While we might see a small uptick in gold prices soon, it’s not likely to last long. We should be prepared to open our parachutes any time now.

The decline in gold continues, and while we might see a small pop-up higher here, it’s unlikely to last. And why could gold move slightly higher and correct the recent declines?

Because it has just reached the rising support line based on its previous important lows. The possible rebound could take place based on this single development. However, just because it might happen doesn’t make it very likely, and it doesn’t mean that taking any action now is justified. The medium-term forecast for gold remains bearish.

The situation in the USD Index is one of the reasons for this outlook:

We recently saw a breather that was similar in terms of time and price to the previous patterns which happened after quick short-term rallies. And now, the USDX is moving higher once again. As soon as it exceeds the previous June highs, it’s likely to rally more substantially, perhaps stopping temporarily at the late-March high or rallying even higher, to 95 or so.

Either way, gold is likely to get the bearish push off the cliff that will likely take it below the above-mentioned rising red line. Gold’s next support is at the previous 2021 lows – close to $1,670.

Besides, while gold bounced off the rising red line visible on the first chart, the yellow metal actually broke visibly below a much more important support line.

In fact, that was the first time when gold managed to break below this line and not rally back up. This time is already different.

Moreover, let’s keep in mind that gold stocks’ relative performance not only hasn’t stopped indicating the bearish outlook recently but also provided a screaming sell sign once again on Monday.

Namely, the GDX ETF declined and closed below its previous monthly lows as well as below the late-April lows. This breakdown took place without gold’s help, which makes it particularly bearish.

Please note that the volume that accompanied this week’s declines is relatively low, and the declines tend to end on huge volume. Consequently, the low-volume readings imply that we’re not at the bottom yet. Also, silver hasn’t broken visibly lower, and it didn’t “catch up” with the miners, which could indicate that the bottom is in. So, it likely isn’t.

The above-mentioned breakdown was even more profound in the case of the GDXJ – a proxy for junior mining stocks.

The size of the recent “upswing” was comparable to the mid-November 2020 one, so it confirms the analogy to this period that I mentioned while discussing the gold’s chart yesterday.

The next short-term downside target is at about $42 – a bit below the previous lows, as that’s where the 50% Fibonacci retracement line coincides with the previous highs and lows (and also with the 2019 highs that are not visible on the above chart).

The 4-hour candlestick chart shows that junior miners moved slightly higher at the beginning of yesterday’s session only to decline in its final hours. So, it’s not that we’re not seeing any corrections – we do have them, but they are so tiny that they are barely noticeable from the daily perspective.

All in all, it seems that the outlook for the precious metals market – especially for the junior gold miners – is very bearish for the following weeks and months, and it seems that the profits on our current short position will grow much more quite soon.