Pullback in Gold Stocks or a New, Powerful Decline?

Let’s take a closer look at the charts to find out.

What Happens Before Bigger Declines?

The clue to answering the above question lies in the final part of the rally that we saw last week.

That’s when miners clearly underperformed gold and when silver outperformed. Junior miners (upper part of the chart) moved just slightly above their initial high, gold moved somewhat higher, and silver pretty much doubled the size of its initial rally.

That’s what tends to happen right before bigger declines – and the emphasis really does go on “bigger”.

What has happened so far? Well, not that much. Even though yesterday’s rally was huge on a stand-alone basis, it only took miners back to their previous lows in intraday terms (we did see a move to new yearly lows in terms of the closing prices, though), and gold is not at its new lows yet.

The silver price plunged – quite decisively so.

Interestingly, the latter happened only a bit over a month after the moment when silver tried to move above the $25 level. On a side note, we saw the same indication in the first days of February – miners were underperforming gold, and based, i.a., on it, I warned that a decline was coming.

Now, the white metal has declined below its 61.8% Fibonacci retracement level, which is a great indication that this decline is not just a correction but actually a new, big move lower.

Let’s keep in mind that miners and silver are linked not only to gold and the USD Index but also to the stock market.

Mining stocks, because they are, well, stocks.

Silver due to its multiple industrial uses.

What Are Stocks Likely to Do Next?

Stocks formed a clear reversal on Monday, so they were likely to decline on Tuesday, and that’s exactly what happened.

However, given the analogy to the previous decline that started in August 2022, it seems that the rally has only begun.

The recent bump in the RSI indicator and a top in it that I marked with a blue arrow suggest that the current situation is similar to what we saw in the early part of the slide.

So, silver and miners have been so weak that they managed to decline even without the stock markets’ help. What’s likely to happen when they finally do get this bearish “help”?

That’s right, you guessed it – miners and silver are likely to decline in a truly profound manner. Just as I warned you at the beginning of February, I’m warning you right now – in my opinion, another big move lower is already underway. And the profits of those who are positioned to gain from the upcoming decline (like my subscribers, for example) are likely to increase much more than they increased based on yesterday’s slide.

Naturally, the above is up-to-date at the moment when it was written. When the outlook changes, I’ll provide an update. If you’d like to read it as well as other exclusive gold and silver price analyses, I encourage you to sign up for our free gold newsletter.

Thank you.

Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief
Sunshine Profits: Effective Investment through Diligence & Care

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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.

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