2. Points To Be Covered Today:
• Gold: Have We Reached A Tipping Point
• Gold’s Bullish Outlook
• Gold Price Technicals
• The Reversal Of The USD Index
• GDX and GDXJ
• Gold News & Analysis
• Gold Technical & Fundamental Overview
• Gold Price & Chart
3. Gold: Have We Reached A Tipping Point.
• Taking history into consideration, we are on the brink of change. If I weren’t
short on the miners already, I would open the position headfirst.
• Disappointment, despair, and the need to urgently “do something to fix” the
situation are all feelings that seem natural at this time, provided that one –
just like me – decided to profit on the decline in the precious metals
market.
• It’s true that the previous long position was closed profitably after we
successfully exited short positions almost right at the March bottoms, but
the emotional part of one’s brain tends to remember the very recent
memories much more vividly.
• There are signs that might make the outlook bullish, like a decisive
breakout above the 2020 highs, but so far we haven’t seen them.
Conversely, it’s imperative to keep in mind what happened and what didn’t
happen, while staying alert to all changes that might seem really positive.
4. Gold’s Bullish Outlook
• The Fed has been keeping the interest rates at ultra-low levels for many months, and it has just
pledged to keep them low for a long time.
• The world is enduring the pandemic, and the amount of money that entered the system is truly
astonishing. The savings available to investors skyrocketed. The USD Index has been beaten down
from over 100 to about 90.
• And yet, gold is not at new highs. In fact, despite the 2020 attempt to rally above its 2011 high,
gold’s price collapsed, and it invalidated the breakout above these all-important highs. It’s now
trading just a few tens of dollars higher than it had been trading in 2013, right before the biggest
slide of the recent years.
• Something doesn’t add up with regard to gold’s bullish outlook, does it?
• Exactly. Gold is not yet ready to soar, and if it wasn’t for the pandemic-based events and everything
connected to them, it most likely wouldn’t have rallied to, let alone above its 2011 highs before
declining profoundly.
• And what happens if a market is practically forced to rally, but it’s not really ready to do so? Well, it
rallies… For a while. Or for a bit longer. But eventually, it slides once again. It does what it was
supposed to do anyway - the only thing that changes is the time. Everything gets delayed, and the
ultimate downside targets could increase, but overall, the big slide is not avoided.
8. Top In Gold Is Already In
• The March 2021 low formed well below the previous low, but as far as other things are concerned,
the current situation is similar to what happened in 2012.
• 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 had ended in huge volume, which is exactly what we saw on Friday. To
be 100% precise, the 2012 rally didn’t end then, but it was when over 95% of the rally was over.
Gold moved very insignificantly higher since that time.
• Most importantly, though, it was the “dollars to the upside, hundreds of dollars to the
downside” situation. And it seems that we are in this kind of situation right now once again.
• Interestingly again, back in 2013 gold started its gargantuan (…) slide from about $1,800 and it is
not far from this level also today.
• Moreover, let’s keep in mind that the RSI indicator just topped slightly above 70, which is what tends
to happen when gold tops. The upside seems very limited. In fact, it seems that the top in gold is
already in.
10. The Reversal Of The USD Index
• Gold is already reversing while the USD Index is not. Gold has
likely topped, while the USDX is likely to reverse shortly.
• Today is the third session below the rising support line and
another intraday attempt to move below the declining red
support line (neckline of the potential head and shoulders
pattern).
• Earlier this month, the USDX reversed and rallied precisely then
– after three days below the rising support line.
12. GDX ETF
• The GDX ETF soared to new highs on volume that was much
greater than 40M shares.
• This happened only three times in the past 12 months. In each
of those three cases, it was a major top, or it was very, very
close to it.
• The RSI just moved above 70, and it happened only twice
recently. One time it heralded the 2020 top, and the other time
we saw it in late February 2020 – right before a huge slide
started.
• This is a very bearish combination of factors, and the linkage
wasn’t accidental, as we saw something similar in the GDXJ
ETF.
14. GDX ETF - II
• On the above chart, the big daily volumes are marked with
horizontal, dashed lines. In most cases in general, and in all
cases after sizable rallies, this meant that the top was in.
• It’s also notable that while yesterday’s session took junior
miners higher, it didn’t take them back above the thick neck
level of the previously broken head-and-shoulders pattern. So,
the implications thereof remain bearish.
• Consequently, taking all the above into account, it seems to me
that the situation in the precious metals market is very bearish
right now, as it seems to be either topping or after the top.
15. Gold News & Analysis
• Gold catches a fresh bid but remains confined in a familiar range.
• US dollar remains broadly subdued amid a return of risk appetite.
• Firmer Treasury yields to limit the upside in gold price.
• Gold price is clawing back earlier losses, as the US dollar remains on the
conflicting signals on inflation and Fed’s next monetary policy moves,
policymakers from the world’s most powerful central bank delivered mixed
• Sources:
• Gold Forecast, News and Analysis - FXStreet
16. Gold News & Analysis - I
• Gold remains pressured despite bouncing off intraday low.
• Firmer USD weighs on the metal but sluggish markets await fresh clues.
• US Durable Goods Orders for May, Weekly Jobless Claims are the key for
fresh direction.
• Covid updates, US stimulus and Fed speak become important too.
• Gold stays supported around $1,760
• Source:
• Gold Forecast, News and Analysis - FXStreet
