Gold Price’s Stealthy Breakdown

Remember when I told you that junior miners are likely to decline significantly when stocks decline? That just happened.

To a small extent, but still. This means that when the stock market moves much lower, junior miners are likely to slide in a major way, too, creating great profits for us. Let’s take a look at what happened.

Gold Price’s Stealthy Breakdown - Image 1

The above chart features the 2-hour candlesticks, and it includes proxies for (starting from the top): gold, silver, junior miners, and the general stock market. As you can see at the bottom of the screen, the SPY (proxy for the S&P 500 Index) moved sharply lower at the end of yesterday’s session.

It’s very interesting to see what kind of moves it triggered in gold, silver, and miners.

Gold price was almost not affected. Silver price declined a bit more, but still nothing to write home about.

But junior miners declined profoundly – by over $1.

This is the kind of reaction that we saw in 2008 and in 2020, when stock prices fell. And as stocks fall in the following weeks, junior miners are likely to be affected to a huge extent.

Gold Price’s Stealthy Breakdown - Image 2

The RSI based on the S&P 500 Index was extremely overbought – more so than at the 2022 top. Given yesterday’s decline close to the end of the session, it seems quite possible that the top is in. And if it’s not, it’s likely that the top is at hand anyway, as the all-time high is unlikely to be taken out given this kind of overbought status in the market.

While Paul views the situation as bullish, it seems to me that he’ll be taking profits soon, as the market does look like it’s about to top here. There are some fake rallies out there in individual stocks as well, including individual oil stocks. This could be viewed as another indication that the entire market is about to turn south.

In today’s early-morning trading, the S&P 500 futures are slightly (0.5%) up, but that’s a normal rebound given yesterday’s ~1.5% decline.

Speaking of early morning trading, here’s what gold has been doing on a short-term basis.

Gold Price’s Stealthy Breakdown - Image 3

Gold has quietly verified the breakdown below its rising support line!

The breakdown that we saw in the first half of the month was more visible, but it was invalidated within a few days after the move below the line.

This time, gold not only closed below the rising support line for four consecutive days (today is the fifth day below it), but it actually moved back to it, and then it declined once again.

This means that gold is more likely to decline now than it was in the first half of December (at least based on the short-term chart alone).

The fact that this breakdown and the subsequent verification were stealthy doesn’t make them any less important.

The full version of today’s analysis - today’s Gold Trading Alert -is much bigger than what you read above, and it includes not only the initial downside target for the GDXJ (level from which juniors could rebound) but the entire price path that the GDXJ is likely to take (with specific target areas (for declines and rallies). I encourage you to subscribe and read those premium details today. Of course, as my premium subscriber, you’ll get the intraday Alerts whenever the situation requires them – that’s one of the parts of the service that my subscribers tend to enjoy the most.


Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief