During yesterday’s trade, gold, silver, and mining stocks (important proxies for them) all reached new annual lows, and they are not back up (they’re rather flat) in today’s pre-market.
This huge negative occurrence will ultimately convince many traders and investors that the bullish thesis for gold and the rest of the industry is flawed.
Why on earth would gold fall to fresh annual lows amid the continuous European conflict, the epidemic, and increasing inflation?
Gold was unable to advance significantly over $2,000 because all of the aforementioned factors were already reduced in price. In reality, gold failed to maintain a position above its 2011 peak. Silver and mining equities were nowhere near reaching their comparable price levels.
Gold’s failure to launch a proper rally was a massive indication that it is not yet prepared to move higher – it needs to decline massively first, which is what I’ve been writing about for many months, but as new black swans kept appearing, gold was unable to complete its regular cyclical decline beforehand. So, it’s going now.
As real interest rates and the USD Index continue to rise, precious metal prices are anticipated to fall for at least the next few weeks. At some point, I anticipate gold, silver, and mining stocks will cease reacting to this negative reality and demonstrate resilience, so signaling the definitive long-term bottom. However, we have not yet arrived.
Based on historical comparisons of the drop of precious metals and mining companies, precious metals mining stocks still have a considerable distance to go, and our short positions provide substantial profit potential. Speaking of which, if you were positioned in accordance with what I’m characterizing as my general opinion in my Gold & Silver Trading Alerts, i.e., if you were positioned to profit from a collapse in junior mining companies, you just earned a lot of money yesterday, and in the previous few weeks in general.
This adds to the profits you earned on the prior long position, which adds to the gains you earned on the prior short position. Congratulations!
Gold has just gone beneath the neckline of the previous head-and-shoulders pattern and to new lows for 2022. The failure occurred at a high volume, so it seems plausible.
In addition, the RSI dropped below 30, which is a typical buy signal. I indicated the past identical signals with dashed vertical lines. In each of the prior three instances, gold was either nearing or at its lowest point.
Specifically, the scenario in early 2021 seems comparable since the preceding price movement is similarly comparable. In both instances, the unsuccessful attempt to rise over $2,000, the consolidation (shown with orange rectangles), and the subsequent downturn, which also featured a consolidation, are all apparent.
In 2021, gold continued to decrease until it fell below $1,700. While this does not ensure that the same will occur today, the fact that both losses began at comparable price levels makes it very probable.
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