The precious metals sector moved higher in the previous several days as the USD Index declined. It all changed yesterday, as the USDX moved higher and the PMs declined. Silver and mining stocks declined enough for this entire week to be a decline. The precious metals rollercoaster is about to start the next big slide. Is your seatbelt fastened?

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We don’t have much to say regarding yesterday’s performance in the precious metals market or in the related markets as nothing really changed. Gold moved $3 higher and changes in silver and mining stocks were similarly small. But, quite a lot is happening in today’s pre-market trading and we can already infer something from the details of the price moves.

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After Trump’s comments on interest rate hikes, the USD Index invalidated the breakout above its rising wedge channel and declined back to it. Invalidations of breakouts usually have immediate consequences, so in this case one might expect the USD Index to decline further in the following days, thus fueling gold’s, silver’s, and miners’ rally. Will the metals and miners indeed soar from their oversold price levels?

The final bottom is likely to be formed later this year at much lower levels and when it comes, one needs to be prepared for it. The good news is that we have just published a new part of the Preparing for THE Bottom series, where we discuss one of the most important issues that need to be considered: what to buy. Should one focus on gold, or silver, or perhaps palladium? Or are the mining stocks the place to be? But if so, should one choose gold stocks or silver stocks? Or maybe juniors? You’ll find our take in this critical discussion in the following article: Preparing for THE Bottom in Gold: Part 6 – What to Buy.

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The most recent decline is very similar to the 2013 one due to multiple reasons and we wrote about it many times in the previous days and weeks. What we didn't write is how exactly this similarity translates into trading suggestions in the following days and weeks and that's what we'll catch up on today. Of course, we can't make any promises regarding performance or price moves, but the odds are that if you're trading or investing in the precious metals market, today's knowledge might save your a ton of money.

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After an extremely bearish week, we finally saw a bit of strength in the precious metals market on Friday. Even mining stocks – finally – rallied. While all the important details seem to come from gold, silver, mining stocks, or one of their ratios, one should not forget about the markets that impact the above in a meaningful way. The most important of these markets is the USD Index, and it just formed a bearish shooting star candlestick in terms of the weekly price changes. That’s a very bearish development, which – if it is followed by a sizable decline in the USDX – is likely to trigger a powerful rally in the precious metals sector. What should one do in such an environment?

In 346 BCE, hoping to avoid a fight that would cost him troops that he would need in Persia, Philip II (king of Macedonia) decided to try to bluff the Spartans into an alliance. “It would be best for you to submit at once,” Philip declared in a message to the city. “If I win a war with Sparta, I will raze it to the ground. I will kill your men, and make slaves of your women and children. I will destroy you.”

Why are we quoting the above right after mentioning the situation in the USD Index?

In response to the above, the ruling council of Sparta, known as the Ephors, sent back a message consisting of just one word. This word is also the perfect reply to the previous sentence regarding the possibility of seeing a PMs’ rally triggered by a sizable decline in the USDX.

“If”.

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