Gold And Silver Waver - A Repeat Of The 2012 Fall Coming?
Sunshine Profits | Apr 12, 2022 01:49AM ET
The key things that I described in last week’s flagship analysis 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 were somewhat down on Monday, which means that overall the monthly consolidation was continuing.
Silver prices moved higher, but it was nothing to write home about, and overall, silver was continuing to decline in a back-and-forth manner.
Moreover, since the white metal had just moved to its declining resistance line, the odds were 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 was generally what we were seeing on the charts lately. Therefore, lower, not higher, values of precious metals were 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 suggested that another short-term decline was just around the corner, but then again, silver has been 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 was far from being confirmed. The VanEck Junior Gold Miners ETF (NYSE:GDXJ) closed the day just slightly above the upper border of the triangle, and the move took place on relatively low volume. This indicated that market participants were 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.
Get The News You Want
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 Direxion Daily Junior Gold Miners Index Bear 2X Shares (NYSE:JDST) wasn’t trading at that time yet, but Direxion Daily Gold Miners Index Bear 2X Shares (NYSE:DUST), which trades opposite to VanEck Gold Miners ETF (NYSE: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.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.