’s been trading for a long time, and therefore it’s able to provide a lot of context to the most recent price moves.

Here We Go Again?

In this case, what I would like to emphasize is that the key breakdown is below the rising long-term support line that’s based on the 2016 and 2018 lows.

Back in 2020, the breakdown below this line was quickly invalidated. This time, it’s the opposite. The breakdown was confirmed.

The very recent move higher simply means that gold stocks are verifying the breakdown. Nothing more.

It is the huge decline that we saw this year that is what is really going on, and by focusing on just the last several trading days, one might completely miss the perspective. The big deal about gold stocks right now is that they are in a medium-term decline, not that they bounced recently.

As far as gold itself is concerned, it continues to correct from approximately its previous lows, which is exactly what we saw in 2013 right before the biggest part of the slide. I was there. I remember what the overall feeling among the investors back then was. The narrative was “the bottom is in, the rally will now surely resume, it’s a no-brainer”. Then gold plunged.

Nothing from what we saw recently (including today) invalidated this analogy. The outlook remains extremely bearish.

Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Sunshine Profits: Effective Investment through Diligence & 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 subject to change without notice. Opinions and analyses are 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 deemed 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.

 

Reversals in Gold and Silver Are More Bearish Than Declines

As Predicted

In yesterday’s analysis, I explained how extremely likely it was for gold to decline after U.S. Labor Day, and that’s exactly what happened – gold declined. Not only that – it actually reversed its early gains before moving lower, and we saw the same thing in silver and mining stocks, and the reversal is more bearish than a small decline, as it indicates that the very brief rally is likely already over.

Let’s take a look at what happened recently, starting with gold.

As I wrote above, gold reversed and declined yesterday. However, it also did something else – it declined on volume that was relatively big after a daily upswing that took place on relatively low volume.

The volume readings confirm the bearish nature of the recent back-and-forth trading.

The medium-term downtrend simply remains intact.

Silver did something similar.

The white metal moved up to $18.47 on an intraday basis, but then declined and ended the day only $0.03 higher. This means that it declined by $0.44 before the closing bell, Aad it closed below the July lows. The breakdown below them was therefore just verified. This is bearish.

What about junior miners? They declined more visibly, ending the session 2.29% lower, thus further increasing our profits from short positions in them. The GDX was down by 1.47%, and the HUI Index by 1.08%.

Let’s zoom in – the chart below is based on hourly candlesticks.

What’s Up With Gold Stocks?

In yesterday’s analysis, I commented on the good technical reason why the GDXJ ETF has moved higher recently:

The GDXJ moved higher and briefly moved above the previous trading day’s closing price and its intraday low. Then, the GDXJ moved back down and closed below those levels.

The important extra detail here is that Thursday’s session started with a price gap. It’s important because prices tend to “want” to close the price gap before continuing with their current trend. “Closing the gap” means temporarily moving to the levels and actually trading where there was no trading before (thus, the gap). That’s exactly what we saw on Friday.

What we haven’t seen on Friday is an invalidation of the breakdown below the July lows in closing price terms. Consequently, the breakdown was not invalidated but verified.

This is not a bullish price action, but something bearish and quite normal. Consequently, the outlook remains bearish.

Indeed, the value of the GDXJ ETF declined yesterday as well. What’s particularly interesting is that while closing below the lower border of the price gap, the GDXJ also closed below the intraday low of July. This means that the breakdown below those lows just became even more believable.

This, together with reversals seen in gold and silver, paints a very bearish picture for the following weeks – and quite likely also for the following days.

Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks.

If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Sunshine Profits: Effective Investment through Diligence & 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 subject to change without notice. Opinions and analyses are 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 deemed 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.

Breaking Down ETFs – What They Are And How They Help Build Wealth

The idea of pooling investment assets has been around for centuries.  Mutual Funds first appeared in the 1920s.  But it wasn’t until the 1980s that mutual funds became widely popular with mainstream investors. In recent years, ETFs have taken off as an alternative to mutual funds.

An exchange-traded fund (ETF) is a “basket” of stocks, bonds, or other financial instruments that gives convenient exposure to a diverse range of assets.  ETFs are an incredibly versatile tool that can track anything from a particular index, sector, or region to an individual commodity, a specific investment strategy, currencies, interest rates, volatility, or even another fund.  You can do about anything with them — hold a diversified portfolio, hedge, focus on a particular sector, or even profit in a bear market.

The most significant practical difference between mutual funds and ETFs is that ETFs can be bought and sold like individual stocks —and mutual funds cannot.  Mutual funds can only be exchanged after the market closes and their Net Asset Value (NAV) is calculated.  Shares of ETFs can be traded throughout regular market hours, like shares of stock.

Both mutual funds and ETFs have expense fees that can range from low to high.  Mutual funds can have front or backend loads or redemption fees in addition to management fees.  ETFs that trade like shares have commissions to buy and sell.  But some ETFs are so popular that brokers offer commission-free trading in them.

So Many Choices

The sheer number and variety of ETFs can be a bit mind-boggling.  Over the last 20 years, we’ve seen just a couple hundred ETF offerings grow to more than 8,000 worldwide, encompassing more than 10 trillion in assets.

A surprising number of ETFs have failed.  They started with an interesting focus (well, “interesting” to somebody) but failed to attract enough interest to remain viable.  For this very reason, I avoid narrow niche ETFs that trade with low volume.

I eliminate many ETFs on poor liquidity alone.  I’m not interested if there’s not much volume in a product.  I don’t want to suffer high slippage from wide bid/ask spreads.  I want to get in and out quickly and at fair prices.

To Leverage or Not to Leverage?

Inverse and leveraged ETFs often use derivatives like options, futures, and short-term contracts to achieve 2x or 3x the daily change in the assets they’re intended to track. These types of instruments have inherent time decay, and they tend to lose value over time, regardless of what happens in the index or benchmark that the ETF tracks. As a result, these products are best for very short holding periods or day trading.

Options on ETFs

Many ETFs have options (puts and calls) available.  But even if the ETF itself trades with decent volume, that does not mean that the options meet my criteria for liquidity.

Sometimes I will use long options – puts or calls — if a clear directional move is in play.  I also use many of my option premium selling strategies on popular ETFs.   Just like with stocks, options can be used with ETFs for additional leverage, collecting premiums for income, and risk management.

An ETF Playlist

Here are some of my favorite ETFs and how I use them.

SPY, QQQ, IWM – Major index ETFs with huge participation. I use options strategies with these to collect premiums or profit from longer-term directional moves.

XLE, XLF, XHB, IYT, XLU, SMH – Sector Exposure. These can work well for directional trades in specific sectors. I like these sector plays as they can give a lot of protection against individual stock risk.

DBC, USO, UNG, WEAT, GLD, SLV, COPX, GDX, URA – Commodity Exposure. All of these can work well when the underlying commodities are appreciating. I tend to use these with option premium selling strategies such as covered calls and diagonal spreads.

TQQQ – Triple leveraged to the QQQ. This very popular ETF can work well to capture very short-term bullish moves in the Nasdaq 100 stocks.

SQQQ – This is the companion inverse ETF to TQQQ. It is triple-leveraged and inverse to QQQ. Long calls on SQQQ can work well to capture gains from a very short-term down move. Timing is everything in short-term trading, so I get in and out quickly, with trades lasting no more than a few days.

UUP – US Dollar Index. This can be a real winner when stocks are weak and the dollar is strong. Implied volatility on options is relatively low, so buying call options can work well if you catch a directional move. Using calls can give about 10x leverage; for example, a 3% increase in UUP might yield around a 33% gain for an in-the-money call option.

Technical Analysis

Whether an individual stock or an ETF, my answer for when to buy or sell is always based on price action. We only want to hold assets that are increasing or at least keeping their value while avoiding assets that are in decline. And the toolset to evaluate price action is technical analysis. The same technical analysis we use for stocks works just as well for the more popular ETFs.

Want to Learn More About Options Trading?

Every day on Options Trading Signals, we do defined risk trades that protect us from black swan events 24/7. Many may think that is what stop losses are for. Well, remember the markets are only open about 1/3 of the hours in a day. Therefore, a stop loss only protects you for 1/3 of each day. Stocks can gap up or down. With options, you are always protected because we do defined risk in a spread. We cover with multiple legs, which are always on once you own.

If you are new to trading or have been trading stock but are interested in options, you can find more information at The Technical Traders – Options Trading Signals Service. Brian, who has been trading options for almost 20 years, sends out real live trade alerts on actual trades, such as TSLA and NVDA, with real money. Ready to subscribe, click here:  TheTechnicalTraders.com.

Enjoy your day!

Chris Vermeulen
Founder & Chief Market Strategist
TheTechnicalTraders

Nothing Is Stopping the GDXJ From Reaching 2020 Lows

Gold moved visibly lower yesterday, silver closed at the second-lowest level in over 2 years, and miners (both GDX and GDXJ) formed their lowest daily close in over 2 years! If someone has chosen to take short positions, profits have increased.

Let’s take a closer look at what happened.

Weaker and Weaker

The freefall in gold stocks continues. Remember when I wrote that miners were about to slide profoundly, when they were trading over 320 earlier this year? Very few of my colleagues agreed, and some laughed. I guess the laughter is silent by now.

The weakness that we saw in previous weeks – and during yesterday’s session – is truly profound, and what I wrote about it yesterday remains even more up-to-date, as we have now seen a breakdown to fresh lows. Quoting my yesterday’s analysis:

Gold and silver are currently more or less where they were trading about two years ago (before the final part of the mid-2020 rally).

What about gold stocks? The HUI Index would have to rally by almost 50% in order to get back to those analogous price levels!

Gold stocks usually lead gold higher and lower (there are some short-term exceptions, but they are not really applicable right now), and there’s no doubt that miners currently lead gold lower.

Please consider the size of the recent corrective upswing in gold, then in silver, and next, please look at how “much” gold stocks rallied.

Laughable, isn’t it?

Not only that – gold stocks already gave away almost the entire rally, even though gold is only about halfway down.

If you think that this is extremely bearish, then… Of course, you’re right. However, the situation is actually even more extreme than that.

You see, that’s the same thing we saw on the precious metals market in 2013, right before the biggest part of the slide!

Now, as far as the GDXJ is concerned, it really seems that it’s on its way to its 2020 lows. The question is whether it will get there in the 2020 style or whether the decline will be more measured. If so, then where the corrections might be, and whether it’s a good idea to try to trade them.

Back in 2020, we had a global panic based on something that the modern markets haven’t experienced before (the pandemic, lockdowns). Now we have “relatively regular carnage.” The rates are going up, as well as the USD, and the stock market is going down.

However, it’s not a massive-event driven price move, and thus it can – and is likely to – take place in a rather regular manner.

So, while it’s still likely to be huge, like what we saw in 2008 and 2013, it’s also likely to be more measured and thus technical.

What Happened During the Crisis?

Back in 2008, the price moves were bankruptcy-news driven, while in 2013 the decline took the regular form. Despite the initial reason for gold to move up (Russian invasion in Ukraine), it failed to hold on to its gains, and instead it started to decline in a very visible way. Silver and miners are declining even more and faster.

The pressures from the USD Index and real interest rates are now greater than they were back in 2013, so the current decline has “bigger legs”. It lacks the dramatic circumstances of 2008, though.

What does it all mean? It indicates that the current big move lower is likely to be at least as significant as what we saw in 2013, but at the same time that it might be easier to trade than with the huge price swings that we saw in 2008.

Where does this discussion get us? It gets us to the indication that it’s still possible that we get a reliable rebound from the $27-28 area in the GDXJ, while gold rebounds one last time from the previous lows.

I previously commented that the above move is too uncertain to bet on it, and this remains to be the case However, I would like to point out that it’s still possible that I will write about adjusting the trade at those levels, after all.

This will depend heavily on the way in which the precious metals market falls in the following days. The more sudden and sharper the drop, and the stronger miners are relative to gold (so far this is completely absent), the bigger the odds that we’ll see a corrective upswing.

Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Sunshine Profits: Effective Investment through Diligence & 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 subject to change without notice. Opinions and analyses are 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 deemed 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 Is Poised to Move as the Euro Is Straddling Parity Against US Dollar

And last week, something epic happened in the forex market.

Namely, the EUR/USD closed the week below the all-important 1 level.

For the first time in almost two decades!

When this level was first approached weeks ago, I wrote that a rebound was likely, but I also added that I expected this level to be broken after the rebound. That’s exactly what we just saw.

This is something that the media will catch on to and is likely to trigger action from the investing public. This is where the early part of panic could start in the forex market, and it could then catch on in other markets – stocks, gold, silver, mining stocks, etc. This is the “oops, the unthinkable is happening” moment.

Those of you who have been profiting from how this situation develops practically throughout the entire year (like my subscribers), will likely be happy to know that the above indicates (I’m not making any guarantees, of course) that the biggest gains (based on mining stocks’ declines) are likely just ahead.

The USD’s Rally

Moving back to the USD Index, it had recently moved slightly below its 50-day moving average, and then it moved back above it. After that, it started to rally, and has continued to rally until this moment.

This move is in tune with what we saw at previous local bottoms. The RSI moved slightly below 50, which used to accompany bottoms in the previous months.

So, the scenario in which the USD Index has already bottomed seems quite likely. In fact, we already saw a breakout to new highs in today’s (Aug. 29) pre-market trading.

Please note that back in June/July, gold was initially reluctant to decline. It moved sharply lower after it was already clear that the USDX was moving to new highs. Consequently, we might see a sizable short-term decline in gold very soon.

Let’s zoom out.

I previously wrote the following about the USD Index’s long-term chart:

There’s also the possibility that the USD Index keeps declining until it reaches the very strong support at about the 104 level – the previous long-term highs (…).

Last week, the USD Index bottomed at about 104.5, which was very close to the above-mentioned 104 level. If traders had expected the USD Index to bottom at this level, then some of them might have bought at higher levels in order to maximize their odds of catching the bottom, thus actually creating the bottom at higher levels.

As the USDX moved to the upper border of my previous downside target, it seems that the short-term bottom is already in.

This, in turn, likely means that the peak for precious metals is already in.

Please note that the USD Index is currently rallying in an approximately mirror image of how it declined in 2002. Based on this, it seems that one shouldn’t be surprised by a rather quick move from the current levels to about 120 – the USD Index’s long-term highs. Of course, the implications for the precious metals market are profoundly bearish.

Follow the Prices

If you can’t or don’t want to profit from declining mining stock prices, I also have good news. Please note that the decline is not likely to take place forever. Based on how the precious metals sector declined in 2008 and 2013, and based on multiple other indications, it seems that we’ll see a major bottom this year. While higher prices are encouraging, please note that there are two moments that determine a given trade’s or investment’s profitability – it’s not just the exit price, but also the entry price.

Thanks to declines and lower prices, one can get in at much lower levels and thus greatly increase the profits (again, I’m not guaranteeing any profits or market performance – nobody can guarantee it) from the entire huge rally that’s likely to take place in the following years.

The “mother of all buying opportunities” in the precious metals sector is likely not here yet, but it’s likely to present itself in the not-too-distant future. Stay tuned!

Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Sunshine Profits: Effective Investment through Diligence & 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 subject to change without notice. Opinions and analyses are 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 deemed 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’s Foremost Lesson from 2013

Gold is performing just as in 2013, and it has extremely important implications for the following weeks.

Since I keep reading about how supposedly bullish the current corrective upswing is, I decided to dedicate today’s analysis to showing you just how perfectly normal it is for this correction to be taking place – in tune with what happened in 2013, not against it.

In other words, what we see now is not a bullish game-changer, but rather a very normal repeat of what we already saw almost a decade ago.

History Rhymes as People Tend to React Similarly to Similar Price Developments

The underlying reasons for price moves change, but the forces that really drive the buy and sell decisions remain the same. These forces are fear and greed. Thanks to this, even though the economic, financial, and geopolitical situations are different now than in 2013, the price moves continue to be very, very similar.

The exception is that back in 2013, there was no major military invasion in Europe, and we have one right now. This means that gold – being a safe-haven asset – was practically forced to rally. As gold rallied higher than it did in late 2012, it then declined in a more volatile manner.

Since the decline was sharper this year than it was in 2012 and 2013, the correction that we see now is also more volatile. That’s perfectly normal. If you drop a ball from a higher level, it will also bounce higher before falling again, right? However, it will fall, nonetheless.

Let’s see what happened in 2013.

Now, let’s see what happened recently.

No, it’s not the same chart :). The first one shows gold’s performance between 2011 and mid-2013, and the second shows gold’s performance between late-2019 and today.

The price pattern in gold is so similar, because… history rhymes! Gold got too high too fast in 2011 and the same thing happened in 2020. In fact, if it weren’t for the huge amounts of money that were created due to the pandemic-related stimulus programs, gold would have likely declined instead of rallying. The proof here lies in the fact that, well, it invalidated the breakout above the 2011 high despite the above and despite the Russian invasion.

Think about it: if someone told you a few years ago that there would be a pandemic, global lockdowns, huge amounts of money being printed, double-digit inflation in many parts of the world, and a Russian invasion of Ukraine, would you believe that gold would fail to rally and stay above its 2011 highs?

Very few people would have likely believed that – and yet, that’s exactly what happened, and what’s still happening.

Yes, gold “wants” to decline before soaring (and yes, I do think that it will soar, but it’s simply unlikely before sliding first, similarly to what we saw in 2008), and since that’s the case, it has to decline in some sort of price pattern. What’s the most likely way for gold to decline? Since history tends to rhyme, the previous big declines provide guidance. In particular, the 2013 decline has been repeated to a very considerable (quite extreme, actually) extent.

What Does This Specific Self-similarity Tell Us Right Now?

It’s telling us… Hmm, no.

It’s screaming right into our ears: watch out!

If the pattern simply keeps repeating itself (which has been taking place for months!), then the huge slide is just ahead. The current correction and back-and-forth trading is likely just the calm before the storm.

Of course, the above is just my opinion, and I can’t promise any kind of performance of any market, including gold, but please note that the previous months’ weakness in gold and silver mining stocks vs. gold are also just like what we saw in 2013 before the huge slide…

I don’t even want to get into the “tiny” fact that while gold moved briefly above its 2011 highs in 2020, neither silver nor gold mining stocks were even close to something similar. Instead, they corrected about a half of their huge decline, and then they started another move lower – a move that continues to this day.

The markets are screaming an important message. However, it’s your choice if you decide to listen to them.

Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Sunshine Profits: Effective Investment through Diligence & 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 subject to change without notice. Opinions and analyses are 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 deemed 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.

Don’t Be Misled by Gold’s Recent Upswing

Patience Advised

Gold moved higher on Friday, so you might be wondering if this changed anything regarding the outlook. In short, it didn’t.

Let’s take a closer look at what happened.

Gold futures moved higher by over $12, and this meant that they moved from the lower part of my previous target area to its upper part. In other words, it remained within the target area, which means that it kept doing what was – in my view – the most likely course of action for this particular market.

As such, it didn’t invalidate any previous expectations, let alone the broader outlook.

Gold stopped below the upper border of the declining trend channel, and it ended the week below the neck level of the previous head-and-shoulders pattern. Both remain unbroken, so the recent upswing doesn’t change the outlook, which turned bearish when we took profits from our previous long position on Thursday.

The RSI indicator is now visibly above 50 and close to the levels that triggered a top in gold in April and June 2022, and in July 2021.

As you may recall, gold is currently repeating its 2012-2013 pattern, and based on it, it’s likely just before the most volatile part of the decline. You can read more about it in Friday’s analysis (and in many previous analyses), and if the above is new to you, I strongly suggest that you take the time to read more – the self-similar pattern is truly astonishing.

So, let’s check what gold did in 2013 at the analogous time.

Well, it consolidated for a few weeks and plunged only after that consolidation.

While it doesn’t guarantee that we’ll see a pause that’s as long as the one that we saw before the April 2013 slide, it’s a good indication that the huge decline might not start immediately, but rather we might see some “preparatory” action.

Back and Forth

For now, investors and traders might view the current prices as temporary, and they might expect gold to soar back up. In fact, I saw multiple analyses indicating exactly that. This means that a week or a few weeks of back and forth trading close to the current price levels or between the current price levels and the recent lows would help to convince them that this move lower was not accidental.

This would make them much more likely to sell (and panic) once gold breaks below its recent lows.

Also, while the above chart doesn’t show it, because it’s based on weekly and not daily prices, gold topped in March 2013 when its daily RSI was trading just a little above 50 and close to its previous higs – just like what we see right now.

Getting back to the possible back-and-forth movement that we might see now, please note that the price “action” was even more boring in the case of silver and mining stocks (middle and lower parts of the above chart). They did very little during the consolidation, but when they finally moved lower, they truly plunged.

Oh, and don’t let the sizes of the moves fool you – the scale is linear in the case of silver and GDX, while it’s logarithmic in the case of gold. In reality, the mining stocks still declined the most, and silver’s decline was still bigger than the one seen in gold.

All in all, the short-term rally appears to be over or about to be over, and mining stocks’ lack of strength on Friday confirms it.

Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Sunshine Profits: Effective Investment through Diligence & 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 subject to change without notice. Opinions and analyses are 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 deemed 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 Price Accession into Recession

Or inclusive of inflation as is the standardized measurement, a second consecutive quarter of shrinkage has just been recorded, which by long-running dictum establishes a recession as being in force, six months after the fact.

This second consecutive quarter of shrinkage having been clearly expected given our Economic Barometer being in full plunge — toward saving face — the StateSide government, investment banks and FinMedia skirted ’round Thursday’s -0.9% Q2 GDP report by redefining if not outright denying “recession”. Here are a few choosings of such high-level musings:

  • “We’re not going to be in a recession”, U.S. President Joseph Robinette Biden Jr., 25 July;
  • “We’re not yet in that recession-type scenario”, Elyse Ausenbaugh, JPM, 28 July;
  • “Are we in a recession? Yes. No. Maybe.”, Allison Morrow, CNN, 29 July.

REALLY?

Not only is the recession ongoing, but by the above Barometer, the underlying economic foundation for Q2 was weaker than ’twas for Q1. But as GDP is not so much calculated using specific metrics as it is a “throw it up on the side of the barn” summation for a quarter’s value of goods and services, the GDP refutes the depth of the ongoing reality. And as is clear in the graphic, Wall Street as measured by the S&P 500 (red line) is obviously siding with the “milder” GDP shrinkage along with the “redefining” of recession rather than with truth of the floundering economy (blue line).

Indeed we oft wonder if the six-figure folks at the banks actually do any honest economic analysis. The optics are that they do not, instead choosing to parrot one another with what they see on TV. (Easy money if you can dumb yourself down enough to get the job). Whereas here, we’ve been pointing out for months that the U.S. economy has been shrinking (simply because we do the math), whilst much of the balance of the bunch prefer to swim in da Nile. (‘Course, any threat to their fee income is verboten!)

And as for the ongoing Q2 Earnings Season, the S&P 500 is on track toward recording its sixth-worse quarter (by year-over-year comparison) in at least the past 21 quarters: which is why the “live” P/E is a lofty 33.3x … which in ironic turn is 33% above the lifetime average price/earnings ratio of 22.3x. “Bear” in mind as well within this S&P “correction” that 3600-3200 structural support has yet to be tested.

“But mmb, everybody’s saying the bottom is in…”

And let them so say, Squire, for without “everybody” there’s no one to take the other side of trade.

As for Gold’s latent price accession into economic recession, ’twas a robust week for the yellow metal. Inclusive of +18 points of price premium (as volume rolled from the August contract into that for December), Gold scored a net weekly gain of +3.3% (+53 points). By percentage — even without the added premium — ’twas Gold’ best weekly gain since that ending 04 March. Moreover, price is finally knocking on the red-dot door to flip the weekly parabolic trend from Short to Long:

And whilst we’ve been most fortunate with some near-term calls (suggesting the precise 1678 low two weeks in advance, and then a week ago suggesting this past week’s precise 1785 high as a near-term target), we remain far off base toward reaching our 2254 forecast high for this year, albeit our near-term “Hello 1800!” looks likely to pan out. Gold having settled yesterday (Friday) at 1783 means a leap from here of +26% is requisite within just five months (107 trading days) to hit the 2254 target.

Such percentage increase within same timeframe did happen in and around 2005, 2006, 2007, 2008, 2009, 2011 and 2020, just in case you’re scoring at home. (Yeah, we know, the “M Word” crowd will be out to quell it, lest they themselves be quelled as currency faith dissipates: history does have a hankerin’ to repeat itself).

Meanwhile, year-over-year we also go for Gold along with several of its key equity measures. Whilst all by their percentage tracks are negative, the troops are now trying to turn the corner, albeit from this time a year ago we’ve Gold itself -2%, Franco-Nevada (FNV) -20%, the VanEck Vectors Gold Miners exchange-traded fund (GDX) -25%, Newmont (NEM) and Pan American Silver (PAAS) both -28%, Agnico Eagle Mines (AEM) -34% and the Global X Silver Miners exchange-traded fund (SIL) -38%. Up or down, you can really see the leverage of the equities-to-Gold herein:

As brutally low as remains the price of Gold (1783 today versus the Scoreboard valuation of 4021), the yellow metal still has a place on the podium as we next see in the year-to-date percentage performances of the BEGOS Markets, with Big Oil remaining the Big Winner. And is not said that last-place Copper supposedly leads the economy, (hint-hint, nudge-nudge, wink-wink)?

As for their past 21 trading days (one month), here we go ’round the horn for each BEGOS component with its respective grey linear regression trendline and baby blue dots of consistency thereto. Gold’s Friday bar gap is indicative of the +18 point price premium as December replaced August for “front month”:

The precious metals’ 10-day Market Profiles reveal prices’ breaking out to the upside, Gold on the left having expanded from the 1740s up into the 1780s and Silver on the right moving up a full point from the 19s to settle above 20 for the first time since 30 June. Indeed, Sister Silver’s gain for the week was a full +10%, in turn knocking down the Gold/Silver ratio from 93.3x to 87.7x, still well above the century-to-date average of 66.9x, (by which measure prices Sister Silver at 26.65 rather than at her lowly 20.34):

Further, it being month-end, here we’ve Gold’s Structure by the monthly bars across the past 11 years. (Caution is advised in reviewing this chart, for reliving The Northern Front time and again can elicit both a headache and thigh rash):

At least Gold has recovered to our call for 1785, (which ain’t sayin’ much); however as was also written a week ago “…what had been Gold’s 1854-1779 support zone mirrors into the 1779-1854 resistance zone…” Thus from here ’twill be the battle of fundamental push versus the “M Word” crowd set to keep Gold on its tush. Rather confounding stuff, as are these three closing observances:

  • There is wide-spread consensus that the Federal Reserve shall continue to aggressively raise rates into the recession only to revert to rate cutting come 2023. Our recommendation is to take the Green route in saving the Planet’s fragile supply of energy by simply shuttering the Eccles Building for a year given ’tis back to here the Fed would otherwise ultimately steer.
  • Dow Jones Newswires this past week reported that “Rich Americans Keep Borrowing, Defying Economic Gloom.” That aligns nicely with Squire’s noting earlier that “…everybody’s saying the bottom is in…” Be mindful of massive margin calls when it all goes wrong.
  • Speaking of which, the International Monetary Fund has again just notched down their forecast for global growth; (we assume this is ex-StateSide, it already being well into a state of shrinkage). The IMF further couvert son derrière in warning of even worse outcomes. Add to that more broadly the Congressional Budget Office’s expectations for increasing budget shortfalls, in turn breeding far higher levels of debt levels over the next 30 years. (That’s one heckova crystal ball there). Moreover, at what point comes Uncle Sam’s first default?

Regardless, the dominos remain poised for their chain reaction ravaging: a still vastly overpriced S&P within a better-yielding debt environment, a Dollar worth more as there are more of them, more and more debt per the CBO (which counters the Bond argument), the Fed raising further into recession, and “ooh-ooh a COVID-22 aggression”? The mutation of the 3Ds (Debasement, Debt, Derivatives) ever so underscores the 3Gs: Gold, Gold and Gold!

Cheers!

www.deMeadville.com

Gold Weekly Price Forecast – Gold Markets Have a Bullish Week

Gold Weekly Technical Analysis

Gold markets have rallied rather significantly during the course of the week, as it looks like we are hell-bent on threatening the $1800 level. $1800 level is an area that is relatively important based upon previous support, and thereby should bring in quite a bit of “market memory.” In this phenomenon, there should be a lot of orders waiting to get involved, perhaps pushing the market back down.

On the other hand, if we turn around and continue to go higher, it’s likely that the $1800 level will put up quite a fight. If we were to break above the $1800 level, then it’s possible that the market could go looking to the 50 Week EMA, which is right at the $1832 level. Obviously, this would be right along with a massive selloff in yields, and thereby would see assets move against the dollar everywhere.

I believe that we are more likely than not going to see a lot of noisy behavior more than anything else, so with that being the case you need to be very cautious with your position sizing. If the market turns around against you, you need to get out quickly because it’s going to continue to be very volatile going forward. The next couple of weeks could be a bit crazy, so you need to pay close attention to yields more than anything else as it seems like they are driving everything right now. Position sizing will be everything, and need to make sure that you do not risk too much at any one time because of the massive amounts of volatility that we are seeing in the GDX.

Gold Price Predictions Video for the Week of 01.08.22

For a look at all of today’s economic events, check out our economic calendar.

If Gold Continues Its Uptrend, Junior Miners Will Benefit

Bullish Indications

Overall, the precious metals sector didn’t do much last week. Gold was up by 1.4%, silver was up by 0.12%, GDX was down by 0.7%, and the GDXJ was up by 2.46%.

Junior miners are the bullish exception that reacts to gold’s recent strength. Seniors and silver are not really participating in the rebound – at least not yet. As a reminder, the above is not necessarily a sign that junior gold and silver miners are particularly strong – it’s likely the case that they have simply fallen the most recently, and therefore their rebound is the strongest.

As you may recall, silver tends to outperform gold close to the end of a given rally, and we haven’t seen this phenomenon this time, except for the last rally that ended on July 18. However, that was too early in the rally to really call this type of performance something close to the end of the rally – it was too close to its beginning.

Consequently, it could be the case that we’re going to see more strength in the precious metals market before the big move lower continues.

What we saw in the general stock market confirms this scenario.

Stocks declined somewhat on Friday, but overall, they ended last week visibly above their declining short-term trend channel and above their 50-day moving average. That’s simply a bullish combination for the short run.

This tells us that silver and mining stocks (and especially junior mining stocks) are likely to move higher unless gold truly plunges.

Gold Hasn’t Stopped Yet

Gold is likely to move higher in the short term, not plunge. The reason is that it just invalidated the breakdown below its mid-2021 lows and the 61.8% Fibonacci retracement level based on the entire 2020 rally. The yellow metal did so after bottoming right in the middle of my target area, close to its previous lows.

Besides, in all recent cases when gold rallied after its RSI was below or very close to the 30 level, it then rallied at least until the RSI was close to 50. That’s not the case yet, so it doesn’t seem that gold is done rallying yet.

All in all, gold is likely to move higher within the next several days, and the same goes for the general stock market. Both are likely to contribute to higher prices in junior mining stocks. The latter are likely to rally, top, and then start another very powerful move lower. For now, however, the short-term outlook remains bullish.

Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Sunshine Profits: Effective Investment through Diligence & 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 subject to change without notice. Opinions and analyses are 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 deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported.

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