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Gold Investment Updates are weekly gold investment newsletter provided by Przemyslaw Radomski, CFA. They are based on the flagship Gold & Silver Trading Alerts that focus on all the key factors that govern long- and medium-term outlooks for gold, silver, and mining stocks. These comprehensive reports (usually size of a small ebook) ensure that you’re kept up-to-date on important developments that 99%+ of investors are likely to miss.

  • Gold Investment Update - Precious Metals Now and Then: A Comparison

    November 24, 2020, 8:03 AM

    The last time The Gold Miners Bullish Percent Index ($BPGDM) signaled overbought conditions, it was 2016 and another U.S. Presidential election had just wrapped up. Precious metals tumbled right after that. What’s this $BPGDM you ask, and why is it important ?

    When making decisions regarding the gold mining stocks sector, some will choose to follow price actions while others will use indicator tools. The Gold Miners Bullish Percent Index is one such tool, essentially being a gauge of overbought and oversold conditions for the gold mining sector with readings plotted on a range between 0 and 100. Anything below 30 suggests oversold conditions while readings above 70 indicate an overbought situation, with a buy or sell signal being triggered when the index reaches an extreme level and then reverses. Because gold stocks move in tune with gold or silver, the index can be useful in determining the direction of the entire precious metals sector as well as acting like a crystal ball when comparing historical patterns.

    Most recently, the $BPGDM showed the highest possible overbought reading, which gives us an indication that the outlook for the precious metals is bearish.

    Graphical user interface, chart, histogramDescription automatically generated

    The excessive bullishness was present at the 2016 top as well and it didn’t cause the situation to be any less bearish in reality. All markets periodically get ahead of themselves regardless of how bullish the long-term outlook really is. Then, they correct. If the upswing was significant, the correction is also quite often significant.

    Please note that back in 2016, there was an additional quick upswing before the slide and this additional upswing had caused the Gold Miners Bullish Percent Index to move up once again for a few days. It then declined once again. We saw something similar also this time. In this case, the move up took the index once again to the 100 level, while in 2016 this wasn’t the case. But still, the similarity remains present.

    Back in 2016, when we saw this phenomenon, it was already after the top, and right before the big decline. Given the situation in the USD Index, it seems that we’re seeing the same thing also this time.

    Please note that back in 2016, after the top, the buying opportunity didn’t present itself until the Gold Miners Bullish Percent Index was below 10. Currently, it’s above 50, so it seems that miners have a long way to go before they bottom (perhaps a few months – in analogy to how gold declined in 2016).

    ChartDescription automatically generated

    Last week, when I was preparing the analysis of the above GDX ETF chart, I commented on the late-week decline in the following way:

    On Thursday (Nov 12th) and Friday (Nov 13th) of last week, miners moved and closed higher, but it’s important to note that their upswing was tiny and not accompanied by strong volume. In other words, it has all the characteristics of the breather that’s going to be followed by another move in the direction in which the market had been moving previously.

    The previous move was down, so the implications are bearish.

    The intraday nature of Friday’s and Thursday’s moves is also quite informative. In both cases miners moved higher – just as gold did – but then they declined, erasing a large part of the preceding gains before the end of the session. That’s yet another clue confirming the counter-trend nature of the recent upswing in the miners.

    Something similar took place last week, and thus today’s comments will be similar. Gold miners declined early during the initial part of the week, and then they bounced right before the weekend. The volume was decent, but nothing to call home about. What does it mean? It means that we have just likely seen a regular breather that is likely to be followed by further declines.

    As indicated earlier, the biggest part of the decline might start shortly after Thanksgiving.

    Also, let’s not forget that the GDX ETF has recently invalidated the breakout above the 61.8% Fibonacci retracement based on the 2011 – 2016 decline.

    ChartDescription automatically generated

    When GDX approached its 38.2% Fibonacci retracement, it declined sharply – it was right after the 2016 top. Are we seeing the 2020 top right now? This is quite possible – PMs are likely to decline after the sharp upswing, and since there is just more than one month left before the year ends, it might be the case that they move north of the recent highs only in 2021.

    Either way, miners’ inability to move above the 61.8% Fibonacci retracement level and their invalidation of the tiny breakout is a bearish sign.

    The same goes for miners’ inability to stay above the rising support line – the line that’s parallel to the line based on the 2016 and 2020 lows.

    Let’s proceed to metals themselves.

    ChartDescription automatically generated

    Just as miners, gold seems to be taking a breather. The breather was quite likely to occur after such a big daily (Nov 9th) decline, and there’s not much more that we can say about it per se.

    However, the size of the counter-trend rally is quite interesting when we compare it to the size of the corrective upswing in silver.

    Please note that gold is more or less in the midway between the bottom and the 38.2% Fibonacci retracement based on the August – November decline.

    Silver, on the other hand, was much higher in relative terms.

    Graphical user interface, chartDescription automatically generated

    In fact, last Monday (Nov 16th), silver even moved slightly above the 38.2% Fibonacci retracement.

    What does it mean? It means that silver was outperforming gold on a very short-term basis. This might not be exciting to those who are new to the precious metals market, but it should be very exciting for those who have been following my analyses for some time. Silver tends to outperform gold on a short-term basis right before declines. Consequently, the above serves as a bearish confirmation.

    Silver broke below the rising short-term support line since that time, which suggests that the days of the counter-trend rally are numbered. Based on the analogy to other U.S. election years, it seems that we won’t have to wait for long.

    Thank you for reading our free analysis today. Please note that the following is just a small fraction of the full analyses that our subscribers enjoy on a regular basis. They include multiple premium details such as the interim target for gold that could be reached in the next few weeks. We invite you to subscribe now and read today’s issue right away.

    Sincerely,
    Przemyslaw Radomski, CFA
    Editor-in-chief, Gold & Silver Fund Manager

  • Gold Investment Update - Gold’s Decline is Written in the Charts

    November 16, 2020, 11:41 AM

    If history is any indicator, then patterns tend to repeat themselves and gold is no exception. The patterns emerging now are retracing events which followed in the wake of the 2016 presidential elections. As it’s taking a breather, bearish signs continue to point at gold being poised for a decline.

    Overall, as the outlook remains bullish for the USD Index, it remains bearish for the precious metals sector. This is particularly the case if we take into account that recently, the Gold Miners Bullish Percent Index ($BPGDM) showed the highest possible overbought reading.

    Graphical user interface, chart, histogramDescription automatically generated

    The excessive bullishness was present at the 2016 top as well and it didn’t cause the situation to be any less bearish in reality. All markets periodically get ahead of themselves regardless of how bullish the long-term outlook really is. Then, they correct. If the upswing was significant, the correction is also quite often significant.

    Please note that back in 2016, there was an additional quick upswing before the slide and this additional upswing had caused the Gold Miners Bullish Percent Index to move up once again for a few days. It then declined once again. We saw something similar also this time. In this case, the move up took the index once again to the 100 level, while in 2016 this wasn’t the case. But still, the similarity remains present.

    Back in 2016, when we saw this phenomenon, it was already after the top, and right before the big decline. Given the situation in the USD Index, it seems that we’re seeing the same thing also this time.

    Please note that back in 2016, after the top, the buying opportunity didn’t present itself until the Gold Miners Bullish Percent Index was below 10. Currently, it’s above 70, so it seems that miners have a long way to go before they bottom (perhaps a few months – in analogy to how gold declined in 2016).

    ChartDescription automatically generated

    On Thursday (Nov 12th) and Friday (Nov 13th) of last week, miners moved and closed higher, but it’s important to note that their upswing was tiny and not accompanied by strong volume. In other words, it has all the characteristics of the breather that’s going to be followed by another move in the direction in which the market had been moving previously. The previous move was down, so the implications are bearish.

    The intraday nature of Friday’s and Thursday’s moves is also quite informative. In both cases miners moved higher – just as gold did – but then they declined, erasing large part of the preceding gains before the end of the session. That’s yet another clue confirming the counter-trend nature of the recent upswing in the miners.

    It seems that in the previous weeks, miners once again rallied in the manner that is similar to other sessions that we marked with blue ellipses on the chart.

    In particular, what we saw in mid-September appears similar to what we see right now. Back then, the GDX ETF was also after a small breakout above its short-term, blue support line and the 50-day moving average. A relatively sharp short-term decline followed at that time, and the same seems likely also this time.

    Also, let’s not forget that the GDX ETF has recently invalidated the breakout above the 61.8% Fibonacci retracement based on the 2011 – 2016 decline.

    ChartDescription automatically generated

    When GDX approached its 38.2% Fibonacci retracement, it declined sharply – it was right after the 2016 top. Are we seeing the 2020 top right now? This is quite possible – PMs are likely to decline after the sharp upswing, and since there is only less than two months left before the year ends, it might be the case that they move north of the recent highs only in 2021.

    Either way, miners’ inability to move above the 61.8% Fibonacci retracement level and their invalidation of the tiny breakout is a bearish sign.

    The same goes for miners’ inability to stay above the rising support line – the line that’s parallel to the line based on the 2016 and 2020 lows.

    Thank you for reading our free analysis today. Please note that the following is just a small fraction of the full analyses that our subscribers enjoy on a regular basis. They include multiple premium details such as the interim target for gold that could be reached in the next few weeks. We invite you to subscribe now and read today’s issue right away.

    Sincerely,
    Przemyslaw Radomski, CFA
    Editor-in-chief, Gold & Silver Fund Manager

  • Gold Investment Update - Post-election highs – Good for Wall Street but not for Gold

    November 10, 2020, 11:33 AM

    Following the close of the U.S. presidential election and latest post-election euphoria, miners posted slight gains on Thursday and Friday, gains which are likely to be short-lived and followed by a sustained decline, if the history charts are any indication.

    When compared to small breakouts over the declining resistance line in August, September and October as well as the small gains and sudden drop by the Gold Miners Bullish Percentage Index back in 2016, the most recent gains by miners are negligible and only predict an eventual and further trend downwards.

    Chart, histogramDescription automatically generated

    The excessive bullishness was present at the 2016 top as well and it didn’t cause the situation to be any less bearish in reality. All markets periodically get ahead of themselves regardless of how bullish the long-term outlook really is. Then, they correct. If the upswing was significant, the correction is also quite often significant.

    Please note that back in 2016, there was an additional quick upswing before the slide and this additional upswing has caused the Gold Miners Bullish Percent Index to move up once again for a few days. It then declined once again. We saw something similar also this time. In this case, this move up took the index once again to the 100 level, while in 2016 this wasn’t the case. But still, the similarity remains present.

    Back in 2016, when we saw this phenomenon, it was already after the top, and right before the big decline. Given the situation in the USD Index, it seems that we’re seeing the same thing also this time.

    Please note that back in 2016, after the top, the buying opportunity didn’t present itself until the Gold Miners Bullish Percent Index was below 10. Currently, it’s above 70, so it seems that miners have a long way to go before they bottom (perhaps a few months – in analogy to how gold declined in 2016).

    ChartDescription automatically generated

    On Thursday and Friday, miners moved and closed slightly above their 50% retracement of the preceding decline, the declining resistance line based on the August and September highs, and the October highs. The breakout was tiny, so it would require a confirmation. I expect to see its invalidation instead, especially given today’s pre-market decline in gold and the very bullish medium-term outlook in the USDX. In fact, at the moment of writing these words, the GDX ETF is down by over 4% in today’s trading on the London Stock Exchange.

    Even if miners didn’t form a top on Friday, they are likely very close to it, as they once again rallied in the manner that is similar to other sessions that we marked with blue ellipses on the chart. The daily upswing on relatively strong volume that was preceded by a price gap is bullish in theory, but in practice this meant that a downturn was just around the corner 4 times out of 4, when we saw such a combination in the last few months. Consequently, the implications are not really bullish here.

    In particular, what we saw in mid-September appears similar to what we see right now. Back then, the GDX ETF was also after a small breakout above its short-term, blue support line and the 50-day moving average. A relatively sharp short-term decline followed at that time, and the same seems likely also this time.

    Also, let’s not forget that the GDX ETF has recently invalidated the breakout above the 61.8% Fibonacci retracement based on the 2011 – 2016 decline.

    ChartDescription automatically generated

    When GDX approached its 38.2% Fibonacci retracement, it declined sharply – it was right after the 2016 top. Are we seeing the 2020 top right now? This is quite possible – PMs are likely to decline after the sharp upswing, and since there are only several months left before the year ends, it might be the case that they move north of the recent highs only in 2021.

    Either way, miners’ inability to move above the 61.8% Fibonacci retracement level and their invalidation of the tiny breakout is a bearish sign.

    The same goes for miners’ inability to stay above the rising support line – the line that’s parallel to the line based on the 2016 and 2020 lows.

    Last week, miners have once again moved back to the upper border of the rising long-term trade channel, but they failed to rally above it. This means that the bearish indications based on the above chart remain up-to-date.

    Thank you for reading our free analysis today. Please note that the following is just a small fraction of the full analyses that our subscribers enjoy on a regular basis. They include multiple premium details such as the interim target for gold that could be reached in the next few weeks.We invite you to subscribe now and read today’s issue right away.

    Sincerely,
    Przemyslaw Radomski, CFA
    Editor-in-chief, Gold & Silver Fund Manager

  • Gold Investment Update - Stocks and the Dollar Weigh In

    November 2, 2020, 11:25 AM

    It’s evident that stocks have once again invalidated the breakout above their early-2020 high. They have also closed the week below the lowest weekly September close. Back in September, the S&P 500 index reversed on a weekly basis and rallied once again. This is similar to what happened in 2018 (August) when stocks first broke to new highs. Back then, the volatility was lower, and therefore it’s no wonder that the breakout held and this time (in September) it was temporarily invalidated.

    Back in 2018, stocks moved to a new high (not significantly higher), and this time they didn’t manage to do so, but were quite close (the rally seems to have burned itself out in August).

    The key take-away from this similarity is that once stocks slide below the September lows in intraday terms, they are likely to decline further. Perhaps much lower.

    Back in 2018, stocks consolidated around the previous lows, and then they declined even more profoundly in the final part of the year. Could the same happen this time as well? Well, it could happen, but with so much money being injected into the system from various directions, we don’t want to say that it's inevitable.

    What is highly likely in my view, however, is that stocks will slide, and when they do, they will take the precious metals sector with it. Especially silver, and mining stocks.

    Moreover, let’s keep in mind that the situation continues to be excessive on the forex market.

    Remember when in early 2018 we wrote that the USD Index was bottoming due to a very powerful combination of support levels? Practically nobody wanted to read that as everyone “knew” that the USD Index is going to fall below 80. We were notified that people were hating on us in some blog comments for disclosing our opinion - that the USD Index was bottoming, and gold was topping. People were very unhappy with us writing that day after day, even though the USD Index refused to soar, and gold was not declining.

    Well, it’s exactly the same right now.

    The USD Index was at a powerful combination of support levels. One of them is the rising, long-term, black support line based on the 2011 and 2014 bottoms. The other major support level and a long-term factor is the proximity to the 92 level – that’s when gold topped in 2004, 2005, and where it – approximately – bottomed in 2015, and 2016.

    The USDX just moved to these profound support levels, broke slightly below them, and now it has clearly invalidated this breakdown. For many weeks, we’ve been warning about the likely USD Index rally, and we finally saw it.

    Quoting my previous comments:

    The USD Index moved briefly below the long-term, black support line and then it invalidated this breakdown before the end of the week. This is a very bullish indication for the next few weeks.

    Before moving to the short-term chart, please note that the major bottoms in the USD Index that formed in the middle of the previous years often took the form of broad bottoms.

    Consequently, the current back and forth trading is not that surprising. This includes the 2008, 2011, and 2018 bottoms.

    A crucial aspect is that the rally that we’ve witnessed so far is just the tip of the bullish iceberg. The breakdown below the key support levels was invalidated, which is a strong bullish indicator. Since it happened on a long-term chart and the temporarily broken lines were critical, the implications are incredibly important as well– and they should be visible from the long-term perspective.

    So, how high could the USD Index rally now be? At least to the 100 level (approximately). This way, the upcoming rally would almost match the rally that started after the previous major invalidation – the 2018 one.

    Still, we wouldn’t rule out a scenario in which the USD Index rallies above its 2020 highs before another major top. After all, the USD Index is after a very long-term breakout that was already verified several times.

    There isn’t a market that moves on its own in today’s globalized world economy. Most recently, gold has been correlated negatively with the USD Index and positively with the stock market. Right now, the implications of the general stock market and the USDX movements remain bearish for the next several weeks. However, precious metals could move higher in the next few hours or days.

    Thank you for reading our free analysis today. Please note that the following is just a small fraction of the full analyses that our subscribers enjoy on a regular basis. They include multiple premium details such as the interim target for gold that could be reached in the next few weeks. We invite you to subscribe now and read today’s issue right away.

    Sincerely,
    Przemyslaw Radomski, CFA
    Editor-in-chief, Gold & Silver Fund Manager

  • Gold Investment Update - A Conceivable Dead-Cat-Bounce on the Cards

    October 26, 2020, 1:00 PM

    Welcome to this week's Gold Investment Update.

    First, let’s discuss the white metal for a bit. Silver is not just any industrial metal. Used as money for centuries, much longer than the fiat currencies have been used, with its specific properties that are also widely used in many industries (best conductor of heat and electricity), with crude oil, it is perhaps one of the most versatile commodities.

    As far as the white metal is concerned, on September 24th, we have warned you about the possible temporary rebound.

    Silver is after a major breakdown, and it just moved slightly below the recent intraday lows, which could serve as short-term support. This support is not significant enough to trigger any significant rally, but it could be enough to trigger a dead-cat bounce, especially if gold does the same thing.

    That’s exactly what happened.

    So, is the counter-trend rally over? That’s entirely possible, particularly if we consider the USDX breakouts. However, given the possibility of higher stock market moves, silver could move somewhat higher before it slides once again.

    In early March, silver moved higher before indeed plunging, so the current move up doesn’t invalidate this similarity, especially that the coronavirus cases are rising in a quite similar way (this similarity is most visible in Europe).

    Technically, silver moved as high as it did on July 28th, on an intraday basis. The corrective rally is not as little as one might think while focusing on just Friday's upswing. But that is not the critical thing here. The key thing is that the breakdown below the rising support line was more than confirmed.

    At this point, one might ask how do we know if that really is just a dead-cat bounce, and not a beginning of a new strong upleg in the precious metals sector. The reply would be that while nobody can say anything for sure in any market, the dead-cat-bounce scenario is very likely because of multiple factors, and the clearest of them are the confirmed breakdowns in gold and silver, and – most importantly – the confirmed breakout in the USD Index.

    Now, since silver has already broken below its rising short-term support line, the corrective upswing might already be over.

    Moreover, please note that from the long-term point of view, silver is not that strong.

    While gold moved to new highs, silver – despite its powerful short-term upswing – didn’t manage to correct more than half of its 2011 – 2020 decline.

    Silver has already invalidated its move above the lowest of the classic Fibonacci retracement levels (38.2%), which is not something that characterizes extraordinarily strong markets.

    Silver is likely to move well above its 2011 highs, but it’s unlikely to do it without another sizable downswing first.

    If you look at the monthly silver volume levels, it seems likely that the next sizable downswing has already begun. The previous substantial monthly volume in silver accompanied the 2011 top. The analogy doesn’t get more bearish than this. Ok, it would, if there were multiple key tops confirmed by huge monthly volume. But the 2011 top was so significant that other tops are not comparable, except for the most recent one. Thus, the implications are bearish.

    Thank you for reading our free analysis today. Please note that the following is just a small fraction of the full analyses that our subscribers enjoy on a regular basis. They include multiple premium details such as the interim target for gold that could be reached in the next few weeks. We invite you to subscribe now and read today’s issue right away.

    Sincerely,
    Przemyslaw Radomski, CFA
    Editor-in-chief, Gold & Silver Fund Manager

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