Forecasting gold prices is not easy, but right now it seems that we have quite many factors aligned.

As you’ll soon read, the situation in gold price itself together with the situation in the USD Index create a quite coherent gold price forecast for March 2024.

The key events of this week are the earlier breakout in the USD Index and the late breakout in gold. Odxjne of them is likely to be invalidated – it’s likely that it will be the case with gold’s breakout.

Let’s start with gold’s bigger picture.

(Click on image to enlarge)

The key thing that impacts the outlook for the following weeks and months didn’t change.

No wonder, it couldn’t change without a prior decline, because it’s something that already happened. I mean the extreme weekly reversal that we saw in late 2023. When we saw something like this at the 2022 and early-2023 tops, the declines that followed were huge, even if they didn’t start right away.

The decline that we saw in the recent months took gold about $150 lower and then back up by about $50 – it’s way too little compared to the previous periods that followed gold’s clear weekly reversals.

Consequently, gold price is likely to move much lower in the following months, quite likely also in March.

Still, the above chart shows that gold is close to its declining orange resistance line based on the previous highs, so let’s zoom in to see what’s going on.

Gold price managed to move above the declining resistance line, which seems like a bullish sign for the near term. The same goes for gold price’s breakout above its 61.8% Fibonacci retracement level based on the February decline.

And yet, I have serious doubts regarding gold’s strength here. They are mostly based on what’s happening in other markets (they are all connected in today’s globalized economy), but we see a few of the reasons right on the above chart as well.

One thing is that gold closed above the declining orange resistance line and the 61.8% Fibonacci retracement level just once – in other words, the breakout is not confirmed. Generally, I view a breakout as confirmed after seeing three consecutive closes above a certain price level. We’re not there yet, so those breakouts are not to be trusted yet.

Another thing is the proximity to the April 2023 high, which I marked with a blue, dashed line. Every time when gold price moved above this high, it then invalidated this move – either sooner or later. And since gold has been forming lower highs since Dec. 2023, it seems that the reversal based on a move above the April 2023 high would arrive quite soon – from price levels below the $2,080s.

At the moment of writing these words, gold price futures are trading at $2,063, which would imply that their maximum likely (of course, no guarantees) size of this rally is an extra $20 or so – not that much. Naturally, gold could already be after its top, meaning that another move higher here is not inevitable nor very likely.

Also, it’s usually the case that it’s difficult to pinpoint a reason behind a given move in prices. This time, however, it can be done. Headlines currently (I’m writing this on March 1) point to the following:

“Congress moves to avert a government shutdown this weekend. The new deadline is just a week away.”

Indeed, the above could spark some safe-haven buying – after all shutting down the government seems like a really big deal.

Except that there’s no chance that it would happen. The Powers That Be have the capacity to pump more money into the system and keep it running. It’s been this way for the past decades and nothing’s about to change now. There is no threat here – only smoke in mirrors.

Apparently, it’s not obvious for everyone and the market reacts. Once the funding for the government is secured, gold will lose some of its safe-haven appeal and prices would likely decline.

Consequently, the current short-term upswing seems to be just a temporary phenomenon.

As I wrote above, the key indications come from other markets – the USD Index is one of them.

The U.S. dollar just moved sharply higher and it’s after a breakout above its declining red resistance line. Today is the third day after the breakout, and since the USDX already moved back down after the breakout and now it’s moving higher again, the odds are that the breakout will be fully confirmed.

The USDX and the precious metals sector are negatively correlated, and they are likely to move in the opposite directions. There are some exceptions, especially when something critical is happening in the Eurozone, but overall, what’s bullish for the USD Index is likely to have bearish consequences for prices of gold, silver, and mining stocks.

This is the third consolidation since the medium-term rally started at the end of 2023, and it appears that it has just ended. Consequently, gold and silver prices are likely to be under pressure.

Finally, there are indications from two all-important ratios connected with the gold price: one featuring gold stocks relative to gold itself, and the other featuring gold stocks relative to the general stock market.

The thing is that gold stocks tend to lead gold, which means that the ratios have predictive power for the entire precious metals sector. And here’s what happened recently:

We saw massive, clear, long-term breakdowns in both ratios!

While there are no immediate-term consequences, this is a perfectly bearish confirmation for the following months.

What Will Gold Price Do in March 2024?

It’s likely to decline eventually, but the first few days are relatively unclear, given that the breakout is not yet invalidated at the moment of writing these words. Don’t get me wrong – the profits in our short positions in junior mining stocks are unlikely to be affected to any significant extent – the miners haven’t shown strength recently.

(Click on image to enlarge)

(Click on image to enlarge)

Both: GDX (proxy for senior mining stocks) and GDXJ (proxy for junior mining stocks) remain below their rising resistance lines, and since the breakout below them was already verified, the next move is likely to be to the downside.

Even the shape of yesterday’s session – the intraday reversal – confirms the bearish outlook.

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