The implications for gold remain bearish…
Very little has changed on the precious metals market since yesterday, and practically everything that we wrote in yesterday’s extensive analysis remains valid. For that reason, our Gold & Silver Trading Alert for today will be relatively brief.
What we want to emphasize today are yesterday’s price moves that didn’t manage to make a significant change in the marketplace. Let’s begin with one of the key precious metals price drivers – the USD Index.
In yesterday’s analysis, we emphasized that the breakout above the declining, medium-term resistance line was more than confirmed. The implications of this remain bullish today as well. The fact that yesterday the USDX moved slightly lower and that nothing changed in today’s pre-market trading due to the really tiny price moves is a normal and natural part of the breather that the market is currently in.
The pause in the precious metals sector continued in the same manner as the ongoing USD Index breather.
On Friday, we’ve commented on the gold chart above in the following manner:
The short-term triangle-vertex-based reversals were quite useful in timing the final moments of the given short-term moves in the past few weeks. Please keep in mind that the early and late September lows developed when the support and resistance lines were crossed.
We can see the same thing happening once more. Based on the recent highs and lows, yesterday, the support and resistance lines both crossed again. And indeed, gold is trading below yesterday’s closing price in today’s pre-market trading.
Now, this technique might not work on a precise basis, but rather on a near-to basis, and given the highly political character of the current month (before the U.S. presidential elections), things might move in a somewhat chaotic manner… But still, this technique worked multiple times in the previous months and years, and it has worked recently as well. It seems quite likely that the days of this corrective upswing are numbered.
While gold didn’t start with its decline right after the most recent triangle-vertex-based reversal, please note that it hasn’t happened previously either. What happened was that it ended the decline, instead of starting a corrective upswing. The move higher took place several days later, after witnessing a pause beforehand.
Hence, it’s absolutely normal that gold didn’t decline yet, and that it appears to have ended the rally instead. The current pause is very much in tune with what happened previously – in late September. The implications were not invalidated, and therefore, they remain bearish.