Gold Stocks, Silver: The Fire In The Precious Forest

You can’t tell if the forest is burning just by touching one tree and not looking around. The gold tree might feel cool now, but what about the rest?

Taking into consideration the recent quick upswing in gold, investors are asking: “Did gold really top on Jun. 1?” And gold stocks are replying: most likely yes.

The above is the essence of what the charts are currently saying, but let’s have look in more detail.

Look at the Bigger Picture

In short, gold recovered right after declining profoundly and reaching its rising support line. At this time – when looking at the above chart alone, and without considering any analogies to 2008 and 2012 – it seems that gold may move either way. Perhaps the next short-term move will be up since the rising short-term support line has held.

But this approach would be similar to saying that there is no fire in the entire forest just because the tree I’m touching right now is of normal temperature. And other key parts of the precious metals sector – gold stocks and silver – are providing us with extra insights, which are making the narrative decisively bearish.

Even without considering the invalidation of the breakout to new highs, the sell signal from the RSI and stochastic indicators, and even without noticing that the GDX corrected to its 61.8% Fibonacci retracement without invalidating it, one can clearly see that gold stocks refused to follow gold higher during the most recent rebound. This is bearish and quite profoundly so.

And silver? Has it maybe indicated something that gold hasn’t?

Of course it has. Silver is after a confirmed breakdown below its rising short-term support line, and this breakdown took place right after silver failed – for the fourth time – to break above its early-January high. And, more importantly, it happened shortly after silver outperformed gold on an intraday basis, just like it tends to do right at the tops.

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Disclaimer: All essays, research and information found on the Website represent the analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong ...

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