Gold had been behaving erratically recently, reacting to movements in the USD index that it shouldn't have. This is seen as a sign that gold wants to move in a certain direction. The document analyzes gold and the USD index's recent movements, noting that gold failed to break above key resistance levels. It suggests gold may consolidate sideways or decline further depending on the USD index. The USD index had roared last week, strengthening significantly, which pressured gold and miners. The document examines technical indicators and patterns to gauge the potential next moves for gold and the USD index.

1. Gold Behaves Like an Upset
Friend - It’ll Get Over It

2. Points TO Be Covered Today:
• Gold Behaviour
• Gold Manage To Break To New Highs
• Situation In The USD Index
• Gold & Gold Stocks
• USDX, Gold Miners: The Lion And The Jackals
• The Lion - USD Index (USDX)
• Gold News & Analysis

3. Gold Behaviour
• Based on gold’s recent behavior, mood swings cannot be ruled
out, but hormone levels are going to level off after the end of the
market holidays.
• Gold rallied visibly as the USD Index gave away some of
Friday’s gains, sparking questions about whether this is actually
bullish for gold.
• And rightfully so, after all, if a given market reacts to what it
shouldn’t react to, it often tells us that the market wants to move
in a certain direction

4. Gold Behaviour - I
• Let’s imagine that you’re about to go fishing with your friends, but you can’t ignore the fact
that one of your friend’s behavior is odd, to say the least. While they’re usually fine with
your selection of the fishing spot and the time you arrived, today they are annoyed by
both.
• They don’t even like the road that your GPS system set for the drive, not to mention your
driving skills. Whatever you say, it makes them complain. You might be tempted to think
that this person is actually not that friendly at all and perhaps this friendship’s status has
changed.
• But… What actually happened was they were up all night as their heater broke, spilling
water on the entire apartment, and since it was this friend that insisted on mounting it
themselves, they didn’t want to brag about this result. They also didn’t have time to eat
anything before they met with you this morning.
• What is obvious based on the context might have been very misleading without it.
• It seems to me that we have the same kind of situation in gold right now. The context here
is that it’s the very final part of the consolidation – the right shoulder of a broad head-and-
shoulders pattern, and, at such tops, markets can behave erratically.

5. Gold Behaviour - II

6. Did Gold Manage To Break To New Highs
• Based on the identical blue rectangles, it seems that we might have seen the end of the correction.
• The breakdown below the short-term support line – along with its confirmation – provides us with
bearish indications as well.
• Did gold manage to break to new highs ? No. So, did it change anything from the technical point of
view? No, once again.
• The only thing that might seem bullish here is gold’s performance relative to the USD Index, but if it
is indeed the very end of the correction, then this kind of performance might be understandable.
After all, that’s where the emotions are at the zenith.
• Moreover, let’s keep in mind that yesterday was a bank holiday in some parts of the world, including
one of the world’s financial centers – London.
• If there are any days during the year when the markets are much more likely to behave erratically
than on other days, it’s during market holidays and options’ expiration days. We had the former.
• The performance of some stock market indices seems to confirm that. For example, the Nasdaq
(the previous strong leader) declined yesterday, while the broad market ended the day slightly
higher (yesterday’s session in the S&P 500 was another daily reversal, though).

7. Situation In The USD Index

8. Gold & Gold Stocks
• The USDX is after a massive breakout, which means that it’s no wonder it
corrected the move yesterday. And as it did, it’s also no wonder that gold
traders assumed the USD’s rally was over. But the interpretation of the
situation is likely to change as the USDX is moving back up today, and it
seems that it’s about to confirm its breakout.
• Now, if the USD Index keeps rallying for days and gold continues to show
strength for days, we might be on to something bullish here. For now, it’s
too early to say that.
• Moreover, the gold-USD dynamic is not the only one that matters. While
the links between gold and the USD Index as well as between gold
and gold stocks often require confirmations, silver’s outperformance of
gold is something that we usually see on a very short-term basis, and it’s
an important sell signal without additional confirmations.

9. USDX, Gold Miners: The Lion And The Jackals
• The USD Index let out a roar heard across all markets. The king of
the financial jungle arrived, along with the greenback’s largest single-
day gain.
• Just as the African landscape sometimes needs to show the
strongest of its inhabitants, so does the less remote but equally
ferocious financial environment.
• This time, the USDX seems to have won the fight – its fangs and
claws turned out to be the sharpest, and so are the rallies. There is
nothing left for gold and its acquaintances than to run through the
forest… run.
• Sometimes, even jackals need to find shelter to lick their wounds in
patience, waiting for a better time to come back to fight. However,
they will come back eventually – they always do.

10. What About Gold, One Of The Jackals?
• With a triple-top in gold’s stochastic oscillator akin to three warning signs
of a nervous breakdown, the yellow metal is still recovering from last
week’s crisis of confidence.
• And with the price action mirroring what we witnessed in early January –
right before gold suffered a significant slide – the yellow metal could soon
need therapy.
• To explain, while gold’s corrective upswing was slightly bigger than I had
anticipated, please note that the length thereof was in tune with the border
of the green ellipse I used to mark the likely upside target area.
• In other words, the recent rally was not a game-changer. The yellow
metal’s inability to crack $1,800 highlights the medium-term implications
that I’ve been warning about.
• As a result, it’s become increasingly clear that gold’s recent strength was
nothing more than a short-term upswing within a medium-term downtrend.

11. What About Gold, One Of The Jackals -I

12. Gold’s Stochastic Oscillator
• The first sell signal occurred slightly below the 80 level, the second
was above it, and the same was the case with the third one.
• Since back in early 2021, the stochastic indicator moved to new
highs – and so far it hasn’t – and since the USD Index might even
move slightly lower before finding its short-term bottom, gold could
move slightly higher on a temporary basis, before topping.
• Perhaps (there are no certainties on any market, but this seems
quite possible in the near term) it would be the round nature of the
$1,800 level and the 300-day moving average that’s very close to it
that would trigger a reversal and another massive decline.
• From the medium-term point of view, another $20 rally doesn’t really
matter. It’s the few-hundred-dollar decline that’s likely to follow that
really makes the difference.

13. Gold’s Stochastic Oscillator - I
• In addition, it seems that gold is moving in a way that’s somewhat similar to what we saw
between mid-April 2020 and mid-June 2020. It’s trading sideways below $1,800 but above
~$1,660.
• Back in 2020, the range of the back-and-forth movement (size of the short-term rallies
and declines) was bigger, but the preceding move was also more volatile, so it’s normal to
expect smaller short-term volatility this year (at least during this consolidation).
• Why is this particularly interesting? Because both consolidations (the mid-April 2020 –
mid-June 2020 one and the March 2021 – today one) could be the shoulders of a broad
head-and-shoulders pattern, where the mid-June 2020 – early-March 2021 performance
would be the head.
• The breakdown below the neck level – at about $1,660 – would be extremely bearish in
this case because the downside target based on the pattern is created based on the size
of the head. The target based on this broad pattern would be at about $1,350 (I marked it
with a thin dashed red line on the chart below – you might need to click on it to expand it
for this line to become visible). Is this level possible? It is.
• When gold soared above $2,000, almost nobody thought that it would decline back below
its 2011 highs (well, you – my subscribers – did know that). Gold below $1,500 seems
unthinkable now, but with rallying long-term rates and soaring USD Index, it could really
happen.

14. The Lion - USD Index (USDX)
• After delivering a ferocious 0.75% rally on Apr. 30 – the greenback’s
largest single-day gain since Mar. 4 – the USD Index let out a roar that
was heard across all corners of the financial markets.
• And while gold, silver and mining stocks are still cackling in disobedience –
as evidenced by the trios’ decelerating correlations over the last 10 days –
every once in a while, the lion has to show the jackals who he is.
• To explain, as the USD Index’s recent plight elicits whispers of a new order
in the currency kingdom, the greenback’s stoic behavior has been
misjudged as weakness. And while the vultures circle and prophecies of
the USD Index’s demise become louder, the lion is slowly moving to his
feet.
• Case in point: with the zeitgeist forecasting new lows for the greenback,
non-commercial (speculative) futures traders are still holding firm. Despite
the greenback’s suffering, the immaterial decline in net-long positioning
last week was relatively muted and highlights investors’ quiet respect for
the U.S. dollar.

15. The Lion - USD Index (USDX) - I

16. US Dollar Index ICE Futures U.S. Futures Only Positions

17. CFTC DXY Net Speculative Positioning (% Of Total OI) Vs.
DXY Index

18. Gold News & Analysis
• Gold picks up bids to intraday high to welcomes European session.
• US Treasury yields retreat, DXY struggles ahead of the Fed’s preferred inflation
gauge of inflation.
• Market sentiment stays upbeat on US stimulus, trade headlines.
• Gold is picking up the bid tone in European trading, taking advantage of the retreat
in the US Treasury yield and the dollar across the curve.
• Source:
• Gold Price Forecast: XAU/USD rises towards key $1794 resistance ahead of
US PCE inflation (fxstreet.com)

19. Gold News & Analysis - I
• Gold extended the negative performance for the third session in a row on Thursday amidst
shrinking open interest and volume.
• The continuation of the consolidative theme appears likely, with the lower bound around
$1,760 and gains still targeting the key $1,800 mark per ounce troy.
• This Friday, the final trading day of the week, nothing seems to have changed for gold –
either fundamentally or technically.
• But gold bulls may be attempting their last dance before today’s US PCE inflation data
reaffirms the FOMC’s hawkish turn, negating the recent dovish comments from several
Fed’s policymakers.
• The US dollar, therefore, could snap its corrective downside and resume its uptrend, as
gold bearish bias is likely to continue.
• In the meantime, US stimulus optimism-led risk tone and the dollar’s dynamics will likely
play out.
• Source:
• Gold Forecast, News and Analysis - FXStreet

20. Gold Behaves Like an Upset
Friend - It’ll Get Over It

21. THANKS FOR LISTENING
Gold Behaves Like an Upset Friend - It’ll Get Over It