We thought you might appreciate a few words from us before the end of the week as today’s session is quite volatile.

Today’s volatility can be most likely attributed to the release of the latest non-farm payroll numbers and the unemployment rate. The payroll numbers were weakest in 7 years, but there are many ways to interpret it in light of the recent hurricanes (the numbers were low, but the market seems to have expected even worse). Consequently, the markets are quite indecisive and are moving back and forth.

Gold, silver and mining stocks formed a reversal and moved higher, but – before they reversed – they didn’t move close to the $1,244 - $1,250 area, so the outlook didn’t become clearly bullish. Shortly after the session started we saw that the prices declined and we were halfway done with writing a different alert to you (we thought about entering orders to close the current short position at least partially with gold below $1,250) as the decline appeared sharp enough to be unsustainable. However, the price reversed sooner and at this time gold is trading a few dollars above yesterday’s close. Did we miss the boat? Not really, because the combination of factors didn’t seem favorable enough to justify changes. The follow-up action here is not as clear as it would have been if gold had indeed reached the $1,244 target or at least moved very close to it.

The situation in the USD Index is also interesting – it moved visibly above 94, but is currently trading below it once again. What are the implications? Was the breakout just invalidated and the implications are therefore bearish? Not necessarily. The USD Index is currently trading at 93.87, and the August high in terms of the daily closing prices is 93.76, so there was no clear invalidation. In terms of daily closing prices, the USD is still likely to break out above the previous highs.

Most importantly, however, the USD Index is about to close the week well above its 2015 and 2016 weekly lows - the previous breakdown is about to be clearly invalidated. The implications for the following weeks are going to be very bullish in case of the USD and bearish in case of gold.

Summing up, today’s session didn’t add much to the short-term clarity and it seems to be confirming the bearish outlook for the precious metals market in the medium term. The short-term situation seems too unclear and the medium-term situation too bearish to adjust the current position at this time - it seems that we will have better opportunities to do so within the next few weeks.

Thank you and have a great weekend.

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

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