USDX: Gold Can’t Wait To Fall - Even Without USDX's Help

PMs Play the Fiddle While USDX Burns

The key thing is that during the recent declines in the USDX (and during the move to new highs in case of the general stock market), gold, silver, and mining stocks didn’t soar. They “should have,” if the situation was normal or bullish. They declined instead, which means it’s highly likely that even if the USD Index doesn’t break out now (but a bit later), the decline in the PMs will not be avoided but only delayed.

In fact, to be more precise, it’s unlikely to be delayed as well – what might be delayed is the increase in the pace at which gold, silver, and miners are about to slide. After all, gold and gold stocks are already moving lower (while silver is trading sideways).

By the way, silver’s lack of movement recently is perfectly normal in the early stage of a decline – the metal tends to catch up big-time in the final part of a given move.

On the above gold chart, you can clearly see how gold moved back up to its rising short-term resistance line this week, and – instead of invalidating the breakdown – it bounced from it and declined once again. This is what verifications of breakdowns look like.

Also, let’s keep in mind that the situation now seems to be a mirror image of what we saw in April – June of 2020, and at the same time it’s somewhat similar to what we saw at the beginning of the year. You can see the former (the rectangles are identical) on the above chart, and you can see the similarity to the early January action below.

Just as was the case in early January, we first saw a pause – a rebound – and the decline continued only thereafter. It seems that the Jan. 7, 2021 price action is quite similar to what we saw yesterday (April 29). Moreover, please note that both happened just above the declining blue support line. It was the final pause before the move higher was invalidated.

Having said that, let’s move to gold stocks:

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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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Jared Green 1 month ago Member's comment

Inflation and dollar weakness should push gold prices up but I was shown a gold price forecast of 1400.

Przemyslaw Radomski, CFA 1 month ago Author's comment

Thanks for the comment. Inflation is one thing, bond yields is another. Thus, dollar doesn't have to decline now. In fact, the opposite seems more likely to me. I think that gold will move well beyond its 2020 highs, but not before declining (likely in the following few months).

Almoni33 1 month ago Member's comment

I am not sure you are right and gold will fall below the price of 1600 - nevertheless I will buy there with great joy

Almoni33 1 month ago Member's comment

Thank you for your article

Przemyslaw Radomski, CFA 1 month ago Author's comment

Thank you, I'm happy that you enjoyed reading it.

Almoni33 1 month ago Member's comment

Unlike dozens of authors on https://seekingalpha.com and others, you have shown not only charts but also target levels, which is especially significant. Yes I think you were wrong and we will not see gold at 1400 $ but more importantly you were not afraid to show your trade view

Przemyslaw Radomski, CFA 1 month ago Author's comment

I'm just not that good at "being afraid" :) Thank you. The next several months might be very interesting in the PMs, that's for sure. The long-term fundamentals are ridiculously bullish, and yet, it seems to me that the gold's going to initially (!) react to strength in the USDX and (eventually) declining stock market by declining significantly. We'll see. Have a great weekend!