Rallies have parts. The beginning of this rally is over, and the middle might be over, too. Time for the final part.
In yesterday’s Gold Trading Alert, I wrote that miners tend to underperform in the final parts of rallies, and due to this, repeating the initial size of the rally in the miners might not take place even though it still seemed to be a quite likely outcome for gold prices.
Yesterday’s session provided us with a confirmation.
Gold price was up, even though mining stocks were not. The yellow metal closed over $7 higher, and it’s now less than $15 away from the place where the declining and rising resistance lines cross. Given the recent momentum, this target could be reached as early as today or tomorrow.
Gold is after a pause, and it just moved to new immediate-term highs, so it’s likely to continue its move higher.
Meanwhile, the USD Index moved a little higher. The outlook for it remains very bullish, as it just confirmed its breakout above the May/June highs.
If that was the case, why did gold rally? There’s no good justification other than “because it reversed in a profound manner last week”. Some moves are not really logical but emotional. If gold shows substantial strength and breaks toward $2,000 and above, the situation might become bullish, but at this point, it seems very unlikely.
What is likely is that this small corrective upswing in gold is temporary, even though it might not be over just yet.
Please remember the 2022 top and the following plunge were also followed by a period during which gold moved higher along with the USD Index. And then, as the USDX continued to rally, gold caught up with its declines. We’re very likely to see the same thing soon.
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Sincerely,
Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief