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?
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.
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.
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.
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.
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Przemyslaw Radomski, CFA