HH How The Eurozone Affects Gold, And Why You Should Care

And since the situation is unclear with regard to the short-term in the case of the USDX, it would be natural for gold to hesitate. Since it’s already declining, it seems that even if the USDX tested it is previous 2021 low, gold would not rally far.

Figure 3 - COMEX Silver Futures (SI.F)

Similar to gold, silver is not doing much. The white metal is moving back and forth after the big January slide and it seems to be preparing for another move lower.

Let’s keep in mind that silver has a triangle-vertex-based reversal in late February – close to Feb. 23. Based on what we’ve seen so far, it seems quite likely that it will be a major bottom (not likely the final one for this slide, though).

Figure 4 - VanEck Vectors Gold Miners ETF (GDX)

Miners didn’t do much yesterday either, so my previous comments on them remain up-to-date. To explain the pattern, I wrote on Jan. 11:

If you analyze the chart above, the area on the left (marked S) represents the first shoulder, while the area in the middle (H) represents the head and the area on the right (second S) represents the potential second shoulder.

Right now, $33.7-$34 is the do-or-die area. If the GDX breaks below this (where the right shoulder forms) it could trigger a decline back to the $24 to $23 range (measured by the spread between the head and the neckline; marked with green).

And after analyzing Thursday’s (Jan. 21) price action, I wrote the following (on Jan. 22):

As far as the miners are concerned, mining stocks didn’t correct half of their 2021 decline. They didn’t invalidate the breakdown below the rising support line, either. In fact, the GDX ETF closed yesterday’s session below the 50-day moving average. Technically, nothing changed.

Regarding the GDX ETF’s current consolidation pattern (November to present), it mirrors what we saw between April and June of last year (the shaded green rectangles above). 

I added:

Both shoulders of the head-and-shoulder formation can be identical, but they don’t have to be, so it’s not that the current consolidation has to end at the right border of the current rectangle. However, the fact that the price is already close to this right border tells us that it would be very normal for the consolidation to end any day now – most likely before the end of January.

If we see a rally to $37, or even $38, it won’t change much – the outlook will remain intact anyway, and the right shoulder of the potential head-and-shoulders formation will remain similar to the left shoulder.

But with many paths to get there, is hitting $37 or $38 a prerequisite to the eventual decline? Absolutely not. The GDX ETF could reverse right away and catch many market participants flat-footed. 

Remember, it’s important to keep last week’s rally in context. Despite the Yellen-driven bounce, the GDX ETF is still down considerably from its January highs.

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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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Monica Kingsley 2 months ago Contributor's comment

I am not really sharing such a bearish $GOLD and GDX view, and in my today's stocks and gold analysis, I lay out why