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.

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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.

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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.

Here is Why I’m Still Bullish on Gold Miners

Precious metals declined yesterday, and so did the general stock market. Is the rally already over?

When I wrote about this rally on May 12, which took place at the same time when I took profits from the short positions and entered the long ones, I mentioned that I planned to hold these long positions for a week or two. Since that was exactly a week ago, the question is: is the top already in?

In short, it probably isn’t. As always, it’s useful to check what happened in the past in similar situations to verify whether what we see is normal or some kind of an outlier that cannot be explained by something that has already happened.

Let’s start with a quote from yesterday’s analysis:

Of course, there will be some back-and-forth movement on an intraday basis, but it doesn’t change anything. Junior miners are likely to rally this week nonetheless. And perhaps not longer than that, as the next triangle-vertex-based reversal is just around the corner – on Friday/Monday.

The previous few days were the “forth” and yesterday was the “back” movement – so far, my comments remain up-to-date. However, comparing the market action with what I wrote previously isn’t what I meant by analogies to past situations. I meant this:

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The areas marked with green rectangles are the starting moments of the previous short-term rallies. Some were bigger than others, and yet they all had one thing in common. They all included a corrective downswing after the initial post-bottom rally.

Consequently, what we saw yesterday couldn’t be more normal during a short-term rally. This means that yesterday’s decline is not bearish at all and the profits from our long positions are likely to increase in the following days.

Besides, the general stock market declined by over 4%, while the GDXJ (normally moving more than stocks) ETF – a proxy for junior mining stocks – declined by only about 2%.

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If the general stock market continues to decline, junior miners could get a bearish push even if gold prices don’t decline.

However, let’s keep in mind the fact that miners tend to bottom before stocks do – in fact, we saw that in early 2020. This means that even if the S&P 500 moves to new yearly lows shortly and then bounces back up, the downside for miners could be limited, and the stocks’ rebound could trigger a profound immediate-term rally.

If stocks decline, then they have quite strong support at about 3815 – at their 38.2% Fibonacci retracement level.

Let’s keep in mind that junior miners have triangle-vertex-based reversal over the weekend, so they might form some kind of reversal on Friday or Monday.

Ideally, miners would be after a quick rally that is accompanied by huge volume on Friday. This would serve as a perfect confirmation that the top is in or at hand.

However, we can’t tell the market what it should do – we can only respond to what it does and position ourselves accordingly. Consequently, if stocks take miners lower, it could be the case that Friday or Monday will be the time when they bottom. This seems less likely to me than the previous (short-term bullish) scenario, but I’m prepared for it as well. In this case, we’ll simply… wait. Unless we see some major bearish indications, we will wait for the rally to end, perhaps sometime next week.

Again, a nearby top appears more likely than another bottom, in particular in light of what I wrote about the common post-bottom patterns in the GDXJ.

Having said that, let’s take a look at the markets from a fundamental point of view.

The Chorus Continues

While investors still struggle with the notion that the Fed can’t bail them out amid soaring inflation, the S&P 500 and the NASDAQ Composite suffered another reality check on May 18. Moreover, with Fed officials continuing to spread their hawkish gospel, I warned on Apr. 6 that demand destruction does not support higher asset prices. I wrote:

Please remember that the Fed needs to slow the U.S. economy to calm inflation, and rising asset prices are mutually exclusive to this goal. Therefore, officials should keep hammering the financial markets until investors finally get the message.

Moreover, with the Fed in inflation-fighting mode and reformed doves warning that the U.S. economy “could teeter” as the drama unfolds, the reality is that there is no easy solution to the Fed’s problem. To calm inflation, it has to kill demand. And as that occurs, investors should suffer a severe crisis of confidence.

To that point, while the S&P 500 and the NASDAQ Composite plunged on May 18, Fed officials didn’t soften their tones. For example, Philadelphia Fed President Patrick Harker said:

“Going forward, if there are no significant changes in the data in the coming weeks, I expect two additional 50 basis point rate hikes in June and July. After that, I anticipate a sequence of increases in the funds rate at a measured pace until we are confident that inflation is moving toward the Committee’s inflation target.”

For context, “measured” rate hikes imply quarter-point increments thereafter.

Please see below:

Graphical user interface, text, application, chat or text messageDescription automatically generatedSource: Reuters

Likewise, Chicago Fed President Charles Evans delivered a similar message on May 17. He said that by December, “we will have completed any 50 [basis point rate hikes] and have put in place at least a few 25 [basis point rate hikes].”

Moreover, “given the current strength in aggregate demand, strong demand for workers, and the supply-side improvements that I expect to be coming,” he added that “I believe a modestly restrictive stance will still be consistent with a growing economy.”

Therefore, while their recent rhetoric had Fed officials “expeditiously” marching toward neutral, now the prospect of a “restrictive stance” has entered the equation. For context, a neutral rate neither stimulates nor suffocates the U.S. economy. However, when the federal funds rate rises above neutral (restrictive), the goal is to materially slow economic activity and consumer spending. As such, the medium-term liquidity drain is profoundly bearish for the S&P 500 and the PMs.

Please see below:

Source: Reuters

Making three of a kind, Minneapolis Fed President Neel Kashkari (a reformed dove) said on May 17 that “My colleagues and I are going to do what we need to do to bring the economy back into balance…”

“What a lot of economists are scratching their heads and wondering about is: if we really have to bring demand down to get inflation in check, is that going to put the economy into recession? And we don’t know.”

For context, Fed officials initially thought inflation was “transitory,” so don’t hold your breath waiting for that “soft landing.” However, while Kashkari is ~16 months too late to the inflation party, he acknowledged the reality on May 17:

Text, chat or text messageDescription automatically generatedSource: Bloomberg

As a result, while the S&P 500 and the NASDAQ Composite sell-off in their search for medium-term support, Fed officials haven’t flinched in their hawkish crusade. As such, I’ve long warned that Americans’ living standards take precedence over market multiples.

To that point, the U.K. headline Consumer Price Index (CPI) hit 9% year-over-year (YoY) on May 18. For the sake of objectivity, the results underperformed economists’ consensus estimates (the middle column below).

Source: Investing.com

However, while investors may take solace in the miss, they should focus on the fact that the U.K. output Producer Price Index (PPI) materially outperformed expectations and often leads the headline CPI. As a result, the inflation story is much more troublesome than it seems on the surface.

Please see below:

Source: Investing.com

In addition, British Finance Minister Rishi Sunak warned of a cost of living crisis on May 18, saying that “as the situation evolves our response will evolve” and “we stand ready to do more.”

Please see below:

TextDescription automatically generatedSource: Reuters

Even more revealing, I’ve noted on numerous occasions that Canada is the best comparison to the U.S. due to its geographical proximity and its reliance on the U.S. to purchase Canadian exports. Therefore, with Canadian inflation outperforming across the board on May 18, the data paints an ominous portrait of the challenges confronting North American central banks.

Please see below:

Graphical user interface, text, applicationDescription automatically generated Source: Investing.com

To that point, the official report stated:

“Canadians paid 9.7% more in April for food purchased from stores compared with April 2021. This increase, which exceeded 5% for the fifth month in a row, was the largest increase since September 1981. For comparison, from 2010 to 2020, there were five months when prices for food purchased from stores increased at a rate of 5% or higher….

“Basics, such as fresh fruit (+10.0%), fresh vegetables (+8.2%) and meat (+10.1%), were all more expensive in April compared with a year earlier. Prices for starchy foods such as bread (+12.2%), pasta (+19.6%), rice (+7.4%) and cereal products (+13.9%) also increased. Additionally, a cup of coffee (+13.7%) cost more in April 2022 than in April 2021.”

Moreover, “in April, shelter costs rose 7.4% year over year, the fastest pace since June 1983, following a 6.8% increase in March.” Therefore, the data is nearly synonymous with the U.S., and I’ve been warning for months that rent inflation would prove much stickier than investors expected.

Please see below:

Source: Statistics Canada

Finally, the investors awaiting a dovish pivot from the Fed assume that growth will overpower inflation. In a nutshell: the U.S. economy will sink into a deep recession in the next couple of months (some believe that we are already in one), and the Fed will resume QE. Moreover, they assume that the inflationary backdrop has left consumers destitute and that we’re a quarter away from famine.

However, I couldn’t disagree more. With Home Depot – which primarily sells discretionary items – noting that consumers are showing no signs of slowing down, I warned on May 18 that investors don’t realize that the Fed’s war with inflation would be one of attrition.

Please see below:

ApplicationDescription automatically generated with medium confidenceSource: Home Depot/The Motley Fool

For context, the National Retail Federation (NRF) listed Home Depot as the fourth-largest retailer in the U.S. in its 2021 report. As a result, the company’s performance is a reliable indicator of U.S. consumer spending.

Graphical user interface, text, applicationDescription automatically generatedSource: NRF

To that point, The Confidence Board released its U.S. CEO Confidence survey on May 18. The report revealed:

CEO confidence “declined for the fourth consecutive quarter in Q2 2022. The measure now stands at 42, down from 57 in Q1. The measure has fallen into negative territory and is at levels not seen since the onset of the pandemic. (A reading below 50 points reflects more negative than positive responses.)”

Please see below:

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However, the devil is in the details and the details are what matter to the Fed. For example:

“More than half (54%) of CEOs said they were effectively managing rising input costs by passing along costs to customers, while 13% said they had no major issues with input costs.”

ChartDescription automatically generatedSource: The Confidence Board

Second:

“More than two-thirds of CEOs said they are increasing wages across the board in response to labor market conditions and managing rising labor costs through different means.”

ChartDescription automatically generated with medium confidence Source: The Confidence Board

More importantly, though:

Graphical user interface, text, application, emailDescription automatically generated Source: The Confidence Board

Therefore, while consolidated CEO confidence has crashed to “levels not seen since the onset of the pandemic,” nearly two-thirds of CEOs plan to increase their workforce and more than nine out of 10 plan to increase wages. As a result, would major U.S. corporations be adding employees and paying them more if demand has fallen off a cliff? Of course not. Moreover, when considering the 15-point drop in consolidated CEO confidence, the three-point decline in employment expectations is largely immaterial.

Bottom Line

While investors keep using the post-GFC script as their roadmap for when the Fed turns dovish, they don’t realize that 1970s/1980s-like inflation is a completely different animal. Thus, what I wrote on May 18 should prove prescient in the coming months:

While Powell keeps warning investors of what’s to come, a decade of dovish pivots has a generation of investors believing that the central bank is all talk and no action. However, with inflation at levels unseen in 40+ years, Powell is not out of ammunition, and the Fed followers should suffer profound disappointment as the drama unfolds.

In conclusion, the PMs declined on May 18, as risk-off sentiment returned to the financial markets. However, since fits and starts are always expected along the way, the GDXJ ETF should have more upside in the coming days, and profits from our long position should increase. The medium-term outlook for the mining stocks remains bearish, though.

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.

 

Here’s Why I’m Bullish on Gold Miners

Miners Last Week

On Thursday, I wrote that I was going to go long on junior mining stocks, and in the following hours, the GDXJ moved even a bit lower, providing you with a great opportunity to exit short positions and enter long ones in a comfortable manner. Hopefully, you did that, because the GDXJ rallied by almost 4% on Friday and ended the week above $37. The popular leveraged ETF, JNUG, was up by over 7% in a single day.

If you’re long on miners and you reaped those profits – congratulations! If not, let me re-emphasize what I wrote in Friday’s extensive flagship Alert: it seems to me that the short-term rally has only begun, and that quick profits are likely just around the corner.

Looking at gold’s pre-market decline, one might get second thoughts about the above, but please note that we are long on mining stocks, not gold, and there is a good reason why I chose mining stocks as a proxy and not gold or silver. The reason is that miners tend to show strength relative to gold before the bottom and then immediately thereafter.

Consequently, even if gold didn’t bottom last week and we’re seeing a bottom more or less right now, it doesn’t necessarily mean that miners will test their lows too.

Gold Price Action This Week

Let’s check what’s gold been doing so far this week.

Gold is down to new lows in today’s pre-market trading, and it’s well below my initial target area for it. However, another important support level is just around the corner.

I don’t mean just the psychologically important (being round) $1,800 level. That too, but it’s crucial to note that gold just moved to levels from which the entire war-tension-based rally started. If it wasn’t for those tensions, gold would likely have plunged profoundly in February and perhaps it would be already after or getting close to its final low. However, since the war has indeed started, gold peaked (when the tensions and uncertainty peaked), and it’s been moving lower since that time – despite what most analysts told you.

Gold and Uncertainty

Here’s what I wrote on February 28, 2022, in the Gold & Silver Trading Alert entitled “Since There is a War, Gold Will Rise, Right? Wrong.”:

Let’s keep in mind that for gold to decline, the war doesn’t have to end, it doesn’t have to be won by either side. The only thing that matters with regard to it, is how big the uncertainty and concern is. And the peak uncertainty/concern might be today, as everything is new, and the situation is dramatically changing the geopolitical environment in Europe.

For comparison, remember Covid-19 cases, deaths in early 2020? That was just a tiny fraction of what we saw later. However, it was new and unknown. People were particularly scared then, and the markets moved particularly significantly then – not based on additional millions of cases and thousands of deaths next year.

Investing and trading are difficult. If it was easy, most people would be making money – and they’re not. Right now, it’s most difficult to ignore the urge to “run for cover” if you physically don’t have to. The markets move on rumor and sell the fact. This repeats over and over again in many (all?) markets, and we have direct analogies to similar situations in gold itself. And junior miners are likely to decline the most, also based on the massive declines that are likely to take place (in fact, it already started) in the stock markets.

That wasn’t the peak uncertainty, but the latter peaked about a week later, and the war is still taking place months later, so it seems that one could say that the above proved to be correct.

Since junior miners just moved to new 2022 lows, it was also profitable not to chase the “emotional stampede”, but rather focus on the analogies to the previous situations from the past. Based on how the situation has developed in the markets so far, it seems that the clearest analogy is to how the gold market performed in 2001, based on the U.S.-Afghanistan war. I provided the chart in my Feb. 28, 2022, analysis, but here it is again:

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The decline had been big and sharp, but please note when it ended. Gold formed an initial, and then final, short-term bottom, very close to the price levels at which the rally started before the outbreak of the war.

Gold Today

Fast-forward to the current situation – these are the levels that gold is approaching in today’s pre-market trading.

The January 2022 low is $1,781.30 and the February 2022 low (which is also the yearly low) is $1,778.80.

Today’s pre-market low is $1,787.44 (at least so far). That’s less than $10 away from the above-mentioned strong support levels.

All this means is that gold and silver prices might have just bottomed or that they could bottom shortly.

Miners vs Gold

Let’s not forget what miners tend to do before and right after bottoms – they tend to show strength relative to gold. Let’s check what the GDXJ ETF is doing in today’s London trading.

It corrected somewhat, but unlike gold, the GDXJ didn’t move to new lows today. In other words, junior miners are showing strength, just as they are supposed to around the bottoms.

There are three more things on the above chart that I would like to discuss.

  1. The first is that a daily pause right after the turnaround is common for the GDXJ, and I marked several other occasions where we saw something similar. This includes what we saw after the sharp early-2020 correction.
  2. The second thing is that it’s clear that the GDXJ just (on Friday) invalidated the small breakdown below its previous (2021 and 2022) lows. This is a huge bullish development (for the short term only!). Invalidations of breakdowns immediately become bullish signals, without the need to wait for confirmation, and that’s what we just saw.
  3. The third indication is the triangle-vertex-based reversal, which will take place in about a week. It points to some kind of reversal taking place on May 22. That’s Sunday, so based on the above, we might expect a turnaround on Friday or next Monday.

Trading Strategy and Technical Analysis

This serves as an indication that we might want to prepare ourselves to close the current long position and go back on the short side of the trade before the end of the week – perhaps on Friday. Geopolitically, a lot can happen over the weekend, so I’d prefer to be positioned along with the medium-term trend beforehand.

The invalidation described as the “second thing” is also something that we saw from the U.S. perspective, so it’s definitely important.

The thing that I’d like to add is that the RSI just moved back above 30 after being below it, which is a classic buy signal. That’s what marked the end of the 2020 decline, and something very similar to what marked the end of the initial March decline (RSI just touched 30 at that time, but it was enough).

Please note that the triangle-vertex-based reversal point is practically the same from the U.S. point of view, so it adds credibility to the scenario in which junior miners top close to the end of this week.

This fits the target area that I provided on Friday on the above 4-hour-candlestick GDXJ chart.

The target would also fit the sharpness of the recent decline. After all, corrections tend to be similarly volatile as the price moves that are being corrected. Of course, let’s keep in mind that the current long position is for trading capital only, not for long-term investments, as I don’t think that the medium-term downtrend in gold, silver, and mining stocks is completely over yet.

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 target for gold 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.

 

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.

 

The Future of the Dollar Seems So Bright It’s Blinding Gold

Mining Stocks

In short, practically everything that I wrote in yesterday’s analysis remains up-to-date. Based on the relative valuations and pre-market price movement, I wrote that junior miners were likely to decline below their rising support line, and I moved the exit price for the current short position in the GDXJ lower (it seems that it will gain even more shortly).

Indeed, the GDXJ fell like a stone in the water, and it pierced through the above-mentioned support line without looking back. Thanks to remaining in the short position, we were able to benefit from the breakdown below the support line.

USD Index and Gold Correlation

Well, what was likely yesterday remains likely today. Markets appear to be approaching, but not yet at, their short-term corrections. Let’s take a closer look, starting with the USD Index.

As you can see above, the USD Index just moved above its 2020 high and above its recent highs, but it failed to close in the green. Actually, the USDX declined slightly during yesterday’s session. So, while gold was initially strong relative to the USDX, it ended up being very weak. This tells us that if the USD Index moved a bit higher here, gold might launch another quick decline.

Given how the USD Index performed after a similar breakout (in 2014), it seems that we might see a corrective move soon (perhaps after an additional rally). I previously described it in the following way:

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.

Yesterday’s high was 104.2, so the USDX could still move higher before correcting.

Gold moved lower – to its previous lows – but didn’t reach its downside target area (marked with green), where we have a few support levels:

  • rising support line,
  • declining support line,
  • early-2022 high,
  • the 61.8% Fibonacci retracement based on the 2021-2022 rally at about $1,829,
  • 200- and 300-day moving averages (back in March 2020, gold bottomed between both averages).

Also, the RSI indicator is close to 30 but not yet at it.

Consequently, if gold declines some more here, it will have very good reasons to rally in the short term, but it doesn’t have those reasons yet.

Silver

The situation in silver is also very interesting.

The white metal moved lower, and its intraday low was just 2 cents above our profit-take price.

Forecast and Trading Strategy

Since gold is likely to move lower, and the general stock market is likely to move lower, I’m moving the downside target lower – slightly above the 50% Fibonacci retracement level based on the entire 2020-2021 decline. That’s the next strong support that’s below the 2021 lows, and that would more or less correspond to the size of the above-mentioned short-term decline in gold (at least that seems realistic to me).

It seems that mining stocks are likely to slide in the very near term too – and then they are likely to correct (probably providing an opportunity for a quick long position), quite possibly sharply.

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.

 

Brace, Gold Bulls – The Fed Is Going to Keep Its Hawkish Word

Gold Fundamental Analysis

It’s a decision day for the Fed, as a 50 basis point rate hike is likely a done deal. Moreover, while the PMs may record a short-term relief rally, their medium-term fundamentals continue to deteriorate.

For example, I’ve been warning for some time that higher interest rates would manifest amid rampant inflation, and – surprise, surprise – the U.S. 10-Year Treasury yield has continued its ascent. Furthermore, while the Treasury benchmark eclipsed 3% intraday on May 3, a close above the key psychological level should occur sooner rather than later.

Please see below:

To explain why, I wrote on Apr. 20:

The red line above tracks the U.S. federal funds rate, while the green and gray lines above track the U.S. 10-Year and 30-Year Treasury yields. If you analyze the connection, you can see that the latter two often take their orders from the former. In a nutshell: when the Fed raises interest rates, it takes several hikes of 0.25% before long-term yields rollover. For example:

  • In 2018, the U.S. 10-Year Treasury yield peaked after ~9 rate hikes.
  • In 2006, the U.S. 10-Year Treasury yield peaked after ~17 rate hikes.
  • In 2000, the U.S. 10-Year Treasury yield peaked after ~7 rate hikes.
  • In 1994, the U.S. 10-Year Treasury yield peaked after ~12 rate hikes.

Thus, with modern history showcasing that the U.S. 10-Year Treasury yield doesn’t peak until the Fed is well within its rate hike cycle, please remember that the Fed has only hiked once. Therefore, with seven rate hikes as the minimum to elicit a peak over the last ~28 years, the U.S. 10-Year Treasury yield should have room to run, and this is bullish for real yields and bearish for gold.

Speaking of real yields, with nominal interest rates rising and breakeven inflation rates falling, the U.S. 10-Year real yield closed at 0.18% on May 2 and 0.15% on May 3. As a result, the PMs confront a fundamental time bomb that should blow up their performance over the next few months.

Please see below:

To explain, the gold line above tracks the price tallied by the World Gold Council, while the red line above tracks the inverted U.S. 10-Year real yield. For context, inverted means that the latter’s scale is flipped upside down and that a rising red line represents a falling U.S. 10-Year real yield, while a falling red line represents a rising U.S. 10-Year real yield.

For more context, I wrote on Apr. 11:

If you analyze the left side of the chart, you can see that the U.S. 10-Year real yield soared and gold plunged during the global financial crisis (GFC). However, when the Fed launched QE and the U.S. 10-Year real yield sank to an all-time low, gold hit a new all-time high along the way. 

Furthermore, the current situation is a spitting image. When Fed Chairman Jerome Powell performed a dovish pivot in late 2018, the U.S. 10-Year real yield suffered. Then, when the Fed fired its liquidity bazooka in March 2020, it pushed the metric to another all-time low. And surprise, surprise, gold hit another all-time high.

However, with the Fed normalizing policy, the U.S. 10-Year real yield has surged in recent weeks. Moreover, the Fed needs to push the metric above 0% to curb inflation. 

Thus, it’s likely only a matter of time until the milestone is achieved. In addition, a U.S. 10-Year real yield of 0% implies a gold price of $1,500, and while the current narrative suggests otherwise, is this time really different?

To that point, while gold has suffered in recent days, the current price is still well above its medium-trend-based value. Likewise, since the GDXJ ETF is much more volatile than the yellow metal, and therefore, should decline even more, epic drawdowns should materialize if (once) the two lines reconnect (not necessarily in the immediate aftermath of the rate hike, as PMs could rally based on the move-on-the-rumor-reverse-on-the-fact tendency).

For example, while these events take time to unfold, history shows that the “this time is different” crowd ends up losing more than just their pride. I first highlighted the epic divergence between the U.S. 10-Year Treasury yield and the U.S. 10-Year breakeven inflation rate on May 11, 2021. I wrote:

To explain, the green line above tracks the U.S. 10-Year Treasury yield, while the red line above tracks the U.S. 10-Year breakeven inflation rate. If you analyze the left side of the chart, you can see that when the bond market finally snapped in 2013, the U.S. 10-Year Treasury yield’s surge was fast and furious. More importantly, though, if you analyze the right side of the chart, you can see that today’s gap makes 2013 look like an appetizer. As a result, with material divergences often reversing in violent fashion, it’s only a matter of time until the next earthquake erupts.

Therefore, while the fundamental thesis didn’t materialize overnight, the two lines eventually reconnected; the U.S. 10-Year Treasury yield surpassed the U.S. 10-Year breakeven inflation rate, and the U.S. 10-Year real yield turned positive.

However, now it’s the gap between gold and the U.S. 10-Year real yield that makes 2011 look like an appetizer, and the same outcome should occur. As a result, the prospect is profoundly bearish for the PMs.

From Negative to Positive

Conversely, with bonds oversold and the stock market nearing a breaking point, investors continue to ask: “Where is the Fed put?” For context, put options are like insurance contracts, and they protect investors when drawdowns occur. In a nutshell: investors expect the Fed to step in, turn dovish, and save stock market investors from their poor valuation decisions.

However, the prospect is far-fetched, and here is why. Following the global financial crisis (GFC), the Fed ran to the rescue whenever the stock market threw a tantrum. As such, investors with short memories assume that the post-GFC script is the right analog. Yet, they fail to realize that the year-over-year (YoY) percentage change in the headline Consumer Price Index (CPI) peaked at 3.81% in September 2011. Thus, the Fed could ease without worrying about stoking inflation.

Conversely, with the headline CPI at ~8.6% YoY now, the game has completely changed.

Please see below:

Second, the other half of the Fed’s dual mandate is maximum employment. With U.S. job openings hitting an all-time high of 11.549 million on May 3 (March results), the data is extremely bullish for Fed policy. For context, the consensus estimate was 11 million.

Source: Investing.com

More importantly, though, another resilient report means that there are now 5.597 million more job openings in the U.S. than citizens unemployed, also an all-time high.

Please see below:

To explain, the green line above subtracts the number of unemployed U.S. citizens from the number of U.S. job openings. If you analyze the right side of the chart, you can see that the epic collapse has completely reversed and the green line is at a record high. Thus, with more jobs available than people looking for work, the economic environment supports normalization by the Fed.

Again, please consider the CPI data above with the job openings spread post-GFC. The period had well-anchored inflation and unemployed citizens outnumbered job openings until 2018. That’s nothing like the current environment. Furthermore, can you notice how the spread’s outperformance helped spur the Fed’s most recent rate hike cycle?

To explain, the green line above tracks the job openings spread, while the red line above tracks the U.S. federal funds rate. If you analyze the relationship, you can see that the spread’s move toward neutral was a hawkish indicator.

Likewise, with the spread positive and at an all-time high, the data alone justifies several rate hikes. However, as mentioned, we also have a YoY headline CPI that’s at its highest level since the 1980s. Thus, if investors assume the Fed lacks the ammunition to follow through with its hawkish promises, they should suffer the same fate as the “transitory” camp did in 2021/2022.

Finally, S&P Global released its U.S. Manufacturing PMI on May 2. The report revealed:

“Operating conditions improved markedly across the U.S. manufacturing sector, according to April PMI data from S&P Global…. New orders increased at a marked pace at the start of the second quarter, and at a rate broadly in line with that seen in March. Companies reported stronger demand conditions, with some noting that new sales expanded despite
substantial rises in prices. Meanwhile, new export orders grew at the fastest rate for
almost a year.”

Also noteworthy:

“Manufacturers recorded a solid rise in employment in April. Workforce numbers grew following greater production requirements and in response to staff leaving voluntarily. Some firms also stated that job creation was linked to the filling of long-held vacancies. Labor
shortages continued to be mentioned as a weight on growth, however.”

More importantly, though:

Obraz zawierający tekstOpis wygenerowany automatycznieSource: S&P Global

Bottom Line

While investors continue to pray for a dovish pivot, they’re likely in for a rude awakening. The U.S. labor market remains abnormally hot, and the latest PMI data shows that inflation is still accelerating. Moreover, while real yields have turned positive, they have done little to cool a U.S. economy that’s flooded with too much stimulus. As a result, with a hawkish Fed poised to push the U.S. 10-Year real yield even higher over the medium term, the PMs should suffer mightily as the drama unfolds.

In conclusion, the PMs rallied on May 3, as sentiment doesn’t die easily. However, while the technical backdrop could support a short-term rally, the PMs’ medium-term technicals and fundamentals are profoundly bearish. Therefore, investors’ optimism should turn to pessimism over the next few months.

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.

 

Inflation, the USDX, Real Yields: The Doom Trio Hangs Over Gold

Gold, Silver and Mining Stocks Fundamental Analysis

With reality rearing its ugly head recently, the S&P 500 and the GDXJ ETF have suffered mightily. Moreover, while I’ve been warning for months that investors underestimated the implications of rampant inflation, the chickens have come home to roost. To explain, I wrote on Oct. 26:

Originally, the Fed forecasted that it wouldn’t have to taper its asset purchases until well into 2022. However, surging inflation pulled that forecast forward. Now, the Fed forecasts that it won’t have to raise interest rates until well into 2023. However, surging inflation will likely pull that forecast forward as well.

Moreover, I added on Nov. 4, following the FOMC meeting:

With Fed Chairman Jerome Powell still searching for his inflationary shooting star, the FOMC chief isn’t ready to label inflation as problematic. “I don’t think that we’re behind the curve,” he said. “I actually believe that policy is well-positioned to address the range of plausible outcomes, and that’s what we need to do.”

The reality is: while Powell has taken the path of least resistance to help calm inflation (the taper), his inability to understand the realities on the ground leaves plenty of room for hawkish shifts in the coming months (interest rate hikes).

Thus, while Powell has shifted his stance materially and Fed officials now expect seven to 12 rate hikes in 2022, the financial markets initially ignored the repercussions. However, always late to the party, the consensus now fears that the medium-term outlook has lost its luster.

Please see below:

Obraz zawierający tekstOpis wygenerowany automatycznieSource: CNBC

Global Financial Conditions Index (FCI) and US Dollar

Likewise, while the fundamental implications have been loud and clear for months, sentiment doesn’t die easily. However, since reality is undefeated, the impact of evaporating liquidity is becoming too much to bear. To explain, I wrote on Feb. 2:

If you analyze the right side of the chart, you can see that the FCI has surpassed its pre-COVID-19 high (January 2020). Moreover, the FCI bottomed in January 2021 and has been seeking higher ground ever since. In the process, it’s no coincidence that the PMs have suffered mightily since January 2021. Furthermore, with the Fed poised to raise interest rates at its March monetary policy meeting, the FCI should continue its ascent. As a result, the PMs’ relief rallies should fall flat, like in 2021. 

Likewise, while the USD Index has come down from its recent high, it’s no coincidence that the dollar basket bottomed with the FCI in January 2021 and hit a new high with the FCI in January 2022. Thus, while the recent consolidation may seem troubling, the medium-term fundamentals supporting the greenback remain robust.

I provided an update on Apr. 13:

While the USD Index has surpassed 100 and reflects the fundamental reality of a higher FCI and higher real yields, the PMs do not. However, the PMs are in la la land since the FCI is now at its highest level since the global financial crisis (GFC).

Please see below:

Also noteworthy, the FCI made quick work of the March 2020 high from the first chart above. Again, Fed officials know that higher real yields and tighter financial conditions are needed to curb inflation. That’s why they keep amplifying their hawkish message and warning investors of what lies ahead. However, with commodities refusing to accept this reality, they’ll likely be the hardest-hit once the Fed’s rate hike cycle truly unfolds.

Surprise, surprise: after surpassing its March 2020 highs, the FCI has continued its ascent.

Please see below:

Who Could’ve Seen This Coming?

As a result, while the Russia-Ukraine conflict and misguided optimism disrupted our bearish timeline, the important point is that investors can only ignore technical and fundamental realities for so long. With a resurgent USD Index and rising real yields, which are profoundly bearish for the PMs, the latter have come down from their recent highs.

Moreover, with the general stock market’s suffering adding to the GDXJ ETF’s ills, the junior miners have underperformed their precious metals counterparts, which has been very beneficial for our short position.

However, the bearish medium-term thesis remains unchanged: inflation is problematic, the Fed is hawked up, and a higher USD Index and higher real yields should materialize in the coming months.

Case in point: while February’s lagging data may not reflect the impact of rising mortgage rates, the S&P/Case-Shiller U.S. National Home Price Index surged by more than 20% year-over-year (YoY) on Apr. 26 and outperformed expectations (19%). As a result, the data is profoundly bullish for shelter inflation, which accounts for more than 30% of the headline Consumer Price Index’s (CPI) movement.

Please see below:

Obraz zawierający tekstOpis wygenerowany automatycznieSource: Investing.com

Also noteworthy, Whirlpool released its first-quarter earnings on Apr. 25. For context, the company manufacturers home and kitchen appliances like washing machines, dryers, refrigerators, and stand mixers. CEO Marc Bitzer said during the Q1 earnings call:

“As our industry and most other industries face historical levels of cost inflation, we observed over $400 million in the fourth quarter, or approximately a 10% increase on cost of goods sold. Despite this, we delivered over 9% ongoing EBIT margins and over 16% EBIT margins in our North America business, again demonstrating the earnings strength of the region and the actions we took, transforming margins over the years.”

“We now expect higher levels of inflation to persist throughout the year and have increased our full year cost inflation expectations by $600 million to $1.8 billion.”

However, is Whirlpool waiting for the Fed to solve the problem?

“Our first quarter results demonstrate that we are a different Whirlpool, delivering structurally improved EBIT margins no matter the operating environment. We have the right actions in place to deliver a solid 2022, including our previously announced cost-based price increases of 5% to 18%, addressing inflation across the globe.

To that point, due to the time lag between incurring costs and implementing price hikes, Bitzer said that more increases are scheduled for the back half of 2022.

Please see below:

Obraz zawierający tekstOpis wygenerowany automatycznieSource: Whirlpool/Seeking Alpha

Latest Labor Market from Indeed

On top of that, Indeed released its latest State of the Labor Market report on Apr. 21. An excerpt read:

“Employer demand for seasonal work is growing in line with pre-pandemic trends, with summer job postings on Indeed soaring 40.1% above their February 1, 2022 baseline as of April 10 (…).”

“Seasonal postings on Indeed for spring and summer jobs comprise a variety of positions. Some of these jobs, like camp counselor and lifeguard, fit the traditional summer mold. But more general roles, like retail sales associate and cashier, make strong showings too.”

However:

“Domestic job seeker interest in seasonal jobs lags prior year trends. As of April 10, the 2022 share of domestic job seeker searches for seasonal work was respectively 27.6% and 16.9% below the comparable periods in 2019 and 2021.”

Please see below:

To explain, the blue and green lines above track U.S. citizens’ interest in seasonal work in 2019 and 2021 (before/after the height of the pandemic), while the pink line above tracks their current interest. As you can see, there is a clear underperformance.

More importantly, the combination of normalized demand and insufficient supply is extremely inflationaryWith demand “growing in line with pre-pandemic trends,” while supply is roughly 17% to 28% below comparable periods, it should put upward pressure on wage inflation. Moreover, remember what I wrote on Apr. 22?

Powell said on Apr. 21 that the U.S. labor market is “too hot” and that the Fed needs to cool it down. “It is a very, very good labor market for workers,” he said. “It is our job to get it into a better place where supply and demand are closer together.”

As a result, he understands the problem. However, reducing 8.6% annualized inflation without impairing the U.S. labor market is like trying to hit a hole in one on the golf course.

Please see below:

Obraz zawierający tekstOpis wygenerowany automatycznieSource: CNBC

Consumer Confidence Index

Finally, The Conference Board released its Consumer Confidence Index on Apr. 26. The headline index decreased from 107.6 in March to 107.3 in April, and Lynn Franco, Senior Director of Economic Indicators at The Conference Board, said:

“The Present Situation Index declined, but remains quite high, suggesting the economy continued to expand in early Q2. Expectations, while still weak, did not deteriorate further amid high prices, especially at the gas pump, and the war in Ukraine. Vacation intentions cooled but intentions to buy big-ticket items like automobiles and many appliances rose somewhat.”

All in all, the data is largely inconclusive, as there are some good and some bad results. However, since “concerns about inflation retreated from an all-time high in March but remained elevated,” more QE is far from the right medicine.

Bottom Line and Forecasts

While I warned on Apr. 8 that when sentiment shifts, the PMs will confront one of the worst domestic fundamental environments since late 2018, the troublesome developments are catching up to gold, silver, and mining stocks. However, despite their recent drawdowns, the PMs are still trading well above their medium-term-trend-based fair values. Therefore, more pain should materialize over the medium term. It seems that we might see a sharp rebound in the near future, though (after PMs decline some more).

In conclusion, the PMs were mixed on Apr. 26, as mining stocks continued their material underperformance. Moreover, while investors will likely remain in ‘buy the dip’ mode until the very end, lower highs and lower lows should confront the S&P 500 and the PMs over the next few months. As a result, the medium-term outlook for the GDXJ ETF is profoundly 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.

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.

 

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

* * * * *

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.

Beating Inflation: Are The Fed’s Dreams Gold’s Worst Nightmare?

Gold Fundamental Analysis

As another week comes to a close, the winds of change are blowing across the financial markets. However, while many investors and analysts can see only sunny days ahead, fundamental storm clouds should rain on their parade over the medium term, and it’s quite possible that it’s going to happen shortly.

To explain, this week culminated with the USD Index soaring above 100, the U.S. 10-Year real yield hitting a new 2022 high, and Goldman Sachs’ Financial Conditions Index (FCI) hitting its highest level since the global financial crisis (GFC). However, the PMs paid no mind yet. In fact, investors across many asset classes continue to ignore the implications of these developments. So far.

With sentiment poised to shift when the economic scars begin to show, the “this time is different” crowd may regret not heeding the early warning signs. For example, the Bank of Canada (BoC) announced a 50 basis point rate hike on Apr. 13., and with the Fed likely to follow suit in May, the domestic fundamental environment confronting the PMs couldn’t be more bearish.

Please see below:

Obraz zawierający tekstOpis wygenerowany automatycznie

Source: BoC

Moreover, BoC Governor Tiff Macklem (Canada’s Jerome Powell) said: “We are committed to using our policy interest rate to return inflation to target and will do so forcefully if needed.”

Furthermore, while he added that the BoC could “pause our tightening” if inflation subsides, he cautioned that “we may need to take rates modestly above neutral for a period to bring demand and supply back into balance and inflation back to target.”

However, with the latter much more likely than the former, the BoC’s decision is likely a preview of what the Fed should deliver in the months ahead.

Please see below:

Obraz zawierający tekstOpis wygenerowany automatycznie
Source: Reuters

To that point, while investors continue to drown out officials’ hawkish cries, I warned on Apr. 13 that the Fed knows full well about the difficulty of the task ahead. I wrote:

Fed Governor Lael Brainard said on Apr. 12: Inflation is too high, and getting inflation down is going to be our most important task.”

She added: “I think there’s quite a bit of capacity for labor demand to moderate among businesses by actually reducing job openings without necessitating high levels of layoffs.” As a result, she’s telling you that Fed officials will make it their mission to slow down the U.S. economy. 

With phrases like “capacity for labor demand to moderate” and “reducing job openings” code for what has to happen to calm wage inflation, the prospect of a dovish 180 is slim to none. As such, this is bullish for real yields and bearish for the PMs.

More importantly, notice her use of that all-important buzzword?

Obraz zawierający tekstOpis wygenerowany automatycznie
Source: Reuters

And:

Obraz zawierający tekst, wewnątrz, zrzut ekranuOpis wygenerowany automatycznie
Source: Reuters

Moreover, where do you think she got it?

Obraz zawierający tekstOpis wygenerowany automatycznie
Source: Reuters

Echoing that sentiment, Chicago Fed President Charles Evans (a relative dove) said on Apr. 11 that more than one 50 basis point rate hike could be on the horizon. “Fifty is obviously worthy of consideration; perhaps it’s highly likely even if you want to get to neutral by December.”

As a result, with the USD Index and the U.S. 10-Year real yield already soaring, what do you think will happen if the Fed pushes the U.S. federal funds rate “to neutral by December?”

Please see below:

Obraz zawierający tekstOpis wygenerowany automatycznie
Source: Reuters

Even more hawkish, Fed Governor Christopher Waller said on Apr. 13: “I think we’re going to deal with inflation. We’ve laid out our plans. We’re in a position where the economy’s strong, so this is a good time to do aggressive actions because the economy can take it.”

He added: “I think we want to get above neutral certainly by the latter half of the year, and we need to get closer to neutral as soon as possible.”

As a result:

Obraz zawierający tekstOpis wygenerowany automatycznie
Source: CNBC

Now, if we presented these quotes to the permabulls, they would say: “So what? We already know that the Fed is going to raise interest rates.” 

However, while a higher U.S. federal funds rate is now the worst-kept secret, the impact on U.S. economic growth is far from priced in. With investors assuming the Fed will normalize inflation without hurting the U.S. economy, they are positioned for an unrealistic outcome. Stagflation, anyone?

Moreover, with the gold and silver prices ignoring everything the Fed throws at them, they’re attempting to re-write the history books.

However, with Brainard and Waller telling you that their goal is to create a bullish environment for the USD Index and the U.S. 10-Year real yield, the PMs have fought this battle before and lost this battle before.

To explain, I wrote on Apr. 6:

Please remember that the Fed needs to slow the U.S. economy to calm inflation, and rising asset prices are mutually exclusive to this goal. Therefore, officials should keep hammering the financial markets until investors finally get the message.

Moreover, with the Fed in inflation-fighting mode and reformed doves warning that the U.S. economy “could teeter” as the drama unfolds, the reality is that there is no easy solution to the Fed’s problem. To calm inflation, it has to kill demand. As that occurs, investors should suffer a severe crisis of confidence.

To that point, Fed officials aren’t even pretending anymore. Waller said on Apr 13:

“All we can do is kind of push down demand for these products and take some pressure off the prices that people have to pay for these products. We can’t produce more wheat, we can’t produce more semiconductors, but we can affect the demand for these products in a way that puts downward pressure and takes some pressure off of inflation.”

Likewise, Waller was even more realistic when he spoke on Apr. 11: He said:

“With housing, can we cool off demand for housing without tanking the construction industry? Can we cool down the labor demand without causing employment to fall? That’s the tricky road that we’re on.”

As a result, while Fed officials understand how difficult it will be to normalize inflation, investors remain in la-la land. However, when the “collateral damage” eventually unfolds, the shift in sentiment should result in the profound re-pricing of several financial assets.

Please see below:

Obraz zawierający tekstOpis wygenerowany automatycznie
Source: Bloomberg

Thus, investors’ uninformed state of denial will likely seem obvious in the months ahead. (Yes, I know, it’s difficult to remain rational while surrounded what’s irrational, and that’s the very thing that makes investing “simple, but not easy”). Moreover, while Macklem cautioned that the BoC could “pause our tightening” if inflation subsides, the same rule applies to the Fed. However, with inflation still raging, the Fed and the BoC are unlikely to change their hawkish tones anytime soon.

Case in point. The U.S. Bureau of Labor Statistics (BLS) released the Producer Price Index (PPI) on Apr. 13.,and with outperformance across the board, green lights were present for all of the wrong reasons. For context, the gray figures in the middle column were economists’ consensus estimates.

Please see below:

Obraz zawierający tekstOpis wygenerowany automatycznie
Source: Investing.com

Likewise, the NFIB released its Small Business Optimism Index on Apr. 12. The report revealed:

“The NFIB Small Business Optimism Index decreased in March by 2.4 points to 93.2, the third consecutive month below the 48-year average of 98. Thirty-one percent of owners reported that inflation was the single most important problem in their business, up five points from February and the highest reading since the first quarter of 1981. Inflation has now replaced ‘labor quality’ as the number one problem.”

How about this divergence?

“Owners expecting better business conditions over the next six months decreased 14 points to a net negative 49%, the lowest level recorded in the 48-year-old survey.”

“The net percent of owners raising average selling prices increased four points to a net 72% (seasonally adjusted), the highest reading recorded in the series.”

Moreover, “a net 50 percent plan price hikes (up 4 points).”

Please see below:


Source: NFIB

On top of that, “a net 49 percent reported raising compensation, down 1 point from January’s 48-year record high reading. A net 28 percent plan to raise compensation in the next three months, up 2 points from February.”

Please see below:


Source: NFIB

Thus, while the Fed hopes to rein in inflation, U.S. small businesses plan more price hikes and wage increases than in February. Therefore, officials’ hawkish intentions are not nearly hawkish enough. As a result, the medium-term outlook for the U.S. federal funds rate, the USD Index and the U.S. 10-Year real yield couldn’t be more bullish. As mentioned, let’s not forget how optimism often turns to pessimism when the drama unfolds.

The Bottom Line?

Investors lack the foresight to see how the Fed’s rate hike cycle will likely unfold. Moreover, with Fed officials warning of the “collateral damage” that occurs when they curb demand to reduce inflation, the permabulls have simply closed their eyes and covered their ears. However, when sentiment is built on a foundation of sand, it often collapses when reality re-emerges.

In conclusion, the PMs rallied on Apr 13 as momentum remains the name of the game. However, while sentiment remains robust, gold, silver, and mining stocks’ fundamentals are worse now than at any point in 2021. As a result, history shows that not only are the current prices unsustainable, but profound drawdowns are required for the PMs to reflect their intrusive values.

What to Watch for Next Week

With more U.S. economic data to be released next week, the most important ones are as follows:

  • Apr. 21: Philadelphia Fed manufacturing index

With the regional data providing early insight into April’s inflation dynamics, continued price increases will put more pressure on the FOMC.

  • Apr. 22: S&P Global’s U.S. manufacturing and services PMIs

Unlike the Philadelphia Fed’s index, S&P Global’s data covers the entire U.S. As a result, the performance of growth, employment, and inflation will be of immense importance.

All in all, economic data releases impact the PMs because they impact monetary policy. Moreover, if we continue to see higher employment and inflation, the Fed should keep its foot on the hawkish accelerator. And if that occurs, the outcome is profoundly bearish for the PMs.

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.

 

Dark Clouds Over the Gold Market Form a Bearish Shape

Gold, Silver and Mining Stocks Technical Analysis

Yesterday’s session served as a great bearish sign, not just because of gold’s and silver’s reversals, but also because of miners’ underperformance.

Let’s take a look at gold.

During yesterday’s session, gold moved slightly above its previous local high, but then quickly invalidated this small breakout. Invalidations of breakouts in gold are a sell signal on their own, but the fact that we saw the same thing in silver makes the bearish nature of this development even more prominent.

After having been relatively calm in April, silver soared above its declining resistance line… only to disappoint shortly thereafter. The white metal still closed the day slightly above the resistance line. However, given that the reversal took place on relatively high volume, the odds are that this breakout will be invalidated shortly.

In fact, it was only yesterday when I wrote that silver was known for its fake breakouts right before starting much bigger declines. It appears that we have witnessed this kind of performance once again.

While both precious metals ended the session higher, mining stocks ended it lower. This could be a sign that the top is in. Let’s take a look at junior miners’ short-term chart.

While the GDXJ ETF didn’t invalidate its tiny breakout above the triangle pattern in terms of the daily closing prices, it did move back below it on an intraday basis.

So, if gold’s and silver’s reversals are followed by lower prices, junior miners will likely invalidate the breakout and trigger more selling.

Historical Comparison with 2012

Let’s keep in mind that while gold and silver are repeating their 2012 performance, we can spot some analogies in GDXJ too.

At first, in late-September 2012 and early-October 2012, junior miners consolidated, and then they declined, thus entering the back-and-forth decline mode. It happened on relatively low volume.

Right now, GDXJ is also after a consolidation that’s been taking place on relatively low volume and that followed a rather sizable short-term upswing.

What happened next in 2012?

Well, at the late-2012 top, the GDXJ closed at $87.83. Months later, it closed at $29.59, or roughly one third of its initial price. In other words, junior miners erased about two-thirds of their initial price. Yes, it was a great time for inversely trading instruments. The JDST wasn’t trading at that time yet, but DUST (which trades opposite to GDX) moved up by over 600%.

Even though the short-term outlook is somewhat unclear, the medium-term outlook for the precious metals sector remains very bearish, and the upside potential for the short positions in junior mining stocks remains enormous, in my opinion. In my view, patience is likely to be very well rewarded.

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 Begins to Wobble. Is It a Sign of a Greater Fall?

Junior Mining Stocks Technical Analysis

On the technical front, we saw that the junior mining stocks moved higher in the first part of the session, but then declined and ended the day practically unchanged.

Why did junior miners rally initially? Perhaps for technical reasons. They were moving higher in their immediate-term trend, and thus, it might have been necessary for them to reach a resistance level before they could return to their downtrend.

Junior miners just found the resistance in the form of the declining line based on the previous March highs. After a tiny attempt to break above this line, the GDXJ declined and the breakout was invalidated, suggesting that the rally is over.

Now, the above-mentioned resistance line appears to be the upper border of the triangle pattern, which might concern you because triangles are usually a “continuation pattern”. In other words, the move that preceded the triangle is usually the type of move that follows it. The preceding move higher was up, so the following move could be to the upside as well.

However, for this to happen, junior miners would first need to confirm the breakout above the line, and we saw the opposite taking place yesterday – the breakout above the line was invalidated.

If – instead – we see a decline below the lower border of the triangle, the pattern would likely be followed by a decline. Please note that I wrote “usually” and now “always” with regard to the bullish implications of triangles.

Gold Technical Analysis and Forecast

If we look beyond the above chart, the bearish case is more justified than the bullish one.

I don’t mean just the extremely bearish situation in gold’s long-term chart, where it’s clear that gold is repeating its 2011-2013 performance, with the recent top being analogous to what we saw in 2012.

If it wasn’t for the Ukraine-war-tension-based rally, gold would have likely topped close to its current levels, which would be a perfect analogy to where it topped in 2012 – close to its preceding medium-term highs.

The fact that the RSI indicator moved lower recently after being close to 70 indicates that the top is already behind us.

If history is about to rhyme (and that’s very probable in my view), gold is likely to decline in a back-and-forth manner before it truly slides without looking back. Basically, that’s what we’ve been seeing recently. The recent consolidation is not a bullish development, but something in perfect tune with the extremely bearish pattern from 2012.

I don’t mean “just” the above, because we see similar analogies in silver and gold stocks (the HUI Index), and we get other indications (of more short-term nature) from the USD Index and the general stock market.

S&P 500 Technical Picture

The technical picture of the S&P 500 index suggests that the final top and the initial corrective upswing are over.

The general stock market closed the week below its February highs, which means that the small breakout above them was invalidated. This is a very bearish indication for the following weeks. Many more investors are likely to become aware of the new interest-rate-hike-driven medium-term bear market once the S&P 500 breaks to new 2022 lows. That’s when the decline is likely to accelerate, quite likely also in silver and mining stocks that are usually most vulnerable to stock market moves.

USD Index and Precious Metals Price Forecast

Moreover, let’s keep in mind that the USD Index is likely to soar once again soon, triggering declines in the precious metals market.

In my previous analyses, I commented on the USD Index in the following way:

If we focus on the USD Index alone, we’ll see that yesterday’s decline was absolutely inconsequential with regard to changing the outlook for the USDX. It simply continues to consolidate after a breakout above the mid-2020 highs. Breakout + consolidation = increasing chances of rallies’ continuation. A big wave up in the USD Index is likely just around the corner, and the precious metal sector is likely to decline when it materializes.

As the war-based premiums in gold and the USD appear to be waning, a high-interest-rate-driven rally in the USD is likely to trigger declines in gold. The correlation between these two assets has started to decline. When that happened during the last two cases (marked with orange), gold plummeted profoundly shortly thereafter.

The USD Index rallied recently, once again clearly verifying the breakout above its mid-2020 high. This means that the USD Index is now likely ready to rally once again. Naturally, this has bearish implications for the precious metals sector.

All in all, technicals favor a decline in the precious metals sector sooner rather than later.

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.

 

The USDX Rocket Is Ready to Take Off: Gold Doesn’t Fit Aboard

Gold and Miners Technical Analysis

The back-and-forth movement in both gold and miners continues. However, as GDXJ keeps trading below its rising support line, the breakout below it becomes confirmed, and the movements that we saw at the same time in gold and the USD Index suggest that the former is ready to slide once the latter rallies. Let’s take a closer look, starting with the GDXJ.

Yesterday’s move in the ETF was rather insignificant, and that’s precisely what makes it… significant.

What I mean is that insignificant moves after a breakdown are a perfect way for the market to take a breather before declining further. In other words, the previous breakdown makes yesterday’s irrelevant price action relevant and bearish.

Consequently, my yesterday’s comments on the above chart remain up-to-date:

Yesterday’s breakdown below the rising support line was not invalidated.

We saw a move higher on volume that was not strong, which suggests that yesterday’s session was not a true reversal. Low volume suggests that it was a correction, and the fact that junior miners have just broken below their rising support line means that it makes perfect sense for them to correct now.

Consequently, yesterday’s action wasn’t really bullish for junior miners when we take the context into account.

US Dollar Index and Gold Correlation

Speaking of context, let’s not forget about yesterday’s action in the USD Index.

The USD Index declined significantly yesterday, which means that gold, silver, and mining stocks “should have” rallied. After all, based on the USD’s decline, their prices (quoted in USD terms) became lower for non-USD buyers.

So, the fact that silver and gold were practically flat yesterday is actually bearish for them, because it means they underperformed. Gold miners moved higher, but given that the USD Index declined visibly and the general stock market rallied, it would be natural for miners to rally more than they did. Taking all this into account, miners were not really strong yesterday.

If we focus on the USD Index alone, we’ll see that yesterday’s decline was absolutely inconsequential with regard to changing the outlook for the USDX. It simply continues to consolidate after a breakout above the mid-2020 highs. Breakout + consolidation = increasing chances of rallies’ continuation. A big wave up in the USD Index is likely just around the corner, and the precious metal sector is likely to decline when it materializes.

As the war-based premiums in gold and the USD appear to be waning, a high-interest-rate-driven rally in the USD is likely to trigger declines in gold. The correlation between these two assets has started to decline. When that happened during the last two cases (marked with orange), gold plummeted profoundly shortly thereafter.

What happened after we posted the above?

The USD Index had declined, and gold had rallied (yesterday), and then (today) the USD Index moved back up by just a little while gold declined strongly.

Gold and Precious Metals Price Forecast

Gold is once again in a situation where it magnifies the USD’s bearish indications while largely ignoring the USD’s bullish indications.

This is a perfectly bearish sign for the short term, because it means that if the USD Index moves back and forth, then gold will most likely continue its downtrend, declining when the USD is up, and pausing when it’s down.

However, the USD Index is not likely to continue to move back and forth for long – quite the opposite. The USD Index has just verified its breakout above the mid-2020 high for the third time (without moving below it; the strong support held!), which means that it’s now very likely that it will simply continue its uptrend.

Based on how gold is now reacting to USDX’s movement, the uptrend in the USD Index would be likely to trigger significant declines in gold. This would be likely to translate into lower silver and mining stock prices.

All in all, technicals favor a decline in the precious metals sector sooner rather than later.

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.

 

Fed’s Actions Will Affect Gold. Are There Any Positives?

The question one of my subscribers asked me was about the rise in mining stocks and gold and how it was connected to what was happening in bond yields. Precisely, while short-term and medium-term yields moved higher, very long-term yields (the 30-year yields) dropped, implying that the Fed will need to lower the rates again, indicating a stagflationary environment in the future.

First of all, I agree that stagflation is likely in the cards, and I think that gold will perform similarly to how it did during the previous prolonged stagflation – in the 1970s. In other words, I think that gold will move much higher in the long run.

However, the market might have moved ahead of itself by rallying yesterday. After all, the Fed will still want to keep inflation under control (reminder: it has become very political!), and it will want commodity prices to slide in response to the foregoing. This means that the Fed will still likely make gold, silver, and mining stocks move lower in the near term.

In particular, silver and mining stocks are likely to decline along with commodities and stocks, just like what happened in 2008.

Speaking of commodities, let’s take a look at what’s happening in copper.

Copper invalidated another attempt to move above its 2011 high. This is a very strong technical sign that copper (one of the most popular commodities) is heading lower in the medium term.

Yes, it might be difficult to visualize this kind of move given the recent powerful upswing, but please note that it’s in perfect tune with the previous patterns.

The interest rates are going up, just like they did before the 2008 slide. What did copper do before the 2008 slide? It failed to break above the previous (2006) high, and it was the failure of the second attempt to break higher that triggered the powerful decline. What happened then? Gold declined, but silver and mining stocks truly plunged. The GDXJ was not trading at the time, so we’ll have to use a different proxy to see what this part of the mining stock sector did.

The Toronto Stock Exchange Venture Index includes multiple junior mining stocks. It also includes other companies, but juniors are a large part of it, and they truly plunged in 2008.

In fact, they plunged in a major way after breaking below their medium-term support lines and after an initial corrective upswing. Guess what – this index is after a major medium-term breakdown and a short-term corrective upswing. It’s likely ready to fall – and to fall hard.

So, what’s likely to happen? We’re about to see a huge slide, even if we don’t see it within the next few days.

In fact, the outlook for the next few days is rather unclear, as different groups of investors can interpret yesterday’s developments differently. However, once the dust settles, the precious metals sector is likely to go down significantly.

Gold is up in today’s pre-market trading, but please note that back in 2020, after the initial post-top slide, gold corrected even more significantly, and it wasn’t really bullish.

This time gold doesn’t have to rally to about $2,000 before declining once again, as this time the rally was based on war, and when we consider previous war-based rallies (U.S. invasion of Afghanistan, U.S. invasion of Iraq, Russia’s invasion of Crimea), we know that when the fear-and-uncertainty-based top was in, then the decline proceeded without bigger corrections.

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.

 

If History Rhymes, Gold and Silver Are Back on Slippery Slope

Last week’s powerful, huge-volume reversal in gold was likely to be followed by declines. It was – but that’s just the beginning.

Yesterday’s $24 decline might seem significant on a day-to-day basis, but compared to last week’s enormous reversal, it’s really tiny.

The modest extent of yesterday’s decline is by no means bullish – my emphasis on the small size of the decline so far should be viewed as an indication that much more is likely on the horizon. Besides, gold was down by about $20 in today’s pre-market trading.

As I wrote yesterday, gold’s breakout above $2,000 was officially invalidated, and given the weekly reversal, it seems that the war-uncertainty-based rally is over.

The decisive move below 70 in the RSI indicator after it was trading above 70 clearly confirms that the top is already behind us. Just like it was in 2020 and 2021 when similar things happened, history appears to have rhymed.

On Friday, I wrote the following:

Gold’s move of $0.40 (yes, forty cents) above $2,000 is not important as the breakout above this level was just invalidated the previous day. Technically, this is another attempt to break above this level, which is likely to be invalidated based on what we see in today’s pre-market trading.

The fact that I would like to emphasize today is that this kind of small rebound after the initial slide is common and perfectly normal for gold. We saw exactly the same thing right after gold’s 2020 top and after its 2021 top, and also two more times in 2021 (as marked on the above chart).

This means that yesterday’s upswing is not particularly bullish. It’s a normal post-top reaction. Lower gold values are to be expected.

Silver declined yesterday, and it closed the day below its late-2021 high.

In other words, the breakout above this level was invalidated. This is a strong bearish confirmation from the white metal.

The white metal just invalidated the move above its 61.8% Fibonacci retracement.

That’s bearish on its own, but let’s keep in mind that it happened right after silver outperformed gold.

Last Tuesday, the GDXJ ETF was up by less than 1%, gold was up by 2.37%, and silver was up by 4.57%. Silver’s outperformance and miners’ underperformance is what we tend to see right at the tops. That’s exactly what it was – a top. Silver declined profoundly, and the attempt to break above its 61.8% Fibonacci retracement level will soon be just a distant (in terms of price) memory.

On a medium-term basis, silver was simply weak relative to gold, but we saw short-term outperformance. In short, that was and continues to be bearish.

As far as silver’s big picture is concerned, please note that it also provides us with a confirmation of the analogy between 2012 and now.

At the turn of the year in 2011/2012, there was a cyclical turning point in silver, and we saw a sizable decline in silver shortly thereafter. The same happened in 2021, after silver’s cyclical turning point.

Back in 2012, silver declined more or less to its previous lows and then rallied back up, but it didn’t reach its previous top. It more or less rallied to its 50-week moving average and then by about the same amount before topping.

Recently, we saw exactly the same thing. After the initial decline, silver bottomed close to its previous lows, and most recently it rallied to its 50-week moving average and then by about the same amount before topping – below the previous high.

Thus, the situation is just like what it was during the 2012 top in all three key components of the precious metals sector: gold, silver, and mining stocks.

We have a situation in the general stock market that points to an even quicker slide than what we saw in 2012-2013. If stocks slide sharply and significantly just like in 2008, then the same fate may await the precious metals sector – just like in 2008. In this case, silver and mining stocks (in particular, junior mining stocks) would be likely to fall in a spectacular manner.

All the above was confirmed by silver’s invalidation of its breakout above the late-2021 high. Not only has the medium-term outlook been bearish, but now the short-term outlook for silver is bearish too.

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 Tries to Hold Above $2000 – Hard Landing Ahead?

Gold is attempting to break above the $2,000 milestone, and miners are trying to break above their declining resistance line. Will they manage to do so, and if so, how long will the rally last?

Yesterday, gold didn’t manage to close above the $2,000 level and it’s making another attempt to rally above it in today’s pre-market trading. However, will it be successful?

Given the RSI above 70 and the strength of the current resistance, it’s doubtful.

In fact, nothing has changed with regard to this likelihood since yesterday, so what I wrote about it in the previous Gold & Silver Trading Alert remains up-to-date:

Gold touched $2,000 in today’s pre-market trading, which is barely above its 2021 high and below its 2020 high. Crude oil is way above both analogous levels.

In other words, gold underperforms crude oil to a significant extent, just like in 2003.

Interestingly, back in 2003, gold topped when crude oil rallied about 40% from its short-term lows (the late-2002 low).

What happened next in 2003? Gold declined, and the moment when crude oil started to visibly outperform gold was also the beginning of a big decline in gold stocks.

That makes perfect sense on the fundamental level too. Gold miners’ share prices depend on their profits (just like it’s the case with any other company). Crude oil at higher levels means higher costs for the miners (the machinery has to be fueled, the equipment has to be transported, etc.).

When costs (crude oil could be viewed as a proxy for them) are rising faster than revenues (gold could be viewed as a proxy for them), miners’ profits appear to be in danger; and investors don’t like this kind of danger, so they sell shares. Of course, there are many more factors that need to be taken into account, but I just wanted to emphasize one way in which the above-mentioned technical phenomenon is justified.

Back in 2003, gold stocks wiped out their entire war-concern-based rally, and the biggest part of the decline took just a bit more than a month. Let’s remember that back then, gold stocks were in a very strong medium- and long-term uptrend. Right now, mining stocks remain in a medium-term downtrend, so their decline could be bigger – they could give away their war-concern-based gains and then decline much more.

Mining stocks are not declining profoundly yet, but let’s keep in mind that history rhymes – it doesn’t repeat to the letter. As I emphasized previously today, back in 2003 and 2002, the tensions were building for a longer time, and it was relatively clear in advance that the U.S. attack was going to happen. This time, Russia claimed that it wouldn’t attack until the very last minute before the invasion. Consequently, the “we have to act now” is still likely to be present, and the dust hasn’t settled yet – everything appears to be unclear, and thus the markets are not returning to their previous trends. Yet.

However, as history shows, that is likely to happen. Either immediately, or shortly, as crude oil is already outperforming gold.

The above chart features the GDXJ ETF. As you can see, the junior miners moved to their very strong resistance provided by the declining resistance line. This resistance is further strengthened by the 38.2% Fibonacci retracement, and the previous (late-2021) high. This means that it’s particularly strong, and any breakout here would likely be invalidated shortly.

Given the clear sell signal from the RSI indicator, a turnaround here is even more likely. I marked the previous such signals to emphasize their efficiency. When the RSI was above 70, a top was in 6 out of 7 of the recent cases, and the remaining case was shortly before the final top, anyway.

This resistance seems to be analogous to the $2,000 level in gold.

By the way, please note that gold tried to break above $2,000 several times:

  • twice in August 2020;
  • twice in September 2020 (once moving above it, once moving just near this level);
  • once in November 2020 (moving near this level);
  • once in January 2021 (moving near this level);
  • once in February 2022 (moving near this level).

These attempts failed in each of the 7 cases mentioned above. This is the eight attempt. Will this very strong resistance break this time?

Given how much crude oil has already soared, and how both markets used to react to war tensions in the case of oil-producing countries, it seems that the days of the rally are numbered.

Moving back to the GDXJ ETF, please note that while gold is moving close to its all-time highs, the junior miners are not doing anything like that. In fact, they barely moved slightly above their late-2021 high. They are not even close to their 2021 high, let alone their 2020 high. Instead, junior mining stocks are just a bit above their early-2020 high, from which their prices were more than cut in half in less than a month.

In other words, junior miners strongly underperform gold, which is a bearish sign. When gold finally declines – and it’s likely to, as geopolitical events tend to have only a temporary effect on prices, even if they’re substantial – junior miners will probably slide much more than gold.

One of the reasons is the likely decline in the general stock market.

I recently received a question about the impact the general stock market has on mining stocks, as the latter moved higher despite stocks’ decline in recent weeks. So, let’s take a look at a chart that will feature junior mining stocks, the GLD ETF, and the S&P 500 Index.

Before the Ukraine crisis, the link between junior miners and the stock market was clear. Now, it’s not as clear, but it’s still present. Juniors only moved to their late-2021 highs, while gold is over $100 above those highs. Juniors underperform significantly, in tune with the stock market’s weakness.

The gold price is still the primary driver of mining stock prices – including junior mining stocks. After all, that’s what’s either being sold by the company (that produces gold) or in the properties that the company owns and explores (junior miners). As gold prices exploded in the last couple of weeks, junior miners practically had to follow. However, this doesn’t mean that the stock market’s influence is not present nor that it’s going to be unimportant going forward.

Conversely, the weak performance of the general stock market likely contributed to junior miners’ weakness relative to gold – the former didn’t rally as much as the latter. Since the weakness in the general stock market is likely to continue, and gold’s rally is likely to be reversed (again, what happened in the case of other military conflicts is in tune with history, not against it), junior miners are likely to decline much more profoundly than gold.

Speaking of the general stock market, it just closed at the lowest level since mid-2021.

The key thing about the above chart is that what we’ve seen this year is the biggest decline since 2020, and the size of the recent slide is comparable to what we saw as the initial wave down in 2020 – along with the subsequent correction. If these moves are analogous, the recent rebound was perfectly normal – there was one in early 2020 too. This also means that a much bigger decline is likely in the cards in the coming weeks, and that it’s already underway.

This would be likely to have a very negative impact on the precious metals market, in particular on junior mining stocks (initially) and silver (a bit later).

All in all, it seems that due to the technical resistance in gold and mining stocks, the sizable – but likely temporary (like other geopolitical-event-based-ones) – rally is likely to be reversed shortly. Then, as the situation in the general stock market deteriorates, junior miners would be likely to plunge in a spectacular manner.

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: What Should We Expect Given the Ongoing Conflict?

Don’t stop reading this mining stock analysis until you get to the part about junior mining stocks’ analogy. Something might interest you there.

While the unfortunate conflict confronting Russia and Ukraine has intensified in recent days, gold, silver, and mining stocks have benefited from the crisis. However, since history shows that geopolitical-tension-based rallies often reverse, Feb. 24 was likely a small indication of what should unfold over the next few months.

For example, gold’s sharp rally turned into a sharp intraday reversal on Feb. 24. While the S&P 500, the NASDAQ Composite, the S&P 500, and gold managed to end the session in the green, the GDX ETF declined by 1.93%.

Furthermore, after the gold and silver senior miners rallied above their medium-term declining resistance line (the downward sloping black line in the middle of the chart below), the intraday reversal invalidated the breakout and it occurred on significant volume.

At the same time, senior mining stocks invalidated their attempt to break above their 38.2% Fibonacci retracement. That’s yet another bearish sign.

This means that the GDX ETF’s medium-term downtrend remains intact, and that the short-term concern-based rally may have just ended.

To that point, the HUI Index provides clues from a longer-term perspective. When we analyze the weekly chart, the current short-term move higher is in tune with the previous patterns, but history is not repeating itself to the letter.

The three previous cases that I marked with green were not identical, but quite similar in terms as they were all some sort of a broad head-and-shoulders pattern.

Now, this pattern can have more than two “shoulders”. It’s not that common, but it happens. It seems that what we saw recently (I mean the late-2021 – Feb. 2022 rally) could be viewed as either a part of a big post-pattern consolidation, or another right shoulder of the pattern.

Based on how broad the pattern is and self-similarity present in gold, it seems that the analogy to what happened in 2012 is most important right now.

Looking at the moving averages, we see that the 50-week moving average (blue) and 200-week moving average (red) performed quite specifically in late 2012, and we see the same thing this year.

The distance between 50- and 200-week moving averages currently narrows, while the former declines. Back in 2012, the top formed when the HUI rallied above its 50-week moving average, which just happened once again.

Still, if the general stock market slides, and that appears likely for the following weeks and months, then we might have a decline that’s actually similar to what happened in 2008. Back then, gold stocks declined profoundly, and they have done so very quickly.

The dashed lines that start from the recent prices are copy-paste versions of the previous declines that started from the final medium-term tops. If the decline is as sharp and as big as what we saw in 2008, gold stocks would be likely to decline sharply, slightly below their 2016 low. If the decline is more moderate, then they could decline “only” to 120 – 140 or so. Either way, the implications are very, very, very bearish for the following weeks.

Turning to the junior miners, the GDXJ ETF tried to break out above a lower declining resistance line (the downward-sloping blue line drawn from the mid-2021 and late-2021 highs below). However, the attempt was rejected and culminated with a sharp intraday reversal. Moreover, the junior miners’ relative weakness was on full display, as despite the green lights flashing for the general stock market, gold, and silver, the GDXJ ETF ended the Feb. 24 session down by 2.28%.

In addition, please note that the bearish about-face occurred on strong volume, and the move mirrored the sharp spike that preceded the March 2020 plunge.

Please note that while junior miners invalidated their breakout above the declining resistance line, similarly to GDX, it was not the analogous line. The line that’s analogous to the one on the previous GDX chart is the blue, dashed line. GDXJ was not even close to it.

In other words, junior miners are underperforming seniors, just like what I’ve been expecting to see for months. The trend in the ratio between them is clear too.

Once again (just like in 2020), junior miners are likely to decline more than seniors, providing a greater shorting opportunity for truly epic profits.

Let’s get back to the previous chart for a moment, and let’s expand on the “just like in 2020” analogy.

Buckle-up, Alice, because the ride down the similarity rabbit hole is going to be a wild one.

Here it goes:

  • The early-2020 top in the GDXJ formed after a sharp short-term rally.
  • The early-2020 top in the GDXJ formed when GDXJ opened much higher, declined on an intraday basis, and ended the day lower.
  • The early-2020 top in the GDXJ formed at $44.85, on significant volume.
  • When the GDXJ topped in early-2020, its 50-day moving average was at about $40, and the MACD indicator was at about 1.

Now, let’s consider what happened yesterday.

  • This week’s top in the GDXJ formed after a sharp short-term rally.
  • This week’s top in the GDXJ formed when GDXJ opened much higher, but declined on the intraday basis, and ended the day lower.
  • This week’s top in the GDXJ formed at $45.16 (just 0.7% higher than in early-2020), on significant volume.
  • When the GDXJ topped this week, its 50-day moving average was at about $40 ($40.50), the MACD indicator was at about 1 (0.747).

If you think that’s extremely similar, you’re right. However, I saved the best for last:

The early-2020 top formed on February 24.

Yesterday WAS February 24.

Does this guarantee a slide like in 2020 in the junior miners? Of course not, there are no guarantees in any market, but does that make it even more likely? Yes, it does. Is it an epic opportunity for those who position themselves correctly? Again, I can’t make any promises or guarantees, but that’s what seems likely to me.

All in all, a crash below $20 is not out of the question. In the meantime, though, I expect the GDXJ ETF to challenge the $32 to $34 range. However, this is my expectation for a short-term bottom only. While the GDXJ ETF may record a corrective upswing at this level, the downtrend should continue thereafter, and the junior miners should fall further over the medium term.

In conclusion, the unfortunate situation unfolding in Ukraine is important, from a humanitarian perspective, and I hope that a peaceful resolution materializes. Also, it is my responsibility to analyze the situation and report it to you how it’s likely to impact the markets and what it implies for one’s trading positions. What’s justified from the risk-to-reward point of view and what’s not. While gold, silver, and mining stocks benefited from geopolitical tensions, history shows that such gains are short-lived. As a result, I still expect the trio to hit lower lows over the medium term, and I think that the decline will not be subtle.

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.

 

Miners for Breakfast, Gold for Dessert: Bearish Fundamentals Will Hurt

While gold remains uplifted due to the Russia-Ukraine drama, the GDXJ ETF declined for the second-straight day on Feb. 22. Moreover, I warned on numerous occasions that the junior miners are more correlated with the general stock market than their precious metals peers. As a result, when the S&P 500 slides, the GDXJ ETF often follows suit.

To that point, with shades of 2018 unfolding beneath the surface, the Russia-Ukraine headlines have covered up the implications of the current correction. However, the similarities should gain more traction in the coming weeks. For context, I wrote on Feb. 22:

When the Fed’s rate hike cycle roiled the NASDAQ 100 in 2017-2018, the GDXJ ETF suffered too. Thus, while the Russia-Ukraine drama has provided a distraction, the fundamentals that impacted both asset classes back then are present now.

Please see below:

To explain, the green line above tracks the GDXJ ETF in 2018, while the black line above tracks the NASDAQ 100. If you analyze the performance, you can see that the Fed’s rate hike cycle initially rattled the former and the latter rolled over soon after. However, the negativity persisted until Fed Chairman Jerome Powell performed a dovish pivot and both assets rallied. As a result, with the Fed Chair unlikely to perform a dovish pivot this time around, the junior miners have some catching up to do.

Furthermore, while the S&P 500 also reacts to the geopolitical risks, the Fed’s looming rate hike cycle is a much bigger story. With the U.S. equity benchmark also following its price path from 2018, a drawdown to new 2022 lows should help sink the GDXJ ETF.

Please see below:

Source: Morgan Stanley

To explain, the yellow line above tracks the S&P 500 from March 2018 until February 2019, while the blue line above tracks the index’s current movement. If you analyze the performance, it’s a near-splitting image.

Moreover, while Morgan Stanley Chief Equity Strategist Michael Wilson thinks a relief rally to ~4,600 is plausible, he told clients that “this correction looks incomplete.”Rarely have we witnessed such weak breadth and havoc under the surface when the S&P 500 is down less than 10%. In our experience, when such a divergence like this happens, it typically ends with the primary index catching down to the average stock,” he added.

As a result, while a short-term bounce off of oversold conditions may materialize, the S&P 500’s downtrend should resume with accelerated fervor. In the process, the GDXJ ETF should suffer materially as the medium-term drama unfolds.

To that point, the Fed released the minutes from its discount rate meetings on Jan. 18 and Jan. 26. While the committee left interest rates unchanged, the report revealed:

“Given ongoing inflation pressures and strong labor market conditions, a number of directors noted that it might soon become appropriate to begin a process of removing policy accommodation. The directors of three Reserve Banks favored increasing the primary credit rate to 0.50 percent, in response to elevated inflation or to help manage economic and financial stability risks over the longer term.”

For context, the hawkish pleas came from the Cleveland, St. Louis, and Kansas City Feds. Moreover, the last time Fed officials couldn’t reach a unanimous decision was October 2019. As a result, the lack of agreement highlights the monetary policy uncertainty that should help upend financial assets in the coming months.

As evidence, the report also revealed:

Obraz zawierający tekstOpis wygenerowany automatycznie Source: U.S. Fed

Thus, while I’ve highlighted on numerous occasions that a bullish U.S. economy is bearish for the PMs, the Russia-Ukraine drama has been a short-term distraction. However, with Fed officials highlighting that growth and inflation meet their thresholds for tightening monetary policy, higher real interest rates and a stronger USD Index will have much more influence over the medium term.

To that point, IHS Markit released its U.S. Composite PMI on Feb. 22. With the headline index increasing from 51.1 in January to 56.0 in February, an excerpt from the report read:

“February data highlighted a sharp and accelerated increase in new business among private sector companies that was the fastest in seven months. Firms mentioned that sales were boosted by the retreat of the pandemic, improved underlying demand, expanded client bases, aggressive marketing campaigns and new partnerships. Customers reportedly made additional purchases to avoid future price hikes. Quicker increases in sales (trades) were evident among both manufacturers and service providers.”

More importantly, though:

Obraz zawierający tekst, wewnątrz, zrzut ekranuOpis wygenerowany automatycznieSource: IHS Markit

In addition, since the Fed’s dual mandate includes inflation and employment, the report revealed:

Obraz zawierający tekstOpis wygenerowany automatycznie Source: IHS Markit

Likewise, Chris Williamson, Chief Business Economist at IHS Markit, added:

“With demand rebounding and firms seeing a relatively modest impact on order books from the Omicron wave, future output expectations improved to the highest for 15 months, and jobs growth accelerated to the highest since last May, adding to the upbeat picture.”

If that wasn’t enough, the Richmond Fed released its Fifth District Survey of Manufacturing Activity on Feb. 22. While the headline index wasn’t so optimistic, the report revealed that “the third component in the composite index, employment, increased to 20 from 4 in January” and that “firms continued to report increasing wages.”

For context, the dashed light blue line below tracks the month-over-month (MoM) change, while the dark blue line below tracks the three-month moving average. If you analyze the former’s material increase, it’s another data point supporting the Fed’s hawkish crusade.

Source: Richmond Fed

Finally, the Richmond Fed also released its Fifth District Survey of Service Sector Activity on Feb. 22. For context, the U.S. service sector suffers the brunt of COVID-19 waves. However, the recent decline in cases has increased consumers’ appetite for in-person activities. The report revealed:

“Fifth District service sector activity showed improvement in February, according to the most recent survey by the Federal Reserve Bank of Richmond. The revenues index increased from 4 in January to 11 in February. The demand index remained in expansionary territory at 23. Firms also reported increases in spending, as the index for capital expenditures, services expenditures, and equipment and software spending all increased.”

Furthermore, with the employment index increasing from 12 to 14, the wages index increasing from 41 to 46, and the average workweek index increasing from 9 to 10, the labor market strengthened in February. Likewise, the index that tracks businesses’ ability to find skilled workers increased from -21 to -19. As a result, inflation, employment and economic growth create the perfect cocktail for the Fed to materially tighten monetary policy in the coming months. 

Source: Richmond Fed

The bottom line? While the Russia-Ukraine saga may dominate the headlines for some time, the bearish fundamentals that hurt gold and silver in 2021 remain intact: the U.S. economy is on solid footing, and demand is still fueling inflation. Moreover, with information technology and communication services’ stocks – which account for roughly 39% of the S&P 500 – highly allergic to higher interest rates, the volatility should continue to weigh on the GDXJ ETF. As such, while gold may have extended its shelf life, mining stocks may not be so lucky.

In conclusion, the PMs were mixed on Feb. 22, as the news cycle continues to swing financial assets in either direction. However, while headlines may have a short-term impact, technicals and fundamentals often reign supreme over the medium term. As a result, lower lows should confront gold, silver, and mining stocks in the coming months.

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.

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

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 Withstands the Storm. Will Miners Drag It off the Raft?

While gold remains relatively firm despite stock market turbulence, rising real yields, and bearish technical indicators, even a confluence of headwinds hasn’t been able to knock the yellow metal off its lofty perch. However, mining stocks haven’t been so lucky. With my short position in the GDXJ ETF offering a great risk-reward proposition, the junior gold miners’ underperformance has played out exactly as I expected.

Moreover, with major spikes in volume preceding predictable sell-offs (follow the vertical dashed lines below), I’ve warned on several occasions that the GDX ETF is prone to tipping its hand – we saw this volume spike in January, which was the 2022 top (as of today). In addition, with mining investors’ power drying up by the day, the medium-term looks equally unkind.

Please see below:

On Wednesday, gold miners fell. Even though they declined by just $0.06, it was profound. The miners were following gold higher during the early part of Wednesday’s (Feb. 9) session, but they lost strength close to the middle thereof and were back down before the closing bell.

If the gold price reversed and then declined during the day, that would have been normal. However, gold stayed up.

This tells us that the buying power has either dried up or is drying up.

When everyone who wanted to get into the market is already in it, the price can do only one thing (regardless of bullish factors) – fall. Those who are already in can then sell. Monitoring the markets for this kind of cross-sector performance is one of the more important gold trading tips.

Look, I’m not saying that declines now are “guaranteed”. There are no guarantees in the markets. There might be buyers that haven’t considered mining stocks that would now enter the market, but history tells us that this is unlikely. Instead, declines are very likely to follow.

Yesterday’s big daily decline confirmed my above comments. Gold miners declined much more than gold did, and they did so at above-average volume. The latter indicates that “down” is the true direction in which the precious metals market is heading.

To that point, the HUI Index provides clues from a longer-term perspective. When we analyze the weekly chart, it highlights investors’ anxiety. For example, after hitting an intraweek high of roughly 260, the HUI Index ended the Feb. 10 session at roughly 250 – just 3.99 up from last Friday – that’s an intraweek reversal.

Furthermore, with the index still in a medium-term downtrend, shades of 2013 still profoundly bearish, and sharp declines often preceded by broad head and shoulders patterns (marked with green), there are several negatives confronting the HUI Index. As such, a sharp drawdown will likely materialize sooner rather than later.

Please see below:

Finally, the GDXJ ETF is the gift that keeps on giving. For example, with lower highs and lower lows being part of the junior miners’ roughly one-and-a-half-year journey, false breakouts have confused many investors. However, while I’ve been warning about the weakness for some time, more downside is likely on the horizon. To explain, I wrote on Feb. 10:

I emphasized before that juniors hadn’t moved above their 50-day moving average, and that they stayed below their rising blue resistance line. Consequently – I wrote – the downtrend in them remained clearly intact.

Yesterday’s reversal served as a perfect confirmation of the above. The previous breakdowns were verified in one of the most classic ways. The silver price has been quite strong recently, which is also something that we see close to the local tops.

The reversals in mining stocks, the situation in gold, outperformance of silver, AND the situation in the USD Index (the medium-term support held) together paint a very bearish picture for the precious metals market in the short and medium term.

All in all, if the weakness continues, I expect the GDXJ ETF to challenge the $32 to $34 range. However, please note that this is my expectation for a short-term bottom. While the GDXJ ETF may record a corrective upswing at this level, the downtrend should continue thereafter, and the junior miners should fall further over the medium term.

In conclusion, gold showcased its steady hand throughout the recent volatility. However, mining stocks have cracked under the pressure. With the latter’s underperformance often a bearish omen for the former, the yellow metal’s mettle may be tested over the medium term. As such, while the long-term outlooks for gold, silver, and mining stocks remain profoundly bullish, a final climax will likely unfold before their secular uptrends 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.

 

Why Gold’s Latest Rally Is Nothing to Get Excited About

What a signal-rich week that was! At least if you’re interested in forecasting gold and predicting silver prices.

The USD Index rallied, but that was the least interesting of the important developments, as it had already reversed during the preceding week. So, the fact that the USD Index continued its medium-term uptrend last week is not that noteworthy.

It needs to be said, though, as that continues to be an important factor for the future of the precious metals market. To be clear – the implications for the PM sector are bearish.

What about gold, the key precious metal?

Gold is so far almost unchanged this year, despite the initial decline and the subsequent rally. Overall, gold is up by $3.20 so far in 2022, which is next to nothing.

Gold rallied on a supposedly dangerous situation regarding Ukraine, but it failed to rally above the combination of resistance lines and very little changed technically.

On a side note, I would like to remind you that, based on our own reliable source in Ukraine (one of our team members is located there), the risk of military conflict (in particular, a severe one) is low, and it seems that the market’s reaction was greatly exaggerated.

Anyway, moving back to technicals, let’s keep this $3.20-up-this-year statistic in mind while we take a look at what’s going on in silver and mining stocks.

Silver declined on Friday, but it’s still up by $0.97 so far in 2022. This means that on a short-term basis, silver greatly outperformed gold.

What’s up with mining stocks?

The GDX ETF – a proxy for generally senior mining stocks – is down this year by $0.38, which is 1.19%.

At the same time, the GDXJ ETF is down by $0.87, which is 2.07%.

In other words:

  1. While silver is outperforming gold on a short-term basis, gold mining stocks are underperforming it.
  2. Junior mining stocks (our short position) are declining more than senior miners, and in fact, they are declining the most out of the entire precious metals sector.

Silver’s outperformance, accompanied by gold miners weakness, is a powerful bearish combination in the case of the entire precious metals sector.

If the general stock market is going to slide, silver and mining stocks (in particular, junior mining stocks) are likely to decline in a rather extreme manner.

The thing is…

We just saw something in the general stock market that we haven’t seen since early 2020 – right before the massive decline that triggered the huge declines in the precious metals sector.

The RSI Index just moved below 30 for the first time since pre-slide moments. Just like what we saw back then, the S&P 500 is now declining on increasing volume.

Yes, RSI below 30 is generally considered oversold territory, but the direct analogies take precedence over the “usual” way in which things work in markets in general. In this case, the situation could get from oversold to extremely oversold. Let’s keep in mind that stocks declined very sharply in 2020.

One could say that times were different, but were they really? The key difference is that the monetary authorities are now already after the bullish money-printing cycle and are handling inflation by aiming to increase interest rates, while they had been preparing to cut them in 2020.

The situation regarding the pandemic is not that different either. Sure, back in 2020, it was all new, we had massive lockdowns and there was great uncertainty regarding… pretty much everything. Now, the situation is not entirely unexpected, but given the explosive nature of new COVID-19 cases (likely due to the Omicron variant), it’s still quite new and uncertain.

The uncertainty is not as great as it was back in 2020, but then again, now we’re facing monetary tightening, not dramatic dovish actions. Thus, I wouldn’t exclude a situation in which we really see a repeat of the early-2020 performance, where the declines are sharp and huge. The technicals in the precious metals market have been pointing to that outcome for months anyway, especially the long-term HUI Index chart that I’ve been discussing previously.

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.