Gold declined after moving to its 61.8% Fibonacci retracement ONCE AGAIN. The implications are clear.
Gold just jumped to its 61.8% Fibonacci retracement. On a day-to-day basis, we just saw a sizable, two-day rally that might seem like uptrend’s continuation.
BUT.
This is exactly what used to happen multiple times after gold tops. This is the default post-top price action for the yellow metal. Again, default.
That’s how gold topped in 2020, 2022, and 2023. It even topped in this way in mid-2019.
In 2008, gold corrected slightly more than 61.8% of its initial decline before plunging, but I’ll move to that in a while, when I’ll describe the analogies between now, 2008 and 2022 in multiple markets.
For now, the above chart provides enough context to prove (!) that the current move up in gold – to its 61.8% retracement – is a normal part of the post-top decline.
Normal, default – whatever one chooses to call it, the key thing about it is that it’s NOT a game-changer. It’s not a return to the previous uptrend. Or at least what we saw so far is NOT an indication thereof.
Impossible to see when looking at just the day-to-day performance, I know, but it’s so obvious and clear when we take a step back and look at the situation from the distance.
As far as the link to 2008 and 2022 is concerned, I described it more thoroughly on Wednesday, but the implications remain up-to-date. I added Fibonacci retracements on the gold charts so that you can see that what we see now is indeed NORMAL.
We saw something similar also in 2008.
At that time, gold corrected slightly more than 61.8% of its initial decline, but the overall tendency for the yellow metal to move back up before sliding to new lows was there.
Today, we see that gold declined quite decisively, moving lower by over 1%, and almost erasing Friday’s gains, which perfectly fits the scenario that played out after gold topped multiple times.
Namely, gold is moving lover after touching its 61.8% Fibonacci retracement.
Silver’s prior outperformance, as well as the fact that mining stocks declined on Friday despite gold’s gains (GDXJ was down by 0.53% while GLD was up by 0.81%), serves as a short-term confirmation of the top.
This, plus the fact that the USD Index is rallying after an intraday reversal, doesn’t bode well for the future of gold prices.
The USDX appears to have bottomed out at its 50-day moving average, and at the same time, it verified the breakout above the February and early-April highs. This is bullish, and while gold doesn’t have to react to the dollar’s rallies immediately, it’s very likely to do so eventually, especially if the USD’s rally is substantial.
It seems that the major tide is here in the case of currencies (USD/YEN!), stocks (tech stocks, broad market), bitcoin, and precious metals. It also seems that junior mining stocks provide an excellent opportunity right now, and I invite you to subscribe and read all key details in my premium Gold Trading Alert (along with trading details). Subscribe today.
Thank you.
Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief