Gold, Miners: How Long Will Short-Term Rally Last?

Comparing this to the size of the previous decline in terms of the trading days, it was:

  • 51 – 56 trading days / 283 trading days = 18.02% - 19.79%
  • 10 – 16 trading days / 283 trading days = 3.53% - 5.65%

Now, let’s examine the current situation.

ChartDescription automatically generated

Figure 7

The preceding decline lasted for 200 trading days and there were 41 – 42 trading days between the final USDX bottom and the short-term reversals in gold and USDX. Comparing this to the final USDX bottom, we get 7 – 8 trading days.

Applying the previous percentages to the length of the most recent medium-term decline in the USD Index provides us with the following:

  • 18.02% - 19.79% x 200 trading days = ~36 - ~40 trading days
  • 3.53% - 5.65% x 200 trading days = ~7 - ~11 trading days

The above estimation of about 36 – 40 trading days almost perfectly fits the current 41 – 42-day delay, and the estimation of about 7 – 11 trading days almost perfectly fits the current delay of 7 – 8 trading days.

In other words, the analogy to the 2018 performance does not only remain intact – it actually perfectly confirms the validity of the current corrective upswing. Once again, it’s very likely just a pullback, not a big trend reversal.

Also, please note that back in 2018, the USD Index corrected after moving back above its mid-2017 lows and now we see the analogy to that – the USDX corrects after moving back above its mid-2020 lows. Back in 2017, the USD Index corrected to approximately its previous short-term high (the January 2018 high). Now, the February high is providing strong support at about 91.6 – that’s where this brief correction might end – on an approximate basis.

The above perfectly fits the scenario in which the precious metals market rallies on a very short-term basis (likely to about $1,770 in gold and about $34 in GDX), and then resumes its medium-term decline.

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Erikas Ivan 2 months ago Member's comment

Thank you for providing exact and valuable service through your emails, Mr. Radomski. Spot on!

Przemyslaw Radomski, CFA 2 months ago Author's comment

Thank you!

Mar1kle 2 months ago Member's comment

Long term (Greater than 2 years...weekly chart), we bottomed in 2016. Medium term (Greater than 1 year...daily chart) we bottomed in Mar 2020. Short term (Less than 6 months 4 hour chart), we have not bottomed. Since Jan we have hit up against a well defined downward channel (shown on Daily and Hourly charts...days 1/29, 2/10, and 2/24), and have failed. Today that top part of channel sits at around 1800. The bottom part of the channel has been violated to the downside. Until we clear the upper line of this corrective channel we cannot say we have a short term bottom. The real question is what is the short term bottom price target and when will we get there. Options expiration next week has been a bloodbath this year for Gold. Short squeezes on highly shorted stocks seems to have also quietly picked up again (GameStop at 265). Options week will be interesting. Will Gold shorts panic and attempt to push the market down to get out of their highly leveraged short positions? I would not be long next week. As to a (short term) bottom.. I vote 61% retracement (measured from the 2018 lows to Jan 2021 High) around 1536. I think a major chunk of this will come next week. Then up from there

Przemyslaw Radomski, CFA 2 months ago Author's comment

Interesting point, thanks. I think we define short-term moves as something different. To me, a short-term move would be a weekly rally, for example - and I think we're more or less in the middle of one.

Carl Schwartz 2 months ago Member's comment

I think we bottomed.

Przemyslaw Radomski, CFA 2 months ago Author's comment

I think so too, but then again, I view this move as a counter-trend rally that would be likely followed by another move lower perhaps as early as next week.