Nothing Is Stopping the Gold GDXJ From Reaching 2020 Lows / Commodities / Gold and Silver Stocks 2022
Both gold and silver’s results sagged,but gold stocks are the worst performers so far. What is this decline leadingto?
Gold moved visibly lower yesterday,silver closed at the second-lowest level in over 2 years, and miners (both GDX and GDXJ) formed theirlowest daily close in over 2 years! If someone has chosen to take shortpositions, profits have increased.
Let’s take a closer look at whathappened.
Weakerand Weaker
The freefall in gold stocks continues.Remember when I wrote that miners were about to slide profoundly, when theywere trading over 320 earlier this year? Very few of my colleagues agreed, andsome laughed. I guess the laughter is silent by now.
The weakness that we saw in previousweeks – and during yesterday’s session – is truly profound, and what I wroteabout it yesterday remains even more up-to-date, as we have now seen abreakdown to fresh lows. Quotingmy yesterday’s analysis:
Goldand silver are currently more or less where they were trading about two yearsago (before the final part of the mid-2020 rally).
Whatabout gold stocks? The HUI Index would have to rally by almost 50% in order toget back to those analogous price levels!
Goldstocks usually lead gold higher and lower (there are some short-termexceptions, but they are not really applicable right now), and there’s no doubtthat miners currently lead gold lower.
Pleaseconsider the size of the recent corrective upswing in gold, then insilver, and next, pleaselook at how “much” gold stocks rallied.
Laughable,isn’t it?
Notonly that – gold stocks already gave away almost the entire rally, even thoughgold is only about halfway down.
Ifyou think that this is extremely bearish, then… Of course, you’re right.However, the situation is actually even more extreme than that.
Yousee, that’s the same thing we saw on the precious metals market in 2013, rightbefore the biggest part of the slide!
Now, as far as the GDXJ is concerned, itreally seems that it’s on its way to its 2020 lows. The question is whether itwill get there in the 2020 style or whether the decline will be more measured.If so, then where the corrections might be, and whether it’s a good idea to tryto trade them.
Back in 2020, we had a global panic basedon something that the modern markets haven’t experienced before (the pandemic,lockdowns). Now we have “relatively regular carnage.” The rates are going up,as well as the USD, and the stock market is going down.
However, it’s not a massive-event drivenprice move, and thus it can – and is likely to – take place in a rather regularmanner.
So, while it’s still likely to be huge,like what we saw in 2008 and 2013, it’s also likely to be more measured andthus technical.
WhatHappened During the Crisis?
Back in 2008, the price moves werebankruptcy-news driven, while in 2013 the decline took the regular form.Despite the initial reason for gold to move up (Russian invasion in Ukraine),it failed to hold on to its gains, and instead it started to decline in a veryvisible way. Silver and miners are declining even more and faster.
The pressures from the USD Index and realinterest rates are now greater than they were back in 2013, so the currentdecline has “bigger legs”. It lacks the dramatic circumstances of 2008, though.
What does it all mean? It indicates thatthe currentbig move lower is likely to be at least as significant as what wesaw in 2013, but at the same time that it might be easier to trade than withthe huge price swings that we saw in 2008.
Where does this discussion get us? It getsus to the indication that it’s still possible that we get a reliable reboundfrom the $27-28 area in the GDXJ, while gold rebounds one last time from theprevious lows.
I previously commented that the abovemove is too uncertain to bet on it, and this remains to be the case However, Iwould like to point out that it’s still possible that I will write aboutadjusting the trade at those levels, after all.
This will depend heavily on the way inwhich the precious metals market falls in the following days. The more suddenand sharper the drop, and the stronger miners are relative to gold (so far thisis completely absent), the bigger the odds that we’ll see a corrective upswing.
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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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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