The Relative Rotation Graph for Commodities shows the tail for precious metals deep inside the lagging quadrant and recently bending towards the left again after a few weeks of picking up relative momentum. This makes precious metals the weakest group in the universe.
Watching such a rotation on the tail for precious metals makes me want to look at the chart of Gold to see what's going on.
GOLD
After breaking out of a multi-year range in the middle of 2019, gold rallied to a peak around $2050 while strongly outperforming the S&P GSCI Commodity Index. This came to an end when Gold started to come off from its $2050 peak. Initially, price found support around $1840 from where it bounced. This caused relative strength to start moving sideways.
A few weeks ago, Gold put in a first lower high; last week, it dropped below that $1840 support level, confirming that a downtrend (lower highs and lower lows) is now underway. And this is now also visible in relative strength vs. $GNX. The relative line and the subsequent positioning of the RRG-Lines are pointing to further relative weakness for Gold within the commodity universe.
A small positive element is coming from the fat that price recently bounced off the rising support line. If this can only hold up, damage for gold can be limited. All in all, the upside potential seems to be very limited while downside risk is seriously present, especially on a break below the recent low at $1765.
#StaySafe, --Julius
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Julius de Kempenaer
Senior Technical Analyst, StockCharts.com
Creator, Relative Rotation Graphs
Founder, RRG Research
Host of: Sector Spotlight
Please find my handles for social media channels under the Bio below.
Feedback, comments or questions are welcome at Juliusdk@stockcharts.com. I cannot promise to respond to each and every message, but I will certainly read them and, where reasonably possible, use the feedback and comments or answer questions.
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