To say that gold's weekly volume was big is like to say that snails are not the fastest animal. You can't say that it's a lie, but it doesn't really convey the entire truth, either. Gold's weekly volume was the highest EVER. Yes, ever. There was not a single week - not ever during the 2011 top or when gold declined in 2008 - when gold moved on volume that was higher than what we saw last week. Is this significant? You bet!

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In yesterday’s alert, we wrote that the situation could change quickly and that in such a case, we would send another alert. Six minutes after yesterday’s opening bell, we already posted the second alert. And for a very good reason. The USD Index took a deep dive and metals were not even close to reacting in a normal way. They were actually a bit lower. We know an extremely bearish signal when we see one and that was definitely the most bearish development for the PMs that we’ve seen this year.

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The USD Index’s breakdown was as severe as we had expected it to be and it managed to reach its critical support - the 2009 high. Gold also reacted as we expected – closing at $1,356.30, while we pointed to $1,357 as a likely target if the USD reached its 2009 high. This means that the gold-USD link is very much intact and the possible price performance – and preferred action regarding it – remain in place. Silver’s sudden rally might appear shocking, but let’s keep in mind that what is chaos for a fly is normal for a spider. What would an “experienced spider” say about silver’s rally?

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The shocking scenario has become a reality – the USD Index broke below the 90 level. Moreover, in the final hours of yesterday’s session, mining stocks soared, outperforming gold and invalidating their earlier breakdown. These are all significantly bullish factors for the precious metals market. Changes in signals mean changes in outlook and thus a change in the trading position. How significant a change is justified given gold’s unstoppable rally?

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