Price moves that follow corrections tend to be similar to the ones preceding them. Even if they are huge. Even in gold.
Based on yesterday’s upswing, the rallies that we saw between 2018 and 2020 and the 2022 – now, for one, are currently equal (percentagewise). This, plus the fact that price moves that follow consolidations tend to be similar to the price moves that precede them, suggest that the rally might be over here. After all, we saw a big consolidation between the 2020 top and the 2022 bottom. (marked with an orange rectangle).
Also, please note how far the GDXJ rallied in the final part of the 2020 rally, and compare it with how little it rallied this year. Miners are truly weak at this time, and when gold finally does decline, they are likely to slide in a profound way.
Of course, it may not look like miners are weak this week, but the above chart shows weakness in terms of months.
The indications coming from the GLD chart also support a turnaround in the near future.
GLD rallied recently, however, both major indicators (RSI and MACD) based on it moved to levels that triggered reversals in the past.
The RSI is above 70, and I marked other cases when that happened with red arrows – some kind of tops were generally seen in those cases, and in some cases, those were major tops.
In the case of the MACD, I marked the signals with vertical, dashed lines – I mean the situations when MACD rallied as much as it did recently. These signals were not as frequent, and they accompanied mostly the major tops.
Once again, I marked the previous moments when RSI moved above 70 with red arrows, and once again, we can see that those were the times when tops were often formed.
This can easily trigger gold’s and miners’ decline - and also a one in silver.
(On a side note, if you decide to hold your gold, you might as well investigate getting extra income while you do it.)
And moving back to silver…
The white metal moved to its recent two highs but didn’t move to (let alone above) the 2024 one.
Silver tends to outperform strongly in the final part of most short-term rallies, but we already saw silver’s outperformance in the previous weeks, so perhaps this effect has already come into play, and right now we are in a different type of situation – something more similar to what we saw in 2011.
And this, my friends, brings us to the key chart of today’s analysis.
History rhymes and it seems that we already saw the current verse.
Back in 2011, gold soared to new highs, but neither silver, nor miners followed.
Silver topped in a clear way earlier, and while it rallied along with gold, it didn’t move very close to its medium-term high (which turned out to be a long-term high)
The GDXJ did something even more interesting. While – like silver – it failed to move to new highs, it also formed a broad head-and-shoulders pattern – a tilted one, to be precise.
You already saw how similar the situation in silver is – there were no new highs in it despite new highs in gold. But what about the GDXJ?
Exactly the same thing. The above chart is a zoomed-in version of the one from 2011 (the time axis is zoomed in, that is) and because of that it seems that the head-and-shoulders top pattern is broader. However, they both expand over many months but less than a year.
Additionally, in both cases, the patterns are tilted. In the current case, we’ve got higher highs and higher lows, but it doesn’t change much. It is for this reason that the move above the Dec. 2024 high didn’t matter that much – the size of the 2025 rally is similar to the July-August 2024 decline.
One could say that this time we had just one left shoulder or several smaller left shoulders, but it doesn’t matter – they are all ways in which this formation can form. What matters is that there was one distinct top in the middle (more or less) and that the volume was declining on average during the formation. This is the case – please compare the volume spike that we saw in April 2024, then what we saw in June 2024, then in November 2024 and what we see now. It’s declining and the formation remains in place.
So, we have a situation that’s very similar to the 2011 top in gold, with regard to the performance of gold, silver, and mining stocks, and we also see gold price at the level that made the recent rally match the one that preceded the 2020-2022 consolidation. This does not bode well for the precious metals sector. And if stocks are going to decline (in particular world stocks) the decline that follows in mining stocks is likely to be particularly huge. So yes, our profits from the short position in FCX are very likely to be joined by profits in GDXJ and NEM – likely significant ones.
Still, I insist that shorting gold here is not justified from the risk to reward point of view. After profitably closing our (in my Gold Trading Alerts) position in gold, we are not re-entering any positions in it – at least not now.
Thank you for reading my today’s free analysis. As always, I will keep my subscribers informed (also via intraday Alerts whenever the situation requires them). Please note that by subscribing, you’ll get access to specific trading details (we even provide details of two option trade ideas). I encourage you to become our subscriber and get those premium benefits while the opportunity from the current trade is still present. Alternatively, if you’re not ready to subscribe yet, I encourage you to sign up for my free gold newsletter today.
Thank you.
Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief