Technical analysis often reveals its most valuable signals through comparative performance across related assets.
Today's trading activity has delivered a clear warning for precious metals investors, with both mining stocks and silver confirming our previous gold price analysis regarding vulnerability in the sector.
Silver Confirms the Warning Pattern
Silver's price action reinforces this cautionary signal. Despite initially pushing toward the psychologically important $35 level (which served as strong resistance in 2024), silver quickly retreated to around $34.58.
This failure to sustain momentum at a key technical threshold provides additional confirmation that precious metals' upside momentum is likely exhausting.
These technical reversals in both silver and mining stocks, occurring simultaneously while gold remains temporarily elevated, create a classic pattern that has preceded significant sector corrections in previous cycles. The fact that these reversals occurred precisely at their respective resistance levels (September 2020 highs for GDXJ and 2024 highs for silver) adds credibility to their significance.
FOMC as the Potential Trigger
Tomorrow's Federal Reserve decision looms as a potential catalyst for resolving this technical divergence. The uncertainty surrounding the FOMC meeting has likely contributed to gold's ability to remain above $3,000 despite warning signs from other precious metals assets. Once this uncertainty clears (remember: whatever decision is made, the uncertainty will decline, anyway -- unless we hear something truly crazy during the press conference), regardless of the specific policy decision, the technical vulnerabilities we've identified could manifest in more pronounced price action.
This pattern aligns precisely with my previous analysis comparing current conditions to the 2011 top. In that instance, gold similarly maintained strength temporarily while miners and silver showed early weakness before all three assets eventually synchronized to the downside.
Stagflation Fears Now Dominating Market Narrative
Today's news that 71% of investors surveyed by Bank of America expect stagflation represents a significant shift in market psychology. This is the highest reading since November 2023 and reflects growing concerns about the economic outlook amid trade tensions and policy uncertainty.
This surge in stagflation expectations directly connects to our previous analysis about parallels to historical periods of economic stress. When institutional investors begin positioning for stagflation en masse, it typically creates a self-reinforcing feedback loop that affects asset prices across the spectrum.
Remember the 2008 slide when even the institutions panicked? Exactly.
Wall Street firms including JPMorgan, Goldman Sachs, and Morgan Stanley have reduced their growth targets specifically citing "the anticipated effects of restrictive trade and immigration policies." This explicit connection between current trade policies and deteriorating economic expectations reinforces our earlier comparison to the Smoot-Hawley era's impact on markets.
S&P 500 and Nasdaq Now in Correction Territory
Both major indices have now officially entered correction territory (defined as 10%+ declines from recent highs). This broader market weakness creates additional vulnerability for precious metals in the near term, as initial phases of significant declines in stocks often trigger liquidation pressure across all asset classes.
Technically, stocks verified their breakdown below their 2024 high by moving back to them and declining once again. The declines can now resume, and given today's 1%+ move lower it seems that this is already taking place.
As we've emphasized previously, while gold ultimately tends to outperform during periods of financial stress (which is why many investors consider a gold IRA for long-term protection), the initial phases of major market corrections typically see correlated selling across asset classes as margin calls and liquidity needs force indiscriminate selling. And the consequences are particularly dire in case of silver, miners, and copper (and copper stocks).
In my view, THIS is the time to be or start to be positioned to take advantage of the decline. It's extremely difficult to get out at the top and it's even more difficult to short the market at the top.
But if you knew what happens after gold's 2011 top, would you really feel bad about shorting mining stocks in August or July -- if you knew what kind of huge declines were about to take place? Or early in 2020, weeks before the enormous slide in mining stocks (btw, do you remember how we caught the bottom then? That happened on March 13 -- which is yet another confirmation that this time of the year is critical in terms of reversals)? This is likely where we were recently, and today's relative weakness of miners after a massive run-up suggests that this might be the exact top.
Technical Confirmation of Our Historical Comparison
The current constellation of technical signals -- miners reversing at exactly their September 2020 highs, silver failing at its 2024 resistance level, the USD Index likely forming a double-bottom here, long-term bearish (extremely so) indications coming from copper, verified breakdown in stocks -- provides compelling confirmation of our historical comparison to previous major market tops. And it also indicates that one should not trust gold's breakout above the $3,000 level.
The fact that these technical warning signs are occurring simultaneously with unprecedented stagflation expectations and major market indices entering correction territory suggests we may be approaching a significant inflection point across multiple asset classes.
From a risk management perspective, the current setup presents a particularly favorable asymmetric opportunity. While gold could extend its move above $3,000 temporarily, the technical evidence from miners and silver suggests any such extension would likely be limited and unsustainable (especially in miners and copper stocks themselves -- they are already showing that they don't want to move even higher in today's session). The risk-to-reward calculus for maintaining or initiating new long positions appears increasingly unfavorable based on these technical signals.
As tomorrow's FOMC decision approaches, the markets will become vulnerable to move significantly. The RSI indicator and other technical signals indicate that one of the directions is much more likely.
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Thank you.
Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief