I took a closer look at the situation in silver and mining stocks
iShares Silver Trust ETF
Market Vectors Gold Miners ETF
(NYSEARCA:GDX) and discussed how it may translate into the precious
I summarized the previous article in the following way: "[W]hen we
factor in the impact of…silver's cyclical turning point, which is
just around the corner, and the fact that the short-term resistance
lines have already been reached in case of the GDX ETF, we can
presume that the top of the recent upward move in the precious
metals may be already in (or is very close to being in)."
After that article was published, silver moved slightly above the
medium-term declining resistance line on an intra-day basis but
didn't manage to hold these gains. Therefore, it's quite possible
that we have already seen the impact of silver's cyclical turning
point on the white metal. Additionally, the GDX ETF quickly
invalidated the breakout above the 50-day moving average and the
38.2% Fibonacci retracement level. When we take into account the
recent price moves in both, we can conclude that my firm's
projections from the previous article's summary remain accurate.
These circumstances have encouraged my firm to focus on the most
interesting asset -- gold. Does it confirm the indications for
silver and mining stocks? To see what we can expect in the gold
market, let us move to the world of charts. Today, we will start
with the yellow metal's very long-term chart (charts courtesy of
Click to enlarge
Once again, we see that the situation hasn't changed much from this
long-term perspective. It was bearish, as gold had already broken
below the long-term rising support line, and this breakdown wasn't
even close to being invalidated this week.
Please note that in 2008, when gold moved higher before plunging
for the final time, there were several intra-week attempts to move
higher which were ultimately unsuccessful. Therefore, a double top
pattern should not surprise us here.
We've recently seen a similar pattern on a smaller scale that is
more visible on the short-term chart. Let's take a look.
Click to enlarge
On the above chart we can see two things:
1. Gold reached the declining resistance line and the 61.8%
Fibonacci retracement level three times (intra-day highs) in the
last three days but failed to break it.
2. The yellow metal has broken below the short-term rising support
line (marked in red on the above chart).
The first point has bearish short- and medium-term implications and
the second one has bearish short-term implications.
Either way, the outlook remains bearish.
Before we summarize, let's take a look at the chart featuring
gold's price from the non-USD perspective.
Looking at the above chart, we see that from this perspective, the
situation is quite unclear. On the one hand, we might see a
post-double-bottom rally. However, on the other hand, a pullback
might be nothing more than a confirmation of a breakdown that we
saw beginning in mid-September.
The non-USD gold price moved to its declining resistance line
(similar to the USD gold price) and declined. In this case we are
taking the weekly closing prices into account. Naturally, we could
see a move up to 51 on the above chart and the medium-term outlook
would remain bearish, but it's not that likely that we will see an
Summing up, the medium-term outlook for gold remains bearish and,
at this time, the short-term outlook is bearish as well. It seems
that the precious metals sector reversed direction this week right
after moving to the declining resistance lines, which is being
reflected in gold, silver, and mining stocks. From this point of
view, it might be the case that the next major downleg has already
begun and it seems likely that we will see at least a short-term
Gold Enthusiasts Should Hope the Low Isn't in
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