Does Gold Have A Green Light To $1700?

What if the USD Index declines much more? The last time when gold was trading at these levels in 2020, the USD Index was trading at about 100. The latter declined about 10 index points and gold is at the same level. So, gold has already proven its ability to ignore the USD’s declines. There will be a time when gold soars in response to even mild declines in the USDX, but this is likely to happen only after gold declines significantly – and it “wants” to rally.

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Figure 3

In previous analyses, I commented on the above chart in the following way:

The move higher in gold was notable, but nothing game changing. The last time gold moved above the declining short-term resistance line, was when it actually topped. The invalidation of the breakdown marked the start of another very short-term decline. The small decline in today’s overnight trading might be the very beginning of this invalidation that leads to another slide.

That’s exactly what happened. The failed breakout led to another slide and gold is currently right after its breakdown to new 2021 lows. The road to ~$1,700 gold is now fully open. That’s when gold would be likely to take some sort of breather and gather strength (well, weakness, but “gathering weakness” just doesn’t sound right) for another wave down – likely to $1,500 or so.

Please note that gold didn’t close at new yearly lows yesterday. This observation is important in comparison with the fact that…

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Figure 4

Mining stocks did.

Miners closed at new 2021 lows yesterday, even though gold didn’t, which once again proves their weakness and once again confirms the bearish outlook.

I previously wrote that gold’s ~$1,700 target is likely to be aligned with the GDX’s ~$31 target and this remains up-to-date. After that, I expect some kind of corrective upswing – perhaps to $33 or so, and then another – big – move lower. Please note that the corrective upswing would be yet another (and final) verification of the head and shoulders pattern, and its very bearish implications would take place only after this verification. That’s why I expect the decline to be particularly significant. You can read more about this broad H&S pattern over here.

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Erikas Ivan 2 months ago Member's comment

Thank you again for the excellent analyses throughout the week, Mr. Radomski. I continue to find your precious metal insight really informative and reliable, both on short and long-term, especially on the short-term bearishness.