Yesterday was the day when chaos levels surged, and yet, gold still ended the day lower. This tells us a lot.
I don’t mean just Trump’s statement that sending out letters is equal to a deal (in reality it’s a deadline’s extension), but a surprising and dramatic increase in the tariffs on copper – to 50%.
This triggered a sharp upswing (and a reversal) in copper prices. I immediately sent out an intraday Alert. However, I had also already commented on tariff impact on copper prices on Feb. 26 and those comments remain up-to-date. In short, tariffs might be bullish in the very short-term, but they are bearish in general.
And right now, it seems like the tariff announcement was the final nail to copper’s coffin.
The big intraday reversal with a move to new highs is exactly how copper topped in 2008 and in 2022. There are no other similar cases and both above point to the same outcome – a huge decline in the following months.
Also, copper is a very important commodity – disruptions in this market “should have” triggered a rally in gold due to safe-haven buying. Nothing like that happened.
Gold price declined yesterday, and it’s declining also today. The Peak Chaos theory is spot on. Gold is no longer reacting to increasing chaos – the maximum thereof has been priced in. When the situation stabilizes and/or and the USD Index rallies, gold is likely to decline more profoundly.
The same goes for mining stocks, which are already leading gold lower. Yesterday, the GDXJ declined on big volume and closed at the lowest price of July (so far).
Once we see a close below $65, the declines are likely to accelerate as that will mean an invalidation of the breakout above the April highs.
And given gold’s current behavior, we’re likely to see the above-mentioned breakout’s invalidation soon.
Meanwhile, the most important action is taking place in the USD Index.
The U.S. currency broke above its declining resistance line and it’s now quietly verifying its breakout.
This small pause might not seem important at all, but it might be the most important thing happening in the markets right now.
The late-June breakout was invalidated and followed by declines. If this breakout holds – we’re likely to finally see a profound rally – perhaps one that will last months.
This is the “enough is enough” of the USD Index’s decline in light of Trump’s chaotic statements (which are not that chaotic after all – he’s simply following his own book) – it seems that the fundamentals are finally about to kick in.
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Thank you.
Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief