Gold is likely to move even higher before a profound invalidation and plunging…
In yesterday’s Alert, we wrote that gold was likely to move higher – at least to $2,000, while the USD Index continued to form its broad bottom, while the GDX ETF was likely to move to about $43.
That’s exactly what happened yesterday and what continues in today’s pre-market trading.
Gold is trading above $2,000 while the similarity to the early-March rally remains intact. This means that gold is likely to move even higher before plunging. In fact, we still think that a move a bit above the previous high, and then a profound invalidation are likely.
After all, that’s what the similarities to both: March top, and the 2011 top suggest.
On the above chart you can also see that the pace at which gold corrected upward before the final (second) top, was slightly smaller than the pace at which gold declined from the first top. Consequently, seeing this kind of action right now is not a reason to be concerned. Even if gold moves slightly above the previous 2020 high this week, the short-term outlook would likely remain bearish.
The next support – and target – is at $1,700, which is where – approximately – gold topped and bottomed multiple times earlier this year.
Please note that in its moves, gold is currently super-sensitive to what’s happening in the USD Index. This month’s $200+ decline and the subsequent rebound in gold were triggered by less than a 1.5 index point rally and then a decline in the USDX. This means that quite likely even small moves in the USDX in the next several hours – days could be enough to trigger a big rally and an even bigger decline in gold.
This also means, that once the USD Index rallies in a more profound way, gold would be likely to truly plunge.
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