Przemysław Radomski

Przemysław Radomski

Cautious optimism

Breaking: Gold Price (XAUUSD) To Decrease Shortly? Bear Market Coming?

Przemysław Radomski Przemysław Radomski 20.04.2022 14:02
Despite increased war tensions, gold failed to break above $2,000. What’s worse, rising USDX and interest rates are already lurking on the horizon. The precious metals just performed exactly as they were likely to. Despite the increase in war tensions, PMs and miners reversed instead of rallying, which indicated that the rally has probably run its course. Since the tensions can now (most likely) either decline or stabilize, gold and silver prices will presumably fall right away, or after a while, as the market starts paying attention to gold’s two key fundamental drivers: the USD Index the real interest rates. Let’s not forget that while gold moved above its 2011 highs, silver and miners are well below the 50% retracement from their respective 2011 highs. Both are inversely correlated with the price of gold, and both are on the rise. It’s therefore most likely only a matter of time before gold declines, and the same goes for silver and mining stocks. In fact, silver and mining stocks are likely to fall harder than gold, as they’ve been very weak in recent years anyway. Let’s not forget that while gold moved above its 2011 highs, silver and miners are well below the 50% retracement from their respective 2011 highs. Let’s check what gold did yesterday. The gold price declined substantially, and it closed below its late-March 2022 high, thus invalidating the breakout above it. Instead of the breakout above $2,000, we saw the above. Instead of a bullish sign, we got a sell signal. We also got another from the stochastic indicator that not only moved below its signal line, but also below the 80 level. Moreover, let’s not forget that it all happened in tune with what we saw back in 2020, after gold’s major top. Back then, gold retraced slightly more than 61.8% of the decline. Although this time it retraced slightly less, both cases are still very similar. Just as gold reversed on Monday, so did silver. Consequently, this month’s recent upswing was not really bullish – it was a natural part of a bigger bearish pattern. Just as gold reversed on Monday, so did silver. It also outperformed gold on a very short-term basis, which served as another bearish confirmation. Silver’s outperformance of gold is often a sell signal, especially when it’s accompanied by mining stocks’ weakness, and we saw the latter too.   Consequently, the current outlook for the precious metals market appears bullish in the long run but bearish in the medium- and short term. During yesterday’s trading, silver and junior miners were down rather similarly, but the latter had also been down on Monday, while silver had ended the session in the green. Also, miners just invalidated their breakout above the March 2022 high in terms of the closing prices. No wonder here – the attempt to rally above the previous highs was accompanied by rather weak volume, suggesting that it would fail. It did, and that’s a sell sign on its own. Consequently, the current outlook for the precious metals market appears bullish in the long run but bearish in the medium- and short term. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Tech down, energy up as inflation, recession fears mount | MarketTalk: What’s up today? | Swissquote

Beating Inflation: Are The Fed’s Dreams Gold’s Worst Nightmare?

Przemysław Radomski Przemysław Radomski 14.04.2022 16:28
While investors remain happy-go-lucky, fundamental data for gold and silver is now worse than in 2021. Is this the last chance to come back to earth? As another week comes to a close, the winds of change are blowing across the financial markets. However, while many investors and analysts can see only sunny days ahead, fundamental storm clouds should rain on their parade over the medium term, and it’s quite possible that it’s going to happen shortly. To explain, this week culminated with the USD Index soaring above 100, the U.S. 10-Year real yield hitting a new 2022 high, and Goldman Sachs’ Financial Conditions Index (FCI) hitting its highest level since the global financial crisis (GFC). However, the PMs paid no mind yet. In fact, investors across many asset classes continue to ignore the implications of these developments. So far. With sentiment poised to shift when the economic scars begin to show, the “this time is different” crowd may regret not heeding the early warning signs. For example, the Bank of Canada (BoC) announced a 50 basis point rate hike on Apr. 13., and with the Fed likely to follow suit in May, the domestic fundamental environment confronting the PMs couldn’t be more bearish. Please see below: Source: BoC Moreover, BoC Governor Tiff Macklem (Canada's Jerome Powell) said: "We are committed to using our policy interest rate to return inflation to target and will do so forcefully if needed." Furthermore, while he added that the BoC could "pause our tightening" if inflation subsides, he cautioned that "we may need to take rates modestly above neutral for a period to bring demand and supply back into balance and inflation back to target." However, with the latter much more likely than the former, the BoC's decision is likely a preview of what the Fed should deliver in the months ahead. Please see below: Source: Reuters To that point, while investors continue to drown out officials’ hawkish cries, I warned on Apr. 13 that the Fed knows full well about the difficulty of the task ahead. I wrote: Fed Governor Lael Brainard said on Apr. 12: “Inflation is too high, and getting inflation down is going to be our most important task.” She added: “I think there’s quite a bit of capacity for labor demand to moderate among businesses by actually reducing job openings without necessitating high levels of layoffs.” As a result, she’s telling you that Fed officials will make it their mission to slow down the U.S. economy.  With phrases like “capacity for labor demand to moderate” and “reducing job openings” code for what has to happen to calm wage inflation, the prospect of a dovish 180 is slim to none. As such, this is bullish for real yields and bearish for the PMs. More importantly, notice her use of that all-important buzzword? Source: Reuters And: Source: Reuters Moreover, where do you think she got it? Source: Reuters Echoing that sentiment, Chicago Fed President Charles Evans (a relative dove) said on Apr. 11 that more than one 50 basis point rate hike could be on the horizon. "Fifty is obviously worthy of consideration; perhaps it's highly likely even if you want to get to neutral by December." As a result, with the USD Index and the U.S. 10-Year real yield already soaring, what do you think will happen if the Fed pushes the U.S. federal funds rate "to neutral by December?" Please see below: Source: Reuters Even more hawkish, Fed Governor Christopher Waller said on Apr. 13: “I think we’re going to deal with inflation. We’ve laid out our plans. We’re in a position where the economy’s strong, so this is a good time to do aggressive actions because the economy can take it.” He added: “I think we want to get above neutral certainly by the latter half of the year, and we need to get closer to neutral as soon as possible.” As a result: Source: CNBC Now, if we presented these quotes to the permabulls, they would say: "So what? We already know that the Fed is going to raise interest rates."  However, while a higher U.S. federal funds rate is now the worst-kept secret, the impact on U.S. economic growth is far from priced in. With investors assuming the Fed will normalize inflation without hurting the U.S. economy, they are positioned for an unrealistic outcome. Stagflation, anyone? Moreover, with the gold and silver prices ignoring everything the Fed throws at them, they're attempting to re-write the history books. However, with Brainard and Waller telling you that their goal is to create a bullish environment for the USD Index and the U.S. 10-Year real yield, the PMs have fought this battle before and lost this battle before. To explain, I wrote on Apr. 6: Please remember that the Fed needs to slow the U.S. economy to calm inflation, and rising asset prices are mutually exclusive to this goal. Therefore, officials should keep hammering the financial markets until investors finally get the message. Moreover, with the Fed in inflation-fighting mode and reformed doves warning that the U.S. economy “could teeter” as the drama unfolds, the reality is that there is no easy solution to the Fed’s problem. To calm inflation, it has to kill demand. As that occurs, investors should suffer a severe crisis of confidence. To that point, Fed officials aren’t even pretending anymore. Waller said on Apr 13: “All we can do is kind of push down demand for these products and take some pressure off the prices that people have to pay for these products. We can’t produce more wheat, we can’t produce more semiconductors, but we can affect the demand for these products in a way that puts downward pressure and takes some pressure off of inflation.” Likewise, Waller was even more realistic when he spoke on Apr. 11: He said: “With housing, can we cool off demand for housing without tanking the construction industry? Can we cool down the labor demand without causing employment to fall? That’s the tricky road that we’re on.” As a result, while Fed officials understand how difficult it will be to normalize inflation, investors remain in la-la land. However, when the “collateral damage” eventually unfolds, the shift in sentiment should result in the profound re-pricing of several financial assets. Please see below: Source: Bloomberg Thus, investors’ uninformed state of denial will likely seem obvious in the months ahead. (Yes, I know, it’s difficult to remain rational while surrounded what’s irrational, and that’s the very thing that makes investing “simple, but not easy”). Moreover, while Macklem cautioned that the BoC could “pause our tightening” if inflation subsides, the same rule applies to the Fed. However, with inflation still raging, the Fed and the BoC are unlikely to change their hawkish tones anytime soon. Case in point. The U.S. Bureau of Labor Statistics (BLS) released the Producer Price Index (PPI) on Apr. 13.,and with outperformance across the board, green lights were present for all of the wrong reasons. For context, the gray figures in the middle column were economists’ consensus estimates. Please see below: Source: Investing.com Likewise, the NFIB released its Small Business Optimism Index on Apr. 12. The report revealed: “The NFIB Small Business Optimism Index decreased in March by 2.4 points to 93.2, the third consecutive month below the 48-year average of 98. Thirty-one percent of owners reported that inflation was the single most important problem in their business, up five points from February and the highest reading since the first quarter of 1981. Inflation has now replaced ‘labor quality’ as the number one problem.” How about this divergence? “Owners expecting better business conditions over the next six months decreased 14 points to a net negative 49%, the lowest level recorded in the 48-year-old survey.” “The net percent of owners raising average selling prices increased four points to a net 72% (seasonally adjusted), the highest reading recorded in the series.” Moreover, “a net 50 percent plan price hikes (up 4 points).” Please see below: Source: NFIB On top of that, “a net 49 percent reported raising compensation, down 1 point from January’s 48-year record high reading. A net 28 percent plan to raise compensation in the next three months, up 2 points from February.” Please see below: Source: NFIB Thus, while the Fed hopes to rein in inflation, U.S. small businesses plan more price hikes and wage increases than in February. Therefore, officials’ hawkish intentions are not nearly hawkish enough. As a result, the medium-term outlook for the U.S. federal funds rate, the USD Index and the U.S. 10-Year real yield couldn’t be more bullish. As mentioned, let’s not forget how optimism often turns to pessimism when the drama unfolds. The bottom line? Investors lack the foresight to see how the Fed’s rate hike cycle will likely unfold. Moreover, with Fed officials warning of the “collateral damage” that occurs when they curb demand to reduce inflation, the permabulls have simply closed their eyes and covered their ears. However, when sentiment is built on a foundation of sand, it often collapses when reality re-emerges. In conclusion, the PMs rallied on Apr 13 as momentum remains the name of the game. However, while sentiment remains robust, gold, silver, and mining stocks’ fundamentals are worse now than at any point in 2021. As a result, history shows that not only are the current prices unsustainable, but profound drawdowns are required for the PMs to reflect their intrusive values.   What to Watch for Next Week With more U.S. economic data to be released next week, the most important ones are as follows: Apr. 21: Philadelphia Fed manufacturing index With the regional data providing early insight into April’s inflation dynamics, continued price increases will put more pressure on the FOMC. Apr. 22: S&P Global’s U.S. manufacturing and services PMIs Unlike the Philadelphia Fed’s index, S&P Global’s data covers the entire U.S. As a result, the performance of growth, employment, and inflation will be of immense importance. All in all, economic data releases impact the PMs because they impact monetary policy. Moreover, if we continue to see higher employment and inflation, the Fed should keep its foot on the hawkish accelerator. And if that occurs, the outcome is profoundly bearish for the PMs. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Dark Clouds Over the Gold Market Form a Bearish Shape

Dark Clouds Over the Gold Market Form a Bearish Shape

Przemysław Radomski Przemysław Radomski 12.04.2022 13:39
  Gold’s efforts misfired, silver probably faked another breakout, and gold miners aren’t doing very well either. Is there a repeat of events from a decade coming? Yesterday’s session served as a great bearish sign, not just because of gold’s and silver’s reversals, but also because of miners’ underperformance. Let's take a look at gold. During yesterday’s session, gold moved slightly above its previous local high, but then quickly invalidated this small breakout. Invalidations of breakouts in gold are a sell signal on their own, but the fact that we saw the same thing in silver makes the bearish nature of this development even more prominent. After having been relatively calm in April, silver soared above its declining resistance line… only to disappoint shortly thereafter. The white metal still closed the day slightly above the resistance line. However, given that the reversal took place on relatively high volume, the odds are that this breakout will be invalidated shortly. In fact, it was only yesterday when I wrote that silver was known for its fake breakouts right before starting much bigger declines. It appears that we have witnessed this kind of performance once again. While both precious metals ended the session higher, mining stocks ended it lower. This could be a sign that the top is in. Let’s take a look at junior miners’ short-term chart. While the GDXJ ETF didn’t invalidate its tiny breakout above the triangle pattern in terms of the daily closing prices, it did move back below it on an intraday basis. So, if gold’s and silver’s reversals are followed by lower prices, junior miners will likely invalidate the breakout and trigger more selling. Let’s keep in mind that while gold and silver are repeating their 2012 performance, we can spot some analogies in GDXJ too. At first, in late-September 2012 and early-October 2012, junior miners consolidated, and then they declined, thus entering the back-and-forth decline mode. It happened on relatively low volume. Right now, GDXJ is also after a consolidation that’s been taking place on relatively low volume and that followed a rather sizable short-term upswing. What happened next in 2012? Well, at the late-2012 top, the GDXJ closed at $87.83. Months later, it closed at $29.59, or roughly one third of its initial price. In other words, junior miners erased about two-thirds of their initial price. Yes, it was a great time for inversely trading instruments. The JDST wasn’t trading at that time yet, but DUST (which trades opposite to GDX) moved up by over 600%. Even though the short-term outlook is somewhat unclear, the medium-term outlook for the precious metals sector remains very bearish, and the upside potential for the short positions in junior mining stocks remains enormous, in my opinion. In my view, patience is likely to be very well rewarded. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Analysis of Gold for June 22,.2022 - Broken downside channel and potential for the rally  | InstaForex

Gold Investors: High Time to Treat Market Threats Seriously?

Przemysław Radomski Przemysław Radomski 08.04.2022 15:53
  The rising USDX and more interest rate hikes prospect don’t seem to bother investors. Meanwhile, gold’s outlook for 2022 has worsened significantly. With the bond market unhinged and equities pretending that all is well, the PMs look like the cleanest shirts in the basket of dirty laundry. For example, bond prices often move inversely to stock prices. When stocks fall, bonds are bid, and the latter serves as a hedge against uncertainty and volatility. However, with inflation raging and the Fed hawked up, bond prices have been falling, yields have been rising, and risk-on/risk-off sentiment has done little to reassert the historical relationship. However, keep in mind, the bond market is pricing in the implications of the Fed’s war on inflation, while the general stock market and the PMs are not. As such, U.S. Treasuries’ safe-haven bid has evaporated, and in this upside-down world, stocks and commodities are incurring much less volatility. Thus, please remember that short-term moves in the financial markets are not based on fundamentals. Instead, algorithms analyze sentiment indicators, and as long as momentum is bullish, why worry about medium-term fundamentals?  Think of it like this: we could present a quantitative trader with data that supports medium-term caution. However, he would respond with… who cares? In reality, momentum investors are so short-term-oriented that their strategy is to ride the wave higher and bolt at the first sign of trouble. As a result, with the PMs exhibiting less volatility, momentum investors haven’t seen the red flags that would cause them to exit their positions. Furthermore, a subscriber asked me if “gold is now the only risk-off asset left standing” and if “this would explain why gold has been so resilient.” To answer, the conclusion is spot on.  With investors hiding out in gold despite its domestic fundamentals falling off a cliff, the Russia-Ukraine crisis has provided cover for overzealous investors. However, while gold permabulls use the elevated price to justify their narrative, the reality is that “those who cannot remember the past are condemned to repeat it.” For context, we expect the PMs to soar over the long term. However, with the Fed hawked up and its rate hike cycle just beginning, we should witness sharp drawdowns before their secular bull markets continue. To that point, I’ve written a lot about U.S. real yields over the last several months. With the metric bullish for the USD Index and bearish for the PMs, I warned on Feb. 7 that the former’s short-term pullback contrasted with fundamental reality. I wrote: To explain, the green line above tracks the USD Index since January 2020, while the red line above tracks the U.S. 10-Year real yield. While the latter didn’t bottom in January 2021 like the USD Index and the FCI (though it was close), all three surged in late 2021 and hit new highs in 2022. Moreover, the U.S. 10-Year Treasury nominal and real yields hit new 2022 highs on Feb. 4.  Furthermore, with the Fed likely to raise interest rates at its March monetary policy meeting, a realization supports a higher U.S. 10-Year real yield, and a higher FCI. As a result, the fundamentals underpinning the USD Index remain robust, and short-term sentiment is likely responsible for the recent weakness.  Therefore, while the algorithms won the short-term battle, the fundamentals won the medium-term war. Moreover, with the U.S. 10-Year real yield surging in recent weeks, the USD Index has responded as expected. Please see below: However, gold prices’ persistent optimism is similar to the USD Index’s pullback in February. For example, the algorithms pushed the USD Index lower when momentum turned. However, reality re-emerged as time passed. Likewise, the algorithms are pushing the PMs higher now, but reality should also re-emerge over the next few months. To explain, I wrote on Jan. 12: The PMs are less volatile than speculative assets. However, it's important to remember that gold, silver, and mining stocks peaked amid the liquidity-fueled surge in the summer of 2020. Likewise, their uprisings coincided with real interest rates that were at all-time lows at the time. Conversely, with the Fed's liquidity drain already unfolding and real interest rates poised to rise in the coming months, the PMs should suffer from the likely re-pricings. For example, when the U.S. 10-Year real yield was at 0% or higher from June 2013 until October 2018, gold was stuck below $1,400 during that timeframe and actually fell below $1,100. As a result, if the Fed pushes its hawkish chips into the middle, don't be surprised if the PMs fold in 2022. Please see below: To that point, the U.S. 10-Year real yield has surged in 2022, and hawkish remarks from the Fed lifted the metric to -0.16% on Apr. 7. Please see below: For your reference, the gold line above tracks the gold futures price, while the red line above tracks the inverted U.S. 10-Year real yield. For context, inverted means that the latter’s scale is flipped upside down and that a rising red line represents a falling U.S. 10-Year real yield, while a falling red line represents a rising U.S. 10-Year real yield.  If you analyze the left side of the chart, you can see that when the U.S. 10-Year real yield surged during the 2013 taper tantrum (depicted by the red line moving sharply lower), gold plunged by more than $500 in less than six months.  Moreover, if you focus your attention on the right side of the chart, you can see that the U.S. 10-Year real yield is gunning for neutral, and the Fed needs to push the metric above 0% to curb inflation.  As a result, the data couldn’t be clearer, and the fundamental outlooks for the USD Index and the U.S. 10-Year real yield are more bullish now than at the end of 2021. However, because algorithms rule the day in the short term, the timing of when reality will resurface is unclear.  Despite that, if we remove the Russia-Ukraine conflict from the equation, this is one of the worst medium-term fundamental setups for gold in a long time. Therefore, while the permabulls will shout that “this time is different,” history shows that the yellow metal can only ignore rising real yields for so long.  Furthermore, I wrote on Apr. 7 that the FOMC minutes show officials plan to raise interest rates several times in the coming months. Moreover, their use of terms like “faster,” “rapid” and “expeditiously” is not bullish for the PMs or the S&P 500. In addition, the crew also pledged to start reducing the balance sheet by ~$95 billion per month “at a coming meeting.” Likewise, the Fed minutes also stated: “Many participants noted that one or more 50 basis point increases in the target range could be appropriate at future meetings, particularly if inflation pressures remained elevated or intensified. A number of participants noted that the Committee's previous communications had already contributed to a tightening of financial conditions, as evident in the notable increase in longer-term interest rates over recent months.” As a result, the medium-term outlook remains unchanged: the Fed could double up its rate hikes at “one or more” meetings, and the future path depends heavily on inflation. However, with the latter still raging, the chances of a dovish pivot are slim to none. As evidence, the Institute for Supply Management (ISM) released its U.S. Services PMI on Apr. 5. Moreover, the headline index increased from 56.5 in February to 58.3 in March. The report revealed: “Prices paid by services organizations for materials and services increased in March for the 58th consecutive month, with the index registering 83.8 percent, 0.7 percentage point higher than the February figure of 83.1 percent. This is its second-highest reading ever, behind the seasonally adjusted figure of 83.9 percent registered in December 2021.” In addition: “Employment activity in the services sector grew in March after contracting in February. ISM’s Services Employment Index registered 54 percent in March, up 5.5 percentage points from the reading of 48.5 percent registered in February. Comments from respondents include: ‘Labor shortages seem to be improving as omicron has waned’ and ‘Hiring back to normal levels.’ As such, all of this is bullish for Fed policy. Likewise, S&P Global also released its U.S. Services PMI on Apr. 5. Here, the headline index increased from 56.5 in February to 58.0 in March. The report revealed: “On the price front, firms recorded a substantial increase in output charges during March. The rise in selling prices was the sharpest on record (since October 2009), as service providers reportedly passed through higher costs to clients, where possible.” For more context: Source: S&P Global Even more bullish for Fed policy: Source: S&P Global The bottom line? While momentum remains gold and silver’s best friend, their domestic fundamental outlooks have deteriorated sharply in 2022. The USD Index and U.S. real yields have risen dramatically, and the Fed has turned the hawkish dial up from 60 to 100. However, the PMs have largely ignored all of these troubling developments. Despite that, though, history shows that technicals and fundamentals win out over the medium term. Moreover, while sentiment remains uplifted for now, the pendulum can swing without warning. When this occurs, the PMs will confront one of the worst domestic fundamental environments since late 2018. In conclusion, the PMs rallied on Apr. 7, as momentum doesn’t die easily. However, with the bearish medium-term thesis becoming clearer by the day, investors are fighting a battle they haven’t won in 10 years. As a result, while the timing remains uncertain, the PMs should suffer profound drawdowns once sentiment shifts. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Are Bearish Times Coming? Gold To Fall And DXY To Rise?

Are Bearish Times Coming? Gold To Fall And DXY To Rise?

Przemysław Radomski Przemysław Radomski 05.04.2022 15:58
  Gold is still running on the war-fumes, but its last moves bring to mind only bearish associations. Worse yet, a rising dollar appeared on the horizon. On the technical front, we saw that the junior mining stocks moved higher in the first part of the session, but then declined and ended the day practically unchanged. Why did junior miners rally initially? Perhaps for technical reasons. They were moving higher in their immediate-term trend, and thus, it might have been necessary for them to reach a resistance level before they could return to their downtrend. Junior miners just found the resistance in the form of the declining line based on the previous March highs. After a tiny attempt to break above this line, the GDXJ declined and the breakout was invalidated, suggesting that the rally is over. Now, the above-mentioned resistance line appears to be the upper border of the triangle pattern, which might concern you because triangles are usually a “continuation pattern”. In other words, the move that preceded the triangle is usually the type of move that follows it. The preceding move higher was up, so the following move could be to the upside as well. However, for this to happen, junior miners would first need to confirm the breakout above the line, and we saw the opposite taking place yesterday – the breakout above the line was invalidated. If – instead – we see a decline below the lower border of the triangle, the pattern would likely be followed by a decline. Please note that I wrote “usually” and now “always” with regard to the bullish implications of triangles. If we look beyond the above chart, the bearish case is more justified than the bullish one. I don’t mean just the extremely bearish situation in gold’s long-term chart, where it’s clear that gold is repeating its 2011-2013 performance, with the recent top being analogous to what we saw in 2012. If it wasn’t for the Ukraine-war-tension-based rally, gold would have likely topped close to its current levels, which would be a perfect analogy to where it topped in 2012 – close to its preceding medium-term highs. The fact that the RSI indicator moved lower recently after being close to 70 indicates that the top is already behind us. If history is about to rhyme (and that’s very probable in my view), gold is likely to decline in a back-and-forth manner before it truly slides without looking back. Basically, that’s what we’ve been seeing recently. The recent consolidation is not a bullish development, but something in perfect tune with the extremely bearish pattern from 2012. I don’t mean “just” the above, because we see similar analogies in silver and gold stocks (the HUI Index), and we get other indications (of more short-term nature) from the USD Index and the general stock market. The technical picture of the S&P 500 index suggests that the final top and the initial corrective upswing are over. The general stock market closed the week below its February highs, which means that the small breakout above them was invalidated. This is a very bearish indication for the following weeks. Many more investors are likely to become aware of the new interest-rate-hike-driven medium-term bear market once the S&P 500 breaks to new 2022 lows. That’s when the decline is likely to accelerate, quite likely also in silver and mining stocks that are usually most vulnerable to stock market moves. Moreover, let’s keep in mind that the USD Index is likely to soar once again soon, triggering declines in the precious metals market. In my previous analyses, I commented on the USD Index in the following way: If we focus on the USD Index alone, we’ll see that yesterday’s decline was absolutely inconsequential with regard to changing the outlook for the USDX. It simply continues to consolidate after a breakout above the mid-2020 highs. Breakout + consolidation = increasing chances of rallies’ continuation. A big wave up in the USD Index is likely just around the corner, and the precious metal sector is likely to decline when it materializes. As the war-based premiums in gold and the USD appear to be waning, a high-interest-rate-driven rally in the USD is likely to trigger declines in gold. The correlation between these two assets has started to decline. When that happened during the last two cases (marked with orange), gold plummeted profoundly shortly thereafter. The USD Index rallied recently, once again clearly verifying the breakout above its mid-2020 high. This means that the USD Index is now likely ready to rally once again. Naturally, this has bearish implications for the precious metals sector. All in all, technicals favor a decline in the precious metals sector sooner rather than later. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Fluctuating, Rallying, Interacting - Gold, Mining Stocks And Dollar

Fluctuating, Rallying, Interacting - Gold, Mining Stocks And Dollar

Przemysław Radomski Przemysław Radomski 31.03.2022 14:51
  Gold and the USD act as if they are swinging on a seesaw. However, the apparent idyll cannot last forever – one of the assets will have to be grounded. The back-and-forth movement in both gold and miners continues. However, as GDXJ keeps trading below its rising support line, the breakout below it becomes confirmed, and the movements that we saw at the same time in gold and the USD Index suggest that the former is ready to slide once the latter rallies. Let’s take a closer look, starting with the GDXJ. Yesterday’s move in the ETF was rather insignificant, and that’s precisely what makes it… significant. What I mean is that insignificant moves after a breakdown are a perfect way for the market to take a breather before declining further. In other words, the previous breakdown makes yesterday’s irrelevant price action relevant and bearish. Consequently, my yesterday’s comments on the above chart remain up-to-date: Yesterday’s breakdown below the rising support line was not invalidated. We saw a move higher on volume that was not strong, which suggests that yesterday’s session was not a true reversal. Low volume suggests that it was a correction, and the fact that junior miners have just broken below their rising support line means that it makes perfect sense for them to correct now. Consequently, yesterday’s action wasn’t really bullish for junior miners when we take the context into account. Speaking of context, let’s not forget about yesterday’s action in the USD Index. The USD Index declined significantly yesterday, which means that gold, silver, and mining stocks “should have” rallied. After all, based on the USD’s decline, their prices (quoted in USD terms) became lower for non-USD buyers. So, the fact that silver and gold were practically flat yesterday is actually bearish for them, because it means they underperformed. Gold miners moved higher, but given that the USD Index declined visibly and the general stock market rallied, it would be natural for miners to rally more than they did. Taking all this into account, miners were not really strong yesterday. If we focus on the USD Index alone, we’ll see that yesterday’s decline was absolutely inconsequential with regard to changing the outlook for the USDX. It simply continues to consolidate after a breakout above the mid-2020 highs. Breakout + consolidation = increasing chances of rallies’ continuation. A big wave up in the USD Index is likely just around the corner, and the precious metal sector is likely to decline when it materializes. As the war-based premiums in gold and the USD appear to be waning, a high-interest-rate-driven rally in the USD is likely to trigger declines in gold. The correlation between these two assets has started to decline. When that happened during the last two cases (marked with orange), gold plummeted profoundly shortly thereafter. What happened after we posted the above? The USD Index had declined, and gold had rallied (yesterday), and then (today) the USD Index moved back up by just a little while gold declined strongly. Gold is once again in a situation where it magnifies the USD’s bearish indications while largely ignoring the USD’s bullish indications. This is a perfectly bearish sign for the short term, because it means that if the USD Index moves back and forth, then gold will most likely continue its downtrend, declining when the USD is up, and pausing when it’s down. However, the USD Index is not likely to continue to move back and forth for long – quite the opposite. The USD Index has just verified its breakout above the mid-2020 high for the third time (without moving below it; the strong support held!), which means that it’s now very likely that it will simply continue its uptrend. Based on how gold is now reacting to USDX’s movement, the uptrend in the USD Index would be likely to trigger significant declines in gold. This would be likely to translate into lower silver and mining stock prices. All in all, technicals favor a decline in the precious metals sector sooner rather than later. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Gold To Go Head To Head With Fed And Inflation

Gold To Go Head To Head With Fed And Inflation

Przemysław Radomski Przemysław Radomski 23.03.2022 15:17
  The Fed's hawkish alerts seem like a voice in the wilderness to gold investors. However, a carefree attitude can backfire on them – in just a few months. An epic battle is unfolding across the financial markets as the Fed warns investors about its looming rate hike cycle and the latter ignores the ramifications. However, with perpetually higher asset prices only exacerbating the Fed's inflationary conundrum, a profound shift in sentiment will likely occur over the next few months. To explain, I highlighted in recent days how the Fed has turned the hawkish dial up to 100. Moreover, I wrote on Mar. 22 that it's remarkable how much the PMs' domestic fundamental outlooks have deteriorated in recent weeks. Yet, prices remain elevated, investors remain sanguine, and the bullish bands continue to play.  However, with inflation still rising and the Fed done playing games, the next few months should elicit plenty of fireworks. For example, with another deputy sounding the hawkish alarm, San Francisco Fed President Mary Daly said on Mar. 22: "Inflation has persisted for long enough that people are starting to wonder how long it will persist. I'm already focused on letting make sure this doesn't get embedded and we see those longer-term inflation expectations drift up." As a result, Daly wants to ensure that the "main risk" to the U.S. economy doesn't end up causing a recession. Please see below: Source: Reuters Likewise, St. Louis Fed President James Bullard reiterated his position on Mar. 22, telling Bloomberg that “faster is better,” and that “the 1994 tightening cycle or removal of accommodation cycle is probably the best analogy here.” Please see below: Source: Bloomberg   Falling on Deaf Ears To that point, while investors seem to think that the Fed can vastly restrict monetary policy without disrupting a healthy U.S. economy, a major surprise could be on the horizon. For example, the futures market has now priced in nearly 10 rate hikes by the Fed in 2022. As a result, should we expect the hawkish developments to unfold without a hitch? Please see below: To explain, the light blue, dark blue, and pink lines above track the number of rate hikes expected by the Fed, BoE, and ECB. If you analyze the right side of the chart, you can see that the light blue line has risen sharply over the last several days and months. For your reference, if you focus your attention on the material underperformance of the pink line, you can see why I’ve been so bearish on the EUR/USD for so long. Also noteworthy, please have a look at the U.S. 2-Year Treasury yield minus the German 2-Year Bond yield spread. If you analyze the rapid rise on the right side of the chart below, you can see how much short-term U.S. yields have outperformed their European counterparts in 2021/2022. Source: Bloomberg/ Lisa Abramowicz More importantly, though, with Fed officials’ recent rhetoric encouraging more hawkish re-pricing instead of talking down expectations (like the ECB), they want investors to slow their roll. However, investors are now fighting the Fed, and the epic battle will likely lead to profound disappointment over the medium term. Case in point: when Fed officials dial up the hawkish rhetoric, their “messaging” is supposed to shift investors’ expectations. As such, the threat of raising interest rates is often as impactful as actually doing it. However, when investors don’t listen, the Fed has to turn the hawkish dial up even more. If history is any indication, a calamity will eventually unfold.  Please see below: To explain, the blue line above tracks the U.S. federal funds rate, while the various circles and notations above track the global crises that erupted during the Fed’s rate hike cycles. As a result, standard tightening periods often result in immense volatility.  However, with investors refusing to let asset prices fall, they’re forcing the Fed to accelerate its rate hikes to achieve its desired outcome (calm inflation). As such, the next several months could be a rate hike cycle on steroids.  To that point, with Fed Chairman Jerome Powell dropping the hawkish hammer on Mar. 21, I noted his response to a question about inflation calming in the second half of 2022. I wrote on Mar. 22: "That story has already fallen apart. To the extent it continues to fall apart, my colleagues and I may well reach the conclusion we'll need to move more quickly and, if so, we'll do so." To that point, Powell said that “there’s excess demand" and that "the economy is very strong and is well-positioned to handle tighter monetary policy." As a result, while investors seem to think that Powell’s bluffing, enlightenment will likely materialize over the next few months. Please see below: Source: Reuters Furthermore, with Goldman Sachs economists noting the shift in tone from “steadily” in January to “expeditiously” on Mar. 21, they also upped their hawkish expectations. They wrote: “We are now forecasting 50bp hikes at both the May and June meetings (vs. 25bp at each meeting previously). The level of the funds rate would still be low at 0.75-1% after a 50bp hike in May, and if the FOMC is open to moving in larger steps, then we think it would see a second 50bp hike in June as appropriate under our forecasted inflation path.” “After the two 50bp moves, we expect the FOMC to move back to 25bp rate hikes at the four remaining meetings in the back half of 2022, and to then further slow the pace next year by delivering three quarterly hikes in 2023Q1-Q3. We have left our forecast of the terminal rate unchanged at 3-3.25%, as shown in Exhibit 1.” Please see below: In addition, this doesn’t account for the Fed’s willingness to sell assets on its balance sheet. For context, Powell said on Mar. 16 that quantitative tightening (QT) should occur sometime in the summer and that shrinking the balance sheet “might be the equivalent of another rate increase.” As a result, investors’ lack of preparedness for what should unfold over the next few months has been something to behold. However, the reality check will likely elicit a major shift in sentiment.  In contrast, the bond market heard Powell’s message loud and clear, and with the U.S. 10-Year Treasury yield hitting another 2022 high of ~2.38% on Mar. 22, the entire U.S. yield curve is paying attention. Please see below: Source: Investing.com Finally, the Richmond Fed released its Fifth District Survey of Manufacturing Activity on Mar. 22. With the headline index increasing from 1 in February to 13 in March, the report cited “increases in all three of the component indexes – shipments, volume of new orders, and number of employees.” Moreover, the prices received index increased month-over-month (MoM) in March (the red box below), while future six-month expectations for prices paid and received also increased (the blue box below). As a result, inflation trends are not moving in the Fed’s desired direction. Please see below: Source: Richmond Fed Likewise, the Richmond Fed also released its Fifth District Survey of Service Sector Activity on Mar. 22, nd while the headline index decreased from 13 in February to -3 in March, current and future six-month inflationary pressures/expectations rose MoM. Source: Richmond Fed The bottom line? While the Fed is screaming at the financial markets to tone it down to help calm inflation, investors aren't listening. With higher prices resulting in more hawkish rhetoric and policy, the Fed should keep amplifying its message until investors finally take note. If not, inflation will continue its ascent until demand destruction unfolds and the U.S. slips into a recession. As such, if investors assume that several rate hikes will commence over the next several months with little or no volatility in between, they're likely in for a major surprise. In conclusion, the PMs declined on Mar. 22, as the sentiment seesaw continued. However, as I noted, it's remarkable how much the PMs' domestic fundamental outlooks have deteriorated in recent weeks. Thus, while the Russia-Ukraine conflict keeps them uplifted, for now, the Fed's inflation problem is nowhere near an acceptable level. As a result, when investors finally realize that a much tougher macroeconomic environment confronts them over the next few months, the shift in sentiment will likely culminate in sharp drawdowns. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Interaction Between Price Of Gold (XAUUSD) And Fed's Interest Rate Decision

Interaction Between Price Of Gold (XAUUSD) And Fed's Interest Rate Decision

Przemysław Radomski Przemysław Radomski 17.03.2022 16:07
  The Fed will want to keep inflation under control, and that could have miserable consequences for gold and miners. Will we see a repeat from 2008?  The question one of my subscribers asked me was about the rise in mining stocks and gold and how it was connected to what was happening in bond yields. Precisely, while short-term and medium-term yields moved higher, very long-term yields (the 30-year yields) dropped, implying that the Fed will need to lower the rates again, indicating a stagflationary environment in the future. First of all, I agree that stagflation is likely in the cards, and I think that gold will perform similarly to how it did during the previous prolonged stagflation – in the 1970s. In other words, I think that gold will move much higher in the long run. However, the market might have moved ahead of itself by rallying yesterday. After all, the Fed will still want to keep inflation under control (reminder: it has become very political!), and it will want commodity prices to slide in response to the foregoing. This means that the Fed will still likely make gold, silver, and mining stocks move lower in the near term. In particular, silver and mining stocks are likely to decline along with commodities and stocks, just like what happened in 2008. Speaking of commodities, let’s take a look at what’s happening in copper. Copper invalidated another attempt to move above its 2011 high. This is a very strong technical sign that copper (one of the most popular commodities) is heading lower in the medium term. Yes, it might be difficult to visualize this kind of move given the recent powerful upswing, but please note that it’s in perfect tune with the previous patterns. The interest rates are going up, just like they did before the 2008 slide. What did copper do before the 2008 slide? It failed to break above the previous (2006) high, and it was the failure of the second attempt to break higher that triggered the powerful decline. What happened then? Gold declined, but silver and mining stocks truly plunged. The GDXJ was not trading at the time, so we’ll have to use a different proxy to see what this part of the mining stock sector did. The Toronto Stock Exchange Venture Index includes multiple junior mining stocks. It also includes other companies, but juniors are a large part of it, and they truly plunged in 2008. In fact, they plunged in a major way after breaking below their medium-term support lines and after an initial corrective upswing. Guess what – this index is after a major medium-term breakdown and a short-term corrective upswing. It’s likely ready to fall – and to fall hard. So, what’s likely to happen? We’re about to see a huge slide, even if we don’t see it within the next few days. In fact, the outlook for the next few days is rather unclear, as different groups of investors can interpret yesterday’s developments differently. However, once the dust settles, the precious metals sector is likely to go down significantly. Gold is up in today’s pre-market trading, but please note that back in 2020, after the initial post-top slide, gold corrected even more significantly, and it wasn’t really bullish. This time gold doesn’t have to rally to about $2,000 before declining once again, as this time the rally was based on war, and when we consider previous war-based rallies (U.S. invasion of Afghanistan, U.S. invasion of Iraq, Russia’s invasion of Crimea), we know that when the fear-and-uncertainty-based top was in, then the decline proceeded without bigger corrections. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
(XAUUSD) Price Of Gold And Price Of Silver (XAGUSD) Decreases...

(XAUUSD) Price Of Gold And Price Of Silver (XAGUSD) Decreases...

Przemysław Radomski Przemysław Radomski 15.03.2022 14:12
  In line with predictions, gold is ceasing to benefit from war-fueled uncertainty. Meanwhile, silver faked another breakout. Could it be more bearish?  Last week’s powerful, huge-volume reversal in gold was likely to be followed by declines. It was – but that’s just the beginning. Yesterday’s $24 decline might seem significant on a day-to-day basis, but compared to last week’s enormous reversal, it’s really tiny. The modest extent of yesterday’s decline is by no means bullish – my emphasis on the small size of the decline so far should be viewed as an indication that much more is likely on the horizon. Besides, gold was down by about $20 in today’s pre-market trading. As I wrote yesterday, gold’s breakout above $2,000 was officially invalidated, and given the weekly reversal, it seems that the war-uncertainty-based rally is over. The decisive move below 70 in the RSI indicator after it was trading above 70 clearly confirms that the top is already behind us. Just like it was in 2020 and 2021 when similar things happened, history appears to have rhymed. On Friday, I wrote the following: Gold’s move of $0.40 (yes, forty cents) above $2,000 is not important as the breakout above this level was just invalidated the previous day. Technically, this is another attempt to break above this level, which is likely to be invalidated based on what we see in today’s pre-market trading. The fact that I would like to emphasize today is that this kind of small rebound after the initial slide is common and perfectly normal for gold. We saw exactly the same thing right after gold’s 2020 top and after its 2021 top, and also two more times in 2021 (as marked on the above chart). This means that yesterday’s upswing is not particularly bullish. It’s a normal post-top reaction. Lower gold values are to be expected. Silver declined yesterday, and it closed the day below its late-2021 high. In other words, the breakout above this level was invalidated. This is a strong bearish confirmation from the white metal. The white metal just invalidated the move above its 61.8% Fibonacci retracement. That’s bearish on its own, but let’s keep in mind that it happened right after silver outperformed gold. Last Tuesday, the GDXJ ETF was up by less than 1%, gold was up by 2.37%, and silver was up by 4.57%. Silver’s outperformance and miners’ underperformance is what we tend to see right at the tops. That’s exactly what it was – a top. Silver declined profoundly, and the attempt to break above its 61.8% Fibonacci retracement level will soon be just a distant (in terms of price) memory. On a medium-term basis, silver was simply weak relative to gold, but we saw short-term outperformance. In short, that was and continues to be bearish. As far as silver’s big picture is concerned, please note that it also provides us with a confirmation of the analogy between 2012 and now. At the turn of the year in 2011/2012, there was a cyclical turning point in silver, and we saw a sizable decline in silver shortly thereafter. The same happened in 2021, after silver’s cyclical turning point. Back in 2012, silver declined more or less to its previous lows and then rallied back up, but it didn’t reach its previous top. It more or less rallied to its 50-week moving average and then by about the same amount before topping. Recently, we saw exactly the same thing. After the initial decline, silver bottomed close to its previous lows, and most recently it rallied to its 50-week moving average and then by about the same amount before topping – below the previous high. Thus, the situation is just like what it was during the 2012 top in all three key components of the precious metals sector: gold, silver, and mining stocks. We have a situation in the general stock market that points to an even quicker slide than what we saw in 2012-2013. If stocks slide sharply and significantly just like in 2008, then the same fate may await the precious metals sector – just like in 2008. In this case, silver and mining stocks (in particular, junior mining stocks) would be likely to fall in a spectacular manner. All the above was confirmed by silver’s invalidation of its breakout above the late-2021 high. Not only has the medium-term outlook been bearish, but now the short-term outlook for silver is bearish too. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Gold Tries to Hold Above $2000 - Hard Landing Ahead?

Gold Tries to Hold Above $2000 - Hard Landing Ahead?

Przemysław Radomski Przemysław Radomski 08.03.2022 16:02
  Gold has hit $2,000 but is still struggling to maintain that historical level. It has already tried 8 times - will the ninth attempt succeed? Many indications make this doubtful. Gold is attempting to break above the $2,000 milestone, and miners are trying to break above their declining resistance line. Will they manage to do so, and if so, how long will the rally last? Yesterday, gold didn’t manage to close above the $2,000 level and it’s making another attempt to rally above it in today’s pre-market trading. However, will it be successful? Given the RSI above 70 and the strength of the current resistance, it’s doubtful. In fact, nothing has changed with regard to this likelihood since yesterday, so what I wrote about it in the previous Gold & Silver Trading Alert remains up-to-date: Gold touched $2,000 in today’s pre-market trading, which is barely above its 2021 high and below its 2020 high. Crude oil is way above both analogous levels. In other words, gold underperforms crude oil to a significant extent, just like in 2003. Interestingly, back in 2003, gold topped when crude oil rallied about 40% from its short-term lows (the late-2002 low). What happened next in 2003? Gold declined, and the moment when crude oil started to visibly outperform gold was also the beginning of a big decline in gold stocks. That makes perfect sense on the fundamental level too. Gold miners’ share prices depend on their profits (just like it’s the case with any other company). Crude oil at higher levels means higher costs for the miners (the machinery has to be fueled, the equipment has to be transported, etc.). When costs (crude oil could be viewed as a proxy for them) are rising faster than revenues (gold could be viewed as a proxy for them), miners’ profits appear to be in danger; and investors don’t like this kind of danger, so they sell shares. Of course, there are many more factors that need to be taken into account, but I just wanted to emphasize one way in which the above-mentioned technical phenomenon is justified. Back in 2003, gold stocks wiped out their entire war-concern-based rally, and the biggest part of the decline took just a bit more than a month. Let’s remember that back then, gold stocks were in a very strong medium- and long-term uptrend. Right now, mining stocks remain in a medium-term downtrend, so their decline could be bigger – they could give away their war-concern-based gains and then decline much more. Mining stocks are not declining profoundly yet, but let’s keep in mind that history rhymes – it doesn’t repeat to the letter. As I emphasized previously today, back in 2003 and 2002, the tensions were building for a longer time, and it was relatively clear in advance that the U.S. attack was going to happen. This time, Russia claimed that it wouldn’t attack until the very last minute before the invasion. Consequently, the “we have to act now” is still likely to be present, and the dust hasn’t settled yet – everything appears to be unclear, and thus the markets are not returning to their previous trends. Yet. However, as history shows, that is likely to happen. Either immediately, or shortly, as crude oil is already outperforming gold. The above chart features the GDXJ ETF. As you can see, the junior miners moved to their very strong resistance provided by the declining resistance line. This resistance is further strengthened by the 38.2% Fibonacci retracement, and the previous (late-2021) high. This means that it’s particularly strong, and any breakout here would likely be invalidated shortly. Given the clear sell signal from the RSI indicator, a turnaround here is even more likely. I marked the previous such signals to emphasize their efficiency. When the RSI was above 70, a top was in 6 out of 7 of the recent cases, and the remaining case was shortly before the final top, anyway. This resistance seems to be analogous to the $2,000 level in gold. By the way, please note that gold tried to break above $2,000 several times: twice in August 2020; twice in September 2020 (once moving above it, once moving just near this level); once in November 2020 (moving near this level); once in January 2021 (moving near this level); once in February 2022 (moving near this level). These attempts failed in each of the 7 cases mentioned above. This is the eight attempt. Will this very strong resistance break this time? Given how much crude oil has already soared, and how both markets used to react to war tensions in the case of oil-producing countries, it seems that the days of the rally are numbered. Moving back to the GDXJ ETF, please note that while gold is moving close to its all-time highs, the junior miners are not doing anything like that. In fact, they barely moved slightly above their late-2021 high. They are not even close to their 2021 high, let alone their 2020 high. Instead, junior mining stocks are just a bit above their early-2020 high, from which their prices were more than cut in half in less than a month. In other words, junior miners strongly underperform gold, which is a bearish sign. When gold finally declines – and it’s likely to, as geopolitical events tend to have only a temporary effect on prices, even if they’re substantial – junior miners will probably slide much more than gold. One of the reasons is the likely decline in the general stock market. I recently received a question about the impact the general stock market has on mining stocks, as the latter moved higher despite stocks’ decline in recent weeks. So, let’s take a look at a chart that will feature junior mining stocks, the GLD ETF, and the S&P 500 Index. Before the Ukraine crisis, the link between junior miners and the stock market was clear. Now, it's not as clear, but it’s still present. Juniors only moved to their late-2021 highs, while gold is over $100 above those highs. Juniors underperform significantly, in tune with the stock market's weakness. The gold price is still the primary driver of mining stock prices – including junior mining stocks. After all, that’s what’s either being sold by the company (that produces gold) or in the properties that the company owns and explores (junior miners). As gold prices exploded in the last couple of weeks, junior miners practically had to follow. However, this doesn’t mean that the stock market’s influence is not present nor that it’s going to be unimportant going forward. Conversely, the weak performance of the general stock market likely contributed to junior miners’ weakness relative to gold – the former didn’t rally as much as the latter. Since the weakness in the general stock market is likely to continue, and gold’s rally is likely to be reversed (again, what happened in the case of other military conflicts is in tune with history, not against it), junior miners are likely to decline much more profoundly than gold. Speaking of the general stock market, it just closed at the lowest level since mid-2021. The key thing about the above chart is that what we’ve seen this year is the biggest decline since 2020, and the size of the recent slide is comparable to what we saw as the initial wave down in 2020 – along with the subsequent correction. If these moves are analogous, the recent rebound was perfectly normal – there was one in early 2020 too. This also means that a much bigger decline is likely in the cards in the coming weeks, and that it’s already underway. This would be likely to have a very negative impact on the precious metals market, in particular on junior mining stocks (initially) and silver (a bit later). All in all, it seems that due to the technical resistance in gold and mining stocks, the sizable – but likely temporary (like other geopolitical-event-based-ones) – rally is likely to be reversed shortly. Then, as the situation in the general stock market deteriorates, junior miners would be likely to plunge in a spectacular manner. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Will Price Of Gold (XAUUSD) Be Affected By Russian Economics?

Will Price Of Gold (XAUUSD) Be Affected By Russian Economics?

Przemysław Radomski Przemysław Radomski 01.03.2022 15:52
  Sanctions, terminated contracts, and a plummeting currency – Russia is facing the financial crisis specter. Can gold also be affected? In the medium term, even painfully.  While gold continues to ride the bullish wave of geopolitical tensions, confusion has arisen over whether Russia’s financial woes will support or hurt the yellow metal. For context, I wrote on Feb. 28: Even if the recent escalation uplifts gold in the short term, the fundamental implications of Russia’s financial plight support lower gold prices over the medium term.  Please see below: To explain, with Russia essentially blacklisted from many influential FX counterparties, the Russian ruble relative to the U.S. dollar was exchanged for a roughly 50% discount on Feb. 27. As a result, Russian's purchasing power is nearly half of what it was before Sunday's developments. Furthermore, if you analyze the chart above, you can see that euros and U.S. dollars made up a large portion of Russia's monetary base in 2013 (the green bars on the left). Conversely, those holdings dropped dramatically in 2021 (the blue bars on the left).  In addition, if you focus your attention on the column labeled "Gold," you can see that FX has been swapped for gold, and the yellow metal accounts for roughly 23% of Russia's monetary base. Now, with the impaired state of the ruble offering little financial reprieve, Russia may have to sell its gold reserves to alleviate the pressure from NATO's economic sanctions.  As a result, while war is often bullish for gold, the fundamental implications of currency devaluation mean that gold is Russia's only worthwhile asset outside of oil. Thus, with bank runs already unfolding in the region, the yellow metal could be collateral damage. To that point, the USD/RUB closed at roughly 105 on Feb. 28. As a result, it costs 105 Russian rubles to obtain one U.S. dollar. With the spot gold price at around $1,900 per ounce, it costs roughly 199,500 Russian rubles to purchase an ounce of gold. In stark contrast, the USD/RUB closed at approximately 75 on Feb. 16, which means that less than two weeks ago, it cost 142,500 Russian rubles to purchase an ounce of gold at the current price. As such, in currency-adjusted terms, the cost of an ounce of gold in Russia has increased by roughly 40% in recent days. However, after Bloomberg posted an article on Feb. 27 titled “Bank of Russia Resumes Gold Buying After Two-Year Pause,” the revelation may have caused some anxiety about our short position (as a reminder, it’s not in gold, but in junior mining stocks). For context, an excerpt from the article read: “The central bank will begin buying gold again on the domestic precious metals market, it said in a statement. The move comes after the monetary authority and several of the country’s commercial banks were sanctioned in response to Russia’s invasion of Ukraine.” As a result, if Russia goes on a shopping spree for bullion, could the price skyrocket? Well, the reality is that the fundamentals don’t support the sentiment. As mentioned, the USD/RUB has surged in recent days, and the sharp decline in the value of the Russian currency is extremely bearish for the Russian economy. Please see below: Furthermore, while Russia may want to increase its gold reserves, it’s essential to focus on what Russia does and not what it says. For example, the Russian central bank increased its overnight lending rate from 9.5% to 20% on Feb. 28. While U.S. investors fret over a 25 basis point hike from the Fed (which, as mentioned previously, should occur in March), Russia had to increase interest rates by 10.5% to help stop the ruble’s bleeding.  Please see below: Source: Reuters For context, higher interest rates encourage capital flows, and with the ruble in free-fall, Russia is hoping that investors will buy the currency, invest in Russian bonds, and potentially earn a 20% return. Moreover, if the currency rallies during the holding period, the carry trade would be highly lucrative for an institution willing to incur the risk. However, the story is only sanguine in theory. In reality, though, crippling sanctions from NATO and private companies divesting their Russian assets mean that buying the ruble and other Russian securities requires a gambler’s mentality. For example, Viraj Patel, FX and Macro Strategist at Vanda Research, summed up the dynamic in a few simple words on Feb. 28: Source: Viraj Patel Twitter Thus, while Russia may claim it's buying gold, and who knows, maybe it will, the financial destruction plaguing the region will likely make Russia a net-seller over the medium term. To that point, if we circle back to the Bloomberg article referenced above, Nicky Shiels, head of metals strategy at MKS PAMP SA, said in the same piece that investors would interpret the actions as short-term bullish.  However, aligning with our expectations, she noted that investors have misjudged the medium-term impact of Russia's currency crisis.  Please see below: Source: Bloomberg As a result, that’s why I wrote on Feb. 28 that while volatility may be the name of the game this week as investors struggle to digest the implications, the geopolitical risk premium that often supports gold may prove counterintuitive this time around. Furthermore, we shouldn't ignore the potential impact on the USD Index. For example, while the dollar basket defied expectations and rose materially in 2021, the momentum continued in 2022. However, after a sharp rally in January, investors repositioned their bets, and euro longs were in style once again. However, with the risk-on trade now disrupted by the Russia-Ukraine conflict, more downside for the euro implies more upside for the USD Index. Please see below: Source: Institute of International Finance (IIF)/Robin Brooks To explain, the color blocks above track the non-commercial (speculative) futures positioning for various currencies versus the U.S. dollar, while the black line above tracks the consolidated total. If you analyze the right side of the chart, you can see that the black line has moved higher recently, which signals fewer U.S. dollar long positions.   More importantly, though, if you focus your attention on the light blue blocks on the right side of the chart, you can see that speculative euro longs have increased and remain in positive territory. However, with the economic impact of the Russia-Ukraine conflict much more troublesome for the Eurozone than the U.S., speculative EUR/USD positioning still has plenty of room to move lower. To that point, Mark Sobel, Senior Advisor at the Center for Strategic and International Studies (CSIS), wrote on Feb. 28 that “the overall impact of Russia’s actions on the U.S. economy may not be significant, assuming oil prices don’t soar, though that remains a significant risk.” “The challenges for the ECB will be much greater in its debates over balancing the stagflationary consequences of the Russian invasion. Europe is a large net energy importer and remains dependent on Russia for oil and natural gas.” As a result: “European Central Bank President Christine Lagarde will feel the strain more than Federal Reserve Chair Jerome Powell. Higher oil prices will boost inflation, weaken growth prospects and stoke stagflation fears.” Furthermore, if you analyze the right side of the chart below, you can see that Russia’s monetary base includes more euros (the light blue line) than U.S. dollars (the dark blue line). As a result, if Russia swaps its other FX holdings for rubles (to help stop the decline), the euro has more downside risk than the greenback. The bottom line? While Russia may put on a brave face and claim that gold purchases are on the horizon, the reality is that its materially weak financial position requires more attention to more pressing matters. With bank runs and a currency crisis already unfolding, combined with NATO sanctions and private companies divesting their Russian assets, the country’s leaders need to stem the tide before a depression unfolds. As a result, Russia’s oil revenues and the securities it can monetize are more likely to be used to support the Russian economy, rather than to buy gold. Thus, while the yellow metal has enjoyed short-term sentiment high (and so did the silver price), the fundamentals imply a much different outcome over the medium term. In conclusion, the PMs were mixed on Feb. 28, as the GDX ETF ended the session roughly flat. However, the recent rallies are far from troublesome. For example, I noted previously how gold rallied following the 2001 terrorist attacks and after Russia annexed Crimea in 2014. However, those gains were short-lived, and the latter resulted in lower lows in the months that followed. As a result, while the recent volatility will likely continue, it doesn’t change the bearish medium-term thesis. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Analysing Precious Metals - Price Of Gold And Gold Mining Stocks

Analysing Precious Metals - Price Of Gold And Gold Mining Stocks

Przemysław Radomski Przemysław Radomski 25.02.2022 14:10
  As history shows, gold and silver rallies based on geopolitical tensions are often short-lived. Yesterday, a hint of a trend reversal appeared. Don’t stop reading this mining stock analysis until you get to the part about junior mining stocks’ analogy. Something might interest you there. While the unfortunate conflict confronting Russia and Ukraine has intensified in recent days, gold, silver, and mining stocks have benefited from the crisis. However, since history shows that geopolitical-tension-based rallies often reverse, Feb. 24 was likely a small indication of what should unfold over the next few months. For example, gold’s sharp rally turned into a sharp intraday reversal on Feb. 24. While the S&P 500, the NASDAQ Composite, the S&P 500, and gold managed to end the session in the green, the GDX ETF declined by 1.93%. Furthermore, after the gold and silver senior miners rallied above their medium-term declining resistance line (the downward sloping black line in the middle of the chart below), the intraday reversal invalidated the breakout and it occurred on significant volume. At the same time, senior mining stocks invalidated their attempt to break above their 38.2% Fibonacci retracement. That’s yet another bearish sign. This means that the GDX ETF’s medium-term downtrend remains intact, and that the short-term concern-based rally may have just ended. To that point, the HUI Index provides clues from a longer-term perspective. When we analyze the weekly chart, the current short-term move higher is in tune with the previous patterns, but history is not repeating itself to the letter. The three previous cases that I marked with green were not identical, but quite similar in terms as they were all some sort of a broad head-and-shoulders pattern. Now, this pattern can have more than two “shoulders”. It’s not that common, but it happens. It seems that what we saw recently (I mean the late-2021 – Feb. 2022 rally) could be viewed as either a part of a big post-pattern consolidation, or another right shoulder of the pattern. Based on how broad the pattern is and self-similarity present in gold, it seems that the analogy to what happened in 2012 is most important right now. Looking at the moving averages, we see that the 50-week moving average (blue) and 200-week moving average (red) performed quite specifically in late 2012, and we see the same thing this year. The distance between 50- and 200-week moving averages currently narrows, while the former declines. Back in 2012, the top formed when the HUI rallied above its 50-week moving average, which just happened once again. Still, if the general stock market slides, and that appears likely for the following weeks and months, then we might have a decline that’s actually similar to what happened in 2008. Back then, gold stocks declined profoundly, and they have done so very quickly. The dashed lines that start from the recent prices are copy-paste versions of the previous declines that started from the final medium-term tops. If the decline is as sharp and as big as what we saw in 2008, gold stocks would be likely to decline sharply, slightly below their 2016 low. If the decline is more moderate, then they could decline “only” to 120 - 140 or so. Either way, the implications are very, very, very bearish for the following weeks. Turning to the junior miners, the GDXJ ETF tried to break out above a lower declining resistance line (the downward-sloping blue line drawn from the mid-2021 and late-2021 highs below). However, the attempt was rejected and culminated with a sharp intraday reversal. Moreover, the junior miners’ relative weakness was on full display, as despite the green lights flashing for the general stock market, gold, and silver, the GDXJ ETF ended the Feb. 24 session down by 2.28%. In addition, please note that the bearish about-face occurred on strong volume, and the move mirrored the sharp spike that preceded the March 2020 plunge. Please note that while junior miners invalidated their breakout above the declining resistance line, similarly to GDX, it was not the analogous line. The line that’s analogous to the one on the previous GDX chart is the blue, dashed line. GDXJ was not even close to it. In other words, junior miners are underperforming seniors, just like what I’ve been expecting to see for months. The trend in the ratio between them is clear too. Once again (just like in 2020), junior miners are likely to decline more than seniors, providing a greater shorting opportunity for truly epic profits. Let’s get back to the previous chart for a moment, and let’s expand on the “just like in 2020” analogy. Buckle-up, Alice, because the ride down the similarity rabbit hole is going to be a wild one. Here it goes: The early-2020 top in the GDXJ formed after a sharp short-term rally. The early-2020 top in the GDXJ formed when GDXJ opened much higher, declined on an intraday basis, and ended the day lower. The early-2020 top in the GDXJ formed at $44.85, on significant volume. When the GDXJ topped in early-2020, its 50-day moving average was at about $40, and the MACD indicator was at about 1. Now, let’s consider what happened yesterday. This week’s top in the GDXJ formed after a sharp short-term rally. This week’s top in the GDXJ formed when GDXJ opened much higher, but declined on the intraday basis, and ended the day lower. This week’s top in the GDXJ formed at $45.16 (just 0.7% higher than in early-2020), on significant volume. When the GDXJ topped this week, its 50-day moving average was at about $40 ($40.50), the MACD indicator was at about 1 (0.747). If you think that’s extremely similar, you’re right. However, I saved the best for last: The early-2020 top formed on February 24. Yesterday WAS February 24. Does this guarantee a slide like in 2020 in the junior miners? Of course not, there are no guarantees in any market, but does that make it even more likely? Yes, it does. Is it an epic opportunity for those who position themselves correctly? Again, I can’t make any promises or guarantees, but that’s what seems likely to me. All in all, a crash below $20 is not out of the question. In the meantime, though, I expect the GDXJ ETF to challenge the $32 to $34 range. However, this is my expectation for a short-term bottom only. While the GDXJ ETF may record a corrective upswing at this level, the downtrend should continue thereafter, and the junior miners should fall further over the medium term. In conclusion, the unfortunate situation unfolding in Ukraine is important, from a humanitarian perspective, and I hope that a peaceful resolution materializes. Also, it is my responsibility to analyze the situation and report it to you how it’s likely to impact the markets and what it implies for one’s trading positions. What’s justified from the risk-to-reward point of view and what’s not. While gold, silver, and mining stocks benefited from geopolitical tensions, history shows that such gains are short-lived. As a result, I still expect the trio to hit lower lows over the medium term, and I think that the decline will not be subtle. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Miners for Breakfast, Gold for Dessert: Bearish Fundamentals Will Hurt

Miners for Breakfast, Gold for Dessert: Bearish Fundamentals Will Hurt

Przemysław Radomski Przemysław Radomski 23.02.2022 15:59
  To the disappointment of gold bulls, the yellow metal’s upward trend will not last long. Fundamentals have already taken their toll on gold miners.  While gold remains uplifted due to the Russia-Ukraine drama, the GDXJ ETF declined for the second-straight day on Feb. 22. Moreover, I warned on numerous occasions that the junior miners are more correlated with the general stock market than their precious metals peers. As a result, when the S&P 500 slides, the GDXJ ETF often follows suit. To that point, with shades of 2018 unfolding beneath the surface, the Russia-Ukraine headlines have covered up the implications of the current correction. However, the similarities should gain more traction in the coming weeks. For context, I wrote on Feb. 22: When the Fed’s rate hike cycle roiled the NASDAQ 100 in 2017-2018, the GDXJ ETF suffered too. Thus, while the Russia-Ukraine drama has provided a distraction, the fundamentals that impacted both asset classes back then are present now. Please see below: To explain, the green line above tracks the GDXJ ETF in 2018, while the black line above tracks the NASDAQ 100. If you analyze the performance, you can see that the Fed’s rate hike cycle initially rattled the former and the latter rolled over soon after. However, the negativity persisted until Fed Chairman Jerome Powell performed a dovish pivot and both assets rallied. As a result, with the Fed Chair unlikely to perform a dovish pivot this time around, the junior miners have some catching up to do. Furthermore, while the S&P 500 also reacts to the geopolitical risks, the Fed’s looming rate hike cycle is a much bigger story. With the U.S. equity benchmark also following its price path from 2018, a drawdown to new 2022 lows should help sink the GDXJ ETF. Please see below: Source: Morgan Stanley To explain, the yellow line above tracks the S&P 500 from March 2018 until February 2019, while the blue line above tracks the index's current movement. If you analyze the performance, it's a near-splitting image. Moreover, while Morgan Stanley Chief Equity Strategist Michael Wilson thinks a relief rally to ~4,600 is plausible, he told clients that "this correction looks incomplete." "Rarely have we witnessed such weak breadth and havoc under the surface when the S&P 500 is down less than 10%. In our experience, when such a divergence like this happens, it typically ends with the primary index catching down to the average stock," he added. As a result, while a short-term bounce off of oversold conditions may materialize, the S&P 500's downtrend should resume with accelerated fervor. In the process, the GDXJ ETF should suffer materially as the medium-term drama unfolds.  To that point, the Fed released the minutes from its discount rate meetings on Jan. 18 and Jan. 26. While the committee left interest rates unchanged, the report revealed: “Given ongoing inflation pressures and strong labor market conditions, a number of directors noted that it might soon become appropriate to begin a process of removing policy accommodation. The directors of three Reserve Banks favored increasing the primary credit rate to 0.50 percent, in response to elevated inflation or to help manage economic and financial stability risks over the longer term.” For context, the hawkish pleas came from the Cleveland, St. Louis, and Kansas City Feds. Moreover, the last time Fed officials couldn’t reach a unanimous decision was October 2019. As a result, the lack of agreement highlights the monetary policy uncertainty that should help upend financial assets in the coming months. As evidence, the report also revealed: Source: U.S. Fed Thus, while I’ve highlighted on numerous occasions that a bullish U.S. economy is bearish for the PMs, the Russia-Ukraine drama has been a short-term distraction. However, with Fed officials highlighting that growth and inflation meet their thresholds for tightening monetary policy, higher real interest rates and a stronger USD Index will have much more influence over the medium term. To that point, IHS Markit released its U.S. Composite PMI on Feb. 22. With the headline index increasing from 51.1 in January to 56.0 in February, an excerpt from the report read: “February data highlighted a sharp and accelerated increase in new business among private sector companies that was the fastest in seven months. Firms mentioned that sales were boosted by the retreat of the pandemic, improved underlying demand, expanded client bases, aggressive marketing campaigns and new partnerships. Customers reportedly made additional purchases to avoid future price hikes. Quicker increases in sales (trades) were evident among both manufacturers and service providers.” More importantly, though: Source: IHS Markit In addition, since the Fed’s dual mandate includes inflation and employment, the report revealed: Source: IHS Markit Likewise, Chris Williamson, Chief Business Economist at IHS Markit, added: “With demand rebounding and firms seeing a relatively modest impact on order books from the Omicron wave, future output expectations improved to the highest for 15 months, and jobs growth accelerated to the highest since last May, adding to the upbeat picture.” If that wasn't enough, the Richmond Fed released its Fifth District Survey of Manufacturing Activity on Feb. 22. While the headline index wasn't so optimistic, the report revealed that "the third component in the composite index, employment, increased to 20 from 4 in January" and that "firms continued to report increasing wages." For context, the dashed light blue line below tracks the month-over-month (MoM) change, while the dark blue line below tracks the three-month moving average. If you analyze the former's material increase, it's another data point supporting the Fed's hawkish crusade. Source: Richmond Fed Finally, the Richmond Fed also released its Fifth District Survey of Service Sector Activity on Feb. 22. For context, the U.S. service sector suffers the brunt of COVID-19 waves. However, the recent decline in cases has increased consumers’ appetite for in-person activities. The report revealed: “Fifth District service sector activity showed improvement in February, according to the most recent survey by the Federal Reserve Bank of Richmond. The revenues index increased from 4 in January to 11 in February. The demand index remained in expansionary territory at 23. Firms also reported increases in spending, as the index for capital expenditures, services expenditures, and equipment and software spending all increased.” Furthermore, with the employment index increasing from 12 to 14, the wages index increasing from 41 to 46, and the average workweek index increasing from 9 to 10, the labor market strengthened in February. Likewise, the index that tracks businesses’ ability to find skilled workers increased from -21 to -19. As a result, inflation, employment and economic growth create the perfect cocktail for the Fed to materially tighten monetary policy in the coming months.  Source: Richmond Fed The bottom line? While the Russia-Ukraine saga may dominate the headlines for some time, the bearish fundamentals that hurt gold and silver in 2021 remain intact: the U.S. economy is on solid footing, and demand is still fueling inflation. Moreover, with information technology and communication services’ stocks – which account for roughly 39% of the S&P 500 – highly allergic to higher interest rates, the volatility should continue to weigh on the GDXJ ETF. As such, while gold may have extended its shelf life, mining stocks may not be so lucky. In conclusion, the PMs were mixed on Feb. 22, as the news cycle continues to swing financial assets in either direction. However, while headlines may have a short-term impact, technicals and fundamentals often reign supreme over the medium term. As a result, lower lows should confront gold, silver, and mining stocks in the coming months. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
In Contrary To Others, DXY Is Likely To Feel Stable

In Contrary To Others, DXY Is Likely To Feel Stable

Przemysław Radomski Przemysław Radomski 18.02.2022 16:25
  Gold and the USDX reacted vigorously to the worrisome news concerning Eastern Europe. However, only the latter can be calm about its medium-term future. As geopolitical tensions uplift gold, silver, and mining stocks, they’re in rally mode each time a doom-and-gloom headline surfaces. However, while the ‘will they or won’t they’ saga commands investors’ attention, the USD Index continues to behave rationally. For example, while volatility has increased recently, the dollar basket has held firm. To explain, I wrote on Feb. 17: The USD Index is at its medium-term support line. All previous moves to / slightly below it were then followed by rallies, sometimes really big rallies, so we’re likely to see something like that once again. Such a rally would be the prefect trigger for the triangle-vertex-based reversal in gold and the following slide. Please see below: Furthermore, the USD Index’s recent pullback was far from a surprise. For example, I highlighted on numerous occasions that the greenback is nearing its weekly rising resistance line, and the price action has unfolded as I expected. Moreover, while overbought conditions resulted in a short-term breather, history shows that the USD Index eventually catches its second wind. To explain, I previously wrote: I marked additional situations on the chart below with orange rectangles – these were the recent cases when the RSI based on the USD Index moved from very low levels to or above 70. In all three previous cases, there was some corrective downswing after the initial part of the decline, but once it was over – and the RSI declined somewhat – the big rally returned and the USD Index moved to new highs. As a result, with the USD Index showcasing a reliable history of profound comebacks, higher highs should materialize over the medium term. Please see below: Just as the USD Index took a breather before its massive rally in 2014, it seems that we saw the same recently. This means that predicting higher gold prices (or those of silver) here is likely not a good idea. Continuing the theme, the eye in the sky doesn’t lie, and with the USDX’s long-term breakout clearly visible, the wind remains at the dollar’s back. Furthermore, dollar bears often miss the forest through the trees: with the USD Index’s long-term breakout gaining steam, the implications of the chart below are profound. While very few analysts cite the material impact (when was the last time you saw the USDX chart starting in 1985 anywhere else?), the USD Index has been sending bullish signals for years. Please see below: The bottom line? With my initial 2021 target of 94.5 already hit, the ~98-101 target is likely to be reached over the medium term (and perhaps quite soon). Mind, though: we’re not bullish on the greenback because of the U.S.’s absolute outperformance. It’s because the region is fundamentally outperforming the Eurozone. The EUR/USD accounts for nearly 58% of the movement of the USD Index, and the relative performance is what really matters. In conclusion, the financial markets remain on Russia-Ukraine watch. While gold, silver, mining stocks, and the USD Index whipsaw on the news, the technical and fundamental backdrops support higher prices for the latter, not the former. Thus, while geopolitical tensions are always short-term bullish for the precious metals, the rush is often short-lived. As a result, the trios’ downtrends that began in late 2020 will likely resurface once the headline-driven market returns to normal. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Should Someone Tell The Price Of Gold It's Time To Review Its Incoming "Oponents"?

Should Someone Tell The Price Of Gold It's Time To Review Its Incoming "Oponents"?

Przemysław Radomski Przemysław Radomski 15.02.2022 16:00
  Gold continues to benefit from the market turmoil and has apparently forgotten about medium-term problems. Meanwhile, the rising USD and a hawkish Fed await confrontation. With financial markets whipsawing after every Russia-Ukraine headline, volatility has risen materially in recent days. With whispers of a Russian invasion on Feb. 16 (which I doubt will be realized), the game of hot potato has uplifted the precious metals market. However, as I noted on Feb. 14, while the developments are short-term bullish, the PMs’ medium-term fundamentals continue to decelerate. For example, while the general stock market remains concerned about a Russian invasion, U.S. Treasury yields rallied on Feb. 14. With risk-off sentiment often born in the bond market, the safety trade benefiting the PMs didn’t materialize in U.S. Treasuries. As a result, bond traders aren’t demonstrating the same level of fear. Please see below: Source: Investing.com Furthermore, while the potential conflict garners all of the attention, the fundamental issues that upended the PMs in 2021 remain unresolved. For example, with inflation surging, St. Louis Fed President James Bullard said on Feb. 14 that “the last four [Consumer Price Index] reports taken in tandem have indicated that inflation is broadening and possibly accelerating in the U.S. economy.” “The inflation that we’re seeing is very bad for low- and moderate-income households,” he said. “People are unhappy, consumer confidence is declining. This is not a good situation. We have to reassure people that we’re going to defend our inflation target and we’re going to get back to 2%.” As a result, Bullard wants a 50 basis point rate hike in March, and four rate hikes by July. Please see below: Source: CNBC Likewise, while San Francisco Fed President Mary Daly is much less hawkish than Bullard, she also supports a rate hike in March. Source: CNBC As a result, while the PMs can hide behind the Russia-Ukraine conflict in the short term, their medium-term fundamental outlooks are profoundly bearish. As mentioned, Bullard highlighted inflation’s impact on consumer confidence, and for a good reason. With the University of Michigan releasing its Consumer Sentiment Index on Feb. 11, the report revealed that Americans’ optimism sank to “its worst level in a decade, falling a stunning 8.2% from last month and 19.7% from last February.” Chief Economist, Richard Curtin said: “The recent declines have been driven by weakening personal financial prospects, largely due to rising inflation, less confidence in the government's economic policies, and the least favorable long term economic outlook in a decade.” “The impact of higher inflation on personal finances was spontaneously cited by one-third of all consumers, with nearly half of all consumers expecting declines in their inflation adjusted incomes during the year ahead.” Please see below: To that point, I’ve highlighted on numerous occasions that U.S. President Joe Biden’s re-election prospects often move inversely to inflation. With the dynamic still on full display, immediate action is needed to maintain his political survival. Please see below: To explain, the light blue line above tracks the year-over-year (YoY) percentage change in inflation, while the dark blue line above tracks Biden’s approval rating. If you analyze the right side of the chart, you can see that the U.S. President remains in a highly perilous position. Moreover, with U.S. midterm elections scheduled for Nov. 8, the Democrats can’t wait nine to 12 months for inflation to calm down. As a result, there is a lot at stake politically in the coming months. As further evidence, as inflation reduces real incomes and depresses consumer confidence, the Misery Index also hovers near crisis levels. Please see below: To explain, the blue line above tracks the Misery Index. For context, the index is calculated by subtracting the unemployment rate from the YoY percentage change in the headline CPI. In a nutshell, when inflation outperforms the unemployment rate (the blue line rises), it creates a stagflationary environment in America. To that point, if you analyze the right side of the chart, you can see that the Misery Index is approaching a level that coincided with the global financial crisis (GFC). As a result, reversing the trend is essential to avoid a U.S. recession. As such, with inflation still problematic and the writing largely on the wall, the market-implied probability of seven rate hikes by the Fed in 2022 is nearly 93% (as of Feb. 10). Please see below: Ironically, while consumers and the bond market fret over inflation, U.S. economic growth remains resilient. While I’ve been warning for months that a bullish U.S. economy is bearish for the PMs, continued strength should turn hawkish expectations into hawkish realities. To that point, the chart above shows that futures traders expect the U.S. Federal Funds Rate to hit 1.75% in 2022 (versus 0.08% now). However, Michael Darda, Chief Economist at MKM Partners, expects the Fed’s overnight lending rate to hit 3.5% before it’s all said and done. “We have this booming economy with high inflation and a rapid recovery in the labor market – much different relative to the last cycle,” he said. “The Fed is behind the curve this time. They are going to have to do more.”  Singing a similar tune, John Thorndike, co-head of asset allocation at GMO, told clients that “inflation is now here, [but] the narrative is that inflation goes away and markets tend to struggle with change. It is more likely than not that real yields and policy rates need to move above inflation during this cycle.” The bottom line? While the Russia-Ukraine drama distracts the PMs from the fundamental realities that confront them over the medium term, their outlooks remain profoundly bearish. Moreover, while I’ve noted on numerous occasions that the algorithms will enhance momentum in either direction, their influence wanes materially as time passes. As such, while headline risk is material in the short-term, history shows that technicals and fundamentals reign supreme over longer time horizons. Thus, while the recent flare-up is an unfortunate event that hurts our short position, the medium-term developments that led to our bearish outlook continue to strengthen. In conclusion, the PMs rallied on Feb. 14, as the Russia-Ukraine conflict is the primary driver moving the financial markets. However, while the PMs will ride the wave as far as it takes them, they ignored that the USD Index and U.S. Treasury yields also rallied. Moreover, with Fed officials ramping up the hawkish rhetoric, the PMs' fundamental outlook is more bearish now than it was in 2021 (if we exclude the Russia-Ukraine implications). As a result, while the timeline may have been delayed, lower lows should confront gold, silver, and mining stocks in the coming months. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Mining Stocks Don't Stay As Strong As Gold

Mining Stocks Don't Stay As Strong As Gold

Przemysław Radomski Przemysław Radomski 11.02.2022 15:41
  In line with bearish bets, miners have thrown a match. Gold, however, doesn’t want to leave the ring without a fight. How long will it stay high? While gold remains relatively firm despite stock market turbulence, rising real yields, and bearish technical indicators, even a confluence of headwinds hasn’t been able to knock the yellow metal off its lofty perch. However, mining stocks haven’t been so lucky. With my short position in the GDXJ ETF offering a great risk-reward proposition, the junior gold miners’ underperformance has played out exactly as I expected. Moreover, with major spikes in volume preceding predictable sell-offs (follow the vertical dashed lines below), I’ve warned on several occasions that the GDX ETF is prone to tipping its hand – we saw this volume spike in January, which was the 2022 top (as of today). In addition, with mining investors’ power drying up by the day, the medium-term looks equally unkind. Please see below: On Wednesday, gold miners fell. Even though they declined by just $0.06, it was profound. The miners were following gold higher during the early part of Wednesday’s (Feb. 9) session, but they lost strength close to the middle thereof and were back down before the closing bell. If the gold price reversed and then declined during the day, that would have been normal. However, gold stayed up. This tells us that the buying power has either dried up or is drying up. When everyone who wanted to get into the market is already in it, the price can do only one thing (regardless of bullish factors) – fall. Those who are already in can then sell. Monitoring the markets for this kind of cross-sector performance is one of the more important gold trading tips. Look, I’m not saying that declines now are “guaranteed”. There are no guarantees in the markets. There might be buyers that haven’t considered mining stocks that would now enter the market, but history tells us that this is unlikely. Instead, declines are very likely to follow. Yesterday’s big daily decline confirmed my above comments. Gold miners declined much more than gold did, and they did so at above-average volume. The latter indicates that “down” is the true direction in which the precious metals market is heading. To that point, the HUI Index provides clues from a longer-term perspective. When we analyze the weekly chart, it highlights investors’ anxiety. For example, after hitting an intraweek high of roughly 260, the HUI Index ended the Feb. 10 session at roughly 250 – just 3.99 up from last Friday – that’s an intraweek reversal. Furthermore, with the index still in a medium-term downtrend, shades of 2013 still profoundly bearish, and sharp declines often preceded by broad head and shoulders patterns (marked with green), there are several negatives confronting the HUI Index. As such, a sharp drawdown will likely materialize sooner rather than later. Please see below: Finally, the GDXJ ETF is the gift that keeps on giving. For example, with lower highs and lower lows being part of the junior miners’ roughly one-and-a-half-year journey, false breakouts have confused many investors. However, while I’ve been warning about the weakness for some time, more downside is likely on the horizon. To explain, I wrote on Feb. 10: I emphasized before that juniors hadn’t moved above their 50-day moving average, and that they stayed below their rising blue resistance line. Consequently – I wrote – the downtrend in them remained clearly intact. Yesterday’s reversal served as a perfect confirmation of the above. The previous breakdowns were verified in one of the most classic ways. The silver price has been quite strong recently, which is also something that we see close to the local tops. The reversals in mining stocks, the situation in gold, outperformance of silver, AND the situation in the USD Index (the medium-term support held) together paint a very bearish picture for the precious metals market in the short and medium term. All in all, if the weakness continues, I expect the GDXJ ETF to challenge the $32 to $34 range. However, please note that this is my expectation for a short-term bottom. While the GDXJ ETF may record a corrective upswing at this level, the downtrend should continue thereafter, and the junior miners should fall further over the medium term. In conclusion, gold showcased its steady hand throughout the recent volatility. However, mining stocks have cracked under the pressure. With the latter’s underperformance often a bearish omen for the former, the yellow metal’s mettle may be tested over the medium term. As such, while the long-term outlooks for gold, silver, and mining stocks remain profoundly bullish, a final climax will likely unfold before their secular uptrends continue. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Bear Came And Drove Out Gold Enthusiasts, Will Silver Decrease As Well?

Bear Came And Drove Out Gold Enthusiasts, Will Silver Decrease As Well?

Przemysław Radomski Przemysław Radomski 10.02.2022 15:14
  The market was up, but mining stocks chose to reverse. Meanwhile, gold sent a clear signal to investors. So, when everyone buys, what happens? The gold mining stocks and silver mining stocks have reversed, even though gold didn’t. The top for the former is likely in. Most developments regarding the precious metals and their immediate surroundings were a continuation of what we had seen in the previous days, but one thing was different. That one thing is particularly informative. It has trading implications, too. Without further ado, let’s jump into mining stocks. Gold miners fell. Even though they declined by just $0.06, it was profound. The miners were following gold higher during the early part of yesterday’s (Feb. 9) session, but they lost strength close to the middle thereof and were back down before the closing bell. If the gold price reversed and then declined during the day, that would have been normal. However, gold stayed up. It’s fairer to compare GDX to GLD than to compare GDX to gold continuous futures contracts, as the former have the same closing hours, so let’s take a look at what GLD did yesterday. There was no reversal. GLD simply stopped at its declining medium-term resistance line. Also, the general stock market was up yesterday. Consequently, gold mining stocks had no good reason to decline. In fact, they “should have” rallied. They didn’t – they reversed instead. This tells us that the buying power has either dried up or is drying up. When everyone who wanted to get into the market is already in it, the price can do only one thing (regardless of bullish factors) – fall. Those who are already in can then sell. Monitoring the markets for this kind of cross-sector performance is one of the more important gold trading tips. Look, I’m not saying that declines now are “guaranteed”. There are no guarantees in the markets. There might be buyers that haven’t considered mining stocks that would now enter the market, but history tells us that this is unlikely. Instead, declines are very likely to follow. Let’s focus on the GLD ETF chart one more time. As I wrote earlier, it approached its declining medium-term resistance line. Any small breakout here is likely to be invalidated just like what we saw previously in November 2021 and January 2022. This time, however, the volume is low, so gold might not have enough strength for a breakout, and it could decline right away. Junior mining stocks provide us with a perfect confirmation of the bearish narrative. I emphasized before that juniors hadn’t moved above their 50-day moving average, and that they stayed below their rising blue resistance line. Consequently – I wrote – the downtrend in them remained clearly intact. Yesterday’s reversal served as a perfect confirmation of the above. The previous breakdowns were verified in one of the most classic ways. The silver price has been quite strong recently, which is also something that we see close to the local tops. The reversals in mining stocks, the situation in gold, AND the situation in the USD Index together paint a very bearish picture for the precious metals market in the short and medium term. By “the situation in the USD Index”, I’m referring to the fact that it’s after its early-month reversal and right above its rising medium-term support line that was not successfully broken. Since the USD Index remains above its rising medium-term support line, the trend remains up. Therefore, higher – not lower – USD Index values are to be expected. All in all, it seems that gold, silver, and mining stocks are going to decline in the coming weeks (quite possibly days) and that we won’t have to wait too long for the next big decline to start. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Are You Thinking the Dollar Will Collapse? That’s False Hope

Are You Thinking the Dollar Will Collapse? That’s False Hope

Przemysław Radomski Przemysław Radomski 07.02.2022 15:49
  Gold’s latest feats increased investors’ appetite. The outlook for the dollar, however, remains healthy. That can only mean one thing. As volatility erupts across the financial markets, gold and silver prices are being pulled in conflicting directions. For example, with the USD Index suffering a short-term decline, the outcome is fundamentally bullish for the precious metals. However, with U.S. Treasury yields rallying, the outcome is fundamentally bearish for gold and silver prices. Then, with panic selling and panic buying confronting the general stock market, the PMs are dealing with those crosscurrents. However, with QE on its deathbed and the Fed poised to raise the Federal Funds Rate in the coming months, the common denominator is rising real interest rates. To explain, the euro’s recent popularity has impacted the USD Index. For context, the EUR/USD accounts for nearly 58% of the dollar basket’s movement. Thus, if real interest rates rise and the U.S. dollar falls, what will happen to the PMs? Well, the reality is that rising real interest rates are bullish for the USD Index, and the euro’s recent ECB-induced rally is far from a surprise. With investors often buying the EUR/USD in anticipation of a hawkish shift from the ECB, another ‘hopeful’ upswing occurred. However, the central bank disappointed investors time and time again in 2021, and the currency pair continued to make new lows. As a result, we expect the downtrend to resume over the medium term.  Supporting our expectations, I wrote the following about financial conditions and the USD Index on Feb. 2: To explain, the blue line above tracks Goldman Sachs' Financial Conditions Index (FCI). For context, the index is calculated as a "weighted average of riskless interest rates, the exchange rate, equity valuations, and credit spreads, with weights that correspond to the direct impact of each variable on GDP." In a nutshell: when interest rates increase alongside credit spreads, it's more expensive to borrow money and financial conditions tighten. To that point, if you analyze the right side of the chart, you can see that the FCI has surpassed its pre-COVID-19 high (January 2020). Moreover, the FCI bottomed in January 2021 and has been seeking higher ground ever since. In the process, it's no coincidence that the PMs have suffered mightily since January 2021. To that point, with the Fed poised to raise interest rates at its March monetary policy meeting, the FCI should continue its ascent. As a result, the PMs' relief rallies should fall flat like in 2021.  Likewise, while the USD Index has come down from its recent high, it's no coincidence that the dollar basket bottomed with the FCI in January 2021 and hit a new high with the FCI in January 2022. Thus, while the recent consolidation may seem troubling, the medium-term fundamentals supporting the greenback remain robust. Furthermore, tighter financial conditions are often a function of rising real interest rates. As mentioned, the USD Index bottomed with the FCI and surged to new highs with the FCI. As a result, the fundamentals support a stronger, not weaker USD Index. As evidence, the U.S. 10-Year real yield, the FCI, and the USD Index have traveled similar paths since January 2020. Please see below: To explain, the green line above tracks the USD Index since January 2020, while the red line above tracks the U.S. 10-Year real yield. While the latter didn’t bottom in January 2021 like the USD Index and the FCI (though it was close), all three surged in late 2021 and hit new highs in 2022. Moreover, the U.S. 10-Year Treasury nominal and real yields hit new 2022 highs on Feb. 4.  In addition, if you compare the two charts, you can see that all three metrics spiked higher when the coronavirus crisis struck in March 2020. As such, the trio often follows in each other’s footsteps. Furthermore, with the Fed likely to raise interest rates at its March monetary policy meeting, this realization supports a higher U.S. 10-Year real yield, and a higher FCI. As a result, the fundamentals underpinning the USD Index remain robust, and short-term sentiment is likely to be responsible for the recent weakness.  Likewise, as the Omicron variant slows U.S. economic activity, the ‘bad news is good news’ camp has renewed hopes for a dovish Fed. However, the latest strain is unlikely to affect the Fed’s reaction function. A case in point: after ADP’s private payrolls declined by 301,000 in January (data released on Feb. 2), concern spread across Wall Street. However, after U.S. nonfarm payrolls (government data) came in at 467,000 versus 150,000 expected on Feb. 4, the U.S. labor market remains extremely healthy.  Please see below: Source: U.S. Bureau of Labor Statistics (BLS) On top of that, the BLS revealed that “the over-the-month employment change for November and December 2021 combined is 709,000 higher than previously reported, while the over-the-month employment change for June and July 2021 combined is 807,000 lower. Overall, the 2021 over-the-year change is 217,000 higher than previously reported.”  Thus, the U.S. added more than 700,000 combined jobs in November and December than previously reported, and the net gain in 2021 was more than 200,000. Please see below: Source: BLS As for wage inflation, the BLS also revealed: “In January, average hourly earnings for all employees on private nonfarm payrolls increased by 23 cents to $31.63. Over the past 12 months, average hourly earnings have increased by 5.7 percent.” As a reminder, while investors speculate on the prospect of a hawkish ECB, the latest release out of Europe shows that wage inflation is much weaker than in the U.S. To explain, I wrote on Feb. 1: Eurozone hourly labor costs rose by 2.5% YoY on Dec. 16 (the latest release). Moreover, the report revealed that “the costs of wages & salaries per hour worked increased by 2.3%, while the non-wage component rose by 3.0% in the third quarter of 2021, compared with the same quarter of the previous year.”  As a result, non-wage labor costs – like insurance, healthcare, unemployment premiums, etc. – did the bulk of the heavy lifting. In contrast, wage and salary inflation are nowhere near the ECB’s danger zone. Please see below: And why is wage inflation so critical? Well, ECB Chief Economist Philip Lane said on Jan. 25: Source: ECB As a result, when the ECB’s Chief Economist tells you that wage inflation needs to hit 3% YoY to be “consistent” with the ECB’s 2% overall annual inflation target, a wage print of 2.3% YoY is far from troublesome. Thus, while euro bulls hope that the ECB will mirror the Fed and perform a hawkish 180, the data suggests otherwise.  In addition, while U.S. nonfarm payrolls materially outperformed on Feb. 4, I noted on Feb. 2 that there are now 4.606 million more job openings in the U.S. than citizens unemployed. Please see below: To explain, the green line above subtracts the number of unemployed U.S. citizens from the number of U.S. job openings. If you analyze the right side of the chart, you can see that the epic collapse has completely reversed and the green line is now at an all-time high. Thus, with more jobs available than people looking for work, the economic environment supports normalization by the Fed. Thus, if we piece the puzzle together, the U.S. labor market remains healthy and U.S. inflation is materially outperforming the Eurozone. As a result, the Fed should stay ahead of the ECB, and the hawkish outperformance supports a weaker EUR/USD and a stronger USD Index. Moreover, the dynamic also supports a higher FCI and a higher U.S. 10-Year real yield. As we’ve seen since January 2021, these fundamental outcomes are extremely unkind to the PMs. Finally, while the Omicron variant has depressed economic sentiment, I noted previously that the disruptions should be short-lived. For example, with Americans’ anxiety about COVID-19 decelerating, renewed economic strength should keep the pressure on the Fed. Please see below: To explain, the light brown line above tracks the net percentage of Americans concerned about COVID-19, while the dark brown line above tracks the change in flight search trends on Kayak. In a nutshell: the more concern over COVID-19 (a high light brown line), the more Americans hunker down and avoid travel (a low dark brown line). However, if you analyze the right side of the chart, you can see that the light brown line has rolled over and the dark brown line has materially risen. Moreover, with the trend poised to persist as the warmer weather arrives, increased mobility should uplift sentiment, support economic growth, and keep the Fed’s rate hike cycle on schedule. The bottom line? The USD Index’s fundamentals remain extremely healthy, and while short-term sentiment has been unkind, rising real yields and a hawkish Fed should remain supportive over the medium term. Moreover, with the PMs often moving inversely to the U.S. dollar, more downside should confront gold, silver, and mining stocks over the next few months. In conclusion, the PMs rallied on Feb. 4, despite the spike in U.S. Treasury yields. However, with so much volatility confronting the general stock market recently, sentiment has pulled the PMs in many directions. However, the important point is that the medium-term thesis remains intact: the USD Index and U.S. Treasury yields should seek higher ground, and the realization is profoundly bearish for the precious metals sector. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
As Fed Is Acting, Is The DXY The Most Interesting Chart For Now?

As Fed Is Acting, Is The DXY The Most Interesting Chart For Now?

Przemysław Radomski Przemysław Radomski 28.01.2022 15:42
  Despite death wishes from the doubters, the dollar took to the skies on the Fed’s hawkish wings. Gold and silver can wave from the ground for now. While Fed Chairman Jerome Powell threw fuel on the fire on Jan. 26, it’s no surprise that the USD Index has rallied to new highs. For example, while dollar bears feasted on false narratives in 2021, I was a lonely bull forecasting higher index values. Likewise, after more doubts emerged in 2022, the death of the dollar narrative resurfaced once again. However, with the charts signaling a bullish outcome for some time, my initial target of 94.5 was surpassed and my next target of 98 is near. As such, it’s crucial to avoid speculation and wait for confirmation of breakdowns and breakouts. In its absence, the price action often pulls you in the wrong direction. Remember the supposedly bearish move below 95 when the USD Index moved even below its rising support line? It’s been just 2 weeks since that development. On Jan. 14, I wrote the following: In conclusion, 2022 looks a lot like 2021: dollar bears are out in full force and the ‘death of the dollar’ narrative has resurfaced once again. However, with the greenback’s 2021 ascent catching many investors by surprise, another re-enactment will likely materialize in 2022. Moreover, since gold, silver, and mining stocks often move inversely to the U.S. dollar, their 2022 performances may surprise for all of the wrong reasons. As such, while the dollar’s despondence is bullish for the precious metals, a reversal of fortunes will likely occur over the medium term. Given yesterday’s reversal in the USD Index, it’s likely also from the short-term point of view – we could see the reversal and the return of the USD’s rally and PMs’ decline any day or hour now. Fortunately, if you’ve been following my analyses, the recent price moves didn’t catch you by surprise. What’s next? While the USD Index still needs to confirm the recent breakout and some consolidation may ensue, the bullish medium-term thesis remains intact. More importantly, though, the USD Index’s gain has resulted in gold, silver, and mining stocks’ pain. For example, the dollar’s surge helped push gold below its short-and-medium-term rising support lines (the upward sloping red lines on the bottom half of the above chart). However, since the USD Index hit a new high and gold didn’t hit a new low, is the development bullish for the yellow metal? To answer, I wrote on Jan. 27: The U.S. currency just moved above its previous 2022 and 2021 highs, while gold is not at its 2021 lows. Yet. I wouldn’t view gold’s performance as true strength against the USD Index at this time just yet. Why? Because of the huge consolidation that gold has been trading in. The strength that I want to see in gold is its ability not to fall or soar back up despite everything thrown against it, not because it’s stuck in a trading range. In analogy, you’ve probably seen someone, who’s able to hold their ground, and not give up despite the world throwing every harm and obstacle at them. They show their character. They show their strength. Inaction could represent greater wisdom and/or love and focus on one’s goal that was associated with the lack of action. You probably know someone like that. You might be someone like that. The above “inaction” is very different from “inaction” resulting from someone not knowing what to do, not having enough energy, or willpower. Since markets are ultimately created by people (or algorithms that were… ultimately still created by people) is it any surprise that markets tend to work in the same way? One inaction doesn’t equal another inaction, and – as always – context matters. However, wasn’t gold strong against the USD Index’s strength in 2021? It was, but it was very weak compared to the ridiculous amounts of money that were printed in 2020 and 2021 and given the global pandemic. These are the circumstances, where gold “should be” soaring well above its 2011 highs, not invalidating the breakout above it. The latter, not the former, happened. Besides, the “strength” was present practically only in gold. Silver and miners remain well below their 2011 highs – they are not even close to them and didn’t move close to them at any point in 2020 or 2021. The Eye in the Sky Doesn’t Lie Moreover, if we zoom out and focus our attention on the USD Index’s weekly chart, the price action has unfolded exactly as I expected. For example, while overbought conditions resulted in a short-term breather, the USD Index consolidated for a few weeks. However, history shows that the greenback eventually catches its second wind. To explain, I previously wrote: I marked additional situations on the chart below with orange rectangles – these were the recent cases when the RSI based on the USD Index moved from very low levels to or above 70. In all three previous cases, there was some corrective downswing after the initial part of the decline, but once it was over – and the RSI declined somewhat – the big rally returned and the USD Index moved to new highs. Please see below: Just as the USD Index took a breather before its massive rally in 2014, it seems that we saw the same recently. This means that predicting higher gold prices (or those of silver) here is likely not a good idea. Continuing the theme, the eye in the sky doesn’t lie, and with the USDX’s long-term breakout clearly visible, the wind remains at the dollar’s back. Furthermore, dollar bears often miss the forest through the trees: with the USD Index’s long-term breakout gaining steam, the implications of the chart below are profound. While very few analysts cite the material impact (when was the last time you saw the USDX chart starting in 1985 anywhere else?), the USD Index has been sending bullish signals for years. Please see below: The bottom line? With my initial 2021 target of 94.5 already hit, the ~98-101 target is likely to be reached over the medium term (and perhaps quite soon) Mind, though: we’re not bullish on the greenback because of the U.S.’s absolute outperformance. It’s because the region is fundamentally outperforming the Eurozone. The EUR/USD accounts for nearly 58% of the movement of the USD Index, and the relative performance is what really matters. In conclusion, the USD Index’s ascent has surprised investors. However, if you’ve been following my analysis, you know that I’ve been expecting these moves for over a year. Moreover, with the rally poised to persist, gold, silver, and mining stocks may struggle before they reach lasting bottoms. However, with long-term buying opportunities likely to materialize later in 2022, the precious metals should soar to new heights in the coming years. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Gold Is Bruised but Can Show Strength – By Doing Nothing

Gold Is Bruised but Can Show Strength – By Doing Nothing

Przemysław Radomski Przemysław Radomski 27.01.2022 17:59
  The Fed finally said it: the rates are going up. The USD Index and gold heard it and reacted. The former is at new yearly highs, while gold slides. The medium-term outlook for gold is now extremely bearish. The above might sound like a gloom and doom scenario for precious metals investors, but I view it as particularly favorable. Why? Because: This situation allows us to profit on the upcoming decline in the precious metals sector through trading capital. This situation allows us to detect a great buying entry point in the future. When gold has everything against it and then it manages to remain strong – it will be exactly the moment to buy it. To be more precise: to buy into the precious metals sector (I plan to focus on purchasing mining stocks first as they tend to be strongest during initial parts of major rallies). At that moment PMs will be strong and the situation will be so bad that it can only improve from there – thus contributing to higher PM prices in the following months. Most market participants have not realized the above. “Gold and (especially) silver can only go higher!” is still a common narrative on various forums. Having said that, let’s take a look at the short-term charts. In short, gold declined significantly, and it’s now trading once again below the rising support / resistance line, the declining red resistance line, and back below 2021 closing price (taking also today’s pre-market decline into account). In other words: All important short-term breakouts were just invalidated. The 2022 is once again a down year for gold. Is this as bearish as it gets for gold? Well, there could be some extra bearish things that could happen, but it’s already very, very bearish right now. For example, gold market could catch-up with its reactions to USD Index’s strength. The U.S. currency just moved above its previous 2022 and 2021 highs, while gold is not at its 2021 lows. Yet. I wouldn’t view gold’s performance as true strength against the USD Index at this time just yet. Why? Because of the huge consolidation that gold has been trading in. The strength that I want to see in gold is its ability not to fall or soar back up despite everything thrown against it, not because it’s stuck in a trading range. In analogy, you’ve probably seen someone, who’s able to hold their ground, and not give up despite the world throwing every harm and obstacle at them. They show their character. They show their strength. Inaction could represent greater wisdom and/or love and focus on one’s goal that was associated with the lack of action. You probably know someone like that. You might be someone like that. The above “inaction” is very different from “inaction” resulting from someone not knowing what to do, not having enough energy, or willpower. Since markets are ultimately created by people (or algorithms that were… ultimately still created by people) is it any surprise that markets tend to work in the same way? One inaction doesn’t equal another inaction, and – as always – context matters. However, wasn’t gold strong against the USD Index’s strength in 2021? It was, but it was very weak compared to the ridiculous amounts of money that were printed in 2020 and 2021 and given the global pandemic. These are the circumstances, where gold “should be” soaring well above its 2011 highs, not invalidating the breakout above it. The latter, not the former, happened. Besides, the “strength” was present practically only in gold. Silver and miners remain well below their 2011 highs – they are not even close to them and didn’t move close to them at any point in 2020 or 2021. Gold has been consolidating for many months now, just like it’s been the case between 2011 and 2013. The upper part of the above chart features the width of the Bollinger Bands – I didn’t mark them on the chart to keep it clear, but the important detail is that whenever their width gets very low, it means that the volatility has been very low in the previous months, and that it’s about to change. I marked those cases with vertical dashed lines when the big declines in the indicator took it to or close to the horizontal, red, dashed line. In particular, the 2011-2013 decline is similar to the current situation. What does it mean? It means that gold wasn’t really showing strength – it was stuck. Just like 2012 wasn’t a pause before a bigger rally, the 2021 performance of gold shouldn’t be viewed as such. What happened yesterday showed that gold can and will likely react to hawkish comments from the Fed, that the USD Index is likely to rally and so are the interest rates. The outlook for gold in the medium term is not bullish, but very bearish. The above is a positive for practically everyone interested in the precious metals market (except for those who sell at the bottom that is), as it will allow one to add to their positions (or start building them) at much lower prices. And some will likely (I can’t guarantee any performance, of course) gain small (or not so small) fortunes by being positioned to take advantage of the upcoming slide. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Price of Gold Hasn't Increased a Lot Since the Beginning of the Year

Price of Gold Hasn't Increased a Lot Since the Beginning of the Year

Przemysław Radomski Przemysław Radomski 24.01.2022 14:47
  You don't have to be a fortune teller to predict some of the precious metals’ behavior in the market. Any incoming signs take the shape of a bear. What a signal-rich week that was! At least if you’re interested in forecasting gold and predicting silver prices. The USD Index rallied, but that was the least interesting of the important developments, as it had already reversed during the preceding week. So, the fact that the USD Index continued its medium-term uptrend last week is not that noteworthy. It needs to be said, though, as that continues to be an important factor for the future of the precious metals market. To be clear – the implications for the PM sector are bearish. What about gold, the key precious metal? Gold is so far almost unchanged this year, despite the initial decline and the subsequent rally. Overall, gold is up by $3.20 so far in 2022, which is next to nothing. Gold rallied on a supposedly dangerous situation regarding Ukraine, but it failed to rally above the combination of resistance lines and very little changed technically. On a side note, I would like to remind you that, based on our own reliable source in Ukraine (one of our team members is located there), the risk of military conflict (in particular, a severe one) is low, and it seems that the market’s reaction was greatly exaggerated. Anyway, moving back to technicals, let’s keep this $3.20-up-this-year statistic in mind while we take a look at what’s going on in silver and mining stocks. Silver declined on Friday, but it’s still up by $0.97 so far in 2022. This means that on a short-term basis, silver greatly outperformed gold. What’s up with mining stocks? The GDX ETF – a proxy for generally senior mining stocks – is down this year by $0.38, which is 1.19%. At the same time, the GDXJ ETF is down by $0.87, which is 2.07%. In other words: While silver is outperforming gold on a short-term basis, gold mining stocks are underperforming it. Junior mining stocks (our short position) are declining more than senior miners, and in fact, they are declining the most out of the entire precious metals sector. Silver’s outperformance, accompanied by gold miners weakness, is a powerful bearish combination in the case of the entire precious metals sector. If the general stock market is going to slide, silver and mining stocks (in particular, junior mining stocks) are likely to decline in a rather extreme manner. The thing is… We just saw something in the general stock market that we haven’t seen since early 2020 – right before the massive decline that triggered the huge declines in the precious metals sector. The RSI Index just moved below 30 for the first time since pre-slide moments. Just like what we saw back then, the S&P 500 is now declining on increasing volume. Yes, RSI below 30 is generally considered oversold territory, but the direct analogies take precedence over the “usual” way in which things work in markets in general. In this case, the situation could get from oversold to extremely oversold. Let’s keep in mind that stocks declined very sharply in 2020. One could say that times were different, but were they really? The key difference is that the monetary authorities are now already after the bullish money-printing cycle and are handling inflation by aiming to increase interest rates, while they had been preparing to cut them in 2020. The situation regarding the pandemic is not that different either. Sure, back in 2020, it was all new, we had massive lockdowns and there was great uncertainty regarding… pretty much everything. Now, the situation is not entirely unexpected, but given the explosive nature of new COVID-19 cases (likely due to the Omicron variant), it’s still quite new and uncertain. The uncertainty is not as great as it was back in 2020, but then again, now we’re facing monetary tightening, not dramatic dovish actions. Thus, I wouldn’t exclude a situation in which we really see a repeat of the early-2020 performance, where the declines are sharp and huge. The technicals in the precious metals market have been pointing to that outcome for months anyway, especially the long-term HUI Index chart that I’ve been discussing previously. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish?

Gold Is the Belle of the Ball. Will Its Dance Turn Bearish?

Przemysław Radomski Przemysław Radomski 21.01.2022 16:06
  The precious metals still do pirouettes on the trading floor, but they can stumble in their choreography. The bears are just waiting for it. With the GDX ETF soaring on significant volume on Jan. 19, the senior miners had a renewed pep in their step. With gold, silver, and mining stocks all dancing to the same beat, the precious metals garnered all of the bullish attention. However, with the trio known to cut their performances short as soon as investors arrive, will the mood music remain so sanguine? Well, for one, the GDX ETF has a history of peaking when the crowd enters the party. For example, I marked with the blue vertical dashed lines and blue arrows below how large daily spikes in volume often coincide with short-term peaks. Moreover, with another ominous event unfolding on Jan. 19, historical data implies that we’re much closer to the top than the bottom. To explain, I wrote on Jan. 20: From the technical point of view, we just saw another day similar to the other days that I marked with vertical dashed lines and black arrows. Those days were either right at the tops or not far from them. As much as yesterday’s (7%!) rally looks bullish, taking a look at the situation from a broad perspective provides us with the opposite – bearish – implications. The zig-zag scenario is being realized as well. The GDX ETF moved to the upper border of the rising trend channel. Also, doesn’t it remind you of something? Hint: it happened at a similar time of the year. Yes, the current price/volume action is similar to what we saw in early 2021. The RSI was above 60, a short-term rally that was preceded by a bigger decline, and a strong daily rally on huge volume at the end of the corrective rally. We’ve seen it all now, and we saw it in early 2021. Please see below: What’s more, the senior miners’ fatigue is already present. For example, the GDX ETF declined by 1.40% on Jan. 20, and the index ended the session only $0.30 above its 2021 close. Likewise, the senior miners failed to rally above the upper trendline of their ascending channel (drawn with the blue lines above). As a result, the price action resembles an ABC zigzag pattern, and while the short-term outlook is less certain, the medium-term outlook is profoundly bearish. As further evidence, the HUI Index’s weekly chart provides some important clues. For example, despite the profound rally on Jan. 19, the index’s stochastic indicator still hasn’t recorded a buy signal. Moreover, the HUI Index dropped after reaching its 50-week moving average, and the ominous rejection mirrors 2013. Back then, the index approached its 50-week moving average, then suffered a pullback, and then suffered a monumental decline. As a result, is this time really different? Remember – history tends to rhyme, and this time the analogies from the past favor a bearish forecast for gold stocks. Turning to the GDXJ ETF, the junior miners were off to the races on Jan. 19. However, the size of the rally is actually smaller than what we witnessed in early 2021. Moreover, when the short-term sugar high ended back then, optimism turned to pessimism and the GDXJ ETF sank to new lows. Thus, with the junior miners’ 2021 story one of lower highs and lower lows, 2022 will likely result in more of the same. Please see below: Finally, the Gold Miners Bullish Percent Index ($BPGDM) isn’t at levels that trigger a major reversal. The Index is now at 30. However, far from a medium-term bottom, the latest reading is still more than 20 points above the 2016 and 2020 lows. Likewise, when the BPGDM hit 30 in 2013, the HUI Index was already in the midst of its medium-term downtrend (similar to what we witnessed in 2021). However, the milestone was far from the final low. With material weakness persisting and a lasting bottom not forming until the end of 2015/early 2016, further downside for gold (and silver) likely lies ahead. For context, it’s my belief that the precious metals will bottom when the BPGDM hits zero – and perhaps when it remains there for some time. In conclusion, gold, silver, and mining stocks put on quite a show on Jan. 19. However, with their bullish rhythm known to turn bearish in an instant, investors should proceed with caution. Moreover, the data shows that when investors rush to buy the precious metals, their over-enthusiasm results in medium-term weakness, not strength. As a result, the trio’s declines likely have more room to run before long-term buying opportunities emerge later in 2022. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Gold Chart And Silver Chart Look Quite Similar We Might Say...

Gold Chart And Silver Chart Look Quite Similar We Might Say...

Przemysław Radomski Przemysław Radomski 19.01.2022 15:10
  While the USD show is gaining applause, silver has decided to present its repertoire too. Was its rally just a magic trick or a good omen for gold? Bond yields soared once again, just as I’ve been expecting them to for many months now. The reaction in some markets was as expected (the USD Index soared), but in some, it was perplexing. Gold moved lower a little, miners declined a bit more, and silver… rallied. Who’s faking it? Well, perhaps nobody is. Let’s look at the yields’ movement first. The 10-year bond yields have just moved to new yearly highs and are also above their 2021 highs. This happened just after they moved back to their 50-week moving average (marked in blue). For a long time, I’ve been writing that the 2013 performance is likely to be repeated also in this market, and that’s exactly what is taking place right now. Bond yields are doing what they did back then. If history continues to rhyme, we can expect bond yields to rally further, the USD Index to gain, and we can predict gold at lower prices. Speaking of the USD Index, let’s take a look at what it did yesterday. It soared over 0.5 index points, which was the largest daily increase so far this year. This happened after the USD Index moved to a combination of powerful support levels: the rising medium-term support line and the late-2020 high. The tiny attempts to move below those levels were quickly invalidated, and the USD Index was likely to rally back up; and so it did. What’s next? The uptrend was not broken, so it’s likely to continue. In other words, the USD Index’s rally is likely to continue, and this, in turn, is likely to trigger declines across the precious metals sector. Gold didn’t react with a significant decline yesterday – just a moderate/small one – which some might view as bullish. I’d say that it’s rather neutral. The rally above the 2021 highs in bond yields might have come as a shock to many investors, and they might not have been sure how to react or what to make of it. It might also have been the “buy the rumor, sell the fact” type of reaction. Either way, it seems to me that we’ll have to wait a few days and see how it plays out once the dust settles. The volume that we saw yesterday was huge. After a period of relatively average volume, we saw this huge volume spike. I marked the previous cases with red arrows. In those cases, such volume accompanied gold’s sizable declines. This time, the volume spike accompanied a $4.10 decline, which might appear perplexing. Fortunately, gold is not the only market that we can analyze, and – as it’s often the case – context provides us with details that help to make sense of what really happened. Let’s check the key supplemental factor – silver’s price action. While gold declined a bit, silver soared over $0.5! The volume that accompanied this sizable daily upswing was the biggest that we’ve seen so far this year too. The latter provides additional confirmation of the importance of yesterday’s session. What was it that happened yesterday that was so important? Silver outperformed gold on a very short-term basis! This is profoundly important, because that’s what has been accompanying gold’s, silver’s, and mining stocks’ tops for many years. Knowing to pay attention to even small signs of silver’s outperformance is one of the useful gold trading tips, and the extent of the outperformance is what determines the importance of the signal (and its bearishness). The extent was huge yesterday, so the implications are very bearish. Yes, silver moved to new yearly highs as well, but silver is known for its fake breakouts (“fakeouts”), which usually happen without analogous moves in gold and mining stocks. Since neither gold nor miners moved to new yearly highs yesterday, it seems that silver “faked out” once again. Silver is up in today’s pre-market trading, and gold is up only slightly, but the latter is not even close to moving to new 2022 highs. The GDX ETF is actually down in today’s London trading (at the moment of writing these words). Speaking of mining stocks, let’s take a look at what happened in them yesterday. In short, they declined – by over 1%, which is about five times more than gold. Since silver outperformed gold, while gold miners underperformed it, the implications for the precious metals sector are bearish. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
We Will Probably Review All Of Inflation Indicators Around The World This Weekend

The USD Had a Slip-Up, but Gold Turned a Blind Eye to It

Przemysław Radomski Przemysław Radomski 13.01.2022 15:22
  “It’s my party and I’ll fall if I want to”, sang gold and kept its word. Although the dollar weakened, gold seemed reluctant to take advantage of it. Now that was a big decline in the USD Index! What made gold yawn and why is it declining today? Because it doesn’t want to rally. I’ve been writing this over and over again, and yet I’ll write it once more. Markets don’t move in a straight line up or down, and periodic corrections are natural. However, the way markets interact during those corrections tells us a lot about what’s likely to take place next, at least in the case of some markets. The USD Index declined quite visibly yesterday and in today’s overnight trading. The key questions are: so what, and if that was completely unexpected. Starting with the latter, it wasn’t unexpected. It’s something in tune with gold’s long-term chart. When the weekly RSI (based on the weekly price changes) for the USD Index hit 70, I wrote the following: Also, please note that the recent medium-term rally has been calmer than any major upswing witnessed over the last 20 years, where the USD Index’s RSI has hit 70. I marked the recent rally in the RSI with an orange rectangle, and I did the same with the second-least and third-least volatile of the medium-term upswings. The sharp rallies in 2008 and 2014 were of much larger magnitudes. And in those historical analogies, the USD Index continued its surge for some time without suffering any material corrections. As a result, the short-term outlook is more of a coin flip. Consequently, the current decline is not unexpected, it’s rather normal. I marked additional situations on the above chart with orange rectangles – these were the recent cases when the RSI based on the USD Index moved from very low levels to or above 70. In all three previous cases, there was some corrective downswing after the initial part of the decline, but once it was over – and the RSI declined somewhat – the big rally returned and the USD Index moved to new highs. I marked those declines in the RSI with blue rectangles, and I did the same thing for the current decline. As you can see, the size of the move lower is currently analogous to previous short-term corrections that were then followed by higher prices. This means that it’s quite likely over or very close to being over, and the medium-term rally can return any day now. Moving back to USD’s short-term chart, we see that the USD Index just (in overnight trading, so the move is not even close to being confirmed) moved a little below USDX’s rising support line based on the previous June and October 2021 lows. At the same time, the USDX is slightly below its late-2020 top and slightly above its November 2021 top. In light of the situation on the long-term USDX chart (as discussed above), this combination of support levels is likely to trigger a rebound and the continuation of the medium-term rally. At the beginning of 2021, I wrote that the year was likely to be bullish for the USD Index, and my forecast for gold (and the rest of the precious metals sector) was bullish – against that of almost every one of my colleagues. The USD Index ended 2021 about 6% higher, gold was down about 3.5%, silver was down almost 12%, the GDX ETF was down by about 9.5%, and the GDXJ ETF (proxy for junior mining stocks, my primary tool for shorting the precious metals sector in 2021 – I wasn’t shorting gold at any point in 2021) was down by about 21%. What about this year? It’s a tough call to say how the entire year will go, but it seems to me that the USD Index will move higher, and we’ll see both in the PMs: a massive decline, and then a huge rally. It’s very likely to be a year to remember for anyone interested in trading gold, silver, and/or mining stocks and/or investing in them. Let’s get back to the current situation. The USD Index declined to fresh 2022 lows – well below the previous January lows, and also below the December and late-November lows. How did gold respond? Gold rallied – but just by a mere $8.80. While gold got close to its early-January high, it didn’t manage to move above it. 2022 is still a down year for gold. Also, gold is clearly below its November 2021 highs, when it was trading close to $1,900. Is gold showing strength here? Absolutely not. Gold is showing the opposite of strength. It’s weak and unwilling to react to the USD’s weakness. That’s exactly what I want to see as a bearish indication if I plan on entering a short position in the precious metals sector or when I’m timing an exit of a long position, or as a confirmation of a bearish narrative in general. So, yes, of course I want to say that yesterday’s rally in gold was a bearish development. That’s the case, because gold should have rallied so much more, given what happened in the USD Index. Today’s overnight action makes the bearish case even clearer. The USDX is down a bit, but gold is down too, anyway. It simply doesn’t want to rally. Gold wants to decline instead. Mining stocks and silver behaved similarly to gold yesterday – they didn’t move to, let alone above, their previous 2022 highs. Consequently, they confirm the indications for the gold vs. USD dynamic – they don’t point to something else. Summing up, the outlook for silver, gold, and mining remains bearish for the medium term, and this week’s rally seems to be nothing more than a counter-trend breather. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
We might say interest rates became Topic #1

We might say interest rates became Topic #1

Przemysław Radomski Przemysław Radomski 11.01.2022 14:10
  The imminent interest rate hike by the Fed is almost certain. Are investors' concerns justified and will it mean trouble for the precious metals?  While the S&P 500 and the NASDAQ Composite recovered from sharp intraday losses on Jan. 10, investors’ mood swings signaled heightened anxiety. With the PMs whipsawing alongside the general stock market, more volatility should materialize in the weeks and months to come. To explain, with the Fed on a hawkish warpath to fight rampant inflation, JPMorgan CEO Jamie Dimon told CNBC on Jan. 10 that a resilient U.S. economy could prove problematic for the financial markets in 2022. “The consumer balance sheet has never been in better shape; they’re spending 25% more today than pre-COVID,” said Dimon. “Their debt-service ratio is better than it’s been since we’ve been keeping records for 50 years.” As for inflation and the Fed: “It’s possible that inflation is worse than they think and they raise rates more than people think. I personally would be surprised if it’s just four [interest rate] increases [in 2022],” he added. How would the financial markets react? Source: CNBC Singing a similar tune, the International Monetary Fund (IMF) warned on Jan. 10 that the Fed’s rate hike cycle could slaughter emerging markets. Its report revealed: “For most of last year, investors priced in a temporary rise in inflation in the United States given the unsteady economic recovery and a slow unravelling of supply bottlenecks. Now sentiment has shifted. Prices are rising at the fastest pace in almost four decades and the tight labor market has started to feed into wage increases.”   Volatile Days Ahead While I warned for all of 2021 that inflationary pressures were bullish for the U.S. dollar and U.S. Treasury yields and bearish for the PMs, the IMF stated: “Faster Fed rate increases in response could rattle financial markets and tighten financial conditions globally. These developments could come with a slowing of US demand and trade and may lead to capital outflows and currency depreciation in emerging markets.” As a result, even the IMF is anxiously bullish on the USD Index: For a good reason. With September, July, June, and May all gone by the wayside, now, the market-implied probability of a Fed rate hike in March has risen to nearly 83%. For context, the probability of a March liftoff was less than 10% in early November. Please see below: Likewise, the market-implied probability of four rate hikes by the Fed in 2022 has risen to nearly 87%. Again, the probability was less than 50% in early November. Please see below: Why the material shift? Well, while I’ve been warning for months that rampant inflation would elicit a hawkish about-face from the Fed, investors are finally coming around to this reality. With inflation still running hot, market participants understand that pricing pressures won’t subside without policy responses from the Fed. As a result, the “transitory” narrative is dead, and investors have lost one of their staunchest allies. This means that predicting silver and gold at higher levels in the medium term might not be the best idea. To that point, Bank of America’s dove-hawk spectrum shows that the dovish brigade has lost several soldiers. With the hawks now on the offensive, the officials preaching monetary patience are few and far between.  Please see below: For context, Bank of America still places San Francisco Fed President Mary Daly in the dovish bucket. However, I noted on Dec. 23 that she has materially shifted her stance in recent weeks: Source: The New York Times Furthermore, with inflationary pressures still bubbling, the Manheim Used Vehicle Value Index hit another all-time high of 236.2 in December, as “wholesale used vehicle prices (on a mix-, mileage-, and seasonally adjusted basis) increased 1.6% month-over-month.” Please see below: On top of that, the cost of shipping from Shanghai, China, is still increasing. With the U.S. importing more goods from China than any other nation, the inflationary impact on the U.S. economy is material. Please see below: Finally, while the GDXJ ETF benefited from the NASDAQ Composite’s intraday reversal on Jan. 10, I warned on Oct. 26 that monetary policy tightening would eventually upend the junior miners. I wrote: To explain, the green line above tracks the GDXJ ETF from the beginning of 2013 to the end of 2015. If you analyze the left side of the chart, you can see that when Fed Chairman Ben Bernanke hinted at tapering on May 22, 2013, the GDXJ ETF declined by 32% from May 22 until the taper began on Dec. 18. Moreover, the onslaught didn’t end there. Once the taper officially began, the GDXJ ETF enjoyed a relief rally (similar to what we’re witnessing now), as long-term interest rates declined and the PMs assumed that the worst was in the rearview. However, as the liquidity drain caught up to the junior miners over the medium term, the GDXJ ETF declined by another 36% from when the taper was announced on Dec. 18, 2013 until the end of 2015. To that point, with part one already on the books, the second act will likely unfold once the Fed formally begins its taper in “either mid-November or mid-December.” Thus, history implies that the GDXJ ETF still has plenty of downside left. While the junior miners' ETF has declined by more than 11% since Oct. 26, Goldman Sachs has come around to our way of thinking. Please see below: To explain, Goldman Sachs told its clients last week that the yellow metal has been following its ominous path since 2013/2014 (as you may recall, I’ve been writing about the 2013-now analogy for months). For context, the red line above tracks gold’s price action from July 2010 until December 2014, while the blue line above tracks gold’s price action from July 2019 until now. If you analyze the symmetrical overlay, you can see that the pair have been in sync for some time. Moreover, if you focus your attention on the red line’s plight as time passes, it’s clear why Goldman Sachs is warning its clients about “further downside risk”. To that point, with the investment bank forecasting a real (inflation-adjusted) interest rate regime change in 2022, gold is poised to suffer along the way. To explain, the various bars above track gold’s monthly returns when the real U.S. Federal Funds Rate (dark blue), the real U.S. 5-Year Treasury yield (green), and the real U.S. 10-Year Treasury yield (light blue) begin with positive/negative values and then increase/decrease. If you focus your attention on the bars furthest to the right, you can see that when the real U.S. 5-Year Treasury yield and the real U.S. 10-Year Treasury yield are negative and then rise, gold suffers its worst monthly performances. Moreover, with the current fundamental environment presenting us with precisely that, similar results will likely materialize over the medium term. The bottom line? While investors desperately bought the dip on Jan. 10, the more than 2% intraday swing in the NASDAQ Composite screamed of monetary policy anxiety. With another hot inflation print poised to hit the wire on Jan. 12, the reprieve will likely be short-lived. Furthermore, with the PMs suffering from a similar fundamental affliction – as both the PMs and technology stocks are extremely allergic to rising interest rates – volatility is likely here to stay. As a result, the Fed should continue to break investors’ hearts over the medium term. In conclusion, the PMs rallied on Jan. 10, though their fundamental outlooks remain profoundly bearish. With interest rates poised to rise and the USD Index still undervalued, more headwinds should confront gold, silver, and mining stocks in the coming months. As a result, long-term buying opportunities are likely still a ways away. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Miners Should Prepare a Pillow: Gold's Hard Landing Can Hurt

Miners Should Prepare a Pillow: Gold's Hard Landing Can Hurt

Przemysław Radomski Przemysław Radomski 07.01.2022 15:54
  As in sports, a weak market streak can reverse in the next season. However, the precious metals team looks like it’s about to drop out of the league. While gold, silver, and mining stocks were in the holiday spirit during the final weeks of 2021, I warned on Jan. 4 that the GDXJ ETF’s sleigh was headed for an epic crash. I wrote: The GDXJ ETF’s corrective upswing has likely run its course. Interestingly, the junior miners’ current rally mirrors the small correction that materialized in mid-2021 (early August). Back then, the GDXJ ETF rallied on low volume and didn’t recapture its 50-day moving average. With the same tepid strength present today, the drawdown that followed in mid-2021 will likely commence once again. On top of that, the behavior of the GDXJ ETF’s RSI is also similar – with the indicator moving from roughly 30 to 50. For context, I highlighted the similarities with green and purple ellipses below. Also noteworthy, similar developments occurred in February/March 2020, before the profound plunge unfolded. As a result, the GDXJ ETF looks set for another sharp drawdown over the medium term. After the junior mining stocks ETF proceeded to decline by more than 6% in two days, my short position rang in the New Year with solid gains. What’s more, with the GDXJ ETF likely to break below its 2021 lows over the medium term, winter woes should materialize before a long-term buying opportunity emerges. Please see below: Likewise, with the GDX ETF’s RSI (Relative Strength Index) signaling an ominous outcome for the senior miners, I warned that a sell-off was likely on the horizon. For context, I highlighted the historical similarities with the blue vertical dashed lines below. Moreover, with the GDX ETF’s weakness accelerating on Jan. 5/6, the senior miners have declined sharply in recent days. In addition, the current price action mirrors the senior miners’ ominous performance in July/August 2021 – just like I’ve been describing it for a few weeks now. As a result, the previous corrective upswing is likely over, and the GDX ETF should confront lower lows sooner rather than later. For context, a breakdown below the 2021 lows should materialize over the medium term, and the forecast for gold, as well as gold stocks, is bearish for the next several weeks / months. However, the milestone may not occur over the next few days. Turning to the HUI Index’s long-term chart, the same bearish signals are present. For example, I marked the specific tops with red and black arrows. In the current situation, we saw yet another small move up, but that’s most likely because the price moves are now less volatile. The areas marked with red ellipses remain similar and show back-and-forth movement before the big decline. As such, while we’ve entered a consolidation phase, this week’s selling pressure has been quite ferocious. Thus, the implications are not bullish but bearish. Finally, the GDX/GDXJ ratio continues to perform as expected. For example, I warned throughout 2021 that the ratio was destined for devaluation. ith the metric kicking off 2022 with another decline, the GDXJ ETF continues to underperform the GDX ETF. For context, I believe that gold, silver, and the GDX ETF are all ripe for sharp re-ratings over the medium term. However, I think that the GDXJ ETF offers the best risk-reward ratio due to its propensity to materially underperform during bear markets. As a result, shorting junior miners offers a great risk to reward trade-off. In conclusion, gold, silver, and mining stocks began 2022 with the same weakness that plagued them in 2021. While the worst performers one year often become the best performers the next, the charts signal more weakness ahead. As a result, while the precious metals are poised to soar over the long term, lower lows will likely materialize before their secular uptrends resume. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Gold: No Cheer in the New Year

Gold: No Cheer in the New Year

Przemysław Radomski Przemysław Radomski 06.01.2022 12:22
  What a way to start a year! Gold just faked its comeback before moving to new yearly lows. That’s a very bearish way for a market to start the year. Given that miners underperformed gold and silver briefly outperformed it, we have a very bearish storm brewing for the next couple of weeks / months. On Jan 3, I wrote the following: The year 2021 is over, 2022 has finally arrived. However, why does the current price action look “sooo last year”? Because the patterns appear to be repeating and the clearest similarity is present in the key precious metal – gold itself. Gold prices moved higher in late December, and it happened on low volume. The rally caused the stochastic indicator to move above 80 and the RSI above 50. That’s exactly what happened in both: late 2021 and late 2020. What does it mean? Well, it means that we shouldn’t trust this rally, as it could end abruptly, just like the one that we saw a year ago. Besides, gold corrected 61.8% of the preceding decline (so it moved to its most classic Fibonacci retracement), which means that – technically – what we saw in the past two weeks was just a correction, not the beginning of a new rally. And what happened next? Gold declined, faked its comeback, and then declined again to new yearly lows. 2022 continues to be a down year for gold, and this is particularly revealing, because early January is the time when the buy-backs should – theoretically – happen. I’m referring to the tendency for investors to exit losing positions (and – in tune with my expectations and against expectations of almost everyone else – 2021 was a down year for gold, silver, and mining stocks, after all) close to the end of the year, in order to harvest the tax loss, and then to get back into the market in early January. Despite the above tendency, gold is down, silver is down, and mining stocks are down as well. This shows that the precious metals market is weak (which has been clear since gold invalidated its breakout above the 2011 high in 2020) and is unlikely to soar significantly (in terms of hundreds of dollars) unless it slides first. Besides, at the beginning of major rallies, gold stocks tend to lead the way up. And right now, it’s exactly the opposite. The upper part of the above chart features the GDXJ ETF – proxy for junior mining stocks, the middle part features the GLD ETF – proxy for gold, and the bottom part features the S&P 500 Index. The red lines compare the previous stock market highs to what happened in junior miners, and the dotted lines show what juniors did when gold formed its recent highs and lows. In short, junior gold mining stocks are underperforming both: gold, and other stocks. This is as bearish as it can get, given the current situation regarding the USD Index (which is in a medium-term uptrend) and the situation in the interest rates, which are not only about to go up, but the expectations of them going up are becoming more and more hawkish. And that’s no accident either, as it’s in tune with the current political narrative in the U.S. – inflation is currently presented as the major enemy that needs to be dealt with. In other words, as the situation in interest rates is likely to become even more hawkish and the USD Index is likely to move higher, gold is likely to go down, and so – eventually – will the general stock market. And since junior mining stocks have already proven over and over again that they magnify declines on both markets, they are likely to fall particularly hard, when the above markets decline. We gained quite a lot based on the decline in the juniors in 2021, but it seems that the gains that could be reaped in 2022 (of course, I can’t and I’m not promising any kind of specific performance for any market) based on junior miners’ decline (and then their revival) could be breathtaking – but as always, only if one is positioned correctly for both major moves. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Gold and silver - The beginning of the year 2022 may not satisfy

Gold and silver - The beginning of the year 2022 may not satisfy

Przemysław Radomski Przemysław Radomski 04.01.2022 16:10
  Gold, silver, and mining stocks started 2022 with a bang. However, this wasn’t the kind of fireworks investors were hoping for. While gold, silver, and mining stocks partied hard into year-end, the trio woke up to massive hangovers on Jan. 3. Although I’ve been warning for some time that mining stocks would stumble in 2021, the New Year is still filled with old problems. For example, the GDX ETF has been making lower lows and lower highs for months, and when its RSI (Relative Strength Index) approaches 70, the senior miners often run out of gas. For context, I highlighted the events with the blue vertical dashed lines below. Moreover, with the senior miners’ current price action following the ominous paths of 2000, 2008, and 2013, and their stochastic indicator still signaling overbought conditions, Monday’s weakness may be a sign of things to come. Please see below: Please also consider the implications of year-end tax-loss harvesting. With the general stock market rallying to start the New Year, losing positions that were sold to offset capital gains near the end of 2021 were likely repurchased on Jan. 3. However, gold, silver, and mining stocks didn’t benefit from the phenomenon. As a result, while the GDX ETF may have outperformed gold, the relative strength was immaterial within the overall picture. Turning to the HUI Index’s long-term chart, the same bearish forecast is present. For example, I marked the specific tops with red and black arrows. In the current situation, we saw yet another small move up, but that’s most likely because price moves are now less volatile. The areas marked with red ellipses remain similar and show back-and-forth movement before the big decline. As a result, we’ve entered a consolidation phase, and the implications are not bullish, but bearish. Making three of a kind, the GDXJ ETF’s corrective upswing has likely run its course. Interestingly, the junior miners’ current rally mirrors the small correction that materialized in mid-2021. Back then, the GDXJ ETF rallied on low volume and didn’t recapture its 50-day moving average. With the same tepid strength present today, the drawdown that followed in mid-2021 will likely commence once again. On top of that, the behavior of the GDXJ ETF’s RSI is also similar – with the indicator moving from roughly 30 to 50. For context, I highlighted the similarities with green and purple ellipses below. Also noteworthy, similar developments occurred in February/March 2020, before the profound plunge unfolded. As a result, the GDXJ ETF looks set for another sharp drawdown over the medium term and predicting higher prices might be misleading. Finally, while my short position in the GDXJ ETF proved quite prescient in 2021, the junior miners continue to underperform the senior miners. With the GDX/GDXJ ratio likely to confront new lows in the coming months, the GDXJ ETF should remain a material laggard in 2022. In conclusion, gold, silver, and mining stocks started off 2022 with a bang. However, it wasn’t the kind of fireworks that investors were hoping for. With each new celebration shorter in magnitude, it’s likely only a matter of time before their parties are canceled. As a result, the precious metals still confront the same bearish technical outlooks that plagued them in 2021. While mean reversion remains undefeated over the long term, the wait may prove longer than many expect. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Will Santa Give Us Interest Rate Hikes for 2022?

Will Santa Give Us Interest Rate Hikes for 2022?

Przemysław Radomski Przemysław Radomski 23.12.2021 17:28
If the Fed normalizes its balance sheet and markets freak-out, it will be a bridge too far. But interest rate hikes won’t crash a strong US economy. With Fed officials increasingly hawked up, the narrative shifted from a tapering of asset purchases to potential interest rate hikes. And now, with whispers of the Fed plotting to normalize its balance sheet, questions have arisen over the potential impact on the PMs. To explain, I wrote on Dec. 20: After admitting that inflation “is alarmingly high, persistent, and has broadened to affect more categories of goods and services,” Waller implored the Fed to sell some of its bond holdings. For context, tapering means that bonds are purchased at a slower pace or not at all. However, even zero purchases result in the Fed’s nearly $8.76 trillion in bond holdings remaining constant. Conversely, if the Fed reduces its balance sheet by selling bonds to private investors, it’s akin to a taper on steroids. Waller said: “If we start doing some balance sheet runoff by summer, that’ll take some pressure off, you don’t have to raise rates quite as much. My view is we should start doing that by summer.” Source: Bloomberg However, is this a plausible path for the Fed over the medium term? In a word: no. While the prospect is profoundly bullish for the USD Index and profoundly bearish for the PMs, Chairman Jerome Powell will likely avoid quantitative tightening.   For one, if the Fed tries to reduce its balance sheet from 35% to 20% of GDP, the financial markets will freak out. Currently, the Fed has such a large stockpile of bonds that private investors can’t absorb that kind of supply. Thus, another taper tantrum will likely unfold if the Fed tries to ‘normalize’ its balance sheet through the open market. Second, the Fed’s only hawkish goal is to calm inflation. To explain, when inflation was running hot and most Americans bought into the “transitory” narrative, Fed officials exuded confidence. However, when consumer confidence sunk to a 10-year low and inflation became political, the Fed changed its tune. As a result, Powell wants to reduce inflation while tightening as little as possible (3% to 4% inflation may be considered acceptable in 2022). Thus, normalizing the balance sheet is likely a bridge too far.  However, please remember that if quantitative tightening is a ten on the hawkish scale, hitting a seven or an eight is still profoundly bearish for the PMs. To explain, I highlighted on Dec. 20 how San Francisco Fed President Mary Daly had a come-to-Jesus moment. I wrote: Daly – a major dove that urged patience in November – admitted on Dec. 17 that “I have adjusted my stance.” And conducting another interview with The New York Times on Dec. 21, Daly said: “My community members are telling me they’re worried about inflation. What influenced me quite a lot was recognizing that the very communities we’re trying to serve when we talk about people sidelined” from the labor market “are the very communities that are paying the largest toll of rising food prices, transportation prices and housing prices…. “I’m comfortable with saying that I expect us to need to raise rates next year. But exactly how many will it be – two or three – and when will that be – March, June, or in the fall? For me it’s just too early to know, and I don’t see the advantage of a declaration.” However, with her slip of “two or three” rate hikes offering a window into her thought process, it’s clear that more hawkish policy will materialize over the medium term. Please see below: Source: The New York Times To that point, many short and medium-term gold bulls support the narrative that “the Fed is trapped.” For context, we’re bullish on the PMs over the long term. However, we expect sharp medium-term corrections before their uptrends resume.  Moreover, the narrative implies that the Fed can’t tighten monetary policy without crashing the U.S. economy. Thus, Fed officials are “trapped,” and the PMs should soar as inflation runs wild. However, this hyper-inflationist theory is much more semblance than substance.    To explain, adopters assumed that the Fed couldn’t taper its asset purchases without crashing the U.S. economy. However, the Fed tapered, then accelerated the taper, and the U.S. economy remained resilient. Now, the new narrative is that the Fed can’t raise interest rates without crashing the U.S. economy. However, it’s simply misleading.  As evidence, anxiety has increased with U.S. monetary and fiscal spending stuck in reverse/neutral. For example, the Fed is tightening monetary policy and Americans are no longer receiving stimulus checks and enhanced unemployment benefits. Moreover, U.S. President Joe Biden’s $1.75 trillion stimulus package was torpedoed by Senator Joe Manchin. As a result, who knows if it will pass in 2022?  However, while “the Fed is trapped” crew cites these issues as reasons for an economic calamity, they often miss the forest through the trees. For example, while the fiscal spending spree may end, U.S. households are still flush with cash. Please see below: To explain, the green line above tracks U.S. households’ checkable deposits (data released on Dec. 9). In a nutshell: it’s the amount of money that U.S. households have in their checking accounts and/or demand deposit accounts. If you analyze the vertical ascent on the right side of the chart, you can see that U.S. households have nearly $3.54 trillion in their checking accounts. For context, this is 253% more than Q4 2019 (pre-COVID-19). Likewise, even though U.S. stimulus has disproportionately flowed to the top, the bottom 50% of American households (based on wealth percentiles) still have plenty of money to spend. Please see below: To explain, the green line above tracks the checkable deposits held by the bottom 50% of U.S. households (again, data released on Dec. 9). And with these individuals sitting on nearly $243 billion in cash, it's 142% more than Q4 2019. Finally, it's important to remember that more than 75% of Canada's exports are sent to the United States. And with the former's exports to the latter hitting an all-time high in October (data released on Dec. 7), it's another indicator that U.S. consumer demand remains resilient. Source: Statistics Canada The bottom line? While some investors expect a dovish 180 from the Fed, they shouldn’t hold their breath. With U.S. economic growth still resilient and the U.S. consumer in much better shape than some portray, the Fed can raise interest rates without crashing the U.S. economy. As a result, Powell will likely stick to his hawkish script and forge ahead with rate hikes in 2022. Conversely, the only wild card is the Omicron variant. If the latest strain severely disrupts economic activity, the Fed could slow its roll. However, this is extremely unlikely. For one, the strain’s spread has been violent, but so far, the data shows it’s much milder than Delta. Second, the Fed needs to solve its inflation problem. And with the FOMC’s dot plot and officials’ rhetoric nodding in agreement, they likely realize that a continuation of 6%+ inflation will do more harm to the U.S. economy than raising interest rates. Also, please note that when the Fed called inflation “transitory,” I wrote for months that officials were misreading the data. As a result, I don’t have a horse in this race. However, now they likely have it right. Thus, if investors assume that the Fed won’t tighten, their bets will likely go bust in 2022.   In conclusion, the PMs rallied on Dec. 22, as an FDA approval of Pfizer’s coronavirus treatment pill helped uplift sentiment. However, the next several months will likely test their mettle. With the Fed hawked up and little stopping interest rate hikes in 2022, the pace of the current liquidity drain should surpass the precedent set in 2013/2014. As a result, more downside likely confronts the PMs over the medium term. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Silver: Strong and Weak at Once. How Is That Even Possible?

Silver: Strong and Weak at Once. How Is That Even Possible?

Przemysław Radomski Przemysław Radomski 21.12.2021 16:01
  Gold is barely crawling up, while silver is boldly climbing the market ladder. When will its rungs turn slippery, causing the precious metal to fall?  Yesterday’s session was particularly uneventful in the case of the precious metals market, as crude oil and the general stock market stole the spotlight. Consequently, today’s analysis will focus on what’s happening in pre-market trading, as that’s what appears to be more important. At the moment of writing these words, gold is up very modestly – less than 0.2%. Consequently, after rallying to about $1,815 (in tune with my Thursday’s analysis) and invalidating the breakout above the rising resistance line, gold appears to be making another attempt to rally, but the strength of the move is very limited. Predicting higher gold prices might not be the best idea here, as the yellow metal was not able to even get to the red line, let alone to its previous monthly high. Silver, on the other hand, has moved quite visibly higher so far today. While gold moved higher by less than 0.2%, silver rallied by about 1.5% and is now trading very close to its previous monthly highs. This is very interesting, because silver is showing strength and weakness at once. How is that possible – one might ask. It’s the same as with trends or forecasts for silver. They can be bearish and bullish simultaneously, depending on the time frame that one focuses on. For example, I think that the very long-term outlook for silver is extremely bullish, but I also think that the medium-term trend is bearish. The short-term trend is also bearish, but the immediate-term trend is bullish. So, am I bullish or bearish on silver? Answering this without specifying the time frame is bound to create misunderstandings. Getting back to silver’s relative performance, it’s been weak when taking into account the last couple of weeks – please note how little of the recent monthly decline silver has corrected compared to gold. Gold recently moved to its October highs, but silver topped a few dollars below its October high. What does it tell us? Silver is likely to fall hard, also compared to gold, probably in tune with the general stock market – similarly to what happened in 2008 and 2020. That’s the same kind of performance that we saw in the very early parts of the huge declines. At the same time, silver is strong compared to gold on an immediate-term basis. This means that we’re likely at or close to a short-term top. Why? Because that’s what the precious metals market tends to do when it’s topping, and it’s one of the great gold trading tips to monitor the PM market for these situations. One could debate why this is really the case, and there are quite a few theories (the silver market is smaller, so more prone to sudden moves, etc.), but the point is that it simply works. Please note that some things – like the Pareto principle (a.k.a. the 20:80 rule) – can work and be very useful, even if it’s not clear why they work. Consequently, it seems that the days of this short-term corrective upswing are either over or about to be over, and that the precious metals sector will return to its medium-term decline any day now. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Article by Decrypt Media

Dollar’s 2021 Rally – Over or Just Resting?

Przemysław Radomski Przemysław Radomski 17.12.2021 11:21
With the USD Index suffering a ‘sell the news’ event on Dec. 15, the FOMC’s hawkish Summary of Economic Projections wasn’t enough to uplift investors’ optimism. However, while the dollar day traders performed their usual disappearing act, the greenback’s fundamentals were bolstered by the FOMC’s median projection of three rate hikes in 2022. What’s more, while the USD Index initially dipped below 96 and fell below its rising resistance line (which is now support) on Dec. 16, buyers stepped in, and the USD Index bounced. For context, a short-term correction is possible. However, the important point is that the USD Index is likely on a medium-term path to ~98. And with gold, silver and mining stocks often moving inversely to the U.S. dollar, their optimism may disappear over the next few months. Please see below: For context, I warned that a consolidation was likely overdue by highlighting the USD Index’s overbought RSI (Relative Strength Index) readings with the red arrows above. Conversely, the blue vertical dashed lines above demonstrate how the USD Index often bottoms near the end of each month, and rallies often follow. And while the current consolidation may need some more time to run its course, higher highs should materialize over the medium term. To explain, after the USD Index recorded sharp rallies in June and July, consolidation phases unfolded before the uptrends continued. And while the secondary uprisings occurred at more moderate paces, the USD Index still managed to make new highs. As a result, ~98 should materialize during the winter months. Furthermore, if the forecast proves prescient, the USD Index’s strength will likely usher gold back to its previous 2021 lows. Adding to our confidence (don’t get me wrong, there are no certainties in any market; it’s just that the bullish narrative for the USDX is even more bullish in my view), the USD Index often sizzles in the summer sun and major USDX rallies often start during the middle of the year. Summertime spikes have been mainstays on the USD Index’s historical record and in 2004, 2005, 2008, 2011, 2014 and 2018 a retest of the lows (or close to them) occurred before the USD Index began its upward flights (which is exactly what’s happened this time around). Furthermore, profound rallies (marked by the red vertical dashed lines below) followed in 2008, 2011 and 2014. With the current situation mirroring the latter, a small consolidation on the long-term chart is exactly what occurred before the USD Index surged in 2014. Likewise, the USD Index recently bottomed near its 50-week moving average; an identical development occurred in 2014. More importantly, though, with bottoms in the precious metals market often occurring when gold trades in unison with the USD Index (after ceasing to respond to the USD’s rallies with declines), we’re still far away from that milestone in terms of both price and duration. Again, the recent move higher in the USD Index doesn’t necessarily apply in the case of the above rule, as it was not the strength of the USD but the weakness in the euro that has driven it. Likewise, with the USD Index now approaching its long-term rising support line (which is now resistance), a rally above the upward sloping black line above would invalidate the prior breakdown and support a move back above 100. Also, please note that the recent medium-term rally has been calmer than any major upswing witnessed over the last 20 years, where the USD Index’s RSI has hit 70. I marked the recent rally in the RSI with an orange rectangle, and I did the same with the second-least and third-least volatile of the medium-term upswings. The sharp rallies in 2008 and 2014 were of much larger magnitudes. And in those historical analogies, the USD Index continued its surge for some time without suffering any material corrections. As a result, the short-term outlook is more of a coin flip. However, the medium-term outlook remains profoundly bullish, and gold, silver, and mining stocks may resent the USD Index’s forthcoming uprising. Just as the USD Index took a breather before its massive rally in 2014, it seems that we saw the same recently. This means that predicting higher gold prices (or the ones of silver) here is likely not a good idea. Continuing the theme, the eye in the sky doesn’t lie. And with the USDX’s long-term breakout clearly visible, the wind remains at the dollar’s back. Furthermore, dollar bears often miss the forest through the trees: with the USD Index’s long-term breakout gaining steam, the implications of the chart below are profound. And while very few analysts cite the material impact (when was the last time you saw the USDX chart starting in 1985 anywhere else?), the USD Index has been sending bullish signals for years. Please see below: The bottom line? With my initial 2021 target of 94.5 already hit, the ~98 target is likely to be reached over the medium term (and perhaps quite soon), mind, though: we’re not bullish on the greenback because of the U.S.’ absolute outperformance. It’s because the region is fundamentally outperforming the Eurozone, the EUR/USD accounts for nearly 58% of the movement of the USD Index, and the relative performance is what really matters. In conclusion, gold, silver and mining stocks pulled rabbits out of their hats on Dec. 16. However, as 2021 has demonstrated, their daily tricks often lose their allure fairly quickly. Moreover, while it’s uncommon for magicians to reveal their secrets, the precious metals tip their hands time and time again. As a result, the USD Index’s daily weakness was likely a corrective downswing, while the precious metals daily strength was likely a corrective upswing. And with a reversal of fortunes likely to occur over the medium term, gold, silver and mining stocks may lose their magic touch. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
We Might Say Next FED Moves Are Not Obvious As Some Factors Differentiate Circumstances

Will Inflation Look Different in 2022?

Przemysław Radomski Przemysław Radomski 13.12.2021 17:04
One swallow doesn't make a summer, but when it comes to slower inflation pressure, there have been several. Will the narrative change soon? While Fed Chairman Jerome Powell had been preaching his “transitory” doctrine for months, the thesis was obliterated once again after the headline Consumer Price Index (CPI) surged by 6.8% year-over-year (YoY) on Dec. 10. Additionally, while the Commodity Producer Price Index (PPI) – which will be released on Dec. 14 – is likely provide a roadmap for inflation’s next move, signs of deceleration are already upon us.  For example, supply bottlenecks, port congestion, and rapidly rising commodity prices helped underwrite inflation’s ascent. However, with those factors now stagnant or reversing, inflationary pressures should decelerate in 2022. To explain, Deutsche Bank presented several charts that highlight 2021’s inflationary problems. However, whether it’s suppliers’ delivery times, backlogs of work, port congestion, bottleneck indices, or the cost of shipping and trucking, several inflationary indicators (excluding air cargo rates) have already peaked and rolled over.  Please see below: To that point, global manufacturing PMIs also signal a deceleration in input price pressures. With input prices leading output prices (like the headline CPI), the latter will likely showcase a similar slowdown if the former’s downtrend holds. Please see below: Source: IIF/Robin Brooks To explain, the colored lines above track the z-scores for prices paid within global manufacturing PMI reports. In a nutshell: regions were experiencing input inflation that was ~2 and ~4 standard deviations above their historical averages. However, if you analyze the right side of the chart, you can see that all of them have consolidated or come down (the U.S. is in light blue). As a result, it’s another sign that peak input inflation could elicit peak output inflation. As mentioned, though, the commodity PPI is the most important indicator and if the data comes in hot on Dec. 14, all bets are off. However, the monthly weakness should be present since the S&P Goldman Sachs Commodity Index (S&P GSCI) declined by 11.2% in November.   Also noteworthy, Morgan Stanley’s Chief U.S. Economist, Ellen Zentner, also sees signs of a deceleration. She wrote: “We are seeing nascent signs that pipeline inflation pressures are easing – based on evidence from company earnings transcripts, ISM comments, Korea trade data, China's inflation data, the Fed's Beige Book, a department huddle with our equity analysts, and our own survey.” To explain, the green, gold, and blue lines above track Morgan Stanley’s core inflation estimates for emerging markets, developed markets, and global markets. If the predictions prove prescient, the 2022 inflation narrative could look a lot different than in 2021. However, please remember that inflation doesn’t abate without direct action from the Fed, and with a hawkish Fed known to upend the PMs (at least in the short- or medium run), the fundamental environment has turned against them. For example, when the Fed turns hawkish, commodities retreat, and with U.S. President Joe Biden showcasing heightened anxiety over inflation, more of the same should materialize over the medium term. To explain, Morgan Stanley initially projected no rate hikes in 2022. Now, Zentner expects “2 hikes in 2022, followed by 3 hikes plus a halt in reinvestments in 2023.” She wrote: “Before investors close out the year, we need to get past the FOMC's final meeting next week, and it comes with every opportunity for surprise. On Wednesday, we expect the Fed to move to a hawkish stance by announcing that it is doubling the pace of taper, highlighting continued inflation risks and no longer labeling high inflation as transitory, and showing a hawkish shift in the dot plot. We think this shift will shake out in a 2-hike median in 2022, followed by 3.5 hikes in 2023 and 3 hikes in 2024.” Furthermore, upping the hawkish ante, Goldman Sachs initially projected no rate hikes in 2022. Then, the team moved to three rate hikes in 2022 (June, September, and December 2022). Now, Goldman Sachs expects the FOMC to hike rates in May, July, and November 2022 – with another four hikes per year in 2023 and 2024.   The Fed’s Time to Shine “The FOMC is very likely to double the pace of tapering to $30bn per month at its December meeting next week, putting it on track to announce the last two tapers at the January FOMC meeting and to implement the last taper in March,” wrote Chief Economist Jan Hatzius. “We expect the Summary of Economic Projections to show somewhat higher inflation and lower unemployment. Our best guess is that the dots will show 2 hikes in 2022, 3 in 2023, and 4 in 2024, for a total of 9 (vs. 0.5 / 3 / 3 and a total of 6.5 in September). We think the leadership will prefer to show only 2 hikes in 2022 for now to avoid making a more dramatic change in one step, especially at a meeting when the FOMC is already doubling the taper pace. But if Powell is comfortable showing 3 hikes next year, then we would expect others to join him in a decisive shift in the dots in that direction.” Speaking of three hikes, the market-implied probability of three FOMC rate hikes in 2022 has risen to 96%. Please see below: For context, I’ve been warning for months that surging inflation would force the Fed’s hand. I wrote on Oct. 26: Originally, the Fed forecasted that it wouldn’t have to taper its asset purchases until well into 2022. However, surging inflation pulled that forecast forward. Now, the Fed forecasts that it won’t have to raise interest rates until well into 2023. However, surging inflation will likely pull that forecast forward as well. More importantly, though, while the PMs have remained upbeat in recent weeks, the forthcoming liquidity drain will likely shift the narrative over the medium term. The bottom line? While inflation shows signs of peaking, there is a vast difference between peak inflation and the Fed’s 2% annual target. As a result, even if a 6.8% YoY headline CPI was the precipice, it’s nothing to celebrate. Thus, the Fed needs to tighten monetary policy to control inflation, and anything less will likely re-accelerate the cost-push inflationary spiral.  To that point, with the precious metals extremely allergic to a hawkish Fed, I’ve highlighted on numerous occasions how the GDXJ ETF suffered following the 2013 taper. With 2022 Fed policy looking even more hawkish than in mid-2014, the latter’s downtrend should have plenty of room to run. In conclusion, the PMs were mixed on Nov. 10, and the scorching inflation print was largely ignored by investors. However, with the Fed poised to provide another dose of reality on Dec. 15, the recent volatility should persist. To that point, it’s important to remember that the S&P 500’s volatility increased materially after the Fed tapered in 2013. With stock market drawdowns bullish for the USD Index and bearish for the PMs, there are plenty of technical, fundamental, and sentiment factors brewing that favor the theme of ‘USD Index up, PMs down’ over the medium term. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
All’s Well That Ends Well, But Gold Is Far From Finished

All’s Well That Ends Well, But Gold Is Far From Finished

Przemysław Radomski Przemysław Radomski 10.12.2021 13:51
  Fundamentals are as strong as ever, but gold has to go some way down before it can resume its uptrend. Think of Moria from The Lord of the Rings. While inflation has soared, the S&P 500 has soared, WTI has soared, and copper has soared, 2021 has been extremely unkind to the precious metals. Gold has declined by 6.25%, silver by 16.66% and the GDX ETF by 14.83% YTD – not to mention the GDXJ ETF (our short position), which is down by 24.91% (all as of the Dec. 9 close). Moreover, investors often assume that material underperformance provides them with buying opportunities. I mean, why not position for a reversion to the mean? However, the harsh truth is that bearish technicals predicted these drawdowns well in advance. And while 2021 has been rough, the charts signal more downside in 2022. To explain, while gold prices, silver prices, and mining stocks rallied hard in October, their price action was more of a trick than a treat. And with the trio becoming part of the bears’ Thanksgiving dinner in November, only Santa Clause can save them now. However, while the S&P 500 had uplifted sentiment, the GDX ETF closed the Dec. 9 session one cent below its Dec. 3 close and the senior miners gave back all of their early-week stock-market-induced gains. As a result, investors aren’t showing much faith in the GDX ETF’s medium-term prospects. Please see below: As further evidence, the GDX ETF’s 4-hour chart is also sending ominous signals. For example, after running into its declining resistance line (the red dashed line on the right side of the chart below), the senior miners’ momentum fizzled, and a sharp decline followed. For more context, I wrote the following on Dec. 7 and updated the analysis on Dec. 9: After verifying the breakdown below its rising support line, the GDX moved lower, just as I expected it to. Now it’s after a breakdown below its previous (November) lows, and it seems to be verifying that breakdown just as it verified the breakdown below the rising support line in late November. The black dashed line in the above chart shows the resistance provided by the previous lows. It wasn’t invalidated. At the same time, the GDX is well below its declining red resistance line, and even if it moves close to this line but then declines, it will not be viewed as something bullish. What happened yesterday (Wednesday) and on Tuesday is exactly what I put in bold. Gold miners moved to their declining red resistance lines and then they moved back down. As far as the November lows are concerned, while it might not be 100% clear based on the above chart, it is the case that the lowest daily close in November was $31.53, and yesterday, the GDX ETF closed the day at $31.49. As the daily closes are more important than the mid-session candlestick closes, I don’t view the breakdown below the November lows as invalidated. Showcasing similar weakness, the GDXJ ETF also reversed sharply after slightly breaking above its declining resistance line (the black dashed line on the right side of the chart below). The invalidation of the breakout served as a strong sell sign, and it’s no wonder that junior miners declined by almost 3% yesterday. Moreover, investors rejected the junior miners’ attempt to rally back above their November lows. As a result, whether big or small, the gold miners have struggled mightily. Please see below: To that point, with more negativity likely to commence in the coming weeks and months, I wrote on Dec. 2 that the selling pressure may persist until the GDXJ ETF reaches its September lows: One of the previous situations that’s similar to the current one is what we saw right before the mid-year top. I marked mid-year declines (from the start to the first more visible correction) in both charts: GDX and GDXJ with orange rectangles. If the history repeats itself, both proxies for mining stocks could move back to their previous 2021 lows before correcting. Please see below: Finally, while I’ve been warning for months that the GDXJ/GDX ratio was destined for devaluation, the ratio has fallen precipitously in 2021. Interestingly, the ratio is still moving lower, its RSI was previously overbought, and similar periods of excessive optimism have preceded major drawdowns (marked with the black vertical dashed lines below). For example, the ratio showcased a similar overbought reading in early 2020 – right before the S&P 500 plunged. On top of that, the ratio is still near its mid-to-late 2020 lows and its mid-2021 lows. As a result, the GDXJ ETF will likely underperform the GDX ETF over the next few months. It’s likely to underperform silver in the near term as well. Furthermore, a drop below 1 in the ratio isn’t beyond the realms of possibility. In fact, it’s actually quite likely – that’s what happened in 2020 as well, and that’s why I’m shorting the GDXJ ETF. For context, I believe that gold, silver, and the GDX ETF are all ripe for sharp re-ratings over the medium term. However, it’s my belief that the GDXJ ETF offers the best risk-reward ratio due to its propensity to materially underperform during bear markets. As a result, shorting junior miners remains the most prudent strategy, in my opinion. In conclusion, while the seasons have changed, gold, silver, and mining stocks’ downtrends have remained the same. With a cold winter likely to culminate with new lows, the precious metals should embark on a tumultuous journey over the medium term. However, as Shakespeare told us: all's well that ends well. And with gold, silver and mining stocks poised to soar in the years to come, the bulls should have the last laugh over the long term. In the meantime, patience is prudent, as sharp drawdowns will likely materialize before the precious metals resume their secular uptrends. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
What Happens After a Bullish Stampede?

What Happens After a Bullish Stampede?

Przemysław Radomski Przemysław Radomski 08.12.2021 15:14
  The bulls pumped up the market, but with fundamentals deteriorating and corporations largely responsible for the spike, regular investors will be left holding the bag. With investors betting on a Santa Clause rally despite the deteriorating fundamentals, the S&P 500 helped the GDXJ ETF (proxy for junior mining stocks) outperform on Dec. 7. However, with short-covering and corporate buybacks primarily responsible for the daily spike, another ‘Minsky Moment’ could be on the horizon. To explain, I wrote on Nov. 19: While European markets have largely ignored the recent coronavirus spikes, a sharp sell-off could be the spark that lights the S&P 500’s correction. To explain, the DAX 30 Index (Germany) and the CAC 40 Index (France) both closed slightly lower on Nov. 18. However, prior to Nov. 18, the DAX 30 had closed in the green for 13 of the last 15 trading days, and one-upping its European counterpart, the CAC 40 had closed in the green for 15 of the last 16 trading days. On top of that, the CAC 40 had an RSI (Relative Strength Index) north of 80, while the DAX 30 had an RSI north of 75. As a result, both indices are materially overbought at a time when Germany is implementing new restrictions. Thus, if a Minsky Moment strikes in Europe, don’t be surprised if the negativity cascades across the Atlantic. To that point, after volatility erupted on cue, the DAX 30 suffered an intraday peak-to-trough decline of 7.8%, the CAC 40 dropped by 7.3%, and the S&P 500 dropped by 5.2%. Please see below: However, with overzealous equity bulls back at it again on Dec. 7, the PMs benefited from the risk-on sentiment. However, with the fundamental problems still present, investors may have set themselves up for more disappointment. To explain, with hedge funds increasing their short bets a little too late, Goldman Sachs Prime Brokerage reported that last week, “US equities on the GS Prime book made up more than 85% of the global $ net selling (-1.4 SDs), driven by short sales and to a lesser extent long sales (9 to 1).”  In a nutshell: hedge funds increased their short bets at the worst possible time. Please see below: Thus, with the Dec. 7 rally driven mainly by a reversal of these positions, the profound short squeeze helped uplift the PMs. For example, Bank of America data shows that last week’s corporate buybacks were the highest weekly total since March. And by repurchasing nearly $3.4 billion of their own stock (focus on the first blue column from the left), their bids helped calm the S&P 500’s selling pressure. Please see below: What’s more, while Bank of America said that hedge funds and retail investors somewhat bought the dip last week (though, they’re still net-sellers over the last four weeks), corporations did much of the heavy lifting.  As a result, with retail investors running out of gas and hedge funds mainly closing out their shorts on Dec. 7, the S&P 500 should resume its correction. More importantly, though, mining stocks’ recent strength should wilt away as the drama unfolds.  Please see below: And now for the grand reveal: corporations' buyback blackout period begins on Dec. 10. And since they can't repurchase more shares until the New Year, the elephant in the room won't be able to support the S&P 500. Likewise, after hedge funds covered their shorts on Dec. 7, short-covering won't be able to support the S&P 500 either. As a result, mining stocks should suffer if the negativity resurfaces over the next few weeks. Please see below: To explain, the red line above tracks the hourly movement of the S&P 500, while the gold line above tracks the hourly movement of the GDXJ ETF. As you can see, the junior miners often follow in the S&P 500’s footsteps. And with the S&P 500 setting itself up for another drop, the GDXJ ETF likely won’t be far behind. To that point, with the headline Consumer Price Index (CPI) scheduled for release on Dec. 10 and the Fed’s next monetary policy meeting scheduled for Dec. 14/15, sources of volatility will arrive at a time when corporations are stuck on the sidelines.  For context, I wrote on Nov. 12: I’ve highlighted on several occasions how the Commodity Producer Price Index (PPI) often leads the following month’s headline CPI. And after the former increased by 2% month-over-month (MoM) on Nov. 9 – which is a material MoM increase – and by 22.2% YoY (a new 2021 high), it implies a headline CPI print of roughly 5.75% to 6.25% when the data is released on Dec. 10. Please see below: To explain, the green line above tracks the YoY percentage change in the commodity PPI, while the red line above tracks the YoY percentage change in the headline CPI. If you analyze the relationship, you can see that the pair have a close connection. In addition, after expectations for September were pulled forward to July, and then expectations for July were pulled forward to June, now, the probability of a Fed rate hike in May 2022 has reached ~69%. Please see below: Also noteworthy, St. Louis Fed President James Bullard said on Dec. 3 that “the danger now is that we get too much inflation.... It's time for the [Fed] to react at upcoming meetings.” He added: “the inflation numbers are high enough that I think [ending the taper by March] would really help us to create the optionality to do more if we had to, if inflation doesn't dissipate as expected in the next couple of months.” For context, Bullard reiterated that he expects two Fed rate hikes in 2022. The bottom line? While the bulls stampeded through Wall Street on Dec. 7, things aren’t as rosy as they appear. And while the PMs benefited from the renewed optimism, their tepid rallies are even more fragile. Moreover, with another inflation print on the horizon and the FOMC’s Dec. 15 decision including its Summary of Economic Projections, the hawkish revelations could rattle the financial markets. And with corporate buybacks starting their holiday vacation on Dec. 10, stock market investors are on their own to navigate what comes next. In conclusion, the PMs rallied on Dec. 7, as risk-on sentiment reigned supreme. However, with the S&P 500 rallying by more than 2% and WTI rallying by nearly 4%, the PMs’ daily upswings were relatively muted. As a result, precious metals investors sense that caution is warranted. And with their trepidation a sign of heightened anxiety, they likely realize that going long the PMs involves much more risk than reward. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
US Dollar Still Has the Green Light

US Dollar Still Has the Green Light

Przemysław Radomski Przemysław Radomski 06.12.2021 16:13
  The dollar looks poised for another rally, to gold’s dismay. So, what’s the price target for the greenback over the winter months? While the consensus across the financial markets (especially at the beginning of the year) was that the U.S. dollar was destined for devaluation, I warned that the greenback would rise from the ashes. And with gold, silver, and mining stocks often moving inversely to the U.S. dollar, the latter’s ascent helped make the precious metals one of the worst-performing asset classes in 2021. Moreover, after more dollar doubters emerged in October – and the precious metals rallied hard – the USD Index eventually cut through 94, 95, and then 96 like a knife through butter. And with the precious metals reversing sharply once again, I expect another rally to push the USD Index to ~98 over the medium term. Perhaps quite soon. And the implications for the precious metals sector, are bearish. On top of that, while overbought conditions elicited a short-term pullback, end-of-month turnarounds and / or rallies are commonplace for the greenback. For context, I warned that a consolidation was likely overdue by highlighting the USD Index’s overbought RSI (Relative Strength Index) readings with the red arrows above. Conversely, the blue vertical dashed lines above demonstrate how the USD Index often bottoms near the end of each month, and rallies often follow. And while the current consolidation may need some more time to run its course, higher highs should materialize over the medium term. To explain, after the USD Index recorded sharp rallies in June and July, consolidation phases unfolded before the uptrends continued. And while the secondary uprisings occurred at more moderate paces, the USD Index still managed to make new highs. As a result, ~98 should materialize during the winter months. Furthermore, if the forecast proves prescient, the USD Index’s strength will likely usher gold back to its previous 2021 lows. Adding to our confidence (don’t get me wrong, there are no certainties in any market; it’s just that the bullish narrative for the USDX is even more bullish in my view), the USD Index often sizzles in the summer sun and major USDX rallies often start during the middle of the year. Summertime spikes have been mainstays on the USD Index’s historical record and in 2004, 2005, 2008, 2011, 2014 and 2018 a retest of the lows (or close to them) occurred before the USD Index began its upward flights (which is exactly what’s happened this time around). Furthermore, profound rallies (marked by the red vertical dashed lines below) followed in 2008, 2011 and 2014. With the current situation mirroring the latter, a small consolidation on the long-term chart is exactly what occurred before the USD Index surged in 2014. Likewise, the USD Index recently bottomed near its 50-week moving average; an identical development occurred in 2014. More importantly, though, with bottoms in the precious metals market often occurring when gold trades in unison with the USD Index (after ceasing to respond to the USD’s rallies with declines), we’re still far away from that milestone in terms of both price and duration. Again, the recent move higher in the USD Index doesn’t necessarily apply in the case of the above rule, as it was not the strength of the USD but weakness in the euro that has driven it. Likewise, with the USD Index now approaching its long-term rising support line (which is now resistance), a rally above the upward sloping black line below would invalidate the prior breakdown and support a move back above 100. Also, please note that the recent medium-term rally has been calmer than any major upswing witnessed over the last 20 years, where the USD Index’s RSI has hit 70. I marked the recent rally in the RSI with an orange rectangle and I did the same with the second-least and third-least volatile of the medium-term upswings. The sharp rallies in 2008 and 2014 were of much larger magnitudes. And in those historical analogies, the USD Index continued its surge for some time without suffering any material corrections. As a result, the short-term outlook is more of a coin flip. However, the medium-term outlook remains profoundly bullish, and gold, silver, and mining stocks may resent the USD Index’s forthcoming uprising. Just as the USD Index took a breather before its massive rally in 2014, it seems that we saw the same recently. This means that predicting higher gold prices (or the ones of silver) here is likely not a good idea. Continuing the theme, the eye in the sky doesn’t lie. And with the USDX’s long-term breakout clearly visible, the wind remains at the dollar’s back. Furthermore, dollar bears often miss the forest through the trees: with the USD Index’s long-term breakout gaining steam, the implications of the chart below are profound. And while very few analysts cite the material impact (when was the last time you saw the USDX chart starting in 1985 anywhere else?), the USD Index has been sending bullish signals for years. Please see below: The bottom line? With my initial 2021 target of 94.5 already hit, the ~98 target is likely to be reached over the medium term (and perhaps quite soon), mind, though: we’re not bullish on the greenback because of the U.S.’ absolute outperformance. It’s because the region is fundamentally outperforming the Eurozone, the EUR/USD accounts for nearly 58% of the movement of the USD Index, and the relative performance is what really matters. In conclusion, gold, silver, and mining stocks have reversed sharply in recent weeks. And though the trio tried to ignore the USD Index’s recent uprising, I wrote on Jul. 23 that the time-tested relationship of ‘U.S. dollar up, PMs down’ will likely be a major storyline during the Autumn months. To that point, with the theme likely to continue over the medium term, lower lows should confront gold, silver, and mining stocks over the next few months. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Can You Hear It? That’s the Crowd Booing Gold’s Downturn

Can You Hear It? That’s the Crowd Booing Gold’s Downturn

Przemysław Radomski Przemysław Radomski 29.11.2021 15:46
Even though the technicals have been predicting this for several months, people were still taken aback by gold’s fall — that’s why they are booing. While the precious metals received a round of applause for their performances in October, I warned on several occasions that the celebration was premature. And with gold, silver, and mining stocks resuming their 2021 downtrends, investors’ cheers have turned into jeers in short order. To explain, I warned previously that the GDX ETF could rally to or slightly above $35 (the senior miners reached this level intraday on Nov. 12, moving one cent above it). However, with the GDX ETF’s RSI (Relative Strength Index) signaling overbought conditions, I highlighted just how quickly the air often comes out of the balloon. For context, the blue vertical dashed lines below depict the sharp reversals that followed after the GDX ETF’s RSI approached or superseded 70. Why am I telling you this? To emphasize that what happened recently was neither random nor accidental. What you see is a true, short-term top that formed in tune with previous patterns. You also see a fake inverse head-and-shoulders formation that was invalidated. This means that the implications of what happened really are bearish. Let’s check why and how, in tune with the past patterns, the previous broad top really was. Please see below: The GDX ETF rallied on huge volume on Nov. 11 and there were only 4 cases in the recent past when we saw something like that after a visible short-term rally. In EACH of those 4 cases, GDX was after a sharp daily rally. In EACH of those 4 cases, GDX-based RSI indicator (upper part of the chart above) was trading close to 70. The rallies that immediately preceded these 4 cases: The July 27, 2020 session was immediately preceded by a 29-trading-day rally that took the GDX about 42% higher. It was 7 trading days before the final top (about 24% of time). The November 5, 2020 session was immediately preceded by a 5-trading-day rally that took the GDX about 14%-15% higher (the high-volume day / the top). It was 1 trading day before the final top (20% of time). The January 4, 2021 session was immediately preceded by a 26-trading-day rally that took the GDX about 17%-18% higher (the high-volume day / the top). It was 1 trading day before the final top (about 4% of time). The May 17, 2021 session was immediately preceded by a 52-trading-day rally that took the GDX about 30% higher. It was 7 trading days before the final top (about 13% of time). So, as you can see these sessions have even more in common than it seemed at the first sight. The sessions formed soon before the final tops (4% - 24% of time of the preceding rally before the final top), but the prices didn’t move much higher compared to how much they had already rallied before the high-volume sessions. Consequently, since history tends to rhyme, it would have been only natural for one to expect the GDX ETF to move a bit higher here (but not significantly so) and for one to assume that this move higher would take between additional 0 to 7 trading days (based on the Nov. 12 session). That’s what is wrote to my subscribers – to expect this kind of performance. The final top formed on Nov. 16 - 4 trading days after the huge-volume session, practically right in the middle of the expected 0-7 trading day range. Moreover, since the GDX topped very close to its 38.2% Fibonacci retracement, it seems that miners corrected “enough” for another huge downswing to materialize. Having said that, let’s move on to more recent developments. Gold price declined heavily recently and the same goes for the silver price. What’s more, the proxy for junior mining stocks - the GDXJ ETF (our short position) materially underperformed on Nov. 26 – after it declined by nearly 3x the percentage of the GDX ETF – and, in my opinion, more downside is likely to materialize over the medium term. The GDXJ ETF ended the Nov. 26 session slightly below its 50-day moving average, and the milestone is often a precursor to sharp drawdowns. That’s what happened in late February 2020 and also in mid-June 2021. Big declines followed in both cases. Moreover, with the S&P 500’s weakness on Nov. 26 mirroring the onslaught that unfolded in early 2020, the GDXJ ETF’s underperformance follows a familiar script. As a result, another ‘flash crash’ for the pair may unfold once again. Keep in mind, though: while asset prices often don’t move in a straight line, a bullish pause may ensue if/once gold reaches its previous lows. All in all, though, lower lows should confront the GDXJ ETF over the short term and my $35 price target remains up to date. As a reminder, that’s only an interim target, analogous to the late-Feb. 2020 low. Interestingly, it is the February 2020 low along with its late-March 2020 high that created this target. Also, the GDXJ/GDX ratio is falling once again. And with the price action implying that the GDXJ ETF is underperforming the GDX ETF, a drop below 1 isn’t beyond the realms of possibility. In fact, it’s quite likely. As such, this is why I’m shorting the junior mining stocks. For context, I think that gold, silver and the GDX ETF are all ripe for sharp re-ratings over the medium term. However, I think that the GDXJ ETF offers the best risk-reward proposition due to its propensity to materially underperform during bear markets in the general stock market. Finally, the HUI Index/gold ratio is also eliciting bearish signals. For example, I marked (with the shaded red boxes below) just how similar the current price action is to 2013. And back then, after a sharp decline was followed by a small corrective upswing before the plunge, the ratio’s current behavior mirrors its historical counterpart. What’s more, the end of the corrective upswing in 2013 occurred right before gold sunk to its previous lows (marked with red vertical dashed lines in the middle of the chart below). Thus, the ratio is already sending ominous warnings about the PMs’ future path. In addition, with the S&P 500 acting as the bearish canary in the coal mine, the ratio plunged in 2008 and 2020 when the general stock market tanked. Thus, if a similar event unfolds this time around, the gold miners’ sell-off could occur at a rapid pace. For more context, I wrote previously: A major breakdown occurred after the HUI Index/gold ratio sunk below its rising support line (the upward sloping black line on the right side of the chart above). Moreover, with the bearish milestone only achieved prior to gold’s crash in 2012-2013, the ratio’s breakdown in 2013 was the last chance to short the yellow metal at favorable prices. And while I’ve been warning about the ratio’s potential breakdown for weeks, the majority of precious metals investors are unaware of the metric and its implications. As a result, investors’ propensity to ‘buy the dip’ in gold will likely backfire over the medium term. In conclusion, the crowd has turned on the precious metals, and the narrative has shifted once again. However, despite all of the drama and the volatility that came with it, the technicals have been predicting this outcome for several months. And with the GDXJ ETF down by more than 20% YTD (as of the Nov. 26 close), the junior miners’ 2021 performance is far from critically-acclaimed. As a result, the chorus of boos will likely continue over the short- and/or medium term. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
November: Is a Bigger Drop in Gold Just Around the Corner?

November: Is a Bigger Drop in Gold Just Around the Corner?

Przemysław Radomski Przemysław Radomski 24.11.2021 15:18
  As expected, after the applauded increase, gold fell. But will it manage to bounce off the bottom or rather slide lower? Today’s analysis is going to be all about gold, and for a good reason. Based on yesterday’s and Monday’s sessions, November is now a down month for gold. Please let that sink in. Gold ended last week above $1,850, with almost everyone in the market cheering and making bets, on how soon gold will move above $1,900 and then rally to new yearly highs. It was after the completion of the inverse head-and-shoulders pattern, after all! Well, I warned you that there were more long-term-based factors in place than the above-mentioned inverse head-and-shoulders pattern, and since longer-term patterns are more important than the shorter-term-based ones, the outlook was bearish, not bullish. In fact, it was the very short-term rally that made the outlook bearish, because of three separate time-based indications for a reversal. And I don’t even mean other bearish indications like gold’s invalidation of the small breakout above the declining red resistance line. Two of the indications that I described previously were the triangle-vertex-based reversals based on the below chart. When resistance and support lines cross, markets tend to reverse their previous course. There’s no good logical explanation for why it should work, but it does. Not in every case, and I’m not promising that it will work in all cases, but I’ve seen it work so many times in the precious metals market so that I can say that ignoring these indications is a very costly endeavor. Another indication came from gold’s long-term chart – its cyclical turning point was pointing to a major reversal, and the preceding move was up. Consequently, gold was likely to top. And that’s exactly what it did. Gold moved lower this week and taking into account the weekly high to yesterday’s closing price, it declined by over $100. Not bad for just two days. But perhaps the most interesting things are now visible on gold’s monthly chart (based on monthly candlesticks). The above chart is loaded with clues. Let’s start with the similarity between now and 2013 that we see from this perspective. The consolidation is similar not only in terms of the shape of the price move but also in terms of the decline in long-term volatility. The upper part of the above chart represents the width of the Bollinger Bands – a tool that is based on the volatility of the market. In short, greater volatility means broader Bands, meaning the above indicator would move higher. So, it’s essentially a proxy for volatility. Since we’re using monthly candlesticks here, it’s a proxy for long-term volatility. Please note that the BB width not only moved from similar levels in 2011 and 2020 to similar levels in late-2012 and now, but it took approximately the same time to get there (if we start both moves with the final monthly high). Like a Decade Ago? The interesting thing about long-term volatility is that periods of low volatility tend to be followed by periods of high volatility – in either way. I marked four previous cases when we saw very low volatility after gold’s several-year-long rally, and it was indeed very close to the start of big moves. One of those cases was the late-2012 case, which appears similar to what we see right now. Consequently, gold is likely to move quite significantly in the following months. If the similarity to 2013 continues, gold would be likely to decline just as the blue dashed line suggests. This implies a move below $1,300. Will gold indeed decline to that low? I doubt it, as there’s very strong support a bit below $1,400. It’s based on the previous highs and the rising support line based on the 2015 and 2018 lows. The decline to those levels would have been enough of a reaction that was likely to follow the failed 2020 breakout above the 2011 highs. Invalidations of breakouts are strong “sell” signals, and invalidation of a breakout that was extremely important (as well as a breakout to a new all-time high), is likely to have very dire consequences. Summing up, gold declined in tune with my long-term-based indications and the medium-term downtrend appears to have resumed. Based on the analogy to 2013 and other factors, a bigger decline in gold appears to be just around the corner (regardless of what happens in the very near term). Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Like the Latest Bond Flick, the US Dollar Has No Time to Die

Like the Latest Bond Flick, the US Dollar Has No Time to Die

Przemysław Radomski Przemysław Radomski 22.11.2021 15:11
While the dollar is on a tear, precious metal stocks have gotten away with it lately. But how long will their resistance last? The USD Index (USDX) After the USD Index’s negative response to the ECB’s monetary policy meeting on Oct. 28, I warned on Oct. 29 that dollar bears were unlikely to celebrate for much longer. I wrote: Based on the rather random comment during the conference, the traders panicked and bought the EUR/USD, which triggered declines in the USD Index (after all, the EUR/USD is the largest component of the USDX). Was the breakout to new 2021 lows invalidated? No. The true breakout was above the late-March highs (the August highs also served as a support level, but the March high is more important here) and it wasn’t invalidated. What was the follow-up action? At the moment of writing these words, the USDX is up and trading at about 93.52, which is just 0.07 below the August high in terms of the closing prices. Consequently, it could easily be the case that the USD Index ends today’s session (and the week) back above this level. You’ve probably heard the saying that time is more important than price. It’s the end of the month, so let’s check what happened in the case of previous turns of the month; that’s where we usually see major price turnarounds. I marked the short-term turnarounds close to the turns of the month with horizontal dashed blue lines, and it appears that, in the recent past, there was practically always some sort of a turnaround close to the end of the month. Consequently, seeing a turnaround (and a bottom) in the USD index now would be perfectly normal. And with the USD Index making quick work of 94, 95, and now 96, the greenback’s rally continues to gain steam. What’s more, the USD Index also surged above its late 2020 resistance and 98 should be the next bullish milestone. More importantly, however, gold, silver, and mining stocks are sensing that something is amiss. For example, while they largely ignored the USD Index’s recent ascent, their negative correlations resurfaced last week (on a very short-term basis, so far, but still). Moreover, while the precious metals’ recent rallies were likely euro-weakness-driven and not USD Index-strength-driven, the dollar basket’s uprising should elicit more pain for gold, silver, and mining stocks over the medium term. To explain, I wrote on Nov. 17: The euro recently declined and the prices of silver and gold recently rallied shortly after dovish comments from the eurozone. Namely, while the expansionary nature of fiscal and monetary decisions in the U.S. might be after its peak (with the infrastructure bill signed even despite high inflation numbers), the eurozone is far from limiting its expansionary (i.e., inflationary) policies, and it was just made clear recently. That was bearish for the euro and bullish for the gold price – as more money (euros in this case) would be chasing the same amount of physical gold. The point here is that it might have been the decline in the value of the European currency that caused gold to rally, and it had little to do with what happened in the USD Index. Don’t get me wrong, most of the time, the gold-USD link is stable and negative. In some cases, gold shows strength or weakness by refusing to move in tune (and precisely: again) with U.S. dollar’s movement. But in this case, it seems that it’s not about the U.S. dollar at all (or mostly), but rather about what happened in the Eurozone and euro recently. As a result, with the USD Index likely to take the lead in the coming months, the precious metals should suffer along the way. For context, the USD Index is approaching overbought territory and a short-term decline to ~95 isn’t out of the question. However, it’s more of a possibility than a given. Moreover, the greenback’s medium-term outlook remains robust, and any short-term pullback is likely a corrective downswing within a medium-term uptrend. Circling back to the euro, I’ve been warning for months that the Euro Index was materially overvalued and that a sharp re-rating would likely unfold. I wrote previously: The next temporary stop could be ~1.1500 (the March 2020 highs, then likely lower). For context, the EUR/USD accounts for nearly 58% of the movement of the USD Index, and that’s why the euro’s behavior is so important. And after the Euro Index sunk to a new 2021 low last week, the European currency has officially fallen off a cliff. To that point, after breaking below the declining support line of its monthly channel, a drawdown to ~111 is likely next in line (which is signaled by the breakdown below its bearish head & shoulders pattern). The Euro Index is near oversold territory and a short-term bounce may ensue, but the bearish medium-term implications remain intact. Please see below: Adding to our confidence (don’t get me wrong, there are no certainties in any market; it’s just that the bullish narrative for the USDX is even more bullish in my view), the USD Index often sizzles in the summer sun and major USDX rallies often start during the middle of the year. Summertime spikes have been mainstays on the USD Index’s historical record and in 2004, 2005, 2008, 2011, 2014 and 2018 a retest of the lows (or close to them) occurred before the USD Index began its upward flights (which is exactly what’s happened this time around). Furthermore, profound rallies (marked by the red vertical dashed lines below) followed in 2008, 2011 and 2014. With the current situation mirroring the latter, a small consolidation on the long-term chart is exactly what occurred before the USD Index surged in 2014. Likewise, the USD Index recently bottomed near its 50-week moving average; an identical development occurred in 2014. More importantly, though, with bottoms in the precious metals market often occurring when gold trades in unison with the USD Index (after ceasing to respond to the USD’s rallies with declines), we’re still far away from that milestone in terms of both price and duration. Again, the recent move higher in the USD Index doesn’t necessarily apply in the case of the above rule, as it was not the strength of the USD but weakness in the euro that has driven it. Likewise, with the USD Index now approaching its long-term rising support line (which is now resistance), a rally above the upward sloping black line below would invalidate the prior breakdown and support a move back above 100. However, with the dollar basket’s weekly RSI (Relative Strength Index) now above 70, a short-term consolidation may ensue. Conversely, please note that the recent medium-term rally has been calmer than any major upswing witnessed over the last 20 years where the USD Index’s RSI has hit 70. I marked the recent rally in the RSI with an orange rectangle and I did the same with the second-least and third-least volatile of the medium-term upswings. The sharp rallies in 2008 and 2014 were of much larger magnitudes. And in those historical analogies, the USD Index continued its surge for some time without suffering any material corrections. As a result, the short-term outlook is more of a coin flip. However, the medium-term outlook remains profoundly bullish, and gold, silver, and mining stocks may resent the USD Index’s forthcoming uprising. Just as the USD Index took a breather before its massive rally in 2014, it seems that we saw the same recently. This means that predicting higher gold prices (or the ones of silver) here is likely not a good idea. Continuing the theme, the eye in the sky doesn’t lie. And with the USDX’s long-term breakout clearly visible, the wind still remains at the dollar’s back. Please see below: The bottom line? With my initial 2021 target of 94.5 already hit, the ~98 target is likely to be reached over the medium term, and the USDX will likely exceed 100 at some point over the medium or long term. Keep in mind, though: we’re not bullish on the greenback because of the U.S.’ absolute outperformance. It’s because the region is fundamentally outperforming the Eurozone, the EUR/USD accounts for nearly 58% of the movement of the USD Index, and the relative performance is what really matters. In conclusion, while the USD Index’s 2021 surge caught the consensus by surprise, I’ve been sounding the bullish alarm for many months. And with more strength likely to materialize over the medium term, the ‘death of the dollar’ narrative has been grossly over-exaggerated. Moreover, while gold, silver, and mining stocks recently ignored the greenback’s fervor, history implies that their relative strength won’t last. As a result, more downside will likely confront the precious metals over the next few months. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Gold – USD Relationship Status: It’s Complicated

Gold – USD Relationship Status: It’s Complicated

Przemysław Radomski Przemysław Radomski 17.11.2021 13:27
  If the dollar goes through a corrective downswing, it’s more bullish for gold? Not if a decline in the euro caused gold to rise in the first place. Another day, another new yearly high for the USD Index. The U.S. currency soars just like it has since the beginning of the year, in tune with what I said at that time, (and against what almost everyone else said about its outlook). The rally accelerated recently, with the USD Index soaring by 0.78 this week – and it’s only Wednesday today. So, surely that’s bullish for the USD Index? - one might ask. No. “Bullish” or “bearish” relates to the future, not to the past. In fact, the rally in the USD Index might need a breather as all markets – no matter how bullish or bearish the situation is in them – can’t rally or decline in a straight line, without periodic corrections. The USD Index, gold, silver, mining stocks, and practically all the other markets are no exception from this rule. Even the real estate prices don’t increase over the long run without periodic downturns. As you can see on the above chart, the U.S currency index soared to almost 96 yesterday and it’s after an almost straight-up rally. This rally caused the RSI indicator to move above 70, and this has been a quite precise short-term sell signal this year. In fact, in all cases when we saw it, some kind of short-term correction followed. Based on the size of the current rally, it seems that the current situation is most similar to what we saw in early March and in late June. That’s when we saw short-term declines that took the USDX approximately a full index point lower. In the current case, it could mean a decline back to 95. This would be a perfectly natural thing for the USD Index to do right now, given that the previous resistance (which now serves as support) is located slightly below 95. The support is provided by the late-2020 high and the March 2020 low (not visible on the above chart). So, surely this corrective downswing in the USD Index would cause an even bigger rally in the precious metals sector, right? That’s where things get complicated. You see, the biggest (over 50%) part of the USD Index (which is a weighted average) is the EUR/USD currency pair. Let’s take a look at it. The Euro Index moved sharply lower last week and just like the RSI based on the USD Index flashed a sell signal, the RSI based on the Euro Index flashed a buy signal. Also, the Euro Index just moved to the lower border of its declining trade channel, which is likely to indicate some kind of rebound. Why am I discussing the euro here? Because that’s what’s complicated about the current USD-gold link. The euro recently declined and the prices of silver and gold recently rallied shortly after dovish comments from the eurozone. Namely, while the expansionary nature of fiscal and monetary decisions in the U.S. might be after its peak (with the infrastructure bill signed even despite high inflation numbers), the eurozone is far from limiting its expansionary (i.e., inflationary) policies, and it was just made clear recently. That was bearish for the euro and bullish for the gold price – as more money (euros in this case) would be chasing the same amount of physical gold bars. The point here is that it might have been the decline in the value of the European currency that caused gold to rally, and it had little to do with what happened in the USD Index. Don’t get me wrong, most of the time, the gold-USD link is stable and negative. In some cases, gold shows strength or weakness by refusing to move in tune (and precisely: again) with the U.S. dollar’s movement. But in this case, it seems that it’s not about the U.S. dollar at all (or mostly), but rather about what happened in the Eurozone and euro recently. I marked the recent decline in the euro and the rally in gold with a golden rectangle. The usual link between gold-USD would have one assume that lower USD Index values (due to higher EUR/USD values) would trigger a rally in gold. However, given how things worked and the fact that we saw/heard the news coming from the Eurozone, it seems like this “temporary” and “bearish for the PMs” interpretation would actually prevail. It could also be the case that we see some kind of mixed reply from the precious metals sector when the USD Index and the Euro Index correct. The PMs could for example fall only after the situation regarding the gold-USD link gets back to normal – that is perhaps after both currencies correct. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Gold: Don’t Fret the Small Stuff

Gold: Don’t Fret the Small Stuff

Przemysław Radomski Przemysław Radomski 10.11.2021 14:38
  Do small upswings really matter if one has medium-term goals in mind? Have the bulls come home?  The medium-term back and forth movement in gold continues. If I could make the markets move in a certain direction sooner, and end the prolonged consolidation, I would. However, I can’t, and the only thing that I can do is to report to you what I see on the markets and describe what my course of action will be. During yesterday’s session we saw more of what we’ve been seeing in the previous days. Gold moved higher, and gold stocks moved higher (but in a weak manner), and even though gold moved to new monthly highs, the HUI Index is not even back to its late-October highs. It’s boring, discouraging, and demotivating. But the only thing that we can do is to react to what the market is willing to provide us with. What do yesterday’s and today’s pre-market price moves tell us? First of all, the market tells us that the breakout to new highs in the USD Index is not being invalidated. I know that I’ve written this tens of times, but this factor remains intact and it continues to have very important implications going forward. These are bullish for the USD Index and bearish for the precious metals sector. Second, as I had already written earlier today, gold stocks are not showing strength relative to gold. The gold price just made new monthly highs and is now visibly above its October highs, but the silver price and – most importantly - gold stocks are not. In fact, they are just a little above their mid-October highs. Consequently, the thing that one tends to see in the final parts of a short-term rally remains in place. So, when will the decline in PMs finally continue? Based on what I wrote on Monday – in particular about gold’s reversal points, it’s likely to start soon – perhaps as early as this week. As a quick reminder, you can see gold’s triangle-vertex-based reversal on the chart below: And you can see gold’s long-term cyclical turning point on the chart below: The fact that gold moved to its recent medium-term highs is also a factor here. Resistance provided by those highs is quite likely to trigger a reversal in gold, and based on today’s pre-market action, it’s what we might already be seeing right now. The move lower is small so far, but all bigger moves have small beginnings, and given the reversal points and the resistance that gold just encountered, this could be “it”. Also, speaking of resistance levels, on today’s second chart I placed a red resistance line based on the previous highs. It might be tempting to view the price action below it as an inverse head and shoulders pattern, which could have bullish implications. However, let’s keep in mind that without a breakout above the neck level (approximately the previous highs), the formation is not yet complete, and as such it has NO bullish implications whatsoever, as it simply doesn’t exist yet. All in all, the outlook for the precious metals market is not bullish, even though the last several days / weeks might make one feel otherwise. Before viewing the recent move higher as something significant and/or bullish, please consider how tiny this upswing is compared to the decline in gold stocks between May and October. No market moves in a straight line, and periodic corrections are inevitable. It doesn’t make them a start of a new powerful upswing in each case, though. And if the part of the precious metals market that is supposed to rally the most at the start of a major upswing is so weak right now, then why should one expect the current upswing to be anything more than a corrective upswing within a bigger downtrend? Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
USD Index: Are New Milestones in the Cards?

USD Index: Are New Milestones in the Cards?

Przemysław Radomski Przemysław Radomski 08.11.2021 16:54
While the greenback's failed breakout on Nov. 4th may seem bearish, it faced a similar situation in August and October, only to recover and achieve new highs. After the USD Index’s negative response to the ECB’s monetary policy meeting on Oct. 28, I warned on Oct. 29 that dollar bears were unlikely to celebrate for much longer. I wrote: Based on the rather random comment during the conference, the traders panicked and bought the EUR/USD, which triggered declines in the USD Index (after all, the EUR/USD is the largest component of the USDX). Was the breakout to new 2021 lows invalidated? No. The true breakout was above the late-March highs (the August highs also served as a support level, but the March high is more important here) and it wasn’t invalidated. What was the follow-up action? At the moment of writing these words, the USDX is up and trading at about 93.52, which is just 0.07 below the August high in terms of the closing prices. Consequently, it could easily be the case that the USD Index ends today’s session (and the week) back above this level. You’ve probably heard the saying that time is more important than price. It’s the end of the month, so let’s check what happened in the case of previous turns of the month; that’s where we usually see major price turnarounds. I marked the short-term turnarounds close to the turns of the month with horizontal dashed blue lines, and it appears that, in the recent past, there was practically always some sort of a turnaround close to the end of the month. Consequently, seeing a turnaround (and a bottom) in the USD index now would be perfectly normal. And after the forecast turned into reality, the USD Index surged above 94 and remains poised to resume its uptrend over the medium term. To explain, if we zoom in on the four-hour chart, it highlights the importance of the price action on Nov. 5. During the session, the USD Index hit a new 2021 intraday high before a small reversal occurred. This might seem bearish at the first sight (it’s a failed breakout, after all)… However, similar developments were also present in August and October. After the dollar basket attempted to make new highs and failed, the greenback eventually regained its composure and achieved the milestones. As a result, another 2021 high should occur sooner rather than later. Please see below: The first failed attempt to break above the previous highs triggered sizable short-term declines. This happened in August (marked with red). The second – September – attempt triggered only a small correction (marked with green) that was then followed by a bigger rally. Similarly, the – marked with red – October invalidation was followed by a sizable decline, and the current one (marked with green), is relatively small. And it’s likely to be followed by a short-term rally, just like the September correction was. On top of that, as you can see on the below chart, the current setup for the USD Index and gold mirrors what we witnessed in early August. Following its sharp summertime rally, the USD Index moved close to its 50-day moving average without reaching it. And after buyers stepped in, the USD Index resumed its uptrend and made a new 2021 high. Moreover, with a similar pattern and a similar reading on the USD Index’s RSI (Relative Strength Index) present today, the greenback’s outlook remains robust. I marked both cases with red, vertical, dashed lines below. More importantly, though gold, silver, and mining stocks’ upswings concluded once the USD Index bottomed close to its 50-day moving average in August and sharp drawdowns followed. Moreover, while gold, silver, and mining stocks’ recent rallies were likely underwritten by expectations of a weaker USD Index (it did fail to move to new highs, right?) , technical (as described above and below) and fundamental realities contrast this thesis. As a result, the 2021 theme of ‘USD Index up, PMs down’ will likely resume over the medium term. Please see below: Equally bullish for the greenback, the Euro Index remains overvalued and should suffer a material drawdown over the medium term. For example, the index’s previous lows, its 50-day moving average, and its declining resistance line combined to create major resistance and the Euro Index is now retesting its 2021 lows. As a result, the next temporary stop could be ~1.1500 (the March 2020 highs, then likely lower). For context, the EUR/USD accounts for nearly 58% of the movement of the USD Index, and that’s why the euro’s behavior is so important. Please see below: Adding to our confidence (don’t get me wrong, there are no certainties in any market; it’s just that the bullish narrative for the USDX is even more bullish in my view), the USD Index often sizzles in the summer sun and major USDX rallies often start during the middle of the year. Summertime spikes have been mainstays on the USD Index’s historical record and in 2004, 2005, 2008, 2011, 2014 and 2018 a retest of the lows (or close to them) occurred before the USD Index began its upward flights (which is exactly what’s happened this time around). Furthermore, profound rallies (marked by the red vertical dashed lines below) followed in 2008, 2011 and 2014. With the current situation mirroring the latter, a small consolidation on the long-term chart is exactly what occurred before the USD Index surged in 2014. Likewise, the USD Index recently bottomed near its 50-week moving average; an identical development occurred in 2014. More importantly, though, with bottoms in the precious metals market often occurring when gold trades in unison with the USD Index (after ceasing to respond to the USD’s rallies with declines), we’re still far away from that milestone in terms of both price and duration. Moreover, as the journey unfolds, the bullish signals from 2014 have resurfaced once again. For example, the USD Index’s RSI is hovering near a similar level (marked with red ellipses), and back then, a corrective downswing also occurred at the previous highs. More importantly, though, the short-term weakness was followed by a profound rally in 2014, and many technical and fundamental indicators signal that another reenactment could be forthcoming. Please see below: Just as the USD Index took a breather before its massive rally in 2014, it seems that we saw the same recently. This means that predicting higher gold prices (or the ones of silver) here is likely not a good idea. Continuing the theme, the eye in the sky doesn’t lie. And with the USDX’s long-term breakout clearly visible, the wind still remains at the dollar’s back. Please see below: The bottom line? With my initial 2021 target of 94.5 already hit, the ~98 target is likely to be reached over the medium term, and the USDX will likely exceed 100 at some point over the medium or long term. Keep in mind though: we’re not bullish on the greenback because of the U.S.’ absolute outperformance. It’s because the region is fundamentally outperforming the Eurozone, the EUR/USD accounts for nearly 58% of the movement of the USD Index, and the relative performance is what really matters. In conclusion, the USD Index remains in the driver’s seat and new highs should materialize over the medium term. And while gold, silver and mining stocks have rode the S&P 500 higher recently, history has been unkind when the precious metals ignore technical and fundamental realities. Moreover, with gold, silver, and mining stocks’ strong negative correlations with the U.S. dollar standing the test of time, it’s likely only a matter of time before investors realize this as well. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Gold, Silver, and Miners Just Can’t Jump

Gold, Silver, and Miners Just Can’t Jump

Przemysław Radomski Przemysław Radomski 03.11.2021 15:17
Let’s face it, the metals are not having an easy time breaking out. Short-term rallies end up going nowhere and bearish signs are still in abundance. Yesterday’s session was once again quite informative, and so is today’s pre-market trading. In yesterday’s analysis, I emphasized the importance of the relative weakness that we just saw in mining stocks, so let’s start with taking a look at what mining stocks did yesterday. At first glance, yesterday’s performance might look like a bullish reversal, but zooming in clarifies that something else was actually in the works. Let’s take a look at the GDXJ 1-hour candlestick chart for details. Yesterday’s “reversal” was actually a breakdown below the previous (mid-October) intraday lows along with the verification thereof. The GDXJ moved below the above-mentioned lows and – while it moved back up – it ended the session below them. This is a bearish type of session. Also, if you were wondering about the high volume in the final hour of trading – that’s relatively normal as that’s when bigger trades tend to take place. And while mining stocks were busy verifying the breakdown, gold tried to break above its declining, red resistance line, and verify that breakout. While yesterday’s session didn’t bring much lower gold prices (and the invalidation), today’s pre-market trading makes it clear that the attempt to break higher failed. Just like I had indicated yesterday. This time the rising short-term support line is not there to prevent further declines as the breakdown below it was also confirmed. What does it mean? It means that gold is likely to fall, and quite likely it’s going to fall hard. Besides, silver price is after a major short-term breakdown, too. After a powerful short-term rally, silver had reversed, and now it broke below its rising support line. That’s yet another bearish indication. Please note that at first silver was reluctant to decline while mining stocks moved decisively lower, which was normal during the early part of a given decline. Silver did some catching-up action yesterday, but since miners are not showing strength, I’d say that we’re getting to the regular part of a short-term move, not close to its end. And the move lower is likely to continue, just as the move higher is likely to continue in case of the USD Index. The USDX is after a verification of the breakout to new 2021 highs and after an about monthly consolidation above them. This is a perfect starting point for a major upswing, and we’re likely to see one soon. All in all, while the outlook for the precious metals sector is very bullish for the following years, it’s very bearish for the following weeks. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
An Interesting Interview With Gareth Mackenzie Conducted By Luke Suddards - The Latest Episode of "Buy The Dip"

Hey Gold, the USDX Has Put On Its Boxing Gloves

Przemysław Radomski Przemysław Radomski 26.10.2021 12:18
The USD Index has been eating its Wheaties, is itching for a fight, and it’s got solid fundamentals backing it up. Doesn’t look good for the metals. While the USD Index has come under pressure in recent days, the dollar basket’s fundamentals are actually stronger now than they were during the September rally. On top of that, after the USD Index ended the week above its August daily closing high, the greenback’s technical breakout to new 2021 highs still remains intact. More importantly, though, the recent price action mirrors what we witnessed back in early August. To explain, following its sharp summertime rally, the USD Index moved close to its 50-day moving average without reaching it. And after buyers stepped in, the USD Index resumed its uptrend and made a new 2021 high. Moreover, with a similar pattern and a similar reading on the USD Index’s RSI (Relative Strength Index) present today, the greenback’s uptrend should resume sooner rather than later. I marked both cases with red, vertical, dashed lines. On the flip side, after gold, silver, and mining stocks’ upswings concluded once the USD Index bottomed close to its 50-day moving average in August, sharp drawdowns followed. As a result, the precious metals’ current upswing is likely to suffer a similar fate. Please see below: The middle part of the above chart features gold and silver and you can clearly see that the final pre-slide top in early August materialized when gold and silver reversed profoundly on an intraday basis. The same thing happened on Friday, and the implications are clearly bearish. Equally bullish for the greenback, the Euro Index remains overvalued and should suffer a material drawdown over the medium term. For example, while the index closed above its late 2020 lows, it couldn’t recapture its August 2021 lows. Thus, the next temporary stop could be ~1.1500 (the March 2020 highs, then likely lower). For context, the EUR/USD accounts for nearly 58% of the movement of the USD Index, and that’s why the euro’s behavior is so important. Please see below: Adding to our confidence (don’t get me wrong, there are no certainties in any market; it’s just that the bullish narrative for the USDX is even more bullish in my view), the USD Index often sizzles in the summer sun and major USDX rallies often start during the middle of the year. Summertime spikes have been mainstays on the USD Index’s historical record and in 2004, 2005, 2008, 2011, 2014 and 2018 a retest of the lows (or close to them) occurred before the USD Index began its upward flights (which is exactly what’s happened this time around). Furthermore, profound rallies (marked by the red vertical dashed lines below) followed in 2008, 2011 and 2014. With the current situation mirroring the latter, a small consolidation on the long-term chart is exactly what occurred before the USD Index surged in 2014. Likewise, the USD Index recently bottomed near its 50-week moving average; an identical development occurred in 2014. More importantly, though, with bottoms in the precious metals market often occurring when gold trades in unison with the USD Index (after ceasing to respond to the USD’s rallies with declines), we’re still far away from that milestone in terms of both price and duration. Moreover, as the journey unfolds, the bullish signals from 2014 have resurfaced once again. For example, the USD Index’s RSI is hovering near a similar level (marked with red ellipses), and back then, a corrective downswing also occurred at the previous highs. More importantly, though, the short-term weakness was followed by a profound rally in 2014, and many technical and fundamental indicators signal that another reenactment could be forthcoming. Please see below: Just as the USD Index took a breather before its massive rally in 2014, it seems that we saw the same recently. This means that predicting higher gold prices (or the ones of silver) here is likely not a good idea. Continuing the theme, the eye in the sky doesn’t lie. And with the USDX’s long-term breakout clearly visible, the wind still remains at the dollar’s back. Please see below: The bottom line? As the drama unfolds, the ~98 target is likely to be reached over the medium term, and the USDX will likely exceed 100 at some point over the medium or long term. Keep in mind though: we’re not bullish on the greenback because of the U.S.’ absolute outperformance. It’s because the region is fundamentally outperforming the Eurozone, the EUR/USD accounts for nearly 58% of the movement of the USD Index, and the relative performance is what really matters. In conclusion, while the USD Index has pulled back from its recent highs, Fed Chairman Jerome Powell effectively announced on Oct. 22 that the central bank will taper its asset purchases in November/December. And with bullish reinforcements also gathering near the USD Index’s 50-day moving average, the greenback’s medium-term fundamentals and technicals remains robust. And with gold, silver, and mining stocks often moving inversely to the U.S. dollar, their performance is likely to suffer if/once the USD Index resumes its ascent. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFA Founder, Editor-in-chief Sunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
European Rate Surge Continues

Gold: The S&P 500 Stirs the Pot

Przemysław Radomski Przemysław Radomski 23.10.2021 12:08
With the S&P 500 back at its all-time highs, gold stopped lagging behind. However, how long can this unsustainable growth last? The FOMO Rally While the S&P 500 has demonstrated a resounding ability to shake off bad news, an epic divergence has developed between positioning and economic expectations. And while ‘fear of missing out’ (FOMO) keeps sentiment near the high-end of its range, Q3 GDP growth is projected near the low-end of its range. For example, while the Atlanta Fed’s third-quarter GDP growth estimate was north of 5% in early September, the bank reduced the estimate to 1.3% on Oct. 5. Moreover, with the outlook even worse now, the Atlanta Fed cut its Q3 GDP growth estimate to 0.5% on Oct. 19. Please see below: To explain, the blue line above tracks the Blue Chip consensus GDP growth estimate for the third quarter, and the shaded blue area represents the range of economists’ estimates. If you analyze the depth, you can see that economists expect a print in the ~2% to ~5.5% range. In stark contrast, the green line above tracks the Atlanta Fed’s GDPNow estimate – which has sunk like a stone and now implies 0.5% GDP growth in the third quarter. What’s more, Bank of America also released its latest Global Fund Manager Survey on Oct. 19. And with institutional investors increasing their equity exposure when their economic expectations have turned negative for the first time in 18 months, FOMO is now on full display. Please see below: To explain, the dark blue line above tracks the net percentage of respondents that are overweight equities, while the light blue line above tracks the net percentage of respondents that expect stronger economic growth. If you analyze the right side of the chart, you can see that intuitional investors’ equity positioning still far exceeds what’s implied from economic growth prospects. As a result, if the dark blue line moves lower and reconnects with the light blue line, plenty of sell orders will hit the market. On top of that, with stagflation fears now front and center, institutional investors are hitting the bid even when their better judgment tells them otherwise. Please see below: To explain, the dark blue line above tracks the net percentage of respondents that expect above-trend growth and above-trend inflation, while the light blue line above tracks the net percentage of respondents that expect below-trend growth and above-trend inflation. If you analyze the red circle on the right side of the chart, you can see that growth-with-inflation prophecies are losing momentum (the dark blue line), while fears of low growth and persistent inflation are increasing (the light blue line). Will We See an Inflation Miracle? Moreover, with the Fed stuck between a rock (high inflation) and a hard place (weak growth), the margin for error has dwindled and one policy mistake could bring down equities’ entire house of cards. To that point, while I’ve been warning for months that the Fed was (and still is) materially behind the inflation curve, FOMC officials aren’t the only ones displaying inflationary anxiety. Please see below: To explain, inflationary concerns have surged in October. And while the spread between institutional investors’ concerns over “Inflation” and the “Fed taper” is quite the oxymoron, persistent inflation makes another hawkish surprise even more likely. Moreover, with the death of QE unlikely to solve the inflationary conundrum on its own, the Fed will likely forecast further tightening in 2022. To that point, slowly but surely, institutional investors are waking up to this reality. For context, Q3 earnings calls have been riddled with mentions of inflation and many CEOs that dabble in real goods have projected a further acceleration in 2022. As a result, with the “transitory” camp now suffering a death by a thousand cuts, it will likely take a miracle for the Fed’s 2022 inflation forecast to come to fruition. To explain, 69% (28%) of respondents viewed inflation as “transitory” (“permanent”) in September. However, the script has flipped to 58% and 38% in October. As a result, it’s likely only a matter of time before the majority of institutional investors (and the Fed) realize what’s actually happening on the ground. Case in point: Unilever – a consumer goods company with 149,000 employees and 400 brands that operates in more than 190 countries – released its third-quarter earnings on Oct. 21. CFO Graeme Pitkethly said that Q4 price increases should at least rival Q3 and extend into 2022: Source: Reuters Moreover, Unilever CEO Alan Jope told Bloomberg on Oct. 21: “Peak inflation will be in the first half of 2022, and it will moderate as we move towards the second half…. We continue to responsibly take pricing, and that’s in relation to the very high levels of inflation we’re seeing.” The S&P 500 Ahead of a Deep Correction? Furthermore, I highlighted on Oct. 21 that rising commodity prices over the last month should filter into the Commodity Producer Price Index (PPI) and headline Consumer Price Index (CPI) in the coming months. I wrote: The commodity PPI is a reliable leading indicator of the following month’s headline Consumer CPI. And if the former stays flat for the next three months (which is unlikely) – referencing releases in November 2021, December 2021 and January 2022 – the readings will still imply year-over-year (YoY) percentage increases in the headline CPI in the 4.75% to 5.50% range. Furthermore, this is an extremely conservative forecast since the commodity PPI has increased month-over-month (MoM) for the last 17 months. Thus, it’s more likely that the headline CPI rises above 6% YoY than it falls below 4% YoY. To that point, Union Pacific Railroad – a shipping company that operates 8,300 locomotives in 23 U.S. states – released its third-quarter earnings on Oct. 21. And with freight revenue up by 12% and average revenue per car up by 9%, EVP Kenny Rocker said that the results reflected “strong core pricing gains and higher fuel surcharge revenue.” More importantly, though, with the input surge intensifying “over the last 30 days,” the cost-push inflationary spiral remains alive and well, and it signals something important. Source: Union Pacific Railroad/ The Motley Fool Finally, the reason why inflation is so important in terms of its direct effect on the general stock market and its indirect effect on the PMs is due to the composition of the S&P 500. With information technology and communication services stocks accounting for roughly 39% of the S&P 500’s movement, deflationary assets have been the go-to source for returns since 2009. However, if the “transitory” narrative suffers a painful death, a material unwind could ensure. Please see below: To explain, the “Deflation basket” (the dark blue line) has materially outperformed the “Inflation basket” (the light blue line) since the global financial crisis (GFC). Thus, if surging inflation encourages a reversion to the mean, immense volatility could strike the S&P 500. The bottom line? With investors prioritizing FOMO over fundamentals, the general stock market’s recent uprising has helped uplift the PMs. However, with the Fed losing its inflation battle and the USD Index poised to benefit from more hawkish momentum over the next few months, a profound correction of the S&P 500 will only enhance the U.S. dollar’s already robust fundamentals. Moreover, with the PMs often moving inversely to the U.S. dollar, their performance should suffer along the way. In conclusion, the PMs declined on Oct. 21, as the USD Index regained its mojo. Furthermore, the front-end of the U.S. yield curve surged (2-year yield up by 21% rounded), and the U.S. 10-Year Treasury yield closed at its highest level (1.7% rounded) since Apr. 4. Thus, while the PMs borrow confidence from the S&P 500, their fundamentals are actually deteriorating rather quickly. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFA Founder, Editor-in-chief Sunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
USDX, Gold, Silver: A Confluence of Signs This Week

USDX, Gold, Silver: A Confluence of Signs This Week

Przemysław Radomski Przemysław Radomski 20.10.2021 16:23
With silver outperforming and key supports for the USDX holding, what’s in store for the precious metals in the upcoming months? Yesterday’s session was informative. Very. I already indicated some of the specific developments during yesterday’s (pre-market) trading (and I talked about silver and bitcoin recently as well), but having the closing prices, and knowing what happened on a day-to-day basis adds a new dimension to the signals that we saw. Let’s jump into charts. What Was So Important About Yesterday? The key thing that happened yesterday was that silver rallied profoundly while gold stocks didn’t. The latter moved just a little higher, just like gold. This tells us that the rally has most likely either run its course completely or that its end is just around the corner. I’ve been emphasizing this many times before, but it’s so important (and so ignored) that I’m going to repeat it once again – silver tends to outperform in the final part of a rally in the precious metals market. This – by itself – is one of key indications that a top is just around the corner or that we have already seen one. Yesterday’s daily reversal in gold only adds to the bearish implications of the session. Despite the attempt to move much higher, gold ended the day a mere $4.80 higher. The key development, though, happened not in the precious metals market, but in the USD Index. Namely, the USD Index managed not to close back below the previous 2021 highs in terms of the closing prices. The U.S. currency did end the day lower, but it was after a recovery from a much bigger intraday decline. The August top in terms of the daily closing prices is 93.59, and while yesterday’s intraday lows was 93.49, the USDX closed the day at 93.73. The key support held and – obviously – that’s a bullish development for the USDX. Since the latter tends to move in the opposite way to the gold price and silver price, we can say that the above is bearish for the precious metals sector. The lower part of the above charts shows the correlation between the USDX and gold (based on the previous 30 trading days) and as you can see, the correlation is almost always negative, and usually strongly negative – below -0.5. As you can see in the above Correlation Matrix (second row from the top), gold is negatively correlated with the USD Index also in the medium term and in the long term, so this link is quite stable, even though there are exceptions (for example, at times gold shows strength despite the USD’s rallies and it indicates great buying opportunities for gold). The correlation now moved higher, but please note that we saw something similar (to an even bigger extent) in late July, and that was when gold and the USDX itself were performing similarly to what we saw recently. Even the RSI indicator (upper part of the chart) was close to 50 in both cases. Gold and silver are slightly up in today’s pre-market trading, but it doesn’t change any of the above. The USD Index is still above the highest daily close that we saw in August. Consequently, while yesterday’s session might have appeared to be something major, it turned out to be just a combination of factors that we saw at the final days of short-term rallies many times before. It seems that the medium-term downtrend will resume any day now. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFA Founder, Editor-in-chief Sunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
UK Budget Announcement - Commentary

Inflation Advances, and So Does Gold — Except That It Doesn’t

Przemysław Radomski Przemysław Radomski 19.10.2021 19:53
Inflation accelerated again in September, and gold prices (finally!) reacted positively. Bad news: the rally was short-lived. Unfortunately, I was right. One month ago, when commenting on the CPI readings for August, I wrote that inflation “doesn’t have to go away anytime soon” and that the economic developments suggest that “inflation isn’t disappearing just yet.” And here we are, one month later, with inflation accelerating again. Indeed, the latest BLS report on inflation shows that the CPI rose 0.4% in September after increasing 0.3% in August. The core CPI, which excludes food and energy prices, also accelerated to 0.2% in September from 0.1% in the preceding month. On an annual basis, inflation has also accelerated a bit, as the chart below shows. The overall index soared 5.4% in September, following 5.2% in the previous month (numbers seasonally adjusted). It was the biggest surge since July 2008 – and that was in the midst of the Great Recession. Meanwhile, the core CPI edged up from 3.98% to 4.04%. So, inflation is not transitory. On the contrary, the chart above shows that the June overall CPI reading functioned as a peak only temporarily. The fact that inflation rebounded to a new high is a final blow to the ‘transitory inflation’ narrative. Therefore, my warnings that inflation doesn’t have to go away anytime soon remain valid. Actually, my arguments have been strengthened by the recent data. Why? Well, inflation intensified despite the fact that several subindexes declined in September. As we can read in the BLS report: The index for airline fares continued to fall sharply, decreasing 6.4 percent over the month after falling 9.1 percent in August. The apparel index also decreased in September, declining 1.1 percent over the month after rising 0.4 percent in the previous month. The index for used cars and trucks fell 0.7 percent this month, continuing to decline after it decreased 1.5 percent in August. So, why didn’t inflation decrease? After all, the mainstream narrative was that inflation was caused by a few categories strongly linked to the pandemic and the reopening that followed. Well, here we are; these categories fell, but inflation rose. The answer to this puzzle is: the Fed officials and the pundits were wrong. Inflation is not limited to just a few categories because of the supply-chain disruptions, it’s a broad-based phenomenon caused by the increase in the broad money supply and in the monetary demand. More specifically, the declines in some subindexes were counterweighted by increases in others, in particular by the significant acceleration in the shelter index. As one can see in the chart below, the shelter index jumped 3.2% in September, much faster than the 2.8% observed in August. This acceleration is perfectly in line with my analyses. In September, I wrote: Secondly, the index for shelter – the biggest component of the CPI – has been rising gradually since February 2021, and it accelerated from 2.79% in July to 2.82% in August (…) As a reminder, home prices – which are not covered by the CPI – have been surging recently, which should translate into further increases in the index for shelter. Oh boy, I hate to be right! However, I’m afraid that consumer inflation could increase even further in the near future. Careful examination of the money supply growth implies that the real peak in inflation might occur in Q1 2022. Given the upward trend in home prices, the shelter index could continue its upward march. Last but not least, the surging Producer Price Index (see the chart above) might also add to the inflationary pressure. Implications for Gold What does the September report on CPI imply for the gold market? Well, the theory remains the same: high inflation should be positive for gold, as it is considered an inflation hedge. Higher inflation also means lower real interest rates and a weaker greenback, which should support gold prices. However, elevated inflation wasn’t supportive for the yellow metal so far, as it strengthened the expectations of the Fed’s tightening cycle, creating downward pressure on gold prices. All in all, the September report (which showed continuously rising inflationary pressure) made investors rethink the Fed’s transitory argument. These worries pushed gold prices to their resistance level of $1,800 on Thursday, as the chart below shows. Unfortunately for the gold bulls, any hopes of a more prolonged rally were quickly quenched, as the price of gold declined on Friday. So, it seems that until the Fed tapers its quantitative easing, gold will remain under downward pressure. Nonetheless, when it finally happens, better times may come for gold. If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care
This Is When Risk-On Returns

Gold Miners: Will Investors Dump the Laggards?

Przemysław Radomski Przemysław Radomski 19.10.2021 08:46
Mining stocks were picked up by investors in the latest bullish wave. But these bad performers may be dumped just as quickly as they were bought. After the HUI Index rallied back above the neckline of its bearish head & shoulders pattern, a new bull market for mining stocks has finally begun. Or has it? Well, after an identical development occurred in 2000, the HUI Index soon invalidated the breakout (and once again confirmed the breakdown) and a sharp decline followed. Please see below: As further evidence, stock market strength often follows the aphorism that ‘a rising tide lifts all boats.’ And while gold mining stocks rode the bullish wave, the sentiment high will likely reverse over the medium term. To explain, silver and mining stocks are some of the worst performers when volatility strikes the general stock market. And with mining stocks’ recent bout of optimism underwritten by the ‘everything rally’ that we witnessed last week, when market participants ‘panic buy’ everything in sight, they often gobble up the major laggards (with the goal of capitalizing on potential mean reversion). Moreover, with silver and mining stocks some of the worst-performing assets YTD, the excessive optimism helped uplift these laggards last week. To that point, with last week’s move largely driven by sentiment and not fundamental or technical realities, silver and mining stocks’ rallies are unlikely to hold over the medium term. Furthermore, it’s important to remember that cheap assets are often cheap for a reason. And with the marginal buyer of silver and mining stocks buying momentum and not fundamentals, they’ll likely end up holding the bag if/when sentiment reverses once again. In other words, it was probably buying from the general public that helped to lift gold stocks higher – the kind of investors that enter the market at the end of the upswing, buying what’s cheap regardless of the outlook. And these are also the kind of investors that tend to lose money. If you really think that gold stocks were strong last week, please compare their performance to the one of copper, for example. The latter moved sharply higher, while miners simply corrected from their yearly lows. In addition, while I’ve also been warning about the ominous similarity to 2012-2013, the HUI Index continues to hop into the time machine. To explain, the vertical, dashed lines above demonstrate how the HUI Index is following its 2012-2013 playbook. For example, after a slight buy signal from the stochastic indicator in 2012, the short-term pause was followed by another sharp drawdown. For context, after the HUI Index recorded a short-term buy signal in late 2012 – when the index’s stochastic indicator was already below the 20 level (around 10) and the index was in the process of forming the right shoulder of a huge, medium-term head-and-shoulders pattern – the index moved slightly higher, consolidated, and then fell off a cliff. Thus, the HUI Index is quite likely to decline to its 200-week moving average (or so) before pausing and recording a corrective upswing. That’s close to the 220 level. Thereafter, the index will likely continue its bearish journey and record a final medium-term low some time in December. Furthermore, I warned previously that the miners’ drastic underperformance of gold was an extremely bearish sign. There were several weeks when gold rallied visibly, and the HUI Index actually declined modestly. And now, gold stocks are trading close to their previous 2021 lows, while gold is almost right in the middle between its yearly high and its yearly low. And why is this so important? Well, because the bearish implications of gold stocks’ extreme underperformance still remain intact. Let’s keep in mind that the drastic underperformance of the HUI Index also preceded the bloodbath in 2008 as well as in 2012 and 2013. To explain, right before the huge slide in late September and early October 2008, gold was still moving to new intraday highs; the HUI Index was ignoring that, and then it declined despite gold’s rally. However, it was also the case that the general stock market suffered materially. If stocks didn’t decline so profoundly back then, gold stocks’ underperformance relative to gold would have likely been present but more moderate. Nonetheless, broad head & shoulders patterns have often been precursors to monumental collapses. For example, when the HUI Index retraced a bit more than 61.8% of its downswing in 2008 and in between 50% and 61.8% of its downswing in 2012 before eventually rolling over, in both (2008 and 2012) cases, the final top – the right shoulder – formed close to the price where the left shoulder topped. And in early 2020, the left shoulder topped at 303.02. Thus, three of the biggest declines in the gold mining stocks (I’m using the HUI Index as a proxy here) all started with broad, multi-month head-and-shoulders patterns. And in all three cases, the size of the declines exceeded the size of the head of the pattern. As a reminder, the HUI Index recently completed the same formation. Yes, the HUI Index moved back below the previous lows and the neck level of the formation, which – at face value – means that the formation was invalidated, but we saw a similar “invalidation” in 2000 and in 2013. Afterwards, the decline followed anyway. Consequently, I don’t think that taking the recent move higher at its face value is appropriate. It seems to me that the analogies to the very similar situation from the past are more important. As a result, we’re confronted with two bearish scenarios: If things develop as they did in 2000 and 2012-2013, gold stocks are likely to bottom close to their early-2020 low. If things develop like in 2008 (which might be the case, given the extremely high participation of the investment public in the stock market and other markets), gold stocks could re-test (or break slightly below) their 2016 low. In both cases, the forecast for silver, gold, and mining stocks is extremely bearish for the next several months. For even more confirmation, let’s compare the behavior of the GDX ETF and the GDXJ ETF. Regarding the former, the GDX ETF’s small breakout mirrors what we witnessed during the senior miners’ downtrend in late 2020/early 2021. Moreover, when the GDX ETF’s RSI (Relative Strength Index) approached 70 (overbought conditions) back then, the highs were in (or near) and sharp reversals followed. Please see below: As for the GDXJ ETF, the gold junior miners’ RSI also signals overbought conditions and history has been unkind when similar developments have occurred. To explain, I wrote on Oct. 15: It is quite interesting when you consider how high the RSI is right now, and when in the past both the RSI and the GDXJ itself were trading at today’s levels. That was in late February 2020. Back then, juniors were after a short-term rally from below $40, and they topped above $44. The RSI approached 70 — just like what we see today. And then the GDXJ declined below $20 in less than a month. I think the decline will take place longer this time, but the outlook is still extremely bearish. By the way, the last time when the RSI was as high as it is right now was… right at the 2020 top. That’s yet another indication for gold that signals that the top is in or at hand. Please see below: Also noteworthy, while mining stocks outperformed gold on Oct. 15, their relative strength requires further verification to be considered material. For example, gold declined by 1.65% on Oct. 15, while the GDX ETF and the GDXJ ETF were down by roughly 1%. Moreover, this occurred with the USD Index largely flat. However, mining stocks will likely play catch-up over the next few months and their relative strength should reverse over the medium term. In other words, it’s not correct to simply compare gold stocks and gold right now and say that the former were strong. It should be noted that the USD Index did nothing on Friday (Oct. 15) and gold stocks declined anyway. Consequently, it’s just the case that gold was the “odd man out” on Friday, while other markets were relatively normal. The USD Index verified its breakout, but it hasn’t moved visibly higher yet, so miners didn’t move visibly lower yet. Yet. Finally, while I’ve been warning for months that the GDXJ/GDX ratio was destined for devaluation, the ratio has fallen precipitously in 2021. And while a tiny breakout occurred last week, the price action actually mirrors what we witnessed in early 2020 – right before the ratio fell off a cliff. As a result, further downside likely lies ahead. The bottom line? If the ratio is likely to continue its decline, then on a short-term basis we can expect it to decline to 1.27 or so. If the general stock market plunges, the ratio could move even lower, but let’s assume that stocks decline moderately (just as they did in the last couple of days) or that they do nothing or rally slightly. They’ve done all the above recently, so it’s natural to expect that this will be the case. Consequently, the trend in the GDXJ to GDX ratio would also be likely to continue, and thus expecting a move to about 1.26 - 1.27 seems rational. If the GDX is about to decline to approximately $28 before correcting, then we might expect the GDXJ to decline to about $28 x 1.27 = $35.56 or $28 x 1.26 = $35.28. In other words, ~$28 in the GDX is likely to correspond to about $35 in the GDXJ. Is there any technical support around $35 that would be likely to stop the decline? Yes. It’s provided by the late-Feb. 2020 low ($34.70) and the late-March high ($34.84). There’s also the late-April low at $35.63. Consequently, it seems that expecting the GDXJ to decline to about $35 is justified from the technical point of view as well. In conclusion, gold, silver, and mining stocks are doing what they often do: with short-term oversold conditions eliciting countertrend rallies, investors that ignore history, technicals, and fundamentals are hoping that this is the rally where the precious metals finally deliver on all of their promises. However, with each corrective upswing akin to ‘The Boy Who Cried Wolf,’ investors are often left disappointed when they run to the precious metals rescue. As a result, a similar outcome will likely materialize this time around. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFA Founder, Editor-in-chief Sunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
We Will Probably Review All Of Inflation Indicators Around The World This Weekend

Beware, Gold Bulls — That’s the Beginning of the End

Przemysław Radomski Przemysław Radomski 18.10.2021 11:40
Strong words, I know. Can I back them up? Well, what we see now – looking at various markets – does indeed look like the start of gold’s end. “Everything that has a beginning has an end.” – The Oracle in Matrix Revolutions, 2003 The counter-trend rally has probably just ended, and the final big downswing has probably just started. This “beginning” of the final downswing is, in my opinion, the beginning of the final part of the prolonged sideways trend in gold that started in 2011. In the case of silver and mining stocks, that’s likely the final part of the decline that started back then. These are strong words – I know. Let’s see if I can back them up. First of all, I’ve been writing about the analogy between 2013 and now for many weeks now, and you can read about these analogies in this week’s flagship analysis. This key link remains intact. The charts given below confirm that from the short-term point of view. In yesterday’s analysis, I commented on them in the following way: Gold jumped to its 40-week moving average and to the declining red line based on the previous short-term highs. Let’s check the context – what happened in 2013? Right before moving to its previous medium-term lows, gold moved to its declining red resistance line that was also very close to its 40-week moving average. I marked this situation with a red arrow on both charts. As you can see, nothing changed. The link between 2013 and now remains completely intact and its implications remain very bearish. On a very short-term basis (yesterday’s session), silver outperformed gold and moved above its declining resistance line. While gold moved higher by 0.18%, silver moved higher by 1.32%. I wrote this numerous times, and I’m going to write about this again today – silver’s very short-term outperformance of gold is not a bullish sign but a bearish one, and being aware of that is one of the more useful gold trading tips. As far as silver’s “breakout” is concerned, it’s nothing bullish either. When you look at the August top, you’ll see that it also happened after a small, short-term breakout. The same with the early-September high. We’re seeing the same thing once again, and the implications are, once again, bearish. On the bottom part of the above chart, you can see the HUI Index – a proxy for gold stocks. It moved notably higher recently, and it even moved above its March low, but it’s still far from its November 2020 low. So, taking a broader point of view, gold stocks are still the weakest part of the precious metals sector right now. Moreover, please note that gold failed to hold its tiny move back above $1,800 – it was quickly invalidated. At the moment of writing these words, gold is trading at about $1,785. Also, speaking of mining stocks, let’s take a look at what the juniors did. They rallied profoundly, which by itself might not be the most exciting thing you read today, especially given our short positions in them (let’s keep in mind that we took profits from the previous short position in the junior miners on Sep. 28, just one day before the bottom), but it is quite interesting when you consider how high the RSI is right now, and when in the past both the RSI and the GDXJ itself were trading at today’s levels. That was in late February 2020. Back then, juniors were after a short-term rally from below $40, and they topped above $44. The RSI approached 70 — just like what we see today. And then the GDXJ declined below $20 in less than a month. I think the decline will take place longer this time, but the outlook is still extremely bearish. By the way, the last time when the RSI was as high as it is right now was… right at the 2020 top. That’s yet another indication for gold that signals that the top is in or at hand. But why shouldn’t gold, silver, and mining stocks rally even higher before turning south? Not only are they overbought on their own, but they actually have a good reason to reverse, which is coming from the USD Index. The USD Index moved back to its previous 2021 lows and its rising support line, and then it moved back up. It’s also been moving higher in today’s pre-market trading. This tells us that the corrective flag pattern might already be over and – since the support held – the next move higher is quite likely just about to start, or it’s already underway. Even though the USD’s move higher is so far very tiny, gold and silver are down by about 0.5% today. Is the top in the PMs in? This seems quite likely to me. What we see right now – especially in light of the analogy to Feb. 2020 in the GDXJ – does indeed look like the beginning of the end. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFA Founder, Editor-in-chief Sunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.