The Future of the Dollar Seems So Bright It's Blinding Gold / Commodities / Gold and Silver 2022
While the USDX rushes up withoutlooking back, gold is running... out of power. What could the next dollar highsmean for the precious metals market?
In short, practically everything that Iwrote in yesterday’sanalysis remains up-to-date. Based on the relative valuations andpre-market price movement, I wrote that junior miners were likely to declinebelow their rising support line, and I moved the exit price for the currentshort position in the GDXJ lower (it seems that it will gain even moreshortly).
Indeed, the GDXJ fell like a stone in thewater, and it pierced through the above-mentioned support line without lookingback. Thanks to remaining in the short position, we were able to benefit fromthe breakdown below the support line.
What’s next? Well, what was likelyyesterday remains likely today. Markets appear to be approaching, but not yetat, their short-term corrections. Let’s take a closer look, starting with theUSD Index.
As you can see above, the USD Index justmoved above its 2020 high and above its recent highs, but it failed to close inthe green. Actually, the USDX declined slightly during yesterday’s session. So,while goldwas initially strong relative to the USDX, it ended up being veryweak. This tells us that if the USD Index moved a bit higher here, gold mightlaunch another quick decline.
Given how the USD Index performed after asimilar breakout (in 2014), it seems that we might see a corrective move soon(perhaps after an additional rally). I previously described it in the followingway:
I would like to add one important detail.Back in 2014, the USD Index didn’t correct after reaching its previous high. Itcorrected after moving above it. The higher of the highs was the March 2009high, at 89.11.
The higher of the recent highs is at103.96 right now, so if the analogy to 2014 is to remain intact, the USD Index could now top at close to104.5 or even 105.
Yesterday’s high was 104.2, so the USDXcould still move higher before correcting.
Gold moved lower – to its previous lows –but didn’t reach its downside target area (marked with green), where we have afew support levels:rising support line,declining support line,early-2022 high,the 61.8% Fibonacciretracement based on the 2021-2022 rally at about $1,829,200- and 300-day movingaverages (back in March 2020, gold bottomed between both averages).
Also, the RSI indicator is close to 30but not yet at it.
Consequently, if gold declines some morehere, it will have very good reasons to rally in the short term, but it doesn’thave those reasons yet.
The situationin silver is also very interesting.
The white metal moved lower, and itsintraday low was just 2 cents above our profit-take price.
Since gold is likely to move lower, andthe general stock market is likely to move lower, I’m moving the downsidetarget lower – slightly above the 50% Fibonacci retracement level based on theentire 2020-2021 decline. That’s the next strong support that’s below the 2021lows, and that would more or less correspond to the size of the above-mentionedshort-term decline in gold (at least that seems realistic to me).
It seems that mining stocks are likely toslide in the very near term too – and then they are likely to correct (probably providing an opportunity for aquick long position), quite possibly sharply.
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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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