Yesterday's second most interesting news was Fed's interest rate decision. The crown goes to Fed's indication of a pause in the rate declines. It doesn't mean that much, of course, as Powell made it clear that if new risks or data start to require a rate cut, they will cut. Still, lower rates became a little less probable based on the above. What did it really change?

The long-term bond yield chart shows that yesterday's news was no news at all, because the market has already determined that the long-term rates have bottomed earlier this year - in late August. Yesterday's announcement was just a confirmation of the less dovish tone.

Bond Yields, Rates and Gold

The 30-year bond yields are rising back up after a huge slide. The true implications have been visible on the above chart for quite a few weeks and in light of yesterday's announcement, they remain up-to-date.

Despite the very long-term downtrend in the rates, there is a certain cyclicality in their medium-term moves. There are sharp declines, but also big rallies. What is interesting from our (gold & silver investors' and traders') point of view, is how gold performs after major bottoms in the rates, as it's quite clear now that the bottom is already in.

Let's take a look at the chart for details. The red dashed lines mark the major bottoms in yields and they often corresponded to major turnarounds in gold. Out of 8 cases when the yields bottomed, gold topped 4 times, bottomed 2 times, and in 2 cases the implications were unclear. Overall, in most cases (6 out of 8) gold reversed direction when yields bottomed. The moves that followed were huge in all 6 cases.

When yields were dropping in the first half of the year, gold was rallying in a decisive manner. This means that the above-mentioned 6 out of 8 statistic has very bearish implications. Reversing course after a rally means declines. Indeed, just as bond yields bottomed in late August, gold topped and it's been declining since that time. The decline is not profound so far, but let's keep the second part of the above-mentioned statistic in mind. Namely, that the gold price moves that followed yield bottoms were all huge. This means that the current decline in gold is likely to become much bigger before it's over.

We hope you enjoyed reading the above free analysis, and we encourage you to read today's Gold & Silver Trading Alert - this analysis' full version. It covers the USD Index's message for gold and silver investors as well as a two important clues from the gold stocks. The way gold miners just moved relative to it's previous price swing tell a lot, and the looming triple (!) reversal clearly confirms it. We can't give out all the details, but we can say that you really want to know them before the next week. Please note that there's no risk in subscribing right away, because there's a 30-day money back guarantee for all our products - we encourage you to subscribe today.

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Do you know what mining companies did yesterday? They verified a major breakdown, confirming the extremely bearish outlook for the following months. What? The miners rallied? Oh, you mean the senior mining stocks (HUI, GDX...) - then yes, they moved a bit higher. But the junior miners (Toronto Stock Exchange Venture Index) just declined after confirming breakdown below the very important rising support line, which has profound implications for the next months. Truth be told, what's happening in the senior miners can be used to indicate the next short-term moves as well, but we'll start today's analysis with the big picture.

The Mining Index That Is Breaking Down

On October 25, we wrote the following about juniors' outlook:

What's going on in this proxy for junior miners?

It's declining - that's what's happening. In particular, it declined below the rising medium-term support line that's based on two profound and clear bottoms: the 2016 and 2018 lows. And it's not something that happened just yesterday. It happened about 3 weeks ago and unless the TSX Venture Index rallies today, this week's close will mark the third consecutive weekly close below this line. That's important, because this means that the breakdown - even though it's tiny - was just confirmed. And confirmed breakdowns are likely to be followed by further declines.

Now, the more significant the support that was broken, the bigger decline one can expect, and the line that was just broken is definitely significant.

This means that the confirmed breakdown in the TSX Venture sends a huge warning to the gold, silver, and mining stock bulls. It's not an immediate-term or even a short-term sign (we have plenty of them coming from other places), but it is a powerful sign pointing to sector-wide decline in the following months. We have been warned by yet another market. Those who refuse to listen will have to face the costly consequences.

The decline's continuation means that everything that we wrote above is more than up-to-date. It was just confirmed by juniors' price action. If the breakdown was not a big deal, the junior miners could have rallied, just like the senior miners did. But that's not what happened. The previously broken support has now turned into resistance, and it makes the possible short-term upside very limited. The downside, however, is huge.

The nearest strong support is the 2018 low, but we doubt that it will hold, given that the recent breakdown took place so close to it. The price had already taken a breather and it's ready to slide further. This means that the next likely target is the early-2016 bottom. That's far from the current price, so the move is likely to significant. And, since the medium-term moves are more or less aligned between the major parts of the precious metals sector and the Toronto Stock Exchange Venture Index, it seems that gold, silver, and senior mining stocks have much further to drop in the following months too.

Speaking of senior mining stocks, let's see how they performed compared to the price of gold and compared to other stocks.

Examination of Senior Miners

The HUI to gold ratio is a good way to measure gold stocks' relative performance to gold. And this ratio is once again in the decline mode after a rather sharp counter-trend move. Why was the recent upswing a counter-trend move and not the start of a beginning of a new trend? Because the attempt to break above the declining resistance line failed miserably. The current small move lower in the ratio is the very early part of the price move right after the breakout was invalidated.

Invalidations are strong bearish signs in general. The line that was broken was based on two major (2011 and 2016) tops, therefore it's important - and so is the invalidation of the breakdown above it. Focusing on what one saw in the previous several days is tempting, especially for beginning gold traders, but keeping the context in mind is absolutely critical if one wants to make serious gains in this - or, in fact, any other - market.

Moreover, let's remember that the 2019 top in the ratio made the RSI indicator move above 70 and there were only two similar cases in the past 15 years. That was the late-2012 top and the 2016 top. Both were followed by substantial declines in the ratio, in gold stocks, and in gold itself. The implications here are clearly bearish for the following months and weeks. The above chart doesn't signal anything for gold in the next several days, though. Given how rich this week is in terms of news, things could get quite volatile, especially given the looming reversal turning point, but we'll get to that in the following text.

We hope you enjoyed reading the above free analysis, and we encourage you to read today's Gold & Silver Trading Alert - this analysis' full version. There, we carry on with the gold stocks examination and share the short-term PMs picture. Finally, we've also included a helpful summary of the gold move's determinants at play. Taken together, these paint a coherent picture of what's likely to come in the following months. The full Alert includes detailed price targets for gold, silver, and the GDX ETF as well as related leveraged ETNs. There's no risk in subscribing right away, because there's a 30-day money back guarantee for all our products, so we encourage you to subscribe today.

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After over 15 years of being the underdog, palladium is not only outshining gold - it's doing so in an extreme manner. It's no wonder that palladium moved more on a short-term basis than gold did, as the palladium market is relatively small. What is remarkable, however, is that in nominal terms palladium's price exceeded gold's, and - which is even more striking - it managed to hold on to these gains. After consolidating a bit, the gold to palladium ratio is diving decisively below 1. Many may think that given its outperformance, the palladium market is moving into uncharted waters, but that's far from the truth. We've seen the same kind of strength before. What is even more interesting, that the previous breakdown below 1 in the gold to palladium ratio was also followed by a consolidation and then...

Palladium in the Spotlight

(click on the chart to expand it)

And then the decline in the ratio continued until it moved well below 0.5. In other words, palladium continued to be more and more expensive than gold until it became more than twice as expensive as gold.

That's quite interesting, but what is even more striking is what happened in gold at that time. During the final part of palladium's outperformance, gold declined and then finally reached its true bottom after declining for many years.

The decline accelerated in 1999, which is when the breakdown below the 1 level in the ratio was verified and the consolidation was over. The consolidation appears to be over right now, which does not bode well for the following months.

Looking at the upper part of the chart, we see that the RSI is approaching the 30 level. It's not yet at or below it, which would indicate an oversold territory for the ratio, but it's getting there quite fast.

The RSI indicator usually works in a rather straightforward way: RSI over 70 suggests a looming top, and RSI below 30 suggests a looming bottom. However, before applying any indicator to any market, it's best to check how it worked (one might discover that, for instance, golden cross in gold is not bullish at all). In case of the gold to palladium ratio, the RSI indicator works in a rather specific manner.

The overbought (above 70) levels of the gold to palladium ratio are not consistent with each other (the ratio does not reverse after reaching the same level), which makes it a poor signal for detecting tops. On a side note, the precious metals' CoT reports have the same flaw.

The oversold levels of the gold to palladium ratio have shown more consistency and serve as a bearish signal for gold. It's not clear enough to rely solely on it while making investment decisions, but it appears very useful as a confirmation tool. In the past decade, the RSI based on the ratio below or very near 30 has been a very reliable indication that a big decline in gold may be just around the corner. The 2009, late-2010, early-2013, late-2016, early 2018 tops were all accompanied by this signal. The mid-2014 was an exception from the rule. The current implications are bearish.

Having said that, let's take a look at palladium's sister metal - platinum.

Turning to Platinum Now

After seeing the first reversal candlestick last week, we commented on the above platinum chart in the following way:

Based on what happened yesterday, it's not just a daily show of strength that makes the outlook bearish. It's also a daily reversal that's similar to the reversal that we saw previously. Shooting star reversal candlesticks are bearish on their own and we saw one yesterday. But, they are even more bearish if they have recently proved to be useful for a given market and that's exactly what happened in case of platinum on September 23^rd. It was very close to the top in platinum as well as tops in gold, silver, and mining stocks. While the implications are bearish, it's not necessarily immediately so. There was one additional day of strength (September 24^th) before platinum declined, so it might be the case that the decline gets postponed to the next week instead of starting right away.

That's exactly what happened - we saw one additional day of strength, after which platinum reversed and declined. And the key parts of the precious metals sector: gold, silver, and mining stocks declined along with it.

On a side note, have you noticed that the platinum jewelry is much more expensive than palladium jewelry? One reason is that platinum is almost twice as dense as palladium, which means that more of it has to be used to make the same piece of jewelry (e.g. a wedding ring). The other reason is that the marketing side of business is quite slow to reflect the pricing changes in the underlying market dynamics. Another example would be credit cards. Is platinum or gold card better and packed with more features? Exactly - and platinum has been cheaper than gold for almost 5 years now...

All in all, both above-mentioned precious (and industrial) metals, and both perspectives that one can take to examine the palladium market point to lower gold prices in the following months. If you're thinking about when and how to buy gold, it might best to wait with the purchases for lower prices. There will most likely be much better buying opportunities in the following months than the one that we have right now.

We hope you enjoyed reading the above free analysis, and we encourage you to read today's Gold & Silver Trading Alert - this analysis' full version. There, we discuss also the very short-term PMs situation. Finally, we've also included a helpful summary of the gold move's determinants at play. Taken together, these paint a coherent picture of what's likely to come in the following months. The full Alert includes detailed price targets for gold, silver, and the GDX ETF as well as related leveraged ETNs. There's no risk in subscribing right away, because there's a 30-day money back guarantee for all our products, so we encourage you to subscribe today.

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Friday's session was exceptional for several reasons and the most profound ones are gold's and silver's sizable intraday rally, and the subsequent slide. The reversals that both metals created are practically screaming signs pointing to what's next. The way mining stocks behaved, and how gold closed relative to its previous tops also have important implications, but let's start today's analysis with the former.

Silver, the less valuable (at least so far) of the most popular precious metals and many small investors' metal of choice, reversed in a particularly meaningful way.

Friday's PMs Reversals

All three parts of the precious metals sector: gold, silver, and mining stocks (HUI is a proxy for gold stocks) moved to or above their respective 50% Fibonacci retracements based on the September - October declines, but only silver closed visibly below the 38.2% retracement. That's one of the reasons why silver's reversal was so important. Silver simply moved up and down the most. That's far from it all, though. The big deal about this reversal is how similar it is to what silver has done in the previous years after similar reversals.

You see, silver is known to rally very high and outperform gold and mining stocks right before or while forming a top (often creating a fake breakout a.k.a. fakeout), but it doesn't necessarily happen on one day. Silver might rally for a day or a few days, when gold and miners are not doing much, or simply visibly less than silver. At times, the above and the subsequent slide take place during the same trading day, but it is not very common. This means that such sessions are relatively easy to find among other days simply because they stand out.

We won't be able to provide you with a complete list of silver's profound daily reversals, but we will feature some of them that should make you think at least twice before viewing the initial "strength" in the white metal as being anything close to bullish.

Let's start the silver time machine and set it back to about three years ago. Whoosh!

The Power of Silver's Reversals

We're now in the second half of 2016. Precisely, at the beginning of July. Silver just soared several dollars, but it reversed some of its daily gains. All silver analysts are cheering as silver ended the session higher than the previous one, and the white metal gained a bit more on the following day. That was true, but the perceived - bullish - implications were entirely off. Silver had just reversed and that intraday high turned out to be the yearly high.

Before declining in the most profound way (in October), silver flashed the daily reversal once again, at the end of September. One could say that the mid-August session was also a daily reversal, which also had bearish implications for the following days and weeks.

Based on what happened in 2016, it seems that silver's daily reversals should at least raise an eyebrow.

Let's get back to the time machine. This time, we're setting it to 2013. Whoosh!

It's mid-June 2013, and silver is after a steady decline. It just moved almost a full dollar higher during just one day, but it gave away most of these gains before the session was over. The following session opened a bit higher, but silver closed the day lower. And it declined on the next day. And the next one too. And then silver plunged almost $2 in just one day, only to decline some more in the following days. And it all started with the daily reversal.

The take-away is that silver's daily reversals might be worth more than just a raised eyebrow.

The time machine still has some fuel left. Let's get back one additional year. Whoosh!

It's the first day of October 2012 and silver just rallied to new highs, after rising about $12 in less than 2 months. Silver didn't manage to hold these intraday gains, and closed the day only a bit higher. The outlook seemed quite optimistic. But in reality, it was very, very, very far from that. The daily reversal marked the end of the volatile counter-trend rally, and started the decline that continued for years (in fact, the odds are that this medium-term downswing continues up to this day). In other words, since the first day of October 2012, we haven't seen silver prices at higher levels.

All in all, silver's daily reversals should do much more than just raise both of one's eyebrows, especially when they take place in October. They should make investors prepare for much lower silver prices - if not immediately, then relatively shortly. And we have just seen a profound daily silver reversal on Friday.

We hope you enjoyed reading the above free analysis, and we encourage you to read today's Gold & Silver Trading Alert - this analysis' full version. There, we dive into the silver time machine lessons. Then, we discuss the outlook for gold and miners in more detail, and also gold performance from European currencies' point of view. Finally, we've also included a helpful summary of the gold move's determinants at play. Taken together, these paint a coherent picture of what's likely to come in the following months. The full Alert includes detailed price targets for gold, silver, and the GDX ETF as well as related leveraged ETNs. There's no risk in subscribing right away, because there's a 30-day money back guarantee for all our products, so we encourage you to subscribe today.

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