Gold Tipping Points That Investors Shouldn't Miss / Commodities / Gold & Silver 2024
The situation in gold and gold stocksis not stagnant. Something shifted. And the implications are not minor.
A Moment of Realization
In 1993, Aerosmith released the songcalled “Amazing”. I really enjoyed it when it came out and some of the lyricsstuck in my mind. When I was reviewing the charts to prepare today’s analysis,I recalled a part of that song. I wasn’t sure why, as it’s been sometime when Iwas listening to it.
But then it hit me. And as we move to thechart analysis, in particular the ones featuring the USD Index and the S&P500 futures, you’ll see why. Here’s what I recalled:
It'samazing.
Withthe blink of an eye, you finally see the light.
Oh,it's amazing.
Whenthe moment arrives that you know you'll be alright
In the song, it’s about a tipping pointin life. And it seems that we reached tipping points in those twoabove-mentioned markets, which has implications for… Pretty much everything.
Let’s start with the key thing thathappened and what didn’t happen at the same time.
The S&P 500 Index futures approachedthe 5,000 level. Friday’s intraday high was 4997.75, after reaching which thefutures retraced. They are slightly lower today.
I wrote on many occasions that roundnumbers are important from a psychological point of view, and there’s littledoubt that 5,000 carries a significant weight in that regard. This level is super-important as resistance, but also as something that people can gravitate to.
“The S&P will rally to 5,000!” likelybecame a self-fulfilling prophecy, as people were buying all the way up to5,000, actually causing the move that they had been foreseeing.
No fundamental trigger is necessary for that. In fact, this kind of emotional rally can happen againstfundamental signs, like less dovish than expected signals from the Fed.
As the S&P 500 futures attempted tomove to/above 5,000 and they moved back down, whatever was likely to happenbased on the emotional upswing has probably already happened. It’s quite likelythat the S&P futures’ move to 5,000was the tipping point.
The S&P 500 Index futures were a bithigher than the index itself, which topped at 4,975.29, but that’s also veryclose to 5,000. This have been enough to trigger the final reversal, or itmight be the case that we’ll see index’s move to 5,000 before itreverses. This would imply a move slightly above 5,000 in index futures, whichcould then invalidate this breakdown and both: index and futures based on itwould fall – taking many other sectors with it. In particular, junior miningstocks.
If that wasn’t enough, we also saw atipping point in the USD Index.
In my Jan. 30 analysis, I wrote the following:
TheUSD Index tends to reverse its course right at or close to the turn of themonth. I marked the previous times when the USDX reversed close to the turn ofthe month with dashed, blue lines. As you can see, this simple tendency hasproven to be very effective.
Tomorrowis the last day of January, so we could see the reversal today or tomorrow. Orperhaps later this week. Either way, it’s most likely coming.
Ifit wasn’t for the very short-term move lower that we’re seeing now, the natureof this reversal could have been bearish. After all, the USDX is after amonthly rally.
Thanks to a dip in the USDXvalue, this cyclical tendency could result in another powerful upleg.
Ofcourse, this would be particularly bearish for the precious metals sector, andit would very likely make our short positions more profitable.
That’s exactly what the USD Index did,and that was another tipping point. Friday’s decisive rally took the index well above the previous intraday highs,showing that the turning point had bullish implications. And as the U.S.currency is after over two weeks of consolidation, it’s definitely ready foranother big upswing. This has bearish implications for commodities (yes, Anna’sprofits in crude oil increase as a result), as well as for preciousmetals and mining stocks.
I’m not saying that the de-dollarization will never happen, but it’s unlikely to happen anytime soon.
Indeed, the USD Index is rallying today,and gold price is declining.
Gold's MisinterpretedSignals
Many voices out there claimed thatgold re-started its rally, but just taking a brief look at the position ofgold’s resistance lines proves that it actually verified its breakdown.
Gold didn’t re-start its rally – itre-started its decline.
It might be difficult to notice it whenlooking at gold’s very recent price swings only, but gold topped in December,and it’s been forming lower highs since that time.
The most interesting part of the preciousmetals sectors’ performance is not visible on gold’s chart alone. We need tocombine it with what gold stocks have been doing.
While gold closed last week relativelyclose to its recent high, the GDXJ closed close to its recent lows. And thathappened even despite stock markets’ move to its all-time high!
It’s quite obvious that junior minersreally can’t wait to decline here. And it’s likely that they won’t have to.
On Friday,Jan 19 (so, over 2 weeks ago), I described a new approach toprofiting on lower junior mining stock prices and those two weeks were enoughto show that it generated more profits than two more commonly used techniques(shorting GDXJ or buying JDST).
To clarify, I think that GDXJ is about tomove lower and JDST is about to move higher, however, I think that the approachthat I had featured is likely to provide bigger gains down the road.
I started today’s analysis with a quotefrom Amazing, and I’ll end with a different one:
Life'sa journey, not a destination
So is trading. It’s not about “having anoutlook” and then sticking with it no matter what.
Please remember that this likely movelower will not persist forever. We’re not only aiming to profit on it (andwe’re doing so now), but we’re aiming to buy into the next long position. Justlike we bought into the one that preceded our current short position. And we’llkeep our subscribers informed about both.
Naturally, the above is up-to-date at themoment when it was written. When the outlook changes, I’ll provide an update.If you’d like to read it as well as other exclusive gold and silver priceanalyses, I encourage you to sign up for our freegold newsletter.
Thank you.
Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Toolsfor Effective Gold & Silver Investments - SunshineProfits.com
Tools für EffektivesGold- und Silber-Investment - SunshineProfits.DE
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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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