Gold Powerful 2008 Lessons That Apply Today / Commodities / Gold & Silver 2020

MarkTwain said that history does not repeat itself, but it rhymes. It’s certainlytrue in both life and financial markets. Let’s explore how the recent historylessons apply to the precious metals.

The2008 - Now Link

Let’s recount the similarities. We already had goldreversing on huge volume, and we saw it decline very strongly in the first weekafter the top. We already had another attempt to break above that high and wesaw it fail. We also saw rhodium at about $10,000. We already saw silver andminers plunging much more severely than gold did. In fact, silverjust plunged almost exactly as it did in 2008 during the analogouspart of the slide.

All these factors make the current situationsimilar to how it was in 2008, at the beginning of one of the biggest declinesin the precious metals sector of the past decades.

But the very specific confirmation came from the linkbetween gold and the stock market. Stocks plunged along with gold, silver, andmining stocks. That's exactly what was taking place in 2008. The drop in 2008was very sharp, and silver and miners were hit particularly hard. We expectthis to be the case this time as well.

In 2008, the temporary rallies were particularlyvisible in case of gold, not that much in case of silver, mining stocks, or thegeneral stock market. Gold declined particularly hard only after the USD Indexstarted its powerful rally.

The 2008 decline in the PMs ended only after asubstantial (about 20%) rally in the USD Index.

The USDX has just corrected almost 61.8% of itsprevious decline, and it could be the case that it’s now ready to soar muchhigher. Last week, we wrote that the USD Index could correct based on the 2Tstimulus and other monetary,and fiscal steps taken by the US officials.

That’s exactly what happened. Yet, it’s not likelythat these steps will prevent people from raising cash when their fear reachesextreme levels. We’re getting there. And we’re getting there fast.

As the situation is more severe, the USD Indexmight rally even more than 20%, and the 120 level in the USD Index (comeback tothe 2001 high) has become a quite likely scenario.

Let's keep in mind that it was not only the 2008drop that was sharp - it was also the case with the post-bottom rebound, so ifthere ever was a time, when one needed to stay alert and updated on how thingsare developing in the precious metals market - it's right now.

Lastweek we supplemented the above with description of the 2008 analogy in terms ofthe shape of the price moves. OnWednesday, we supplemented it with a more detailed time analysis.It’s very important today (and for the rest of the week), so we’re quoting ourWednesday’s comments:

It took 9 trading days for gold todecline from its top to the final intraday bottom, before starting the powerfulcomeback.

In 2008, it took 41 days. It seemsthat things are developing about 4.5 times faster now, than they weredeveloping in 2008. More precisely: 41/9 = 4.56 times.

Please note that the decline thatpreceded the sharp upswing in gold, is also somewhat similar to what we sawrecently. There was an initial slide in gold that ended in mid-August 2008, thenwe saw a correction and then another slide and a bottom in early September.This year, we saw an initial bottom in mid-March, and the final one a few daysago.

Back in 2008, it took 23 tradingdays for gold to reach its initial bottom and it then took another 18 days forthe final short-term bottom to form. 56.1% of the downswing was to the initialbottom, and the 43.9% of the downswing was between the initial and finalbottom.

And now? It took 5 out of 9 tradingdays for gold to reach the initial bottom, and the remaining 4 days were thetime between the bottoms. That’s 55.6% and 44.4% respectively.

This is very important, because itshows that the shape of the move is indeed very similar now.

This means that we can most likelydraw meaningful conclusions for the current situation based on how thesituation developed back in 2008.

Back then, gold moved back andforth close to the initial top. That’s what gold has been doing so far today –which serves as another confirmation for the analogy.

Back in 2008, gold topped over theperiod of 16 trading days. Dividing this by 4.56 provides us with 3.5 days asthe target for the end of the topping pattern since its start. The pattern started yesterday, which suggests that goldcould top tomorrow [Thursday, March 26th] or on Friday.

EDIT: That’s exactly what happened – in terms ofthe daily closing prices, gold has indeed topped on Thursday.

The situation gets more interestingas we dig in more thoroughly…

There are 24 hours in a day.Dividing this by the factor of 4.56 provides us with 5.26. This means that ifwe could create a chart with 5.26 hour candlesticks, the price moves in goldshould be analogous (in terms of how we see them on the chart) to their dailyperformance from 2008. The closest that we have available are the 4-hourcandlesticks.

Let’s check how gold performedrecently from this perspective, and compare it to its daily performance from2008.

The price moves are remarkablysimilar.

Even the March 17, 2020 upswingtook gold to analogous price level! Gold temporarily topped very close to theprevious (Feb 28) low. That’s in perfect analogy to how high gold corrected inlate August 2008 – it moved up to the early May 2008 high.

The link to 2008 truly is the keyright now.

Ok, so when are silver and minerslikely to top?

Sooner than gold.

Please note that both: silver andmining stocks topped more or less in the middle of gold’s topping formation…Which suggests that they should be topping today.

And for the final confirmation –please take a look at what the stock market and the USD Index have been doingat that time. The USD Index was within a pullback while the stock market formeda very short-term upswing. Silver and miners topped along with the stockmarket.

Silver just moved to its previousshort-term high (a small high, but the one that preceded the final part of thedecline) and it’s approximately at its 38.2% Fibonacci retracement.

That’s exactly where silver toppedin 2008. Back then the analogous high was the late-August high, and it alsotopped close to its 38.2% Fibonacci retracement.

We are probably looking at a top insilver right now.

This means that miners are likelyto top today as well.

EDIT:That’s exactly what happened in terms of the daily closing prices. Both: silverand GDX formed the highest daily closing prices on Wednesday – the same day wehad published the above.

Please keep in mind that after the 2008 bottom instocks, it took only two days before they formed an intraday top. Given thatthis time, the price moves are more volatile, it seems that we could (far fromcertain) see a powerful reversal (top) as early as tomorrow. Thisestimate is in perfect tune with the triangle-vertex-based reversal that we seeon the GDX and GDXJ charts.

EDIT:Again, that’s exactly what happened. The GDX index formed the intraday high on Thursday,one day after we wrote the above. The GDXJ formed the intraday high onWednesday.

Howmuch clearer could it get that the precious metals market is re-creating its2008 slide?

Ok,so what does it tell us going forward?

Ittells us that the precious metals market is likely going to slide veryprofoundly, and very quickly. And it might happen as early as this, or the nextweek.

Today's article is asmall sample of what our subscribers enjoy on a daily basis. They know aboutboth the market changes and our trading position changes exactly when theyhappen. Apart from the above, we've also shared with them the detailed analysisof the miners and the USD Index outlook. Check more of our free articles on our website, including this one – justdrop by and have a look. Weencourage you to sign up for our daily newsletter, too - it's free and if youdon't like it, you can unsubscribe with just 2 clicks. You'll also get 7 daysof free access to our premium daily Gold & Silver Trading Alerts to get ataste of all our care. Signup for the free newsletter today!

Thank you.

Przemyslaw Radomski, CFA

Founder, Editor-in-chief

Toolsfor Effective Gold & Silver Investments - SunshineProfits.com
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