Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Covid and Democrat Blue Wave Beats Gold - 15th Jan 21
On Regime Change, Reputations, the Markets, and Gold and Silver - 15th Jan 21
US Coronavirus Pandemic Final Catastrophe 2021 - 15th Jan 21
The World’s Next Great Onshore Oil Discovery Could Be Here - 15th Jan 21
UK Coronavirus Final Pandemic Catastrophe 2021 - 14th Jan 21
Here's Why Blind Contrarianism Investing Failed in 2020 - 14th Jan 21
US Yield Curve Relentlessly Steepens, Whilst Gold Price Builds a Handle - 14th Jan 21
NEW UK MOT Extensions or has my Car Plate Been Cloned? - 14th Jan 21
How to Save Money While Decorating Your First House - 14th Jan 21
Car Number Plate Cloned Detective Work - PY16 JXV - 14th Jan 21
Big Oil Missed This, Now It Could Be Worth Billions - 14th Jan 21
Are you a Forex trader who needs a bank account? We have the solution! - 14th Jan 21
Finetero Review – Accurate and Efficient Stock Trading Services? - 14th Jan 21
Gold Price Big Picture Trend Forecast 2021 - 13th Jan 21
Are Covid Lockdowns Bullish or Bearish for Stocks? FTSE 100 in Focus - 13th Jan 21
CONgress "Insurrection" Is Just the Latest False Flag Event from the Globalists - 13th Jan 21
Reflation Trade Heating Up - 13th Jan 21
The Most Important Oil Find Of The Next Decade Could Be Here - 13th Jan 21
Work From Home £10,000 Office Tour – Workspace + Desk Setup 2021 Top Tips - 12th Jan 21
Collect a Bitcoin Dividend Without Owning the King of Cryptos - 12th Jan 21
The BAN Hotlist trade setups show incredible success at the start of 2021, learn how you can too! - 12th Jan 21
Stocks, Bitcoin, Gold – How Much Are They Worth? - 12th Jan 21
SPX Short-term Top Imminent - 12th Jan 21
Is This The Most Exciting Oil Play Of 2021? - 12th Jan 21
Why 2021 Will Be the Year Self-Driving Cars Go Mainstream - 11th Jan 21
Gold Began 2021 With a Bang, Only to Plunge - 11th Jan 21
How to Test Your GPU Temperatures - Running Too Hot - GTX 1650 - Overclockers UK - 11th Jan 21
Life Lesson - The Early Bird Catches the Worm - 11th Jan 21
Precious Metals rally early in 2021 - 11th Jan 21
The Most Exciting Oil Stock For 2021 - 11th Jan 21
Financial Market Forecasts 2021: Navigation in Uncharted Waters - 10th Jan 21
An Urgent Message to All Conservatives, Right-Wingers and Patriots - 10th Jan 21
Despite Signs to the Contrary, Gold Price at or Near Top - 10th Jan 21 -
Ultimate Guide On The 6 Basic Types Of Index Funds - 10th Jan 21
Getting Vaccinated at TESCO - Covid-19 Vaccinations at UK Supermarket Pharmacies and Chemists - 10th Jan 21
Cheers for the 2021 Stock Market and These "Great Expectations" - 9th Jan 21
How to Plan Your Child With Better Education - 9th Jan 21
How To Find The Best Casino - 9th Jan 21
Gold Is Still a Bargain Buy - 8th Jan 20
Gold Price Set to Soar as Hyperinflation Looms - 8th Jan 21
Have Big Dreams? Here's How to Pay for Them - 8th Jan 21
Will the Fed Support Gold Prices in 2021? - 8th Jan 21
Stocks trading strategies for beginners - 8th Jan 21
Who is Buying and Selling Stocks in 2021 - 8th Jan 21
Clap for NHS Heroes 2021 as Incompetent Government Loses Control of Virus Again! - 8th Jan 21
Ultimate Gaming and Home Working PC System Build 2021 - 5950X, RTX 3080, Asus MB - Scan Computers UK - 7th Jan 21
Inflation the bug-bear looking forward through 2021 - 7th Jan 21
ESG ETF Investing Flows Drive Clean Energy to Fresh Highs - 7th Jan 21
5 Financial Market Surprises in 2021 - 7th Jan 21
Time to ‘Reset’ Your Investment Portfolio in 2021? - 7th Jan 21
Bitcoin Price Collapses almost 20% at the start 2021 - 7th Jan 21
Fed Taper Nervous Breakdown - 6th Jan 21
What Will the U.S. Dollar Ring in for 2021? - 6th Jan 21
Stock market frenzy- Ride the bandwagon but be sure to take along some gold coins - 6th Jan 21
Overclockers UK Custom Build Gaming System Review Heat Test and Final Conclusion - 6th Jan 21
Precious Metals Resuming Bull Market, Gold, Silver, GDX Trend Forecasts 2021 - 5th Jan 21
Trump’s Iran-COVID-Gate Anniversary  - 5th Jan 21
2021 May Be A Good Year For The Cannabis / Marijuana Sector - 5th Jan 21
Stock Market Approaching an Important Target - 5th Jan 21
Consumer Prices Are Not Reflecting Higher Inflation; Neither Is The CRB - 5th Jan 21
NEW UK Coronavirus PANIC FULL Lockdown Imminent, All Schools to Close! GCSE Exams Cancelled! - 4th Jan 21
The Year the World Fell Down the Rabbit Hole - 4th Jan 21
A Year Like No Other for Precious Metals… and Everything Else - 4th Jan 21
The Stocks Bull Market is Only Half Completed - 4th Jan 21
An In- Depth Look At Gold Price Trend - 4th Jan 21
Building America Back After a Dark Covid Winter - 4th Jan 21
America's Dark Covid Winter Ahead - 4th Jan 21
Buy a Landrover Discovery Sport in 2021? 3 Year Driving Review - 3rd Jan 21
Stock Market Major Peak in Early April 2021 - 3rd Jan 21
Travel and Holidays 2021 - Flight Knight Cabin Bag Review - 3rd Jan 21
�� Happy New Year 2021 Fireworks and Drone Light Show from London and Sheffied - BBC�� - 2nd Jan 2
The Next IMMINENT Global Catastrophe After Coronavirus - 1st Jan 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Not Everything Is Bullish for Gold

Commodities / Gold and Silver 2016 Jul 21, 2016 - 06:39 PM GMT

By: P_Radomski_CFA

Commodities

There are quite a few bearish indications that suggest lower precious metals prices are just around the corner. Let's take a look at a few of them (charts courtesy of http://stockcharts.com).


First of all, the USD Index broke above the triangle consolidation pattern and the breakout is almost confirmed (or confirmed, depending on the approach - some suggest waiting for 2 closes above a certain level and some prefer 3 closes; in the case of the precious metals market we found the 3-day rule to be more useful, but it's not as clear in the case of currency markets). That's bearish news for the precious metals sector, because (with local exceptions, like the Brexit vote) PMs tend to move in the opposite way to the USD Index.

In yesterday's alert we wrote the following:

(...) The USD has been consolidating for about 3 weeks - definitely enough to cool down the previous - post-Brexit-vote emotions, so the consolidation can end any day now - perhaps even later today as only a little additional move higher is necessary.

The cyclical turning point was last Friday and the USD Index indeed turned around and rallied on this day, thus increasing the odds for a rally's continuation.

The implications for the USD Index are bullish as the move that follows a breakout tends to be similar (mostly in terms of price, but often also in terms of time) to the moves that preceded the consolidation. The move that preceded the consolidation this time was a rally from about 93 to about 96.5 - a 3.5 move. Starting an analogous move from the bottom of the triangle pattern (about 95.5 in early July) provides 99 as the next target.

Consequently, the implications of the current situation are bullish for the USD Index and bearish for the precious metals sector (which tends to move in the opposite way to the U.S. dollar; the Brexit case was an exception from this rule) and they will be much more bullish (USD) and bearish (precious metals) in case the breakout above the triangle pattern is confirmed.

Let's keep in mind that 99 is only an initial target.

The USD Index indeed broke higher and closed visibly above the 97 level - clearly above the mentioned resistance at 96.75.

Now, the breakout didn't result in a big plunge in the precious metals sector, but the reason could be that the breakout is not confirmed yet - the move is seen as something temporary by traders and investors. Consequently, it could simply be the case that the metals' and miners' reaction is delayed, not absent.

A few hours after writing the above gold and silver indeed plunged - most likely as traders started viewing the breakout in the USD Index as confirmed. At the moment of writing these words, the USD remains above 96.75 (it moved to 96.88, though), so the breakout was not invalidated.

The upper border of the triangle consolidation pattern is not the only resistance that's in play, though. The USD Index moved to the 61.8% Fibonacci retracement based on the December - May decline, which is also an important resistance level. Consequently, a day or a few days of consolidation will not be surprising. Still, 99 remains to be the initial upside target for the USD Index.

Gold declined on volume that was big on a relative basis (compared to the last few days) and it is clear that the breakout above the post-Brexit high is invalidated. The implications are bearish.

Why didn't gold decline more? Most likely due to the mentioned technical resistance in the USD Index and the rising support lines in gold itself. Still, given the breakout in the USD, it's likely that gold will follow and break down in analogy.

Daily Silver Chart

As far as silver is concerned, the white metal also moved lower on higher volume, but the more important volume reading was seen at the beginning of the month, when silver soared on an intra-day basis, only to slide later on. Then silver had an additional short-term run-up and it's now declining, moving to its 20-day moving average. The situation is very similar to what happened in late April and in the first half of May. Back then silver also had a huge-volume reversal, followed by a short-term run-up and subsequent decline. What can we infer from this similarity? That silver could spend a few days moving close to the 20-day moving average, just like it did in mid-May. The decline is likely to continue either after such a small consolidation or right away.

VanEck Gold Miners Daily Chart

Similarly to what happened in the USD Index, the mining stocks broke below one support level, but hasn't broken below the lower one yet. However, the size of the volume was huge, which is an important bearish factor. What's also bearish is the fact that miners moved decisively below the most recent trading range - in the case of the previous huge-volume declines that we saw earlier this year miners remained within the trading range after the huge-volume slide (for instance in late March and in mid-May). Consequently, we can speak of a specific breakdown that has already happened.

Summing up, there are quite a few bearish signals for the precious metals market alone but there are very important ones just outside of the sector - the situation in the USD Index is likely to have significant impact on the prices of PMs and it's likely to be negative (and the likelihood of that happening increased based on this week's breakout). Once the short-term consolidation in the USD is over and the breakouts (above both the triangle and the 61.8% Fibonacci retracement) are confirmed, we are likely to see another sizable upswing in the latter, which is likely to correspond to a decline in gold, silver and mining stocks.

Finally, we would like to stress that the long-term outlook for the precious metals sector is positive due to the positive fundamental situation as far as the very long-term uptrend is concerned, but in the short- and medium-term the market can move lower despite a positive fundamental situation and what happened between 2011 and 2015 serves as a good example.

In order to stay updated on our latest thoughts on the precious metals market (including thoughts not available publicly), we invite you to sign up for our free gold mailing list. You'll also get free 7-day access to our premium Gold & Silver Trading Alerts. Sign up today.

Thank you.

Sincerely,

Przemyslaw Radomski, CFA

Founder, Editor-in-chief

Tools for Effective Gold & Silver Investments - SunshineProfits.com
Tools für Effektives Gold- und Silber-Investment - SunshineProfits.DE

* * * * *

About Sunshine Profits

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and best silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer

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 a subject to change without notice. Opinions and analyses were 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 believed 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.

Przemyslaw Radomski Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules