Gold Price Forecast – The Power Of Turning Point In Gold And Silver

July 13, 2020
CFA, Editor & Founder @ Sunshine Profits

For all the buzz gold gets, it's easy to forget silver. Its turning points are telling a really interesting story here, so let's see how well the technique worked for the white metal. Next in this analysis, we'll see what it means for gold.

The 2019 silver top took place almost right at the long-term turning point and the high that was formed back then, wasn’t exceeded ever since. Besides showing you how useful the long-term turning points were, and how dangerous ignoring them would have been, it shows in a clear way just how little silver rallied recently compared to gold. Silver is just several dollars above its 2015 lows and tens of dollars away from its 2011 high.

Is it really a true bull market in the precious metals sector if it’s practically only gold that is showing substantial strength?

Gold’s very long-term turning point is here and since the most recent move has definitely been to the upside, its implications are bearish.

They are particularly bearish since gold just invalidated the tiny breakout above its November 2011 high.

We used the purple lines to mark the previous price moves that followed gold's long-term turning points, and we copied them to the current situation. We copied both the rallies and declines, which is why it seems that some moves would suggest that gold moves back in time - the point is to show how important the turning point is in general.

The take-away is that the long-term turning point is a big deal, and that gold could fall significantly before it soars due to its extremely positive fundamental outlook. This also means that the downside target of $1,400 or slightly lower (the 2016 - 2018 highs) is well within the range of the possible moves.

The initial move lower is likely to end at about $1,700, though as that’s where we have support that had already proved to be strong several times.

So far, gold has been moving more or less in tune with the way it was behaving after the previous tops. The early part of the decline is usually characterized by some back-and-forth action as many investors don’t realize that it’s a top yet.

The dashed lines represent the recent declines and they make the comparison of the declines’ pace easier. When will gold’s decline be more decisive? When it breaks below the rising support lines and the April low. This means that once gold slides below $1,780, the pace at which declines is likely to accelerate.

Based on the declines that were similarly big as the move that would take gold to about $1,700, we can expect gold to reach this level sometime this or next week.

Summary

Silver's 2019 top formed almost precisely at the long-term turning point, and given where it is right now, the implications are bearish. Especially since gold' turning point is here, and as the yellow metal has previously risen, it means that now…

So far, gold has been more or less following the price path right after previous tops. Initially, the downswing is to target $1,700, and it could happen as early as this or next week.

The following days are not likely to be pleasant times for anyone who refuses to jump on the bullish bandwagon just because prices moved higher in the previous months. But what’s profitable is rarely the thing that feels good initially. As silver often moves in close relation to the king of metals, forecasting gold’s rally without a bigger decline first is thus likely to be misleading. The times when gold is trading well above the 2011 highs will come, but they are unlikely to be seen without being preceded by a sharp drop first.

Naturally, the above is up-to-date at the moment of publishing and the situation may – and is likely to – change in the future. If you’d like to receive follow-ups to the above analysis, we invite you to sign up to our gold newsletter. You’ll receive our articles for free and if you don’t like them, you can unsubscribe in just a few seconds. Sign up today.

Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager
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 term “carat” comes from “carob seed,” which was standard for weighing small quantities in the Middle East.

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