Gold Topped – But Did Silver?

Given today’s decline in gold, it appears that we took profits pretty much right at the top on Friday – at least in the case of gold – but…

Bullion.Directory precious metals analysis 13 January, 2025
By Przemysław K. Radomski
Founder of GoldPriceForecast.com

Was that the final short-term top?

To clarify, we had gone long on Jan. 2, and I then moved the profit-take level for gold higher – to $2,733 on Jan. 3.

Friday’s (Jan. 10) intraday high in gold’s continuous futures contract was $2,735 and wrote about closing this positions in Friday’s intraday Alert. This is why getting the Alerts exactly when they are needed with very specific details is so valuable.

Moving back to the previous question – this is likely at least in terms of price, but I wouldn’t be so sure in general. The USD Index still didn’t correct in a more meaningful way, and it seems that the stock market could form a local bottom shortly, which could trigger a near-term rally in the PMs and miners as well. Also, we haven’t seen a more visible outperformance in the case of silver (vs. gold), which suggests that this part of the rally might still be ahead.

Besides, as you may remember, I wrote about the current price pattern in gold being similar to what we saw in 2011-2013. Based on that analogy, gold’s decline could now take the back-and-forth form, at least initially.

Of course, history rhymes instead of repeating to the letter, and the price moves that we see now are of a very short-term nature. This means that what took weeks back then could take just days this time. Consequently, we could see another rally as soon as this week, which might or might not take gold to its last week’s high.

In my view, the easy part of the rally is over, and I’m very happy that we’ve taken profits off the table. However, as you may remember, the plan was to switch to silver for the final stage of the rally, to also make money on its outperformance. This hasn’t happened – at least not yet.

What we might get during gold’s next (and final?) run-up is that show of silver’s (fake) strength.

Of course, if this is THE top, and the USD Index simply keeps on soaring and the stock market plunges, we’re unlikely to get another corrective upswing in the PMs. It seems more likely to me, though, that we will indeed get it.

Right now, silver is after a sizable daily decline, but if the stock market turns around and moves higher in the following days, I think silver will follow it higher.

The same goes for the mining stocks, but since this is not the initial stage of the rally, but – more likely – it’s final part, the odds are that silver will now be relatively stronger than miners.

Given the analogy to the late-2024 correction, Friday’s and today’s declines are relatively normal. We could still see another small wave up here.

Also, please compare the sizes of the December 2024 rallies in the GDXJ and silver. In case of the GDXJ that rally was about half of the entire rally, but in case of silver, that was a much bigger part of the entire rally.

This is why my current plan is to still catch that final rally in silver.

When might I write about going long?

It seems to me that the silver bottom will coincide with the bottom in stocks, and they are about to encounter an important support level – their previous lows – soon.

Technically, stocks are right after a breakdown below a head-and-shoulders pattern, which is a sell signal. BUT, it’s also true that this pattern tends to be followed by a correction, and this correction might be exactly what is needed to trigger the final upswing in the precious metals sector.

This corrective upswing might start shortly, but the November lows are about 5,700, which is a quite round number, which increases their technical strength.

So, unless I see something profoundly bearish and the above theory is invalidated, I plan to go long silver when the S&P 500 moves to 5,700 or close to it.

Meanwhile, the USD Index soared once again, but it doesn’t mean that it can keep on rallying without correcting. The correction will come, regardless of how bullish the medium-term picture looks like.

The 23.6% Fibonacci retracement (the one that characterizes particularly strong bull markets) is just below 108, which would be a good target in my view, as a decline to this level would approximately correspond to the previous high and lows.

That’s where I also plan to take profits from the current positions in the UDN (inverse ETF to the USD Index).

So, for now, we remain on a stand-by regarding the precious metals market, which the good possibility of going long for a quick trade in silver.

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