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May 20, 2019 | Gold’s Exciting Boredom

Przemyslaw Radomski

Przemyslaw Radomski, CFA (PR) is a precious metals investor and analyst who takes advantage of the emotionality on the markets, and invites you to do the same. His company, Sunshine Profits, publishes analytical software that anyone can use in order to get an accurate and unbiased view on the current situation. Recognizing that predicting market behavior with 100% accuracy is a problem that may never be solved, PR has changed the world of trading and investing by enabling individuals to get easy access to the level of analysis that was once available only to institutions. High quality and profitability of analytical tools available at www.SunshineProfits.com are results of time, thorough research and testing on PR's own capital. PR believes that the greatest potential is currently in the precious metals sector. For that reason it is his main point of interest to help you make the most of that potential. As a CFA charterholder, Przemyslaw Radomski shares the highest standards for professional excellence and ethics for the ultimate benefit of society.

The last few trading days in gold were quite interesting, but overall gold has been a quite boring market in the last couple of months. Gold’s volatility index dropped to new lows as the current back and forth movement is just a small part of the same kind of movement on a broader scale. It’s more of the same. And when gold’s volatility gets very low, interesting things tend to happen next over 80% of the time. In other words, the situation in gold is now so boring that it’s a signal on its own. In today’s analysis, we’ll dig into details.

It’s time for gold’s boring, yet effective signal.

Extracting Value from Boredom

The gold volatility index moved to new lows this year and it is not a one-time event. There were already two moves below the 2017 and 2018 lows and the current move lower is the third attempt to slide even lower. The 50-day moving average is also at the levels that haven’t been seen previously.

What does it mean? It most likely means lower gold prices.

We marked the similar very low-volume cases with vertical dashed lines. The red ones are the ones that were followed by gold’s declines and the green ones are the ones that were followed by upswings in gold. We didn’t pay attention to daily moves, but to bigger moves that one can measure in terms of weeks. It turns out that 16 out of 19 preceding signals (about 84% of them) were followed by gold’s declines. We’re not counting the last 2 signals as they are still “in play”.

The only three bullish cases were actually single spikes lower in volatility. It was not a prolonged boredom, like the one that we saw in late 2012 / early 2013 and it’s not like what we see right now. Consequently, it seems that the above-mentioned 84% is likely understated in terms of the volatility-based probability of declines in gold in the following weeks.

Many goldbugs and other investors will view the lack of volatility as something neutral. After all, gold is not doing much, so why should it have any implications going forward? The point is that it does have implications as almost all low-volatility periods, especially the ones similar to the current one are, were followed by meaningful downtrends.

Naturally, there are also other signals that that need to be considered, but they also support lower gold prices in the following weeks.

Let’s examine the most recent ones.

The previous week started with a geopolitical-news-based rally in gold that quickly became invalidated even though the tensions that made gold rally in the first place, didn’t subside at all. Gold formed a weekly shooting star candlestick and it took place on relatively big volume. At the same time, it happened despite bullish news. This is an extremely bearish combination for the following weeks and a final warning sign that gold price is about to really slide.

Today’s article is a small sample of what our subscribers enjoy regularly. In its full version that is reserved for our subscribers, it also covers short-term gold analysis, silver with its near-term target, and the implications miners’ strength we just saw on Friday. To keep informed of both the market changes and our trading position changes exactly when they happen, we invite you to subscribe to our Gold & Silver Trading Alerts today.

Thank you.

Przemyslaw Radomski, CFA

Editor-in-chief, Gold & Silver Fund Manager

Sunshine Profits – Effective Investments through Diligence and Care

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All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

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May 20th, 2019

Posted In: Sunshine Profits

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