Gold & Silver Soar, Miners Test

Gold’s up, yet miners pause after an initial move up and reverse on an intraday basis.

Once again.

Miners Lose Steam Despite Gold’s Surge

Gold price clearly moved higher today, and while miners and silver moved higher as well, mining stocks failed to move to new highs.

It’s all happening while the USD Index is reaching its highest values since mid-August.

The rally is not yet obvious to most, even though the technical signs are clear.

Consequently, my previous comments on the situation remains up-to-date:

We saw a daily reversal, which happened on big volume, and it all took place at the vertex of the lines creating the previous rising wedge formation, which itself was broken to the downside.

That’s a sell signal on top of a sell signal, confirmed by a sell signal with another sell signal.

And it’s all happening while mining stocks are extremely overbought, and the USD Index is rallying despite extremely negative sentiment and multiple fundamental headwinds.

This is an extremely bearish combination for the precious metals mining stocks. Yes, I did write that previously, and it was way too early. However, this doesn’t mean that the current market analysis is incorrect.

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The perfect storm for the precious metals market is brewing. Will gold be able to continue its parabolic upswing? It’s not clear – it recently rallied despite USD’s gains, and the USD – despite moving higher – is not rallying in a way that would be clear for everyone. The latter’s impact on gold could kick in once gold moves even higher.

The important thing here, however, is that mining stocks are moving lower even though gold is up. This means that even though gold could rally more visibly in the very near term, miners don’t have to follow it. Just like what we saw recently – their rallies could be small, and their declines could be significant. Just one daily decline in gold could mean a slide in miners from which they would not be able to recover for months.

Gold Nears Target Zone as Reversal Looms

The today’s intraday high of gold was $4,071.50 – which is in the middle of my upside target for gold. It can reverse and side any day or hour now, especially that the USD Index is on the rise. When will the market realize that gold went up too far, too fast, and that the USD Index is actually starting to soar? The above chart suggests that it’s going to happen soon or very soon – very, very likely this month.

All in all, it looks like the final part of gold’s parabolic upswing. Silver could still shoot higher, but since miners already refuse to move to new highs, it looks like this month will mark the turning point for all gold and silver investors. We’re prepared for what’s to come.

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Przemyslaw K. Radomski, CFA
Founder
Golden Meadow®