The precious metals: gold and silver moved once again to the levels they reached on the previous Friday on an intraday basis. As bullish as it may appear, even though the USD Index moved today below the yesterday’s low (which was the new 2017 low), gold and silver simply moved back to their previous intraday highs - not breaking visibly above them. Consequently, while the size of today’s move may suggest that it is a bullish sign, it really isn’t.

Still, the gold stocks are moving visibly higher today and even though gold’s and silver’s response to USD’s decline is limited, the move in miners is significant - is this a sign of strength? Relative to gold - it is, but if we compare it to the move in the USD, we can say that the reaction is simply normal - which is not bullish nor bearish (unless we would be expecting the USD to slide that is). The first classic Fibonacci retracement level based on the major 2016 top and the late 2016 bottom in the HUI Index is at about 208, which is exactly the level that the gold stocks reached today. Will this be enough to stop the rally? We’ll have more to say once we get today’s closing prices and volume levels, but it could be the case - or the top is at hand - given the situation in the USD Index.

What about the USD Index? It’s below its major support level that’s based on the weekly closing prices. Consequently, even though the USD Index moved lower, it’s still likely to move back above it before the end of the week, thus forming a major reversal. As far as the intraday support is concerned, the lowest intraday price of the recent years was seen on May 3rd, 2016 at 91.88. Today’s intraday low for the USD Index is 92.251 - still above the above-mentioned low. The USD Index has NOT broken below the intraday low in intraday terms and below the weekly low in terms of weekly closing prices. There was no major breakdown and thus a reversal and a rally are likely to be seen this week.

Summing up, it’s too early to say that the outlook for the precious metals market changed. The USD Index moved lower, but there was no real breakdown in it and metals reaction was limited. The price levels reached by the USD suggest that the decline is likely to reverse shortly and that the USD is likely to close the week much higher. It seems that ultimately the short-term chaos in PMs and the currency markets will subside and our positions will become very profitable, for instance just like our short positions in crude oil.

As always, we’ll keep you - our subscribers - informed.

Thank you.

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

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