Top in Interest Rates or Top in Gold?

So, the Fed did as expected, raising the rates by 0.25%. But that didn’t really matter. 

What mattered was what was said later.

And how it was then interpreted.

Powell’s 0.25% hike was expected, so when it became a reality, markets didn’t really react. But what changed was the narrative regarding the future price moves. Powell said that they will make further decisions based on the data that they get. So, Powell is no longer saying about further increases but about being data-dependent. The latter is irrelevant because the Fed is always data-dependent, at least in theory (theory says that there are no political influences on the Fed, too…). The former, however, means that the pause is on the table.

That’s what was said.

What does it mean? It means that if the inflation isn’t lower, they will have to raise rates again. Why? Because inflation is political – simple as that. That’s the thing that voters are most concerned with, and that’s a fact.

If the inflation does move lower, they will probably not be raising rates again.

Also, Powell added that he doesn’t plan to cut rates anytime soon.

"Inflation [is] going to come down not so quickly," he said, yesterday. "It will take some time. And in that world, if that forecast is broadly right, it would not be appropriate to cut rates."

So, to summarize what’s likely to happen: the rates are either moving higher if the inflation doesn’t decline or the rates are staying where they are if inflation declines visibly.

In both cases, real interest rates (nominal rates minus expected inflation) are going to increase. So, both outcomes presented by Powell are bearish for gold and the rest of the precious metals sector.

Now, since people, in general, prefer to hear what they want to hear rather than hearing what is indeed being said, here’s what the market is currently expecting (charts are from the CME FedWatch tool):

Top in Interest Rates or Top in Gold? - Image 1Top in Interest Rates or Top in Gold? - Image 2Top in Interest Rates or Top in Gold? - Image 3

People expect that it’s practically certain that the rates will stay as they are on the next Fed meeting and that they will then start to decline. In other words, the market participants think that the rates are going to decline within the next couple of months, but not necessarily in June.

Please note the contrast between the current expectations and what I wrote above as the scenarios that Powell pretty much revealed.

For a long time, we’ve been emphasizing that inflation is much stickier than many expect, so it’s much more likely that what Powell is saying about the rates and the outlook for them is much more realistic than what the market largely expects right now.

Why would the market be wrong at this time? Because of the stage of the bull/bear cycle, it’s in.

Top in Interest Rates or Top in Gold? - Image 4

We’re probably in the “return to “normal”” part right now, and the most recent upswing was a bull trap. The “New Paradigm” top was likely the moment when many thought that interest rates could be kept very low for decades and during the crypto peak.

Even the name makes perfect sense in light of yesterday’s news and the current expectations. The “return to normal” in this case, means a return to “normally” low interest rates.

So, what does that all imply? That the market is likely to be surprised – negatively so. It’s obvious also from the technical point of view, and I’ve been writing about the bearish stock price forecast for quite a long time now.

Top in Interest Rates or Top in Gold? - Image 5

Stocks just failed to move to new 2023 highs. They got close but declined shortly thereafter. It looks like we’re going to get the right shoulder of the head-and-shoulder top formation completed in the following weeks.

Commodities like crude oil and copper are already declining, and so do their producers.

Top in Interest Rates or Top in Gold? - Image 6

This is not a sign of an economic upturn – quite the opposite.

And yes, yesterday’s decline means that the profits on our short positions in the FCX (entered in early April) increased once again.

What does all the above imply for the forecast for gold prices?

Gold has two primary fundamental drivers. One is the USD Index (so, the forex price moves are important), and the other is the real (!) interest rate.

As I explained above, the real interest rates are likely to go higher, which means that gold is likely to go lower. The reason why gold moved higher in the previous months is likely due to the overall situation on the market – the move from the “bull trap” to the “return to normal” stage of the bear market. And now – with the following moves in interest rates and inflation, it’s likely to become clear what is really happening and what’s not.

So, yes, gold is likely to slide as well.

However, silver and junior mining stocks are likely to take most of the burden due to their links with the general stock market.

Silver is widely used in the industry, so falling industrial demand is likely to negatively affect the silver price projection; and junior mining stocks have proven to be particularly linked to the general stock market many times in the past. Remember the 2020 slide? Junior miners declined the most.

Top in Interest Rates or Top in Gold? - Image 7

Please note that junior mining stocks moved only slightly higher yesterday despite a quite notable daily upswing in gold. Junior miners’ weakness relative to gold is one of the bottom-up signs (as opposed to the top-down signs like aligning the situation with the general cycles of bull/bear markets) pointing to lower precious metals values in the following weeks.

Top in Interest Rates or Top in Gold? - Image 8

For comparison, gold moved notably higher, and it moved even higher in the overnight trading (that’s not visible on the above chart). Yet, the GDXJ is only slightly up in today’s London trading.

So, all in all, I’d view this week’s upswing as something temporary and not really sustainable. The profits on the short positions in FCX are likely to increase further, and the precious metals sector is likely to join in this decline, too. In particular, in my view, the downside potential for junior mining stocks is enormous at this time.

Overview of the Upcoming Part of the Decline

  1. It seems that the recent – and probably final – corrective upswing in the precious metals sector is over.
  2. 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.
  3. I plan to switch from the short positions in junior mining stocks or silver (whichever I’ll have at that moment) to long positions in junior mining stocks when gold / mining stocks move to their 2020 lows (approximately). While I’m probably not going to write about it at this stage yet, this is when some investors might consider getting back in with their long-term investing capital (or perhaps 1/3 or 1/2 thereof).
  4. I plan to return to short positions in junior mining stocks after a rebound – and the rebound could take gold from about $1,450 to about $1,550, and it could take the GDXJ from about $20 to about $24. In other words, I’m currently planning to go long when GDXJ is close to $20 (which might take place when gold is close to $1,450), and I’m planning to exit this long position and re-enter the short position once we see a corrective rally to $24 in the GDXJ (which might take place when gold is close to $1,550).
  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 prices close to $1,400 and GDXJ close to $15 . 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 $1,400, but at the moment it’s too early to say with certainty.
  6. 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:

Top in Interest Rates or Top in Gold? - Image 9

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 nor clear enough for me to think that they should be used for purchasing options, warrants, or similar instruments.

Letters to the Editor

Please post your questions in the comments feed below the articles, if they are about issues raised within the article (or in the recent issues). If they are about other, more universal matters, I encourage you to use the Ask the Community space (I’m also part of the community), so that more people can contribute to the reply and enjoy the answers. Of course, let’s keep the target-related discussions in the premium space (where you’re reading this).


To summarize, we recently took profits from the additional FCX trade (right before the trend reversed!) and the current short position in it is profitable as well.

The short position in junior mining stocks is – in my view – poised to become very profitable in the following weeks.

Things might appear chaotic in the precious metals market right now, but based on the analogy to the previous crises (2020 and 2008), it’s clear that gold, miners, and other markets are pretty much doing the same thing all over again.

The implications of this “all over” are extremely bearish for junior mining stocks. Back in 2008, at a similar juncture, GDX’s price was about to be cut in half in about a month! In my opinion, while the decline might not be as sharp this time, it’s likely to be enormous anyway and very, very, very profitable.

If I didn’t have a short position in junior mining stocks, I would be entering it now.

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: $26.13; stop-loss: none.

Alternatively, if one seeks leverage, we’re providing the binding profit-take levels for the JDST (2x leveraged). The binding profit-take level for the JDST: $13.87; stop-loss for the JDST: none.

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: $17.83 (stop-loss: none)

SLV profit-take exit price: $16.73 (stop-loss: none)

ZSL profit-take exit price: $32.97 (stop-loss: none)

Gold futures downside profit-take exit price: $1,743 (stop-loss: none)

HGD.TO – alternative (Canadian) 2x inverse leveraged gold stocks ETF – the upside profit-take exit price: $10.97 (stop-loss: none due to vague link in the short term with the U.S.-traded GDXJ)

HZD.TO – alternative (Canadian) 2x inverse leveraged silver ETF – the upside profit-take exit price: $25.47 (stop-loss: none)


Optional / additional trade idea that I think is justified from the risk to reward point of view:

Short position in the FCX with $27.13 as the short-term profit-take level.

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’ve 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 (as 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.


On a side note, while commenting on analyses, please keep the Pillars of the Community in mind. It’s great to provide points that help others be more objective. However, it’s important to focus on the facts and discuss them in a dignified manner. There is not much of the latter in personal attacks. As more and more people join our community, it is important to keep it friendly. Being yourself, even to the point of swearing, is great, but the point is not to belittle other people or put them in a position of “shame” (whether it works or not). Everyone can make mistakes, and everyone does, in fact, make mistakes. We all here have the same goal: to have a greater understanding of the markets and pick better risk-to-reward situations for our trades. We are on the same side.

On another – and final – side note, the number of messages, comments etc. that I’m receiving is enormous, and while I’m grateful for such engagement and feedback, I’m also starting to realize that there’s no way in which I’m going to be able to provide replies to everyone that I would like to, while keeping any sort of work-life balance and sanity ;) Not to mention peace of mind and calmness required to approach the markets with maximum objectivity and to provide you with the service of the highest quality – and best of my abilities.

Consequently, please keep in mind that I will not be able to react / reply to all messages. It will be my priority to reply to messages/comments that adhere to the Pillars of the Community (I wrote them, by the way) and are based on kindness, compassion and on helping others grow themselves and their capital in the most objective manner possible (and to messages that are supportive in general). I noticed that whatever one puts their attention to – grows, and that’s what I think all communities need more of.

Sometimes, Golden Meadow’s support team forwards me a message from someone, who assumed that I might not be able to see a message on Golden Meadow, but that I would notice it in my e-mail account. However, since it’s the point here to create a supportive community, I will specifically not be providing any replies over email, and I will be providing them over here (to the extent time permits). Everyone’s best option is to communicate here, on Golden Meadow, ideally not in private messages (there are exceptions, of course!) but in specific spaces or below articles, because even if I’m not able to reply, the odds are that there will be someone else with insights on a given matter that might provide helpful details. And since we are all on the same side (aiming to grow ourselves and our capital), a to of value can be created through this kind of collaboration :).

Thank you.

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