Don't Be Misled by Gold's Recent Upswing / Commodities / Gold and Silver 2022
Despite gold’s latest move higher, itsoutlook remains bearish. If its 2012-2013 pattern is to repeat, it means goldis now preparing for a big fall.
PatienceAdvised
Gold moved higher on Friday, so you might be wondering if this changed anythingregarding theoutlook. In short, it didn’t.
Let’s take a closer look at whathappened.
Gold futures moved higher by over $12,and this meant that they moved from the lower part of my previous target areato its upper part. In other words, it remained within the target area, whichmeans that it kept doing what was – in my view – the most likely course ofaction for this particular market.
As such, it didn’t invalidate anyprevious expectations, let alone the broader outlook.
Gold stopped below the upper border ofthe declining trend channel, and it ended the week below the neck level of theprevious head-and-shoulders pattern. Both remain unbroken, so the recent upswing doesn’t change theoutlook, which turned bearish when we took profits from our previouslong position on Thursday.
The RSI indicator is now visibly above 50and close to the levels that triggered a top in gold in April and June 2022,and in July 2021.
As you may recall, gold is currentlyrepeating its 2012-2013 pattern, and based on it, it’s likely just before themost volatile part of the decline. Youcan read more about it in Friday’s analysis (and in many previousanalyses), and if the above is new to you, I strongly suggest that you take thetime to read more – the self-similar pattern is truly astonishing.
So, let’s check what gold did in 2013 atthe analogous time.
Well, it consolidated for a few weeks andplunged only after that consolidation.
While it doesn’t guarantee that we’ll seea pause that’s as long as the one that we saw before the April 2013 slide, it’sa good indication that the huge declinemight not start immediately, but rather we might see some “preparatory” action.
Backand Forth
For now, investors and traders might viewthe current prices as temporary, and they might expect gold to soar back up. Infact, I saw multiple analyses indicating exactly that. This means that a week or a few weeks of back andforth trading close to the current price levels or between the current pricelevels and the recent lows would help to convince them that this move lower wasnot accidental.
This would make them much more likely tosell (and panic) once gold breaks below its recent lows.
Also, while the above chart doesn’t showit, because it’s based on weekly and not daily prices, gold topped in March2013 when its daily RSI was trading just a little above 50 and close to itsprevious higs – just like what we see right now.
Getting back to the possibleback-and-forth movement that we might see now, please note that the price“action” was even more boring inthe case of silver and mining stocks (middle and lower parts of theabove chart). They did very little during the consolidation, but when theyfinally moved lower, they truly plunged.
Oh, and don’t let the sizes of the movesfool you – the scale is linear in the case of silver and GDX, while it’slogarithmic in the case of gold. In reality, the mining stocks still declinedthe most, and silver’s decline was still bigger than the one seen in gold.
All in all, the short-term rally appearsto be over or about to be over, and mining stocks’ lack of strength on Fridayconfirms it.
Thank you for reading our free analysistoday. Please note that the above is just a small fraction of today’sall-encompassing Gold & Silver Trading Alert. The latter includes multiplepremium details such as the target for gold that could be reached in the nextfew weeks. If you’d like to read those premium details, we have good news foryou. As soon as you sign up for our free gold newsletter, you’ll get a free7-day no-obligation trial access to our premium Gold & Silver TradingAlerts. It’s really free – sign up today.
Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Toolsfor Effective Gold & Silver Investments - SunshineProfits.com
Tools für EffektivesGold- und Silber-Investment - SunshineProfits.DE
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Disclaimer
All essays, research and information found aboverepresent analyses and opinions of Przemyslaw Radomski, CFA and SunshineProfits' associates only. As such, it may prove wrong and be a subject tochange without notice. Opinions and analyses were based on data available toauthors of respective essays at the time of writing. Although the informationprovided above is based on careful research and sources that are believed to beaccurate, Przemyslaw Radomski, CFA and his associates do not guarantee theaccuracy or thoroughness of the data or information reported. The opinionspublished above are neither an offer nor a recommendation to purchase or sell anysecurities. Mr. Radomski is not a Registered Securities Advisor. By readingPrzemyslaw Radomski's, CFA reports you fully agree that he will not be heldresponsible or liable for any decisions you make regarding any informationprovided in these reports. Investing, trading and speculation in any financialmarkets may involve high risk of loss. Przemyslaw Radomski, CFA, SunshineProfits' employees and affiliates as well as members of their families may havea short or long position in any securities, including those mentioned in any ofthe reports or essays, and may make additional purchases and/or sales of thosesecurities without notice.
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