Gold, silver, and mining stocks reversed practically exactly at their double triangle reversal point and the short positions that we opened along with taking profits off the table from the previous long positions, became profitable almost instantly. There's quite a decline to catch here, and it seems that only a small part thereof had already taken place.

PMs Reversing

The above chart clearly shows how important the triangle reversals were recently. The two first reversals were local bottoms before the final part of the upswing, and the third one - confirmed by two separate reversals from silver and miners - marked the rally's final top. This is likely the case with gold, crystal clear with silver, and it might not seem to be the case yet in case of the miners.

In fact, at first sight it may appear that the outlook for gold, silver, and mining stocks is bullish, because the decline in mining stocks is not very big and thus miners are actually showing strength. This is not necessarily the case.

It's not one of the most popular gold trading techniques, but the mining stocks can have this tendency to show a kind of stillness (stiffness if you will) after the top, but they get back to their normal behavior shortly. Please note what happened on September 5^th - on the first day of the September decline. Gold and silver took a big dive, but miners declined visibly less. Did it change anything? No. That was still a major top, and when silver's initial slide turned then into a pause, miners caught up with the pace at which the metals had declined previously. Similar action is likely to follow also this time.

The GDX ETF declined back below the 50-day moving average and we saw a sell signal from the Stochastic indicator shortly after it reached above 80. That's what confirmed both the early-November and the early-September tops. Moreover, please note that GDX's Friday's decline took place on big volume, which further validates the theory that the top for the recent decline is already in.

Moving to silver, please note that it ended the previous week at a price level that we haven't seen since August.

Silver Also Hints at the Upcoming Decline

The breakdown below the November lows is confirmed by the weekly close and significant volume, but not yet by three consecutive daily closes. Still, given the fact that silver reversed almost exactly at its triangle-based reversal and after touching its 50-day moving average make the confirmation of breakdown very likely.

The nearest support levels are the intraday mid-August low, and the 61.8% Fibonacci retracement based on May - September rally. However, the decline to these levels would be relatively small. Too small. The two short-term declines that we saw in September and in November are at least twice as big as what we saw recently, and this means that if this rally is only to be "normal", the move lower should be much bigger.

This means that silver is likely to decline further - likely below $16.

There's a good reason to believe that this decline will be more than just twice of what it's been so far.

The USD Index Throws Its Weight Behind the Coming Decline Too

Gold and silver plunged in early November in response to soaring USD Index. Since that time, the USDX declined and moved relatively close to its early-November low. Neither gold, nor silver moved close to their early-November highs. All they did was to correct part of their November decline. It took just one daily upswing in the USD Index from the short-term lows to make silver break below its own November low.

The link between precious metals and the USDX strongly favors the continuation of metals' weakness. If it wasn't for the late-November and early-December decline in the USDX, both gold and silver would have probably already been trading at much lower price levels. USD's pullback triggered a pause in the decline, which at the same time prepared the PMs for the next big downswing.

Gold and - especially - silver are already magnifying the bearish signs from the USDX, and it seems that they will get much more of them in the following day(s).

The USDX bottomed slightly below our target area (just one daily close below it) and it invalidated the breakdown below its rising support. Invalidations of breakdowns are strong bullish signs. We previously wrote that the invalidation of breakout that we saw in late-November was a bearish sign for the short term and indeed, a quick slide followed. We now saw something quite the opposite. The difference is that this time, the support that was not broken, is stronger. This means that this bullish invalidation is also more important than the previous bearish invalidation.

With soaring USD Index and the gold-silver-USD link in place that magnifies USD's signals, the short-term outlook for the precious metals market looks very bearish. And it's not too late to take advantage of it

Our profitable long precious metals position has been closed last week, and we've entered another trade immediately. This time, on the short side of the market, and it's going profitable again. The full version of this analysis features the full details and targets of the already-profitable short, adjusted for current gold seasonality and long-term turning points with the supports ahead. Join us and profit along!

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Not much happened yesterday. And yet everything crucial did.

Yesterday's price action was almost meaningless if one looks at it without any context, and without prior investigation of the technical picture of gold, silver, mining stocks, and the USD Index. At the same time, however, it was a profound cherry on the analytical cake. It was like the first tiny lightning after the storm had been brewing for hours.

The final high had likely been put in on Tuesday, when the GDX topped almost exactly at our profit-take level of $27.88. Yesterday's small move higher was likely the final goodbye kiss to the $28 level in GDX, $1,490 in gold, and silver above $17. The white metal closed the day slightly above $17, but it's already below $17 in today's pre-market trading.

Why was yesterday's session so significant? For several reasons. We already laid the short-term analytical foundation yesterday, therefore we won't go over the situation in mining stocks again today, but the fact that they moved exactly to their target is already a bearish factor.

The big deal that is likely going below traders' radars is what happened in the USD Index, and - most importantly - how gold and silver reacted to it.

USD Index Bottoming

The USDX declined once again and it's very close to its short-term support level - at about 97.20 (in yesterday's analysis we explained why 97.20 is significant). Yesterday's low was 97.31 - just 0.11 above it.

This might mean that the USD Index low is already in, especially since yesterday's decline was a small breakdown below the rising dashed support line. The previous attempt to break lower was immediately followed by a strong rally. That rally corresponded with a sizable short-term decline in gold.

At the moment of writing these words, the USD Index already moved a bit higher today, which means that we might see an invalidation of the above-mentioned breakdown very soon.

USD's outlook is one thing, but the way gold and silver reacted to USD's decline and a move to the new monthly low is something different. And even more important.

The prices of gold and silver didn't move to new highs. In fact, silver was barely affected by yesterday's decline in the USDX. This is a subtle, yet very important confirmation of multiple factors that we've been describing in previous days. After all, it happened right after the double triangle-vertex-based reversal, which was already a reason good enough for the metals to form a top.

The Miners in the Meantime

Mining stocks didn't move much higher either. After the initial test of the previous highs, they erased some of the gains and ended the day only 14 cents higher.

If Tuesday's top was not the final top for this rally, PMs would have likely rallied much more significantly yesterday. They didn't, so the odds are that the top for this rally is already in.

Before moving to gold, let's take look at its proxy, the GLD ETF. It's showing something specific that the regular gold chart doesn't.

Turning to Gold

The GLD chart is based on the stock market session, so it covers only a certain part of the time that gold futures chart cover. But at times, this can actually be a good thing. It can make the comparisons between similar situations easier. For instance, right now.

Looking at the above chart makes it clear that the last three trading days are actually an island top - something that happens after a price gap and is formed when the price doesn't then do much for a few days. The decline that follows is quite often similar to the one that precedes the top - at least initially.

That's exactly what happened last month. The November decline started with a price gap that was almost exactly the same as the price gap that preceded the top. The implication is that gold could slide shortly, perhaps later today.

And how low could gold slide in the near term?

Gold is likely to decline at least as much (approximately) as it had declined during the recent short-term declines. We copied the November decline to September and to the current situation. It's clear that the September decline was almost identical. Applying the same size and pace of decline to the current situation, we get a prediction that gold will decline to about $1,415 before correcting.

This level is additionally supported by the 38.2% Fibonacci retracement based on the 2018 - 2019 rally, and the August low. Moreover, given the pace at which gold declined previously and the proximity of the next cyclical turning point for gold (the middle of next week), gold may not have time to decline more before correcting.

The lower target area is bigger and stronger. It is based on the rising medium-term support line, the declining support line (red), the 50% Fibonacci retracement, and the July low. Most importantly, it's supported by the long-term gold chart.

The rising medium-term support line that we already mentioned above crosses with the support line that's based on the 2016 and 2018 highs, which makes the $1,360 (approximately) support particularly strong. Moreover, let's keep in mind that since these two major lines are crossing, we're likely to see a reversal at that time.

Interestingly, this triangle-vertex-based reversal corresponds to the reversal from the previous short-term gold chart. This means that both reversals confirm each other and that they are even stronger as a result. In other words, gold is very likely to form a reversal close to the end of the year.

That's also when the nearest very long-term triangle-based reversal is scheduled.

This means that the odds for a major reversal at the end of the year increase even further.

Summed up, what does it all mean? That gold could decline shortly, correct a bit after reaching the proximity of $1,415, then decline once again until - approximately - the end of the year. Then correct once again - perhaps more visibly - and then gold's decline would likely continue.

Our profitable long precious metals position has been closed a while ago, and we've entered another trade immediately. This time, on the short side of the market, and it's going profitable again. The full version of this analysis features the full details and targets of the already-profitable short. Join us and profit along!

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The top in the precious metals sector is in or at hand and the implications for both the precious metals investors and traders are critical. That's because at some point, traders need to take profits off the table and get ready for the next trade, and they are important for investors as we're quite likely close to or already beyond the point that we will refer to as the last chance to get out before the slide.

The Hint from the Miners

Let's start today's analysis with the look at the mining stocks and with a quote from November 26^th:

Some may say that the close in the GDX ETF below the previous November low is a major breakdown. It isn't. The move was not confirmed and GDX didn't break below the October low.

Interestingly, if the GDX rallies from here in a way that's very similar to how it rallied earlier in November, it will move exactly to our price target in early December - and that's to the letter what we've been writing about for days.

And what happened in the GDX in the following days?

It moved higher in a zig-zag manner, in exact tune with the line that we created, topping at $27.94, a bit above our profit-take level.

Our target of approximately (!) $28 was reached. Moreover, the ratio that made us view the proximity of $28 as the likely target also reached its own target.

On November 14^th, we commented on the GDX to GLD ratio in the following way:

Looking at the GDX to GLD ratio, we see that the ratio could move higher, to about 0.2. This is (approximately) the 50% Fibonacci retracement level that is strengthened by the upper border of the rising trend channel, and the early-October high.

In case of gold, our target ($1488.90) is based on the very recent high - on November 6th gold closed at $1,493 and the intraday high was $1495.90. We placed the profit-take level a bit below these levels in order to increase the odds of the waiting order being reached. This high corresponds to $140.45 and a bit below it would be $140.

Multiplying $140 by the 0.2 from the ratio provides us with $28 as the target for the GDX - and that's almost exactly the upper border of the trading channel - the resistance that we thought was going to be reached anyway. Both techniques point to the same level - they confirm each other.

Now, the question is why don't we think gold, silver, or miners move even higher. Actually, that might happen, especially if we see more weakness in the USD Index than we expect to see at this time. But the point is that our profit-take levels represent the easy part of the move. Our goal here is not to catch the exact top, but to make some quick profits and get back on the short side of the market, because that's where the biggest money is likely to be made in the following months. What we're doing right now is a trade against the bigger trend (down), which is quite risky - and that is also why our trading position is relatively small.

And what happened in the ratio since that time?

It moved higher and topped in the middle of our target area (value-wise) and practically right at the upper border of the rising trend channel.

Why are we mentioning both situations today? Because we want to emphasize that what bullish was supposed to happen, has likely already happened. The easy part of the rally is over. It could be the case that the rally is completely over and that the current trading is just a post-top pause.

The USD Index Shares Its Message

The USD Index is one of the things that is very useful in case of precious metals trading and it's particularly useful in two ways:

1. Directly - as the PMs tend to move in the opposite way
2. Through the analysis of gold's relative strength to what the USD Index is doing.

The USD Index declined significantly yesterday, but it came back up before the day was over. The decline continues today, which suggests that the USDX might move even lower before rallying back up.

Since the USDX broke below the support line created by the previous lows and highs (thick line) and it also broke below the 50% and 61.8% Fibonacci retracement levels, the next strong support is provided by the rising support line based on the October and November lows. The support is at about 97.2, so it's just 0.26 away (at the moment of writing these words).

So, the implications for the precious metals market are still bearish, but only for the very short term - perhaps for only the next several hours.

The relative strength of gold and silver to the USD Index already has bearish implications. Even though the USDX is very close to its recent lows, gold and silver are not approaching their recent highs. Gold is about $10 below its recent high, while silver is about $0.50 below the recent highs.

Both facts together suggest that precious metals might move higher from here, but not significantly so. We might not see new highs - neither in gold, nor in silver.

Apart from summarizing the outlook of our long position opened right after the November 12 reversal, the full version of this analysis features the warning of upcoming reversals, its confirmation from silver seasonality and more. In turning points such as the one at hand, these are superb tools in planning when and where to profitably switch market sides - just as our preceding success with the earlier short position. Profit along with us.

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In yesterday's analysis on gold price in December 2019, we wrote that while the outlook for the yellow metal for the following months was bearish, it was bullish for the short term. And indeed - gold, silver, and mining stocks rallied. In fact, the rally continues in today's pre-market session. As it's happening even without a decline in the USD Index, many investors might think that something more than a short-term rally is actually taking place. But is that really the case?

The odds are that it's not, and that we're actually seeing a business-as-usual kind of situation. That is if one knows the details of the gold trading business.

The key detail in the current gold-USD dynamics is its shape and strength during the final part of the moves in both USD and gold. Long story short, gold tends to react much more to the final moves in the USD Index than to the ones that we see initially or in the middle of the USD movement.

USD Index Done Pulling Back?

What do we see right now in the USD Index? Most likely, it's the final part of the its pullback that we predicted when the USDX was topping in mid-November. The size of the decline is in tune with previous similar cases, and so is the time factor.

We marked the similar cases with green rectangles. All the setups are similar in terms of shape, and half (two) of them are similar in terms of the price action that preceded the consolidation (sharp rallies). In all four previous cases, the USD Index moved back and forth. Twice (July and October) it created two distinct bottoms, and twice (April and September) it moved quickly up and down, creating multiple intraday tops and bottoms.

In all cases, it took about two weeks before the USD Index started to rally. Moreover, in cases that were preceded by a sharp rally - just like the early-November upswing - the USDX corrected less than half of the upswing. It also declined until moving to the previous local extreme. In case of the April correction, it was the mid-Feb top, and in case of the July correction, it was the early-June bottom.

Right now, we have a situation when the USD Index has been correcting for about 2 weeks, it corrected a bit less than half of the preceding upswing and it appears to be bottoming (second distinct bottom) close to the previous local extreme (late-October top). The history seems to be rhyming.

What does it mean to gold? The same thing it meant previously. If you look at the lower part of the chart and focus on what happened when the green rectangles were drawing to their ends, you'll see that gold rallied relatively strongly at that time after being more or less muted previously. That's exactly what we see this week.

What does it mean? It means that gold is most likely in the final part of its rally and that we should expect to see a local top any day now.

Apart from summarizing the outlook of our long position opened right after the November 12 reversal, the full version of this analysis features the comprehensive short-term precious metals analysis, and the valuable sign from yesterday's action in silver. Bottom line, these are superb tools in planning when and where to profitably switch market sides - just as our preceding success with the earlier short position. Profit along with us.

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