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For the precious metals market to move lower once again.
The S&P 500 is down by 0.86% so far today, and the Dow is down
by 0.56%. Not significant, but the entire precious metals sector
moved lower much more visibly.
Yes, the move higher in the USD Index helped as well, but the fact
that silver and miners declined much more than gold perfectly fits
the narrative that I described yesterday – namely, that stocks’ decline is likely to impact
those two markets more than gold.
Gold is down by 2.4% today. Silver is down by 4.7%. The GDXJ is down
by over 6%.
At the same time, the USD Index is higher, and today’s rally
is more important than it may seem at first sight.
It’s a breakout.
The USDX moved above the short-term declining resistance line, which
is a bullish sign.
This line, along with the rising support line based on the very
recent lows, create a vertex that is likely to mark some kind of
turnaround. Either a local top or a quick decline to the previously
broken line that would – most likely – verify the
breakout.
This means that PMs and miners could decline in the very near term
and then move higher in a rather insignificant way – perhaps
another re-test of the February lows that would then be followed by
a decline to fresh short-term lows.
Before wrapping it up – due to lack of new developments or
ones that would go against my previous thesis – I’d like
to show you the charts of gold and silver from the European point of
view – in terms of the euro.
Gold priced in the euro is most overbought in the entire history of this currency, at
least based on the RSI indicator. The move above 70 in this
indicator was spectacular, but the analogies to the previous cases
point to a good chance of seeing a medium-term decline or
consolidation.
The chart featuring silver in terms of the euro is clearer –
and more bearish.
It’s clearer because we’ve had more similar instances
where RSI moved above 70 in a similar, sharp way. In all previous
cases – in the past 30 years – those were major,
medium-term tops.
The current fundamental situation in silver is unique, however, given the odds of seeing big declines on the stock
market AND given this sign, it seems that the price of the white
precious metal will need to cool off before it soars again.
Thank you for reading today’s free analysis. I’ll
continue to send you occasional updates and, as always, I’ll
keep my subscribers informed at all times.
Thank you.
Przemyslaw K. Radomski, CFA
Founder
Golden Meadow®
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