Probing Gold's Bottom

1. Probing Gold’s Bottom

2. Points To Be Covered Today:
• GDX & HUI Index
• Gold’s Performance Around Thanksgiving
• Gold True Seasonal Chart For Q4
• Gold And Thanksgiving During The Presidential Election Years
• Gold Miners (GDX)
• Gold News & Analysis
• Gold Technical Overview

3. GDX & HUI Index
• The GDX and HUI Index are enjoying a blissful moment. With HUI behaving
civilly, will the GDX cling to the unrealistic and try to leap to cloud “ten”?
• With the GDX ETF punching a hole through its glass ceiling, the senior
miners are now witnessing an environment that’s beyond their wildest dreams:
sunshine, clear skies and a utopia that’s eluded them since the beginning of the
New Year.
• However, while leaving paradise is often more difficult than arriving, the GDX
ETF’s recent vacation is likely coming to an end. And with the senior miners
about to resume the daily grind of real life, their optimism will likely fade with the
tropical sun.
• To explain, while the GDX ETF remains on cloud nine, the HUI Index (a proxy for
gold mining stocks) has already left the resort. With the latter’s long-term outlook
still intact and its broad head & shoulders pattern remaining on schedule, I wrote
previously that the right shoulder would likely form after the HUI Index reaches
300.
• And after closing at 301.72 on May 7, the BUGS (after all, HUI is called the Gold
Bugs Index) are currently living up to expectations.

4. Gold’s Performance Around Thanksgiving
• Thanksgiving is on the fourth Thursday of each November, which means that the
holiday always falls between November 22and 28.
• What’s usually happening to the price of gold before and after this period? Let’s
check gold’s seasonality for Q4.
• During this period, gold is usually just before forming a short-term top and starting
the biggest decline within the final quarter of the year.
• Please note that the accuracy measure as to when the top is likely to be is
relatively low, but soars right before gold’s plunge.
• This means that while it’s not that clear when gold is likely to top, it’s quite
probable that we are going to see some kind of important top regardless of when
exactly that takes place. Could it be slightly ahead of Thanksgiving? Yes. Could it
be slightly after It? That’s possible as well.
• But this year is not like other years, and I don’t mean the pandemic. This year,
particularly this November, is special because of the U.S. presidential elections.
• Therefore, instead of taking into account the average of the previous periods
around all recent Thanksgivings, one should focus on the Thanksgivings which
were concurrent with presidential elections.

5. Gold True Seasonal Chart For Q4

6. Gold And Thanksgiving During The Presidential Election Years

7. Gold Miners (GDX)
• Declining by 1.50% for the week, I warned on Dec 18 that
options activity across the GDX signaled trouble beneath the
surface.
• And in an unsurprising twist, the GDX failed to recapture its
December highs. For context, on Dec17, the GDX traded above
its 50-day moving average, however, it failed to hold the key
level and closed below it again this week (invalidating the initial
breakout).
• But since the 50-day MA acts as a fulcrum between the bulls
and the bears, how will the tug-of-war end?

8. Gold Miners (GDX) - I

9. Gold Miners (GDX) - II
• Well, like a glass ceiling that just won’t break, the GDX is staring up at a
potential top (with the next move lower likely to unfold in the coming weeks
– perhaps days).
• Why so?
• Last week’s price action was analogous to the GDX’s behavior in October.
From a short-term perspective, Decembers’ rallies continue to fizzle, which
follows the topping pattern seen in October.
• Furthermore, on Tuesday (Dec 22.), the Stochastic indicator began
flashing red. The last time this occurred, the GDX declined by
approximately $8. From the most recent top, it implies a bottom of roughly
$31 (the upper bound of a target range that I’ve reiterated for some time).
• Last but not least (in fact, it’s the most important indication that keeps
on flashing the very bearish signals), the GDX’s underperformance
relative to gold hasn’t dissipated

10. GDX ETF
• While gold corrected about 61.8% of its November decline, gold miners declined only half
thereof. In other words, they underperformed gold, which is bearish.
• The GDX ETF moved to its 50-day moving average – the level that kept its rallies in check
since early October. Can miners move above it? Sure, they did that in early November,
but is it likely that such a move would be confirmed or followed by more significant
strength? Absolutely not. Let’s keep in mind two things:
• Back in early November, the GDX moved above the 50-day MA, when gold did the same
thing, so if the GDX wanted to rally above this MA, it “should have” done so yesterday. It
was too weak to do it.
• The early-November move above the 50-day MA was invalidated in just 2 days.
• Moreover, please note that the performance of the GDX ETF from late-November to now
looks like an ABC correction. This is not a bearish sign on its own, but it fits other
indications described today and this week in general. It increases the chance that the top
is already in or very, very close.
• Another important development was the spike in volume during Thursday’s (Dec. 17)
upswing. It resulted in the largest number of GDX shares traded since the November 6
top (on days when GDX is positive), and we all know what happened to GDX after
November 6 (As a point of reference, the four other highest volume days since the
November 6 top coincided with declines of 6.13%, 2.74%, 3.40% and 4.29%).

11. Gold’s 50-day Moving Average
• Despite bouncing off its rising support line (the dotted line on
the right side of the chart), gold still ended the week in the red.
• Lifted by an indecisive USDX (which consolidated during the
back-half of the week), gold’s 50-day moving average (which it
held last week) remains the last line of defense for the bulls.
• But just like the sun – which appears brightest before it sets –
gold is unlikely to hold its 50-day MA for much longer. In
addition, gold’s RSI (at ~56) is currently declining from a similar
level that preceded the yellow metal’s plunge in November

12. Gold’s 50-day Moving Average - I

13. Gold & The USDX: Correlations
• Briefly: in our opinion, full (300% of the regular position size)
speculative short positions in mining stocks are justified from
the risk/reward point of view at the moment of publishing this
Alert.
• Gold’s rebound continues and mining stocks soared back to
their October lows – is the bottom in? Most likely, it’s just an
interim one.
• In yesterday’s analysis, I emphasized that a corrective upswing
right now would be in perfect tune with the previous similar
medium-term downtrend and this comment remains intact:

14. Gold & The USDX: Correlations - I

15. Gold & The USDX: Correlations - II
• We copied the short-term chart and pasted it over the long-term chart above and next to the 2011
top.
• They are very similar to say the least. Yes, these patterns happened over different periods, but this
doesn’t matter. Markets are self-similar, which is why you can see similar short-term trends and
long-term trends (with regard to their shapes). Consequently, comparing patterns of similar shape
makes sense even if they form over different timeframes.
• After a sharp rally, gold declined quickly. Then we saw a rebound, and a move back to the previous
low. Some time later gold moved close to the most recent high and started its final decline.
• This decline was less volatile than the initial slide. That’s what happened when gold topped in 2011
(and in the following years), and that’s what also happened this year.
• The patterns with this level of similarity are rare, and when they do finally take place, they tend to be
remarkably precise with regard to the follow-up action.
• What is likely to follow based on this pattern, is that we’re likely to see the end of the slower decline,
which will be followed by a big and sharp decline – similarly to what we saw in 2013.
• The above similarity also shows that gold’s decline might initially have counter-trend rallies
– just as we saw in early 2013. Consequently, seeing such a rally could be viewed as a
bearish confirmation of this self-similarity.

16. Gold Finally Broke Below

17. Gold Finally Broke Below - I
• Does it change anything from the short-term point of view? Absolutely not.
• Gold just moved above its declining resistance line, but it didn’t move to its
September low just yet. Consequently, what we see right now is just a
rebound and quite likely a verification of the breakdown.
• Gold was declining almost each day recently, and no market can move up
or down without periodic breathers – that’s exactly what happened
yesterday and it seems to be taking place today as well. Not only is it not a
game-changer; it’s actually in tune with how gold declined in 2013 – with
periodic corrections.
• Back in 2013 these corrections ended at some point and then the gold
market truly plunged. This means that it seems best not to try to time each
and every correction, but focus on the bigger move, instead.

18. Gold News & Analysis
• Gold rebounds from intraday low, prints two-day downtrend.
• Firmer US dollar weighs on the commodities during quiet session.
• Covid, Sino-American headlines join mixed Fed speak to back the bears.
• Gold ended last week higher, notching a gain of about 1%. After a sharp selloff the
week before, the yellow metal consolidated in a tight range last week, largely trading
from $1774 to $1792 and below the 100-DMA.
• Source:
• Gold Forecast, News and Analysis - FXStreet

19. Gold Technical Overview

20. Probing Gold’s Bottom

21. THANKS FOR LISTENING
Probing Gold’s Bottom