The Breakout That’s REALLY Important for Gold
Commodities / Gold and Silver 2022 Dec 23, 2022 - 11:21 PM GMTBy: P_Radomski_CFA
Since the gold market now shows parallels to 2008 and 2013, what can we expect if the correction has just ended?
The USDX's Breakout
The changes that we saw on the charts yesterday were not enough to change anything that I described yesterday, so those comments remain up-to-date. Also, what I covered during yesterday’s live event (I combined the live market analysis with the presentation about the top 3 gold trading techniques – you can see the recording here) remains up-to-date at the moment of writing these words.
So far today, gold and silver have moved a bit lower, while the USD Index moved a bit higher (chart courtesy of https://goldpriceforecast.com).
After yesterday’s intraday reversal, both precious metals moved lower. The silver price once again failed to move above the $24 level.
And the USD Index?
At the moment of writing these words, it’s after an overnight reversal and after a confirmed breakout above its declining resistance line.
This means that it’s now likely to move higher.
Please keep in mind that both markets, the USDX and the precious metals market, have been very strongly negatively correlated recently (with the exception of the very recent yen-related turmoil). Consequently, analyzing the gold price, USDX, and their correlation implies very bearish implications for the PMs and miners.
From the long-term point of view, it’s clear that the long-term support remains intact. The relatively small move lower that we saw this week didn’t take the USDX to new short-term lows.
There was no breakdown below the 2016 and 2020 highs in terms of the closing prices, which means that the odds for a turnaround and a rally are very high.
What Can Happen to Gold Miners?
Meanwhile, junior gold and silver mining stocks moved a bit higher yesterday, but they haven’t moved above the lower border of the accelerated trend channel (marked with orange). This means that this week’s upswing was likely just a verification of the breakdown below it.
Interestingly, if we see a decline soon, which is likely, it could become the right shoulder of a potential head-and-shoulders pattern. I marked the theoretical right shoulder with a red rectangle and the neck level with a blue rectangle.
In short, when we see a confirmed breakdown below $34 in the GDXJ, we’re likely to see a move even lower – to $30.5 or so. Then, I’d expect to see something similar to what we saw in August, earlier this year – a small correction that is followed by another decline.
This time, however, I think that the medium-term decline will be much bigger than what we saw in the middle of the year. This is based not just on the bullish medium-term outlook for the USD Index but also on the analogies in gold price, silver price, and precious metals mining stocks: to 2013 and 2008. It seems that the history is rhyming, and the correction right before the biggest slide appears to be over or about to be over. I’ll discuss more details in tomorrow’s analysis.
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
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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.
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