Bearish Momentum Builds in Gold
What IS of consequence is that gold’s recent price performance is clearly different from what we saw earlier this year, when gold was approaching its previous highs. The rally was temporary, just like I had warned.
Gold used to move to the previous highs in a steady manner and then break above them. There was once a tiny pause after the breakout, but there were no corrections before the breakout, let alone significant ones.
The fact that we saw gold’s significant decline this week and a move back below the 38.2% Fibonacci retracement (yesterday’s close) clearly proves that the previous bullish pattern was broken.
Now, as the USDX verifies its breakout, the odds for gold’s decline in the following days/weeks continue to increase. This translates into the same outlook for silver and mining stocks.
And if stocks decline – and they are likely to do that – the decline in silver and miners are likely to be magnified.
Also, since the tariffs are now moving back down, gold’s tariff- and uncertainty-based appeal is going to decrease. At the same time, the tariffs are likely to stay high enough to still cause economic damage to world economies, supporting declines in stock markets and commodity prices. Of course, there are ways to profit on this situation.
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Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief