Not much happened yesterday on the precious metals market, but the situation became more bearish anyway. Why? Because the factors that impact gold, silver, and mining stocks don’t come only from the PM market itself. In today’s globalized economy, no market can move entirely on its own and we see the same thing in gold and the rest of the PM sector. The two key actions that we need to take into account today is what happened in the currency markets. The USD Index’s breakout to new 2018 highs is one thing, and the second thing is the strong sign that gold’s relative strength to the former is likely over. Taken together they paint a coherent outlook for the precious metals sector. And it’s terrible.

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Gold, silver and mining stocks moved lower yesterday despite an attempt of the latter to rally above the neck level of the inverse head-and-shoulders pattern. That was another trading day in a row when miners tried to do it and failed. This is a clear sign that there is not enough strength to push miners’ prices higher and this doesn’t bode well for the near future of the precious metals sector. But, silver just underperformed gold on a very short-term basis, and since silver's outperformance during rallies is a sell signal, then perhaps we have just seen a buy one? Will we see a quick and sizable rally in the near term before the decline resumes?

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And so it happened. Gold stocks closed the week below the neck of their inverse head-and-shoulders pattern, while the USD Index closed it above its own inverse H&S. The implications thereof are strongly bearish for gold, silver, and mining stocks and we can say the same about gold’s shooting star candlestick that formed on Friday... And that’s not even close to being everything that happened and changed in the last few trading days. There are myriads of factors that are in place right now and if one wants to trade and invest in the precious metals market successfully, they should definitely not be ignored.

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Wait, what?! Isn’t the inverse head-and-shoulders a bullish pattern that was supposed to take gold miners much higher? Indeed, it is. But it didn’t take gold miners much higher and all that the completion of the above-mentioned pattern generated was a corrective upswing that didn’t even take gold stocks back above their December 2016 lows. And we warned that this is the likely outcome as the more important, long-term factors continued to favor lower mining stocks values. Why is there a sell signal based on the inverse H&S pattern? Because the breakout above its neck level was just invalidated and this invalidation by itself is a strong sell sign.

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The GLD ETF closed yesterday’s session a bit higher, while GDX declined visibly. This is an important development that (we hope) many precious metals investors noticed. But, there is something else that should have received even bigger attention that most likely went under the investors’ radar. Something that’s likely to greatly impact gold, silver and mining stocks in the following days, weeks, and months.

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