In short, this might really be the case. But since we just saw a rally in the price of gold, let me start by commenting on that.
The gold price tends to be volatile before important statistics are released, and today is one of those days.
Today, we have ADP nonfarm employment statistics (the leading indicator for nonfarm payrolls) and, 15 minutes later, the initial jobless claims. Then, 1.5 hours after the opening bell, we’ll get the Fed monetary policy report.
As investors sometimes try to guess what the report is going to be and then attribute certain meaning to this expected outcome, gold moves up and down. It seems that we saw this phenomenon in today’s pre-market trading.
Gold moved up in a quite sharp manner, but not particularly significantly so. It moved above the declining resistance line, which might have been a big deal if it wasn’t exactly the same event that – in late June – was then invalidated and triggered significant declines.
Besides, the head-and-shoulders pattern I described yesterday could partially explain why gold moved higher here. I wrote that both shoulders tend to have some degree of similarity. Consequently, today’s move very close to the mid-June high is unsurprising.
Moreover, you know very well (if you’ve been following my analyses for some time) that silver’s very short-term outperformance is a bearish indication, and that’s exactly what we see right now (precisely, what I see at the moment of writing these words).
Silver moved higher approximately 3x as much as gold, and it moved above the $30 level again.
Remember what happened when we saw this in mid-June? Silver and gold topped (and so did miners) and declined, quickly invalidating the fake breakout.
Something similar could be in the works right now.
The USD Index continues to consolidate around the 105.5 level. Since this has been the case for a couple of weeks now, the U.S. currency seems ready for its next big move up.
Again, why would a move up here be likely? Because the USDX is after long-, medium-, and short-term breakouts.
Besides, another anti-dollar asset appears to be ready to break lower.
Last week’s rebound from below $60k didn’t take bitcoin as high as the previous (May) rebound – it was much lower.
This confirms my theory, according to which those, who wanted to get in the bitcoin have mostly done so ahead of its halving, as it was presented as a “sure bet” event that would take bitcoin to the moon. That didn’t happen, and while the price didn’t fall enough to trigger waterfall selling (yet), the size of the recent rebound confirms that there was little buying power left to keep pushing bitcoin to higher prices.
And if this is indeed the case, then bitcoin is about to plunge. The $60k is a powerful support -it held several times, so it will be an important sell signal when it’s broken (and the breakdown is confirmed).
The other important detail is that the rally preceding the move above $60k was big and sharp. As there have been no significant tops/bottoms since $40k, this also means that the price won’t have meaningful support until it slides to $40k.
So, a slide to this level is likely (and then lower, but this is likely the medium-term target).
Let’s keep in mind that bitcoin was the first anti-dollar asset to rally in February/March. It might be the first anti-dollar asset to plunge this month. Gold, silver, and miners would be very likely to follow.
Thank you for reading my today’s free analysis. If you’d like to read more and stay up-to-date with the quick trades, intraday Alerts, and all the key details that my subscribers are getting, I invite you to sign up for my Gold Trading Alerts or the Diamond Package that includes them. Alternatively, please sign up for my free gold newsletter today.
Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief
P.S. While I think that gold will move lower in the following months, please note that I’m keeping my insurance capital (physical gold/silver) intact. If you want to establish this capital or you want to buy gold/silver now anyway(or plan to do so soon), I encourage you to do so using the gold dealers that we trust. The above link will take you to a page that includes one US and one UK dealer. The former also has a pretty cool Inflation/Retirement Calculator, I encourage to check it out.
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