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Correction Within a Medium-Term Downtrend in the Offing for Gold

By Sunshine Profits (Przemyslaw Radomski, CFA)CommoditiesJan 25, 2023 06:30AM ET
www.investing.com/analysis/correction-within-a-mediumterm-downtrend-in-the-offing-for-gold-200634689
Correction Within a Medium-Term Downtrend in the Offing for Gold
By Sunshine Profits (Przemyslaw Radomski, CFA)   |  Jan 25, 2023 06:30AM ET
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Gold recently moved above its August highs but stopped – approximately – at its June highs. This doesn’t have to be the top, but it’s pretty likely to be one, especially since gold recently moved quite close to the most prominent of its Fibonacci retracement levels – the 61.8% one.

But you’ll see that more clearly on the following short-term gold chart. For now, I would like you to note the shape of this week’s gold performance. On the chart, you can see the gold prices shown as weekly candlesticks.

Gold Price Weekly Chart
Gold Price Weekly Chart

Gold reversed. This might not be something very important per se because there are two more sessions this week; however, when one compares it to the performance of silver and junior mining stocks (VanEck Junior Gold Miners ETF (NYSE:GDXJ)) that both declined so far this week, it becomes something that should make gold bulls concerned.

The chart below shows that while gold moved slightly above its recent short-term highs, silver is far from doing the same thing. Silver has serious problems with staying above the $24 level.

Gold-Silver Price Chart
Gold-Silver Price Chart

The orange rectangles on the previous chart represent the corrective upswings from approximately the previous local lows. There are two of them, and back in 2013, there was just one corrective upswing before gold plunged.

However, please remember that history doesn’t repeat itself to the letter – it rhymes. This means that two corrections instead of one are still within the scope of the similarity, especially since the first correction wasn’t as big as the 2008 one.

The current situation is extraordinary, as the rate hikes are something we haven’t seen in a long time. The same goes for the level of concern about the inflation “out there.” The latter implies that when faced with a decision on whether to fight inflation or help the economy, the Fed is likely to lean toward the former. And that’s bearish for assets like gold.

Gold Daily Chart
Gold Daily Chart

A series of daily reversals indicate that gold is just waiting for a trigger to move lower. The RSI indicator is trading very close to 70, which means that it’s pointing to a condition that’s not yet clearly overbought but is close to being overbought.

If gold moved higher and reached its 61.8% Fibonacci retracement level, then the odds are that the RSI would move to the 70 levels, thus creating a clear sell signal.

The above could happen as the markets overreact to the CPI numbers released today, regardless of what the numbers actually are.

However, does gold need this to happen before declining? It doesn’t.

Gold moved slightly above its June 2022 high and then back below it. That’s an invalidation of a breakout, which is a bearish indication.

The fact that we saw several recent intraday reversals makes it even more likely that gold will move lower soon.

Correction Within a Medium-Term Downtrend in the Offing for Gold
 

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Correction Within a Medium-Term Downtrend in the Offing for Gold

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Comments (10)
Dwain Hobbs
Dwain Hobbs Jan 26, 2023 2:42AM ET
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Wher have u been hiding nuthead ? Gold was desperately waiting for your bearish articles to get more firepower and move up ,, just in time lol
Sunghoon Shawn Hwang
Sunghoon Shawn Hwang Jan 26, 2023 2:10AM ET
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I wonder how he manage his business with what?
Dwain Hobbs
Dwain Hobbs Jan 26, 2023 2:10AM ET
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Spam business needs no management
James Invest Outlook
James Invest Outlook Jan 26, 2023 12:29AM ET
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Good points and charts to consider.
Golden Nugget
Golden Nugget Jan 25, 2023 11:07PM ET
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You said silver outperforming gold was bearish for gold and you're saying gold outperforming silver is bearish.
Bernd Langer
Bernd Langer Jan 25, 2023 11:07PM ET
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Don’t believe a word he is saying. Radomski is cherry-picking TA indicators at will to support his bearish thesis.
Dwain Hobbs
Dwain Hobbs Jan 25, 2023 11:07PM ET
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A cat crossing the road and a dog barking past midnight is also bearish ,, basically everything for him is bearish ,,
Patron Silver
Patron Silver Jan 25, 2023 2:48PM ET
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How much are you down?
Khalid Aldawood
Khalid Aldawood Jan 25, 2023 2:17PM ET
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One more stupid note of so many before and so many to follow
Jason Guptill
Jason Guptill Jan 25, 2023 11:40AM ET
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This guy again LOL
john mcnaught
john mcnaught Jan 25, 2023 11:40AM ET
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Exactly - gold down his only story 🤣
FIGARD Tony
FIGARD Tony Jan 25, 2023 9:28AM ET
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graph analysis is only one indicator, the investors expecting to make money use this kind of analysis so they make happen what they expect by reading graph. But when the true investors (big funds, banks and government) decide to do something the graph analysis becomes useless... So don't believe so much, and always trade carefully and safely. Nodody can read the future.
Tom Scheuermann
Tom Scheuermann Jan 25, 2023 9:28AM ET
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there is definitely something to be said for this. I have not see TA like he uses reliably work....and obviously it's not working much for him either as he has been so wrong. my opinion is stuck to fundementals with a long term time horizon and price action is noise but you will eventually get there if your analysis is correct.
post blue
post blue Jan 25, 2023 9:12AM ET
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bro stop it. i am listening to you since gold is 1780 and here we are at 1940
param walia
param walia Jan 25, 2023 9:12AM ET
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He said the same thing when gold was at 1620.
Dean SP
Dean SP Jan 25, 2023 8:04AM ET
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good analysis. thank you
Tom Scheuermann
Tom Scheuermann Jan 25, 2023 8:04AM ET
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it's actually brutal, like he has been for the last half year
 
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