Gold is at a critical juncture. Prices could top or breakout within the next 48-hours. Our cycle work favors a top. 

This week’s employment data could trigger a breakout in gold above $1800 or force an intermediate top. Expect increased volatility over the next 2-days. 

To sustain a breakout, I’d need to see a daily finish in futures above $1820. Whereas closing below $1770 in the coming days would promote a top followed by a 1 to 3-month decline. 

Beware of False Breakouts

A favorite trick of manipulators is to get prices just above a resistance level and then wash the market with sell orders. I’m not sure if that will happen this time, but it’s a distinct possibility. 

Our Gold Cycle Indicator reached 441 and is within maximum topping. The conditions are ripe for a cycle top. If prices peak, expect a decline in gold to $1450 - $1550.

 

Gold Prices

Gold is testing the waters around $1800, and I think we will know by Thursday’s employment report if prices are breaking out or topping. It would take a close below $1770 to support a potential top. Whereas a daily close above $1820 would promote a breakout and a run to $1900.

Silver Prices

Silver is also threatening to breakout to fresh highs, and a strong rally through $20.00 would be incredibly bullish. Prices are at a critical juncture - this is where price manipulators thrive, so be careful. 

GDX

I think we will find out within the next 48-hours if gold and miners are breaking to new highs or if prices are topping. To support a breakout in GDX, I’d need to see a strong rally through the $38.00 level. Failing to break through $38.00, on significant volume, would keep the potential for an immediate top alive. 

GDXJ

Juniors made a...

Historical precedents are in many a technician's toolbox – and it's a tool they reach for with success repeatedly. What lessons can we draw from the miners' performance back in 2016 and now?

We previously described the above HUI Index – flagship proxy for the gold miners – in the following way:

The HUI Index declined significantly, and then it rebounded significantly.

Both are likely linked. Miners first declined more sharply than they did in 2008, so the rebound was also sharper. Based on the stimulus and gold reaching new yearly highs, miners also rallied, and tried to move to new yearly highs. It's not surprising. 

However, if the general stock market is going to decline significantly one more time, and so will gold - and as you have read above, it is very likely - then miners are likely to slide once again as well. This would be in tune with what happened in 2008.

At this time, it may seem impossible or ridiculous that miners could slide below their 2015 lows, but that's exactly what could take place in the following weeks. With gold below their recent lows and the general stock market at new lows, we would be surprised not to see miners even below their 2020 lows. And once they break below those, their next strong resistance is at the 2016 low. However, please note that miners didn't bottom at their previous lows in 2008 - they moved slightly lower before soaring back up.

Please note that the HUI Index just moved to its 2016 high which serves as a very strong resistance. Given the likelihood of a very short-term (1-2 days?) upswing in stocks and perhaps also in gold (to a rather small extent, but still), it could be the case that gold miners attempt to rally above their 2016 high and... Spectacularly fail, invalidating the move. This would be a great way to start the next huge move lower.

And what happened next?

The HUI Index invalidated the breakout above its 2016 high in terms of the weekly closing prices and also in terms of the monthly closing prices.

The HUI ended last week...