Yesterday’s news of the day was the PPI reading that shot visibly past the regular levels. Higher inflation = higher rates… Again?
After all, high inflation readings preceded interest rate hikes just a few years ago, so why would this time be different?
Okay, there are multiple reasons for that – including the likely economic slowdown due to tariffs and the implications for world trade. Still, while higher inflation might not trigger interest rate hikes, it might prevent the Fed from cutting them – which is what almost everyone is counting on. For now, according to the CME FedWatch tool, over 90% market participants expect the rates to be lowered in September.
But what if this isn’t the case?
PPI soared way above the levels that can be considered normal.
The last time when we saw a big increase in the value of PPI after it had been in the normal range for a while was on Feb. 12, 2021.
And do you know what happened then?
We saw only a very brief upswing in the values of gold, silver, and mining stocks, and only a brief decline in the value of the USD Index.
In the following weeks, however, the precious metals sector moved lower, while the USD Index moved higher.
Back then, the size of those weekly moves was not that huge, but the technical situation was nowhere close to being as dramatic as it is right now.
As you read yesterday, GDX almost reached its 2011 high, and then it moved back down. In the case of a different proxy for mining stocks – the XAU Index – we even saw a breakout.
A breakout that was already invalidated. If XAU closes the week even lower – which might be the case given the lack of strength in gold’s pre-market trading – this will become a strong weekly sell signal.
And speaking of sell signals, we saw a daily reversal in the GDXJ ETF yesterday.
If we see a daily decline, and a weekly close back below the June highs, it will be a clear confirmation that the top is in.
If gold soars and miners confirm their breakout – we’ll know that it’s time to focus on the long positions in selected gold stocks. This seems unlikely though, especially given what gold is doing right now.
Namely, it’s not doing much. The USD Index moved slightly lower in today’s pre-market trading, after rallying somewhat yesterday.
What did gold do in response to those moves? Gold declined when the USD was up, and gold is shrugging it off, as the USD Index is moving lower. This is a clear short-term confirmation that gold wants to move lower. This comes on top of gold futures’ invalidation of the breakout to new highs – which was a powerful long-term sell signal on its own. Just as the link to the 2011 top is.
The USD Index itself looks like it’s ready to rally once again – it’ consolidated at its rising support line after breaking above its medium-term downtrend.
This, plus the way gold magnifies USD’s moves (in the opposite direction) is yet another reason to expect the precious metals sector to move lower.
If the opposite happens and we see a confirmed breakout, we also have a strategy for that (and my subscribers know the details), but we’re positioned for what’s most likely to happen.
Before wrapping it up for today, I have an announcement regarding a public launch (it was made available for Diamond members a week ago) of a new service.
Stock Signal Hub by David Chen
I already wrote about the launch of David’s service focused on the precious metals and commodity markets – Gold & Energy Edge – on Wednesday. David applies his “systems over stories” methodology also to other sectors, and this is what his second premium service is about. In his Stock Signal Hub, David applies the same proven methodology to other markets. It’s the same 2:1 win-risk ratio, and the same theory that backs it all up.
Let me show you something in practice. One of David’s trades featured on Wednesday was a long position in UNH. Here’s how his chart looked like:
And here’s what I saw when I opened Yahoo!Finance today.
Going long before the Warrant Buffet announcement is something.
So, if you’re into short-term trades, it might be a good idea to give David’s methodology and his services a try.
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All in all, my gold price forecast for August 2025 remains bearish.
Thank you for reading today’s free analysis. Its full version – my Gold Trading Alert – includes also more detailed discussion along with specific price targets. If you enjoyed what you read above and would like to get those premium details, I invite you to subscribe to my Gold Trading Alerts.
Thank you.
Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief