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

Gold jumped higher, shortly after the core CPI numbers were released, which were above expectations and at the same time the weekly jobless claims came in at a new pandemic-era low. The initial reaction was very positive – gold futures moved to $1,869.65, and now they are trading $10 lower. The USD Index appears to be gaining as emotionality declines.

In today’s regular Gold & Silver Trading Alert, I commented on the inverse head-and-shoulders pattern, and in particular I emphasized its absence.

Based on today’s intraday rally, gold moved visibly above the neck level of the pattern, therefore almost (!) triggering bullish implications. Why “almost”? Because the breakout should be confirmed by three consecutive daily closes above a certain level (in this case, the neck level of the patten = approximately the previous highs).

In case of the GDX ETF, we saw a breakout above the October highs, but, just like what I wrote about gold, this move was not yet confirmed. The inverse head and shoulders pattern in the GDX ETF has a neck level that’s based on the September and October highs. This line is at about $34.15. At the moment of writing these words, the GDX ETF is trading at $34.31, so it could be the case that this breakout is invalidated very soon.

Also, based on today’s rally in the GDX, the RSI indicator based on it moved above 68, and the proximity of the 70 level meant tops many times in the past. In fact, there were just three cases since the beginning of 2020 when GDX’s RSI moved above 70: at July and August 2020 highs, and once at the May 2020 top. Since RSI is doing what it’s been doing at or very close to previous yearly (2020 and 2021) highs, it’s not a bullish sign.

So, what does it all mean? It means that NOW the situation has NOT changed. It might become more bullish IF the breakouts in gold and GDX are confirmed. Gold already gave away $10 of its earlier gains, and I can easily see the situation in which gold reverses today, or later this week, thus invalidating the breakout above its inverse head and shoulders formation.

Again, ff the breakouts in GDX and gold are confirmed, the short-term outlook might become bullish. For now, I continue to think that short positions in mining stocks (I continue to prefer juniors a shorting candidates) remain justified from the risk to reward point of view.

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

Thank you.

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