Just a quick update as things are moving quite fast in the PMs.

Gold and silver soared in today’s trading, most likely based on a surprisingly positive U.S. initial jobless claims (498k vs. 540k expected). This number seemed important to traders as it’s the new pandemic-era low. The USD Index plunged, and gold soared – on an intraday basis.

What changed based on that? Well, nothing. In my opinion, markets seem to have overreacted. The above doesn’t change anything with regard to the factors that I’ve been outlining in the previous analyses with regard to the fundamental situation in the U.S. and in the Eurozone.

Technically, it changed little so far as well. Gold did move above $1,800, and the USD Index moved back below the 91 level. However, the latter didn’t move back the below the declining resistance which now turned into support. Consequently, it’s still likely to rally in the following weeks – and substantially so.

In fact, I wrote the following earlier today:

“What is really happening here is that the USD Index has been verifying the breakout – and it managed to do so. Consequently, the situation is bullish for the next several weeks (even if we see a very short-term move to somewhere around the recent lows).”

In yesterday’s analysis, I wrote that it’s not certain that the $1,800 will hold on a short-term basis, but that’s not the key issue here. The myriads of other factors are much more important. For instance, the breakout and in the USD Index and it’s extremely oversold status in the medium term, as well as gold stocks underperformance relative to gold. Not to mention the recent performance of tech stocks.

Please note that while gold just soared to $1,815 (visibly above its April high), the GDX ETF is mere $0.04 above its April high. And the GDXJ ETF didn’t even manage to reach to its April high.

Moreover, please note that silver is once again outperforming gold today – the white metal rallied by about 3.6% (soaring well above its April highs), while gold is up by about 1.7%. This, plus miners’ inability to rally visibly above its April highs is not a bullish combination, but a bearish one. Consequently, the outlook for the PMs for the following weeks remains very bearish, even though the next several hours and days are relatively unclear.

How high could gold rally in the very near term? Perhaps by another $15, to about $1,830 as that’s where we have the 38.2% Fibonacci retracement level based on the August 2020 – March 2021 decline. However, even if gold does rally there (which is far from being certain – the top might form as early as today), it doesn’t seem likely to me that GDXJ would soar substantially. Please note that miners tend to be particularly weak relative to gold right at or before the top and GDXJ is already underperforming. Consequently, I’m keeping the current positions intact.

As always, we’ll keep you - our subscribers - informed.

Thank you.

Sincerely,
Przemyslaw Radomski, CFA
Founder, Editor-in-chief