“What is chaos for the fly, is normal for the spider.”
Remember the analogy to 2011? I haven’t discussed it in several days, but that doesn’t make it any less meaningful or profound. It’s one of the more important factors contributing to my current prediction for gold prices in July 2024.
The implication I’ve been emphasizing recently is that the back-and-forth nature of the decline is normal and to be expected at this time. This continues to this day – we have lower lows.
That’s not the only takeaway from this analogy. Let’s take a closer look.
That’s the chart that I featured previously – I wanted to emphasize not just the price movements, but also the volume spikes that – together with the price moves – make this analogy apparent.
But when we zoom in, something else becomes visible.
This chart also includes the declining resistance line based on the final high and the first high after it.
If you take a closer look at that line, you’ll see that right before the slide, there were two breakouts above this line.
The bottom before the final fake breakout was at the previous immediate-term lows. At that time, many analysts were forecasting gold prices at much higher levels.
Sounds familiar? It should be because that’s what we see right now.
The first fake breakout was in mid-June, then gold price moved to its previous lows, and we saw the second breakout today.
The breakouts are happening just like what we saw in 2011 – right before the decline accelerated.
Timewise, in 2011, the time between the second top and the final short-term top was slightly bigger than the time between the key tops (11 days vs. 9 days).
This time, the tops were 26 days apart, and applying this ratio (22.2% more) would provide us with the time target for the final top about 31-32 days after the second top. Today was the 30th day after the second top.
This means that the scenario in which gold invalidates its breakout on Friday or early next week would be most in line with the analogy to 2011. Therefore, it seems reasonable to forecast a bearish turnaround in gold prices in the second week of July 2024.
Also, do you remember the triangle-vertex-based reversal in gold? You know, then one that pretty much perfectly timed the last top in gold?
We’re about to see another triangle-vertex-based reversal point. Its due on the following trading day – on Monday.
This means that gold might indeed stay where it is without declining or even moving somewhat higher today (Jul 5)
The key take-away here is this, though: what we saw in the first week of July is NOT an invalidation of the bearish patterns that I’ve been commenting on in the previous days, but rather a continuation of a broader – bearish – pattern.
Additionally, it’s not just the case that what we see now is in tune with gold’s 2011 top. It’s also in tune with what we saw after the 2020 top a well.
Gold Price Forecast – the Long-term Chart
Corrections after the final top in gold are common – what we see right now is typical. The huge volume that we saw previously helped to put things into perspective – that was THE medium-term top, not just the start of a pause.
What we see now is a post-top correction – again, this is common for gold.
The fact that we see this specific price pattern (where gold forms a fake breakout as the third small top after the final one) once again makes it clear what’s about to happen – a significant decline.
Patience is difficult. And it’s not pleasant when one decides to wait. But it’s one of the qualities that successful investors and traders need to have. The same goes for objectivity and flexibility – when the outlook for gold price changes, one should change their positions as well. The thing is that at this point, the outlook for the following weeks and months has not changed, and in my opinion, the likelihood of seeing enormous declines in junior mining stocks remains very high. The same is likely for gold.
Thank you for reading my today’s free analysis. If you’d like to read more (comments on mining stocks, profit-take targets for our current positions) 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.
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Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief