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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 - Rebounding Gold and the Many Triggers

    August 17, 2020, 9:36 AM

    Everything good comes to its end sooner or later, and no ascent lasts forever as Icarus would confirm. That could very well apply to the current situation around PMs.

    Speaking of indications pointing to the situation being excessive, let's take a look at the USD Index.

    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 the same right now.

    The USD Index is at a powerful combination of support levels. One of them is the rising, long-term, black support line that's based on the 2011 and 2014 bottoms.

    The other major, 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, and it's very oversold on a short-term basis. It all happened in the middle of the year, which is when the USDX formed major bottoms on many occasions. This makes a short-term rally here very likely.

    While it might not be visible at the first sight (you can click on the chart to enlarge it), the USD Index moved briefly below the long-term, black support line and then it invalidated this breakdown before the end of the previous week. This is a very bullish indication for the next few weeks.

    We even saw a confirmation from USD's short-term chart.

    The U.S. currency is finally after a decisive short-term breakout. In fact, it's already after two short-term breakouts. Looking at the short-term picture only, the USD's sideways trading could be both: a triple-bottom pattern, or a flag consolidation pattern. The former would be bullish, and the latter would be bearish. Based on the previous long-term chart, the bullish interpretation is stronger.

    Back in March, the short-term breakout in the USD Index was the thing that triggered the powerful rally in it, as well as a powerful plunge in the precious metals market. It's generally a good gold trading tip to monitor the USD Index's performance.

    Consequently, based on this analogy, the implications for the near term are bearish for the PMs. Especially, when we consider the fact that Gold Miners Bullish Percent Index showed the highest possible overbought reading recently.

    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. It's currently above 70, so it seems that miners have a long way to go before they bottom.

    Gold stocks declined significantly last week, after which they paused. Their performance is weaker than it was in early March, but this can be explained by smaller size of gold's rebound.

    Back in March, gold moved back to its previous highs (in fact it moved slightly above it) before topping and right now, it's consolidating lower. Still, we should keep in mind that there's also the possibility that gold won't repeat the March performance to the letter and history will rhyme instead.

    Consequently, it might be more useful to monitor the market for signs of weakness and to pay extra attention to the time factor.

    After all, time is more important than price; when the time is right, the price will reverse.

    Back in February, it took 4 days after the top for the miners to form their initial bottom and we saw the same thing also this time.

    Back then, it then took 4 (closing prices) or 5 (intraday extremes) trading days for the miners to top. Today will be the 4th trading day after the bottom, so if the history is to repeat itself with regard to time, miners might form the final top today or tomorrow. This would be in tune with where the general stock market is trading right now. It's so close to its previous high that it could easily break to new highs and then invalidate this breakout today or tomorrow.

    If gold does indeed rally to the previous highs or even moves slightly above them, we don't expect miners to do the same thing. In fact, we think that they would be likely to top close to the 61.8% Fibonacci retracement level (at most) - at about $43.

    The downside target for the mining stocks is very far from the current price. However, if the stock market declines significantly once again, miners can indeed fall far, even if gold declines by "only" a couple of hundreds of dollars.

    We marked also an interim price target that's based on a few other techniques, with a red ellipse - at about $31 - $32. One of the techniques is the 50% Fibonacci retracement level based on the March - August rally, and the other two are the February high, and the May and June lows. That's also where - approximately - we have the 200-day moving average. The latter is not particularly strong in case of the GDX ETF, so we wouldn't say that it creates any significant support on its own, but it serves as a good confirmation of the other techniques.

    The price targets for the precious metals market changed based on new information and gold's breakout to new highs. You will find details in today's flagship Gold & Silver Trading Alert. We invite you to subscribe and read today's issue right away.

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

  • Gold Investment Update - Gold Is Starting Its Move

    August 10, 2020, 9:22 AM

    Everything good comes to its end sooner or later, and the higher one rises, the deeper one falls. These could very well apply to the current situation around PMs.

    Speaking of indications pointing to the situation being excessive, let's take a look at the USD Index.

    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 the same right now.

    The USD Index is at a powerful combination of support levels. One of them is the rising, long-term, black support line that's based on the 2011 and 2014 bottoms.

    The other major, 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, and it's very oversold on a short-term basis. It all happened in the middle of the year, which is when the USDX formed major bottoms on many occasions. This makes a short-term rally here very likely.

    While it might not be visible at the first sight (you can click on the chart to enlarge it), 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.

    We even saw a confirmation from USD's short-term chart.

    The U.S. currency is finally after a decisive short-term breakout. In fact, it's already after two short-term breakouts. Looking at the short-term picture only, the USD's sideways trading could be both: a double-bottom pattern, or a flag consolidation pattern. The former would be bullish, and the latter would be bearish. Based on the previous long-term chart, the bullish interpretation is stronger.

    Back in March, the short-term breakout in the USD Index was the thing that triggered the powerful rally in it, as well as a powerful plunge in the precious metals market. It's generally a good gold trading tip to monitor the USD Index's performance.

    Consequently, based on this analogy, the implications for the near term are bearish for the PMs. Especially, when we consider the fact that Gold Miners Bullish Percent Index showed the highest possible overbought reading recently.

    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.

    On Friday, gold stocks declined significantly, and they moved visibly below their July 27 high, even though gold ended its Friday's session almost $100 higher. Mining stocks' underperformance is quite extreme, especially that it's connected with silver's very strong short-term performance. This is what we usually see when the precious metals market is topping.

    Please note that the miners topped almost right at the vertex of the huge rising wedge pattern. Quoting our previous analysis:

    (...) huge rising wedge pattern is about to form a vertex today or tomorrow. The same rule that applies to triangles has implications also here. The vertex is quite likely to mark a reversal date. Given the overbought status of the RSI (given today's upswing, it's almost certain to move above 70 once again) as well as miners recent unwillingness to track gold during its continuous rally, it's highly likely in my view that this will be a top.

    The downside target for the mining stocks is very far from the current price. However, if the stock market declines significantly once again, miners can indeed fall far, even if gold declines by "only" a couple of hundreds of dollars.

    We marked also an interim price target that's based on a few other techniques, with a red ellipse - at about $31 - $32. One of the techniques is the 50% Fibonacci retracement level based on the March - August rally, and the other two are the February high, and the May and June lows. That's also where - approximately - we have the 200-day moving average. The latter is not particularly strong in case of the GDX ETF, so we wouldn't say that it creates any significant support on its own, but it serves as a good confirmation of the other techniques.

    And they're pointing one way...

    The price targets for the precious metals market changed based on new information and gold's breakout to new highs. You will find details in today's Gold & Silver Trading Alert. We invite you to subscribe and read today's issue right away.

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

  • Gold Investment Update - The Trifecta of Key Signals for Gold Miners

    August 3, 2020, 10:00 AM

    Nothing lasts forever, and the brightest flame burns itself out the fastest. That could very well apply to the current situation around PMs.

    Speaking of indications pointing to the situation being excessive, let's take a look at the USD Index.

    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 the same right now.

    The USD Index is at a powerful combination of support levels. One of them is the rising, long-term, black support line that's based on the 2011 and 2014 bottoms.

    The other major, 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, and it's very oversold on a short-term basis. It all happened in the middle of the year, which is when the USDX formed major bottoms on many occasions. This makes a short-term rally here very likely.

    We even saw a confirmation from USD's short-term chart.

    The U.S. currency finally after a decisive short-term breakout. Back in March, the short-term breakout in the USD Index was the thing that triggered the powerful rally in it, as well as a powerful plunge in the precious metals market.

    Consequently, based on this analogy, the implications for the near term are bearish for the PMs. Especially, when we consider the fact that Gold Miners Bullish Percent Index showed the highest possible overbought reading recently.

    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.

    On Friday, gold moved higher once again, but senior mining stocks refused to move to new highs. They didn't manage to even erase their Thursday's decline. The volume that accompanied this daily upswing was relatively low. This means that it's likely that this is a counter-trend bounce, and not the bigger move higher.

    Miners were the first to top, and the short-term breakout in the USD Index indicates that other PM markets are likely to follow.

    Please note that the miners topped almost right at the vertex of the huge rising wedge pattern. Quoting last week's analysis:

    (...) huge rising wedge pattern is about to form a vertex today or tomorrow. The same rule that applies to triangles has implications also here. The vertex is quite likely to mark a reversal date. Given the overbought status of the RSI (given today's upswing, it's almost certain to move above 70 once again) as well as miners recent unwillingness to track gold during its continuous rally, it's highly likely in my view that this will be a top.

    Combine the USDX situation with Gold Miners' Bullish Percent and vertex-based reversal, and you get a high likelihood of lower prices in miners next.

    The price targets for the precious metals market changed based on new information and gold's breakout to new highs. You will find details in today's Gold & Silver Trading Alert. We invite you to subscribe and read today's issue right away.

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

  • Gold Investment Update - Can Gold Really Confirm Its Breakout Above 2011 Highs?

    July 27, 2020, 10:22 AM

    Available to premium subscribers only.

    The price targets for the precious metals market changed based on new information and gold's breakout to new highs. You will find details in today's Gold & Silver Trading Alert. We invite you to subscribe and read today's issue right away.

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

  • Gold Investment Update - Translating the Gold Index Signal into Gold Target

    July 20, 2020, 9:29 AM

    Last week, we wrote that gold miners flashed an "extremely overbought" signal, which they had only flashed once in the past - almost right at the 2016 top. The Gold Miners Bullish Percent Index recently moved to the highest level that it could reach - 100.

    The only other case when the index was at 100, was in mid-2016.

    We marked this situation with a vertical dashed line. Did miners continue to move higher for a long time, or did they move much higher? No.

    Precisely, the index reached 100 on July 1st 2016, and gold mining stocks moved higher for two additional trading days. Then they topped. This was not the final top, but the second top took miners only about 5% above the initial July high.

    This year, the index reached the 100 level on July 2nd - almost exactly 4 years later, and once again practically exactly in the middle of the year. Miners seemed to have formed the intraday high on July 9th - four trading days later.

    It's not justified to assume that the delay in the exact top would be 100% identical, but it seems justified to view it as similar. Two-day delay then, and four-day delay now seem quite in tune, and this similarity supports a bearish prediction for gold.

    There's also one additional point that we would like to emphasize and it's the previous high that the index made on November 9, 2010. That was the intraday top, so there was no additional delay. There was one additional high about a month later, in December, but miners moved only about 1.5% above the initial high then.

    One might ask if mining stocks are really overbought right now given the unprecedented quantitative easing, and the answer is yes. Please note that in 2016 the world was also after three rounds of QE, which was also unprecedented, and it didn't prevent the miners to slide after becoming extremely overbought (with the index at the 100 level). The 100 level in the index reflects the excessive optimism, and markets will move from being extremely overbought to extremely oversold and vice versa regardless of how many QEs there are. People tend to go from the extreme fear to extreme greed and then the other way around, and no fundamental piece of news will change that in general. The economic circumstances change, but fear and greed remain embedded in human (and thus markets') behavior. Taking advantage of this cyclicality is the basis for most (if not all) gold trading tips and the same goes for other markets.

    Today, we would like to dig deeper into the analogy to the 2016 top. There are more similarities than just the most-extreme reading from the Gold Miners Bullish Percent Index.

    In order to do that, let's zoom in.

    Back in 2016, the extremely overbought (100) reading from the Gold Miners Bullish Percent Index resulted in a small decline, which was supposedly a verification of the breakout above the previous (2013 and 2014) highs. Then we saw another final move back up and that was the top for the next few years.

    What happened recently? The extremely overbought reading resulted in a decline back to the previous 2020 high and then another move higher. This is very similar to what we saw in 2016.

    What happened in the GDX ETF with regard to its own technical indications?

    Well, shortly after the extremely-overbought reading, the GDX ETF moved lower and broke below the rising medium-term support line. It then moved back up and topped slightly above the previous highs. When the rising support line was more or less at the same price level as the previous high, GDX broke below it and formed a top that was not exceeded for a few years.

    And what happened recently in the GDX?

    Pretty much the same thing. Shortly after we saw the extreme (100) reading from the Gold Miners Bullish Percent Index, GDX broke below its rising medium-term support line. It then moved back up, and while it didn't move to new intraday highs, Friday's closing price was slightly above the previous 2020 high.

    The rising medium-term support line just moved to the previous high as well.

    The history has been repeating to a very considerable (quite remarkable) extent, and if it continues to do so - which seems likely - we're likely to see a sizable decline shortly. In fact, Friday's high might have been the high for the next few months. If not, then such a high is very likely to form this week.

    Today's Gold & Silver Trading Alert includes multiple additional details such as the interim target for gold that could be reached in the next few weeks. We invite you to subscribe and read today's issue right away.

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

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