Gold, Silver, and Miners Haven’t Declined Despite USD’s Bottom – YET

End of the Rally? Signals Point to a Turning Tide

Last week’s reversal in the USD Index continues to provide the foundation.

This is a huge development and my last week’s point remain up-to-date:

It’s not “just” an invalidation of the breakdown to new yearly lows. It’s a major weekly reversal!

The same kind of reversal that meant local bottoms in April and in June. The difference now is that this is the second bottom, which what used to start huge rallies in the past, but I already wrote about it [on Thursday]  – the thing that I want to add on top of that is that the USD Index is UP this week. This makes the implications of the current situation here even more bullish – extremely so.

Despite the above, gold is not down this week – conversely, the entire precious metals sector moved higher.

Gold price is up – once again at the rising resistance line. This is the third time that it reached it. This time, it also moved to the psychologically important $3,750 level.

Silver is up, and it even briefly moved above the price level marked by the highest of the red lines – that’s how far silver rallied after previous breakouts. It now moved back below this level, perhaps while creating a daily reversal.

Speaking of reversals, that’s what miners are doing on an intraday basis. Perhaps this two-day rally is the final breath of the dying bull. We’ll see soon, but even if this is not the case immediately, it still seems that miners’ rally’s days are numbered.

Back in 2008, neither gold, nor miners, topped right when the USD Index bottomed. The PMs top was delayed by a few days. In particular, miners topped about a week after the USD Index did.

The USD Index bottomed last Wednesday, so if the analogy is to continue, gold and miners can top literally any day now.

Bitcoin’s – this time – confirmed breakdown points to this outcome as well.

About three years ago, when bitcoin was after its final top, it had a correction after the first part of the decline. The end of the correction in bitcoin preceded the top in the precious metals sector.

The FCX was already after a top at that time. The same appears to be the case right now.

In fact, FCX just broke below its rising support line based on this year’s lows.

Let’s get back to the previous chart. The thing about bitcoin is that it moved below its rising red support line, moved back to it and failed to rally above it. It’s now moving lower once again. That’s how breakdown’s verification looks like. It seems that the ‘new gold’ is ready to decline in the following months.

Gold Stocks Have Likely Overshot Their Rally

Given the similarity to 2022, it could be one of the factors that takes miners along with it.

Let’s keep in mind that gold stocks have rallied even a bit more than they used to rally during its key medium-term upswings. This makes it even more likely that this rally’s days are numbered. And I don’t mean just from the short-term but also from the medium-term point of view.

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Thank you.

Przemyslaw K. Radomski, CFA