Break-Out Not Likely To Hold: Gold & Silver Likely To Decline In Dollar Terms And In Euro Terms

The history tends to rhyme, so it’s likely to do it again…

by Przemyslaw Radomski via Sunshine Profits

The Euro and Silver Cues for Precious Metals

The greenback isn’t the only currency that precious metals’ investors need to consider. As we just received a request to include the yellow metal analysis in terms of the euro, we deliver.

Gold priced in the euro moved above its February high and verified this breakout by bouncing from it twice. Still it lost its momentum and broke below the rising support line (and then verified this breakdown by moving back to the rising line and verifying it as resistance).

Will this breakout hold? We doubt it. Please note that gold price in terms of the euro declined profoundly in March, when gold declined in the USD terms. Why? Because gold declined more than the USD Index rallied. The history tends to rhyme, so it’s likely to do it again.

And it is not only analogy to March that suggests so, it’s also the way gold finished the previous bear market before staring the long-term bull market.

When the USD Index soared in 1997, gold declined heavily from both: US and European point of view. Of course, the decline took years back then, but the overall shape of the relationship was similar.

The analogies to both previous situations, the very recent one and the more distant one point to the same conclusion. If the USD Index soars in the following weeks, gold is likely to decline – also in terms of the euro. And the USD Index is likely to soar in the following weeks. Guess what that means for precious metals.

In the full version of the analysis, we also feature our preferred way of taking advantage of the current situation and the analogies to the previous price moves.

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Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager