Gold: No Cheer In The New Year

What a method to start a year! Gold simply faked its return before relocating to brand-new yearly lows. Thats an extremely bearish way for a market to start the year.

The upper part of the above chart includes the GDXJ ETF– proxy for junior mining stocks, the middle part includes the GLD ETF– proxy for gold, and the bottom part features the S&P 500 Index.
The red lines compare the previous stock exchange highs to what happened in junior miners, and the dotted lines reveal what juniors did when gold formed its current highs and lows.
Simply put, junior gold mining stocks are underperforming both: gold, and other stocks.
This is as bearish as it can get, offered the current circumstance regarding the USD Index (which remains in a medium-term uptrend) and the situation in the rate of interest, which are not just about to increase, however the expectations of them increasing are ending up being a growing number of hawkish. And thats no accident either, as its in tune with the present political story in the U.S.– inflation is presently presented as the significant opponent that needs to be handled.
Conclusion
To put it simply, as the situation in interest rates is most likely to become even more hawkish and the USD Index is most likely to move higher, gold is most likely to decrease, therefore– eventually– will the basic stock market. And given that junior mining stocks have currently proven over and over once again that they amplify declines on both markets, they are most likely to fall particularly hard, when the above markets decrease. We acquired rather a lot based on the decrease in the juniors in 2021, but it seems that the gains that might be reaped in 2022 (obviously, I cant and Im not promising any sort of specific efficiency for any market) based on junior miners decline (and then their revival) might be breathtaking– but as always, just if one is located properly for both significant moves.
Thank you for reading our totally free analysis today. The latter includes numerous premium details such as the targets for gold and mining stocks that could be reached in the next couple of weeks. If you d like to check out those exceptional information, we have good news for you.
Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Sunlight Profits: Effective Investment through Diligence & & Care
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Updated on Jan 6, 2022, 11:16 am

A Down Year For Gold
Gold declined, fabricated its return, and then declined again to brand-new annual 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 need to– in theory– take place.
Im describing the propensity for financiers to leave losing positions (and– in tune with my expectations and against expectations of practically everybody else– 2021 was a down year for mining, silver, and gold stocks, after all) near the end of the year, in order to gather the tax loss, and after that to return into the marketplace in early January.
In spite of the above propensity, gold is down, silver is down, and mining stocks are down also.
This shows that the precious metals market is weak (which has been clear because gold revoked its breakout above the 2011 high in 2020) and is not likely to skyrocket considerably (in terms of hundreds of dollars) unless it slides.
Besides, at the beginning of significant rallies, gold stocks tend to blaze a trail up. And right now, its exactly the opposite.

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Considered that miners underperformed gold and silver briefly exceeded it, we have a really bearish storm developing for the next couple of weeks/ months.
On Jan 3, I composed the following:
The year 2021 is over, 2022 has actually lastly gotten here. Nevertheless, why does the current cost action appearance “sooo in 2015”? Due to the fact that the patterns appear to be repeating and the clearest resemblance is present in the key rare-earth element– gold itself.
Gold costs moved higher in late December, and it took place on low volume. The rally triggered the stochastic sign to move above 80 and the RSI above 50. Thats exactly what took place in both: late 2021 and late 2020.
What does it indicate? Well, it indicates that we should not trust this rally, as it could end suddenly, similar to the one that we saw a year back.
Besides, gold remedied 61.8% of the preceding decrease (so it relocated to its most traditional Fibonacci retracement), which means that– technically– what we saw in the previous 2 weeks was just a correction, not the beginning of a new rally.
And what occurred next?

Gold just fabricated its comeback prior to moving to brand-new annual lows. Due to the fact that the patterns appear to be duplicating and the clearest similarity is present in the crucial valuable metal– gold itself.
Gold prices moved higher in late December, and it took place on low volume. In other words, as the scenario in interest rates is likely to end up being even more hawkish and the USD Index is likely to move higher, gold is likely to go down, and so– ultimately– will the general stock market. The latter consists of several premium details such as the targets for gold and mining stocks that might be reached in the next couple of weeks.

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