In yesterday’s analysis we explained why the outlook was no longer bullish, but bearish and we didn’t have to wait long for a confirmation. The short positions that we had entered became profitable very quickly and we even saw more bearish signs yesterday as mining stocks continued to underperform gold. What’s next and how will we profit on it?

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In yesterday’s analysis, we discussed how meaningful gold and silver’s pre-market decline was given a relatively small move in the USD Index. The implications were quite bearish for the PM market, especially that we had just seen a target being reached in gold stocks. And because mining stocks had just underperformed gold for the first time in weeks. Yet, before the day was over, the USD, gold and silver had all reversed and erased most of their daily moves. Does it make the outlook bullish again? Is gold still likely to reach $1,300 shortly?

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After many days of strong performance of mining stocks, we finally saw a day, when they clearly underperformed the price of gold. Both: gold and silver rallied initially yesterday, only to move back down later during the US sessions, but overall, they still moved higher yesterday. Mining stocks didn’t. The GDX formed a big red candlestick and some may say that this marks the end of the rally in the precious metals sector. Would they be correct? Is it high time to cash in the profits and move to the short side of the market?

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