Gold Forecast: Gold And Silver Waver - A Repeat Of The 2012 Fall Coming?

The key things that I described in last week’s flagship analysis (posted on Thursday) remain up-to-date, but there are a few specific comments that I would like to make today about Friday’s session.

Gold prices moved higher on Friday, and they are somewhat down so far today, which means that overall the monthly consolidation continues.

Silver prices moved higher, but it was nothing to write home about, and overall, silver continues to decline in a back-and-forth manner.

Moreover, since the white metal just moved to its declining resistance line, the odds are that we’ll see another short-term downswing shortly.

The above-mentioned moves in gold and silver are in perfect tune with what we saw in 2012 in both precious metals right after the final pre-slide top.

In both cases, the decline first took the form of a back-and-forth move lower, which is generally what we see on the charts right now. Therefore, lower, not higher, values of precious metals are to be expected in the medium term, even though it’s not 100% clear when the short-term consolidation will end.

Silver’s move to its declining resistance line suggests that another short-term decline is just around the corner, but then again, silver is known for fake breakouts right before declining, so it wouldn’t be surprising to see some short-term strength before a much bigger decline resumes.

Junior miners moved slightly above their triangle pattern, but this breakout is far from being confirmed. The GDXJ closed the day just slightly above the upper border of the triangle, and the move took place on relatively low volume. This indicates that market participants are not convinced that the next move will really be to the upside.

Also, since I already wrote about the similarity to 2012 in gold and silver, let’s see how GDXJ performed at that time.

In short, it performed similarly.

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.

What happened next?

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.

Summary

Despite the ongoing Russian invasion of Ukraine, and despite gold being the traditional safe haven in times of turmoil, the overall outlook for the precious metals sector remains bearish for the next few months, and the medium-term outlook for the yellow metal remains pessimistic.

Since it seems that the PMs are starting another short-term move lower more than it seems that they are continuing their bigger decline, I think that junior miners would be likely to (at least initially) decline more than silver.

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Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Sunshine Profits - Effective Investments through Diligence and 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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