The month is over. The week is over. Some things changed, some things didn’t. What can one predict for gold price in July 2023?
Let’s start with the gold price’s monthly chart.
While it might appear that not much happened in gold last month, in reality, it declined by over $50 – and that’s no small feat.
What’s important about this move lower is that it pushed gold (temporarily, but still) back below its 2011 high. Think about it… Pandemic, lockdowns, a war in Europe, and ridiculous amounts of money that were printed in the last twelve years, and gold hasn’t really moved higher – in nominal terms. In real terms (adjusted for inflation), the gold price in July 2023 is much lower than it was at its 2011 high.
Silver price is much lower than it was at its 2011 high, and the same goes for mining stocks. This shows just how weak the precious metals market really is – in general.
To be more specific, the June 2023 decline in gold was important because its pace was in perfect tune with what we saw in 2012 and in 2008 when gold declined. Based on rising interest rates, it seems that we might see a repeat of 2008 based on fundamental reasons, but the technicals are here to support it too.
The extreme underperformance of gold stocks relative to the price of gold indicates that we’re about to see much lower gold price values, and this major indication points to a similarity between now and 2012 when gold miners were underperforming gold price to a significant extent as well.
Let’s zoom in a bit.
Predicting Gold Price Based on Weekly Price Moves
The above chart features gold price changes in weekly terms. At first sight, you might think that this chart has bullish implications due to the fact that gold was able to reverse last week’s early decline and closed it practically flat – thus forming a hammer reversal candlestick.
However, it’s important to note that the very same thing happened at very similar price levels last year. And it was also after the gold price’s unsuccessful attempt to break – and hold – above the $2,000 level. Just as I warned on both occasions – the gold price failed to hold above that level and declined in tune with my expectations.
At that time, this supposed “reversal” was followed by another 2+ weeks of declines before we saw a meaningful corrective upswing (after which gold continued to decline, anyway).
So, is gold price’s last week’s action bullish? Not really. As I already stated earlier today, the gold price is falling in tune with how it declined back in 2008 and 2012. Consequently, forecasting higher gold prices here – based on just gold’s weekly performance – might be misleading.
Stocks’ Rally and Its Implications for Gold Price Outlook
Stocks soared profoundly on Friday, even though not much happened on that day. This happened right before the start of the long weekend in the U.S., which seems suspicious.
It will likely be impossible to prove it, but it’s quite possible that large investors (perhaps institutional ones) used this opportunity to take advantage of those that are not long to pay attention to the market or are unable to execute trades early this week.
A rally often makes unsophisticated investors bullish (incorrectly so – a rally can be bullish, neutral or bearish, it all depends on the context!) and makes them “join the party”. If a bigger entity knew that the markets were about to turn south, then they might be tempted to artificially pump the price higher to lure those investors into entering long positions in order to then “pull the plug” on the futures market while those investors can’t exit their positions as the markets are closed.
I’m not saying that it definitely happened on Friday, but it might have. So far, stock futures are flat in today’s trading, but the “big surprise” might await investors tomorrow.
Since stocks are such a large market in general, this might have been the reason behind gold’s and gold miners’ upswing on Friday and in today’s early trading.
Now, if the move higher in stocks was artificial, then it’s also possible that it was the same with the move higher in the gold price, silver price, and the prices of mining stocks.
And if so, then making bullish predictions based on what happened on Friday is not the best idea.
On Friday, the GDXJ ETF (a proxy for mining stocks) moved back up – probably verifying the breakdown below its May lows once again.
During today’s session, the GDXJ moved slightly above $36 and then moved back below it – and below the lowest daily close of May. This means that the resistance provided by this level is held. This is not a bullish game-changer.
We’re quite likely to have a bigger rebound in gold, silver, and mining stocks as no market can fall without periodic corrections, but what we see right now probably isn’t it – it’s just a small and perhaps very brief pause.
In fact, please note that we saw something very similar at the same price levels last year – I marked that situation with a blue ellipse. And just like the decline continued shortly thereafter then, we’re likely to see another side shortly. A rebound – and quite possibly a buying opportunity might be near (as well as the opportunity to take profits from short positions in the GDXJ) – but it doesn’t seem that they are already here.
All in all, the gold price for July 2023 (and the same goes for silver and mining stocks) remains bearish, at least for the initial part of the month. We might see a rebound as early as this (or next) week, though.
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Sincerely,
Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief