Zig-Zagging Gold Is Not Necessarily Bearish Gold / Commodities / Gold & Silver 2019

InFriday’s article, we wrote that what comes up must correct and gold has indeedshown to be in a corrective mode. We also wrote that the yellow metal wasunlikely to break below the 61.8% Fibonacci retracement based on the previousupswing and while gold moved to this level earlier today, it didn’t break belowit. At least not in any significant way – the few cents below this leveldoesn’t really count. Let’s take a closer look at gold’s overnight chart to seewhat the decline means.

Inshort, it doesn’t mean much. All markets, including gold, quite often correctin a zigzag fashion, and they relatively often correct between 38.2% and 61.8%of the preceding move before continuing their previous move. That’s exactlywhat is happenning in gold.

Goldmoved to the 61.8% Fibonacci retracement level based on the preceding upswingand it moved there in a zig-zag style. Goldreversed after reaching the retracement, so the bottom might be in and the yellow metalcould be ready to resume its upswing shortly. If gold confirms the breakdownbelow the 61.8% Fibonacci retracement level ($1457), the bullish forecastfor gold for the short-term might change, but that’s not the case so far.

Besides,the short-term correction in the USD Index that’s likely to contribute tohigher gold, silver, and mining stock values in the short run is not over justyet.

Isthe USD Index Done Declining?

The breakdownbelow the very short-term rising wedge pattern resulted in a majordecline. “Major” from the very short-term point of view as the following dailydownswing has been the biggest daily decline that we saw this month. After theinitial decline, the move lower continued and the USDX closed the week belowits 50-day moving average. The 50-day MA has been providingsupport quite reliably in the previous months. It was not always strongsupport, but often meaningful enough to make it useful as a tradingtool.While it stopped the decline on Thursday, the USDX broke below it overall.

Theabove breakdown opened the way to even lower USDX values.

Thegreen and blue dashed lines represent declines that are similar to the Octoberdecline. The rallies that followed them were quite sharp, but they too hadsmaller pauses within them. Both: March-April, and July rallies consolidatedafter the USDX moved above its 50-day moving average.

Theshort-term decline that we saw so far doesn’t compare to what we saw in earlyApril and in mid-June. Consequently, the odds are that the USD Index willdecline some more before soaring to new highs.

Thismeans that gold is likely to move higher before plunging. Consequently, theodds are that reportsof gold turning bearish for the short run are premature.

Also,let’s keep in mind that this decline is taking place after both gold and silverinvalidated their previous breakdowns in terms of daily closing prices.

PreciousMetals Short-Term

OnThursday, both precious metals closed slightly (but still) above their lowestclosing prices of September. Silver didn’t move back above the rising redsupport/resistance line, but the breakdown below the previous low wasinvalidated.

Theresistance provided by the lows is a good reason why gold and silver correctedon Friday and earlier today. But, just as the decline in the USDX doesn’t seemto be over, the rally in gold and silver seems to have more upside.

Andthe mining stocks?

Lookingat miners’ performance in one way provides us with bearish implications for theday, but looking from a different angle shows the silver lining.

Thebearish case is based on the shape of the last three sessions. They look likean island top that formed right after the bullish reversal. Gold is down intoday’s pre-market session, so goldstocks are likely to decline today as well, in tune with implications of theabove-mentioned top formation.

Onthe other hand, such a daily comeback close to the start of the rally isexactly what happened about a month ago, and it was a relatively normal part ofthe upswing. The similarity may not be obvious at first sight, but pleasenote the three intraday attempts to reach more than about half of the precedingdownswing. In the following days, the HUI Index continued to rally, but notwithout a daily decline first.

Thepositions of Stochastic and RSI indicators confirm the similarity between thesetwo cases.

Allin all, even though gold moved lower today, it doesn’t mean that the short-termrally is already over.

Theshort term is one thing and the big move that’s likely to unfold is somethingquite different. The goldfutures open interest (number of positions in goldfutures) just exceeded its previous extremes and if it sounds as something ofkey importance to you – you’re perfectly right. There are two ways in whichthis major development is practically screaming what’s going to happen next.But one needs to know how to read this sign. Today’s Gold Trading Alert – the fullversion of this analysis – covers all the details to know before (!) the biggold price move happens. Please note that you can still subscribe to theseAlerts at very promotional terms – it takes just $9 to read the details rightaway and then receive follow-ups for the next three weeks. Stayinformed at very preferred terms.

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Thank you.
PrzemyslawRadomski, CFA
Editor-in-chief,Gold & Silver Fund Manager
Sunshine Profits - Effective Investments through Diligence and Care

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All essays, research and information found above represent analyses andopinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. Assuch, it may prove wrong and be a subject to change without notice. Opinionsand analyses were based on data available to authors of respective essays atthe time of writing. Although the information provided above is based oncareful research and sources that are believed to be accurate, PrzemyslawRadomski, CFA and his associates do not guarantee the accuracy or thoroughnessof the data or information reported. The opinions published above are neitheran offer nor a recommendation to purchase or sell any securities. Mr. Radomskiis not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFAreports you fully agree that he will not be held responsible or liable for anydecisions you make regarding any information provided in these reports.Investing, trading and speculation in any financial markets may involve highrisk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees andaffiliates as well as members of their families may have a short or longposition in any securities, including those mentioned in any of the reports oressays, and may make additional purchases and/or sales of those securitieswithout notice.

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