The Groundhog Day movie featuring Bill Murray was released in 1993, but it easily could have been based on what we see right now. At least in case of the precious metals market. Practically everything that happened yesterday, confirmed what we already wrote based on Wednesday's price moves (which was in tune with what happened on Tuesday, anyway).

The outlooks for the USD Index and the precious metals market are exactly the same as they were yesterday. PMs are likely to decline significantly in the medium term, but they are likely to rally in the very short term.

The USDX moved up and PMs moved down yesterday, which might seem to contradict the above, but it doesn't.

On Wednesday and in early Thursday trading, the USD Index moved higher and then declined less than it had rallied.

At the same time both gold and silver moved lower, and then rallied more than they had declined.

PMs were showing exceptional short-term strength relative to what the USD Index has been doing.

Shortly thereafter - in the last 24 hours - gold and silver are a bit higher, while the USDX is once again higher (only about 0.10, but still). PMs continue to refuse to decline when faced with USD's rallies.

Just as gold and silver are providing ridiculous amounts of very strong indications that the are going lower in the following months, they are providing ridiculously strong signals that they are not going to decline far unless they rally first.

The very short-term decline in the USDX and the very short-term rally in the PMs wasn't cancelled - it was just slightly delayed.

Let's take a look at the details.

The Immediate PMs Outlook

Miners' performance was relatively weak recently compared to the one of gold, indicating that the early part of the upswing is well over and that we are now in its final round. The only thing missing is silver's sudden outperformance. Based on how silver is responding to even a tiny decline in the USDX, it seems that we won't have to wait for this final sign for much longer.

Short-Term USDX Dynamics

The USD Index is just about 0.20 away from the 2019 intraday high. It's also most overbought (based on the RSI indicator) since August, 2018. That's right, it's more overbought that it was throughout the entire 2019.

This means that the USD Index is most likely already topping, or that it's going to top very, very soon. Given its recent momentum, it would be likely to reach the 2019 intraday high shortly. Plus, let's keep in mind the triangle-vertex-based reversal, which means that the USD should reverse any hour or day now.

The USDX could top even before it moves to the 2019 intraday high and that's because of two things. They would not be clear on the above chart, so we created a new, bigger one for you. Please note that you can click on it to enlarge it.

One thing is the 2019 high in terms of the daily closing prices. It was just reached. There were four times when the USD Index tried to break above the 99 level. Three times in 2019 and once today. In each 1999 case, the USDX declined shortly after such attempt. This means that the top might be forming right now.

The second thing is the declining resistance line that's based on the two highest highs of 2019. This line is not horizontal, but slowly descending. It currently provides resistance at about 99.18, so if the USDX was to rally today, it's upside potential in the near term would very limited.

The outlook for the next few days (or at least hours) for the precious metals sector remains bullish and the profit-take level that we disclosed to our subscribers remains up-to-date.

Thank you for reading.

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

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The outlooks for the USD Index and the precious metals market are exactly the same as they were yesterday. PMs are likely to decline significantly in the medium term, but they are likely to rally in the very short term.

The USDX moved up and PMs moved down yesterday, which might seem to contradict the above, but it doesn't.

In the last 24 hours, the USD Index moved higher and then declined less than it had rallied.

At the same time both gold and silver moved lower, and then rallied more than they had declined.

PMs are showing exceptional short-term strength relative to what the USD Index is doing. Just as gold and silver are providing ridiculous amounts of very strong indications that the are going lower in the following months, they are providing ridiculously strong signals that they are not going to decline far unless they rally first.

The very short-term decline in the USDX and the very short-term rally in the PMs wasn't cancelled - it was just slightly delayed.

Let's take a look at the details.

Short-Term USDX and PMs Dynamics

The above 4-hour chart (for those who are new to technical analysis - 4-hour chart means that each candlestick represents 4 hours - not that the entire chart covers the last 4 hours) shows that the USDX is finally starting to roll over, but that this move is tiny so far.

And yet...

The move in the PMs (the above chart features silver futures) is already relatively visible.

Also, please note that silver just once again refused to decline below the 61.8% Fibonacci retracement level based on the December - January rally. If anyone doubts the usefulness of the Fibonacci retracements, the above serves as a good example thereof.

What was the USD Index doing while silver was refusing to move visibly below $17.50?

Longer-Term USDX and PMs Dynamics

It's been rallying! PMs refused to respond to dollar's near-vertical upswing. Why would they do that? Because they are not ready to decline just yet. They need to correct to the upside one more time (at least) before being ready to slide. And that's in perfect tune with what happened after other huge-volume tops - similar to the January 2020 one.

It seems that we might not get more than one corrective upswing before the big plunge after all. At least that's what the mining stocks are suggesting.

The Immediate PMs Outlook

Miners' performance was relatively weak recently compared to the one of gold, indicating that the early part of the upswing is well over and that we are now in its final round. The only thing missing is silver's sudden outperformance. Based on how silver is responding to even a tiny decline in the USDX, it seems that we won't have to wait for this final sign for much longer.

The outlook for the next few days for the precious metals sector remains bullish and the profit-take level that we disclosed to our subscribers remains up-to-date.

Thank you for reading.

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

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Although it's decline was not yet significant, the USD Index finally declined yesterday. Given the recent breakout above the November 2019 highs, this move lower might leave one with mixed feelings.

The USDX in the Short Run

On one hand, the USD Index just closed above the November high for the third consecutive trading day, which confirms the breakout, and is a bullish factor.

On the other hand, the USD Index reversed right at its triangle-vertex-based reversal as we had indicated yesterday. Plus, it did so after a big short-term rally and while being very overbought from the short-term point of view, as confirmed by the RSI indicator. The latter moved above 70, and in the past 1.5 years, this meant a local top in each case.

There are more bearish factors for the short term than the bullish ones, and RSI's ability to detect short-term tops is uncanny. Consequently, in our view, USD's outlook for the next several days is bearish.

The USD Index is likely to drop to approximately 98 or even lower, to the rising red support line, and the precious metals market is likely to react by rallying. Since the decline in the USDX is not likely to be very big, this move is not likely to take a lot of time. This means that PMs are likely to rally from here, but not for long.

PMs in the Meantime

Yesterday, gold didn't report gains despite USD's decline, but it doesn't seem meaningful as it was just one day and USD's decline was relatively small. Miners have barely moved even though gold moved lower, which might be viewed as a bullish sign, but... again - it was just one day of strength and it was not a screaming sign of strength anyway.

Overall, the situation and outlook for the precious metals market seems to be just as it's been previously. PMs and miners are likely to move higher in the very short term, as the USD Index is likely to decline for the next several days or so. As that's likely the final part of the rally, silver is likely to outperform, even though it's not doing so right now.

Thank you for reading.

Sincerely,

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

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In yesterday's extensive Gold & Silver Trading Alert, we commented on myriads of factors, and we explained why the medium-term outlook for the precious metals market is bearish, but why it's not bearish in the very short term. The way gold, silver, and mining stocks behaved yesterday, confirms our yesterday's points.

On a short-term basis, the USD Index continues to look like it's going to correct any hour now, as no market can move in a straight line indefinitely.

USDX: A One-Way Elevator Ride?

The USD Index broke above its declining resistance line and moved to new yearly highs. The USD Index moved even a bit above it November 2019 high, but the breakout is not yet confirmed. Yesterday was the second day when the USDX closed above the November high, and we want to see three closes above a certain level in order to mark it as confirmed.

Given the RSI at above 70, we doubt that it will be confirmed. While the unconfirmed breakout is still a bullish factor, the odds are that the USDX will decline in the short run anyway.

If the USDX doesn't decline immediately, it's likely to rally to its 2019 high and correct from there. The short-term downside target area for the USD Index is between the January high of about 98 and the declining support line at about 97.5.

Please note that the sharp 2020 rally took place without any major change in the fundamentals on which the USDX usually moves. The Fed didn't change its course, and Trump continues to favor lower USD values. So why on Earth did the US currency move up at all? Because that is in tune with its long-term trend that we've been writing about for months. Bearish news was only able to trigger smaller or bigger - but still nothing more than just - corrections. Each time after it was hammered down, the USDX rose from the ashes like a mythical phoenix. Given a major upswing in the USDX around the corner, the medium-term outlook for the PMs is bearish in this timeframe.

On a short-term basis, the USDX is likely to correct and PMs might move up. They might challenge their recent highs but are not likely to move visibly above them - if they are reached at all. That's in perfect tune with what happened multiple times in the past after previous tops that formed on huge volume.

When would the USD Index be likely to form its next local top? Perhaps that's going to happen today. The rising red support line and the declining black support line cross today, thus creating a triangle-vertex-based reversal. Overbought condition, unconfirmed breakout, and reversal timing suggest that a USDX top is going to be formed shortly.

And what about the implications for the precious metals market? The PMs are likely to rally, but not very far. The analogy to the previous topping patterns that took place right after a huge-volume top shows what's likely in store for the following days.

The three very similar cases volume-wise and volatility-wise are the September 2008 top, the 2011 top, and the early 2018 top. How did gold perform immediately after the tops?

It Means This for Gold

In all three cases, gold topped on huge volume, but the decline didn't proceed immediately. There was a delay in all cases and a re-test of the previous high. The delay took between several days and a few months.

Since a similar pattern followed the huge-volume tops, it seems that we might see a re-test of the recent high in the near future. Don't get us wrong - the true rally has most likely ended, but we might see a move close to the January high, a move to it, or even a move that takes gold very insignificantly above it. That's when people bought gold at the top in 2008, 2011, and 2018, and we don't want you to fall for this market trick. Knowing what happened then - huge declines in the price of gold - should prevent you from buying on hope for a breakout to new highs. Oh, and by huge declines, we mean the ones where gold declined by hundreds of dollars.

Summing up, while the very-short-term outlook for the precious metals market is bullish, the medium-term outlook remains bearish.

Thank you for reading.

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

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Let's start with gold and the US dollar. The yellow metal and its fiat nemesis. Often, they move inversely, though the strength and even the direction of their relationship varies when examined from different time perspectives. What is the message the greenback is sending out currently?

About the USD Index and Gold

The USD Index is moving up in a rising trend channel (all medium-term highs are higher than the preceding ones) that formed after the index ended a very sharp rally. This means that the price movement within the rising trend channel is actually a running correction, which is the most bullish type of correction out there. If a market declines a lot after rallying, it means that the bears are strong. If it declines a little, it means that bears are only moderately strong. If the price moves sideways instead of declining, it means that the bears are weak. And the USD Index didn't even manage to move sideways. The bears are so weak, and the bulls are so strong that the only thing that the USD Index managed to do despite Fed's very dovish turn and Trump's calls for lower USD, is to still rally, but at a slower pace.

The temporary breakdown below the rising blue support line was invalidated. That's a technical sign that a medium-term bottom is already in.

Interestingly, that's not the only medium-term running correction that we saw. What's particularly interesting is that this pattern took place between 2012 and 2014 and it was preceded by the same kind of decline and initial rebound as the current running correction.

The 2010 - 2011 slide was very big and sharp, and it included one big corrective upswing - the same was the case with the 2017 - 2018 decline. They also both took about a year. The initial rebound (late 2011 and mid-2018) was sharp in both cases and then the USD Index started to move back and forth with higher short-term highs and higher short-term lows. In other words, it entered a running correction.

The blue support lines are based on short-term lows and since these lows were formed at higher levels, the lines are ascending. We recently saw a small breakdown below this line that was just invalidated. And the same thing happened in early 2014. The small breakdown below the rising support line was invalidated.

Since there were so many similarities between these two cases, the odds are that the follow-up action will also be similar. And back in 2014, we saw the biggest short-term rally of the past 20+ years. Yes, it was bigger even than the 2008 rally. The USD Index soared by about 21 index points from the fakedown low.

The USDX formed the recent fakedown low at about 96. If it repeated its 2014 performance, it would rally to about 117 in less than a year. Before shrugging it off as impossible, please note that this is based on a real analogy - it already happened in the past.

Based on what we wrote previously in today's analysis, you already know that big rallies in the USD Index are likely to correspond to big declines in gold. The implications are, therefore, extremely bearish for the precious metals market in the following months.

On a short-term basis, the USD Index is likely to correct as no market can move in a straight line indefinitely.

And it's likely to correct relatively soon. The USD Index broke above its declining resistance line and moved to new yearly highs. The USD Index moved even a bit above it November 2019 high, but the breakout is not yet confirmed. Given the RSI at about 70, we doubt that it will be confirmed. While the unconfirmed breakout is still a bullish factor, the odds are that the USDX will decline in the short run anyway.

Now, based on the recent local high (the one that was just broken), we can estimate how high the USD Index is likely to move in the next few weeks. This can be done thanks to the Fibonacci extensions technique. In short, it means multiplying the size of the previous rally by 1.618.

In practice, we can do it by using the Fibonacci... retracement tool, but drawing it in a way that anchors the start of the retracement at the initial bottom, and then placing the 61.8% Fibonacci retracement at the initial top. The 100% "retracement" now points to the target. Why would the "retracement" work in this way? Because 100% / 61.8% = 1.618 (approximately) That's one of the very specific properties of the Phi number. Other include that 1 / 0.618^2 = 2.618 (approximately) and many more.

But the math behind it is not that important - what is important is that it very often works.

In all cases that we marked on the above chart, this technique pointed to important short-term tops. Currently, it points to a top being likely at about 99.24. This is the 2019 high, which makes this level very likely to stop the USD Index... for some time. After all, the USD Index is in a powerful uptrend - it's likely to exceed its previous highs despite short-term pullbacks.

Still, the USD Index might not rally to the 2019 high without an intermediate correction. Please note what happened in the cases that we applied the Fibonacci extension to. In all cases, except for the July rally, the USD Index first formed an initial high, corrected, and only then moved to the Fibonacci-extension-based target.

The November high is the next strong (from the short-term point of view) resistance and it's confirmed also by a short-term inverse head-and-shoulders pattern. This high was already reached.

So, while the USD Index is still likely to move lower in the following days, the precious metals are likely to move higher. The opposite is likely in the following months.

We hope you enjoyed reading today's free analysis. The full version of today's flagship Gold & Silver Trading Alert includes so much more... Where to start from? How about the short-term downside target area for the USD Index? Rhodium's lessons? A dive into the yield curve inversion, coronavirus or upcoming PMs reversals? Miners, silver, silver stocks? Making sense of it all, there comes our trading plan and the estimations regarding when the next rally and top in gold are likely to take place. If you'd like to read it, we invite you to subscribe today.

Thank you.

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

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