Gold closed yesterday’s session higher and silver closed it lower, which is normal given the situation in the gold to silver ratio. Both reversed on an intraday basis, which is still nothing uncommon as corrections right after breakdowns are quite common. What is not normal, however, is for such a daily reversal to be confirmed by big volume. And that’s exactly what we saw yesterday. Are we going to see another powerful wave higher before the decline resumes?

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Gold finally broke below the triangle pattern and confirmed multiple medium-term bearish signals that we previously saw. Gold is the flagship metal of the precious metals sector, so the above is an important indication for the short term. However, the most important development for gold and silver investors happened somewhere else.

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Remember the highly useful technique based on the vertexes of triangles? The ones that trigger reversals? In today’s analysis we’ll provide an update on the nearby reversal dates that are based on this particular technique. Interestingly, the reversal with the most confirmations, is relatively close…

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The technical picture for the mining stocks deteriorated even more yesterday as the GDX moved to a new yearly low, but gold managed to close the session over $5 higher, which was the second highest daily close of the year. Eventually, one of them will have to give way to the other as the prices of gold stocks and gold cannot move in the opposite directions for longer periods. After all, stock prices depend on profits and profits depend on the producers’ revenue, which in turn depends on the price of the good that is sold – in this case, it’s the price of gold. So, which will it be? Will miners follow gold higher, or will gold drop, following gold stocks’ lead?

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Gold stocks are no longer hiding their breakdowns. They declined substantially yesterday, especially given that quite little happened in case of gold and silver. Miners’ underperformance is definitely bearish. However, gold didn’t decline significantly (just $2.90) yesterday even though the USD Index moved visibly higher. If a given market doesn’t react to what should trigger a decline, it usually suggests that this market wants to move higher. Consequently, gold’s performance appears bullish. Which effect should one trust?

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