Gold, its rally and its upside target

Gold soared today and it almost touched the $4,000 level, but miners already reversed.

While it could be the case that gold keeps on rallying even up to $4,150, miners might move up by relatively little.

The Fibonacci-extension-based (2.618) target based on the 2008-2011 rally was just reached, but the upper border of the rising trend channel was not. The former creates the lower border of gold’s upside target, and the latter its upper border.

Can gold price really rally to $4,150 or so? Yes, however, given how extremely overbought gold is (much more than it was at its 2011 top), it seems that any move to this level would be very brief and the sell-off can – and is likely to – be something epic. This is why – if I had to consider betting on a long side here – I wouldn’t bet on higher gold prices.

Silver’s moment: The final burst before the fall?

If anything – as far as the long side is concerned - one might want to bet on silver’s final outperformance and a rally up to $50 - $52 before it slides along with gold.

Why even $52? Because silver is known for its fake breakouts. A move $1-$2 above its all-time high would serve as the ultimate bull trap. Silver had already reached the $47.74 upside target that I had featured last year, and I think that the additional rally from here will be short-lived – even despite silver’s exceptional long-term potential.

Interestingly, gold is rallying despite the move higher in the USD Index.

This is in tune with what I wrote previously the likely reaction to USD Index’s upcoming strength. Namely, the precious metals sector is likely to finally plunge when the rally in the USD Index is clear. Is it clear now? Not really.

The Dollar’s silent comeback: A rally in the making

Yes, the U.S. dollar moved higher after verifying its short-term breakout, which itself happened after it verified its medium-term breakout, and it’s all happening while the USD Index is universally hated, Fed started to cut rates, and the employment numbers are not being published due to U.S. government shutdown. It seems that the USD is able to rally despite everything being thrown at it.

This is a massive USD rally waiting to happen, and the PMs are not going keep ignoring this for much longer.

In other words, my previous comments on the trigger for the big moves in the markets remain up-to-date:

Gold is likely in the final blow-off part of the speculative parabolic upswing, and it’s “doing its own thing”.

To be clear – gold didn’t permanently disconnect from the USD. We simply have a moment where it’s moving “on its own” as the rallying prices make it more attractive to other buyers (that’s how investment goods differ from consumer goods, which are less attractive to buyers when they are more expensive). But once the parabola breaks, the slide can and is likely to be huge.

And the decisively rallying USD Index is a likely trigger. There can be more of such triggers, though, for example serious turmoil on the job market. Those statistics triggered the 2020 sell-off, and it seems to me that we’re going to see problems there due to either (or more likely both) of the following:

-        The AI revolution, which causes job losses

-        The tariff hikes – their consequences are slowly creeping up

The problem here is that while the job losses in 2008 were temporary, the results of the above could be permanent or at least of medium- or long-term importance.

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