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Fibonacci Seems to Be Right Once Again – At Least About Gold

Sunshine Profits - Tue Feb 27, 3:55AM CST

After moving higher on Friday, gold price disappointed on Monday. What’s going on? Which move is real?

There was no major news on either day (Friday or today), so the odds are that the price moves were of technical nature. I wrote about that in my Friday’s extra Alert – I emphasized that since gold stayed below the 61.8% Fibonacci retracement, nothing really changed from the technical point of view, and I emphasized that mining stocks remained in a medium-term downtrend. If you read that analysis, you were prepared for what’s happening today – and you’re prepared for what’s about to happen next.

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Gold price corrected to the 61.8% Fibonacci retracement level, which is a typical level to which prices move during corrections – there’s nothing special about it. Or actually, the fact that this level tends to work as reliable resistance over and over again is quite special. Other than that, nothing really happened or changed from the technical point of view.

Therefore, what’s happening on the markets today – gold’s decline back below the 50% retracement – is normal. Gold did what was normal for a market to do during corrections, and now it’s moving lower again. 

Also, given the fact that 61.8% of the previous move is often the maximum size of the correction, it could be the case that the top in gold is already in. 

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Silver pretty much erased it’s Friday’s rally, and junior mining stocks are just did that as well.

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Looking at the above chart makes it clear that what we saw yesterday was just another verification of the breakdown below the rising support / resistance line based on the 2022 and 2023 lows.

After touching this line, the GDXJ declined once again – just like it was likely to.

Also, please note that junior miners didn’t move to their recent mid-Feb high, even though gold price moved above its mid-Feb. high (the intraday one on the CPI day), which means that miners continue to severely underperform gold, which is a bearish sign for them and for the gold price as well.

The earnings from big companies might impact the movement of the S&P Index, but they are unlikely to cause any big or lasting changes in the prices of junior miners.

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Meanwhile, the USD Index isn’t doing much – it’s taking a breather after the powerful daily bullish reversal. 

Based on the analogies to the previous consolidations, it’s about to rally. I marked the similarities with red (intraday volatility in the middle of the consolidation) and green (the final decline) arrows. This situation confirms gold’s move to its 61.8% Fibonacci retracement and the subsequent decline. 

How will gold deal with rallying USD Index? It will most likely fall. The top in gold might be in.

And given the confirmed breakdown in junior miners it seems that the very short-term top in their prices is in as well. It seems that our profit-take levels can be reached any day now.

Naturally, the above is up-to-date at the moment when it was written. When the outlook changes, I’ll provide an update. If you’d like to read it as well as other exclusive gold and silver price analyses, I encourage you to sign up for our free gold newsletter.

Thank you.

Przemyslaw K. Radomski, CFA

On the date of publication, Przemyslaw K. Radomski did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

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