Gold just moved below $2,000 one more time, and it looks like this time, it’s a move that will last.
Here’s what’s happening at the moment of writing these words:
Gold and silver are moving lower. And why would this be the case? Except for the fact that they got overbought on a short-term basis and except for the situation in real interest rates, multiple analogies to previous declines…
The USD Index moved a bit higher today, and it was all it took for the precious metals to rally visibly.
The USDX is back above its mid-2022 and early-2023 lows, and despite yesterday’s (Apr. 18) intraday move lower, it didn’t move back below the above-mentioned lows. It’s moving higher again, which makes the invalidation of the breakdown much more credible.
In general, invalidations don’t need extra confirmations on their own, but still, some market participants might feel more comfortable entering the trade once the market confirms its will to move in a certain direction. So, while the short-term outlook improved significantly based on the invalidation itself, yesterday’s move lower and today’s move up again made the bullish case more believable to many.
Consequently, what I’ve been emphasizing previously was just confirmed. The USD Index’s invalidation preceded gold’s invalidation. What about junior miners?
They ended the session insignificantly ($0.20) higher yesterday, but it was the intraday price performance that’s interesting. Namely, the GDXJ moved up and then back down again, erasing almost all the gains. Gold stood firmer yesterday, so GDXJ underperformed it.
And given today’s pre-market move lower in gold (below $2,000), it seems quite likely that miners will slide shortly.
In yesterday’s analysis, I wrote the following:
Now, this isn’t to say that there will definitely be no more bumps on this road. No. In fact, it’s common to see a daily or two-day pause or small rebound right after gold tops. That pause is then followed by a huge slide that takes most people by surprise.
Indeed, it seems that we saw that pause during yesterday’s session. And it seems that it’s over.
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Sincerely,
Przemyslaw Radomski, CFA
Founder, Editor-in-chief