Impending movement downwards
Okay, where do we start…
Let’s start with the glitches. Both: Gold and GDXJ broke below their rising red support lines. It wouldn’t be as important as it is without the verification of those failures. In both cases, we saw prices move back to the rising support lines, view them as resistance, and then drop again. This is a strong indication that the trend has changed and is now down.
Another clue is the general underperformance of mining stocks compared to gold. It’s clear even at first glance: While gold is hundreds of dollars above its 2022 high, miners have simply wiped out their move above. In the short term, we see that miners have fallen below their November low, while gold has not (yet).
This is a sign that:
- The entire precious metals sector is likely to decline
- Miners will likely move MUCH lower if gold falls
This could also mean that some people prefer a strategy that involves owning gold (and perhaps gold). earn passive income from it), but short mining stocks to hedge the above position (just my opinion, not investment advice).
An interesting fact is that miners at the top have risen sharply against gold. This is a very specific exception to the rule it confirms and known to few. Miners are weak before the trend changes, but just before that happens, their volatility increases again. We saw that at the bottom of 2016, where the miners were strong and held up well at first, but when they finally hit a new low, it was a bear trap.
What we saw at the summit this year was probably a bull trap.
The following is how gold has topped recently and annually. In both cases there was a clear turnaround. This has meant tops several times in the past, and I have indicated that on the map. Furthermore, the most recent reversal occurred on relatively high volume, confirming the bearish outlook.
So yeah, there’s a bigger move down coming in the case of the precious metals market and GDXJ and [new asset where we have a short position] (and FCX, for its own reasons) are about to take a deep dive based on that. The initial targets are as I have outlined them, but it is likely that they will only succeed in triggering a correction, and not another major rally.
If gold moves to $2,500 during this short-term decline, I would lean toward opening a long position then, but it is still too early to say with 100% certainty and to say which instruments I will use. During the previous long trade I used GDX (we came in on November 14th and took profits on November 21, and the next day we took a short position in GDXJ, which may or may not be the case this time.