Monthly Reversal in Gold Price and Gold’s Outlook

In Friday’s analysis, I wrote that gold price was likely about to form a monthly reversal – and now it’s a fact. Will gold slide?

Most likely, yes. I explain the reasons in detail in Friday’s premium analysis, but to make a long story short, the single fact that we just saw a powerful monthly reversal makes it very likely.

Monthly Reversal in Gold Price and Gold’s Outlook - Image 1

April is now completely over, so it’s not a supposed reversal but a real one.

And just as this kind of price movement started a powerful price slide in 2008, it’s quite likely to trigger big declines in the following weeks / months.

Why would that be the case? Let’s remember that the real rates are going higher – either through increases in the nominal rates or by decreases in (expected) inflation. And that’s very bearish for gold.

Monthly Reversal in Gold Price and Gold’s Outlook - Image 2

Zooming in allows one to see that gold closed the week and the day below $2,000, thus cementing the move back below this important threshold. Yes, that’s bearish, too.

And while gold moved slightly ($0.10) higher on Friday, gold stocks moved visibly lower.

Monthly Reversal in Gold Price and Gold’s Outlook - Image 3

The GDXJ ETF ended the day 0.82% lower, which might not seem like a lot, but it’s actually an important sign of weakness. Junior miners didn’t even magnify gold’s decline – they declined despite gold’s tiny rally, which is even more bearish.

Also, our short position in the FCX remains greatly profitable, despite the small upswing that we just saw.

Monthly Reversal in Gold Price and Gold’s Outlook - Image 4

Please note that the latter materialized on low volume, and this indicates that further declines are just around the corner. In contrast, when the FCX moved higher on higher volume after a decline, it heralded rallies. We saw this in early January 2023 and in late February. Also, the March reversal took place on a big volume.

What we saw on Friday (and Thursday) was nothing like that – it looks much more like a breather before the decline continues and makes our FCX-based profits bigger.

All in all, the outlook for the precious metals market remains very bearish.

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Przemyslaw Radomski, CFA
Founder, Editor-in-chief