Action In Markets Suggest Gold & Silver Don’t Want To Move Higher Without First Declining

The outlook for the precious metals market is bearish, and the decline is likely to be major…

by Przemyslaw Radomski via Sunshine Profits

Not much happened in the precious metals market yesterday. This was an important “nothing”, though.

The USD Index moved visibly lower this week – also yesterday – and gold has barely reacted. As you can see on the lower chart, gold miners have also simply moved somewhat up, but not to – let alone above – their recent highs.

This “nothing” means that the precious metals market doesn’t want to move higher without a decline first. And based on the multiple factors that we covered previously, especially in Monday’s flagship Gold & Silver Trading Alert, it’s likely that this decline is going to be major.

The lack of reaction to bullish indications from the USD Index also suggest that PMs might be vulnerable to strong reaction given a bearish lead from the USDX. And since the USDX just moved below 96, it seems that we’re likely to see another USD upswing shortly. In fact, it might already be underway. After all, all recent attempts to break below the 96 level were followed by invalidations and rallies. That’s how the huge March rally in the USDX and the huge downswing in the PMs started.

There’s also a more short-term-oriented indication pointing to the same outcome.

The neck level of the head and shoulders pattern that we’ve been commenting on in the previous days, was broken and then the breakdown invalidated just several minutes ago (I’m writing it well before the markets open in the U.S

On Monday, we wrote the following:

The USD Index did move lower and right now it’s in the situation where it could still move slightly lower before soaring. The reason is the incomplete head-and-shoulders formation. Theoretically, this formation is bearish once its completed, but based on what we wrote with regard to USD’s long-term picture, it seems more likely that the USD Index will attempt to break lower and then invalidate this breakdown. We saw this kind of performance multiple times and invalidated H&S pattern is a very bullish phenomenon. In fact, all invalidations are strong signs to the opposite direction, but the signals coming from invalidated H&S patterns appear particularly strong.

That’s exactly what happened. The implications are bullish for the USD Index and bearish for the precious metals market.

Thank you for reading today’s free analysis. Its full version – today’s Gold & Silver Trading Alert includes also analysis of what happened in gold and how it relates to the critical developments in the USD Index. We invite you to subscribe and read today’s issue right away.

Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager