Available to premium subscribers only.

• Read more

Silver is not just any industrial metal. Used as money for centuries, much longer than the fiat currencies have been used, with its specific properties that are also widely used in many industries (best conductor of heat and electricity), with crude oil, it is perhaps one of the most versatile commodities.

As far as the white metal is concerned, on September 24^th, we have warned you about the possible temporary rebound.

Silver is after a major breakdown, and it just moved slightly below the recent intraday lows, which could serve as short-term support. This support is not significant enough to trigger any significant rally, but it could be enough to trigger a dead-cat bounce, especially if gold does the same thing.

That’s exactly what happened.

So, is the counter-trend rally over? That’s entirely possible, particularly if we consider the USDX breakouts. However, given the possibility of higher stock market moves, silver could move somewhat higher before it slides once again.

In early March, silver moved higher before indeed plunging, so the current move up doesn’t invalidate this similarity, especially that the coronavirus cases are rising in a quite similar way (this similarity is most visible in Europe).

Technically, silver moved as high as it did on July 28th, on an intraday basis. The corrective rally is not as little as one might think while focusing on just Friday's upswing. But that is not the critical thing here. The key thing is that the breakdown below the rising support line was more than confirmed.

At this point, one might ask how do we know if that really is just a dead-cat bounce, and not a beginning of a new strong upleg in the precious metals sector. The reply would be that while nobody can say anything for sure in any market, the dead-cat-bounce scenario is very likely because of multiple factors, and the clearest of them are the confirmed breakdowns in gold and silver, and – most importantly – the confirmed breakout in the USD Index.

Now, since silver has already broken below its rising short-term support line, the corrective upswing might already be over.

Moreover, please note that from the long-term point of view, silver is not that strong.

While gold moved to new highs, silver – despite its powerful short-term upswing – didn’t manage to correct more than half of its 2011 – 2020 decline.

Silver has already invalidated its move above the lowest of the classic Fibonacci retracement levels (38.2%), which is not something that characterizes extraordinarily strong markets.

Silver is likely to move well above its 2011 highs, but it’s unlikely to do it without another sizable downswing first.

If you look at the monthly silver volume levels, it seems likely that the next sizable downswing has already begun. The previous substantial monthly volume in silver accompanied the 2011 top. The analogy doesn’t get more bearish than this. Ok, it would, if there were multiple key tops confirmed by huge monthly volume. But the 2011 top was so significant that other tops are not comparable, except for the most recent one. Thus, the implications are bearish.

Thank you for reading our free analysis today. Please note that the following is just a small fraction of the full analyses that our subscribers enjoy on a regular basis. They include multiple premium details such as the interim target for gold that could be reached in the next few weeks. We invite you to subscribe now and read today’s issue right away.

Sincerely,
Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager

• Read more

Since the situation developed in tune with my expectations from yesterday, today’s analysis will be based mainly on yesterday’s analysis, which remains valid.

The key takeaway from yesterday’s remarks was that miners’ relative weakness (on a short-term basis) nullified the bullish implications of gold’s breakout. Thus, the situation didn’t become more bullish because of that, at least as far as the mining stocks are concerned.

And indeed, yesterday, gold and silver mining stocks declined along with the underlying metals. To provide you with a better context, here’s what we indicated yesterday:

Yesterday, the GDX ETF (which we’ll use as a proxy for the sector) moved higher ($0.95) but gave away most of its gains ($0.49) before the session was over, ultimately closing merely $0.46 higher. This means that miners have barely closed above their Friday’s closing price. As a matter of fact, they didn’t even move close to the October high.

Miners’ weakness is something that heralds precious metals market declines, and such was the case back in early March. As you can see on the chart above, the GDX ETF didn’t move back to its previous highs in March – even though at the same time, gold moved slightly above its previous highs. And we are all well aware of the carnage that followed.

So far, gold’s reaction resembles what happened in early March – it declined quite profoundly yesterday, erasing more than its previous daily gains.

Gold stopped at the previously broken declining resistance line, which seems bullish. But, as we explained yesterday, that is not precisely bullish due to miners’ weakness, which accompanied the breakout.

The chart above shows us that the GLD has just tested its October highs and its 50-day moving average, proving to be a strong resistance. Back in early September, this MA served as a support, and when it was finally breaking in mid-September, it was then followed by a quite visible decline. Right now, this makes it quite a potent resistance, and it’s not surprising that gold declined after reaching it.

Additionally, please also take into account that the GLD bounces off relatively similar price levels. In August and early September, the 180-level and its surrounding served as support, and subsequently – in October – it served as resistance. There’s a good reason why that’s the case.

Namely, these are the levels that stopped GLD’s rally back in 2011. This is where we saw the ultimate top. It formed a bit north of $180, but the overall area remains the same.

And what are the implications for the current situation because of it? That the resistance that gold and GLD just reached is stronger than it appears at first sight.

Currently, gold is trying to climb back above its 2011 highs, and the attempt is not a successful one for now. Even at the moment of writing these words, gold futures are trading below their 2011 high.

So… Is there any other indication that gold and miners are about to turn south? You bet! <the discussion continues in the full version of the analysis – today’s Gold & Silver Trading alert>

Thank you for reading our free analysis today. Please note that the above is just a small fraction of the full analyses that our subscribers enjoy on a regular basis. They include multiple premium details such as the interim target for gold that could be reached in the next few weeks. We invite you to subscribe now and read today’s issue right away.

Sincerely,
Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager

• Read more

As it turned out, the USD Index didn’t reverse yesterday. Instead, it declined further and reached the 92.50 level, while gold responded with a rally as a result. And yet – that’s still bearish and in line with what I wrote yesterday. But why is that? How could it be that a daily rally in gold is bearish? The answer is simple – it’s not the rally in gold that’s bearish, but what it had caused. More precisely, what it hadn’t caused. It didn’t make miners rally to any similar extent.

Based on the recent decline, gold touched its October highs and, once again, tested its 38.2% Fibonacci retracement level. This resistance held on, and therefore, the upswing that we’ve witnessed this month is nothing but a corrective upswing.

The breakout above the declining short-term resistance line is a quite bullish sign on its own, especially since gold managed to hold above it for a few days. To be a little more specific – this would have been a bullish indication if it wasn’t balanced by equally or more important new signals coming from the mining stocks.

Yesterday, the GDX ETF (which we’ll use as a proxy for the sector) moved higher ($0.95) but gave away most of its gains ($0.49) before the session was over, ultimately closing merely $0.46 higher. This means that miners have barely closed above their Friday’s closing price. As a matter of fact, they didn’t even move close to the October high.

Miners’ weakness is something that heralds precious metals market declines, and such was the case back in early March. As you can see on the chart above, the GDX ETF didn’t move back to its previous highs in March – even though at the same time, gold moved slightly above its previous highs. And we are all well aware of the carnage that followed.

Now, you might be thinking that comparing gold and miners is not a true apples-to-apples comparison, as their closing time is different. That’s true, so let’s see how the GLD ETF performs – its closing price is the same as the one of the GDX ETF.

The GLD ETF chart is even better in showing us that yesterday’s closing price is visibly above last Friday’s close. Therefore, the argument about miners’ severe underperformance is a valid one.

Moreover, please note that the above chart shows us that the GLD is currently testing its October highs and its 50-day moving average. Back in early September, this MA served as support, and when it was finally broken in mid-September, it was then followed by a quite visible decline. This makes it quite a potent resistance right now, and it’s no wonder that gold is down in today’s pre-market trading.

Additionally, please also take into account that the GLD bounces off relatively similar price levels. In August and early September, the 180-level and its surrounding served as support, and subsequently – in October – it served as resistance. There’s a good reason why that’s the case.

Namely, these are the levels that stopped GLD’s rally back in 2011. This is where we saw the ultimate top. It formed a bit north of $180, but the overall area remains the same.

And what are the implications for the current situation because of it? That the resistance that gold and GLD just reached is stronger than it appears at first sight.

Currently, gold is trying to climb back above its 2011 highs, and the attempt is not a successful one for now. Even at the moment of writing these words, gold futures are trading below their 2011 high.

So… Is there any other indication that gold and miners are about to turn south? You bet! <the discussion continues in the full version of the analysis – today’s Gold & Silver Trading alert>

Thank you for reading our free analysis today. Please note that the above is just a small fraction of the full analyses that our subscribers enjoy on a regular basis. They include multiple premium details such as the interim target for gold that could be reached in the next few weeks. We invite you to subscribe now and read today’s issue right away.

Sincerely,
Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager

• Read more

The current precious metals market movements may seem boring (and to be honest, they actually are, observed from a short-term perspective). However, there are some important and rather interesting indications in this sideways movement.

Yesterday, I commented on gold's strength regarding the USD Index and the mining stocks' strength in relation to gold. Both were weak, which resulted in a bearish combination. So, did yesterday’s and today’s pre-market movements validate or invalidate these observations?

In short, they’ve confirmed them. Despite its recent very short-term breakout, the USD Index moved lower, moving to new short-term lows.

How much did things change? Hardly anything changed. What matters the most is the breakout above the declining medium-term resistance line. More significant than it initially seemed, the post-breakout consolidation is still just that – a post-breakout consolidation. This means that the USD Index will most likely rally significantly anyway.

However, if we consider the next few days, the USDX could move lower, perhaps as low as 92. This target presupposes that the pullback could take the classic zig-zag form, where the two short-term declines are alike. The aforementioned is marked with dashed lines on the chart above.

At the same time, this would take the USDX close to its September lows, which would complete the broad bottom formation. It’s important to note that this final bottom would take place after the USD Index had already broken above the declining medium-term resistance line – that’s what increases the probability that this move lower would be the final part of the broad bottom and not the beginning of a new big slide.

Yes, the breakout above the declining short-term resistance line was just invalidated, and it’s not certain that the breakout above the medium-term resistance line will not be invalidated as well. But resistance lines based on more profound price extremes and formed over a longer timespan are more important. Consequently, just because the very short-term breakout failed to hold, doesn’t mean that the breakout above the medium-term line will also fail. Conversely, it’s a bullish factor that remains intact.

Now, the USD Index moved below its previous October lows. So, in response to the above, did the yellow metal move above its October highs as well?

It didn’t. Instead, it has just made another attempt to break above the declining resistance line. Now, if the US Index declines further, it might be successful in this attempt. But I wouldn’t count on it too much. After all, the previous effort was invalidated relatively quickly.

Let’s also keep in mind that the USD Index moved below its October lows only in today’s pre-market trading. It could be the case that it invalidates this small breakdown and rallies right away, thus triggering a decline in gold as a result.

Right now, it seems that this is the outcome that mining stocks favor.

Looking at the miners alone, one wouldn’t probably say that they are moving higher this week.

They closed higher yesterday, but it was a move higher by just $0.30, which is hardly anything compared to the previous days’ decline and the upswing in gold and the USDX downswing.

In other words, we saw yet another bearish confirmation from the miners, as they were once again weak.

This means that even if gold rallies due to the USD Index declines, miners’ upswing would probably be limited. And on the other hand, if gold declines due to USD’s rally, miners would likely drop significantly.

At the same time, let’s keep in mind that gold itself didn’t magnify USDX’s bullish signals, but instead, it magnified the bearish ones.

All in all, given the limited bullish and the sizable bearish potentials, from today’s point of view, the bearish outlook for the mining stocks continues to be justified.

Thank you for reading our free analysis today. Please note that the following is just a small fraction of the full analyses that our subscribers enjoy on a regular basis. They include multiple premium details such as the interim target for gold that could be reached in the next few weeks. We invite you to subscribe now and read today’s issue right away.

Sincerely,
Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager

• Read more