Gold Price Is ALMOST Ready to Rally / Commodities / Gold & Silver 2023
Enough is enough. No market can decline without correcting every nowand then. And both gold and the USDX point to an upcoming reversal.
Let’s start with gold.
IsIt Over?
Looking at its price from ashort-term point of view, we see that it paused for a brief moment at its 38.2%Fibonacci retracement level.
And then – after the pause – golddeclined.
Not only that – it declined below the38.2% Fibonacci retracement and below the intraday December 2022 highs. Thisbreakdown is not confirmed, but since we did see a daily close below thoselevels, it’s more confirmed than it was before. Consequently, we just sawanother indication that gold’s decline is not over yet.
On the other hand, if you look at the RSIindicator in the upper part of the chart, you’ll notice that it’s just abovethe 30 level. This means that it’s probably (if gold declines some more) aboutto move below 30 or right to it, thus flashing a buy signal.
As a reminder, after a similar decline(in May 2022), gold kept on declining until the RSI touched 30. We’re veryclose, but not there yet.
Well, to be 100% precise, the RSI isclose enough to 30 to be viewed as something that might work on a near-tobasis, but combining this with gold’s breakdown below the 38.2% Fibonacciretracement level makes me doubt that this is already a buy signal.
This means that what I wrote in my analysislast week remains up-to-date:
“So, will gold bottom at$1,800 or close to it? It seems quite likely.
Will this be the finalbottom? It seems very unlikely given how high real interest rates have ralliedrecently and how far they are likely to rally in the future.
Willthere be no other corrections before gold hits $1,800? It’s unclear – we mightsee a rebound right now given that the 38.2% Fibonacci retracement was reached, but it’s unlikely that this rebound wouldbe big enough for most people to really care about it. Remember the late-Apriland early-May 2022 corrections? We might see something of similar size and length.
Allin all, while the biggest opportunity lies in the junior mining stocks rightnow, it seems to me that gold is likely to provide us with a decline that alsomight be useful for those who choose to position themselves accordingly andbenefit from this move.”
Let’s keep in mind that in today’sinterconnected financial markets, no market can truly move on its own. Inparticular, gold (well, it’s the same with silver and miners,too) can’t really move independently from the currency that it’s most oftenpriced in – the U.S. dollar.
In fact, the U.S. dollar is one of thekey fundamental drivers of gold prices (the other is the situation in realinterest rates – whichI discussed at the beginning of February).
WhereIs the Dollar Going?
The USD Index has been on the rise thismonth after bottoming practically right at its cyclical turning point. As areminder, the USDX tends to reverse close to the turn of the month (please notethe dotted, vertical lines). This is not only important. It’s also timely.
The end of the month is just a fewsessions away, which suggests that theUSD Index might want to reverse its direction soon. The most recent movewas to the upside, which would indicate that the next reversal will be a top.
Of course, this doesn’t indicate a changein the medium-term trend, which is likely to remain up, but it does point to agood possibility of seeing a pullback shortly.
This is particularly the case, given thesimilarity to what happened in mid-2021. I marked those areas with orangerectangles.
These were the times (now and then) whenthe USD Index declined while the RSI based on it moved between 30 and 50, andat the same time gold continued to rally. Then, after USDX’s bottom (and gold’stop), it kept on rallying until the RSI indicator moved to the 70 level. It wasthen that we saw a short-term top (and a short-term bottom in gold).
Interestingly, we have a resistance levelnearby – the yearly top. It’s at 105.50 (the intraday high) and 104.83 (thedaily close). Since currencies trade around the clock, it seems to me thatintraday price extremes are more important than it in other markets, whereclosing prices matter quite a lot.
This means that it would be quite in linewith mid-2021 if the USD Index moved up a bit more and topped close to the endof the month and close to the 105.50 level. This would likely make the RSI movehigher (and perhaps touch the 70 level), too.
Moreover, please note that the size ofthe decline in gold (lower part of the chart, orange line) that we saw in 2021(to the initial bottom) copied to the current situation points to a move ingold just a little lower before we see the final bottom – perhaps to $1,800 orso. Of course, this is in line with what the gold chart itself is “suggesting.”
All in all, it seems that even though theprecious metals sector is still likely to move lower over the following months,we’re quite likely about to see a counter-trend rally. This rally is likely toprovide a great opportunity for some traders (especially, if one focuses onmining stocks), but please make sure that trading such a move is in line withyour overall strategy – not all moves are worth trading, after all.
Thank you for reading our free analysistoday. Please note that the above is just a small fraction of today’sall-encompassing Gold & Silver Trading Alert. The latter includes multiplepremium details such as the target for gold that could be reached in the nextfew weeks. If you’d like to read those premium details, we have good news foryou. As soon as you sign up for our free gold newsletter, you’ll get a free7-day no-obligation trial access to our premium Gold & Silver TradingAlerts. It’s really free – sign up today.
Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Toolsfor Effective Gold & Silver Investments - SunshineProfits.com
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Disclaimer
All essays, research and information found aboverepresent analyses and opinions of Przemyslaw Radomski, CFA and SunshineProfits' associates only. As such, it may prove wrong and be a subject tochange without notice. Opinions and analyses were based on data available toauthors of respective essays at the time of writing. Although the informationprovided above is based on careful research and sources that are believed to beaccurate, Przemyslaw Radomski, CFA and his associates do not guarantee theaccuracy or thoroughness of the data or information reported. The opinionspublished above are neither an offer nor a recommendation to purchase or sell anysecurities. Mr. Radomski is not a Registered Securities Advisor. By readingPrzemyslaw Radomski's, CFA reports you fully agree that he will not be heldresponsible or liable for any decisions you make regarding any informationprovided in these reports. Investing, trading and speculation in any financialmarkets may involve high risk of loss. Przemyslaw Radomski, CFA, SunshineProfits' employees and affiliates as well as members of their families may havea short or long position in any securities, including those mentioned in any ofthe reports or essays, and may make additional purchases and/or sales of thosesecurities without notice.
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