How Many Months Are Left Until Gold’s Fundamental Landslide?

We just saw a revival in war tensions as Russia intensified its invasion, and the precious metals’ market response was particularly interesting.

Namely, gold re-tried to capture $2,000 when some markets were still closed, but it failed, and the shape of the session itself served as one big sell signal.

Here’s what happened in gold:

How Many Months Are Left Until Gold’s Fundamental Landslide? - Image 1

While it managed to end Monday’s (Apr. 18) session in the green, it was actually a bearish reversal. It was not a success that gold ended the day higher. It was a failure that, despite the increased geopolitical tensions, gold was unable to break above $2,000.

Yes, gold has been on the rise this month, but this is in perfect tune with how the yellow metal corrected after its 2020 top – the previous attempt to rally above $2,000. I added the Fibonacci retracements to both post-top declines. As you can see, back in 2020, gold retraced slightly more than 61.8% of the decline, and this time it retraced slightly less. However, it’s the same ballpark.

As such, the April upswing is not really bullish – it’s a natural part of a bigger bearish pattern.

Besides, we saw similar price action in silver. While gold ended the day 0.58% higher, silver was up by 1.75%.

How Many Months Are Left Until Gold’s Fundamental Landslide? - Image 2

This means that the white metal not only confirmed the bearish implications of gold’s reversal, but it actually provided a sell signal on its own based on the very short-term outperformance.

Silver’s outperformance of gold is often a sell signal, especially when it’s accompanied by mining stocks’ weakness.

How Many Months Are Left Until Gold’s Fundamental Landslide? - Image 3

Even though gold was up by 0.58% and silver was up by 1.75%, the GDXJ – a proxy for junior miners – ended the day 0.69% lower. This doesn’t bode well for the sector, as it means that juniors most likely won’t be able to confirm the breakout above their previous 2022 high. The (very likely, in my view) invalidation of this breakout is what could start the next massive downleg, similar to the one that followed the 2012 high.

As a reminder, the link between both periods remains intact.

How Many Months Are Left Until Gold’s Fundamental Landslide? - Image 4

If you look at the areas marked with red circles (especially now, 2012/2013, and 2008), you’ll notice that they are very similar. These are the sizable short-term rallies that we saw after/in the final parts of the broad head-and-shoulders patterns. 

The moves were quite sizable – the 2012 rally was even bigger than the current one, even though there was no war in Europe at that time. 

Based on how broad the pattern is and the self-similarity present in gold, it seems that the analogy to what happened in 2012 is most important right now.

Looking at the moving averages, we see that the 50-week moving average (blue) and 200-week moving average (red) performed quite specifically in late 2012, and we see the same thing this year.

The distance between 50- and 200-week moving averages is currently narrowing, while the former is declining. Back in 2012, the top formed when the HUI rallied above its 50-week moving average, which just happened once again.

The RSI indicator (above the price chart), based on the HUI Index’s weekly chart, provides us with another confirmation of the analogy, and the same goes for the stochastic indicator (below the price chart). The former is just below the 70 level – exactly what we saw at the 2012 top, and the latter is above 90 – again, something that we saw at the 2012 top.

As history tends to rhyme, gold stocks are likely to slide, similarly to how they declined in 2012 and 2013.

Still, if the general stock market slides, and that appears likely for the following weeks and months, then we might have a decline that’s actually similar to what happened in 2008. Back then, gold stocks declined profoundly, and they have done so very quickly.

The dashed lines that start from the recent prices are copy-paste versions of the previous declines that started from the final medium-term tops. If the decline is as sharp and as big as what we saw in 2008, gold stocks would be likely to decline sharply, approximately to their 2016 low. If the decline is more moderate, then they could decline “only” to 120-150 or so. Either way, the implications are very, very, very bearish for the following weeks.

On a final note, I would like to draw your attention to the fact that, based on its recent strength, the USD Index managed to do something very profound.

How Many Months Are Left Until Gold’s Fundamental Landslide? - Image 5

Namely, it invalidated the breakdowns below the neck level of its long-term head-and-shoulders formation. This formation didn’t fit the USD’s very long-term chart, so I didn’t think that it would really result in much lower USD prices. Indeed, instead of big declines, we saw a relatively small (from the long-term point of view) move lower – from 94 in 2020 to about 89 in the final part of that year, but then a powerful rally started and it took the USD Index much, much higher.

The thing is that the USDX rallied well above the neck level, thus not only nullifying the bearish implications of the formation, but actually creating a powerful buy signal. Invalidations of patterns have the opposite effect of what the pattern would have if held. In this case, the implications are bullish.

Now, one could draw the neck level of the pattern in two ways, depending on what bottoms one decides to use. One of them is in black (a thick line) and one of them is in red (a dashed line). The point is that the USD Index invalidated breakdowns below both those lines. Therefore, it’s clear that the bullish implications are present.

Let’s check when the previous times were when the USD Index was about to rally profoundly. The three cases that are most visible on the above chart are mid-2008, mid-2011, and mid-2014. In all those cases, it was right before a major decline in the price of gold.

Yes, we still have some war-concern-based premium in the price of gold, but as the situation stabilizes or at least the tensions don’t increase further (and that’s very unlikely as they are very high right now), gold is likely to react to the things that it’s usually reacting to: the USD Index and real interest rates. The former is very likely to go up and… so does the latter. Therefore, gold, silver, and mining stocks are likely to move lower in the following weeks and months, even though it might not look this way based on the day-to-day price swings.

All in all, technicals favor a decline in the precious metals sector sooner rather than later.

Having said that, let’s take a look at the markets from a more fundamental point of view.


While gold prices remain elevated and investors continue to ignore the implications of the Fed’s rate hike cycle, a reality check should emerge sooner rather than later. For example, Bank of America’s latest Global Fund Manager Survey shows that institutional investors don’t expect the Fed to turn dovish anytime soon.

Please see below:

How Many Months Are Left Until Gold’s Fundamental Landslide? - Image 6

To explain, the consensus expects six rate hikes in the coming months. However, while roughly 5% of respondents expected eight rate hikes in March, that figure increased to roughly 25% in April. As a result, institutional investors are slowly coming around to the hawkish realities that I warned about throughout 2021.

Furthermore, institutional investors’ assessment of monetary policy risk hit an all-time high in April.

Please see below:

How Many Months Are Left Until Gold’s Fundamental Landslide? - Image 7

However, old habits die hard, and while institutional investors realize what should materialize amid the Fed’s war on inflation, their positioning contrasts with the hawkish realities. As a result, the relative day-to-day calm contrasts with the crumbling house of cards.

Please see below:

How Many Months Are Left Until Gold’s Fundamental Landslide? - Image 8

To explain, the dark blue line above tracks the net percentage of respondents overweight equities, while the light blue line above tracks the net percentage of respondents expecting a stronger economy. If you analyze the right side of the chart, you can see that the light blue line is on par with the global financial crisis (GFC) lows. Despite that, though, institutional investors refuse to sell their stocks.

Thus, while fund managers believe that a material tightening of financial conditions will commence, the ‘buy the dip’ mentality is hard to break. However, with reality likely to force institutional investors to recalibrate their positions, the prospective negativity should have a profound impact on the PMs.

To that point, long oil/commodities are still the most crowded trades on Wall Street. Moreover, the idea that higher interest rates won’t impact commodity demand lacks credibility. In fact, slowing the U.S. economy should hurt commodities more than most sectors. As such, when the over-optimism reverses, the PMs should suffer substantial declines.

How Many Months Are Left Until Gold’s Fundamental Landslide? - Image 9

For more context, I wrote on Apr. 14

With Brainard and Waller telling you that their goal is to create a bullish environment for the USD Index and the U.S. 10-Year real yield, the PMs have fought this battle before and lost this battle before.

I wrote on Apr. 6:

Please remember that the Fed needs to slow the U.S. economy to calm inflation, and rising asset prices are mutually exclusive to this goal. Therefore, officials should keep hammering the financial markets until investors finally get the message.

Moreover, with the Fed in inflation-fighting mode and reformed doves warning that the U.S. economy “could teeter” as the drama unfolds, the reality is that there is no easy solution to the Fed’s problem. To calm inflation, it has to kill demand. And as that occurs, investors should suffer a severe crisis of confidence.

To that point, Fed officials aren’t even pretending anymore. Waller said on Apr 13:

“All we can do is kind of push down demand for these products and take some pressure off the prices that people have to pay for these products. We can’t produce more wheat, we can’t produce more semiconductors, but we can affect the demand for these products in a way that puts downward pressure and takes some pressure off of inflation.”

Likewise, Waller was even more realistic when he spoke on Apr. 11: He said:

“With housing, can we cool off demand for housing without tanking the construction industry? Can we cool down labor demand without causing employment to fall? That’s the tricky road that we’re on.”

As a result, while Fed officials understand how difficult it will be to normalize inflation, investors remain in la-la land. However, when the “collateral damage” eventually unfolds, the shift in sentiment should result in the profound re-pricing of several financial assets.

Please see below:

How Many Months Are Left Until Gold’s Fundamental Landslide? - Image 10Source: Bloomberg

Building on that theme, Fed officials continue to use the d-word when describing how they will tame inflation. Speaking on Apr. 14, Cleveland Fed President Loretta Mester said: “It’s not really a tradeoff right now, it’s really an imperative that we take the action, that we are committed at the FOMC to do that, to get inflation on a downward trajectory.”

As a result:

How Many Months Are Left Until Gold’s Fundamental Landslide? - Image 11Source: Reuters

Likewise, Philadelphia Fed President Patrick Harker said on Apr. 14 that the central bank will deliver "a series of deliberate, methodical hikes" to curb "far too high" inflation.

Please see below:

How Many Months Are Left Until Gold’s Fundamental Landslide? - Image 12 Source: Reuters

As a result, while commodities remain the belle of the ball, the reality is that the Fed has to reduce demand. When the light bulb goes off that demand is dropping while prices remain sky high, commodities’ history of epic rallies and drawdowns will likely repeat.

To that point, as long as inflation remains problematic, the prospect of a dovish 180 by the Fed is slim to none, and with the data still coming in hot, investors remain unprepared for the medium-term readjustments.

For example, the New York Fed released its Empire State Manufacturing Survey on Apr. 15. The report revealed:

“The prices paid index climbed thirteen points to 86.4, a record high, and the prices received index retreated seven points from last month’s record high, signaling ongoing substantial increases in both input prices and selling prices.”

Please see below:

How Many Months Are Left Until Gold’s Fundamental Landslide? - Image 13Source: New York Fed

In addition, the University of Michigan released its Consumer Sentiment Index on Apr. 14. Chief Economist Richard Curtin said:

“Consumer Sentiment jumped by a surprising 10.6% in early April, although it remained below January's reading and lower than in any prior month in the past decade. Nearly the entire gain was in the Expectations Index, which posted a monthly gain of 18.0%, including a leap of 29.4% in the year-ahead outlook for the economy and a 17.2% jump in personal financial expectations. A strong labor market bolstered wage expectations among consumers under age 45 to 5.3%, the largest expected gain in more than three decades, since April 1990.”

For context, wage growth of 5.3% is mutually exclusive with the Fed’s inflation goal. Moreover, when Powell and his crew begin their crusade to kill demand, consumers will likely suffer the same come-to-Jesus moment as investors.

Finally, the U.S. Census Bureau released its U.S. retail sales report on Apr. 14., and with the metric hitting a new all-time high of ~$666 billion in March, consumers’ spending spree remains alive and well. As such, the Fed still has plenty of work to do to curb demand and inflation.

How Many Months Are Left Until Gold’s Fundamental Landslide? - Image 14

The bottom line? While the PMs remain in momentum-driven upswings, their medium-term fundamentals continue to deteriorate. With real yields rising, the USD Index north of 100 and the Fed in inflation-fighting mode, the officials’ war against demand and inflation should upend the PMs in the coming months. As a result, while gold, silver, and mining stocks’ recent price action may seem bullish on the surface, there are plenty of material risks on the horizon.

In conclusion, the PMs were mixed on Apr. 18, as financial markets continued to assess macroeconomic developments. Moreover, while the Fed keeps hammering home its message, investors are still far from acknowledging reality. Thus, while the timing remains uncertain, medium-term enlightenment should result in a profound shift in sentiment.

Overview of the Upcoming Part of the Decline

  1. It seems to me that the post-decline consolidation is now over or very close to being over , and that gold, silver, and mining stocks are now likely to continue their medium-term decline.
  2. It seems that the first (bigger) stop for gold will be close to its previous 2021 lows, slightly below $1,800 . Then it will likely correct a bit, but it’s unclear if I want to exit or reverse the current short position based on that – it depends on the number and the nature of the bullish indications that we get at that time.
  3. After the above-mentioned correction, we’re likely to see a powerful slide, perhaps close to the 2020 low ($1,450 - $1,500).
  4. If we see a situation where miners slide in a meaningful and volatile way while silver doesn’t (it just declines moderately), I plan to – once again – switch from short positions in miners to short positions in silver. At this time, it’s too early to say at what price levels this could take place, and if we get this kind of opportunity at all – perhaps with gold close to $1,600.
  5. I plan to exit all remaining short positions once gold shows substantial strength relative to the USD Index while the latter is still rallying. This may be the case with gold close to $1,350 - $1,400. I expect silver to fall the hardest in the final part of the move. This moment (when gold performs very strongly against the rallying USD and miners are strong relative to gold after its substantial decline) is likely to be the best entry point for long-term investments, in my view. This can also happen with gold close to $1,375, but at the moment it’s too early to say with certainty.
  6. As a confirmation for the above, I will use the (upcoming or perhaps we have already seen it?) top in the general stock market as the starting point for the three-month countdown. The reason is that after the 1929 top, gold miners declined for about three months after the general stock market started to slide. We also saw some confirmations of this theory based on the analogy to 2008. All in all, the precious metals sector is likely to bottom about three months after the general stock market tops.
  7. The above is based on the information available today, and it might change in the following days/weeks.

You will find my general overview of the outlook for gold on the chart below:

How Many Months Are Left Until Gold’s Fundamental Landslide? - Image 15

Please note that the above timing details are relatively broad and “for general overview only” – so that you know more or less what I think and how volatile I think the moves are likely to be – on an approximate basis. These time targets are not binding or clear enough for me to think that they should be used for purchasing options, warrants or similar instruments.


Summing up, despite the recent rally in gold, the outlook for junior mining stocks remains exactly as I described previously.

Investing and trading are difficult. If it was easy, most people would be making money – and they’re not. Right now, it’s most difficult to ignore the urge to trade along with the crowd that’s ignoring two critical factors:

  1. rising real interest rates,
  2. rising USD Index values.

Both of the aforementioned are the two most important fundamental drivers of the gold price. Since neither the USD Index nor real interest rates are likely to stop rising anytime soon (especially now that inflation has become highly political), the gold price is likely to fall sooner or later. Given the analogy to 2012 in gold, silver, and mining stocks, “sooner” is the more likely outcome.

It seems that our profits from short positions are going to become truly epic in the coming months.

Moreover, let’s keep in mind that we are not patient with this trade to just get out of it close to being even or with a reasonable (10%-30%) profit. Of course, I can’t promise anything, but this entire short trade is likely to end with gold below $1,500 and junior miners close to or below their 2020 lows. The upside potential for the inversely trading instruments is likely enormous. Yes, we might adjust the trade or exit it temporarily, only to get back to it shortly thereafter, but the overall potential remains gargantuan. It’s quite likely that none of those gains will be reaped by precious metals perma-bulls.

After the sell-off (that takes gold to about $1,350-$1,500), I expect the precious metals to rally significantly. The final part of the decline might take as little as 1-5 weeks, so it's important to stay alert to any changes.

As always, we'll keep you  our subscribers  informed.

To summarize:

Trading capital (supplementary part of the portfolio; our opinion): Full speculative short positions (300% of the full position) in junior mining stocks are justified from the risk to reward point of view with the following binding exit profit-take price levels:

Mining stocks (price levels for the GDXJ ETF): binding profit-take exit price: $34.63; stop-loss: none (the volatility is too big to justify a stop-loss order in case of this particular trade)

Alternatively, if one seeks leverage, we’re providing the binding profit-take levels for the JDST (2x leveraged) and GDXD (3x leveraged – which is not suggested for most traders/investors due to the significant leverage). The binding profit-take level for the JDST: $14.98; stop-loss for the JDST: none (the volatility is too big to justify a SL order in case of this particular trade); binding profit-take level for the GDXD: $25.48; stop-loss for the GDXD: none (the volatility is too big to justify a SL order in case of this particular trade).

For-your-information targets (our opinion; we continue to think that mining stocks are the preferred way of taking advantage of the upcoming price move, but if for whatever reason one wants / has to use silver or gold for this trade, we are providing the details anyway.):

Silver futures downside profit-take exit price: $19.12

SLV profit-take exit price: $17.72

ZSL profit-take exit price: $38.28

Gold futures downside profit-take exit price: $1,683

HGD.TO – alternative (Canadian) inverse 2x leveraged gold stocks ETF – the upside profit-take exit price: $11.79

HZD.TO – alternative (Canadian) inverse 2x leveraged silver ETF – the upside profit-take exit price: $29.48

Long-term capital (core part of the portfolio; our opinion): No positions (in other words: cash

Insurance capital (core part of the portfolio; our opinion): Full position

Whether you already subscribed or not, we encourage you to find out how to make the most of our alerts and read our replies to the most common alert-and-gold-trading-related-questions.

Please note that we describe the situation for the day that the alert is posted in the trading section. In other words, if we are writing about a speculative position, it means that it is up-to-date on the day it was posted. We are also featuring the initial target prices to decide whether keeping a position on a given day is in tune with your approach (some moves are too small for medium-term traders, and some might appear too big for day-traders).

Additionally, you might want to read why our stop-loss orders are usually relatively far from the current price.

Please note that a full position doesn't mean using all of the capital for a given trade. You will find details on our thoughts on gold portfolio structuring in the Key Insights section on our website.

As a reminder - "initial target price" means exactly that - an "initial" one. It's not a price level at which we suggest closing positions. If this becomes the case (like it did in the previous trade), we will refer to these levels as levels of exit orders (exactly as we've done previously). Stop-loss levels, however, are naturally not "initial", but something that, in our opinion, might be entered as an order.

Since it is impossible to synchronize target prices and stop-loss levels for all the ETFs and ETNs with the main markets that we provide these levels for (gold, silver and mining stocks - the GDX ETF), the stop-loss levels and target prices for other ETNs and ETF (among other: UGL, GLL, AGQ, ZSL, NUGT, DUST, JNUG, JDST) are provided as supplementary, and not as "final". This means that if a stop-loss or a target level is reached for any of the "additional instruments" (GLL for instance), but not for the "main instrument" (gold in this case), we will view positions in both gold and GLL as still open and the stop-loss for GLL would have to be moved lower. On the other hand, if gold moves to a stop-loss level but GLL doesn't, then we will view both positions (in gold and GLL) as closed. In other words, since it's not possible to be 100% certain that each related instrument moves to a given level when the underlying instrument does, we can't provide levels that would be binding. The levels that we do provide are our best estimate of the levels that will correspond to the levels in the underlying assets, but it will be the underlying assets that one will need to focus on regarding the signs pointing to closing a given position or keeping it open. We might adjust the levels in the "additional instruments" without adjusting the levels in the "main instruments", which will simply mean that we have improved our estimation of these levels, not that we changed our outlook on the markets. We are already working on a tool that would update these levels daily for the most popular ETFs, ETNs and individual mining stocks.

Our preferred ways to invest in and to trade gold along with the reasoning can be found in the how to buy gold section. Furthermore, our preferred ETFs and ETNs can be found in our Gold & Silver ETF Ranking.

As a reminder, Gold & Silver Trading Alerts are posted before or on each trading day (we usually post them before the opening bell, but we don't promise doing that each day). If there's anything urgent, we will send you an additional small alert before posting the main one.

Thank you.

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