2. Points To Be Covered Today:
• Gold Price Forecast
• Gold Suffered Its Historical Drawdowns
• Line Up With The 2012-2013 Roadmap
• Gold’s Corrective Upswing Occurred
• GDX ETF & USD Index
• Gold Price & Chart
3. Gold Price Forecast
• While gold’s inability to muster a relief rally has tempered
expectations, the bullish short-term thesis is still in play.
• Case in point: if we compare the current price action to 2016,
the yellow metal benefitted when the USD Index retested the
38.2% Fibonacci retracement level.
• Thus, with a similar shuffle likely to take place this week, gold
should remain well supported.
5. Gold Suffered Its Historical Drawdowns
• An RSI indicator below 30 (which we saw recently) is a classic buy signal
and similar readings recorded in late November (2020) and late February
were quite fruitful: one marked the bottom and in the second case it was
relatively close to the bottom but not yet at it.
• Moreover, with the yellow metal plunging relatively close to its late-April
bottom and its rising medium-term support line, $1,750 became a key
technical and psychological support level.
• On the flip side, the 2012-2013 analogy remains intact. More importantly,
though, it’s important to remember that while history often rhymes, it
doesn’t mean a complete recreation.
• For example, while a short-term bounce remains the base case, it may not
rival the magnitude of the move that we witnessed in 2012. Likewise,
please keep in mind that following the relief rally in 2012, gold suffered one
of its most meaningful historical drawdowns.
6. Line Up With The 2012-2013 Roadmap
• How does all of this line up with the 2012-2013 roadmap? For
context, I’m excluding the 2008 analogy here because the level
of volatility during the GFC has yet to materialize across the
financial markets.
• However, based on what happened in 2012, once the RSI hit 30
in November, the first part of the huge decline was over.
• As a result, it seems that gold is likely to correct upwards right
away Also, please note that the chart ends where a really huge
decline starts, so the real follow-up is much more bearish than it
seems based on the chart alone.
8. Gold’s Corrective Upswing Occurred
• Moreover, please note that gold’s corrective upswing occurred when it moved
close to its previous short-term (August) high. Thus, with gold already falling
slightly below its April 2021 highs on Jun. 18, given the similarity of both
situations, gold seems ready to rally right away.
• For more on the 2008 and 2012 analogies (key factors for the medium-term
outlook), I wrote on Jun. 4:
• The analogies to how the situation in gold developed in 2008 and 2012, provides
us with an extremely bearish price prediction for gold.
• Many other factors are pointing to these similarities, and two of them are the size
of the correction relative to the preceding decline and to the previous rally.
• In 2012 and 2008, gold corrected to approximately the 61.8% Fibonacci
retracement level. Gold was very close to this level this year, and since the
history tends to rhyme more than it tends to repeat itself to the letter, it seems
that the top might already be in.
9. Analogies To 2008 And 2012 Remain Up-to-date
• In both years, 2008 and 2012, there were three tops. Furthermore, the
rallies that took gold to the second and third top were similar. In 2008, the
rally preceding the third top was bigger than the rally preceding the second
top.
• In 2012, they were more or less equal. I marked those rallies with blue
lines in the above chart – the current situation is very much in between the
above-mentioned situations. Also, the current rally is bigger than the one
that ended in early January 2021 but not significantly so.
• Remember what happened when gold previously attempted to break
above major long-term highs? It was in 2008 and gold was breaking above
its 1980 high.
• Gold wasn’t ready to truly continue its bull market without plunging first.
This downswing was truly epic, especially in the case of silver and mining
stocks; and now even gold’s price patterns are like what we saw in 2008.
11. Gold Corrected To 61.8% Fibonacci Retracement - I
• Back in 2008, gold corrected to 61.8% Fibonacci retracement, but it
stopped rallying approximately when the USD Index started to rally,
and the general stock market accelerated its decline.
• Taking into consideration that the general stock market has probably
just topped, and the USD Index is about to rally, then gold is likely to
slide for the final time in the following weeks/months.
• Both above-mentioned markets support this bearish scenario and so
do the self-similar patterns in terms of gold price itself.
• Moreover, while the pace of gold’s decline in 2012 started off slow,
the momentum picked up later on as the drawdown became even
more vicious.
13. Broad Bottom With Higher Lows - I
• The relatively broad bottom with higher lows is what preceded both final short-term rallies – the
current one, and the 2012 one. Their shape as well as the shape of the decline that preceded these
broad bottoms is very similar.
• In both cases, the preceding decline had some back-and-forth trading in its middle, and the final
rally picked up pace after breaking above the initial short-term high.
• Interestingly, the 2012 rally ended on huge volume, which is exactly what we saw also on May 19
this year.
• Consequently, forecasting much higher silver or gold prices here doesn’t seem to be justified based
on the historical analogies.
• The thing I would like to emphasize here is that gold didn’t form the final top at the huge-volume
reversal on Sep. 13, 2012. It moved back and forth for a while and moved a bit above that high-
volume top, and only then the final top took place (in early October 2012).
• The same happened in September and in October 2008. Gold reversed on huge volume in mid-
September, and it was approximately the end of the rally. The final top, however, formed after some
back-and-forth trading and a move slightly above the previous high.
• Consequently, the fact that gold moved a bit above its own high-volume reversal (May 19, 2021) is
not an invalidation of the analogy, but rather its continuation.
14. Broad Bottom With Higher Lows - II
• On top of that, with the Fed’s confidence game won or lost by whether or not
inflation proves “transitory,” wouldn’t the central bank appreciate lower gold
prices?
• If you think about it, it would be awfully convenient for the price of gold to decline
in order to prove the point of the transitory nature of inflation.
• Now, as you know, I’m not a fan of all the conspiracy theories that are out there,
and I’m not the first to shout gold manipulation or silver manipulation every time
the yellow or while meta
• l goes down, but I also know that being realistic is one of my strengths. With the
situation being what it is, and since the communities of top investment bankers
and the community of officials interlace, I think that we have yet another reason
to expect that the gold price is going to slide in the following weeks/months.
• Finally, there are more layers to the analogue from 2008 that are extremely
important.
17. GDX ETF & USD Index
• Please note (in the lower part of the above chart) that back then, the final
huge slide in the mining stocks started when the GDX ETF moved back to
its previous highs, while the USD Index moved a bit below its rising
support line based on the previous tops.
• That’s exactly what happened recently as well. The final bottom in the
GDX ETF formed about 3 months later at about 1/3 of its starting price.
• The recent high was $40.13 and 1/3 thereof would be $13.38. While I don’t
want to say that we will definitely see the GDX ETF as low as that, it’s not
something that would be out of the ordinary, given the analogy to 2008.
Now you see why the large bottoming target on the GDX ETF chart with
the lower border in the $15s might actually be conservative… As always,
I’ll keep you – my subscribers – updated.
• “Ok, but what price level would be likely to trigger a bigger rebound during
the next big slide?”
18. GDX ETF & USD Index - I
• the 76.4% Fibonacci retracement level (it’s visible as the 23.6% Fibonacci
retracement level on the above chart as inverting the scale is used as a
workaround) also coincides with gold’s April 2020 low. Taken together, an
interim bottom could form in the ~$1,575 to $1,600 range.
• For context, back in early March, the yellow metal continued to decline
after reaching the 61.8% Fibonacci retracement (visible as 38.2%
Fibonacci retracement) level, while, in contrast, the miners began to
consolidate. Gold finally bottomed slightly below the retracement – at its
previous lows. This time around, we might witness a similar event. And
while the story plays out, the miners’ relative strength should signal the
end of the slide (perhaps with gold close to 1,600), while gold will likely
garner support sometime thereafter (at $1,575 – $1,580 or so).
• Remember though: this is only an interim target. Over the medium term,
the yellow metal will likely form a lasting bottom in the ~$1,450 to $1,500
range.
