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If you're interested in gold trading or silver trading and would like to see how we apply our gold trading tips in practice, you've come to the right place. The Gold & Silver Trading Alerts are the daily alert service provided by Przemyslaw Radomski, CFA that deals directly with the latest developments on the precious metals market. The situation is analyzed from long-, medium-, and short-term perspectives and topics covered go well beyond the world of precious metals themselves, ranging from the analysis of currencies, stocks, ratios, as well as using proprietary trading tools. Subscribers also receive intra-day follow-ups in case the market situation requires it. 1-2 alerts per week are posted also in our Articles section, so you can review these real-time samples before you subscribe.

Whether you already subscribed or not, we encourage you to find out how to make the most of our alerts and read our replies to the most common alert-and-gold-trading-related-questions.

  • Gold Bearish Outlook: Everything Falls Into Place

    September 24, 2021, 8:15 AM

    Gold plunged, silver declined, and mining stocks closed at new yearly lows. In other words, the bearish trend continues in tune with my warnings.

    Let’s start today’s analysis with what I wrote about the USD Index yesterday:

    The USD Index moved higher yesterday, and the precious metals sector didn’t decline, which might be viewed as a sign of strength of the latter, but I don’t see it in this way. Why? Because yesterday’s session was an exception from the rule due to the importance of the news that accompanied it – the Fed’s decisions and comments. These days tend to be rich in sudden price swings in all directions, as investors and traders try to guess what the news is going to be, and then they are unsure how to react to the news when it finally hits the market. Consequently, yesterday’s lack of declines in the PMs is not a sign of their strength – it was likely a more-or-less random kind of reaction. If we see more of that, the implications might change, but that’s not the case right now.

    However, instead of a bullish confirmation, we saw a gargantuan bearish confirmation.

    ChartDescription automatically generated

    The USD Index declined by 0.43 and gold – instead of rallying, which would have been normal – declined by almost $30. Moreover, by declining that much, it once again moved below the declining support/resistance line, telling us that the previous breakdown was not accidental.

    Chart, histogramDescription automatically generated

    Gold closed the day at new monthly lows, but still relatively far from its previous 2021 lows. Don’t worry – it’s very likely to get there, and the back-and-forth type of decline is nothing bullish. In fact, it makes the current situation even more similar to what we saw in 2013.

    What Did We See?

    Graphical user interface, chart, histogramDescription automatically generated

    Between September 2012 and February 2013, gold declined in a back-and-forth manner as well, and the current situation seems to be analogous to what we saw in February 2013. At the time, the final short-term upswing took gold to its 50-day moving average (marked with blue), and we saw something very similar recently. The recent high ($1788.40) was very close to gold’s 50-day moving average too – less than $10 from it.

    You can see the comparison even more clearly in the video that I posted on Wednesday (Sep. 22) – on a side note, I was recording this when gold was moving higher, right to its Sep. 22 top. So, it turns out that I said that gold might top close to its 50-day moving average instead of rallying higher, right before exactly that happened.

    Chart, histogramDescription automatically generated

    Silver didn’t decline to new yearly lows, but that’s not as important as the fact that it was unable to get back above the previous yearly lows. Consequently, the outlook for silver remains bearish even without considering all the other (non-silver-price-based) factors.

    Gold Stocks

    ChartDescription automatically generated with medium confidence

    Gold stocks – the GDX ETF – closed at new 2021 lows, and it happened shortly after the ETF confirmed the breakdown below its March and August 2021 lows. That’s exactly what was likely to happen, and that’s exactly what one would expect as the first step of a bigger decline.

    My previous downside target of ~$28 for the GDX ETF remains up-to-date (in fact, GDX might bottom a bit below that). Naturally, that’s just a temporary downside target after which we might see a breather and then another, even bigger slide.

    ChartDescription automatically generated

    Junior mining stocks broke and closed at new 2021 lows too. The outlook for both (senior and junior miners) is clearly bearish.

    ChartDescription automatically generated

    The stock market invalidated the breakdown below the previous lows, so the technical situation here improved. Nonetheless, due to two closes below the previous lows, the situation is already different than it was before. Perhaps stocks are forming a head and shoulders pattern here, but it’s too early to say so with certainty.

    What is certain, however, is that a decline in stocks is not necessary for the precious metals sector (including miners) to decline – they did exactly that yesterday.

    Summing up, the outlook for the next few months for the precious metals sector remains very bearish, and it seems that the profits on our short position in the junior mining stocks (already substantial) will become even bigger in the future.

    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 targets for gold and mining stocks 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

  • Yup, Everything Is Still Bearish

    September 23, 2021, 9:44 AM

    The Fed has decided, and the Fed has spoken. And the markets reacted in tune with their previous trends. In other words, the bearish outlook for the PMs remains very much intact.

    Here’s the key chart for us, in light of the profitable short position in the miners that we have. While our short position is in the junior miners, it is the GDX ETF that is more important, as its actions are observed by more market participants.

    ChartDescription automatically generated

    The GDX ETF confirmed the breakdown to new 2021 lows, and it did so after trying to rally. This makes the most recent price action even more similar to what we saw in mid-August after the previous breakdown.

    The situation was already extremely bearish previously, but it’s getting ridiculously bearish now.

    ChartDescription automatically generated

    The GDXJ ETF also continued to move back and for the below the previous September lows. Despite the intraday attempt to move higher, it ended the session mere $0.16 higher.

    So, nothing really changed – the outlook for the miners remains clearly bearish.

    Chart, histogramDescription automatically generated

    Gold ended yesterday’s session relatively unchanged, so practically everything that I described in yesterday’s video commentary remains up-to-date. If you haven’t had the chance to watch it so far, I encourage you to do so today, tomorrow, or over the weekend.

    Chart, histogramDescription automatically generated

    Despite yesterday’s $0.30 rally, silver didn’t invalidate its previous breakdown to new yearly lows, so the outlook remains clearly bearish also from this point of view.

    ChartDescription automatically generated

    The USD Index moved higher yesterday, and the precious metals sector didn’t decline, which might be viewed as a sign of strength of the latter, but I don’t see it in this way. Why? Because yesterday’s session was an exception from the rule due to the importance of the news that accompanied it – Fed’s decisions and comments. These days tend to be rich in sudden price swings in all directions as investors and traders try to guess what the news is going to be and then they are unsure how to react to the news when it finally hits the market. Consequently, yesterday’s lack of declines in the PMs is not a sign of their strength – it was likely a more-or-less random kind of reaction. If we see more of that, the implications might change, but that’s not the case right now.

    ChartDescription automatically generated

    Finally, while the S&P 500 moved above the mid-August lows in intraday terms, please note that yesterday was the third consecutive close below the mid-August bottom in closing price terms. This means that from this point of view, the breakdown was confirmed. The S&P 500 futures are higher in today’s pre-market trading, but they are just a few index points above the mid-August lows (closing prices), so it’s too early to say that the breakdown was invalidated – we would need to see a close above those lows (4,400.27) to say that

    Summing up, the outlook for the next few months for the precious metals sector remains very bearish.

    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 targets for gold and mining stocks 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

  • How Do You Get Inflation Under Control?

    September 22, 2021, 9:33 AM

    Raise the dollar, drop the metals. Under most possible scenarios, things don’t look good for gold, silver, and mining stocks – for the medium-term.

    With the USD Index and U.S. Treasury yields the main fundamental drivers of the PMs’ performance, some confusion has arisen due to their parallel and divergent moves. For example, sometimes the USD Index rises while U.S. Treasury yields fall, or vice-versa, and sometimes the pair move higher/lower in unison. However, it’s important to remember that different economic environments have different impacts on the USD Index and U.S. Treasury yields.

    To explain, the USD Index benefits from both the safe-haven bid (stock market volatility) and economic outperformance relative to its FX peers. Conversely, U.S. Treasury yields only benefit from the latter. Thus, when economic risks intensify (like what we witnessed with Evergrande on Sep. 20), the USD Index often rallies while U.S. Treasury yields often fall. Thus, the economic climate is often the fundamental determinant of the pairs’ future paths.

    For context, I wrote on Apr.16:

    The PMs suffer during three of four possible scenarios:

    1. When the bond market and the stock market price in risk, it’s bearish for the PMs
    2. When the bond market and the stock market don’t price in risk, it’s bearish for the PMs
    3. When the bond market doesn’t price in risk, but the stock market does, it’s bearish for the PMs
    4. When the bond market prices in risk and the stock market doesn’t, it’s bullish for the PMs

    Regarding scenario #1, when the bond market and the stock market price in risk (economic stress), the USD Index often rallies and its strong negative correlation with the PMs upends their performance. Regarding scenario #2, when the bond market and the stock market don’t price in risk, U.S. economic strength supports a stronger U.S. dollar and rising U.S, Treasury yields reduce the fundamental attractiveness of gold. For context, the PMs are non-yielding assets, and when interest rates rise, bonds become more attractive relative to gold (for some investors). Regarding scenario #3, when the stock market suffers and U.S. Treasury yields are indifferent, the usual uptick in the USD Index is a bearish development for the PMs (for the same reasons outlined in scenario #1). Regarding scenario #4, when the bond market prices in risk (lower yields) and the stock market doesn’t, inflation-adjusted (real) interest rates often decline, and risk-on sentiment can hurt the USD Index. As a result, the cocktail often uplifts the PMs due to lower real interest rates and a weaker U.S. dollar.

    The bottom line? The USD Index and U.S. Treasury yields can move in the same direction or forge different paths. However, while a stock market crash is likely the most bearish fundamental outcome that could confront the PMs, scenario #2 is next in line. While it may (or may not) seem counterintuitive, a strong U.S. economy is bearish for the PMs. When U.S. economic strength provides a fundamental thesis for both the USD Index and U.S. Treasury yields to rise (along with real interest rates), the double-edged sword often leaves gold and silver with deep lacerations.

    In the meantime, though, with investors eagerly awaiting the Fed’s monetary policy decision today, QE is already dying a slow death. Case in point: not only has the USD Index recaptured 93 and surged above the neckline of its inverse (bullish) head & shoulders pattern, but the greenback’s fundamentals remain robust. With 78 counterparties draining more than $1.240 trillion out of the U.S. financial system on Sep. 21, the Fed’s daily reverse repurchase agreements hit another all-time high.

    Please see below:

    Graphical user interfaceDescription automatically generatedSource: New York Fed

    To explain, a reverse repurchase agreement (repo) occurs when an institution offloads cash to the Fed in exchange for a Treasury security (on an overnight or short-term basis). And with U.S. financial institutions currently flooded with excess liquidity, they’re shipping cash to the Fed at an alarming rate. And while I’ve been warning for months that the activity is the fundamental equivalent of a taper – due to the lower supply of U.S. dollars (which is bullish for the USD Index) – the psychological effect is not the same. However, as we await a formal taper announcement from the Fed, the U.S. dollar’s fundamental foundation remains quite strong.

    Furthermore, with the Wall Street Journal (WSJ) publishing a rather cryptic article on Sep. 10 titled “Fed Officials Prepare for November Reduction in Bond Buying,” messaging from the central bank’s unofficial mouthpiece implies that something is brewing. And while the Delta variant and Evergrande provide the Fed with an excuse to elongate its taper timeline, surging inflation has the Fed increasingly handcuffed.

    As a result, Goldman Sachs Chief U.S. Economist David Mericle expects the Fed to provide “advance notice” today and set the stage for an official taper announcement in November. He wrote:

    While the start date now appears set, the pace of tapering is an open question. Our standing forecast is that the FOMC will taper at a pace of $15bn per meeting, split between $10bn in UST and $5bn in MBS, ending in September 2022. But a number of FOMC participants have called instead for a faster pace that would end by mid-2022, and we now see $15bn per meeting vs. $15bn per month as a close call.”

    On top of that, with stagflation bubbling beneath the surface, another hawkish shift could materialize.

    To explain, I wrote on Jun. 17:

    On Apr. 30, I warned that Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), was materially behind the inflation curve.

    I wrote:

    With Powell changing his tune from not seeing any “unwelcome” inflation on Jan. 14 to “we are likely to see upward pressure on prices, but [it] will be temporary” on Apr. 28, can you guess where this story is headed next?

    And with the Fed Chair revealing on Jun. 16 what many of us already knew, he conceded:

    TextDescription automatically generatedSource: CNBC

    Moreover, while Powell added that “our expectation is these high inflation readings now will abate,” he also conceded that “you can think of this meeting that we had as the ‘talking about talking about’ [tapering] meeting, if you’d like.”

    However, because actions speak louder than words, notice the monumental shift below?

    TableDescription automatically generatedSource: U.S. Fed

    To explain, if you analyze the red box, you can see that the Fed increased its 2021 Personal Consumption Expenditures (PCE) Index projection from a 2.4% year-over-year (YoY) rise to a 3.4% YoY rise. But even more revealing, the original projection was made only three months ago. Thus, the about face screams of inflationary anxiety.

    What’s more, I highlighted on Aug. 5 that the hawkish upward revision increased investors’ fears of a faster rate-hike cycle and contributed to the rise in the USD Index and the fall in the GDXJ ETF (our short position).

    Please see below:

    Chart, line chart, histogramDescription automatically generated

    And why is all of this so important? Well, with Mericle expecting the Fed to increase its 2021 PCE Index projection from 3.4% to 4.3% today (the red box below), if the Fed’s message shifts from we’re adamant that inflation is “transitory” to “suddenly, we’re not so sure,” a re-enactment of the June FOMC meeting could uplift the USD Index and upend the PMs once again. For context, the FOMC’s July meeting did not include a summary of its economic projections and today’s ‘dot plot’ will provide the most important clues.

    Please see below:

    TableDescription automatically generated

    Finally, with CNBC proclaiming on Sep. 21 that the Fed is “widely expected to indicate it is getting ready to announce it will start paring back its $120 billion in monthly purchases of Treasuries and mortgage-backed securities,” even the financial media expects some form of “advance notice.”

    A picture containing text, bottle, darkDescription automatically generatedSource: CNBC

    The bottom line? While the Delta variant and Evergrande have provided the Fed with dovish cover, neither addresses the underlying problem. With inflation surging and the Fed’s 2% annual target looking more and more like wishful thinking, reducing its bond-buying program, increasing the value of the U.S. dollar, and decreasing commodity prices is the only way to get inflation under control. In absence, the Producer Price Index (PPI) will likely continue its upward momentum and the cost-push inflationary spiral will likely continue as well.

    In conclusion, the gold miners underperformed gold once again on Sep. 21 and the relative weakness is profoundly bearish. Moreover, while the USD Index was roughly flat, Treasury yields rallied across the curve. And while Powell will do his best to thread the dovish needle today, he’s stuck between a rock and a hard place: if he talks down the U.S. dollar (like he normally does), commodity prices will likely rise, and inflation will likely remain elevated. If he acknowledges reality and prioritizes controlling inflation, the U.S. dollar will likely surge, and the general stock market should suffer. As a result, with the conundrum poised to come to a head over the next few months (maybe even today), the PMs are caught in the crossfire and lower lows will likely materialize over the medium term.

    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 targets for gold and mining stocks 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

  • Stocks Mayhem: Is Evergrande a Perfect Scapegoat?

    September 21, 2021, 9:23 AM

    Evergrande. The topic everyone requested me to cover, so I will. But before I do, I would like to emphasize that I’ve been writing about it for months. No, not about Evergrande per se, but about the situation being similar to 2008. The exact trigger and the name of the company are not really relevant. What is important is that the storm has been brewing for some time, and now, when we finally see the straw that broke the camel’s neck, it seems like a game-changer. But it’s not a game-changer. It’s a milestone telling us that the game is going very similarly to how it was played 13 years ago (in 2008).

    Can the markets repeat both previous patterns at the same time (2008 and 2013)? Sure, why not. The history doesn’t repeat itself to the letter, it rhymes instead. And the current rhyme is somewhat similar to both previous situations.

    Previously, gold and gold stocks have been quite clear with the repeat of their respective 2011-2013 price actions. The USD Index is moving steadily (with corrections) higher this year, also similarly to what we saw then.

    However, if the general stock market is about to plunge, then we might lean more toward its 2008 counterpart, as that was the key thing on the charts at that time (as far as the main markets are concerned). The USD Index soared at that time, which might happen this time as well. But the most important implication from the point of view of a precious metals investor and trader is the dramatic slide in mining stocks and in silver that we saw in 2008. Yes, I’ve been repeating that these two parts of the precious metals sector were likely to fall the most (perhaps miners first, silver a bit later – a’la 2020), but what we’re seeing now in the general stock market and what kind of news accompanies it (major bankruptcy threat related to the real estate market) has 2008 written all over it.

    The Plunge Protection Team

    And yet, there is one thing I haven’t considered previously that hit me today regarding Evergrande. There is something different this time that makes the declines in stocks and the precious metals sector (especially silver, gold stocks, and silver stocks) even more likely.

    ChartDescription automatically generated

    One might say that the thing that prevented the stock market from declining was the rising dashed line. Or the 50-day moving average. And they have likely indeed played an important part on a technical level. But the thing that really prevented the stock market from declining was… the issue of blame.

    You know, it’s not rocket science that the stock markets are overheated. There are myriads of indicators pointing to the overbought status, and I’ve been featuring them for months. Furthermore, the authorities know that.

    Earlier this year, the largest U.S. banks had to prove that they would be able to withstand a 55% crash in the stock market. Interesting, right? Of course, one could say that it was just a normal precautionary test, irrelevant to the authorities knowing that stocks will need to crash eventually.

    If the Powers That Be know that stocks have to crash and that banks can take it, then it’s safe to let the markets do their thing, right?

    Wrong. People might put the blame on those Powers, and the Powers wouldn’t like that, as they like votes, power, money, and such. Blame doesn’t go well with those.

    So, if there is indeed the “Plunge Protection Team” that’s been actively working on keeping the stock market afloat until it’s obvious that the blame can be placed somewhere else, ideally on a political adversary, then they just had their dreams fulfilled.

    The Evergrande Group – a Chinese real estate developer – is a perfect scapegoat here. Of course, the real reason that the stock markets got too high practically all over the world is caused by excessive money printing / stimulus of all kinds. But from the political point of view, it can now be narrated to be someone else’s fault.

    “Yes, folks, it’s very unfortunate that you lost your retirement money, and your kids will have trouble finding jobs in this stagflation… But it’s all because of China! We did all we could, but they caused all this – we couldn’t prevent it despite all our best efforts. Good luck to you and vote for us again so that we may fight for your rights and your financial safety on your behalf!”

    Or something along those lines. That’s what the narrative might be once the stock markets crash globally and once the real-life implications kick in.

    I’m not sure if anyone already called it “the Chinese crisis”, but if not, please mark it in your calendars that I’m forecasting today (Sep. 21, 2021) that this name will emerge sooner or later. Also, please keep in mind that months ago, I wrote that bitcoin was topping (at least in the medium term) at about $50,000. It then moved higher somewhat, but overall, it seems that we’re seeing a broad top in this market. The rising USDX is unlikely to help it, either way.

    Also, please don’t get me wrong. I’m not “cheering for China” here, defending China, etc. In fact, I’m not cheering at all. I’m just analyzing the situation as realistically (perhaps even “brutally”) as I can, and I’m reporting my findings to you, along with discussing the implications for the precious metals sector.

    And the implications for the precious metals sector of the above are very bearish.

    Where Are the Metals Headed?

    Now, on a short-term basis, the reactions might be relatively chaotic, as on one hand, the situation getting out of hand might trigger safe-haven buying for gold, and on the other hand, it might trigger safe-haven buying for the USD Index. This might trigger quite many erratic price swings in the short run.

    Chart, histogramDescription automatically generated

    Gold moved higher by $12 yesterday, but this move seems to have just been a breather after a powerful daily decline.

    Why? Because gold miners are confirming their breakdown and they completely ignored gold’s rally, for instance.

    ChartDescription automatically generated

    The GDX ETF closed below the previous 2021 lows for the second consecutive trading day. If we get a daily close below these lows today, the breakdown will be fully confirmed, and the road to new lows will be fully open.

    Just as I wrote previously, the outlook for the precious metals market remains extremely bearish for the next several months.

    ChartDescription automatically generated

    Junior miners moved lower yesterday, catching up with the GDX’s decline. The GDXJ didn’t close below the August lows yet, but it’s very close to them. The outlook for the junior mining stocks remains very bearish, especially given the likely declines in the general stock market. Remember how profoundly juniors plunged in 2020 when the general stock market declined? In my view, we’ll likely see something similar also this time.

    Chart, histogramDescription automatically generated

    In yesterday’s analysis, I wrote that silver moved to a new yearly low in terms of the daily closing prices. This move was confirmed, and the bearish outlook was emphasized by the move to new intraday 2021 lows. The losses of those who purchased silver close to its yearly top are now very significant. And it’s going to get worse, as silver is likely to decline more – likely much more – before it rallies back up.

    The USD Index suggests caution in the very short term, as it reversed before the end of yesterday’s session, and it did so after moving to its March highs.

    ChartDescription automatically generated

    Indeed, the USD Index is declining in today’s pre-market trading. But does it change much? It doesn’t. Even if the USD Index declines a bit here (and PMs move a bit higher), it’s still likely to soar soon (and PMs are likely to plunge soon).

    ChartDescription automatically generated

    The long-term USD Index chart and the analogy to its previous performance after mid-year bottoms continue to have bullish implications for the medium term. In particular, the analogies to 2014 and 2008 are particularly bullish.

    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 targets for gold and mining stocks 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

  • USD Bears Are Fresh Out of Honey Pots

    September 20, 2021, 9:31 AM

    The declining medium-term outlook for gold, silver, and mining stocks will eat away at the honey pot of US dollar bears. Get ready for bee stings.

    With headline after headline attempting to knock the USD Index off of its lofty perch, I warned on Sep. 13 that dollar bears will likely run out of honey sooner rather than later.

    I wrote:

    While the USD Index was under fundamental fire in recent weeks, buyers eagerly hit the bid near the 38.2% Fibonacci retracement level. And after positive sentiment lifted the greenback back above the neckline of its inverse (bullish) head & shoulders pattern last week, the USDX’s medium-term outlook remains profoundly bullish.

    More importantly, though, after the USD Index rallied by 0.63% last week and further validated its bullish breakout, gold, silver, and mining stocks ran in the opposite direction. And with the divergence likely to accelerate over the medium term, the swarm should sting the precious metals during the autumn months.

    Please see below:

    ChartDescription automatically generated

    Conversely, if the USD Index encounters resistance as it attempts to make a new 2021 high, gold, silver, and mining stocks could enjoy an immaterial corrective upswing. However, the optimism will likely be short lived, and it’s likely a matter of when, not if, the USD Index reaches the illustrious milestone.

    Equally bullish for the greenback, with the USD Index’s technical strength signaling an ominous ending for the Euro Index, I warned on Sep. 13 that the latter faced a tough road ahead.

    I wrote:

    While I have less conviction in the Euro Index’s next move relative to the USD Index, more likely than not, the Euro Index should break down once again and the bearish momentum should resume over the medium term.

    And after the Euro Index sunk below the neckline of its bearish head & shoulders pattern last week, lower lows remains the most likely outcome over the medium term.

    Please see below:

    Chart, line chartDescription automatically generated

    Adding to our confidence (don’t get me wrong, there are no certainties in any market; it’s just that the bullish narrative for the USDX is even more bullish in my view), the USD Index often sizzles in the summer sun and major USDX rallies often start during the middle of the year. Summertime spikes have been mainstays on the USD Index’s historical record and in 2004, 2005, 2008, 2011, 2014 and 2018 a retest of the lows (or close to them) occurred before the USD Index began its upward flights (which is exactly what’s happened this time around).

    Furthermore, profound rallies (marked by the red vertical dashed lines below) followed in 2008, 2011 and 2014. With the current situation mirroring the latter, a small consolidation on the long-term chart is exactly what occurred before the USD Index surged in 2014. Likewise, the USD Index recently bottomed near its 50-week moving average; an identical development occurred in 2014. More importantly, though, with bottoms in the precious metals market often occurring when gold trades in unison with the USD Index (after ceasing to respond to the USD’s rallies with declines), we’re still far away from that milestone in terms of both price and duration.

    Moreover, as the journey unfolds, the bullish signals from 2014 have resurfaced once again. For example, the USD Index’s RSI is hovering near a similar level (marked with red ellipses), and back then, a corrective downswing also occurred at the previous highs. More importantly, though, the short-term weakness was followed by a profound rally in 2014, and many technical and fundamental indicators signal that another reenactment could be forthcoming.

    Please see below:

    ChartDescription automatically generated

    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 the ones 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 still remains at the greenback’s back.

    Please see below:

    ChartDescription automatically generated

    The bottom line?

    Once the momentum unfolds, ~94.5 is likely the USD Index’s first stop, ~98 is likely the next stop after that, and the USDX will likely exceed 100 at some point over the medium or long term. Keep in mind though: we’re not bullish on the greenback because of the U.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 USD Index’s sweet performance left sour tastes in the precious metals’ mouths. And with the former’s bullish breakout signaling an ominous future for the latter, gold, silver, and mining stocks will likely confront new lows over the medium term. However, once the autumn months fade and the winter weather approaches, buying opportunities may present themselves. And with unprecedented monetary and fiscal policy likely to underwrite new highs in the coming years, the long-term outlook for gold, silver, and mining stocks remains extremely bright.

    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 targets for gold and mining stocks 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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