Let’s start with the examination of the most recent price action in gold.
What we just saw could have been the final of the three tops that is then likely to be followed by the biggest decline of this quarter. That’s what gold seasonality in Q4 2019 supports too – we’re in for quite a volatile move lower before any short-term corrective upswing starts.
There’s one more thing about the gold chart to comment on. The above chart features in greater detail what happened recently, and the one below features the not-so-long-ago past – late-2018 price performance.
Lessons From Gold a Year Ago
Both patterns started with a sizable daily rally in gold that took place on big volume (October 2018 and early December 2019). Then gold entered consolidation with a small breakout that was then invalidated. Gold recovered and went on to make the third attempt to break higher, but failed. What’s notable about these final attempts is that we saw a day with very low volume (early November 2018, and the last few days). Back in 2018, this pattern was followed by several days of visibly lower prices before gold rallied.
Something similar could – and is likely to – take place also this time. The end of the year is likely to mark a reversal, which means that gold could bottom at that time and start a corrective upswing. The difference this time is that the follow-up rally that would take place in January is not likely to be as sustainable as the one that started in mid-November 2018.
Having said that, let’s take a look at the silver market.
Turning to Silver
The white metal has indeed shown strength by rallying back to the rising resistance line and the 50-day moving average. It almost moved above the early-December high on Friday. It finally managed to break above it in Monday’s pre-market trading.
Silver has shown exceptional strength and soared to new monthly highs. This means that it also broke above its 50-day moving average and the rising resistance line. This would have been a very important and bullish development if…
If it wasn’t silver. The white metal can be counted on to provide fake signals over and over again, and one of the ways to tell if silver is likely lying is to look at what the rest of the precious metals market is doing. If gold is not breaking higher and if miners are under-performing, it’s very likely a fake move on silver’s part. The above is one of the most important trading tips for the gold market. There are many techniques that are universal, but this one is specific – and highly useful – in case of the PMs.
We already know what happened in gold – it didn’t break above the previous highs, at least at the moment of writing these words. And what about the gold miners?
The Miners’ Turn
On Friday, miners confirmed their breakdown below the rising support line. It’s hard to imagine a clearer sign that silver’s breakout should not be trusted.
Remember the two, three tops in gold? In miners we can only see two of them, right? You know why? Because miners are already in the decline mode.
Just as it’s usually the case, miners were the first to rally and silver was catching up. Again, that’s a classic topping performance in the precious metals market.
The dynamics of other precious metals’ sectors or the lessons from their seasonality are far from the only defining elements in gold price development. The USD Index moves and the key factors at play are another important pieces of the puzzle. This is what the full version of the analysis covers – plus the targets of our promising short position. We encourage you to join our subscribers and reap the rewards. Subscribe today!
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Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager
Sunshine Profits – Effective Investments through Diligence and Care
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All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.