Silver, Miners: Intraday Highs Feel Like Déjà Vu

Silver and mining stocks jumped on intraday highs only to pull back at the day’s close. In other words, they moved nowhere – another sign of a market top.

The price moves we’ve seen so far this week are particularly interesting. And I don’t mean the boring action in the GDX (which serves its own purpose as a signal), but the reversals in gold and silver.

What Can History Teach Us?

In the case of gold, the reversal took gold – temporarily – to new highs, but then gold declined once again. At the moment of writing these words (Jun. 2), gold is trading back below $1,900.

This price action took place on relatively significant volume (not as significant as the price action in silver, though), which suggests that the reversal is important. Moreover, that’s only a confirmation, as we knew that the reversal was important all along – based on the triangle-vertex-based reversal we recently saw. Combination of this with highly overbought RSI, a sell signal from the stochastic indicator, and, most importantly, the analogies to how the situation in gold developed in 2008 and 2012, provides us with an extremely bearish outlook for gold.

Many other factors are pointing to these similarities, and two of them are the size of the correction relative to the preceding decline and to the previous rally. In 2012 and 2008, gold corrected to approximately the 61.8% Fibonacci retracement level. Gold was very close to this level this year, and since the history tends to rhyme more than it tends to repeat itself to the letter, it seems that the top might already be in.

In both years, 2008 and 2012, there were three tops. Furthermore, the rallies that took gold to the second and third top were similar. In 2008, the rally preceding the third top was bigger than the rally preceding the second top. In 2012, they were more or less equal. I marked those rallies with blue lines in the above chart – the current situation is very much in between the above-mentioned situations. Also, the current rally is bigger than the one that ended in early January 2021 but not significantly so.

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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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