Gold Stocks Are Worse Than Gold, Better Than Crypto

Gold Stocks Are Worse Than Gold

The original article was published in September 2016. I just finished reading it again and find no reason to edit or modify its contents.

The price of gold peaked in the summer of 2016 – shortly before my article was written and published – at $1357 oz. (monthly average closing price). At that time the GDX (ETF index of gold mining shares) peaked at 30.60.

Both gold and gold mining shares (gold stocks) have been lower and higher since then, and the past six years have seen a fair amount of volatility. Lately, both gold and gold stocks have undergone downside corrections since their most recent highs earlier this year.

So where are we now?

Below are ten-year charts for gold (source) and GDX (source)

Gold Prices – 10 Year Historical Chart

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GDX (Gold Miners ETF)

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Gold is currently priced at $1827 oz. and is up almost thirty-five percent since its peak of $1357 oz. in July 2016.

The GDX index of gold mining shares is currently 29.66. That is a decline of three percent during the same period in which the price of gold increased by more than a third.

Even if the three percent decline in gold stocks could be changed to a three percent increase, the mathematical calculation for comparison purposes would result in a more than ten-fold increase for gold over gold stocks.

More recent performance is similar. Since their respective peaks in 2020, gold is down eleven percent; and GDX is down by thirty-seven percent, more than three times as much as gold.

Finally, from their respective peaks in the past few months, the gold price has declined by eleven percent, whereas, GDX is down by twenty-seven percent.

Gold Stocks To Gold Ratio

Below is another chart (source). This one is the HUI to Gold ratio…

HUI (NYSE Gold Bugs Index) to Gold Ratio

 

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The HUI is an index of various gold mining stocks. The long-term downward trajectory is indicative and confirmative of everything we have said about the underperformance of gold stocks relative to gold.

The down beat goes on for gold stocks, but it’s not a bad as crypto.

Gold Stocks Not As Bad As Bitcoin, But…

Since its high last October (2021) the price of Bitcoin has dropped seventy percent. Currently at $21,068, the price of the new imaginary money was recently as low as $17,708, a decline of seventy-four percent.

The decline of seventy-four percent in the price of Bitcoin is nearly three times as bad as the recent decline in gold stocks.

That does not serve as justification for those who own gold stocks to talk trash about Bitcoin, however.

After peaking in 2011, gold stocks declined by more than eighty percent over the next four and one-half years.

Even though gold stocks as a group are more than double their 2015 lows, they are still priced at less than half of their 2011 peak.

Think of it this way…

Let’s say you invested/owned $100,000 in gold stocks at their peak in 2011. Less than five years later, your investment was worth $20,000; a loss of eighty percent. That is comparable to the loss incurred by holders of Bitcoin since last October.

IF your dogged determination kept you in the game until now, your investment is worth about $45,000. In other words, you still have a loss of $55,000.

For those who argue that someone might have purchased gold stocks at their lows, that’s great! Sell and take your profits.

It doesn’t mean that gold stocks are a good investment. All it means is that you speculated your way to a profitable trade. And, unless you caught the absolute lows, you could have done just as well or better by buying gold.

Barrick Gold Corp.

Sometimes it helps to be more specific, so let’s look at a chart (source) of Barrick Gold Corp

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The most recent trading range for Barrick stock (20-30) is similar to where it was trading between 1993-97.

You could have bought Barrick at $20 per share in 1997, twenty-five years ago.

Or, you could have bought physical gold twenty-five years ago at $350 oz.

If you consider yourself a long-term investor, and you have owned Barrick for the past twenty-five years, you have gone nowhere.

On the other hand, if you had purchased gold instead, your increase is more than five-fold.

Gold Stock Investors – Take Heed

Investing in gold stocks is a losing game. If you are an investor in gold stocks, most of, if not all, the odds are against you.

It is not about patience. Time and fundamentals for investing in gold stocks are negatively oriented.

If you see a price spike upwards, take the money and run! (also see: The Rise And Fall Of Gold Stocks and Gold Stocks Vs. Gold – Not A Good Bet)

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED!

Best ETFs To Buy In 2022

Key Insights

  • QQQ will gain strong upside momentum in case the broader market starts to rebound. 
  • XLE has a good chance to continue its strong move as demand for energy increases during the summer season. 
  • GDX could serve as a defensive asset if markets find themselves under pressure in the second half of the year and demand for gold increases. 

Global markets remain volatile, and many investors are searching for safer options to protect their funds. ETFs offer an easy way to get exposure to indexes or market segments without picking individual stocks. In this article, we’ll take a look at several ETFs which could provide interesting opportunities this year.

Invesco QQQ Trust

Invesco QQQ Trust has been under significant pressure since the start of this year as traders moved away from higher-PE stocks. As a result, QQQ is down by more than 20% year-to-date.

QQQ dynamics are driven by the dynamics of leading tech stocks like Apple, Microsoft, Amazon, and Tesla, which are trading at a discount to their recent price levels.

In case the general market mood improves in the second half of the year, money would flow back into these stocks, which will be bullish for QQQ.

Energy Select Sector SPDR Fund

Energy Select Sector SPDR Fund enjoyed strong upside momentum this year as energy prices increased.

XLE is heavily focused on Exxon Mobil and Chevron, although it also has services stocks like Schlumberger and refiners like Marathon Petroleum among its holdings.

While Exxon Mobil and Chevron are trading at all-time highs, they are valued at roughly 12 forward P/E and have a good chance to gain additional upside momentum in case WTI oil spends this summer above the $120 level.

VanEck Gold Miners ETF

Gold has lost a lot of ground after touching highs near $2070 in March, so it’s not surprising to see that VanEck Gold Miners ETF has been under pressure in recent months.

GDX is a good bet on the gold price rebound which would be useful in case gold starts to move back towards its yearly highs due to increased uncertainty.

It should be noted that gold prices have moved lower due to rising Treasury yields, but it remains to be seen whether rates will continue to rise at a fast pace as the economy would face material problems if the 10-year Treasury yield settles above the 3.50% level. If Treasury yields settle in the 3.00% – 3.50% level, gold will have a good chance to gain upside momentum.

To keep up with the latest earnings updates, visit our earnings calendar.

Stocks Soar, but Gold’s a Bore

280522_gold_scoreboard

And how about a “standing o” for that soaring S&P 500, Ladies and Gentlemen! This past Thursday — after having been “textbook oversold” for 25 consecutive trading days — the S&P 500 unwound said stance. Oh to be sure, the Index’s regression trend (21 days) remains negative; but the S&P has just recorded five net gains in the past six trading days, including a +5.5% net gain in just these past three days toward finishing the week yesterday (Friday) at 4158. Pretty great! Especially when you consider:

  • The ongoing deterioration of the S&P’s Moneyflow — a critical, tried-and-true leading indicator — that now values the S&P -9.1% below its present level to 3781;
  • The Wednesday confirmation from the Commerce Dept.’s Bureau of Economic Analysis that Q1’s Gross Domestic Product shrank in both nominal and real terms;
  • The interest rate environment being positive and yet the “live” price/earnings ratio of the S&P now being 31.8x versus its lifetime mean of 22.3x;
  • The Economic Barometer having just reached a 14-month low to complete the week.

Therefore: let’s all buy stocks like there’s no tomorrow!

Today’s fund managers are right out of Ivan Pavlov’s dog kennel. (Well not all of them: we were informed during the week of Morgan Stanley targeting the S&P mid-point of 3400 within the 3600-3200 support zone, which as you’ll recall from last week’s missive is about where the S&P would be today had COVID not been created). But either way, in the spirit of our oft-quipped headline “World Ends, Dow +2”, the S&P’s low-to-high gain for the week was 283 points: that amount exceeds the S&P’s entire trading range of the year 2015 (which was 268 points, just in case you’re scoring at home).

But the bottom line from our truth-and-data-driven purview is that getting sucked back into stocks up here is a bad idea. Or as written a week ago: “…Our expectation near-term from here is that the S&P unwind said “oversold” stance, whilst remaining in the broader downtrend toward the noted support zone…” Nuff said.

As for the main act — Gold — it at best keeps yawning along, settling yesterday at 1851, up a scant six points for the week, and all but above the oft-emphasized 1854-1779 critical support zone. Of the five primary BEGOS Markets, Gold’s low-to-high percentage range for the week was the narrowest of the bunch. And overall for 2022-to-date, here’s the whole gang, Oil leaving the pack in the attrition, and boring Gold a with weak podium position:

280522_begos_standings

Still, there was a moment of hopefulness this past Monday when both Gold and Silver generated “BUY” signals upon their “Baby Blues” (graphically shown later in this missive) gaining ground per this end-of-day internal alert…

280522_begos_signals

…but little has yet come of it for either the yellow or white metal.

Thus we’ve next Gold’s weekly bars from one year ago-to-date, the parabolic Short trend now nine weeks in duration and keeping the cover on price:

280522_gold_weekly

As well from this date a year ago through yesterday we’ve the percentage tracks of Gold along with those of several key precious metals equities. The U.S. money supply across these 12 months is +7.0%; but every entity in the following graphic is lower.

Specifically, Gold itself is off the least at -3%, followed by Franco-Nevada (FNV) -5%, Newmont (NEM) -6%, the VanEck Vectors Gold Miners exchange-traded fund (GDX) -18%, Agnico Eagle Mines (AEM) -25%, Pan American Silver (PAAS) -32%, and the Global X Silver Miners exchange-traded fund (SIL) -36%. As they say in the South: “Iz’all dun gone to da dawgs…”:

280522_gold_gdx_nem_aem_fnv_sil_paas

Speaking of dogs, as earlier stated, the Econ Baro — amidst all the frothy stock market euphoria — reached a 14-month low yesterday. (‘Course, that isn’t going to be on CNBS, Bloomy or Foxy, their not wanting you to change the channel). Here’s the raw reality, apparently unbeknownst to the happy stock chaser:

280522_econbaro

Therein from the FinMedia Follies, Dow Jones Newswires queried: “Are We in a Recession?…people [are] talking about a possible U.S. recession…” Obviously ’tis a rhetorical question: the U.S. GDP has already shrunk in REAL terms for three consecutive quarters, and by the above Baro’s sheer drop, likely a fourth (at least). Clearly we’re already well into recession; the real question is: shall it morph into depression? Better question: “Got Gold?”

Mid-week within the overall stagflation situation came the Federal Reserve’s favoured inflation gauge of April’s Core Personal Consumption Expenditures, the same as the March reading of +0.3%; (the 15-year average monthly reading is +0.2%). So a tad high, and annualized, ’tis +3.6%. But hardly Jimmy Carter Era skyrocket numbers; and assuming that neither do you eat, nor travel, and live in a temperate tent, you’re probably gonna make out just fine.

That cited, ’tis said the Meeting Minutes (03/04 May) from the Fed infer an “urgency” to keep raising rates, especially so as to slow the housing market, even as April’s New Home Sales fell the most in nine years. Nothing like being in sync, eh?

Let’s next get in sync with the linear regression trends for all eight BEGOS Markets. Going ’round the horn across the past 21 trading days (one month) we see the aforementioned “Baby Blues” for the grey trendline consistencies rising for every component. Getting complacent, are you? Careful…

280522_begos_dots

And specific to the precious metals, here are their respective 10-day Market Profiles for Gold on the left and for Silver on the right. Those prices carrying the most traded volume are so labeled:

280522_gold_silver_profiles

Finally, it wouldn’t be month-end (save for one full trading day still in May, Monday being a StateSide holiday) without the Gold Structure. Here ’tis, charted by the month since the year 2011. Therein is Gold’s endless battle to regain The Final Frontier:

280522_gold_structure

To close, we’ve these three quickies ahead of a week economically busy:

  • St. Louis FedPrez James “Bullish” Bullard is said to be considering a rate cut as a possibility during 2023. That’s called begging the obvious question;
  • From the “Just Because Yer Rich Dept.” we read of a noted “billionaire” by the name of Ackman crediting Fed irresponsibility for the markets “imploding”. We “get it”, but rightly or wrongly, (this last week’s relief rally notwithstanding), we instead credit the implosion with the aforementioned ever-ongoing unsupportive level of earnings … and too, a far better, less risky return from the Bond market;
  • A just-released Fed survey taken late last year (what’s the point?) finds Americans to be strongly positioned financially. Not having seen the survey content, we wonder if the results included “marked-to-market” assets. (See the cellar dweller in the aforeshown table of the 2022 BEGOS Markets’ performances).

See to it as well that you’ve Got Gold!

Cheers!

www.TheGoldUpdate.com

After Recent Highs, What’s Next for the Junior Miners?

Another day, another higher close in the junior miners. And another day where profits on our long positions in the latter increased. There is a sign that the rally in the precious metals sector is close to being over.

Gold vs US Dollar Correlation and Technical Analysis

That sign is the situation in the USD Index, and the shape of the gold-USD link.

Chart, histogramDescription automatically generated

Starting with the gold-USD link, please note that while gold ended yesterday’s session higher, it was only ~$6 higher. Given that the USD Index declined by over one index point, it would be “normal” for gold to rally much more.

That’s a sign that gold is getting “exhausted”, which is another way of saying that the buying power for this particular rally appears to be drying up. Of course, one swallow doesn’t make a summer, but given the size of USD’s decline, it’s quite notable.

USD’s decline took it below its recent lows, and since it’s slightly down also in today’s pre-market trading, it seems that it can now decline further in the very near term. “Further” here shouldn’t be viewed as “by a lot”. In fact, there is a combination of rising support lines just above where the USD Index is trading right now.

The dashed lines: blue and red one are likely to stop this correction. Of course, it’s not 100% certain, but the fundamental situation continues to favor higher USD values (rising real interest rates), so significant changes don’t appear likely. The possibility is there, especially if the geopolitical situation changes, but it’s simply not likely.

Besides, the RSI just moved below 50, and while this doesn’t mean anything based on “classic” interpretation of this indicator’s signals, I would like to emphasize that practically each time when we saw something like that in the past year or so, it meant that the USD Index was about to bottom.

So, on one hand, gold no longer “wants” to react to the USD’s weakness, and on the other hand, the short-term bottom in the USD Index appears to be at hand.

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Gold itself still didn’t correct as much as it did after previous cases when the RSI touched the 30 level. I marked the smallest rallies that followed this signal in the recent past with blue, dashed lines.

If history is about to rhyme, then gold’s rally might be nearing its end, but it’s not yet there.

Junior Mining Stocks

And what about the junior mining stocks?

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Well, their rebound simply continues. The GDXJ ETF ended yesterday’s session 0.92% higher (GDX was up by 0.59%, silver was up by 0.23% and gold by 0.31%). They are up by almost $4 (about 10%) from May 12, when we switched from short to long positions in the USDX – more than any of the above-mentioned markets.

Gold and Miners Price Forecast

The USD’s decline appears to be close to its end, and the same goes for the end of the short-term rally in gold, which means that the same fate likely awaits the junior miners – their rally too is about to end, in my view.

The target area that I placed on the above chart remains up-to-date. Yesterday’s weakness in gold relative to the USD Index tells me that it’s more likely that the rally will end in the lower part of the target area – probably close to its early-May low.

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 Forecast – Gold Prices Show Signs of Bottoming

Gold bugs will be happy to know the 5-year chart suggests a simple pause before new highs (see below).

Metals and miners could drop further over systemic market risk, but the technicals are starting to support a bottom.

Gold Price Forecast

Gold 5-Year daily chart

The cup-with-handle pattern looks complete. Prices fell deeper than anticipated, but I’m beginning to see signs of a bottom. I continue to expect a breakout above $2000 in the coming months; probably when the Fed pivots.

Chart

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Gold daily chart

The close-up of the handle formation shows gold dipping briefly below the 200-day MA. Prices closed back above it Thursday, and I see the potential for a bottom if we see a strong finish above $1850.

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Silver and Miners Analysis

Silver daily chart

Silver must get back above $22.50 to consider a cycle low.

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GDX daily chart

Miners managed to close above last week’s gap ($31.70). Prices may have reached a cycle low. Prices remain vulnerable to sharp dips and general market risk.

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GDXJ daily chart

Juniors bounced sharply, supporting a possible low. A close above the gap near $41.50 is the next step in confirming a bottom.

Chart

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Word of Caution: Markets are likely to remain volatile through 2022. Whatever happens today could swiftly reverse tomorrow. Try not to read too much into one week’s price action.

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.

Much to Gold’s Dissatisfaction, the USDX Seems Unstoppable

Miners and silver declined in a truly epic manner, and yes, the same is likely to take place in the following months, as markets wake up to the reality, which is that the USD Index and real interest rates are going up.

US Dollar Index Technical Analysis

Speaking of the USD Index, after invalidating the breakout below the multi-year head-and-shoulders pattern, the USDX was poised to soar, just like I’ve been expecting it to do for more than a year, and that’s exactly what it did.

The RSI is currently above 70, but since the USDX is in a medium-term rally and is already after a visible correction, it can rally further. Please note that we saw the same thing in 2008 and 2014. I marked the corrections with blue rectangles.

Still, the USD Index is now practically right at its next strong resistance – at about 104.

I previously wrote the following about this target:

It doesn’t mean that the USD Index’s rally is likely to end there. It’s not – but the USDX could take a breather when it reaches 104. Then, after many investors think that the top has been reached as the USDX corrects, the big rally is likely to continue.

The important detail here is that the consolidation close to the 104 level doesn’t have to be really significant (perhaps 1-2 index points of back-and-forth movement?) and it definitely doesn’t have to take long. The interest rates are going higher, and investors appear to have just woken up to this reality – it will take some time before everyone digests what’s going on. Before the late-reality-adopters join in, the USD Index could be trading much, much higher.

Back in 2014, when the USD Index approached its previous highs (close to 89), it consolidated so quickly that it’s almost not visible on the above chart – it took just a bit more than a week (from Dec. 8, 2014 – 89.56 to Dec. 16, 2014 – 87.83).

I previously wrote the following:

We could see something similar this time – and as the USD Index corrects for about a week, the same thing could take place in other markets as well: stocks and PMs. If junior miners were after a very sharp slide at that time, they would be likely to correct sharply as well.

I would like to add one important detail. Back in 2014, the USD Index didn’t correct after reaching its previous high. It corrected after moving above it. The higher of the highs was the March 2009 high, at 89.11.

The higher of the recent highs is at 103.96 right now, so if the analogy to 2014 is to remain intact, the USD Index could now top at close to 104.5 or even 105.

That’s exactly what happened recently. Yesterday, the USD Index moved to 104.96, which is in perfect tune with what I wrote above. Consequently, it seems that we could now see a move to about 103-103.5, after which USD’s rally could continue.

Gold, Silver and Mining Stocks Price Forecast

The opposite is likely to take place in the precious metals sector. Gold, silver, and mining stocks are likely to rally in the near term, and then – after topping at higher levels – their decline would continue.

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.

 

Short-Term Headwinds Abound For Gold

Summary & Key Takeaways

  • Through rising real yields, a slowing economy and poor seasonality, short-term headwinds remain for gold and precious metals.
  • However, this move higher in real yields is unlikely to last, and will soon turn from a headwind to tailwind for gold.
  • In an environment of ongoing geopolitical tensions, fiscal dominance, sanctions on foreign exchange reserves and international trade, and the weaponization of the dollar, the long-term bull case for gold remains as strong as ever.

What is going on with gold?

One of the notoriously difficult asset classes to forecast are gold and precious metals. Touted as a safe haven, store of value and inflation hedge, the recent price action in gold has largely defied such classifications. This is particularly so within a risk-off environment that is currently sweeping through markets.

Unfortunately, the short-term outlook for gold remains decidedly unclear despite some of the conditions being in place that gold bugs have dreamed of for decades in inflation and geopolitical tension. What is evident is that precious metals and mining companies have been unable to escape the recent volatility encompassing nearly all financial assets.

However, given the recent moves higher in real yields, this pull-back is perhaps unsurprising as real yields tend to be the most reliable indicator for the yellow metal.

Negative real yields are of the consequence of financial repression, an environment that clearly favors gold’s store of value attributes. So, with the recent move higher in nominal yields (particular on the long-end of the curve) being of greater magnitude than inflation, real yields are now largely positive across the board and thus have dragged gold lower.

Right now, real yields are signaling further pain may be forthcoming for precious metals.

https://images.squarespace-cdn.com/content/v1/5edb072f48c9fd655031c59d/54333eef-1509-4806-9d23-7435586302ac/Capture.PNG?format=500w

Indeed, we can see this relationship between gold and real yields by also looking at the rate-of-change in TIPS (via the TIP ETF) compared to the gold price.

https://images.squarespace-cdn.com/content/v1/5edb072f48c9fd655031c59d/aed9a495-ab93-429e-b191-604891bc5ec5/Capture.PNG?format=500w

And by the examining the relationship between gold and the total level negative yielding debt outstanding.

https://images.squarespace-cdn.com/content/v1/5edb072f48c9fd655031c59d/3bb8a1cd-dbd1-4bbf-9849-275b6ec4c839/capture.jpg?format=500w

Source: Variant Perception

As rates have been rising worldwide, the level of negative debt outstanding has plummeted. Clearly, rising real rates are a significant headwind for precious metals at present.

This swift (and historic) move higher in real rates shouldn’t necessarily be surprising to investors however. Historically, one can get a good idea of where real rates are headed simply by looking at the business cycle. We can observe this relationship between real rates and the business cycle below, using the ISM manufacturing PMI as a proxy for the business cycle.

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A growing economy should lead real rates higher and a slowing economy lead real rates lower.

An important observation we can ascertain from this relationship is how much the monetary policy actions at the Fed suppressed real rates through their historical levels of QE since early 2020, despite a growing economy. Now, with the Fed tightening monetary policy in response to their underestimation of inflation, we have finally seen the release valve for real rates turned and allowed them to catch up to the business cycle. A move that has happened in short order.

Whilst there is the likelihood real rates will continue to move meaningfully higher over the next few months, given the outlook for economic growth such a move will be short lived. Whilst this would be negative for gold in the short-term, such a scenario would present attractive entry points for those looking to allocate to gold, silver or precious metals miners long-term. Indeed, the long-term case for gold lies in this thesis that an over indebted economy simply cannot handle sustained positive real rates.

From a positioning perspective, we are beginning to see some constructive movements. Firstly, by looking at money manager positioning in the futures market, we have seen a significantly unwind in long position through this recent move. Remember, money managers consist of hedge funds and CTA’s, both of which are largely trend followers and tend to be long at the tops and short (or less long) at the lows.

A further unwind in managed money longs is something I am keeping a close eye on as a move to the 50-60% level in longs relative to total managed money positioning has been indicative of excellent contrarian buying opportunities in the past. Likewise, an unwind of speculative long positioning will help to put a floor on the gold price.

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More constructive for the present however is the futures market positioning of gold producers. Producers (i.e. the smart money) tend to be largely short the market as they are selling forward futures contracts as a means to hedge their production. They currently have on their smallest short positions since 2018, which as we know was an excellent time to buy.

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From a sentiment perspective, we have also seen a constructive unwind of bullishness of late, as measured here by the Bullish Percent Gold Miners Index. Again, I would like to see a little more pessimism towards precious metals before I become tactically bullish.

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If we look at sentiment through the lens of SentimenTrader’s Optic index, we can see a further washout generally aligns with the better buying opportunities in recent times.

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It is important to member too that sentiment is not necessary a great timing tool as it can remain elevated or depressed for long periods.

From a technical perspective, the picture is somewhat positive. As real yields have been repriced higher, gold has corrected back down to the $1,850 support area, with this test of support accompanied by a DeMark 9 sequential buy signal.

Depending on your time frame this may be a level worth slowly buying into a precious metal position. However, given my outlook for the economy, I could see a flush down to $1,750 or even $1,700 as a distinct possibility for the yellow metal, both of which would represent excellent points to add.

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In regards to the gold miners, given the $34 support area of GDX has been lost, I suspect a move down lower to $30 to be likely, an area I would look to slowly accumulate. Should gold correct further however it is important to remember that miners are largely high-beta versions of gold, so the downside risk is more prevalent with gold miners in a market wide risk-off event typically seen during growth cycle downturns.

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Indeed, given we are entering the worst seasonal period for precious metals in May and June, this ties in nicely to the idea that this correction has yet to run its course.

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Another significant headwind for precious metals at present is the dollar. Whilst the negative relationship between the dollar and gold has not been evident in recent months (a bullish sign for gold), it is important to remember that in a slowing growth environment the dollar will remain bid and is likely to continue higher. Dollar strength is not an ideal environment for precious metals.

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What is the catalyst for the next move higher?

Fortunately, these short-term headwinds for precious metals should provide investors an opportunity to accumulate at lower prices. The question then becomes; what will catalyze the next move higher?

To me, a dovish policy pivot by the Fed will likely be said catalyst. Given Chair Powell and his minions continue to hold steady in their attempts to tighten the economy to stave off inflation, the Fed put is certainly lower than what we have been accustomed to in recent times. However, I am of the belief that maybe it is not as low as some now believe it to be.

Given the poor outlook for the economy, one that risk assets look to be beginning to price in, tightening monetary policy into a slowdown was only ever going to be a recipe for disaster. We remain in a financialized economy and risk assets will continue to struggle whilst the Fed pursues this course. It is only a matter of time before something breaks. Should such a pivot occur later this year if equities correct meaningfully lower, injecting liquidity into an environment of higher inflation would be an environment wherein gold would likely thrive.

Furthermore, as I have touched on, slowing growth will eventually become a headwind for real rates themselves. As such, it seems as though this move higher in real rates is only temporary, and is one that will eventually turn from a headwind to a tailwind once more.

For now however, gold will not escape a market crash event, as correlations between all assets will rise to one. This is a distinct possibility.

The bull case for gold remains intact

Longer-term, the bull case for gold remains as strong as ever. All else equal, an environment of ongoing geopolitical tensions, fiscal dominance, coupled with a precedent for sanctions on foreign exchange reserves and international trade, and the weaponization of the dollar, these dynamics should provide more than enough fuel to warrant investors maintain an allocation to precious metals.

Indeed, the long-term technical picture for gold remains widely bullish, with the decade long cup-and-handle structure pointing to much higher prices in the years ahead, very much confirming the long-term fundamental case for gold.

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This is particularly true for miners, who have largely lagged gold in recent times.

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When the bull market for gold resumes, the miners should finally have their time in the sun.

Gold Rebounds After Yesterday’s Pullback

Key Insights

  • Gold failed to settle below the support at $1865 despite rising yields. 
  • The U.S. Dollar Index declined after an unsuccessful attempt to settle above 104, which was bullish for gold. 
  • A move above $1880 will push gold towards the resistance at $1890.

Gold

Gold received support near $1865 and is heading towards the $1880 level as the U.S. dollar pulls back from yearly highs.

The U.S. Dollar Index has recently made an attempt to settle above the 104 level but faced strong resistance and declined towards 103.60. The American currency is supported by rising Treasury yields.

The yield of 30-year Treasuries continues its attempts to settle above the 3.15% level, while the yield of 10-year Treasuries has managed to get above the 3.05% level.

A combination of strong dollar and rising Treasury yields is bearish for gold that pays no interest. At the same time, gold gets some support from the rising demand for safe-haven assets. This demand may increase further in case S&P 500 settles below the 4100 level and continues its pullback.

VanEck Gold Miners ETF made an attempt to settle above the $36 level during yesterday’s trading session but lost momentum and pulled back below the $35 level amid a broad market sell-off. Today, this pullback could be continued as S&P 500 futures are losing ground in premarket trading.

Technical Analysis

gold may 6 2022

Gold failed to settle below the support at $1865 and is moving towards the resistance level at $1880. If gold settles back above this level, it will head towards the resistance at $1890.

A successful test of the resistance at $1890 will open the way to the test of the next resistance at $1900. In case gold moves above this level, it will head towards the 50 EMA, which is located at $1910.

On the support side, gold needs to settle below the support at $1865 to have a chance to develop downside momentum in the near term. The next support level for gold is located at $1850. If gold declines below the support at $1850, it will head towards the next support level at $1830.

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

Gold Gains Ground Despite Fed Rate Hike

Key Insights

  • The Fed was less hawkish than expected, providing significant support to gold markets. 
  • Gold mining stocks continue to rebound at a robust pace. 
  • A move above $1900 will push gold towards the resistance level at $1915.

Gold Stays Strong After Fed Interest Rate Decision

Gold is trying to settle above the $1900 level as traders focus on new interest rate projections after yesterday’s Fed Interest Rate Decision.

The Fed raised the interest rate from 0.5% to 1.0% and announced that it would start reducing the size of its balance sheet in June. At the same time, comments of the Fed Chair Jerome Powell were less hawkish than expected, and traders quickly adjusted their interest rate forecasts.

Currently, the market expects that the interest rate will be raised to 1.25% on June 15. Previously, traders were ready for a 1.75% rate, so the change in expectations was dramatic. Not surprisingly, such a change provided significant support to gold markets, which are sensitive to interest rate expectations.

VanEck Gold Miners ETF continued to rebound and settled above $35.50. The nearest significant resistance level for VanEck Gold Miners ETF is located at $36.00. In case GDX manages to settle above this level, it will gain additional upside momentum.

Technical Analysis

gold may 5 2022

Gold is testing the resistance level at $1900. In case this test is successful, gold will move towards the next resistance, which is located at the 50 EMA at $1915.

A move above the 50 EMA will open the way to the test of the resistance at $1925. In case gold manages to settle above this level, it will head towards the next resistance at $1935.

On the support side, the previous resistance level at $1890 will serve as the first support level for gold. If gold settles back below this level, it will head towards the next support at $1880. A successful test of this level will push gold towards the support at $1865.

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

Gold Moves Higher As Traders Wait For Fed

Key Insights

  • Gold gains some ground ahead of the Fed Interest Rate Decision. 
  • Trading action will likely remain choppy as traders wait for Powell’s comments. 
  • A move above $1880 will push gold towards the resistance at $1890.

Gold Continues To Rebound

Gold managed to get above the resistance level at $1865 and is moving towards the next resistance at $1880, while traders wait for the release of the Fed Interest Rate Decision.

Today, the U.S. dollar lacks momentum against a broad basket of currencies. Trading action is also calm in the U.S. government bond markets. Everyone is waiting for the Fed decision and the subsequent commentary from Fed Chair Jerome Powell, which will have a significant impact on markets.

Gold markets have recently found themselves under significant pressure as yields were rising and traders prepared for an aggressive reduction of Fed’s balance sheet. In case Powell is not too hawkish, gold will have a chance to rebound.

Meanwhile, VanEck Gold Miners ETF managed to settle back above the $35 level during yesterday’s trading session. Today, VanEck Gold Miners ETF will be extremely sensitive to Fed’s commentary.

Technical Analysis

gold may 4 2022

Gold continues its attempts to settle above the resistance level at $1865. If gold manages to settle above this level, it will move towards the next resistance, which is located at $1880.

A move above the resistance at $1880 will open the way to the test of the resistance at $1890. In case gold settles above this level, it will head towards the next resistance at $1900.

On the support side, a move below $1865 will push gold towards the next support level at $1850. In case gold moves below this level, it will head towards the support level at $1830. A move below the support at $1830 will open the way to the test of the next support at $1815.

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

Gold Keeps Moving Lower As Treasury Yields Rise

Key Insights

  • Treasury yields are testing new highs, which is bearish for gold. 
  • Traders are focused on the Fed Interest Rate Decision, which will be released tomorrow. 
  • A move below $1850 will push gold towards the support level at $1830.

Gold Remains Under Pressure

Gold is moving towards the support level at $1850, while Treasury yields are testing new highs.

Yesterday, the yield of 30-year Treasuries settled above the psychologically important 3.00% level and moved towards the next resistance at 3.05%. The yield of 10-year Treasuries is also testing the 3.00% level.

Treasury yields are moving higher ahead of the Fed Interest Rate Decision, which will be released tomorrow. Bond traders bet that Powell’s comments will be hawkish. It looks that markets expect that the Fed is ready to aggressively reduce the size of its balance sheet. Such policy will push yields higher, which will be bearish for gold that pays no interest.

Not surprisingly, VanEck Gold Miners ETF remains under pressure in the current market environment. As gold prices keep moving lower, gold mining stocks cannot find sufficient support. In case gold manages to get below the $1850 level during today’s trading session, the sell-off in GDX will continue.

Technical Analysis

gold may 3 2022

Gold is currently trying to get below the support level at $1850. If gold declines below this level, it will head towards the next support, which is located at $1830.

A successful test of the support at $1830 will open the way to the test of the next support at $1815. In case gold moves below this level, it will head towards the support level at $1800.

On the upside, the previous support level at $1865 will serve as the first resistance level for gold. In case gold gets above this level, it will head towards the next resistance, which is located at $1880. A successful test of the resistance at $1880 will open the way to the test of the resistance at $1890.

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

Gold Is Under Pressure As Treasury Yields Return To Yearly Highs

Key Insights

  • Gold is moving lower as traders focus on rising yields. 
  • The recent sell-off in the U.S. stock market did not provide any support to gold. 
  • A move below the support at $1880 will push gold towards the next support level at $1865.

Gold Is Losing Ground At The Start Of The Week

Gold is moving towards the support level at $1880, while Treasury yields are trying to settle above yearly highs.

Treasury yields gained upside momentum in recent trading sessions, which was bearish for gold markets. Currently, the yield of 30-year Treasuries is trying to settle above the psychologically important 3.00% level. In case this attempt is successful, the yield of 30-year Treasuries will move towards the resistance at 3.05%, which will put more pressure on gold.

The recent sell-off in the U.S. stock market did not provide any support to gold, and it looks that gold traders are mostly focused on rising yields.

VanEck Gold Miners ETF moved back below the $35 level and will likely remain under pressure in case gold stays in the $1880 – $1890 range. If gold manages to settle below the support at $1880, GDX may gain significant downside momentum.

Technical Analysis

gold may 2 2022

Gold settled below the support at $1890 and is trying to get below the next support level at $1880. In case this attempt is successful, gold will move towards the support, which is located at $1865.

A successful test of the support at $1865 will open the way to the test of the next support at $1850. If gold declines below this level, it will head towards the support at $1830.

On the upside, the previous support at $1890 will serve as the first resistance level for gold. In case gold gets back above this level, it will head towards the resistance at $1900.

A successful test of the resistance at $1900 will push gold towards the next resistance at $1915. If gold moves above this level, it will head towards the 20 EMA at $1925.

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

Gold Tests Resistance At $1915 As Dollar Remains Under Pressure

Key Insights

  • Gold continues to move higher as the U.S. dollar pulls back from yearly highs. 
  • Treasury yields remain below recent highs, which is also bullish for gold markets. 
  • A move above $1915 will push gold towards the 50 EMA at $1920.

Gold Gains Ground Ahead Of The Weekend

Gold is currently trying to settle above the resistance at $1915 as the U.S. dollar continues to pull back from recent highs.

Yesterday, the U.S. Dollar Index made an attempt to get to the test of the 104 level. This attempt was not successful, and the U.S. Dollar Index pulled back towards the 103 level, which was bullish for gold and other precious metals.

Meanwhile, Treasury yields remained mostly stable, which also provided support to gold markets. Higher yields are bearish for gold that pays no interest.

As gold began to rebound, VanEck Gold Miners ETF received support and managed to settle back above the $35 level. Today, VanEck Gold Miners ETF will likely have a chance to test the $36 level as gold markets gained solid upside momentum.

Technical Analysis

gold april 29 2022

Gold is testing the resistance level at $1915. RSI is in the moderate territory, and there is plenty of room to gain additional upside momentum in case the right catalysts emerge.

A move above $1915 will lead to the test of the 50 EMA, which is located at $1920. In case gold manages to settle above the 50 EMA, it will head towards the resistance at $1935, although it can also face some resistance near the 20 EMA at $1930. A successful test of the resistance at $1935 will push gold towards the next resistance at $1950.

On the support side, the previous resistance at $1900 will serve as the first support level for gold. If gold declines below this level, it will head towards the next support level at $1890. A move below $1890 will push gold towards the support at $1880.

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

Gold Tries To Gain Ground As Dollar Pulls Back From Highs

Key Insights

  • The U.S. dollar declined from recent highs, providing some support to gold markets. 
  • VanEck Gold Miners ETF remains under significant pressure. 
  • A move above the nearest resistance at $1890 will push gold towards the next resistance level at $1900.

Gold Attempts To Rebound After Sell-Off

Gold is currently trying to settle back above the $1880 level as it tries to recover after the recent sell-off.

The U.S. Dollar Index has recently made an attempt to settle above 103.60 but failed to gain additional momentum and declined towards the support at the 103.25 level.

These levels were last seen during the acute phase of the coronavirus crisis. The current rally is extremely strong, and it’s not surprising to see that the dollar has finally faced some resistance due to profit-taking. The potential pullback of the American currency could could provide gold markets with an opportunity to rebound from recent lows.

Meanwhile, VanEck Gold Miners ETF continues to move lower. Yesterday, GDX managed to settle below the support level at $35.00. In case gold fails to settle back above the $1880 level, VanEck Gold Miners ETF would continue its pullback during today’s trading session.

Technical Analysis

gold april 28 2022

Gold made an attempt to settle below the support at the $1880 level but failed to develop sufficient downside momentum. In case gold manages to settle back above this level, it will head towards the resistance at $1890.

A successful test of the resistance at $1890 will push gold towards the next resistance level at $1900. A move above this level will open the way to the test of the resistance at $1915. In case gold climbs above this level, it will test the 50 EMA at $1920.

On the support side, a move below $1880 will push gold towards the support level at $1865. In case gold manages to settle below this level, it will head towards the next support level, which is located at $1850. A successful test of the support at $1850 will open the way to the test of the next support at $1830.

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

Gold Tries To Rebound After Yesterday’s Sell-Off

Key Insights

  • Gold found support near the $1890 level and is trying to gain upside momentum. 
  • Traders remain worried about potential rate hikes from the Fed. 
  • A move above $1900 will push gold towards the resistance at $1915.

Gold Attempts To Settle Above $1900

Gold is currently trying to get back above the $1900 level, while the U.S. dollar is testing yearly highs against a broad basket of currencies.

Investors remain worried about higher yields, and these worries have triggered a sell-off in the gold markets, which pushed gold from the $1935 level to the $1890 level.

However, gold continues to receive support in the $1890 – $1900 area and is trying to rebound despite stronger dollar. From a big picture point of view, gold declined from the $2000 level to the $1900 level in less than two weeks, which made it more attractive for speculative traders.

Not surprisingly, the strong sell-off in the VanEck Gold Miners ETF continued, and GDX made an attempt to settle below the $35 level before rebounding towards $35.65. If gold manages to settle back above the $1900 level, VanEck Gold Miners ETF should have a good chance to continue this rebound.

Technical Analysis

gold april 26 2022

Gold is testing the $1900 level. In case this test is successful, gold will move towards the next resistance at $1915.

A successful test of the resistance at $1915 will push gold towards the next resistance level, which is located near the 50 EMA at $1925. If gold gets above this resistance, it will head towards the next resistance at $1935.

On the support side, gold needs to settle below the $1900 level to have a chance to continue its pullback. RSI remains in the moderate territory, so there is plenty of room to gain additional downside momentum in case the right catalysts emerge.

The next support level for gold is located at $1890. If gold declines below this level, it will head towards the support level at $1880. A successful test of this level will open the way to the test of the support at $1865.

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

Gold Stocks: Are We Witnessing the Onset of a Major Collapse?

Remember when gold tried to rally above $2,000? It was just a week ago. Now, it’s likely about to drop below $1,900, silver and mining stocks are sliding too. While the white metal has been weak for a while now, mining stocks finally woke up to the reality and appear to be catching up with gold’s and stocks’ declines.

Boy, they sure have some catching up to do! Even though last week’s ~10% decline might appear terrific, let’s keep in mind that this is most likely just the beginning of a huge slide, probably quite similar to what we saw in 2012, 2013, and in 2008.

Gold Stocks Technical Analysis

Let’s start today’s analysis with a quick look at changes in the long-term HUI Index chart – the flagship proxy for gold stocks.

We saw a powerful weekly reversal, a decline in the RSI indicator from about 70, which confirmed the previous sell signal, and a fresh medium-term sell signal from the stochastic indicator.

In particular, the weekly reversal and the sell signal from stochastic are important, as they closely link last week with what we saw right after the final top in 2008 and 2012.

History is likely about to rhyme, and the implications are extremely bearish for mining stocks for the next few months.

Let’s zoom in.

While senior gold stocks declined by a bit less than 10%, junior miners fell by a bit more than 10% last week.

However, that’s the least important fact about this sector.

The key thing is that practically all the seemingly bullish breakouts that we saw recently were just invalidated.

The breakout above the declining red resistance line was invalidated.

The breakout above the late-2021 high was invalidated.

The breakout above the 50% Fibonacci retracement level based on the 2020-2022 decline had been (earlier) invalidated.

The breakout above the upper border of the previous triangle pattern was invalidated.

The breakout above the lower border of the previous triangle pattern was invalidated.

That’s a sell signal on top of a sell signal, on top of a sell signal, on top of a sell signal, on top of a sell signal.

We saw sell signals from the GDXJ-based MACD indicator too.

Speaking of the triangle on the above chart, its vertex is at the end of April, so we might see some kind of turnaround then – perhaps a volatile comeback, which is then followed by another – even bigger – slide.

Gold and Silver Technical Analysis

This would fit the gold chart too.

Gold has a triangle-vertex-based reversal point nearby, so they both confirm each other.

In the case of gold, please note how it followed its self-similarity to the post-2020 top trading patterns. The yellow metal moved slightly above its initial post-top bottom, and then it immediately turned south.

The support lines cross at about $1,845, so that’s where we might see the next short-term rebound, but let’s keep in mind that it’s not likely to be anything more than that – a corrective rebound that is then followed by another move lower.

Silver declined profoundly recently, and just like miners, it invalidated multiple previous breakouts. Most interestingly, though, it now clearly invalidates the breakout above its January 2022 high.

The next strong support is based on the previous lows, close to the $22 level. That’s where silver might correct before moving much lower.

Why Are Mining Stocks and Silver Declining So Much Nowadays?

It is quite likely due to their connection with the general stock market.

I’ve been writing about the stock market’s incoming demise for quite some time, and that’s what we’re finally seeing. Both silver and miners (especially junior miners) are responding accordingly.

Provided that stocks continue to decline, silver and miners are likely to fall even more than gold.

Let’s keep in mind what happened in the previous cases when stocks declined profoundly – in early 2020 and in 2008. Miners and silver declined in a truly epic manner, and yes, the same is likely to take place in the following months, as markets wake up to the reality, which is that the USD Index and real interest rates are going up.

USD Index Correlation

Speaking of the USD Index, after invalidating the breakout below the multi-year head-and-shoulders pattern, the USDX is poised to soar, just like I’ve been expecting it to do for more than a year ago.

The RSI is above 70, but since the USDX is in a medium-term rally and is already after a visible correction, it can rally further. Please note that we saw the same thing in 2008 and in 2014. I marked the corrections with blue rectangles.

The next strong resistance is at the previous highs – close to the 104 level.

It doesn’t mean that the USD Index’s rally is likely to end there. It’s not – but the USDX could take a breather when it reaches 104. Then, after many investors think that the top has been reached as the USDX corrects, the big rally is likely to continue.

Forecast

All in all, the technical picture for mining stocks is extremely bearish for the following months, even though we might see a short-term correction close to the end of April.

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 Declines As Traders Focus On Fed

Key Insights

  • Markets prepare for aggressive rate hikes from the Fed, which is bearish for gold. 
  • The U.S. dollar moves to new highs against a broad basket of currencies. 
  • A move below the support at $1915 will push gold towards the next support level at $1900.

Gold Remains Under Pressure At The Start Of The Week

Gold is currently trying to settle below the support level at $1915, while the U.S. dollar is testing new highs against a broad basket of currencies.

Markets are focused on the future trajectory of Fed’s rate hikes. Currently, markets are pricing in a 95.4% probability of a 50 basis points (bps) rate hike on May 4, when the Fed will announce its interest rate decision. Markets also believe that the target rate would be raised by as much as 75 bps on June 15, followed by a 50 bps rate hike on July 27.

Not surprisingly, gold markets have found themselves under pressure as the Fed is expected to aggressively fight inflation. VanEck Gold Miners ETF settled below the 50 EMA at $37.30 on Friday, and this pullback would be continued today as gold markets remain under material pressure.

Technical Analysis

gold april 25 2022

Gold is testing the support level at $1915. RSI remains in the moderate territory, and there is plenty of room to gain additional downside momentum in case the right catalysts emerge.

In case gold manages to settle below the support at $1915, it will head towards the next support level, which is located at $1900. A move below this level will open the way to the test of the support at $1890. If gold declines below the support at $1890, it will get to the test of the next support at $1880.

On the upside, the previous support at the 50 EMA at $1925 will serve as the first resistance level for gold. In case gold manages to settle back above this level, it will head towards the resistance at $1935. A successful test of the resistance at $1935 will push gold towards the resistance at the 20 EMA at $1945.

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

Gold Gets Back Above $1950 Despite Strong Greenback

Key Insights

  • Higher yields and stronger dollar failed to put pressure on gold markets. 
  • Demand for safe-haven assets increased, which was bullish for gold. 
  • The nearest significant resistance level for gold is located at $1965.

Gold Gains Some Ground Ahead Of The Weekend

Gold is currently trying to settle back above the $1950 level despite strong dollar and higher Treasury yields.

The U.S. Dollar Index has recently gained upside momentum and moved towards the resistance at 100.85, which is located near yearly highs at the 101 level. Meanwhile, the yield of 10-year Treasuries made another attempt to settle above its yearly highs near the 2.98% level.

Higher yields failed to put pressure on gold markets as demand for safe-haven assets increased. Yesterday’s major sell-off in the U.S. stock markets, which pushed S&P 500 below the 4400 level, indicated that traders remained nervous, which was bullish for gold.

VanEck Gold Miners ETF followed the general market sentiment and suffered a strong sell-off, which pushed it towards the $38 level. Today, VanEck Gold Miners ETF should have a good chance to rebound as gold prices are moving higher.

Technical Analysis

gold april 22 2022

Gold has recently made several attempts to settle below the $1950 level, but these attempts yielded no results. Gold gets strong support in the $1935 – $1950 area, and it has a good chance to develop upside momentum after the recent pullback.

If gold settles back above $1950, it will head towards the resistance level at $1965. A move above this level will push gold towards the resistance at $1975. If gold manages to settle above the $1975 level, it will head towards the next resistance at $2000.

On the support side, the nearest support level for gold is located at $1935. If gold declines below this level, it will head towards the next support level at the 50 EMA at $1925. A successful test of the support at $1925 will push gold towards the support level at $1915.

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

Gold Slips Back Below The $1950 Level

Key Insights

  • Treasury yields are moving higher after the pullback, which is bearish for gold. 
  • Demand for safe-haven assets is not strong enough to offset the negative impact of rising yields. 
  • A move below the $1950 level will push gold towards the support at $1935.

Gold Is Losing Ground As Treasury Yields Rebound

Gold is currently trying to settle back below the support at $1950, while Treasury yields are moving higher after yesterday’s pullback.

The yield of 10-year Treasuries faced significant resistance near the 3.00% level and declined towards 2.85%. Currently, the yield of 10-year Treasuries is trying to get to the test of the 2.90% level. A move above this level will push it closer to the recent highs, which will be bearish for gold. At this point, rising yields are the main bearish catalyst for gold and other precious metals.

Meanwhile, the recent trading action indicates that demand for gold-related assets remains strong. VanEck Gold Miners ETF managed to settle back above the $40 level during yesterday’s trading session. In case gold manages to stay above the $1950 level, VanEck Gold Miners ETF will have a good chance to develop additional upside momentum.

Technical Analysis

gold april 21 2022

Gold continues its attempts to settle below the support level at $1950. In case gold manages to settle below this level, it will head towards the next support at $1935.

A successful test of the support at $1935 will lead to the test of the next support level, which is located at the 50 EMA at $1925. If gold moves below the $1925 level, it will gain additional downside momentum and head towards the support at $1915.

On the upside, a move above $1950 will push gold towards the resistance at $1965. If gold manages to settle above the resistance at $1965, it will head towards the next resistance level, which is located at $1975. A successful test of this level will open the way to the test of the resistance at the psychologically important $2000 level.

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

If Gold Read the Tea Leaves, It Would See the Shape of a Bear

Gold and Silver Fundamentals and Price Forecast

The precious metals just performed exactly as they were likely to. Despite the increase in war tensions, PMs and miners reversed instead of rallying, which indicated that the rally has probably run its course. Since the tensions can now (most likely) either decline or stabilize, gold and silver prices will presumably fall right away, or after a while, as the market starts paying attention to gold’s two key fundamental drivers:

  1. the USD Index
  2. the real interest rates.

Both are inversely correlated with the price of gold, and both are on the rise. It’s therefore most likely only a matter of time before gold declines, and the same goes for silver and mining stocks. In fact, silver and mining stocks are likely to fall harder than gold, as they’ve been very weak in recent years anyway. Let’s not forget that while gold moved above its 2011 highs, silver and miners are well below the 50% retracement from their respective 2011 highs.

Gold Price Recap and 2020 Comparison

Let’s check what gold did yesterday.

The gold price declined substantially, and it closed below its late-March 2022 high, thus invalidating the breakout above it. Instead of the breakout above $2,000, we saw the above. Instead of a bullish sign, we got a sell signal.

We also got another from the stochastic indicator that not only moved below its signal line, but also below the 80 level.

Moreover, let’s not forget that it all happened in tune with what we saw back in 2020, after gold’s major top.

Back then, gold retraced slightly more than 61.8% of the decline. Although this time it retraced slightly less, both cases are still very similar.

Consequently, this month’s recent upswing was not really bullish – it was a natural part of a bigger bearish pattern.

Silver and Mining Stocks Correlation with Gold and Trading Signals

Just as gold reversed on Monday, so did silver. It also outperformed gold on a very short-term basis, which served as another bearish confirmation.

Silver’s outperformance of gold is often a sell signal, especially when it’s accompanied by mining stocks’ weakness, and we saw the latter too.

During yesterday’s trading, silver and junior miners were down rather similarly, but the latter had also been down on Monday, while silver had ended the session in the green.

Also, miners just invalidated their breakout above the March 2022 high in terms of the closing prices. No wonder here – the attempt to rally above the previous highs was accompanied by rather weak volume, suggesting that it would fail.

It did, and that’s a sell sign on its own.

Consequently, the current outlook for the precious metals market appears bullish in the long run but bearish in the medium- and short term.

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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