Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Dow Stock Market Trend Forecast Update - 21st Sep 19
Is Stock Market Price Revaluation Event About To Happen? - 21st Sep 19
Gold Leads, Will the Rest Follow? - 21st Sep 19
Are Cowboys Really Dreaming of... Electric Trucks? - 21st Sep 19
Gold among Negative-Yielding Bonds - 20th Sep 19
Panicky Fed Flooding Overnight Markets with Cash - 20th Sep 19
Uber Stock Price Will Crash on November 6 - 20th Sep 19
Semiconductor Stocks Sector Market & Economic Leader - 20th Sep 19
Learning Artificial Intelligence - What is a Neural Network? - 20th Sep 19
Precious Metals Setting Up Another Momentum Base/Bottom - 20th Sep 19
Small Marketing Budget? No Problem! - 20th Sep 19
The Many Forex Trading Opportunities the Fed Day Has Dealt Us - 19th Sep 19
Fed Cuts Interest Rates and Gold Drops. Again - 19th Sep 19
Silver Still Cheap Relative to Gold, Trend Forecast Update Video - 19th Sep 19
Baby Boomers Are the Worst Investors in the World - 19th Sep 19
Your $1,229 FREE Tticket to Elliott Market Analysis & Trading Set-ups - 19th Sep 19
Is The Stock Market Other Shoe About To Drop With Fed News? - 19th Sep 19
Bitcoin Price 2019 Trend Current State - 18th Sep 19
No More Realtors… These Start-ups Will Buy Your House in Less than 20 Days - 18th Sep 19
Gold Bugs And Manipulation Theorists Unite – Another “Manipulation” Indictment - 18th Sep 19
Central Bankers' Desperate Grab for Power - 18th Sep 19
Oil Shock! Will War Drums, Inflation Fears Ignite Gold and Silver Markets? - 18th Sep 19
Importance Of Internal Rate Of Return For A Business - 18th Sep 19
Gold Bull Market Ultimate Upside Target - 17th Sep 19
Gold Spikes on the Saudi Oil Attacks: Can It Last? - 17th Sep 19
Stock Market VIX To Begin A New Uptrend and What it Means - 17th Sep 19
Philippines, China and US: Joint Exploration Vs Rearmament and Nuclear Weapons - 17th Sep 19
What Are The Real Upside Targets For Crude Oil Price Post Drone Attack? - 17th Sep 19
Curse of Technology Weapons - 17th Sep 19
Media Hypes Recession Whilst Trump Proposes a Tax on Savings - 17th Sep 19
Understanding Ways To Stretch Your Investments Further - 17th Sep 19
Trading Natural Gas As The Season Changes - 16th Sep 19
Cameco Crash, Uranium Sector Won’t Catch a break - 16th Sep 19
These Indicators Point to an Early 2020 Economic Downturn - 16th Sep 19
Gold When Global Insanity Prevails - 16th Sep 19
Stock Market Looking Toppy - 16th Sep 19
Is the Stocks Bull Market Nearing an End? - 16th Sep 19
US Stock Market Indexes Continue to Rally Within A Defined Range - 16th Sep 19
What If Gold Is NOT In A New Bull Market? - 16th Sep 19
A History Lesson For Pundits Who Don’t Believe Stocks Are Overvalued - 16th Sep 19
The Disconnect Between Millennials and Real Estate - 16th Sep 19
Tech Giants Will Crash in the Next Stock Market Downturn - 15th Sep 19
Will Draghi’s Swan Song Revive the Eurozone? And Gold? - 15th Sep 19
The Race to Depreciate Fiat Currencies Is Accelerating - 15th Sep 19
Can Crypto casino beat Hybrid casino - 15th Sep 19
British Pound GBP vs Brexit Chaos Timeline - 14th Sep 19
Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - 14th Sep 19
War Gaming the US-China Trade War - 14th Sep 19
Buying a Budgie, Parakeet for the First Time from a Pet Shop - Jollyes UK - 14th Sep 19
Crude Oil Price Setting Up For A Downside Price Rotation - 13th Sep 19
A “Looming” Recession Is a Gold Golden Opportunity - 13th Sep 19
Is 2019 Similar to 2007? What Does It Mean For Gold? - 13th Sep 19
How Did the Philippines Establish Itself as a World Leader in Call Centre Outsourcing? - 13th Sep 19
UK General Election Forecast 2019 - Betting Market Odds - 13th Sep 19
Energy Sector Reaches Key Low Point – Start Looking For The Next Move - 13th Sep 19
Weakening Shale Productivity "VERY Bullish" For Oil Prices - 13th Sep 19
Stock Market Dow to 38,000 by 2022 - 13th Sep 19 - readtheticker
Gold under NIRP? | Negative Interest Rates vs Bullion - 12th Sep 19
Land Rover Discovery Sport Brake Pads and Discs's Replace, Dealer Check and Cost - 12th Sep 19
Stock Market Crash Black Swan Event Set Up Sept 12th? - 12th Sep 19
Increased Pension Liabilities During the Coming Stock Market Crash - 12th Sep 19
Gold at Support: the Upcoming Move - 12th Sep 19
Precious Metals, US Dollar, Stocks – How It All Relates – Part II - 12th Sep 19

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Gold and Silver’s Stormy September

Commodities / Gold and Silver 2018 Sep 05, 2018 - 12:21 PM GMT

By: P_Radomski_CFA

Commodities

There were only a few analyses that we started with a quote, and there were even fewer that we began by quoting a song. It may even be the first one ever.

I am the storm and I am the wonder
And the flashlights, nightmares
And sudden explosions

  • Royksopp, “What Else Is There”

And you will have all the above in September. At least if you’re going to pay attention to gold, silver and mining stocks.


We warned that the key factors had been in place for a long time and those who were willing to listen, have already positioned themselves accordingly. The multiple bearish confirmations, like the steady rise in the gold to silver ratio and the underperformance of mining stocks, have been repeated over and over again. And it looks like PMs are ready to take the main dive. Yes, gold will very likely soar to new highs, but not before an epic decline. Are you prepared?

In the early part of the previous week, the USD Index moved lower, while the precious metals sector moved higher. But, right before the end of the week, we saw that it was just a trap for those who really wanted to see gold rallying instead of objectively observing what was going on and unemotionally acting on the observations. Let’s take a look at the facts, starting with the USD Index chart (chart courtesy of http://stockcharts.com).

Breakdown? You Mean Breakout?

The objective fact is that the USD Index closed the week above 95, so from the weekly point of view there was no decline. Despite the early decline, overall, the USDX moved higher by 0.02 last week. And it never really invalidated the breakout above the neck level of the reverse head-and-shoulders pattern.

Moreover, from the very short-term point of view, we just saw a breakout above the declining red resistance line and the USD rally continues in today’s pre-market trading (95.55 at the moment of writing these words). The outlook for the USD Index remains very bullish, not only from the long-term point of view, but also due to medium- and short-term signals.

Before moving further, we would like to briefly discuss one thing that is often misunderstood when discussing the outlook for the USD Index. It is often said that the USD Index can’t rally, because of all the problems in the US economy, the ballooning debt, etc. The problems are real, but they – alone – are not enough for the USD to either rally or decline.

What?! You’re saying that the key fundamental information is irrelevant?!

No. That’s not what we are saying. We are saying that the USD Index is… and index. Precisely, it’s an average of the currency exchange rates. The EUR/USD exchange rate has the biggest (over 50%) weight in the index and the USD/JPY exchange rate has the second biggest weight. This means that for the USD Index to rally, the dollar doesn’t have to be perfect. It just has to be a better option than the euro and the yen.

There is a saying that the currencies do not float, but sink at different rates (called inflation). If the non-USD currencies sink faster, the exchange rate mechanisms will cause the USD Index to rally.

The analysts that take a big magnifying glass when discussing what’s wrong with the U.S. economy, but that at the same time entirely ignore the situation in Europe and Japan are entirely missing the point. The situation in the U.S. can be very bad, the debt could be astronomical, but if the situation is even worse in the other major economies (especially in the EU and in Japan), the USD Index is still likely to rally.

So, the next time someone tells you how bad the outlook for the USD Index is, don’t ask them why they think the situation in the US economy is bad. Ask them why they think things are so much better for the EU and Japan. Getting “huh?” as a reply is a good indication that you might want to consider different sources of information.

Having said that, let’s move to the charts and their implications for the following days and weeks.

Gold’s Flag Is Over


At the moment of writing these words, the price of gold is trading at $1,195, which is well below the flag pattern. This is a strong signal that the correction is over, and that gold is now ready to slide much lower.

The moves that follow the flag patterns tend to be similar in size to the moves that preceded them. Gold declined by about 14.6% (April top – August bottom) before the pattern, so if it declines in a similar way (counting from the late August top), we’re likely to see gold at $1,221 * (1 – 14.6%) = $1,043.73 relatively soon. In other words, based on the recent flag pattern, gold is likely to slide to the December 2015 bottom. And our subscribers – have been prepared for this eventuality for more than a month.

If you think the above is bearish, just wait until we tell you what just happened in silver.

Silver’s Breakdown

At the end of August, silver closed the session at a new low in terms of daily and weekly closing prices. That’s an unconfirmed, but still major, breakdown. As an unconfirmed move, it wouldn’t have been so important, if it wasn’t for a different fact.

The thing is that the entire late-August consolidation was a pause that followed the breakdown below the rising red support line. So, the unconfirmed move is a part of a different move, in which the decline is already more than confirmed.

The implications are very bearish, especially that silver’s 2015 bottom is not far away and the gold to silver ratio is on the rise (the real long-term resistance is at about 100, not 80-85). This means that if gold is to move much lower shortly, then silver is very likely to slide below the 2015 lows. To be clear, we expect the same for gold, but we think that in the case of silver, the decline will be even bigger and more profound.

At the moment of writing these words, we have silver futures at $14.30, which means that the white metal already moved to new intraday lows of this year.

Miners’ Breakdown

Last week, the GDX ETF, a proxy for the mining stocks sector, closed below the previous 2018 weekly closing prices. In other words, we just saw a breakdown in terms of the weekly closing prices.

The HUI Index, an even more important proxy for mining stocks, moved a bit higher after breaking below the 2008 and late 2014 lows and then it declined once again. The breakdowns were verified. The decline can now continue.

The decline is likely to be big and sharp as there is no significant support all the way down to the 2015 and 2016 lows. That’s a big slide. And it may not end there. In fact, miners are likely to move to new lows just like gold and silver are. It’s not apparent how low they will slide, but it is likely that this becomes clearer once the entire sector moves lower. We’ll keep our subscribers informed via daily and intraday Alerts.

Finally, we would like to address the question that we’ve been asked multiple times recently. The SP Silver-Miner Indicator that we described in our Buy-and-hold on Steroids essay is not yet available for public viewing. We have it to use in our Excel spreadsheets, but we are not yet prepared to provide it on our website (it needs a few technical adjustments). But, please note that the first time when it’s really useful will be after the final bottom as THE bottom is likely to be immediately followed by mining stocks outperformance. The SP Silver-Miner Indicator will become exceptionally useful after that time, as it will help to detect the optimal moment for making the switch from miners to silver (at least in the case of a part of one’s portfolio).

Summary

Summing up, it’s very likely that the pause in the precious metals market is over and the next big move down is already underway. The move is likely to be sharp and the profits on the current short positions are likely to change from being huge to being enormous and then finally to being ridiculous. You might consider taking advantage of this move as well.

If you’d like to receive follow-ups to the above analysis, we invite you to sign up to our gold newsletter. You’ll receive our articles for free and if you don’t like them, you can unsubscribe in just a few seconds. Sign me up!

Thank you.

Przemyslaw Radomski, CFA

Founder, Editor-in-chief

Tools for Effective Gold & Silver Investments - SunshineProfits.com
Tools für Effektives Gold- und Silber-Investment - SunshineProfits.DE

* * * * *

About Sunshine Profits

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and best silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer

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.

Przemyslaw Radomski Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules