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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: Gold Fails Its All-Time Highs Rally

    March 10, 2022, 9:33 AM

    So much for gold’s move above $2,000. Congratulations on avoiding the mania – it was not easy. The volume readings show that many people were caught up in the “inevitable rally” in gold. You, however, kept focused on what’s most important in the medium term, and over this time frame, this approach is likely to prove most beneficial.

    As gold tried to rally to new all-time highs, I sent out an intraday Gold & Silver Trading Alert, and in it, I emphasized the likely temporary nature of this move. I wrote the following:

    Yes, the situation in Ukraine is critical.

    However, the two key drivers of gold price continue to point to lower gold prices, and at the same time we know that geopolitical-event-based rallies don’t last and very likely to be reversed.

    These two key drivers are:

    • real interest rates
    • the USD Index

    The USD Index is already soaring, and real interest rates are likely to increase as the nominal interest rates are about to increase – and given the recent rally in prices they might increase more than most investors expect them to.

    Consequently, while – given today’s rally – it might seem like there’s no stopping gold, silver, and mining stocks, please keep the above in mind. This rally is likely to be reversed, and when it reverses, junior gold miners are likely to decline in an epic manner. And lead to epic profits in case of those, who were able not to follow the mania during the parabolic upswing.

    The above remains up-to-date.

    Let’s check what changed on the charts based on yesterday’s profound decline.

    When I wrote yesterday’s analysis, gold was trading at about $2,020, and I wrote that, given the last few days’ volatility, it could be below $2,000 in a few hours. That’s exactly what happened next.

    Taking a step back, please note that the previous breakouts above $2,000 were all invalidated sooner rather than later.

    Gold tried to break above $2,000 several times:

    • twice in August 2020;
    • twice in September 2020 (once moving above it, once moving just near this level);
    • once in November 2020 (moving near this level);
    • once in January 2021 (moving near this level);
    • once in February 2022 (moving near this level).

    These attempts failed in each of the 7 cases mentioned above.

    Yesterday, gold failed its eighth attempt. History rhymed, as it often does. Let’s keep in mind the specific similarity to the 2020 top that I described yesterday:

    Gold topped at a similar price to its 2020 top, while the sharpest part of the rally started at about $1,800 (just like in 2020), and the entire rally started in the middle of the year at about $1,670.

    In fact, even the moment where gold traded on huge volume for the first time during those rallies is similar. I marked that with blue dotted lines. We saw huge volume more or less in the middle of the final (sharpest) part of the upswing. The history tends to rhyme, and since it seems that the tensions have finally peaked (as I wrote in the opening part of today’s analysis) the same is quite likely for the gold price.

    Gold’s big-volume reversal on Tuesday added to the decline’s credibility, making its continuation likely.

    The dramatic sell signal was even clearer in the case of mining stocks; and yesterday’s invalidations of breakouts are just as telling.

    Yesterday, I commented on miners’ reversal in the following way:

    While the junior miners (GDXJ ETF) closed higher yesterday, they were up only slightly. At one point of the session, the GDXJ was up from its previous close by 5.74%. However, it ended only 0.86% higher. Therefore, almost the entire daily rally in junior miners was invalidated.

    Yesterday’s session was therefore a profound daily reversal – in candlestick pattern terms, it was a “shooting star reversal”. These patterns should be confirmed by high volume, and yesterday’s volume in the GDXJ was the highest volume not only this year, but it was actually highest volume that we’ve seen in this ETF since mid-2020. The top is most likely in.

    If I didn’t have my short position in the GDXJ ETF that’s already significant (and in tune with how significant I want it to be), I would have entered or added to this position now.

    (Of course, the above is not an investment advice, nor am I saying that should increase your position, but that’s exactly what my opinion is at the moment based on what we just saw.)

    The above bearish signal turned into an extremely bearish one because of GDXJ’s invalidations of previous (small, but still) breakouts. Junior miners just closed visibly below their:

    • 38.2% Fibonacci retracement level;
    • declining (blue) resistance line;
    • late-2021 top.

    Invalidations of breakouts are bearish as they show that a given market’s strength was not real and that sellers were able to overwhelm the buyers.

    While mining stocks underperformed gold in a rather extreme manner on Tuesday, silver outperformed it on the same day. This was a bearish indication, and indeed, it was followed by lower prices.

    On Tuesday, the GDXJ ETF was up by less than 1%, gold was up by 2.37%, and silver was up by 4.57%. Silver’s outperformance and miners’ underperformance is what we tend to see right at the tops. That’s exactly what it was – a top. Silver declined profoundly, and the attempt to break above its 61.8% Fibonacci retracement level will soon be just a distant (in terms of price) memory.

    On a medium-term basis, silver was simply weak relative to gold, but we saw short-term outperformance. In short, that was and continues to be bearish.

    How high could silver go before declining? Given all that I wrote above, I think that silver’s top is already in. However, if it isn’t, I don’t think it would manage to move above $30.

    All in all, it seems that due to the technical resistance in gold and mining stocks, the sizable – but likely temporary (like other geopolitical-event-based ones) – rally is likely to be reversed shortly. Then, as the situation in the general stock market deteriorates, junior miners will likely plunge in a spectacular manner.

    Thank you for reading our free analysis today. Please note that the above 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
    Founder, Editor-in-chief

  • Gold Investment Update: What May Boost Gold Prices in the Coming Years?

    March 9, 2022, 9:33 AM

    Many people wonder what the future of gold is in the face of military conflicts and central bank decisions. Here is an example of possible scenarios.

    Q: Many thanks for your great service. Here are a couple of points I would like to offer to you for your thoughts:

    1. There is talk of the US government (and this would lead other governments to follow) moving to a Central Bank Digital Currency (CBDC). This would potentially be the end of cryptos in the private sector. Crypto would be transferable at a given price and time for the CBDC. Like what FDR did with gold in 1933. After the conversion, cryptos would be banned. Would this occurrence or the rumor/threat of this action occurring push people back into the precious metals? How do you see this scenario playing out?

    2. How do you think the precious metals will react to a long-drawn-out war in Ukraine/Europe (which could potentially morph into WW3 post-2026)?

    3. How do you see the move of both Russia and China away from the SWIFT system affecting the precious metals? (China and Russia are accelerating their efforts to move to a new system in light of the recent Russian bans.)

    A: Thank you. Here’s my take:

    1. Well, as much as I don’t like to write it, I view the above scenario as likely. Cryptocurrencies pose a direct threat to the monetary system and the power that it grants to those that control it. Why wasn’t it banned, then? Because while it’s popular, it could get widespread adoption and then the monetary authorities could move to government cryptos that only they control.

    Theoretically, there are many positives to a system where money is “intelligent” and “customizable”. For example, money that is provided as social support might be used for most products, but not for alcohol or other similar substances. Supporting a specific area could be made easy. Simply put, money spent there would be worth 30% more than elsewhere, so people would rush in to take advantage of the opportunity, thus supporting the area that they were supposed to support. For example, in the case of natural disasters, it would help the area recover.

    However, there are also myriads of things that can go wrong in this system. You didn’t like my party’s narrative before the elections? Swooosh!, goes the magical monetary wand – and your money is now worth only 70% of what it was worth previously. “Hey, my company’s money should be worth more, because we’re so cool, and besides, look, here’s a bribe.”

    Would you rather own this smart money or dumb old gold and silver that nobody can change? I’d personally go with both, but it would be more important to me than previously to have a bigger portion of my assets in physical gold and silver than before. Just in case someone with monetary power doesn’t like what I do, write, or think. Remember that those in power can change, so even by being a completely law-abiding citizen, who knows what the next government would think of that…

    So, I think that ultimately it will make prices of precious metals move higher, but, of course, this is something that I see happening in the coming years, not in the next few weeks.

    Who knows, maybe the global rise in interest rates (which is just starting) is supposed to make people dislike the current monetary system so that they not only are OK with the new crypto system, but they request it. Remember people shouting “Lock us down! Lock us down!” at the beginning of the pandemic?

    2. Moving into a WW3 would like make the precious metals sector (especially gold) soar. However, I think that a stock-market-slide-led decline awaits us first – in the following weeks/months.

    3. My reply here is exactly the same as when I replied to the question about Russia’s ban from the SWIFT system yesterday. Namely: This could work as you wrote above, but… history tells us that this would likely not be the case initially. Remember 2008? We had an international banking crisis (this doesn’t fully express what it was, but serves as a good summary), so the contagion effect was in full force, and what did gold do? It first declined significantly, along with the general stock market, and then came back up with a vengeance. While gold was declining, silver and mining stocks were also declining, particularly significantly. That’s in perfect tune with what I’m expecting to see in the future of the precious metals market.

    Thank you for reading our free analysis today. Please note that the above 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
    Founder, Editor-in-chief

  • Gold Investment Update: Is a Massive Drop in Stocks Around the Corner?

    March 9, 2022, 6:50 AM

    Mining stocks would likely suffer when the general stock market slides, and it seems that we won’t have to wait too long for that.

    World stocks have already begun their decline, and based on the analogy to the previous invalidations, the decline is not likely to be small. In fact, it’s likely to be huge.

    For context, I explained the ominous implications on Nov. 30. I wrote:

    Something truly epic is happening in this chart. Namely, world stocks tried to soar above their 2007 high, they managed to do so and… they failed to hold the ground. Despite a few attempts, the breakout was invalidated. Given that there were a few attempts and that the previous high was the all-time high (so it doesn’t get more important than that), the invalidation is a truly critical development.

    It's a strong sell signal for the medium- and quite possibly for the long term.

    From our – precious metals investors’ and traders’ – point of view, this is also of critical importance. All previous important invalidations of breakouts in world stocks were followed by massive declines in the mining stocks (represented by the XAU Index).

    Two of the four similar cases are the 2008 and 2020 declines. In all cases, the declines were huge, and the only reason why they appear “moderate” in the lower part of the above chart is that it has a “linear” and not “logarithmic” scale. You probably still remember how significant and painful (if you were long that is) the decline at the beginning of 2020 was. 

    Now, all those invalidations triggered big declines in the mining stocks, and we have “the mother of all stock market invalidations” at the moment, so the implications are not only bearish, but extremely bearish.

    What does it mean? It means that it is time when being out of the short position in mining stocks to get a few extra dollars from immediate-term trades might be risky. The possibility that the omicron variant of Covid makes vaccination ineffective is too big to be ignored as well. If that happens, we might see 2020 all over again – to some extent. In this environment, it looks like the situation is “pennies to the upside and dollars to the downside” for mining stocks. Perhaps tens of dollars to the downside… You have been warned.

    Here's how the situation currently looks from the U.S. point of view. The chart below features the S&P 500 futures.

    The key thing about the above chart is that what we’ve seen this year is the biggest decline since 2020, and the size of the recent slide is comparable to what we saw as the initial wave down in 2020. If these moves are analogous, the current rebound is normal – there was one in early 2020 too. This also means that a much bigger decline is likely in the cards in the coming weeks.

    The thing that we see with regard to the short term is that stocks moved above their declining resistance line. However, this line was already “broken” in a similar way earlier this year. The fact is that this “breakout” actually resulted in its invalidation and another wave down.

    If history is about to rhyme with regard to both short-term and the analogy to 2020, the next move lower might be much bigger.

    This would be likely to have a very negative impact on the precious metals market, in particular on junior mining stocks (initially) and silver (a bit later).

    Thank you for reading our free analysis today. Please note that the above 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
    Founder, Editor-in-chief

  • Gold Investment Update: What Should We Expect Given the Ongoing Conflict?

    February 25, 2022, 8:15 AM

    As history shows, gold and silver rallies based on geopolitical tensions are often short-lived. Yesterday, a hint of a trend reversal appeared.

    Don’t stop reading this mining stock analysis until you get to the part about junior mining stocks’ analogy. Something might interest you there.

    While the unfortunate conflict confronting Russia and Ukraine has intensified in recent days, gold, silver, and mining stocks have benefited from the crisis. However, since history shows that geopolitical-tension-based rallies often reverse, Feb. 24 was likely a small indication of what should unfold over the next few months.

    For example, gold’s sharp rally turned into a sharp intraday reversal on Feb. 24. While the S&P 500, the NASDAQ Composite, the S&P 500, and gold managed to end the session in the green, the GDX ETF declined by 1.93%.

    Furthermore, after the gold and silver senior miners rallied above their medium-term declining resistance line (the downward sloping black line in the middle of the chart below), the intraday reversal invalidated the breakout and it occurred on significant volume.

    At the same time, senior mining stocks invalidated their attempt to break above their 38.2% Fibonacci retracement. That’s yet another bearish sign.

    This means that the GDX ETF’s medium-term downtrend remains intact, and that the short-term concern-based rally may have just ended.

    To that point, the HUI Index provides clues from a longer-term perspective. When we analyze the weekly chart, the current short-term move higher is in tune with the previous patterns, but history is not repeating itself to the letter.

    The three previous cases that I marked with green were not identical, but quite similar in terms as they were all some sort of a broad head-and-shoulders pattern.

    Now, this pattern can have more than two “shoulders”. It’s not that common, but it happens. It seems that what we saw recently (I mean the late-2021 – Feb. 2022 rally) could be viewed as either a part of a big post-pattern consolidation, or another right shoulder of the pattern.

    Based on how broad the pattern is and self-similarity present in gold, it seems that the analogy to what happened in 2012 is most important right now.

    Looking at the moving averages, we see that the 50-week moving average (blue) and 200-week moving average (red) performed quite specifically in late 2012, and we see the same thing this year.

    The distance between 50- and 200-week moving averages currently narrows, while the former declines. Back in 2012, the top formed when the HUI rallied above its 50-week moving average, which just happened once again.

    Still, if the general stock market slides, and that appears likely for the following weeks and months, then we might have a decline that’s actually similar to what happened in 2008. Back then, gold stocks declined profoundly, and they have done so very quickly.

    The dashed lines that start from the recent prices are copy-paste versions of the previous declines that started from the final medium-term tops. If the decline is as sharp and as big as what we saw in 2008, gold stocks would be likely to decline sharply, slightly below their 2016 low. If the decline is more moderate, then they could decline “only” to 120 - 140 or so. Either way, the implications are very, very, very bearish for the following weeks.

    Turning to the junior miners, the GDXJ ETF tried to break out above a lower declining resistance line (the downward-sloping blue line drawn from the mid-2021 and late-2021 highs below). However, the attempt was rejected and culminated with a sharp intraday reversal. Moreover, the junior miners’ relative weakness was on full display, as despite the green lights flashing for the general stock market, gold, and silver, the GDXJ ETF ended the Feb. 24 session down by 2.28%.

    In addition, please note that the bearish about-face occurred on strong volume, and the move mirrored the sharp spike that preceded the March 2020 plunge.

    Please note that while junior miners invalidated their breakout above the declining resistance line, similarly to GDX, it was not the analogous line. The line that’s analogous to the one on the previous GDX chart is the blue, dashed line. GDXJ was not even close to it.

    In other words, junior miners are underperforming seniors, just like what I’ve been expecting to see for months. The trend in the ratio between them is clear too.

    Once again (just like in 2020), junior miners are likely to decline more than seniors, providing a greater shorting opportunity for truly epic profits.

    Let’s get back to the previous chart for a moment, and let’s expand on the “just like in 2020” analogy.

    Buckle-up, Alice, because the ride down the similarity rabbit hole is going to be a wild one.

    Here it goes:

    • The early-2020 top in the GDXJ formed after a sharp short-term rally.
    • The early-2020 top in the GDXJ formed when GDXJ opened much higher, declined on an intraday basis, and ended the day lower.
    • The early-2020 top in the GDXJ formed at $44.85, on significant volume.
    • When the GDXJ topped in early-2020, its 50-day moving average was at about $40, and the MACD indicator was at about 1.

    Now, let’s consider what happened yesterday.

    • This week’s top in the GDXJ formed after a sharp short-term rally.
    • This week’s top in the GDXJ formed when GDXJ opened much higher, but declined on the intraday basis, and ended the day lower.
    • This week’s top in the GDXJ formed at $45.16 (just 0.7% higher than in early-2020), on significant volume.
    • When the GDXJ topped this week, its 50-day moving average was at about $40 ($40.50), the MACD indicator was at about 1 (0.747).

    If you think that’s extremely similar, you’re right. However, I saved the best for last:

    The early-2020 top formed on February 24.

    Yesterday WAS February 24.

    Does this guarantee a slide like in 2020 in the junior miners? Of course not, there are no guarantees in any market, but does that make it even more likely? Yes, it does. Is it an epic opportunity for those who position themselves correctly? Again, I can’t make any promises or guarantees, but that’s what seems likely to me.

    All in all, a crash below $20 is not out of the question. In the meantime, though, I expect the GDXJ ETF to challenge the $32 to $34 range. However, this is my expectation for a short-term bottom only. While the GDXJ ETF may record a corrective upswing at this level, the downtrend should continue thereafter, and the junior miners should fall further over the medium term.

    In conclusion, the unfortunate situation unfolding in Ukraine is important, from a humanitarian perspective, and I hope that a peaceful resolution materializes. Also, it is my responsibility to analyze the situation and report it to you how it’s likely to impact the markets and what it implies for one’s trading positions. What’s justified from the risk-to-reward point of view and what’s not. While gold, silver, and mining stocks benefited from geopolitical tensions, history shows that such gains are short-lived. As a result, I still expect the trio to hit lower lows over the medium term, and I think that the decline will not be subtle.

    Thank you for reading our free analysis today. Please note that the above 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
    Founder, Editor-in-chief

  • Gold Investment Update: The USD Keeps Cool Amidst Chaos

    February 18, 2022, 10:11 AM

    Gold and the USDX reacted vigorously to the worrisome news concerning Eastern Europe. However, only the latter can be calm about its medium-term future.

    As geopolitical tensions uplift gold, silver, and mining stocks, they’re in rally mode each time a doom-and-gloom headline surfaces. However, while the ‘will they or won’t they’ saga commands investors’ attention, the USD Index continues to behave rationally. For example, while volatility has increased recently, the dollar basket has held firm.

    To explain, I wrote on Feb. 17:

    The USD Index is at its medium-term support line. All previous moves to / slightly below it were then followed by rallies, sometimes really big rallies, so we’re likely to see something like that once again.

    Such a rally would be the prefect trigger for the triangle-vertex-based reversal in gold and the following slide.

    Please see below:

    Furthermore, the USD Index’s recent pullback was far from a surprise. For example, I highlighted on numerous occasions that the greenback is nearing its weekly rising resistance line, and the price action has unfolded as I expected.

    Moreover, while overbought conditions resulted in a short-term breather, history shows that the USD Index eventually catches its second wind. To explain, I previously wrote:

    I marked additional situations on the chart below with orange rectangles – these were the recent cases when the RSI based on the USD Index moved from very low levels to or above 70. In all three previous cases, there was some corrective downswing after the initial part of the decline, but once it was over – and the RSI declined somewhat – the big rally returned and the USD Index moved to new highs.

    As a result, with the USD Index showcasing a reliable history of profound comebacks, higher highs should materialize over the medium term.

    Please see below:

    Just as the USD Index took a breather before its massive rally in 2014, it seems that we saw the same recently. This means that predicting higher gold prices (or those of silver) here is likely not a good idea.

    Continuing the theme, the eye in the sky doesn’t lie, and with the USDX’s long-term breakout clearly visible, the wind remains at the dollar’s back. Furthermore, dollar bears often miss the forest through the trees: with the USD Index’s long-term breakout gaining steam, the implications of the chart below are profound. While very few analysts cite the material impact (when was the last time you saw the USDX chart starting in 1985 anywhere else?), the USD Index has been sending bullish signals for years.

    Please see below:

    The bottom line?

    With my initial 2021 target of 94.5 already hit, the ~98-101 target is likely to be reached over the medium term (and perhaps quite soon). Mind, though: we’re not bullish on the greenback because of the U.S.’s absolute outperformance. It’s because the region is fundamentally outperforming the Eurozone. The EUR/USD accounts for nearly 58% of the movement of the USD Index, and the relative performance is what really matters.

    In conclusion, the financial markets remain on Russia-Ukraine watch. While gold, silver, mining stocks, and the USD Index whipsaw on the news, the technical and fundamental backdrops support higher prices for the latter, not the former. Thus, while geopolitical tensions are always short-term bullish for the precious metals, the rush is often short-lived. As a result, the trios’ downtrends that began in late 2020 will likely resurface once the headline-driven market returns to normal.

    Thank you for reading our free analysis today. Please note that the above 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
    Founder, Editor-in-chief

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