The end of the previous week was rich in signals as gold, silver and mining stocks all reversed along with the U.S. Dollar Index. Gold closed the week below the rising support line and the implications should not be ignored even by those who usually focus on fundamentals alone.
Why? Because in the short- and medium-term, the important technical developments will shape the price – not the fundamentals. Why should one care? In early 2008 silver was priced above $20 and in late 2008 it was priced below $10 per ounce, even though the fundamental outlook didn’t change. Similar price swings can make a lot of money for those who pay close attention to what’s going on – but knowing about positive fundamentals is not enough.
All charts courtesy of Stockcharts.com
As indicated above, gold broke and closed the week below the rising support lines. This may not seem significant on a day-to-day basis (or when one focuses on fundamentals), but it changes a lot from the technical perspective. Technically, the 2016 rally is over. The weekly closing price is very significant and even without zooming in, the breakdown is clearly visible and the volume that accompanied the downswing was significant. The implications are very bearish.