2. Points To Be Covered Today:
• Gold Performance
• Gold- Continuous Contract
• The Gold Miners
• GDX & GDXJ
• Cryptocurrency crash benefits gold
• Technical & Fundamental Overview
• Gold Price: Key Levels To Watch
3. Gold Performance
• While gold moved slightly above its recent highs yesterday, the gold
stocks moved to their previous lows. Can you hear the bears
approaching?
• Gold made another reversal yesterday, and the miners declined
profoundly – also once again. Just as in early 2013 – that’s
extremely bearish.
• Gold futures moved to new intraday highs yesterday, but they ended
the session $1.90 lower, creating yet another shooting star reversal
candlestick.
• Seeing just one reversal is bearish on its own, but seeing more than
one in a row is profoundly bearish.
4. Gold Performance - I
• Please note that gold reversed after moving slightly above the
38.2% Fibonacci retracement based on the recent decline. The
minimum one of the likely correction sizes was reached, so the
decline can now continue.
• The RSI is no longer oversold, but rather close to the middle of
its trading range.
• This tells us that bearish gold forecasts are clearly justified.
Also based on the reversals that we just saw, this move is likely
to be to the downside.
6. The Gold Miners
• Another detail that serves as a bearish confirmation is the
performance of the mining stocks.
• While gold moved slightly above its recent highs during
yesterday’s session, the gold stocks moved to their previous
lows.
• If this is not a shocking proof of extreme underperformance,
then I don’t know what would be one.
• The mining stocks simply can’t wait to break to new lows. In
fact, the junior miners – my proxy of choice for the current
(profitable) short trade – already broke to new lows.
9. GDXJ ETF
• On June 29 (the June low), the GDXJ ETF closed at $45.83, and
yesterday it closed at $45.53. Ladies and gentlemen, we have a
breakdown.
• Of course, it was not confirmed yet, but the fact that we saw a new low
while gold made a new short-term intraday high is extremely bearish.
• The interesting detail about both (GDX and GDXJ) ETFs is that the recent
price moves created bearish head-and-shoulders formations in them. The
targets based on such formations are based on the size of their heads. I
marked the height of the head and the targets with red, dashed lines.
• It seems that we might see a move below $38 in the GDXJ before it
corrects in a more meaningful way.
• Ok, but shouldn’t March lows provide strong support and trigger a
rebound?
10. GDX & GDXJ
• Yes, the previous lows provide relatively important support, but:
1.Miners have been very weak relative to gold recently, and they don’t
even need to keep it up in order to slide below the March lows – they
could behave “normally” for this to happen.
2.Gold seems to be ready to slide significantly – to its March lows or
so.
3.In order to do it, it would need to approximately repeat its June slide.
• If gold repeats its June slide, it will decline by about $150.
• Taking the entire decline into account (since August 2020), for every
$1 that gold fell, on average, the GDX was down by about 4 cents
(3.945 cents) and GDXJ was down by about 6.5 cents (6.504 cents)
11. GDX & GDXJ - I
• This means that if gold was to fall by about $150 and miners
declined just as they did so far in the past year (no special out- or
underperformance), they would be likely to fall by $5.92 (GDX) and
$9.76 (GDXJ).
• Given yesterday’s closing prices, this would imply price moves to
$27.76 (GDX) and $35.78 (GDXJ).
• Interestingly, both above-mentioned price levels are in perfect tune
with the target areas that I placed on the charts based on the head
and shoulders patterns and the 61.8% Fibonacci retracement level
(which is based on the entire 2020 rally).
• This adds to their credibility. Naturally, I will be making updates as
the situation develops and we get more information.
12. Cryptocurrency crash benefits gold
• The uncertainty surrounding cryptocurrencies has provided the gold market
another boost.
• Although cryptos may be unregulated and can act as a hedge against rising
inflation or weaker paper currencies, they do not have the long, reliable history
that gold bullion does.
• Given gold’s timeless role as a store of value and protector of wealth, some
investors concerned about long-term capital preservation are likely to
reconsider their affinity digital assets and turn toward bullion instead.
14. Technical Overview - I
• Thursday’s Doji candlestick doesn’t seem to have discouraged the bulls, as gold price staged an impressive
bounce on Friday, although remained within the recent trading range.
• Gold price rallied as high as $1812 before reversing into the weekly closing, settling the week at $1808.
• Gold bulls managed to defend the critical short-term 21-Daily Moving Average (DMA) at $1796 and a daily
closing yielded above the same, opens doors for the further upside next week.
• The 14-day Relative Strength Index (RSI) has also steadily advanced to the central line, suggesting that the
tide may have turned in favor of the bulls.
• Therefore, gold buyers keep their sight on the horizontal 200-DMA, aligned at $1828.
• Ahead of that, the past week’s high at $1818 could probe the bullish commitments.
• On the flip side, 21-DMA could limit any retracements from higher levels, below which the horizontal 100-DMA
support at $1790 is likely to be tested.
• A sustained break below the latter could revive the downtrend towards the two-month troughs of $1751.
15. Fundamental Overview
• Gold price is keeping its sluggish momentum intact so far this Friday, wavering a narrow range
around $1800.
• Gold price fails to find a clear directional bias amid mixed clues, as risk-on flows return to markets
and lift the Treasury yields, exerting downside pressure on the metal. The Fed’s tapering
expectations also push the gold bulls on the sidelines.
• Meanwhile, the positive market mood dents the US dollar’s safe-haven appeal, helping keep a floor
under gold price.
• The downside also remains cushioned, as the underlying theme of concerns over slowing global
economic recovery remains intact. Investors remain unnerved about the economic rebound, in light
of the spread of the highly contagious Delta covid variant.
• Amid a data-light US docket and upbeat market mood, gold is likely to extend its range play. Gold
price is set for the third straight weekly gain, with traders now shifting their focus on the next
week’s US CPI and Retail Sales data for fresh cues on the Fed’s next policy move.
17. Gold Price: Key Levels To Watch
• The Technical Confluences Detector shows that gold price is facing stiff resistance at $1807,
which is the convergence of the Fibonacci 38.2% one-day, pivot point one-week R1 and the
previous high four-hour.
• The Fibonacci 61.8% one-day at $1810 will be next on the buyers’ radars.
• Any follow-through buying interest would see gold price taking on the powerful barrier at $1813,
which is the Bollinger Band four-hour Upper.
• The bulls will then yearn to recapture the Fibonacci 38.2% one-month at $1816.
• Alternatively, immediate cushion is seen at $1798, the previous low four-hour
• Strong support awaits at $1796, which is the intersection of the previous week’s high and SMA5
one-day.
• Further south, the last line of defense for gold bulls is aligned at $1791, where the Fibonacci
23.6% one-month and SMA100 one-day coincide.
