At least the early-2025 top. Let’s see if I can back it up.
It’s happening, folks – gold finally broke below the topping pattern and it’s declining.
Gold is down by about 1.5% and all it took was a 0.7% rally in the USD Index to trigger this move.
Remember when I wrote about the USDX being the quite likely trigger for many markets?
When gold was trading about $70 higher, I wrote the following:
The markets look ready. The writing is on the wall. The only remaining thing is the trigger – the spark.
And it might come from the USD Index.
Sure, there are many other places where something major could happen that would have a spillover effect for other markets, but the way things are performing right now suggests that the USDX is a good candidate for that.
Indeed, it was just a spark that it took, as the rally in the USD Index is not significant yet. The fact that the USDX moved back above 107 is notable. The 38.2% Fibonacci retracement held, and the ABC (zigzag) pattern appears to be complete. If so, we can now expect another powerful rally – likely similar to what we saw in the final part of 2024.
Given how strongly gold reacted to just a small rally in the USDX, the above means that gold, silver, and mining stocks are likely to decline in a spectacular way.
This, in turn, means that if gold was to rally in a major way, it’s very unlikely to happen for months to come – maybe later this year. But would it be able to recover and get back to the recent top? It’s a tough call.
Silver is down just like gold is. But it’s nothing compared to what’s likely to come.
Miners slide and the analogy between the most recent top and the October one is quite clear. Even the sharp (but short-lived) corrections that I had marked with red arrows are aligned. What’s next? If history rhymes (and it’s likely to!), we’re about to see a powerful slide.
The additional bearish sign comes from the stock market.
Some time ago I wrote that when stocks finally break below their rising, medium-term support line, then their slide could be truly exceptional. We already saw this breakdown and today is likely to be the third close below this line. This means that it’s about to be fully confirmed, which will have very bearish consequences.
In nominal terms, not much is going on – stocks are still relatively close to their yearly highs. However, anyone that took at least a few days to learn some technical principles understands how big of a deal this breakdown is. The support line is based on over a year of trading and the breakdown followed a failed attempt to break above the previous highs. This is a very strong bearish combination that should not be ignored.
As I wrote before – rallying U.S. dollar is likely to sink many boats – especially the USDX’s alternatives. Of course, I don’t mean “sinking” as in “losing all value” – but it’s very likely to trigger substantial price declines.
Bitcoin is down by over 11% this week (and the fourth session of the week has only begun). If it only doubles this decline, then it will also break below its own rising, long-term support line, with very bearish consequences. And that’s exactly what I see as likely here.
Wanna see something even more interesting?
Tech stocks are doing exactly what they were doing last year at this time.
It was a few months ago when I originally featured this chart – after we saw the gravestone doji reversal (monthly) candlestick in late 2021. We then saw pretty much nothing – just like a year before – and then a decline. This decline is still taking place, and it’s still small at this time. What then followed in the NASDAQ was that it erased about a third of its value. And yes, miners plunged, too.
So, yes, no matter what angle you take, you see a lot of red in the near- and medium-term future of the mining stocks. Profitable shade of red.
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Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief