Here’s What’s Eating Away At Gold

Gold is dodging bullets, as it comes increasingly under fire from rising U.S. interest rates and a USD that is poised to surge.

Catching unsuspecting traders in yet another bull trap, gold’s early-week strength quickly faded. And with investors unwilling to vouch for the yellow metal for more than a few days, the rush-to-exit mentality highlights a short-term vexation that’s unlikely to subside.

Please see below:

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Figure 1

Destined for devaluation after hitting its triangle-vertex-based reversal point (which I warned about previously), the yellow metal is struggling to climb the ever-growing wall of worry.

Mirroring what we saw at the beginning of the New Year, gold’s triangle-vertex-based reversal point remains a reliable indicator of trend exhaustion.

And when you add the bearish cocktail of rising U.S. interest rates and a potential USD Index surge, $1,700 remains the initial downside target, with $1,500 to even ~$1,350 still possibilities under the right curcumstances.

Please see below:

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Figure 2 - Gold Continuous Contract Overview and Slow Stochastic Oscillator Chart Comparison

To explain the rationale, I wrote previously:

Back in November, gold’s second decline (second half of the month) was a bit bigger than the initial (first half of the month) slide that was much sharper. The January performance is very similar so far, with the difference being that this month, the initial decline that we saw in the early part of the month was bigger.

This means that if the shape of the price moves continues to be similar, the next short-term move lower could be bigger than what we saw so far in January and bigger than the decline that we saw in the second half of November. This is yet another factor that points to the proximity of $1,700 as the next downside target.

In addition, as a steepening U.S. yield curve enters the equation, I wrote on Jan. 27 that the bottom, and subsequent move higher, in U.S. Treasury yields coincided with a USDX rally 80% of the time since 2003.

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Disclaimer: All essays, research, and information found on the Website represent the analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong ...

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Erikas Ivan 1 week ago Member's comment

Thank you for your in-depth analyses. There are many analysts that are fond of the bullish case for the long-term, and we should, especially in the following few years.

But, based on the current and upcoming USDX movements, as well as other factors, I must agree on the bearish outlook with you, as you've been calling gold to go lower for weeks now, moving to new yearly lows last week, thank you!