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Money Metals News Alert
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May 12, 2025 –
Both gold and silver are undergoing healthy consolidation phases after their
strong rallies, allowing them to reset and work off overbought conditions.
Last night, both gold and silver fell
on news that the Trump administration will put a 90-day pause on tariffs.
The announcement has caused the dollar
to strengthen against other fiat currencies – and sent stock markets higher
this morning.
Below is Jesse
Colombo's big picture look at where things stand with gold and silver...
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Gold : Silver Ratio (as of
Friday's closing prices) – 75.4 to
1
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Here's Where Gold & Silver Stand
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Both gold and silver are undergoing
healthy consolidation phases after their strong rallies, allowing them to reset
and work off overbought conditions.
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It???s time for an updated
look at where things stand. Three weeks ago, I suggested that gold may have
temporarily peaked after a strong rally, and that a period of sideways movement or
a minor pullback would be both healthy and necessary to cool off its overbought
condition.
That???s exactly what we???ve
seen since—gold has moved sideways, consolidating its gains. Here's what I'm
seeing now and what I believe is likely to happen next.
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For technical analysis purposes, I
prefer to focus on COMEX gold futures rather than spot prices, as futures tend to
respect and form support and resistance levels in clean $100 increments—such
as $3,000, $3,100, $3,200, and so on.
Since peaking on April 22nd, when gold
briefly tested $3,500 before pulling back, futures have been consolidating in a
range between $3,200 and $3,500.
This type of sideways action is common
in strong bull markets and often serves as a launchpad for the next leg higher.
I???m currently watching for a breakout
scenario, which would be confirmed by a decisive close above $3,500 on strong
volume. If that occurs, I believe gold
could surge to $4,000 an ounce fairly quickly—echoing a recent forecast
by JP Morgan. I???ll be monitoring this closely.
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Back on April 22nd, I pointed out that
a candlestick pattern known as a spinning top had formed in gold—a
classic sign of indecision that often marks the end of a rally. I suggested that
this could signal a temporary peak and the start of a consolidation phase, which
is exactly what we???re seeing now.
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Interestingly, almost exactly one year
ago, a spinning top candlestick appeared around the $2,400 level following gold???s
surprise $400 rally (see the chart below)—and that marked the beginning of
several months of consolidation before gold broke out again in August 2024.
I see strong parallels between that
April 2024 candle and the one we just saw in April 2025.
If this pattern holds, gold is likely
to continue moving sideways for a few more months in a healthy pause before making
another run higher. I welcome this kind of consolidation – it's far better
for gold to build a solid base than to surge too quickly and risk a sharp
correction.
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One useful way to gauge whether an
asset has surged too far, too fast is by comparing its price to its 200-day moving
average.
When an asset becomes significantly
stretched above its 200-day moving average, it often signals that a consolidation
phase is due—but that doesn???t necessarily mean a sharp pullback.
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It can take the form of
sideways movement as the market digests recent gains.
As the chart below shows,
gold became notably extended above its 200-day moving average in April 2024 and
October 2024, and in both cases, it entered a healthy consolidation phase to work
off those excesses.
The same pattern emerged
again in April 2025, so it???s no surprise we???re now seeing gold
cool off.
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Although we???re already a couple of
weeks into this pause, I wouldn???t be surprised if it continues a bit longer until
gold and its 200-day moving average converge a bit more...
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This week's Market Update was
authored by Money Metals
Contributing Writer Jesse
Colombo.
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