To say that precious metals investors should watch the USD Index, is an understatement. After all, gold and pretty much everything else, is priced in the greenback - so what has the key world currency been doing lately?

It moved slightly below the 95 level and it's been moving back and forth below this level - exactly as what it had done at the March bottom

The invalidation of the breakdown below the 95 level is what launched the massive March rally, so once the USD Index rallies from here - after forming a March-like broad bottom - we might also see a more visible upswing.

Such a rally would likely translate into a big decline in gold. Did gold top out yet? Given today's pre-market move to 1887.70, it might have, but we might still see a move to about $1,900 which would then be followed by a sharp drop. In both cases, the likely possible upside for mining stocks is very limited as they are already barely reacting to gold's gains.

Today's Gold & Silver Trading Alert includes multiple additional details such as the interim target for gold that could be reached in the next few weeks or days. Don't miss the anatomy of its upcoming move! We invite you to subscribe and read today's issue right away.

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

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As silver just broke above its 2016 highs, it must be a bullish confirmation of the precious metals upswing. In short, no. Let's take a closer look at the below chart.

We marked the final upswing of 2016 with a blue rectangle and we copied it to the current situation - starting at the most recent low.

The moves are almost identical. Ok, silver moved slightly higher in today's pre-market trading, but it's already back within the rectangle. At the same time, silver invalidated the move below the 2014 high, and it seems that it's about to invalidate the rally above the late-2014 high as well. The invalidation of the breakout above the 2016 (which we expect to see shortly), will be the final sign that the top is indeed in.

So far, today's silver's performance looks like a huge daily reversal candlestick. Of course, the day is far from being over (in fact, the markets have yet to open in the U.S.), but the sizes of the moves both up and down are already meaningful.

Today's Gold & Silver Trading Alert includes multiple additional details such as the interim target for gold and the miners that could be reached in the next few weeks. We invite you to subscribe and read today's issue right away.

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

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The mining stocks' performance falls in line with what we wrote previously. Quoting yesterday's analysis:

Today, we would like to dig deeper into the analogy to the 2016 top. There are more similarities than just the most-extreme reading from the Gold Miners Bullish Percent Index.

In order to do that, let's zoom in.

Back in 2016, the extremely overbought (100) reading from the Gold Miners Bullish Percent Index resulted in a small decline, which was supposedly a verification of the breakout above the previous (2013 and 2014) highs. Then we saw another final move back up and that was the top for the next few years.

What happened recently? The extremely overbought reading resulted in a decline back to the previous 2020 high and then another move higher. This is very similar to what we saw in 2016.

What happened in the GDX ETF with regard to its own technical indications?

Well, shortly after the extremely-overbought reading, the GDX ETF moved lower and broke below the rising medium-term support line. It then moved back up and topped slightly above the previous highs. When the rising support line was more or less at the same price level as the previous high, GDX broke below it and formed a top that was not exceeded for a few years.

And what happened recently in the GDX?

Pretty much the same thing. Shortly after we saw the extreme (100) reading from the Gold Miners Bullish Percent Index, GDX broke below its rising medium-term support line. It then moved back up, and while it didn't move to new intraday highs, Friday's closing price was slightly above the previous 2020 high.

The rising medium-term support line just moved to the previous high as well.

The history has been repeating to a very considerable (quite remarkable) extent, and if it continues to do so - which seems likely - we're likely to see a sizable decline shortly. In fact, Friday's high might have been the high for the next few months. If not, then such a high is very likely to form this week.

Miners moved higher yesterday, but they didn't invalidate the breakdown below the rising support line. It continues to serve as resistance. Since gold moved higher in today's pre-market trading and it didn't decline back so far today, it could be the case that gold miners will also move higher today. It could also be the case that gold reverses shortly after touching $1,830 or so, and that happens before the end of today's trading. This would likely result in a decline in miners after an initial upswing. Therefore, we might see an initial move higher - back above the rising resistance line, and then a slide below it, perhaps through a daily reversal pattern. Such a development would be a perfectly bearish confirmation of yesterday's big analysis.

Back in 2016, when the Gold Miners Bullish Percent Index moved to 100, the GDX ETF continue to move up for a few days and topped on July 6^th. The exact top was about a week later - on July 11^th the price was slightly higher, but the real initial top formed on July 6^th. The GDX ETF closed at $29.87 on that day. Then it declined and formed the final top in August. The high in terms of the closing prices was formed on August 2, at $30.60. Consequently, GDX's final top in terms of the closing prices was 2.44% higher than the initial top.

If we made the same calculations for the intraday highs, we would see that the final top was ($31.06 / $30.02 - 1) 3.46% higher.

Now, the most recent high that accompanied the 100-level reading in the Gold Miners Bullish Percent Index was $38.96 in terms of the daily closing prices and $39.44 in terms of the intraday highs.

Assuming the analogous relative price increases this time, one could expect GDX to form a top at $39.91 in terms of the daily closing prices and to form the intraday high at $40.81.

The GDX ETF just closed at $40.38 and the intraday high was $40.49. These prices are between the above-mentioned prices, which means that so far the situation is developing very similarly as it developed in 2016, and that we can expect the final top to be in or to be formed very soon.

Today's Gold & Silver Trading Alert includes multiple additional details and extra lessons. We invite you to subscribe and read today's issue right away.

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

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Last week, we wrote that gold miners flashed an "extremely overbought" signal, which they had only flashed once in the past - almost right at the 2016 top. The Gold Miners Bullish Percent Index recently moved to the highest level that it could reach - 100.

The only other case when the index was at 100, was in mid-2016.

We marked this situation with a vertical dashed line. Did miners continue to move higher for a long time, or did they move much higher? No.

Precisely, the index reached 100 on July 1^st 2016, and gold mining stocks moved higher for two additional trading days. Then they topped. This was not the final top, but the second top took miners only about 5% above the initial July high.

This year, the index reached the 100 level on July 2^nd - almost exactly 4 years later, and once again practically exactly in the middle of the year. Miners seemed to have formed the intraday high on July 9^th - four trading days later.

It's not justified to assume that the delay in the exact top would be 100% identical, but it seems justified to view it as similar. Two-day delay then, and four-day delay now seem quite in tune, and this similarity supports a bearish prediction for gold.

There's also one additional point that we would like to emphasize and it's the previous high that the index made on November 9, 2010. That was the intraday top, so there was no additional delay. There was one additional high about a month later, in December, but miners moved only about 1.5% above the initial high then.

One might ask if mining stocks are really overbought right now given the unprecedented quantitative easing, and the answer is yes. Please note that in 2016 the world was also after three rounds of QE, which was also unprecedented, and it didn't prevent the miners to slide after becoming extremely overbought (with the index at the 100 level). The 100 level in the index reflects the excessive optimism, and markets will move from being extremely overbought to extremely oversold and vice versa regardless of how many QEs there are. People tend to go from the extreme fear to extreme greed and then the other way around, and no fundamental piece of news will change that in general. The economic circumstances change, but fear and greed remain embedded in human (and thus markets') behavior. Taking advantage of this cyclicality is the basis for most (if not all) gold trading tips and the same goes for other markets.

Today, we would like to dig deeper into the analogy to the 2016 top. There are more similarities than just the most-extreme reading from the Gold Miners Bullish Percent Index.

In order to do that, let's zoom in.

Back in 2016, the extremely overbought (100) reading from the Gold Miners Bullish Percent Index resulted in a small decline, which was supposedly a verification of the breakout above the previous (2013 and 2014) highs. Then we saw another final move back up and that was the top for the next few years.

What happened recently? The extremely overbought reading resulted in a decline back to the previous 2020 high and then another move higher. This is very similar to what we saw in 2016.

What happened in the GDX ETF with regard to its own technical indications?

Well, shortly after the extremely-overbought reading, the GDX ETF moved lower and broke below the rising medium-term support line. It then moved back up and topped slightly above the previous highs. When the rising support line was more or less at the same price level as the previous high, GDX broke below it and formed a top that was not exceeded for a few years.

And what happened recently in the GDX?

Pretty much the same thing. Shortly after we saw the extreme (100) reading from the Gold Miners Bullish Percent Index, GDX broke below its rising medium-term support line. It then moved back up, and while it didn't move to new intraday highs, Friday's closing price was slightly above the previous 2020 high.

The rising medium-term support line just moved to the previous high as well.

The history has been repeating to a very considerable (quite remarkable) extent, and if it continues to do so - which seems likely - we're likely to see a sizable decline shortly. In fact, Friday's high might have been the high for the next few months. If not, then such a high is very likely to form this week.

Today's Gold & Silver Trading Alert includes multiple additional details such as the interim target for gold that could be reached in the next few weeks. We invite you to subscribe and read today's issue right away.

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

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