Gold Price Prediction for September 2021
The below gold price forecast article is based on one of our premium gold analyses. Enjoy:
With the outperformance of U.S. retail sales masking the real driver behind gold’s plunge last week, the technical backdrop has been predicting this move for weeks.
And after gold failed to rally on Sep. 17 and closed the week below its declining support line (the declining black line on the chart below which is now resistance), the outlook remains profoundly bearish. Moreover, when we combine silver’s weakness, the gold miners’ weakness and the likely strength in the USD Index with the bearish 2013 analogy (and remember, 2008 likely awaits if/when the S&P 500 plunges), all of the dominoes are in place for a profound decline.
To explain, I wrote on Sep. 17:
So much money printed. Excessive debt. Even pandemic! And gold failed to hold gains. But that’s how markets work, no matter what gold permabulls say.
Gold plunged yesterday, just as it was likely to. The fake reason? U.S. retail sales exceeded expectations. The real reason? A major downtrend.
On the above gold chart, I added annotations that show what happened in the previous 3 cases after the retail sales reports. We saw the following:
- gold declined after retail sales disappointed in June
- gold topped after retail sales outperformed in July
- gold paused its rally after retail sales disappointed in August
- gold declined after retail sales outperformed in September
What should one make of that?
There is no clear link (and perhaps no link whatsoever) between U.S. retail sales and the price of gold. If gold had declined based only on great retail sales, then it surely should have soared based on disappointing retails sales in June, right? It plunged then.
For many weeks, months, and years, I’ve been writing that markets don’t need a trigger to move in a certain way. Getting one could speed things up, but the markets might eventually rally or decline on just about any piece of news, provided that they really “want to”. By markets “wanting” to move in a given way, I mean the fact that markets move in trends and cycles, and even if a given market has a very favorable fundamental situation for the long run, it doesn’t mean that it won’t slide in the short or medium term. That’s how markets work, and that’s been the case for decades, regardless of what gold permabulls might tell you.
Let’s face it, the monetary authorities around the world are printing ridiculous amounts of money, stagflation is likely next, and gold is extremely likely to soar based on that in the following years, just like what we saw in the 1970s.
This is already the case – lots of money has been already printed, and the world has been suffering from the pandemic for well over a year. Gold should be soaring in this environment! Silver should be soaring! Gold stocks should be soaring too!
And what’s the reality?
Gold failed to hold its gains above its 2011 highs. Can you imagine that? So much money printed. Excessive debts. Even pandemic! And gold still failed to hold gains above its 2011 highs. If this doesn’t make you question the validity of the bullish narrative in the medium term in the precious metals sector, consider this:
Silver – with an even better fundamental situation than gold – wasn’t even close to its 2011 highs (~50). The closest it got to this level was a brief rally above $30. And now, after even more money was printed, silver is in its low 20s.
And gold stocks? Gold stocks are not above their 2011 highs, they were not even close. They were not above their 2008 highs either. In fact, the HUI Index – the flagship proxy for gold stocks – is trading below its 2003 high! And that’s in nominal prices. In real prices, it’s even lower. Just imagine how weak the precious metals sector is if the part of the sector that is supposed to rally first (that’s what we usually see at the beginning of major rallies) is underperforming in such a ridiculous manner.
Furthermore, while 2013 still provides us with the clearest roadmap of gold’s next move, 2008 shouldn’t be dismissed. And why is that? Well, with a profound drawdown of the S&P 500 present during the latter and not the former, if (once) the general stock market plunges, the pace of gold’s forthcoming decline could be expedited.
To explain, I wrote previously:
Taking into consideration that the general stock market has probably just topped, and the USD Index is about to rally, then gold is likely to slide for the final time in the following weeks/months. Both above-mentioned markets support this bearish scenario and so do the self-similar patterns in terms of gold price itself.
What’s more, there are many other layers to the analogue from 2008 that are extremely important.
Please see below:
Please note (in the lower part of the above chart) that back then, the final huge slide in the mining stocks started when the GDX ETF moved back to its previous highs, while the USD Index moved a bit below its rising support line based on the previous tops. That’s exactly what happened recently as well. The final bottom in the GDX ETF formed about 3 months later at about 1/3 of its starting price.
The recent high was $40.13 and 1/3 thereof would be $13.38. While I don’t want to say that we will definitely see the GDX ETF as low as that, it’s not something that would be out of the ordinary, given the analogy to 2008. Now you see why the large bottoming target on the GDX ETF chart with the lower border in the $15s might actually be conservative… As always, I’ll keep you – my subscribers – updated.
“Ok, but what price level would be likely to trigger a bigger rebound during the next big slide?”
Well, the 76.4% Fibonacci retracement level (it’s visible as the 23.6% Fibonacci retracement level on the above chart as inverting the scale is used as a workaround) also coincides with gold’s April 2020 low. Taken together, an interim bottom could form in the ~$1,575 to $1,600 range.
For context, back in early March, the yellow metal continued to decline after reaching the 61.8% Fibonacci retracement (visible as 38.2% Fibonacci retracement) level, while, in contrast, the miners began to consolidate. Gold finally bottomed slightly below the retracement – at its previous lows. This time around, we might witness a similar event. And while the story plays out, the miners’ relative strength should signal the end of the slide (perhaps with gold close to 1,600), while gold will likely garner support sometime thereafter (at $1,575 – $1,580 or so).
Remember though: this is only an interim target. Over the medium term, the yellow metal will likely form a lasting bottom in the ~$1,350 to $1,500 range.
Finally, adding credibility to the analogy from 2013, long-term interest rates helped push gold off the cliff. And with the U.S. 10-Year Treasury yield bouncing off of its 50-week moving average, a similar development in 2013 (the red shaded area on the right side of the chart below) preceded the most violent part of gold’s medium-term decline. As a result, whether the S&P 500 leads the move lower (like in 2008) or further momentum persists in long-term Treasury yields (like in 2013), gold confronts a challenging environment over the next few months.
Thank you for reading the above free premium-Alert-based analysis. Please note that the above is just a small fraction of what the subscribers to Gold & Silver Trading Alert enjoy on a daily basis. The full version of the Alerts includes multiple premium details such as the downside target for gold that could be reached in the next few weeks.
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Przemyslaw Radomski, CFA
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