gold price prediction

Gold Price Prediction for June 2021

The below gold price forecast article is based on one of our premium gold analyses. Enjoy:

With gold struggling to hold $1,900, it’s often said that death comes in threes. And with the count already reaching the precipice, the yellow metal could soon meet its maker:

  1. Just as gold moved back and forth, forming three distinctive tops in 2008 and 2011-2012, we saw the same thing now – between the August 2020 top and the recent top, which seems to have been the final breath of the short-term bull.
  2. Not only is the yellow metal’s RSI well above 70 (extremely overbought), but it’s also, most importantly, in near-perfect tune with how the final pre-slide tops formed in 2008 and 2012.
  3. The triangle-vertex-based reversal points have worked multiple times on the precious metals market, and it’s no wonder that we just saw them work once again.

Please see below:

gold price forecast chart

For more context, I wrote on Jun. 4:

The analogies to how the situation in gold developed in 2008 and 2012, provides us with an extremely bearish price prediction for gold. Many other factors are pointing to these similarities, and two of them are the size of the correction relative to the preceding decline and to the previous rally. In 2012 and 2008, gold corrected to approximately the 61.8% Fibonacci retracement level. Gold was very close to this level this year, and since the history tends to rhyme more than it tends to repeat itself to the letter, it seems that the top might already be in.

In both years, 2008 and 2012, there were three tops. Furthermore, the rallies that took gold to the second and third top were similar. In 2008, the rally preceding the third top was bigger than the rally preceding the second top. In 2012, they were more or less equal. I marked those rallies with blue lines in the above chart – the current situation is very much in between the above-mentioned situations. Also, the current rally is bigger than the one that ended in early January 2021 but not significantly so.

Remember what happened when gold previously attempted to break above major long-term highs? It was in 2008 and gold was breaking above its 1980 high. Gold wasn’t ready to truly continue its bull market without plunging first. This downswing was truly epic, especially in the case of silver and mining stocks; and now even gold’s price patterns are like what we saw in 2008.

My previous comments on the analogies to 2008 and 2012 remain up-to-date:

Back in 2008, gold corrected to 61.8% Fibonacci retracement, but it stopped rallying approximately when the USD Index started to rally, and the general stock market accelerated its decline.

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 would change my mind with regard to gold itself? Perhaps if it broke above its January 2021 highs and confirmed this breakout. This would be an important technical indication on its own, but it would also be something very different from what happened in 2008 and 2012. If that happened along with strength in mining stocks, it would be very bullish. Still, if the above happened, and miners didn’t react at all or they declined, it would not be bullish despite the gains in the gold price itself.

The March 2021 low formed well below the previous low, but as far as other things are concerned, the current situation is similar to what happened in 2012. 

The relatively broad bottom with higher lows is what preceded both final short-term rallies – the current one, and the 2012 one. Their shape as well as the shape of the decline that preceded these broad bottoms is very similar. In both cases, the preceding decline had some back-and-forth trading in its middle, and the final rally picked up pace after breaking above the initial short-term high.

Interestingly, the 2012 rally ended on huge volume, which is exactly what we saw also on May 19 this year.Consequently, forecasting much higher silver or gold prices here doesn’t seem to be justified based on the historical analogies.

The thing I would like to emphasize here is that gold didn’t form the final top at the huge-volume reversal on Sep. 13, 2012. It moved back and forth for a while and moved a bit above that high-volume top, and only then the final top took place (in early October 2012). 

The same happened in September and in October 2008. Gold reversed on huge volume in mid-September, and it was approximately the end of the rally. The final top, however, formed after some back-and-forth trading and a move slightly above the previous high.

Consequently, the fact that gold moved a bit above its own high-volume reversal (May 19, 2021) is not an invalidation of the analogy, but rather its continuation.

There’s one more thing I would like to add, and it’s that back in 2012, gold corrected to approximately the 61.8% Fibonacci retracement level – furthermore, the same happened in 2008 as you can see in the below chart. Consequently, the fact that gold moved above its 50% Fibonacci retracement doesn’t break the analogy either. And even if gold moves to $1,940 or so, it will not break it. It’s not likely that it is going to move that high, as in both cases –in 2008 and 2012 – gold moved only somewhat above its high-volume reversal before forming the final top. So, as this year’s huge-volume reversal took place close to the 50% retracement and not the 61.8% retracement, it seems that we’ll likely see a temporary move above it, which will create the final top. And that’s exactly what we see happening so far this week.

The lower part of the above chart shows how the USD Index and the general stock market performed when gold ended its late-2012 rally and was starting its epic decline. In short, that was when the USD Index bottomed, and when the general stock market topped.

Also, please note that while it might seem bullish that gold managed to rally above its declining black resistance line recently (the one based on the 2020 top and the 2021 top), please note that the same happened in 2012 – I marked the analogous line with red. The breakout didn’t prevent gold from sliding. When the price reached the line, we saw a short-term bounce, but nothing more than that – the gold price fell through it in the following weeks.

On top of that, with the Fed’s confidence game won or lost by whether or not inflation proves “transitory,” wouldn’t the central bank appreciate lower gold prices? If you think about it, it would be awfully convenient for the price of gold to decline in order to prove the point of the transitory nature of inflation.

Now, as you know, I’m not a fan of all the conspiracy theories that are out there, and I’m not the first to shout gold manipulationorsilver manipulation every time the yellow or while metal goes down, but I also know that being realistic is one of my strengths. With the situation being what it is, and since the communities of top investment bankers and the community of officials interlace, I think that we have yet another reason to expect that the gold price is going to slide in the following weeks/months.

In addition, while gold has reached its dashed rising support line, the implications of its triangle-vertex-based reversal points remain much more significant. To that point, even if the yellow metal rises to the 61.8% Fibonacci level, it doesn’t change the medium-term outlook. For context, gold rallied to the 61.8% Fibonacci level in 2012 before suffering a profound drawdown. The bottom line? While short-term strength is not my base case, if gold happens to bounce, it’s likely the last “hurrah!” before the yellow metal succumbs to the bearish reality.

Finally, there are more 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 ~$1,450 to $1,500 range.

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
Editor-in-chief
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