Some things that we outlined previously, happened yesterday or in today's pre-market session (gold moved to $1,630, and gold miners moved to their January high) and some things didn't take place (silver didn't move to its January high) - at least not yet. So, is the top in the PM sector in?

It might be already in as far as mining stocks are concerned, but it's unlikely to be in as far as silver is concerned. And in case of gold it's relatively unclear, but closer to being in than most people think.

USDX Status

First of all, the USD Index doesn't seem to have topped or corrected yet, but since it moved very close to 100 level (just 0.18 below it), it might have already topped. Whether this is the case or not (and it's not clear), it is clear that the USD Index has not yet bottomed. This means that the force that could push the PMs higher in the short run remains intact.

PMs Yesterday

Miners should be lagging gold before the top and silver should be outperforming gold. Miners have definitely underperformed gold yesterday by reversing despite a higher close in gold. Their reversal is also a topping sign on its own.

However, we should also see silver outperform gold at the very end of the move up and that didn't happen yesterday. Consequently, it seems that we will get another move higher - perhaps later today or early next week - when PMs would move higher and during this move silver would rise with more verve.

It would be a great bearish confirmation if miners showed weakness during the above-mentioned move higher - perhaps by once again testing the previous high, and once again failing to break above it on a closing-price basis.

Thank you for reading today's free analysis. If you'd like to supplement the above with details regarding our current approach to trading positions (and the upcoming ones), we encourage you to subscribe to our Gold & Silver Trading Alerts today. Naturally, as our subscriber, you'd be notified as soon as we see the confirmation that the top in the precious metals sector is in.

Thank you.

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

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Gold moved a few dollars above the January record-volume high, just like we had indicated previously. But does this mean that the top is already in? Not necessarily, because the USD Index has not yet corrected, and mining stocks are still showing strength.

Miners should be lagging gold before the top and silver should be outperforming gold. Silver should be outperforming mining stocks as well, and we didn't see that yet.

Let's get back to the USD Index.

USDX Examination

In yesterday's analysis, we wrote the following:

If the USD Index is most likely repeating its 2010-2015 performance since 2017, which means that it's likely to perform relatively similarly right now to how it performed in 2014 when it had broken above its previous highs. We marked those cases with red ellipses. Back in 2014, the USDX just pulled back sharply and then continued its massive upswing.

If that happens also shortly, the precious metals market will be likely to jump up quickly, but to plunge shortly thereafter.

This means that what we're looking at right now (gold's test of its January high), is very far from being an obvious buying opportunity. Conversely, it looks like the red light for gold's decline is turning yellow and it will become green very soon.

On a short-term basis, this doesn't tell us if the USDX is going to top immediately or after another index-point-or-so rally. But, the short-term, the 4-hour chart is providing us with some very interesting details.

The USDX rally accelerated once US currency broke above the rising trend channel. Once a breakout above a trend channel takes place, one can expect the market to rally by as much as the height of the channel. If we applied the height of the channel to the moment of breakout, the target would be already surpassed. But, if we apply it to the channel at any given time, we see that the distance between the USDX and its previous trend channel only now (!) equals the height of the latter. This might mean that the top was just reached.

If not, then the proximity of the 100 level used to stop short-term rallies many times in the past - also in 2003.

So, while the USD Index is likely to top either right now or shortly, the precious metals market might still move higher on a very short-term basis.

Thank you for reading today's free analysis. If you'd like to also read its full version with info regarding likely upside targets for gold, silver, and mining stocks, we encourage you to subscribe to our Gold & Silver Trading Alerts today.

Thank you.

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

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Gold rallied by $17.20 yesterday (1.08%), while silver soared by $0.42 (2.35%), which means that silver more than doubled gold's rally. Silver is outperforming gold, which was both profitable (at least for our subscribers), and informative. Gold miners moved higher even more (4.60% in case of the HUI Index), indicating that the final part of the rally is not yet over but rather that we are still in it. Alternatively, it could mean that yesterday's session was the top, but given today's pre-market moves higher in gold and silver, the former seems much more likely. In other words, gold and silver are likely to move higher shortly.

Our free articles are usually much shorter than their premium counterparts, but today we'll provide you with an almost full premium version free of charge.

One question is how far are they likely to move, but the key question is how likely it is that they will indeed move higher.

At first sight, the situation is as bullish as it gets:

• the USD Index might be topping here while being very overbought from the short-term point of view
• gold, silver, and mining stocks showed exceptional strength by rallying despite USD's rally
• gold and silver broke above their declining resistance lines
• HUI, the mining stock index showed strength and created a bullish price gap yesterday

Indeed, these are all factors that will likely make one consider jumping in the precious metals market with both feet without warm-up. Caution is warranted, though. There are also other factors and a what-if case that's becoming increasingly important that need to be considered.

Let's start with the last two points.

PMs in the Short-Term, Seasonality and Gold Tops

The breakouts above the declining resistance lines as well as the bullish price gap in the mining stocks are bullish, but only for the short term. In fact, they may be bullish only for the very short term. Remember the late-October breakouts and the subsequent rally? It ended the second day after the breakout.

The bullish price gaps in the mining stocks are often the starting points of big rallies, but they are also seen at the beginning of relatively insignificant upswings. For instance, the early October 2019 rally started with a bullish price gap. About 2 weeks later, miners moved to new lows.

Let's discuss two more things before moving to the USD-related points.

First, gold's bullish seasonality is about to become bearish.

We have only several additional days in which gold is likely to show strength based on what it used to do in the previous years. Precisely said, since it became clear that the gold's bull market started - since 2002.

This suggests that any rally here is not likely to persist for long.

The second thing that we would like to feature, is the analogy to the previous price patterns that we saw right after gold topped on huge volume. Yes, we know that we've been writing about it for weeks now, but record-breaking volume in gold is so important that this is definitely justified.

The rally to or close the previous yearly high would be in perfect tune with how gold behaved after previous tops that formed on huge volume.

The three very similar cases volume-wise and volatility-wise are the September 2008 top, the 2011 top, and the early 2018 top. How did gold perform immediately after the tops?

In all three cases, gold topped on huge volume, but the decline didn't proceed immediately. There was a delay in all cases and a re-test of the previous high. The delay took between several days and a few months.

Since a similar pattern followed the huge-volume tops, it seems that based on the above gold analysis, we might see a re-test of the recent high in the near future. Don't get us wrong - the true rally has most likely ended, but we might see a move close to the January high, a move to it, or even a move that takes gold very insignificantly above it. That's when people bought gold at the top in 2008, 2011, and 2018, and we don't want you to fall for this market trick. Knowing what happened then - huge declines in the price of gold - should prevent you from buying on hope for a breakout to new highs. Oh, and by huge declines, we mean the ones where gold declined by hundreds of dollars.

This means that gold is not likely to soar very far. At the moment of writing these words, gold futures' pre-market high is $1,612.45, which is just $0.85 below the January record-volume top.

In all three above-mentioned cases, gold's final top formed a few dollars above its initial top. Right now, gold is practically right at its previous top, meaning that - based on the above analogy - it's likely to rally for a few more dollars and then form a top.

Gold could get an extra boost from the coronavirus-scare factor, but even in this case, it's unlikely to rally very far - at least not in light of how it used to perform after previous huge-volume sessions.

Combining all the above-mentioned factors, it seems that the reversal in gold could even take place as early as today. A major news announcement could also trigger a reversal - either directly, or indirectly as the tensions subside after the news is already announced. There are several data points announced each day, but if there only was a way to check what's particularly important for a given market... Just kidding, of course there is such a way, that's what Paul Rejczak is doing in his Market News Reports.

Based on this week's issue, we see that there is only one day of the week with major news hitting the market (major meaning that they are important enough to be important also for the investors, not only for traders). The FOMC Meeting Minutes are being released today. While it may not seem that important at first sight (after all, some may say that it's just a report on what was already decided previously), it actually is important.

It's not just a report - it's a report that shapes expectations of investors and traders alike. Since markets are forward looking, the expectations are of critical importance. If the Minutes manage to change people's expectations, they will move the market.

• Ok, ok, but what about US Dollar Index? Isn't it topping right now? Shouldn't it make gold soar much higher?

This is where the situation gets tricky.

First, yes, based on USD's short-term factors, it's likely topping.

Checking on the USDX

The USD Index hit our target area for this rally, it's more overbought from the short-term point of view than it's been since mid-2018 (at least as measured by the RSI). We saw a breakout above the 2019 highs, but the breakout was not confirmed. If it gets invalidated today, a sizable decline is likely to follow.

However, there's more to the USD's technical picture than just the short-term factors.

On the above long-term chart, you can see that the USD Index is not overbought from the medium-term point of view. Its pace of growth may seem unsustainable from the short-term point of view, but the above chart shows that the USDX soared at the same pace in mid-2018. And that rally didn't stop just because it was overbought from the short-term point of view.

The USD Index is moving up in a rising trend channel (all medium-term highs are higher than the preceding ones) that formed after the index ended a very sharp rally. This means that the price movement within the rising trend channel is actually a running correction, which is the most bullish type of correction out there. If a market declines a lot after rallying, it means that the bears are strong. If it declines a little, it means that bears are only moderately strong. If the price moves sideways instead of declining, it means that the bears are weak. And the USD Index didn't even manage to move sideways. The bears are so weak, and the bulls are so strong that the only thing that the USD Index managed to do despite Fed's very dovish turn and Trump's calls for lower USD, is to still rally, but at a slower pace.

The temporary breakdown below the rising blue support line was invalidated. That's a technical sign that a medium-term bottom is already in.

Interestingly, that's not the only medium-term running correction that we saw. What's particularly interesting is that this pattern took place between 2012 and 2014 and it was preceded by the same kind of decline and initial rebound as the current running correction.

The 2010 - 2011 slide was very big and sharp, and it included one big corrective upswing - the same was the case with the 2017 - 2018 decline. They also both took about a year. The initial rebound (late 2011 and mid-2018) was sharp in both cases and then the USD Index started to move back and forth with higher short-term highs and higher short-term lows. In other words, it entered a running correction.

The blue support lines are based on short-term lows and since these lows were formed at higher levels, the lines are ascending. We recently saw a small breakdown below this line that was just invalidated. And the same thing happened in early 2014. The small breakdown below the rising support line was invalidated.

Since there were so many similarities between these two cases, the odds are that the follow-up action will also be similar. And back in 2014, we saw the biggest short-term rally of the past 20+ years. Yes, it was bigger even than the 2008 rally. The USD Index soared by about 21 index points from the fakedown low.

The USDX formed the recent fakedown low at about 96. If it repeated its 2014 performance, it would rally to about 117 in less than a year. Before shrugging it off as impossible, please note that this is based on a real analogy - it already happened in the past.

If the USD Index has been indeed repeating its 2010-2015 performance since 2017, then it would be likely to perform relatively similarly right now to how it performed in 2014 when it had broken above its previous highs. We marked those cases with red ellipses. Back in 2014, the USDX just pulled back sharply and then continued its massive upswing.

If that happens also shortly, the precious metals market will be likely to jump up quickly, but to plunge shortly thereafter.

The above is in perfect tune with what seems to be the most likely outcome also based on other factors that we discussed above.

Summing up, this means that what we're looking at right now (gold's test of its January high), is very far from being an obvious buying opportunity. Conversely, it looks like the red light for gold's decline is turning yellow and it will become green very soon.

You have been warned.

Thank you for reading today's free analysis. If you'd like to also read the version with info regarding our just closed (yes, profitably), current, and likely upcoming trading positions, we encourage you to subscribe to our Gold & Silver Trading Alerts today.

Thank you.

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

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It isn't just about gold most of the time - there are times when silver rises to the forefront of everyone's attention. And we fully expect such a moment of the white metal stealing the spotlight to arrive shortly. What lessons can we draw from the silver chart?

The key analogy in silver (in addition to the situation being similar to mid-90s) continues to be the one between 2008 and the 2016 - now periods.

There is no meaningful link in case of time, or shape of the price moves, but if we consider the starting and ending points of the price moves that we saw in both cases, the link becomes obvious and very important. And as we explained in the opening part of today's analysis, price patterns tend to repeat themselves to a considerable extent. Sometimes directly, and sometimes proportionately.

The rallies that led to the 2008 and 2016 tops started at about $14 and we marked them both with orange ellipses. Then both rallies ended at about $21. Then they both declined to about $16. Then they both rallied by about $3. The 2008 top was a bit higher as it started from a bit higher level. And it was from these tops (the mid-2008 top and the early 2017 top) that silver started its final decline.

In 2008, silver kept on declining until it moved below $9. Right now, silver's medium-term downtrend is still underway. If it's not clear that silver remains in a downtrend, please note that the bottoms that are analogous to bottoms that gold recently reached, are the ones from late 2011 - at about $27. Silver topped close to $20.

The white metal hasn't completed the decline below $9 yet, and at the same time it didn't move above $19 - $21, which would invalidate the analogy. This means that the decline below $10, perhaps even below $9 is still underway.

Naturally, the implications for the following months are bearish.

Let's consider one more similarity in the case of silver. The 2012 and the 2018 - today performance are relatively similar, and we marked them with red rectangles. They both started with a clear reversal and a steady decline. Then silver bottomed in a multi-bottom fashion, and rallied. This time, silver moved above its initial high, but the size of the rally that took it to the local top (green line) was practically identical as the one that we saw in the second half of 2012.

The decline that silver started in late 2012 was the biggest decline in many years, but in its early part it was not clear that it's a decline at all. Similarly to what we see now, silver moved back and forth with lower highs and lower lows, but people were quite optimistic overall, especially that they had previously seen silver at much higher prices (at about $50 and at about $20, respectively).

The 2012 corrective upswings were actually the final chances to exit long positions and enter short ones. It wasn't easy to do it back then just as it's not easy to do so right now. But the size of the decline that followed speaks for itself. In investing and trading, what's pleasant and what's profitable is rarely the same thing.

Silver's huge early-January reversal confirms gold's reversal. Silver's volume didn't set a new record, but it was truly big nonetheless. Definitely more than enough to make silver's reversal important and reliable. It's very bearish on its own and extremely bearish when examined together with gold's reversal.

Silver has been very volatile recently, but the overall tendency for silver to outperform gold and mining stocks in the final part of a given rally remains intact. This means that if the precious metals sector is to rally for the next week or so, silver is likely to rally visibly.

There is something interesting on its chart that we would like to share with you. Namely, silver's performance so far this year resembles the way silver behaved after the early-September 2019 top.

We marked the analogous price extremes with ellipses of the same color. The tops are in black, the initial lows are in red, the first corrective highs are in blue, then the lowest short-term lows are in green, then the next corrective highs are in orange, and then the final short-term lows are in purple.

If the similarity is to persist, silver is likely to rally particularly well this week.

This is especially the case, given silver's pre-market breakout above the declining dashed resistance line that you can see on the above chart.

Just as gold broke above its resistance line, silver did the same thing above a different line. The implications are very bullish for the short term. The market just confirmed our decision to advantageously adjust the profit-take levels in silver - and our subscribers already know what that means precisely.

We hope you enjoyed reading today's free analysis. The full version of today's flagship Gold & Silver Trading Alert includes so much more... Where to start from? How about the short-term USD Index outlook and targets? Silver, platinum and palladium lessons? A dive into the industrial production and inflation numbers' effect? Or the coronavirus close watch and the upcoming PMs reversals? Miners, silver, silver stocks? Making sense of it all, there comes our trading plan and the estimations regarding when the next rally and precious metal tops are likely to take place. If you'd like to read it, we invite you to subscribe today.

Thank you.

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

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Quick Alert with change in the profit-take levels of trading positions.

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