I prepared several charts for you today, but ultimately, only one really matters. The long-term chart featuring the USD Index.
Before I present it, please note that I’m also providing a long reply to a question about investing $10M below the chart analysis, and you might want to read it (so I encourage you to don’t close the analysis after watching just this single key chart).
Having said that, let’s move right to the key event that is unfolding before our eyes.
The thing is that the USD Index invalidated its move above the 61.8% Fibonacci retracement level. As I had written previously, this was likely to happen as the USD Index rallied too much too quickly, which took the daily RSI (visible on the below chart) above 70, and we had the monthly turning point.
The invalidation of the move above 61.8% retracement is no small feat. This is a key, classical retracement that is obvious to everyone analyzing the charts. The decline that it’s based on is also really important. Consequently, what we see now is likely to trigger sales by many technical traders and take the USD Index lower in the short term. As a reminder, I continue to think that the USDX is likely to rally in the medium term, but I also think that it’s going to correct this month – likely to its 38.2% Fibonacci retracement level, which tends to be the default target for corrections during strong rallies. And as the USDX declines, gold, silver, and mining stocks are likely to move higher. In other words, we were likely correct to take profits from the short positions in miners and then go long gold and mining stocks on Thursday (Jan. 2).
Alternatively, the USD Index could correct to the 23.6% Fibonacci retracement, which would confirm that this is not just a strong rally in the USDX but a very strong one. This retracement is at about 107.1, which aligns with the 2023 highs. So, if the USD Index is close to this level and is showing signs of strength (e.g. intraday reversal(s)) while gold and miners are at their own upside targets or close to them, I’d likely write about taking profits from the current long trades in the latter (and the short position in the USDX).
Moving on to the precious metals sector, remember how weak mining stock performance indicated weakness in the entire precious metals sector? We just saw the opposite.
Gold price moved to its late-Dec. highs during Friday’s correction, but the GDXJ didn’t – it stayed visibly higher.
This tells us that the precious metals sector is about to move higher in the near term despite Friday’s and today’s pre-market move lower in gold.
Gold price remains above the rising support line, which is also the lower border of the triangle. Gold can rally up to the upper border of the triangle before it moves lower once again, and given the proximity to the 76.4% and 78.6% Fibonacci retracements, it could even move briefly above it – just like what we saw during the November and December 2024 rallies. Those retracements were broken but very briefly so.
We can see the same thing once again. Interestingly, this would be in tune with what we saw (on a larger scale) in 2012 and 2013, and I previously described it in the following way:
Does this rally weaken the bearish case for the following months? Not at all. Please remember that the entire 2012-2013 pre-slide trading pattern was back-and-forth movement within a rather broad trading range. There were four distinct tops then – perhaps we’re seeing exactly the same thing right now and this rally will take gold to its fourth – and final – top.
So, just as I wrote yesterday, I think that it was worth it to adjust the trading position for this kind of correction. If the outlook was less bullish, I would most likely keep the short position intact and plan to wait out the correction. However, the upside seems big enough for the above-mentioned adjustments.
We see some interesting technical developments in silver and copper as well.
Silver price is once again above the $30 level, and while I don’t think this will hold, it’s likely to trigger another rally, which could eventually take silver up to the $32.50 level.
Right now, silver is trying to verify (or invalidate) its head and shoulder top pattern. For now, the jury remains out – at least as silver price action is concerned on its own.
However, since no market moves on its own, and silver will likely respond to USDX’s movement, it seems that silver will move higher from here in the short run.
Interestingly, copper already invalidated its breakdown below its head and shoulders pattern in terms of the daily closing prices. Since copper often moves in tune with the precious metals sector, this is a bullish sign - not just for copper, but also for gold, silver, and mining stocks. (In the full version of today’s analysis – the Gold Trading Alert – I’m also featuring a GDXJ chart with a target area for it, and I’m providing specific profit-take levels in the following part of the Alert.)
Finally, I’d like to move to the $10M question that I mentioned earlier today.
Approaching the $10M
Q: PR, thank you for your analyses the past months – they have been very helpful. I just upgraded to the “Diamond” product to diversify my trades, and I like what I see so far. I have a question, though. I just got a $10m from a business deal closure, and I was wondering if there is something specific that I should pay attention to that people usually miss when thinking about investments. I mean, there’s a lot of info on the Internet – it’s overwhelming. What would you recommend?
A: Thank you for your kind words, and welcome aboard! While I can recommend anything individually, and I’m not doing it here, I will reply to a different question that many people might be asking themselves – “what is the thing that one should pay attention to while investing a substantial amount of money?”
The reply might be surprising because the key thing is hidden in plain sight. Two things, actually. Plus, one bonus point that got larger as I started writing about it, and it ended up being an intro to a survey.
- There are myriads of different investment approaches out there and twice as many trading approaches, but it’s easy to forget about one basic thing – to actually have gold in one’s portfolio as insurance against systemic risk (which is a fancy way of saying that it’s for being secured against all hell breaking loose). I would suggest having some physical bullion in one’s possession (like, the kind that you can hold in your hand), and also having some in a gold IRA (if one is based in the U.S. – here’s a useful guide on that topic ) to reap the extra tax advantages. I’d also consider owning some while leasing it out, for the extra income . I would not do that with most of my gold holdings, though.
- I would make sure that I keep my individual trades (I don’t mean long-term investments, but speculative trading positions) small so that no single loss could erase more than 2% of my capital. If a trade looks exceptionally good, I might increase that to 3%, but anything beyond 5% is just asking for trouble. This might not seem like much, but since one often has multiple trades at the same time, and they can be correlated, it’s not fun to wake up one day and see the entire portfolio down $1M or something along those lines. Stay disciplined and stay safe. Of course, there’s risk in all trades, but keeping the position sizes low enough to keep one “in the game” for long is one of the “secrets” that is not secret at all, but it’s a thing investors often have to learn the hard way before they apply it. I strongly suggest that you apply this instead of learning it the hard way.
The first research paper that I ever published (about 16 years ago; it ultimately became this report ) was about position sizes. It turns out that there is a position size that, once exceeded, will give you negative results over time, even if your chance of success per trade is over 50%. Yup. That’s because earning 50% and losing 50% doesn’t get you even (not even close), whereas losing 1% and earning 1% almost does.
The bonus point is not about money itself, but about you. Remember Warren Buffett’s top 2 investment rules? Don’t lose money. Most people don’t end up losing money because they lack financial insights or investment assistance. They end up losing money, because the market tends to bring out all of one’s weaknesses and using them against one’s investments and trades.
One might say that people end up panicking out of their positions because they get too greedy or too fearful/anxious, and while it’s certainly true, that’s also an oversimplification.
There are all sorts of different things underneath greed and anxiety. In particular, many people feel that they absolutely HAVE TO make money on this trade and that they have to make a specific (usually astronomical) amount of money before the end of the year in order to be “successful”, which they view as a necessary step to being happy. In reality, it’s often just a distraction from dealing with what’s actually preventing them from being happy. Hey, I know what I’m talking about - I’ve been there myself.
And as people feel the lack of something deeper inside them, they obsess over profits which make them super-anxious or super-greedy about trades. Here are some candidates:
- Being viewed as successful by others - seeking validation
- Having great relationships with your significant other, with your kids, and your friends
- Having a life full of meaning
- Actually, being yourself
- Knowing how to express yourself - your needs/boundaries
If it was “just money”, it would be much easier to grow it – with patience and objectivity. Look, I’m not saying that money is meaningless – it is very important, please bear with me while I’m making my point.
The truth is that if one is serious about growing one’s portfolio, there is no better way to support this process than to focus on one’s own growth. About giving yourself what you actually want the money for. Sure, some things need to be bought – tickets to Tuscany and Liguria in Italy, for example. But, will you be able to easily climb the steps of Cinque Terre if your health deteriorates while you pursue those gains? Will you really enjoy the climb with someone close to you? Thanks to great communication that comes with emotional maturity, expression of one’s needs and boundaries? Will you have the mental resilience not to worry about the markets while you’re there? Finally, was the trip there really your (!) dream? And if not, did you take the time to get to know yourself, your needs, and then pursuing them, and not some things that someone else (your family, society in general) made you want?
Those are all big questions (and of course, there are many more of those), and many people just focus on making money in one way or another just to avoid answering them, as they might discover some things that they don’t like. It’s the only way to improve them, but it’s difficult, nonetheless. Of course, I’m not saying that it is the case with you, but you asked what people miss about investments and what I recommend. People miss the entire forest of their lives and themselves while focusing on a tree (money) or a single branch (one trade).
They say that if you want to make an apple pie right from the start, you have to start by creating the entire universe.
I won’t go so far with the analogy, but I would say that if you want to be a truly successful investor, you have to work on yourself, on your discipline, on your character, and on your own happiness. The upside is that… Those things are the that will make your life a great experience, anyway. If you take care of it all and make money, you’ll be truly successful and happy, and fulfilled. And if you make a lot of money without all this… You might not end up in a state that you’d enjoy, anyway.
The lengthy reply to this question is something that allows me to proceed with something that I meant to do for a while. Namely, I’d like to ask for your input regarding what kind of insights (courses, masterclasses, webinars, and so on) you’d consider useful at this time and in the future for yourself, and perhaps for others. What you think that would be good that your kids learned or what you wish that your past self-had learned. The educational component of Golden Meadow is currently being developed and it’s likely to be significant. As our goal is to bridge the gap between the worlds of investing and well-being, we ultimately plan to cover a lot of ground over here, and we want to invite many experts to collaborate with us.
However, we would like to start with content that you’d most enjoy getting. We have some ideas and assumptions, but ultimately, we are not building Golden Meadow for ourselves, but for you and others, so we want to hear your input before we invite even more experts to collaborate with us. “Even more”, because we are already working (some of the works is in the initial stages) on the following courses (each expert is asked to provide practical, actionable steps not just theory):
- Mental resilience and handling anxiety and stress in investments
- Physical health and thinking about it in investment and financial terms – how to engage one’s financial insights to help one be healthier
- Growth mindset for investors (this one is close to my heart as the only public speaking event that I ever did was on that topic - really powerful approach and it’s applicable in many areas of life, not just in investing)
- Motivation – how to motivate oneself
- Preparing for changing work environment (not directly investment-related, but very much money- and well-being related)
- Rick Ackerman’s advanced courses for his Hidden Pivot methodology
- Beginner’s Guide: How to start investing
The first course (the one on mental resilience, anxiety and stress - by the way, I already approved the script for it and it’s being recorded right now – really good stuff) will likely start with a very useful webinar on Jan. 16, but we’ll confirm a bit later.
The question is what else would you like to know? What abilities you would like to have? What do you think others should know / be able to do? It’s about making money and about well-being, but if you’re not sure if your idea/request fits, please enter it anyway – quite many things are covered in both areas.
Please treat this as both: important and urgent. It’s our – Golden Meadow’s – mission, and it’s also my personal mission, and we’re going to pursue it. You’re going to hear about new things being released on Golden Meadow. Let’s connect through this survey to make sure that you really welcome those announcements and are excited to see what the experts prepared. We insist that each expert provides the first lesson for free and that it’s actually useful, not just about sales – so that everyone can benefit to at least some extent whether they decide to purchase the full course or not.
Please fill out the survey about education on Golden Meadow today. I will be immensely grateful.
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Thank you.
Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief