Does Gold Want To Move Lower?

Gold’s slight rally might be getting some people excited, but appearances can be deceiving. USDX action hints at gold really wanting to move lower.

The yellow metal has climbed, but only with lackluster energy. If the USD Index is not rising, then gold should really be shooting up and breaking new monthly highs, but it isn’t. Readers have been asking what’s happening and some have been concerned with gold’s apparent strength. So, let’s break it down.

History tends to rhyme and what happened before, will – to some degree - happen again. Gold is not immune to this concept, and the current implications are bearish.

Let’s jump right into the charts for details.

Graphical user interface, chartDescription automatically generated

Gold topped right at its triangle-vertex-based reversal, just like it did in mid-March and in early January (please note the points that are marked on the above chart for confirmation – they are described in red). That happened on Thursday (Apr. 8), and since that time gold has continued to move lower.

Gold invalidated the breakout above its mid-March highs, proving that what we saw was nothing more than just an ABC (zigzag) correction within a bigger downswing. The moves that follow such corrections are likely to be similar to the moves that precede it. In this case, the move that preceded the correction was the 2021 decline of over $150. This means that another $150+ decline could have just begun.

It might appear bullish that gold rallied yesterday (Apr. 13), but it only appears this way until one compares this rally with what happened in the USD Index during the same time. Paying attention to today’s (Apr. 14) pre-market price moves further emphasizes the fake nature of yesterday’s rally in gold.

The point is not that gold rallied, but that it hasn’t rallied enough.

A picture containing chartDescription automatically generated

During yesterday’s session, the USD Index moved to new monthly lows and this decline continued in today’s pre-market trading. Consequently, if gold was at least reacting to the USD’s movement “normally”, it should move to new monthly highs. If gold “wanted” to rally, it would have likely exploded to the upside. But what happened instead? Gold moved higher only somewhat yesterday – not to new monthly highs – and in today’s pre-market trading it’s actually slightly lower.

1 2
View single page >> |

Disclaimer: All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be ...

more
How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.