Gold Forecast: Nothing New… But Was It Nothing for Sure?

CFA, Editor & Founder @ Sunshine Profits
October 5, 2021

gold bar and nuggetsIf there was a way to describe the last days on the precious metals market, it would be “a whole lot of nothing”. More or less, that’s what happened.

Let’s start with the nothing that happened in the USD Index.

The USDX moved lower very recently, but it changed absolutely nothing. The USD Index moved back to:

  • Its previous highs

  • Its previous rising resistance line based on the previous highs, which it has verified as support

  • The rising dashed support line based on the recent lows.

Moving to a rising support line and verifying a previous breakdown is not a bearish development. Conversely, it’s something quite common during an uptrend.

I previously mentioned that the USD Index is likely to consolidate either below or above its horizontal resistance at about 94.5, and what we’re seeing right now is a consolidation below this level. Once this level is taken out, the USDX could actually rally further without a bigger post-breakout consolidation. Consequently, I’m removing the short-term target area around this level as it no longer seems likely that the USDX will form a meaningful top there.

The next “nothing” comes from the gold market.

There’s a local breakout above the dashed resistance line, but it’s so much in tune with what happened in 2013 that it’s difficult to view it as bullish.

Likewise, the very short-term breakout that we just saw is similar to what we saw in… early 2013. Remember the similarity to early 2013 that I described on multiple markets? It’s not just gold, it’s the HUI Index, the HUI to gold ratio, and even the 10-year yield.

The small breakout above the red dashed line in early 2013 didn’t take the yellow metal much higher. Gold only finished moving back and forth before sliding to previous important lows, and that was just the beginning of a much bigger move lower.

The very bearish analogy remains intact, so what changed? Nothing.

Any Impact On Miners?

Additionally, please have a look at how weak the mining stocks’ reaction to gold’s upswing was.

Even without looking at exact percentage gains, it’s clear that the GDX has barely moved back up. It didn’t even manage to move back above $30 in yesterday’s intraday trading.

Juniors (GDXJ) confirm seniors’ (GDX) relative weakness, and they both suggest that the precious metals sector is likely to move lower in the following weeks.

Summary

To summarize, the outlook for the precious metals sector remains extremely bearish for the next few months. It seems that we are in the final part of this short-term decline, which is why I expect silver to catch up with mining stocks and decline quite substantially.

From the medium-term point of view, the key two long-term factors remain the analogy to 2013 in gold and the broad head and shoulders pattern in the HUI Index. They both suggest much lower prices ahead.

And as silver often moves in close relation to the yellow metal, when gold falls, Silver is likely to decline as well – it has probably already started its slide. The times when gold is continuously trading well above the 2011 highs will come, but they are unlikely to be seen without being preceded by a sharp drop first.

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Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Sunshine Profits - Effective Investments through Diligence and Care

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All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

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Przemyslaw Radomski, CFA, is the founder, owner and the main editor of SunshineProfits.com.  You can reach Przemyslaw at: http://www.sunshineprofits.com/help/contact-us/.

The Incas thought gold represented the glory of their sun god and referred to the precious metal as “Tears of the Sun.”

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