However, there is also a black slope – a steep and dangerous road on which inexperienced skiers can hurt themselves badly; it’s very similar to what happened to gold in 2008 and 2020.
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If the Fed hints that it’s ready to taper its stimulus, the long-term rates will likely rally, whereas stocks, precious metals and commodities will likely slide.
In the case of gold, it means either a measured late-2012-style decline or a more powerful slide similar to the moves we saw in 2008 and 2020.
And to those who took the expertise to the next level and see an even bigger picture, the chart is relatively calm, and normal.
The excitement is even bigger because of what happened on an intraday basis – gold moved back to its declining support line based on the 2020 and 2021 highs and then it moved back up.
What’s likely to happen now? Gold is likely to move back and forth, but will ultimately break below the declining support line, which will be a major “uh-oh” moment for those who think that gold will move higher from here based on the very positive fundamental situation.
Taking into consideration that the general stock market has probably just topped, and the USD Index is about to rally, then gold is likely to slide for the final time in the following weeks/months.
Moreover, while the pace of gold’s decline in 2012 started off slow, the momentum picked up later on as the drawdown became more vicious.
In both cases, the preceding decline had some back-and-forth trading in its middle, and the final rally picked up pace after breaking above the initial short-term high.
Interestingly, the 2012 rally ended on huge volume, which is exactly what we saw also on May 19 this year.
It moved back and forth for a while and moved a bit above that high-volume top, and only then the final top took place .
The final top, however, formed after some back-and-forth trading and a move slightly above the previous high.
The lower part of the above chart shows how the USD Index and the general stock market performed when gold ended its late-2012 rally and was starting its epic decline.
Also, please note that while it might seem bullish that gold managed to rally above its declining black resistance line recently , please note that the same happened in 2012 – I marked the analogous line with red.
Silver price confirmed its breakdown below its rising support line, and it has just finished invalidating its fifth attempt to break above the early January highs.
The breakdown in the GDX ETF is also crystal clear.
We saw a buy signal from the stochastic indicator, but the breakdown in terms of closing prices is more important, as the buy signals from the stochastic were not that reliable so far this year.
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Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.